THE  LIBRARY 
OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


A  TREATISE 


ON  THE 


LAW  OF  INSURANCE 

OF  EVERY  KIND 


By 

JOSEPH  A.  JOYCE 

Of  the  New  York,  California,  and  Connecticut  Bars 


Second  Edition 


In  Five  Volumes 
Vol.  I 


THE  LAWYERS  CO-OPERATIVE  PUBLISHING  CO. 

ROCHESTER,    N.    Y. 

1917 


T 


Copyright  1897 

by 

Joseph  A.  Joyce. 

Copyrisht  1917 

by 

Joseph  A.  Joych. 


\ 


i 


To  My  Wife 
M.  E.  J. 

THIS  TREATISE  WAS  DEDICATED 
IN  THE 
FIRST   EDITION 
"AS  A  TRIBUTE  TO  HER  CONSTANT  ENCOURAGEMENT" 

AND 

THIS  SECOND  EDITION 

IS 

REDEDICATED 

TO  HER 

AS  A  PERPETUAL  TRIBUTE 


PREFACE  TO  SECOND  EDITION. 

In  the  following  volnmes  tlie  author  has  adhered  to  the  plan 
adopted  in  the  first  edition  as  stated  in  the  preface  thereto,  which 
also  appears  herein,  although  it  may  be  restated  here  that  the 
writer  has  not  treated  the  several  kinds  of  insurance  separately, 
but,  on  the  contrary,  he  has  grouped  decisions  together  with  refer- 
ence to  the  grounds  on  which  the  authorities  have  been  based; 
where  this  has  not  been  possible  owing  to  some  technical  doctrine 
peculiar  to  a  particular  kind  of  insurance,  as  in  case  of  abandon- 
ment and  constructive  total  loss  in  marine  insurance  and  some 
other  instances,  the  subject  has  been  treated  separately  under  its 
proper  heading. 

In  other  w^ords,  the  author  has  endeavored  to  make  clear  the  unity 
of  insurance  law,  which  unity  cannot  be  ignored  in  any  authori- 
tative treatise  on  insurance  for  its  recognition  is  necessary  to  any 
thorough  understanding  of  this  great  subject  or  of  any  kind  or 
form  of  true  insurance.  That  this  is  realized  by  the  courts  is  evi- 
denced b}'  numerous  learned  and  exhaustive  opinions  wherein  the 
discussion  is  not  limited  to  that  of  the  particular  kind  of' insurance 
involved,  but  recourse  is  had  to  authorities  covering  other  kinds  of 
insurance  in  w^hich  the  same  or  like  principles  have  controlled.  And 
the  writer  has  believed  and  still  believes  that  it  were  futile  to 
attempt  to  solve  a  question  of  insurance  law  without  recourse  to 
principles,  and  necessarily  a  recourse  to  principles  means  a  recog- 
nition of  the  unity  of  insurance  law.  Therefore  it  has  been  the 
intention  in  this  edition,  as  in  the  first,  to  bring  out  as  clearly  as 
possible  and  apply  the  underlying  principles  running  through  and 
governing  this  entire  subject,  to  present  whatever  distinctions  exist 
between  the  various  kinds  or  forms  of  insurance,  to  follow  up  to  a 
logical  conclusion,  to  show  generally  and  particularly  this  applica- 
tion of  principles  and  these  distinctions,  to  harmonize  conflicting 
decisions  as  far  as  possible,  and  to  formulate  rules  whenever  it 

can  be  done. 

iii 


iv  PREFACE 

The  author  has  given  the  last  five  years  and  more  of  ardvious 
exdusive  application  to  the  writing  of  this  second  edition,  exam- 
ining personally  the  adjudications  since  the  publication  of  the 
first  edition,  and  has  added  over  one  thousand  new  sections  and 
also  new  material  to  nearly  all  the  old  sections,  and  he  believes 
no  point  of  value  has  been  overlooked. 

Various  new  forms  or  kinds  of  insurance  concerning  which  there 
were  few  if  any  decisions  when  the  first  edition  was  issued  have 
been  fully  treated  so  far  as  there  have  been  authorities  covering  the 
same. 

It  has  also  been  the  writer's  purpose  to  present  as  exhaustively 
as  the  decisions  or  rulings  of  courts  and  other  authorities  permit, 
all  insurance  questions  involving  war  risks,  including  arrests,  re- 
straints, capture,  seizure,  contraband  of  war,  etc.,  prize  law  in  so 
far  as  it  has  bearing  upon  questions  involved,  a  consideration  of 

the  British  Proclamations  or  Orders  in  Council,  etc.,  etc. 

An  appendix  has  been  added  containing  certain  matters  which 
have  been  deemed  of  special  importance  to  the  profession  in  con- 
nection with  the  subjects  of  war  risks  in  insurance;  average;  and 
marine  insurance. 

In  this,  as  in  the  former  edition,  every  effort  has  been  made  to 
bring  this  treatise  up  to  that  standard  which  the  profession  requires 
'and  which  is  necessitated  by  the  technical  character  of  the  subject, 
and  it  is  sincerely  hoped  that  the  profession  will  find  that  it  meets 
its  approval  and  use,  and  that  the  work  will  accomplish  something 
towards  bringing  about  some  degree  of  certainty  or  uniformity  in 
the  law  in  many  instances  where  it  is  now  wanting. 

It  is  believed  that  in  this  edition,  as  in  the  first,  full  credit  has 
been  given  to  all  works  and  authorities  consulted.  The  author  also 
acknowledges  with  great  pleasure  the  many  courtesies  extended  to 
him  in  '"The  Law  Library  in  Brooklyn,"  County  Court  House, 
Brooklyn,  ]^ew  York,  by  the  librarian,  Mr.  Otto  Wetzel;  the 
assistant  librarians,  Mr.  William  Burt  Cooke,  Jr.,  and  Mr.  Daniel 
Cubberly,  and  the  clerk,  Mr.  William  Rosmarin, 

JOSEPH  A.  JOYCE. 
New  York  City,  K  Y.,  1917. 


PREFACE  TO  FIRST  EDITION. 

In  the  following  volumes  the  writer  has  endeavored  to  give  the 
profession  not  only  a  treatise,  but  a  working  book,  which  will  meet 
the  needs,  lessen  the  labors,  and  save  the  time  of  all  lawyers  inter- 
ested in  questions  relating  to  insurance,  and  to  make  it  alike  valuable 
to  the  practitioner  who  has  access  to  large  libraries  and  to  the  one 
who  has  not.  The  writer's  experience  in  practice,  coupled  with 
what  he  has  learned  from  judges  and  other  members  of  the  profes- 
sion, convinced  him  that  a  work  covering  the  whole  law  of  insur- 
ances and  its  practice  before  the  courts  would  be  favorably  received. 
He  has,  therefore,  attempted  to  prepare  a  work  presenting,  in  a 
carefully  and  systematically  arranged  form,  the  principles  under- 
lying adjudged  cases,  the  facts  to  which  such  principles  have  been 
applied,  and  the  opinions  of  courts  and  text-writers  upon  conilicting 
questions  of  law.  Having  this  purpose  in  view,  the  writer  in  1S80 
commenced  collecting  the  necessary  material,  since  which  time  no 
labor  has  been  spared  in  critically  examining  the  authorities,  syste- 
matically arranging  them  with  reference  to  their  underlying  prin- 
ciples, and  in  noting  as  briefly  and  concisely  as  has  been  deemed 
advisable  the  facts  of  such  important  cases  as  will  show  the  applica- 
tion of  the  governing  principle  therein,  and  the  grounds  of  the 
decisions.  If  for  other  reasons  than  a  conflict  of  authority  it  has 
been  impossible  to  formulate  any  certain  rule,  the  substance  of  the 
decision  or  decisions  in  point  has  been  given.  Where  decisions 
have  conflicted,  the  writer  has  endeavored  to  reconcile  them  and 
to  state  the  weight  of  authority,  and  has  called  to  his  aid  in  numer- 
ous instances  the  opinions  of  other  text-writers  and  of  courts.  It 
has  not  been  the  writer's  plan  to  treat  of  the  several  kinds  of  insur- 
ances separately,  but,  on  the  contrary,  to  group  decisions  together 
with  reference  to  the  grounds  on  which  the  rulings  have  been  based  ; 
where  this  has  not  been  possible,  owing  to  some  technical  doctrine 
peculiar  to  a  particular  kind  of  insurance,  as  in  case  of  abandon- 


vi  PREFACE 

raeut  and  constructive  total  loss  in  marine  assurance,  the  subject 
has  been  treated  separately  under  that  heading  to  which  it  belongs. 
This  arrangement  has  made  it  possible  to  cover  all  kinds  of  insur- 
ances, including  mutual  benefit  insurance.  Much  time  and  labor 
has  been  expended  in  arranging  alphabetically  the  sections  of  some 
chapters,  but  in  no  instance  has  this  been  done  where  it  has  not 
seemed  more  systematic,  in  view  of  the  subject  matter  of  such 
chapters,  and  better  calculated  to  aid  the  practitioner  by  facilitating 
speedy  reference.  It  is  believed  that  no  errors  exist  as  to  the 
authorities  relied  on,  for  they  have  not  only  been  carefully  selected 
and  fully  and  conscientiously  examined  before  and  during  compila- 
tion, but  the  citations  made  have  also  been  verified  from  the  com- 
pleted manuscript.  Every  effort  has  been  made  to  bring  this  work 
up  to  that  standard  which  the  technical  character  of  the  subject 
and  the  wants  of  the  profession  necessitate,  and  to  make  it  one  of 
value  alike  in  the  court  room  and  the  office.  It  is  trusted  that  such 
effort  has  not  been  unsuccessful. 

A  succinct  account  of  the  origin  and  sources  of  insurances  has 
been  incorporated  in  the  form  of  a  "Preliminary  Chapter.''  The 
adjudications  have  been  brought  down  to  the  time  of  going  to  press, 
and  cover  not  onlv  those  in  this  countrv,  but  also  numerous  Enoiish 
and  Canadian  cases.  The  w^riter  has  freely  consulted  the  works 
of  Emerigon,  Marshall,  Arnould,  Duer,  and  others,  and  has  care- 
fully endeavored  to  give  full  credit  to  all  from  whom  any  informa- 
tion has  been  obtained.  The  writer  also  acknowledges  his  indebt- 
edness to  his  brother,  Mr.  Howard  C.  Joyce,  for  assistance  rendered 
during  a  part  of  the  time.  Credit  is  also  due  Mr.  Howard  K. 
James  for  aid  in  helping  verify  some  of  the  citations;  and  the 
unfailing  courtesy  of  Mr.  James  H.  Deering  and  Mr.  Lloyd  Conk- 
ling  of  the  San  Francisco  Law  Library  extended  to  the  writer  is 
acknowledged  by  him  with  great  pleasure. 

If  the  purpose  of  this  treatise  and  the  choice  of  the  plan  have 
been  fortunate  and  the  work  is  otherwise  meritorious,  the  writer 
is  content  to  leave  it  in  the  hands  of  the  profession. 

JOSEPH  A.  JOYCE. 

San  Francisco,  Cal.,  August,  1897. 


CONTENTS. 

TITLE  I. 

PRELIMINARY  CHAPTER. 
THE  SOURCES  AND  ORIGIN  OF  INSURANCES. 

I.     Sources  of  insurance. 
II.     Origin  of  insurance  generally. 

III.  Origin  of  marine  insurance. 

IV.  Adoption  of  marine  insurance  in  modern  times. 
I\'a.  Marine  insurance  continued :    origin  of  Lloyds. 
IVb.  Marine  insurance:    summary. 

IVc.  Lloyds  associations  in  United  States:    American  Lloyds. 
IVd.  Inter-insurance:    reciprocal  insurance:    inter-indemnity  contracts. 

Origin  of  mutual  insurance  system. 

Origin  of  cattle  insurance  societies. 

Origin  of  fire  insurance. 

Boards  of  fire  or  marine  underwriters. 

Origin  of  life  insurance. 
§    Vila.  History  of  industrial  insurance. 
§     Vllb.  History    of    workmen's    industrial    insurance:    state    insurance: 

compulsory  insurance:    workmen's  compensation. 
§    VIIc.  Savings  bank  insurance  and  annuity  law  of  Massachusetts. 
§  VIII.     Origin  of  accident  insurance. 
§  Villa.  History  of  casualty  insurance. 
§  Vlllb.  History  of  employers'  liability  insurance. 
§       IX.     Origin  of  guaranty,  fidelity  guaranty,  etc.,  insurances. 
§       IXa.  History  of  title  guaranty  insurance. 
§       IXb.  History  of  credit  guaranty  insurance. 


§ 

V. 

§ 

Va, 

§ 

VI. 

§ 

Via 

§ 

VIL 

X.     Origin  of  other  insurances. 


vu 


viii  CONTENTS 

TITLE  IL 

GENERAL  TERMS  AND  DEFINITIONS. 

CHAPTER  I. 

TERMS  AND  DEFINITIONS. 

§     1.     "Insured''  and  "assured"  synonymous. 
§     2.     Definition  of  insurance. 
§§  3,  4.  (Transferred  to  §§  338d,  339c  herein.) 
§     5.     Definition  of  marine  insurance. 
§     6.     Definition  of  fire  insurance. 
§     7.     Definition  of  life  insurance. 
§     7a.  Definition  of  assessment  insurance. 
§     7b.  Definition  of  industrial  insurance. 
§     7c.  Definition  of  burial  insurance. 

§     7d.  Definition  of  workmen's  industrial  insurance:   state  insurance :   com- 
pulsory insurance:    workmen's  compensation. 
§     8.     Definition  of  accident  insurance. 
§     9.     Definition  of  casualty  insurance. 

§     9a.  Definition  of  employers'  liability  or  indemnity  insurance. 
§  10.     Definition  of  endowment  insurance. 
§  11.     Definition    of  tontine   insurance. 
§  12.     Definition  of  guaranty  insurance. 
§  13.     Definition  of  real  estate  and  title  insurance. 
§  13a.  Definition  of  rent  insurance:   rent  guaranty  insurance. 
§  13b.  Definition  of  strike  insurance. 


CONTENTS  ix 

TITLE  III. 

CONTRACT  AND  POLICY. 

CHAPTER  II. 

NATURE  OF  THE  CONTRACT. 

§  16,     Risk  is  an  essential  element. 

§  17.     Division  and  distribution  of  loss  are  essential. 

§  18.     Insurance  is  an  aleatory  contract. 

§  19.     Insurance  is  a  voluntary  contract. 

§  19a.  Standard  fire,  policy  a  voluntary  contract. 

§  20.     Insurance  is  an  executory  contract. 

§  21.     The  contract  is  synallag-matic. 

§  22.     Insurance  is  a  conditional  contract. 

§  23.     Insurance  is  a  personal  contract.  » 

§  24.  Insurance  other  than  that  of  life  and  accident  is  a  contract  of  in- 
demnity. 

§  24a.  Standard  fire  policy  is  contract  of  indemnity:  collateral  contracts: 
mortgages. 

§  25.     Indemnity :    stipulation  as  to  value  in  policy. 

§  26.     Life  insurance  not  a  contract  of  indemnity. 

§  27.     Accident  insurance  is  not  a  contract  of  indemnity  in   all  cases. 

§  27a.  That    employers'   liability   insurance   is   contract    of   indemnity. 

§  27b.  Same  subject :  whether  contract  one  of  indemnity  or  liability  or  both. 

§  27c.  Injury  to  property  or  to  employees  and  others :  to  what  extent  con- 
tract one  of  indemnity. 

§  27d.  English  workmen's  compensation  act  grants  complete  indemnity. 

§  27e.  Insurance  of  carriers  against  losses  from  injuries  to  passengers  is 
contract  of  indemnity. 

§  27f.  Insurance  against  burglary  and  loss  or  damage  to  property  are  con- 
tracts  of   indemnity. 

§  27g.  Insurance  against  accidents,  death,  and  theft  of  animals  is  contract 
of  indemnity. 

§  27h.  Fidelity  guaranty  insurance  is  contract  of  indemnity. 

§  27i.    Title  guaranty  insurance  is  contract  of  indemnity. 

§  27 j.  Rent  or  rent  guaranty  insurance  is  contract  of  indemnity. 

§  27k.  Insurance  on  ''use  and  occupancy"  of  an  elevator:  when  not  a  con- 
tract of  indemnity. 


X  CONTENTS 

^  271.  Credit  guaranty  insurance  is  contract  of  indemnity. 

§  27m.  Whether  contract  to  defend  physician  against  suits  for  malprac- 
tice is  one  of  insurance  and  indemnity. 

§  27n.  Employees'  benefit  and  relief  association:  contract  not  one  of  in- 
demnity. 

§  28.     Reinsurance  is  a  contract  of  indemnity. 

^  29.     Other  incidents  of  the  doctrine  of  indemnit3% 


CHAPTER  III. 


PAROL  CONTRACTS. 

§  31.     Contract  need  not  be  in  writing:   parol  contract  and  rule  in  England. 

§  31a.  Parol  contracts:  life  insurance — industrial   life  insurance. 

§  31b.  Parol  contracts:  accident  insurance. 

§  31c.  Parol  contracts:  "workman's  collective  policy:"  custom. 

§  31d.  Parol  contract:  where  policy  partly  w-ritten  at  time  of  loss:  contract 
binding. 

§  32.     Parol  contracts:  the  common-law  rule. 

§  33.     Parol  contracts:   statutory  regulations:   English  stamp  acts. 

§  33a.  Parol  contracts:  standard  policy. 

§  33b.  Statutory  regulations:  contract  partly  in  writing  and  partly  by 
parol. 

§  34.     Parol  contracts:   mutual  benefit  societies. 

§  35.     Parol  contracts:   corporations:   statutory  or  charter  provisions. 

§  36.  Parol  contracts:  corporations:  statutory  or  charter  provisions,  con- 
tinued. 

§  37.     Parol  contract  for  insurance  subject  to  usual  provisions  of  policy. 

§  38.  Parol  agreement  for  insurance  may  be  specifically  enforced,  or  court 
may  award  damages. 

§  38a.  Same  subject:  standard  policy:  rule  in  New  York. 

§  38b.  Same  subject:   life  insurance:    industrial  life  insurance. 

§  38c.  Evidence:  oral  contract  must  be  clearly  established. 

§  39.     Parol  contracts:  statute  of  frauds. 

§  40.     How   far  parol  contract  merged   in   written   agreement. 

§  41.     Parol  contract :  renewal. 

§  41a.  Same  subject:  standard  policy:  agent's  authority. 

§  41b.  Parol  contract:  renewal:  contract  must  be  complete:  recovery:  evi- 
dence to  establish. 

§  41c.  Parol   contract:    renewal:    standard    policy:    equitable   estoppel. 

§  41d.  Parol  contract:   reinsurance:  validity. 

§  41e.  Parol  agreement  for  reinsurance  may   be  specifically  enforced. 


CONTENTS  xi 


CHAPTER  IV. 


REQUISITES   OF  VALID   CONTRACT— COMPLETION  OP 

CONTRACT. 

SuBDiv.      I.  Requisites  of  Valid  Contract. 

11.  Completion   of   Contract — Proposal  and   Acceptance. 

III.  Completion  of  Contract — Prepayment  of  Premium. 

IV.  Completion    of    Contract— Delivery    of    Policy — Knowl 

EDGE    OF    Loss. 

SuBDiv.  I.  Requisites  of  Valid  Contract. 

§  43.     Requisites  of  a  valid  contract  of  insurance. 

§  44.     Requisites  of  a  valid  parol  contract  of  insurance. 

§  44a.  Same  subject :  identity  of  parties :  designation  of  insurer. 

§  44b.  Same  subject :   designation  of  insured. 

§  44c.   Oral  contract  for  reinsurance  or  for  renewal  must  be  complete. 

§  45.     Minds  of  the   parties  must  meet  on   all   essentials   of  contract. 

§  45a.  Same  subject :  where  impossible  to  obtain  definite  particulars  or  im- 
portant facts. 

§  46.  Essentials  need  not  be  expressly  agreed  upon :  prior  course  of  deal- 
ing,  custom,  etc. 

§  47.     The  usual  rate  of  premium  will  be  presumed  to  have  been  intended. 

§  48.  Both  the  rate  of  premium  and  the  duration  of  the  risk  may  be  under- 
stood. 

§  49.     The  rate  of  premium  and  amount  may  be  understood. 

§  50.  Whether  contract  exists  may  be  governed  by  custom  or  usage  of  the 
parties  or  of  the  insurance  business  at  a  place. 

SuBDiv.  II.  Completion  op  Contract — Proposal  and  Acceptance. 

§  53.     Completion  of  contract :  mutual  benefit  societies  or  associations. 

§  53a.  Same  subject :  acceptance :  approval. 

§  53b.  Same  subject:    signing. 

§  53c.   Same   subject  r  initiation :    medical   examination :    signing. 

§  54.     Completion  of  contract:   prdposal  or  application. 

§  54a.  Effect  of  absence  of  signed  proposal :  insurer  may  be  estopped  to  set 
up  want  of  proposal. 

§  54b.  When  contract  of  fidelity  insurance  Complete,  and  not  a  mere  pro- 
posal. 

§  55.     Completion  of  contract :  acceptance  generally. 

§  55a.  Mere  intention  to  accept,  insufficient. 


xii  CONTENTS 

§  55b.  To  what  extent  acceptance  must  accord  with  terms  of  application. 

§  55c.  Proposal  and  acceptance:  counter  propositions. 

§  55d.  Whether  acceptance  of  offer  should  be  communicated  to  proposer. 

§  55e.  Protection  by  insurer  pending  approval :  date  when  policy  in  force. 

§  56.     Qualified  acceptance:  conditions  precedent. 

§  57.     Acceptance:   delay  in  acting  on   application. 

§  58.     (Transferred  to  §§  G6b-66j  herein.) 

§  59.     Agent's  agi-eement:  liability  not  to  attach  till  approval. 

§  59a.  Usage  or  custom  that  agents  can  bind  insurer  until  notice  of  refusal. 

§  60.     Approval  may  be  implied  from  the  circumstances. 

§  61.     Oral  agreement  of  agent  may  be  controlled  by  application. 

§  61a.  Agent's  statement  that  application  accepted:  when  insurer  estopped. 

§  61b.  Agent's  statement   that  certificate  or   application   binding:    mutual 

benefit  insurance. 
§  62.     Completion  of  contract:   negotiations  through  mail. 
§  62a.  Employers'  liability  insurance:  when  contract  incomplete:  negotia- 
tions with  insurance   agent  through  mail. 
§  62b.  Contracts   of  insurance:   telegraphic   agency. 

§  63.     No  contract  where  acceptance  mailed  differs  in  terms  from  proposal. 
§  64.     Agents  receipt  pending  approval   or  issuance  of  policy:   "binding 

slip :"  "binding  receipt." 
§  65.     Same  subject:   effect   of   memorandum:   binding  slip,   indorsement, 

etc. 
§  6G.     Completion  of  contract,  marine  and  fire:  binding  slip. 
§  66a.  Binding  slips,  etc.,  continued:  new  terms:  rate  of  premium:  parol 

evidence. 
§  66b.  Delivery  to  and  acceptance  by  applicant:   generally. 
§  66c.  Right  of  applicant  to  reject  policy:   generally. 
§  66d.  Stipulation  or  agreement  for  return  of  policy  by  applicant :  option 

to  accept  or  reject. 
§  66e.  Where  applicant   receives  policy   for   examination:    acceptance. 
§  66f.  Applicant  not  bound  to  accept  policy  when  it  does  not  conform  to 

proposal  or  agreement. 
§  66g.  Where  policy  does  not  conform  to  proposal :  neglect  of  applicant  or 

assured  to  read  policy:   duty  to  notify  company   or  rescind. 
§  66h.  When  applicant  may  reject  policy  not  conforming  to  agent's  repre- 
sentations. 
§  66i.    Effect    of   retention    of    policy   by   applicant:    unreasonable    delay. 
§  66 j.    Acceptance  by  insured  father  for  infant  beneficiaries. 

SUBDIV.    III.     COMPLKTIOK    OF    CONTRACT — PREPAYMENT    OF    PREMIUM. 

§  70.     Prepayment  of  premium  condition  precedent. 

§  71.     Actual  prepayment  of  premium  not  in  all  cases  essential  to  validity 
of  contract. 


CONTENTS  xiii 

§  72.     Prepayment   of  premium:   oral   agi'eement. 

§  73.     Prepayment   of   premium   to   agent   or  broker. 

§  74.     Effect   of  part   payment. 

§  74a.  Same  subject :  rebate :  agent's  commission  released  or  property  taken 

on  credit  therefor. 
§  74b.  Part  payment:   good  health. 
§  75.     Payment  by  third  person. 
§  76.     Prepayment  of   premium  may  be  waived. 
§  77.     Waiver  of  prepayment  by  agent. 
§  78.     Renewal:  waiver  of  prepayment  of  premium. 
§  79.     Prepayment   of  premium:    effect  of   delivery   of   policy. 
§  80.     Prepayment:   credit  may  be  given. 
§  80a.  Same  subject:   promissory  notes,  checks,  and  drafts. 
§  81.     Prepayment:    mutual   credits:    application   on    agent's   debt. 
§  82.     Where  there  are  mutual  credits. 

§  83.     Crediting   premium   on   agent's   indebtedness   to   applicant. 
§  84.     Prepayment:  course  of  dealings:  allowing  credit. 
§  85.     Prepayment   of  premium:   evidence   of  waiver. 
§  86.     Effect  of  receipt  in  policy  for  premium. 

SuBDiv.  IV.  Completion  op  Contract — Delivery  of  Policy — Knowledge 

OF  Loss. 

§  90.     Delivery  of  policy  not  necessary  to  complete  contract. 

§  90a.  Same  subject:   date. 

§  91.     Actual    or   manual   delivery   of   policy    not   necessary    to   complete 

contract. 
§  92.     Agreement  to  deliver  policy:  demand  is  unnecessary. 
§  93.     There  may  be  a  constructive  delivery. 
§  94.     Delivery:   possession  of  policy  by  assured. 
§  95.     Neglect  of  assurer  to  deliver  policy. 
§  96.     Conditional   delivery. 

§  97.     Parol    evidence    admissible    to    show    conditional    delivery. 
§  97a.  Condition  precedent:   delivery  or  prepayment  of  premium  during 

lifetime  or  good  health,  etc.,  of  assured. 
§  97b.  Same   subject. 

§  97c.  Change  in  health  of  assured:  date  of  contract. 
§  98.     Wlien   actual   delivery   of   the   policy   necessary. 
§  99.     Delivery:  misrepresentation  or  fraud. 
§  100.     Delivery:  notice  to  assured  of  execution  of  policy. 
§  101.     Delivery   to   agent   of  insured   or  to   third   person. 
§  102.     Delivery  by  and  to  agent:  policy  held  by  agent. 
§103.     Delivery:    agreement    completed    before    loss,    mortal    illness    or 
accident. 


xiv  CONTENTS 

§  104.  Delivery:  agreement  iucomplete  at  time  of  loss,  mortal  illness,  or 
accident. 

§  104a.  Same  subject. 

§  105.     Loss  before  date  of  contract :  policy  retroactive. 

§  lOG.  AVhere  both  parties  know  of  loss  when  contract  is  made  or  exe- 
cuted. 

§  107.     Knowledge    of    loss    by   assured    before    and    after    risk    attaches. 

§  108.  Assured  not  obligated  to  notify  company  of  loss  before  de- 
livery of  policy  when  risk  has  attached. 

§  108a.  Mutual  benotit  societies  or  associations:   issuance  of  certificate. 

§  108b.  Mutual  benefit  societies  or  associations:  actual  delivery  of  cer- 
tificate unnecessary,  unless. 

§  108c.  Mutual  benefit  societies  or  associations:  initiation  as  prerequisite 
to  delivery. 

§  108d.  Delivery   of   certificate    to   subordinate    lodge,    local    camp,    etc. 

§  108e.  Mutual  benefit  societies  or  associations:  delay  in  executing  and 
delivering  certificates :   retention  of  certificate. 

§  108f.  Where   officer   of  society   acts   as   custodian   of   certificate. 

§  108g.  Mutual  benefit  societies  or  associations:  delivery  of  certificate  or 
prepayment  of  dues  during  life  or  good  health. 


CHAPTER  V. 


REINSURANCE. 

§  112.     Reinsurance  defined. 

§  112a.  Evidence  admissible  to  show  "reinsurance"  has  technical  mean- 
ing of  agency  reinsurance. 

§  112b.  When  transfer  is  not  reinsurance,  but  an  illegal  transaction : 
assets  a  trust  fund:  deposit  with  state. 

§  113.     Reinsurance:   nature  of  contract. 

§  114.     Reinsurance :  validity  of  contract. 

§  115.     Reinsurance:  validity  of  company's  acts:  its  powers. 

§  115a.  Same  subject. 

§  115b.  Same  subject:  mutual  benefit  societies,  associations,  and  co-oper- 
ative companies :  Lloyds. 

§  116.     Reinsurance   not   within   statute  of  frauds. 

§  117.     Relations   between   parties   and  between   insured  and   reinsurer. 

§  117a.  Same  subject :  Lloyds. 

§  118.     Insurable  interest   of  reinsurer. 

§  118a.  Same  subject :   wagering  contract. 

§  118b.  Same  subject :  Lloyds. 


CONTENTS  XV 

§  119.     Reinsurance:  the  risk. 

§  119a.  Same  subject. 

§  119b.  Same  subject :   mutual,  etc.,  companies. 

§  120.     Duration :  term  of  risk  may  be  controlled  by  ori^nal  insurance. 

§  121.     Custom  of  underwriters  may  affect  risk. 

§  122.     Limitation  of  risk  of  specified  date:  change  of  risk. 

§  122a.  Reinsurance    not    retroactive:    property    destroyed    when    contract 

made. 
§  123.     Limitation  of  risk  to  particular  locality. 
§  121.     Condition  as  to  assignment. 
§  123.     Condition  as  to  other  insurance. 
§  126.     Conditions :  time  limit  for  suing :  award. 
§  127.     Amount  of  reinsurance. 
§  127a.  Same  subject:  sej^arate  risks:  notice. 

§  128.     Representations  and  warranties  in  reinsurance:  concealment. 
§  129.     Abandonment  unnecessarj^  in  reinsurance. 
§  130.     Proofs  of  loss  in  reinsurance. 
§  131.     Extent  of  reinsurer's  liability. 
§  131a.  Same  subject. 

§  131b.  Same  subject:  mutual  benefit  societies,  etc. 

§  131c.  Same  subject :   reinsurer   not  liable  where  risk  materially  altered. 
§  132.     Agreements  affecting   reinsurer's  liability. 
§  133.     Reinsurer's  liability:  pi-o  rata  clause. 
§  133a.  Same  subject. 

§  134.  Reinsurer's  liability :  compromise :  insolvency  of  insurer. 
§  134a.  Same  subject :  mutual  benefit  societies,  etc. :  trust  fund. 
§  135.     When  suit  may  be  brought  against  reinsurer:    rights  of  original 

insured. 
§  135a.  Same  subject. 

§  135b.  Same  subject :   mutual  benefit   societies,  etc. 
§  135c.  Same  subject :  Lloyds. 
§  136.     Reinsurance:  recovery:  evidence. 

§  136a.  Same  subject:  mutual  benefit  societies,  etc.:  fraud  of  directors. 
§  136b.  Same  subject :  recovery  of  statutory  deposits. 
§  136c.  Reinsurance:   recovery  induced  by  fraud:   subrogation:   deduction 

of  expenses  of  recovery. 
§  137.     Reinsurer  bound  by  judgment:  notice  to  defend. 
§  138.     Defenses  available  to  reinsurer. 


CHAPTER  VI. 

THE  POLICY— ITS  FORM  AND  REQUISITES— SUBSTANCE 

GENERALLY. 

§  145.     Policy  defined. 


§ 

146. 

§ 

147. 

§ 

148. 

§ 

149. 

§ 

150. 

§ 

151. 

§ 

152. 

§ 

153. 

§ 

154. 

§ 

155. 

§ 

156. 

xvi  CONTENTS 

Certificates  in  mutual  benefit  societies  or  associations. 

Division  and  kinds  of  policies. 

Wager  policies. 

Wager  policies,  valid  at  common  law,  now  void. 

Wager  policy :    conflict  of  laws. 

Valued  policy  may  be  sbown  to  be  a  wager. 

Policy  valid  at  inception  cannot  become  wager. 

Wager  policies :  loss  should  be  total. 

Wager  policies:  what  are  and  are  not.    (Transferred  to  §§  894a, 
954a  herein.) 

Interest  policy  defined. 

Open  or  unvalued  policy  defined. 
§  156a.  Named  policy  defined. 

§  157.     Kunning  policies :  blanket  policies :  floating  policies. 
§  157a.  Blanket    or    compound    policies:    floating    policies:    distinguished 

from  specific  policies. 
§  157b.  "Drummer  floater"  policy  defined:  when  risk  suspended. 
§  158.     Open    or   unvalued   policies :    what   are :    whether   policy    open   or 

valued. 
§  158a.  Same   subject :    standard    policy. 
§  159.     Valued  policy  defined. 

§  160.     Valued  policy:   what  the  valuation   includes. 
§  161.     Valued  policy:  how  far  valuation  conclusive. 
§  162.     Valued   policy:   effect   of  overvaluation:    fraudulent   valuation. 
§  163.     Valued  policies:  statutory  regulations. 
§  163a.  Same  subject :  conflicting  clauses. 
§  163b.  Valued  policy  laws :  three-fourths  value. 
§  163c.  Valued  policy  laws:  overvaluation:  fraudulent  valuation. 
§  163d.  Valued  policy  law :  property  destroyed  by  more  than  one  fire. 
§  163e.  Valued  policy  law :  real  and  personal  property. 
§  163f .  Valued    policy   law :    improvements    upon    real    property :    loss    of 

rents  not  covered. 
§  163g.  Valued  policy  laws :   mutual  companies :   mutual   benefit  societies. 
§  164.     Valued   policies :   partial  loss. 
§  165.     Valued  policy;  pro  rata  recovery. 
§  166.     Valued  policies :  "valued  at"  not  conclusive. 
§  167.     Valued  policies;  prior  insurance. 
§  168.     Valued  policies:  what  are. 

§  168a.  Rent  insurance  policy  analogous  to  valued  policy. 
§  169.     Mixed  policy  defined. 
§  170.     Time  policy  defined. 
§  171.     Time  policy:  computation  of  time. 
§  172.     Time  policy:  trading  voyage:   nature   of  contract. 
§  173.     Time  policy:  continuance  after  expiration  of  time. 
§  174.     Voyage  policy  defined. 


CONTENTS  svii 

§  175.     Voyage  policy :   voyage  must   conform   to   course   fixed  by   usage. 

§  176.     The   form   of   the   policy :   statutory   provisions :    standard    policy. 

§  ITGa.  Standard  policy:  constitutional  law:  power  of  legislature  and 
of  commission:  review  by  court:  injunction. 

§  176b.  Standard  policy:  stipulations  contra,  additions,  changes,  etc. 

§  176c.  Standard  policy :  waiver. 

§  17Gd.  Standard  policy  law:   effect  as  to  valued  policy  law. 

§  176e.  Statutory  requirements  as  to  size  of  type,  written  conditions,  etc. 

§  176f.  Standard  policy:  mutual  companies  or  associations:  "special  reg- 
ulations" as  part  of  policy. 

§  177.  The  policy:  what  it  usually  contains:  policy  to  contain  entire 
contract :    statutes. 

§  178.     Execution  of  the  policy. 

§  178a.  Fidelity  bond:  necessity  of  signing  by  employee:  agency:  waiver. 

§  179.     Execution  of  policy :  afifixing  date. 

§  180.     Execution  of  policy :  affixing  seal. 

§  180a.  Life  annuity:  insurance  contract:  non-necessity  of  seal. 

§  180b.  Printed  signature  is  sutficient  to  satisfy  the  statute  of  frauds. 

§  181.     Requisites   of  a  valid   policy. 


CHAPTER  VII. 


CONSTRUCTION— WHAT  IS  PART  OF  THE  POLICY. 

§  185.     What  is  part  of  the  policy:  general  rule:  parol  evidence. 

§  185a.  Same  subject. 

§  186.     W^hen  application  is  part  of  the  policy. 

§  186a.  Same  subject. 

§  187.     When  application  is  not  part  of  policy. 

§  187a.  Same  subject :   subsequent   application. 

§  188.     When  charter  and  by-laws  are  and  are  not  part  of  contract. 

§  188a.  Same  subject. 

§  189.  Effect  of  subsequent  amendment  of  by-laws  or  enactment  of  new 
by-laws. 

§  189a.  Same  subject. 

§  190.  Application  and  by-laws:  when  part  of  contract:  statutory  pro- 
visions. 

§  190a.  Standard  policy:  what  is  part  of  contract:  application,  by-laws, 
etc.,  special  provisions. 

§  190b,  What  is  pa«rt  of  contract:  contract  to  be  plainly  expressed  in  pol- 
icy: policy  to  contain  entire  contract:  statutes. 

§  190c.  State  has  power  to  enact :    such  statutes  constitutional. 

§  190d.  Purpose  or  intent  of  such  statutes. 


xviii  CONTENTS 

§  190e.  Construction  of  such  statutes,  the  policy  and  application  or  con- 
tract. 

§  190f.  Such  statutes  govern  only  relative  rights  of  parties. 

§  190g.  Retroactive  effect   of  such  statutory  requirements. 

§  190h.  Necessity  of  true,  correct,  or  entire  copy  of  application. 

§  190i.    Such  statutes  do  not  apply  to  oral  contracts. 

§  190 j.  Copy  of  application  for  renewal  or  reinstatement  to  be  annexed, 
etc. 

§  190k.  Mere  reference  to  application  insufficient   under  such  statutes. 

§  1901.  Right  of  insurer  to  provide  forms  of  application  under  such  stat- 
utes. 

§  190m.  What  is  and  is  not  part  of  contract:  statutes. 

§  190n.  Same  subject :  medical  examination. 

§  190o.  Foreign  contracts:  effect  of  statutes. 

§  190p.  What  companies  or  associations  are  within  such  .statutes. 

§  190q.  Failure  to  comply  with  such  statutes  does  not  preclude  defenses 
based  upon  policy  alone. 

§  190r,  Application  as  part  of  contract:  statutes:  fraud  as  defense:  mis- 
rejaresentations. 

§  190s.  Conspiracy  a  defense  though  application  not  attacked. 

§  loot.  Waiver  of  statutory  rights  by  insurer  or  insured. 

§  190u.  When  question  whether  copy  of  application  annexed  to  or  in- 
dorsed on  policy  is  for  jury. 

§  191.     When  other  papers  are  and  are  not  part  of  policy. 

§  191a.  Receipt  books,  manuals,  and  schedules  as  part  of  contract. 

§  191b.  Riders  or  slips  as  part  of  contract:  standard  policy. 

§  192.     Whether  prospectus  or  pamphlet  part   of  policy. 

§  193.     Same  subject :  the  cases. 

§  194.  Whether  common  or  statutory  law  part  of  contract:  city  ordi- 
nances or  local  laws. 

(a)  City  ordinances  or  local  laws. 

(b)  Statutes  relating  to  foreign  insurance  companies. 

(e)  As  to  prospective  or  retroactive  statutes,  or  in  case  of  re- 

peal or  amendment, 
(d)   As  to  mutual  companies,  benefit  societies  and  the  like, 
(o)    Total  loss:  valued  policy  statutes. 

(f)  As  to  representations  and  warranties. 

(g)  As  to  stipulations  in  tlie  policy  contrary  to  statutory  re- 

quirements, 
(h)    Express   statutory   provisions   making   void   policy  stipula- 
tions contra. 
(i )    As  to  waiver. 
§  191a.  Same  subject:    what  statutes  are  and   are   not    part   of  contract: 

miscellaneous  cases. 
§  195.     Indorsements:    marginal   references:    when   part    of   policy:    when 
not. 


CONTENTS  xix 

§  105a.  Same  subject. 

§  196.     Indorsements  continued:  conditions  annexed  to  policy,  etc.:  when 

and  when  not  part  of  same, 
(a)    Conditions  and  stipulations  when  indorsed  upon  the  back 

of  a  policy. 
§  197.     Whether  premium  note  part  of  policy. 
§  197a.  Same  subject :  statutory  provisions :  standard  policy. 
§  198.     Usage:  how  far  a  part  of  policy. 


CHAPTER  VIII. 


CONSTRUCTION  OF  POLICY. 

§  205.     Construction  generally. 

§  205a,  Recitals:    when  not  conclusive. 

§  20G.     Whether  same  rules  govern  marine,  fire,  and  life  policies. 

§  20Ga.  Rule  as  to  standard  policy. 

§  20Gb.  Where  standard  policy  statute  declares  policy  binding  though 
not  in  form  prescribed. 

§  20Cc.  Rule  as  to  guaranty  or  tidelity,  contract,  credit  guaranty,  title, 
and  employers'  liability  insurance. 

§  207.     Construction:  mutual  companies:  benefit  societies, 

§  208.     Policies  construed  like  other  written  contracts. 

§  209.     Construction :  intention  of  parties  governs. 

§  209a.  Same  subject :  cases  generally, 

§  209b.  Same  subject:   construction  of  warranties. 

§  209c.  Same  subject:  application,  proposal,  policy,  etc. 

§  209d,  Contemporaneous  agreements. 

§  210.  Construction:  reference  must  be  had  to  nature  of  risk  and  sub- 
ject-matter. 

§  211.     Construction  must  be  reasonable. 

§  212.     Contract  should  be  given  effect  if  possible. 

§  213.     Construction :  rejection  of  words  and  clauses, 

§  214.     General  and  special  clauses. 

§  214a.  General  provisions  not  rcfen-ed  to  in  separate,  independent  para- 
graph nor  limited  by  prior  clause :  accident  policy. 

§  215.     Construction  will  be  given  to  uphold  the  law. 

§  216.     Words  are  to  be  construed  in  ordinary  and  popular  sense, 

§  217.     Construction :  technical,  etc.,  words. 

§  218.     Addition  of  words   by  construction. 

§  219.     Courts  cannot  extend  or  enlarge  by  construction. 

§  220.     Forfeitures  and  exceptions  not  favored  by  construction. 

§  220a.  Same  subject:  benefit  certificates. 


XX  CONTENTS 

§  220b.  Same  subject:  guaranty  or  fidelity  insurance:  employers'  liability 

policy. 
§  221.     Construction  should  be  liberal  in  favor  of  assured  and  for  benefit 

of  trade. 
§  221a.  Same  subject. 

§  221b.  Same   subject :   kinds   of   insurance   to   which   rule   applicable. 
§  222.     Same  subject:  the  rule  contra  proferentem. 
§  222a.  Same  subject. 

§  222b.  Same  subject:  employers'  liability  policy. 

§  222e.  Same  subject :  accident  policy  under  workmen's  compensation  act. 
§  222d.  Same  subject :   reinsurance. 
§  222e.  Rule  as  to  standard  policy. 
§  223.     The  written  controls  the  printed  part  of  policy. 


§  224 
§  225 
§  226 


§  227 
§  228 
§  229 
§  230 
§  231 


Same  subject :   cases. 

Construction:  lex  loci  contractus. 

Same  subject :  cases. 

Same  subject :  exceptions  to  the  rule. 

Same  subject:  mutual  benefit,  etc.,  societies. 

When  place  where  policy  is  countersigned  is  place  of  contract. 

"When  pla^'e  of  delivery  is  place  of  contract. 

When  place  of  acceptance  and  mailing  is  place  of  contract. 
§  231a.  Lex  loci:   situation  of  insured   property. 
§  231b.  Lex  loci :   fidelity  or  guaranty  insurance. 
§  231c.  Lex  loci :   contracts   by  unauthorized  companies   or  agents. 
§  231d.  Lex  loci :  contract  stipulations. 
§  231e.  Lex  loci:   statutory   provisions. 
§  231f .  Lex  loci :  public  policy :  comity. 
§  231g.  Lex  loci:  rights  of  beneficiaries  or  claimants. 
§  231h.  Lex  loci :   adjustment  of  claim  on   forfeited  policy. 
§  231i.    Lex  loci :  reinstatement,  extension  or  revival  of  policy. 
§  231j.  Lex   loci:   policy   pledged   for  loan:   collateral   note:   capital-stock 

note. 
§  232.     Lex  loci :  assignment. 
§  232a.  Lex  loci:  substituted  policy. 


CHAPTER  IX. 


CONSTRUCTION— USAGE. 

§  237.  LTsage  generally. 

§  238.  L'sage  part  of  the  common  law. 

§  239.  Presumption  as  to  knowledge  of  usage.. 

§  240.  Usage  must  be  general. 


CONTENTS  XXI 

§  241.  Usage  must  be  well  established  and  notorious. 

§  242.  Usage  may  be  of  recent  origin. 

§  243.  Usage  must  be  reasonable. 

§  244.  Usage  must  be  uniform. 

§  245.  Parties   may  by  express  contract  include   or  waive  usage. 

§  246.  Usage  admissible  where  contract  ambiguous  or  obscure. 

§  247.  Usage  inadmissible  to  contradict   or  substantially  vary   the  plain 

terms  of  policy. 

§  248.  Same  subject:  cases  and  authorities. 

§  249.  Whether  usage  controls  the  plain  and  legal  import   of  words  of 

the  policy. 

§  250.  Same  subject:  opinions  and  cases. 

§  251.  Same  subject:  conclusion. 

§  252.  Usage  cannot  legalize  an  illegal  act. 

§  253.  General  usage  may  be  controlled  by  evidence  of  a  different  usage. 

§  254.  Usage  controls  implied  limitations. 

§  255.  Usage  of  another  similar  trade  or  place  or  of  another  company. 

§  256.  Evidence   of   usage:   liberal   construction. 

§  257.  What  is  sufficient  evidence  of  usage. 
§  258.     Evidence  of  usage,  when  admissible:  cases.  \ 

§  259.     Evidence  of  usage,  when  inadmissible:  cases. 


CHAPTER  X. 


THE  POLICY— ALTERATION  AND   MODIFICATION. 

§  265.     Material  alteration  without  consent  avoids  contract. 

§  266.     Immaterial  alteration  does  not   avoid  contract. 

§  267.     Alteration  when  contract  is  inchoate. 

§  268.     Alteration  by  a  third  party. 

§  269.     Alteration  by  the  insurer. 

§  269a.  Substitution  of  corrected   policy  by  insurer. 

§  270.     Material  alteration  of  policy  may  be  made  by  consent. 

§  271.     Same  subject:   decisions. 

§  271a.  Alteration   of   certificate   of   membership:    consent. 

§  272.     Alteration  of  contract  by  parol. 

§  273.     Same  subject:  decisions. 

§  274.     Alteration   with  intent  to  obtain  insurer's  consent. 

§  275.     Same  subject:  decisions. 

§  276.     Alteration:  substitution  of  parties. 

§  276a.  Alteration   or  modification   of  standard   policy. 


xxii  CONTENTS 

CHAPTER  XI. 

WAR— ALIEN  ENEMIES. 

§  281.  Effect  of  war  generally. 

§  282.  Insurances  on  enemies'  property  formerly  upheld. 

§  283.  Insurances  on  enemies'  property  now  illegal. 

§  284.  Same  subject :   early  decisions. 

§  285.  Trading  with  enemy :   mistake  or  ignorance  no  excuse. 

§  286.  Defense  of  alien  enemy. 

§  287.  Binding  force  here  of  laws  of  belligerent   nations. 

§  288.  Alien   enemies:   life  insurance. 

^  289.  Effect  of  war  on  pre-existing  valid  contract. 

§  290.  Same  subject :   loss  before  war. 

§  291.  Same  subject :   that  war  merely  suspends  the  contract. 

§  292.  Right  of  citizen  to  bring  property  from  enemy's  country. 

§  29;i.  War :  license  to  trade, 

j:;  294.  Wlijo  are  alien  enemies:    domicil. 

§  295.  Alien  enemy:  what  constitutes  domicil. 

§  296.  Residence  with  intent  to  return. 

§  297.  Change  of  domicil. 

§  298.  Alien  enemy :  what  is  enemy's  country. 

§  299.  Alien  enemy :   commencement   and  cessation  of  hostilities. 

§  299a.  Alien  enemy:   intention  to  subsequently  wage  war. 

§  299b.  Alien    enemies:    status   of:    power   of   government    over:    acts    of 
Congress:  effect  of  war  declaration. 


TITLE  IV. 

PARTIES— AGENTS— BENEFICIARIES. 

CHAPTER  XII. 

PARTIES  TO  THE  CONTRACT— THE  INSURED. 

§  305.     Who  may  be  parties  to  the  contract. 
§  300.     Who  are  not  parties. 


CONTENTS  xxiii 

§  306a.  Parties:  husband  or  wife. 
§  307.     Parties:  infants. 
§  307a.  Same  subject:   statutes. 
§  307b.  When  infant  bound. 

§  307c.  Corporation  or  partnership  as  party  insured. 
§  307d.  Municipal  corporation  as  party  insured. 

§  307e.  Parties:  employees  under  employers'  liability  and  fidelity  or  guar- 
anty insurance. 
§  308.     When  aliens  may  be  insured, 
§  300.     Relations  of   insurer  and   insured. 
§  309a.  Same  subject:  title  guaranty. 
§  309b.  Relation  of  insured  to  each  other. 
§  310.     Name  of  assured  need  not  be  set  out  in  policy. 
§  311.     Names:  evidence  admissible  to  show  actual  party  in  interest. 


CHAPTER  XIII. 


PARTIES— MEMBERS   OF  MUTUAL  INSURANCE   COMPANIES, 
MUTUAL  BENEFIT,  ETC.,  SOCIETIES. 

§  316.     Parties:    members    of    mutual    insurance    companies    and    mutual 

benefit  societies. 
§  317.     Membership  exists  when  contract  is  completed. 
§  318.     Obligations  and  rights  of  members  generally. 
§  318a.  Same  subject:  title  to  company's  property. 
§  318b.  Property  rights  of  company  and  members:  constitutional  law. 
§  319.     Relations  of  members  of  mutual  companies:    partnership. 


CHAPTER  XIV. 


PARTIES— THE  INSURER. 

§  325.     Insurer  defined. 

§  326.     Stock  insurance  companies  defined. 

§  327.     Legislation    concerning   insurance    companies. 

§  328.     Same  subject:  foreign  companies. 

§  328a.  State  regulation :  insurance  business  as  franchise. 

§  328b.  State  regulation :  quasi  public  character  of  insurance  business. 


xxiv  CONTENTS 

§  329.  Foreign  company:  retaliatory  and  anti-compact  laws:  combina- 
tions to  control  rates. 

§  329a.  Anti-compact  laws:  combinations  to  control  rates  continued:  con- 
spiracy. 

§  330.     Foreign  companies:  what  constitutes  "doing  business,"  etc. 

§  330a.  Same  subject. 

§  331.  Foreign  company  estopped  to  avoid  contract  by  setting  up  non- 
compliance with  statutes. 

§  332.  Wlien  contracts  valid  although  company  has  not  complied  with 
statutes. 

§  332a.  Same  subject. 

§  332b.  Same  subject:  insurance  in  foreign  state  of  property  in  another 
state. 

§  333.  When  contracts  not  valid  where  company  has  not  complied  with 
statutes. 

§  333a.  Same  subject. 

§  333b.  Same  subject. 

§  334.     Charter:  corporate  powers:  ultra  vires. 

§  334a.  Same  subject:  power  of  corporation  to  insure  life  of  its  president. 

§  335.     Forfeiture  of  charter. 


CHAPTER  XV. 


INDIVIDUALS,  UNINCORPORATED  ASSOCIATIONS,  LLOYDS, 

PARTNERSHIPS. 

§  335a.  English  and  American  Lloyds  systems  compared. 

§  335b.  Individuals,  unincorporated  associations)  Lloyds:   Alabama. 

§  335c.  Same  subject :  Florida. 

§  335d.  Same  subject:  Georgia. 

§  335e.  Same  subject:  Illinois. 

§  335f .  Same  subject :  Kentucky. 

§  335g.  Same  subject:  Massachusetts. 

§  335h.  Same  subject :  Minnesota. 

§  335i.    Same  subject :  Mississippi. 

§  335j.    Same,  subject :  Missouri. 

§  335k.  Same  subject :  New  Jersey. 

§  3351.    Same  subject :  New  York. 

§  335m.  Same  subject :  Ohio. 

§  335n.  Same  subject :  Pennsylvania. 

§  335o.  Same  subject :  decisions  inf erentially  bearing  thereon. 

§  335p.  Partnerships  as  insurers. 


CONTENTS  XXV 

CHAPTER  XVI. 

DIFFERENT  FORMS   OF  INSURANCE   CLASSIFIED. 

§  33G.     Policy  against  railroad  .liability  for  fires  is  fire,  not  guaranty,  in- 
surance. 

§  336a.  Whether   inter-insurance    or   inter-indemnity    plans   are   insurance 
contracts. 

§  336b.  Same  subject:  agreement  between  printing  companies. 

§  336c.  When  copartnership  agreement  is  life  insurance. 

§  336d.  Burial  or  funeral  benefit  insurance  is  life  insurance. 

§  336e.  Whether  annuities  are  life  insurance. 

§  336f.  Endowment:   pure  endowment  and   annuity   contracts. 

§  336g.  To  what  extent  tontine  insurance  is  life  insurance. 

§  337.     Whether  contract  one  of  loan  or  of  life  insurance. 

§  337a.  Other  instances  of  what  is  and  is  not  life  insurance. 

§  337b.  Whether  policy,  life  or  accident :  generally. 

§  337c.  Industrial  insurance  with  provisions  as  to  accidental  death  is  not 
accident    insurance. 

§  337d.  Newspaper  contract  may  constitute  an  accident  policy:  ultra  vires. 

§  337e.  Employers'  liability  or  indemnity  insurance. 

§  338.     Insurance  of  and  by  carriers:  agreement  of,  to  procure  insurance. 

§  338a.  Burglary  insurance. 

§  338b.  What  is  not  insurance  on  automobiles. 

§  338c.  When  bicycle  association  not  insurance  company. 

§  338d.  Sanitary  inspection   of  buildings,   etc.,  is  not  insurance. 

§  338e.  Contracts   to   compensate   unemployed   employees. 

§  339.     When  guarantee  or  surety  company  contracts  constitute  insurance. 

§  339a.  Fidelity  guaranty  bonds  or  contracts  constitute  insurance. 

§  339b.  Same  subject. 

§  339c,  Contract  to  indemnify  "assured"  for  bank's  default  is  contract  of 
insurance:  bond  to  secure  deposits. 

§  339d.  WHien  contract  guaranty,  bond,  mortgage,  and  securities  guaranty, 
do  and  do  not  constitute  insurance. 

§  339e.  Guarantee  to  repay  loan  is  contract  of  insurance. 

§  339f.  When  building  contractors'  bonds  are  insurance  contracts. 

§  339g.  Title  guaranty  contract  constitutes  insurance. 

§  339h.  Credit  guaranty  contracts  constitute  insurance. 

§  339i.  Loss  of  crops:  guarantee  of  realty  revenue  constitutes  insurance. 


xxvi  CONTEXTS 

CHArXER  XVII. 

PARTIES— MUTUAL  COMPANIES,  BENEFIT,  ETC.,  SOCIETIES. 

§  340.     Mutual   insurance  benefit,   etc.   companies   or   associations   defined. 

§  341.  Mutual  and  benefit,  etc.  companies  or  associations:  capital  stock: 
funds  for  payment  of  losses:  guaranty  or  reserve  funds. 

§  341a.  Same  subject. 

§  342.     Kinds  of  mutual  insurance  companies  or  associations. 

§  343.     Plans  of  mutual  insurance. 

§  344.  When  mutual,  etc.  societies  or  associations  are  and  are  not  insurance 
companies. 

§  344a.  Same  subject :  pecuniary  profit  as  a  factor. 

§  344b.  Same  subject :  pecuniary  profit  as  a  factor :  lodge  systems. 

§  344c.  Same  subject:  lodge  system   continued. 

§  344d.  Same  subject :  pecuniary  profit  as  a  factor :  masonic  benevolent  or 
relief  associations. 

§  344e.  Same  subject :  rules  of  construction  as  a  factor. 

S  344f .  Same  subject :   attachment   of  copy   of   application   or  by-laws. 

>5  344g.  Same  subject:  other  insurance  as  a  factor. 

§  344h.  Same  subject :  liabilitj^  as  a  factor. 

§  344i.  Same  subject:  applicability  of  insurance  laws:  statutory  exemp- 
tions. 

§  344j.  Applicability  of  insurance  laws  continued :  right  to  do  business  as  a 
factor. 

§  344k.  Applicability  of  insurance  laws:  live  stock  association. 

CHAPTER  XVIII. 


PARTIES— MUTUAL  COMPANIES,  BENEFIT,  ETC.,  SOCIETIES, 

CONTINUED. 

§  345.     What  societies  or  associations  are  not  insurance  companies:  cases. 

§  34G.     What  societies  or  associations  are  insurance   companies :   cases. 

§  346a.  Same  subject. 

§  346b.  Whether  co-operative  or  assessment  plan  or  old  line  company: 
distinctions. 

§  346e.  Whether  comiiany  fraternal  beneficial  association  or  mutual  assess- 
ment company:  distinctions. 

§  346d.  Whether  sick  benefit,  burial,  and  beneficial  association  an  insur- 
ance company. 


CONTENTS  .xxyii 

§  346e.  Whether   railroad   relief   associations    are  insiiranee    companies. .. 

§  346f.  Stock   associations   with   beneficiary   fund  not   an   insurance   com- 
pany. 


CHAPTER  XIX. 


PARTIES— MUTUAL    COMPANIES,    BENEFIT,    ETC.,    SOCIETIES, 

CONTINUED— POWER  S. 

§  350.  Power  of  mutual  companies,  societies,  or  associations  affecting 
the  contract :  ultra  vires. 

§  350a.  Same  subject :  power  as  to  membership. 

8  350b.  Same  subject:   power  to  classify  members:   discrimination   as   to. 

§  350c.  Same  subject:  power  to  restrict  or  extend  classes  of  beneficiaries. 

§  350d.  Same  subject:  limitation  of  amount  of  risk. 

§  350e.  Same  subject:  limiting  liability  as  to  premiums  and  assessments. 

§  350f.  Same  subject:  contract  to  return  dues. 

§  350g.  Same  subject :  paid-up  or  extended  insurance :  non-f orf eitable  and 
incontestable  insurance. 

§  350h.  Same  subject:  waiver  by  association,  or  mutual  benefit  company. 

§  350i.    Same  subject:  estoppel:  defense  of  ultra  vires. 

§  350j.    Same  subject:  reinsurance. 

§  350k.  Same  subject :  power  as  to  other  business  or  risks. 

§  3501.    Same   subject :    contract   with    amusement    company   valid. 

§  350m.  Same  subject :  when  company  or  society  can  change  plan :  im- 
pairment  of   obligation   of  contract. 

§  350n.  Same  subject:   when   company   or  society  cannot  change   plan. 

§  350o.  Same  subject:  when  change  from  mutual,  etc.,  to  joint-stock  or 
stock  plan  can  be  made. 

§  350p.  Same  subject:  when  change  from  mutual,  etc.,  to  joint-stock  or 
stock  plan  cannot  be  made. 

§  350q.  Right  to  convert  friendly   society  into  company:   injunction. 

§  350r.  Same  subject :  consolidation  or  merger. 

§  350s.  Same  subject :  reincorporation  or  reorganiation  of  mutual  com- 
pany on  stock  plan. 

§  350t.  Same  subject:  reorganization  or  reincorporation:  impairment  of 
obligation  of  contract. 

§  351.     Same  subject :  guaranty  or  reserve  fund. 

§  351a.  Same  subject:  guaranty  or  reserve,  ''mortuary  reserve,"  "death 
benefit,"   "reserve   and   emergency,"   funds:   trust   funds. 

§  352.  Benevolent  and  fraternal  organizations  subject  to  laws  of  state 
and  jurisdiction  of  courts:  conditions  precedent  to  resort  to 
courts.  .i 


xxviii  CONTENTS 

§  352a.  Same  subject. 

§  352b.  Same   subject:    strict    construction   of   such    conditions    precedent. 

§  352c.  Same  subject:  Kelly  v.  Trimont  Lodge. 

§  353.  Absolute  right  to  become  member  under  charter  of  mutual  com- 
pany. 

§  354.  Contributions  by  subordinate  lodge  to  supreme  lodge:  specific 
purpose:  power  of  disposal  of  funds. 

§  354a.  Right  of  subordinate  circles  or  lodges  to  funds:  rights  of  member 
who  has  withdrawn. 

§  354b.  Funds  of  subordinate  circle  or  lodge:  trust  funds:  cannot  be  di- 
verted. 

§  354c.  Duty  of  association  to  protect  subordinate  circle's  funds  against 
diversion. 

§  355.     Effect  of  decisionr  by  official  body  created  by  constitution  of  order. 

§  356.     Delegation   of   jiower   by   supreme   lodge:   mutual   benefit    society. 

§  357.  Subordinate  association  cannot  be  deprived  of  charter  without 
hearing. 

§  358.  Member  or  officer  of  benevolent  association  cannot  be  expelled 
without  hearing. 


CHAPTER  XX. 


MUTUAL  COMPANIES,  BENEFIT,  ETC.,  SOCIETIES— BY-LAWS. 

§  364.  Definition  of  by-laws. 

§  365.  Power  to  enact  by-laws  inherent :  how  exercised. 

§  365a.  Same  subject. 

§  365b.  When  statutory  power  to  adopt  by-laws  is  exclusive. 

§  365c.  Association  may  be  estopped  to  assert  by-law  not  properly  adopted, 

§  366.  Charter  provisions  concerning   by-laws. 

§  367.  Adoption  of  by-laws  by  custom  or  usage. 

§  368.  Incorporated  societies :  unreasonable  by-laws. 

§  369.  Unincorporated    societies :    unreasonable    by-laws. 

§  369a.  When  by-laws  reasonable:  continued. 

§  369b.  Same  sul)ject :  police  power. 

§  369c.  When  by-laws  unreasonable:  continued. 

§  369d.  When  member  bound  by  unreasonable  by-laws. 

§  370.  By-laws   must   not   be    unequal:    discrimination. 

§  371.  By-laws,  rules,  and  regulations :   when  valid. 

§  371a.  By-law  providing  wedding  gift  valid :   ultra  vires. 

§  371b.  When   by-laws  invalid. 

§  371c.  By-laws  valid  in  part  and  void  in  part. 

§  372.  By-laws  excluding  resort  to  civil  courts :  constitutional  provisions. 


CONTENTS  xxix 

§  372a.  Same  subject:   when  courts  will  not  intervene:   decisions. 

§  372b.  Same  subject:   when  courts  will   intervene:   decisions. 

§  373.  By-laws  must  not  be  contrary  to  laws  of  state  or  United  States. 

§  374.  By-laws  against  public  policy  are  void. 

§  375.  By-laws   must   not   contravene   terms   of   charter,   constitution,   or 

articles  of  association. 

§  376.  Enforcement  of  by-laws:  penalty. 


CHAPTER  XXI. 


MUTUAL  COMPANIES,  BENEFIT,  ETC.,  SOCIETIES— CHANGE  OF 
BY-LAWS,  ETC.— CONSTRUCTION. 

§  377.     Power  to  alter  or  change  by-laws. 

§  378.     By-laws,  constitutions,  etc.:  changes,  how  made. 

§  378a.  Same  subject. 

§  378b.  Same  subject :   requirements  as  to  notice. 

§  378c.  Same  subject:  delegation  of  power. 

§  378d.  Same  subject:  adoption  of  committee's  report:  validating  unau- 
thorized by-laws. 

§  378e.  Same  subject:  right  to  exercise  powers  outside  state  of  incor- 
poration. 

§  379.     By-laws : '  statutory    or    charter    power    to    repeal,    change,    etc. 

§  379a.  By-laws,  constitution,  etc.:  amendments,  changes,  or  repeal  under 
reserved  power  or  agreement. 

§  379b.  Same   subject:    decisions   holding   amendments,   etc.,    binding. 

§  379c.  Same  subject:  decisions  holding  amendments,  etc.,  not  binding. 

§  379d.  Same  subject:   prohibiting  extra-hazardous  occupation. 

§  379e.  Same  subject:  prohibiting  engaging  in  liquor  or  saloon  business. 

§  379f.  Same  subject:  prohibiting  use  of  intoxicating  liquors  or  drugs. 

§  379g.  Same  subject:   accidental  injuries:   total  disability. 

§  379h.  Same  subject:  deficiency  or  reserve  assessments:  delinquent  as- 
sessments. 

§  379i.    Same  subject:  time  limitation  for  suing. 

§  379j.    Same  subject:  as  to  remedies  within  association. 

§  379k.  Amendments,  changes,  or  repeal  must  be  reasonable  even  under 
reserved  power  or  agreement. 

i>  3791.    Reasonable  amendments,  etc.,  Ijindiiig. 

§  379m.  When  amendments,  etc.,  are  reasonable. 

§  379n.  When  amendments,  etc.,  are  unreasonable. 

§  379o.  Amendments  or  changes  must  not  operate  retroactively:  reserved 
right  or  agreement  to  amend  or  change:  vested  rights. 

§  379p.  Same  subject. 


■XXX  CONTENTS 

§  379q.  Same  subject:  instances. 

§  380.     Change  of  by-laws,  etc.:  vested  right. 

§  380a.  Same  subject. 

§  380b.  Same  subject :   instances. 

§  380c.  Same  subject :  changes  in  by-laws,  etc. :  increasing  assessments  or 
dues  or  reducing  amount  payable. 

§  380d.  Same  subject :  changes  in  "by-laws,  etc.,  to  prevent  financial  disas- 
ter or  dissolution. 

§  380e.  Same  subject:  classification  of  risks:  discrimination. 

§  380f.  Right  of  member  or  beneficiary  to  object  to  amendmento :  waiver 
or  estoppel. 

§  380g.  Same  subject:  when  waiver  or  estoppel  not  applicable. 

§  380h.  Waiver  by  or  estoppel  against  association,  society,  etc.,  or  ofTicers 
thereof:  amendments. 

§  381.     Construction   of   by-laws. 


CHAPTER  XXII. 


AGENTS    OF    INSURER— APPOINTMENT,    ETC.— POWERS. 

§  386.     Corporations  act  through  agents. 

§  387.     Charter   provisions   concerning  agents. 

§  388.     Who  are  insurance  agents. 

§  389.     Classification  of  agents, 

§  390.     Appointment  of  agents. 

§  391,    Appointment  of  agents:  statutes. 

§  391a.  Statute  confining  business  of  agent  or  broker  to  certai  class,  un- 
constitutional. 

§  392.     Appointment  of  agents:  territory:   contract   wi.;    principal. 

§  393.     Relative  power  of  agents  of  stock  and  mutual  companies. 

§  394.     Same  subject:  powers  after  completion  of  contract, 

§  395.     Who  is  general  agent. 

§  395a.  Same  subject. 

§  396.     Power  of  agents  to  delegate  authority. 

§  397.  Officers  of  insurance  corporations  and  associations  and  their  pow- 
ers. 

§  398.     Powers  of  officers  of  mutual  benefit  societies, 

§  399.     Powers  of  president. 

§  400.     Powers  of  vice-president. 

§  401.     Powers  of  secretary. 

§  402.     Powers  of  assistant  secretary. 

§  403.     Powers  of  treasurer. 

§  404.     Powers  of  directors. 


CONTENTS  xxxi 


§  405.  Powers  of  superintendent. 

§  406.  Powers  of  g-eneral  managers. 

§  407.  Agency  of  subordinate  lodges. 

§  407a.  Same  subject. 

§  408.  Agency  arising  from  necessity  or  emergency. 

§  409.  Agent  delegated  for  special  purpose. 

§  410.  Agency:  person  referred  to  by  company. 

§  411;  Powers  of  clerk. 

§  412.  Powers  of  medical  examiner. 

§  413.  Whether  one  is  agent  or  broker. 

§  414.  Whether  broker  is  agent  of  insured  or  insurer. 

§  415.  Partnership  as  agent:  joint  agents. 

§  416.  Powers   of   adjuster. 

§  416a.  Fidelity  bond :  when  not  obligor's  agent. 


CHAPTER  XXIII. 


AGENTS  OF  INSURER-POWERS,  CONTINUED. 

§  424.     Powers  of  agents:  generally. 

§  425.     Authority  which  the  agent  is  held  out  to  possess. 

§  426.     Agent's  authority  is  coextensive  with  his  employment. 

§  427.     Authority  which  the  agent  represents  himself  to  possess. 

§  428.     Private  restrictions  upon  agent's  authority. 

§  428a.  Same  subject:  subagents.  ^ 

§  429.     Assured  bound  by  knowledge  of  limitations  upon  agent's  authority. 

§  430.     Obligation  to  inquire  as  to  agent's  authority. 

§  431.     What  is  not  notice  of  agent's  limited  authority. 

§  432.     Stipulation  that  only  certain  agents  may  waive. 

§  433.     Limitation  of  agent's  authority  in  policy  is  valid. 

§  433a.  Statutory  provisions:    waiver:    standard  policy. 

§  434.     Authorities  holding  that  restrictions  in  policy  on  agent's  authority 

bind  insured. 
§  434a.  Same  subject. 
§  435.     Restrictions  in  policy  as  to  the  manner  of  exercising  authority  by 

agent. 
§  436.     That  restrictions  in  policy  on  agent's  powers  only  relates  to  acts 

after  policy  delivered. 
§  436a.  Same  subject. 
§  437.     That  restrictions  in  policy  on  agent's  powers  only  relate  to  acts 

before  loss. 
§  438.     That  restrictions  in  policy  on  agent's  powers  are  only  prima  facie 

binding. 


xxxii  CONTENTS 

§  439,     Conclusion :   agent  may  waive  conditions  notwithstanding  inhibition 

in  policy. 
§  440.     Opinions  of  courts  upon  waiver  and  estoppel :   agents. 
§  440a.  Same  subject. 

§  441.     Restrictions  in  policy :    oral  waiver. 
§  442.     Same  subject :  cases  contra. 

§  442a.  Waiver:  officers  or  agents  of  subordinate  lodges. 
§  443.     Where  agent  promises  to  make  proper  indorsement  on  policy,  but 

fails  to  do  so. 
§  444.     Restrictions  in  application  on  agent's  authority. 
§  445.     Agency :  custom,  etc. :  course  of  business :  similar  acts. 
§  446.     Agency :  custom :  signing  for  principal. 
§  447.     Agency:  custom,  etc.:  waiver  of  conditions. 
§  448.     Agency :  custom :  alteration  of  contract. 
§  449.     Agency :  custom,  etc. :  submission  to  award. 
§  450.     Agency :  custom :  proofs  of  loss. 
§  451.     Agency :  custom,  etc. :  surrender  of  policy. 
§  452.     Agency :  custom :  transfer  of  insurance. 
§  453.     Agency :  custom,  etc. :  negotiation  of  drafts. 
§  454.     Agency :  custom,  etc. :  cancelation  of  policy. 
§  455.     Ratification  of  agent's  acts:  generally. 
§  455a.  Same  subject. 

§  456.     Ratification  of  agent's  acts  operates  retroactively. 
§  457.     Ratification  of  agent's  acts  must  be  entire. 
§  458.     Ratification  of  agent's  acts  must  be  one  which  principal  could  have 

authorized. 
§  459.     Ratification  of  agent's  acts:  signing  for  principal. 
§  460.     Ratification  of  agent's  acts :  the  premium. 
§  461.     Ratification  of  agent's  acts:  retaining  benefits. 
§  462.     Ratification  of  agent's  acts:  neglect  to  disaffirm. 
§  463.     Ratification :  agent  must  have  assumed  to  act  for  claimed  principal. 
§  464.     Ratification  of  agent's  acts:    other  insurance. 
§  465.     Power  to  bind  insurance  company  by  contracts  other  than  those 

of  insurance. 


CHAPTER  XXIV. 


AGENTS  OF  INSURER— POWERS  PRIOR  TO  ISSUE  OF  POLICY. 

§  472.     Powers  of  agent  concerning  application :    misrepresentations. 
§  473.     Misrepresentations  of  agent :     continued. 

§  474.    Misrepresentations  by  agent  in  the  application:    statements  made 
warranties. 


CONTENTS  xxxiii 

§  474a.  Same  subject:    medical  examiner. 

§  474b.  Same  subject:    effect  of   signature   of   applicant  at   beginning   of 
examination  papers. 

§  475.     Wbere  true  answers  are  given  but  agent  inserts  different  ones  m 
application. 

§  47ja.  Same  subject. 

§  476.     Same  subject:    cases. 

§  477.     Where  answers  are  unintentionally  incorrect:    agent's  knowledge. 

§  477a.  Where  agent  corrects  old  application  or  tills  in  new  one  therefrom 
or  from  other  applications. 

§  478.     False  answers  by  clerk  of  agent. 

§  479.  Misrepresentations:  application  signed  by  agent  without  applicant's 
authority. 

§  480.     Where  agent  agrees  to  note  fact  in  application. 

§  481.     Omission  or  negligence  of  agent  in  filling  out  application. 

§  481a.  Same  subject. 

§  482.  View  that  not  question  of  waiver  or  estoppel,  but  whether  condi- 
tion attached. 

§  483.     Mistake  of  agent  in  filling  out  application. 

§  484.     Misrepresentations  by  agent  with  full  knowledge  of  facts. 

§  485.     Misrepresentations  by  agent :    applicant  signs  in  blank. 

§  486.  Misrepresentations  by  agent:  application  sent  unsigned  to  com- 
pany. 

§  487.     Where  agent  fills  out  application  without  inquiry  or  of  his  own 

knowledge. 

§  487a.  Question  not  answered  or  imperfectly  answered  and  policy  issued 
without  further  inquiry. 

$5  488.  Where  applicant  has  no  knowledge  of  facts  and  agent  fills  out 
application. 

§  489.  Misrepresentations  by  agent:  where  applicant  signs  application 
without  reading  or  knowing  contents. 

§  489a.  Same  subject. 

^  490.     Misrepresentations  by  agent:    where  applicant  is  illiterate,  etc. 

§  491.     Fraud  of  agent  in  preparing  application. 

§  492.  Agent's  knowledge  of  falsity  or  incorrectness  of  applicant's  state- 
ments. 

§  492a.  Same  subject. 

§  493.     Where  applicant  is  assured  by  agent  that  application  is  correct. 

§  494.     Misrepresentations  by  agent:    insured  may  rescind. 

§  495.     Broker's  misrepresentations:    application. 

§  496.     Oral  application:    agent's  knowledge. 

§  497.     Information  obtained  from  others  by  agent:    application. 

§  498.  Where  agent  writes  down  such  answers  as  he  deems  material: 
application. 

§  498a.  Agent's  construction  of  answers:    application. 


xxxiv  CONTENTS 

§  499.     Where  agent  dictates  or  advises  the  answers :  application. 

§  500.     Where  agent  tells  insured  no  answers  are  necessary :  application. 

§  501.     Policy  issued  on  agent's  representations  or  recommendations. 

§  502.     Where  application  gives  notice  of  agent's  limited  authority. 

§  503.  ^lisrepresentations  by  agent :  copy  of  application  or  by-laws  an- 
nexed to  policy. 

§  504.     Misre^jresentations :    agent's  collusion  with  applicant. 

§  504a.  Same  subject. 

§  505.     Misrepresentation  by  agent :    parol  evidence  admissible. 

§  506.     Same  subject :  the  opposing  view. 

§  507.     Same  subject :  wliere  agent's  authority  is  limited. 

§  508.     Agent  of  insured:  when  such  provision  in  policy  is  inoperative, 

§  508a.  Same  subject :  standard  policy. 

§  508b.  Same  subject:  medical  examiner. 

§  509.     Same  subject :  mutual  companies  and  benefit  societies. 

§  510.  Authority  of  subordinate  officers  of  benefit  association  or  rail- 
road relief  department  to  waive  requirements  as  to  application. 

§  511.     Agents  of  insured :    knowledge  of  insured. 

§  512.     Statutes:    soliciting  agent  is  company's  agent. 

§  512a.  Same  subject. 

§  512b.  Same  subject:  stipulations  conflicting  with  statute. 

§  512c.  Who  are  insurer's  agents :    cases. 

§  513.     Cases  holding  that  agent  is  agent  of  insured. 

§  514.     ^Misrepresentations  of  insurer's  agent  to  induce  insurance. 

§  515.     Notice  to  and  knowledge  of  agent :    generally. 

§  515a.  Same  subject :  rule  applies  to  what  agents. 

§  515b.  Same  subject :  when  certain  agents  not  within  rule, 

§  515c.  Same  subject :  notice  to  one  of  firm  of  agents. 

§  515d.  Same  subject :  brokers. 

§  515e.   Same  subject :  manner,  mode  or  place  of  notice, 

§  515f.  Same  subject :  statutes. 

§  515g.  Same  subject :  when  insurer  bound :  instances. 

§  515h.  Same     subject :  when  insurer  not  bound :  instances. 

§  515i.    Same  subject:  mutual  benefit,  etc.,  societies  or  associations. 

§  516.     Presumption  as  to  agent's  knowledge. 

§  517,     Reformation  of  policy  to  'conform  with  actual  contract. 


CHAPTER  XXV. 


AGENT  OF  INSURER— POWERS— THE  POLICY. 

§  525.     Agent :  power  to  make  oral  contract. 

§  526.     Power  of  agent  to  accept  risks  and  make  contracts. 


CONTENTS  XXXV 

§  526a.  Same  subject:  credit  guarantee  insurance. 

§  527.     Where  contract  of  agent  is  personal. 

§  528.     Power  of  agent  to  subscribe  policy. 

§  529.     Power  of  agent  to  execute  retroactive  policy. 

§  530.     Countersigning  policy  by  agent. 

§  530a.  Same  subject:  mutual  benefit  certificate:  execution  by  subordinate 

officers. 
§  531.     Where  subagent  signs  for  agent. 
§  532.     Signature  of  assured:  waiver  by  agent. 
§  533.     Waiver  and  estoppel  by  acts  of  agents:  generally. 
§  533a.  Same  subject. 

§  533b.  Same  subject:    new  agreement,  consideration  or  estoppel. 
§  533c.   Same  subject :    industrial  insurance  agent. 
§  533d.  Same  subject:  mutual  benefit,  etc.,  companies  or  associations. 
§  534.     Waiver  and  estoppel  by  agent:    conditions  precedent  and   subse- 
quent. 
§  535.     What  agents  may  waive  conditions:    knowledge  before  and  after 

contract  made. 
§  536.     Waiver  of  forfeitures  by  agent:  generally. 
§  537.     Power  of  agent  to  bind  company  by  construction  of  policy :  agent's 

conclusions  or  advice. 
§  537a.  Power  of  attorney-at-law  as  agent  to  estop  insurer  by  advice  to 

insured. 
§  538.     Agent:    power  to  renew. 
§  539.     Revival  of  policy  by  agent. 
§  540.     Power  of  agent  to  orally  waive. 
§  541.     Where  agent  fails  to  take  advantage  of  forfeiture. 
§  542.     Waiver  by  receiving  premium:    agent. 
§  543.     Waiver  by  delivery  of  policy :    agent. 
§  543a.  Same  subject :  agent  of  local  lodge  of  fraternal  order. 
§  544.     Knowledge  not  obtained  in  course  of  agent's  employment. 
§  544a.  Same  subject:  what  evidence  necessary  to  innd  insuier. 
§  545.     What  agent  might  have  learned  by  ordinary  diUgence. 
§  546.     Agent's  knowledge  obtained  in  individual  capacity. 
§  547.     Knowledge  of  company  at  whose  instance  another  company  issues 

policy. 
§  548.     Agent's  power  to  grant  permits  affecting  risk. 
§  549.     Agents:  pov.er  to  alter  policy. 
§  550.     Agents:    powers  in  relation  to  the  premium. 
§  551.     Agent's  authority  to  fix  rates  for  premium. 
§  552.     Agent's  agreement  to  give  notice  wlien  premium  due. 
§  553.     Agent's  authority  in  regard  to  first  and  subsequent  premiums. 
§  554.     Agent's  powers  in  relation  to  premium.s :    what  agent  may  waive. 
§  555.     Agent's  powers  in  relation  to  premium:    when  no  waiver:    cases. 
§  555a.  Same  subject. 


xxxvi  CONTENTS 

§  556.     Agent's  powers:    other  insurance:    waiver, 

§  556a.  Same  subject. 

§  556b.  Statutory  policy:    provisions  as  to  agents  and  waiver  by  failure 

to  cancel :  other  insurance. 
§  557.     Broker :    other  insurance :    waiver, 

§  558.     Agent's  powers :  other  insurance :  when  no  waiver :  instances. 
§  558a.  Same  subject, 

§  559.     Agent's  powers:    change  of  risk:   waiver, 
^  560.     Agent's  powers :  alienation  :  assignment :  waiver. 
§  561.     Alienation :   assignment :   when  company  not  bound  by  agent's  acts. 
§  561a.  Agent's   powers :    alienation :    change  of   interest :    "in   trust   or  on 

commission,  or  sold  but  not  removed :"  chattel  mortgage, 
§  562.     Agent's  powers :    keeping  prohibited  articles :    waiver. 
§  562a.  Agent's  authority:    title  and  interest:    waiver. 
§  563.     Agent's  authority:  encumbrances:  waiver:  instances. 
§  563a.  Same  subject. 

§  564.     Agent's  authority :    encumbrances :    when  no  waiver. 
§  565.     Agent's  authority:    vacant:    unoccupied:    waiver, 
§  565a.  Same  subject. 

§  566.     Agent's  authority :    vacant :    unoccupied :    when  no  waiver. 
§  567.     Agent's  authority:    cancelation. 
§  568.     Agent's  authority:    location  of  property:    removal  of  projDerty. 


CHAPTER   XXVI. 


AGENTS  OF  INSURER— POWERS— THE  LOSS, 

§  575,  Agent's  authority :  notice  of  loss. 

§  576.  Agent's  authority:  what  is  not  sufficient  notice  of  loss. 

§  577.  Misstatements  by  agent  in  proofs  of  loss :    estoppel. 

§  578.  "Where  agent  aids  in  preparing  proofs  of  loss :  waiver. 

§  579.  Agent :   waiver  of  proofs  of  loss :   condition  conflicting  with  settled 

rule  of  law. 

§  580.  Where  formal  proofs  are  waived :   agent. 

§  581.  Delivery  of  proofs  of  loss  to  agent. 

§  582.  Proofs  of  loss :    place  of  delivery :    waiver  by  agent. 

§  583.  What  agent  may  waive  proofs  of  loss,  or  death. 

§  584.  Waiver  by  acts  of  adjuster:    proofs  of  loss  or  death. 

§  584a.  Same  subject. 

§  585.  Where  no  waiver  by  adjuster  of  proofs  of  loss. 

§  586.  Acts  of  agent  in  adjusting  loss:    how  far  binding  on  company. 

§  586a.  Same  subject. 


CONTENTS  xxxvii 

§  587.  What  agent  may  not  waive  proofs  at  loss. 

§  588.  Proofs  of  loss  :   what  is  not  a  waiver :  agent. 

§  589.  Retention  of  proofs  of  loss  by  agent :    failure  to  object. 

§  590.  Proofs  of  loss :    examination  by  agent :    waiver. 

§  591.  Proofs  of  loss :   waiver :  agent's  denial  of  company's  liability :  other 

grounds. 

§  592.  Proofs  of  loss :   delay  caused  by  agent. 

§  593.  Custom  of  other  agents:    proofs  of  loss:    waiver. 

§  594.  Fraud  of  agent  in  inducing  settlement :    waiver :    proofs  of  loss. 

§  595.  Adjustment  of  loss:    agent. 

§  596.  Particular  account :    loss :    waiver  by  agent. 

§  597.  Marine  protest:    waiver:    agent. 

§  598.  Agent's  powers  after  loss:    generally. 

§  599.  Fraud  of  agent :    settlement:    award:    assignment. 

§  600.  Agent's  authority :  arbitration  :  appraisement. 

§  601.  Agent's  ^authority:    subrogation. 

§  602.  Agent's  authority:    time  limit  for  suing:    waiver. 

§  603.  Abandonment   to  insurer's  agent. 


CHAPTER   XXVII. 


AGENT  OF  INSURED. 

§  608.  Agent  of  insured:    authority,  how  conferred. 

§  608a.  Power  of  attorney:    power  to  hypothecate  policy. 

§  609.  Right  of  general  or  special  agent  to  insure. 

§  610.  Agency  arising  from  situation  with  reference  to  the  property. 

§  611.  Agency  may  be  created  by  possession  of  the  policy. 

§  612.  Agency:    possession  of  written  application. 

§  613.  Agent  with  general  power  to  insure:  mutual  company. 

§  614.  Authority  of  partner. 

§  615.  Authority  of  part  owner. 

§  616.  Authority  of  joint  owner. 

§  617.  Authority  of  tenant  in  common. 

§  618.  Authority  of  ship's  husband. 

§  619.  Agent  effecting  insurance  "for  whom  it  may  concern." 

§  620.  Right  of  agent  to  insure  in  case  of  emergency. 

§  621.  Agency  arising  from  custom  or  course  of  dealing. 

§  622.  Del  credere  agents. 

§  623.  Insurance  by  factors. 

§  624.  Supercargo:  power  to  insure. 

§  625.  Authority  of  commission  merchants:    consignees. 

§  626.  Bailee  mav  effect  insurance:    warehouseman. 


xxxviii  CONTENTS 

§  626a.  Authority  of  bailee  or  agent  in  possession. 
§  627.     Authority  of  trustees. 

Treasurer  of  local  lodge  may  be  trustee. 

Authority  of  prize  agents  to  insure. 

Agent :   insurance  by  carrier. 

Where  husband  acts  as  agent  of  wife. 

Insured's  agent :   adjustment  of  loss. 

Authority  of  insured's  agent  as  to  proofs  of  loss  or  death. 

Authority  of  agent  to  make  abandonment:    master. 

Broker  not  agent  of  insurer  to  receive  notice  of  transfer  of  policy. 

Agent  or  broker  procuring  insurance  cannot  cancel. 

Notice  of  cancelation  to  agent  or  broker  procuring  insurance  in- 
sufficient. 

Same  subject. 

Cancelation :  condition  that  notice  be  given  party  procuring  insur- 
ance':   provision  that  agent,  etc.,  is  insured's  agent. 
§  639.     Cancelation :  when  notice  to  insured's  agent  or  broker  is  sufficient. 
§  639a.  Same  subject :    where  agency  is  general  as  to  insured's  business. 
§  639b.  Notice  of  cancelation  by  or  to  agent  or  broker  of  insured :    whether 
cjue^tion  for  jury. 

Cancelation  :   agent  of  both  parties. 

Agents  of  insured :    cancelation:    custom. 

Ratification  by  insured  of  agent's  acts:    waiver. 

Concealment  by  assured:    general  rule. 

Concealment  by  principal  from  agent  to  effect  insurance. 

Concealment  by  principal  from  general  agent. 

Concealment  by  agent  or  broker  to  effect  insurance. 

Concealment  by  agent  other  than  one  to  effect  a  policy. 

Concealment  where  agency  has  ceased. 

Concealment  by  agent :    false  advices :    loss  by  another  peril. 

Degree  of  diligence  required  to  communicate  information :    agent. 


§ 

028. 

§ 

629. 

§ 

630. 

§ 

631. 

§ 

632. 

§ 

633. 

§ 

634. 

§ 

635. 

§ 

636. 

§ 

637. 

§ 

637a 

§ 

638. 

§ 

640. 

§ 

641. 

§ 

642. 

§  643. 

§ 

644. 

§ 

645. 

§ 

646. 

§ 

647. 

§ 

648. 

§ 

649. 

§ 

650. 

■"o"- 


CHAPTER  XXVIII. 


AGENTS— DUTIES— LIABILITIES. 

§  655.  Duties  of  agents:    generally. 

§  656.  Duties  of  insurer's  agents:    generally. 

§  657.  Duty  of  agent  of  insured :    generally. 

§  658.  Duty  of  agent  to  inform  principal. 

§'659.  Effect  on  insured  of  agent's  neglect  of  duty  to  insurer. 

§  660.  Agent  cannot  issue  policy  to  himself. 

§  661.  Agent  cannot  act  for  both  parties. 


CONTENTS  xsxix 

§  662.     Same  subject:    exception  to  rule. 

§  663.     Agent  should  notify  principal  of  refusal  to  accept  order. 

§  664.     Agent  should  notify  principal  of  failure  to  effect  insurance. 

§  665.     Agent  must  follow  instructions. 

§  665a.  Same  subject. 

§  666.     Same  subject :    instructions  to  cancel. 

§  667.     Where  agent's  orders  vest  him  with  a  discretion. 

§  668.     When  agent  is  excused  for  noncompliance  with  instructions. 

§  669.     Duty  to  insure. 

§  670.     Agent's  duty:    more  advantageous  terms. 

§  671.     Where  agent  departs  from  usage  or  usual  form  of  the  policy. 

§  672.     Duty  as  to  premium. 

§  673.     Duty  as  to  subagent. 

§  674.     Degree  of  skill  required  from  agents. 

§  675.     Duty  to  effect  other  insurance  in  case  of  insurer's  insolvency. 

§  676.     Duty  of  agent  to  settle  loss. 

§  677.     Duty  and  liability  as  to  payment  of  loss:    agent. 

§  678.     Liability  of  agent  or  brokers:  generally. 

§  678a.  Same  subject :    when  agent  not  liable. 

§  678b.  Liability  of  agent  for  subagent's  acts  or  of  broker  for  agent's 
acts. 

§  679.  Neglect  to  effect  a  valid  insurance  policy:  insolvent,  unauthorized, 
nonadmitted  companies. 

§  679a.  Liability  to  insured  of  agent  inducing  insurance  in  insolvent,  un- 
licensed nonadmitted  company:  statute  of  frauds:  defenses. 

§  679b.  Statutory  liability  to  insured  of  agent  procuring  insurance  in 
unauthorized  company:    defenses. 

§  680.     Liability  of  voluntary  or  gratuitous  agent. 

§  681.     Liability  of  agent  or  broker  for  premium. 

§  682.     Liability  for  concealment :    agent. 

§  683.     Liability  of  officers  of  company. 

§  683a.  Same  subject:    mutual  companies  or  fraternal  associations. 

§  683b.  Libel  and  slander  of  agent  or  insurer:  privileged  communications 
of  president  of  association. 

§  684.     Liability  of  company  for  agent's  frauds,  illegal  acts,  etc. 

§  684a.  Same  subject: 


CHAPTER   XXIX. 


AGENTS— RIGHTS  AND  REMEDIES. 

§  690.     Agent's  and  broker's  lien:    when  it  attaches  and  what  it  covers. 
§  691.     Agent's  lien :   assignment  of  policy  by  assured. 


xl  CONTENTS 

§  692.     Lien  of  subagent  or  broker. 

§  693.     How  agent's  lien  may  be  lost  or  waived. 

§  694.     Revival  of  agent's  lien. 

§  694a.  Advances  to  agent  or  subagent:    lien. 

§  69.5.     Agent's  or  broker's  right  to  commissions :    renewal  commissions. 

§  69G.     Subagent's  right  to  commissions:    renewal  commissions. 

§  697.     When  agent  not  entitled  to  commissions  or  renewal  commissions. 

§  697a.  When  subagent  not  entitled  to  commissions  or  renewal  commis- 
sions. 

§  697b.  Same  subject:  contract  procured  jointly  with  or  through  another 
agent. 

§  697e.  Agent's  right  to  commissions :    cancelation :    unearned  premiums. 

§  697d.  Stipulation  not  to  engage  in  business  with  another  company:  for- 
feiture of  renewal  commission. 

§  697e.  Stipulation  that  commissions  shall  not  apply  to  new  forms  of 
policy. 

§  697f.  Agent's  right  to  contingent  commissions :    computation. 

§  697g.  Agent's  right  to  commissions  where  insurer  puts  it  out  of  his 
power  to  pay  them. 

§  697h.  Agent's  right  to  commissions :  deductions :  novation. 

§  697i.  Statutory  limitation  of  expenses  not  retroactive:  commissions: 
reductions :     police   power :    constitutional   law. 

§  697j.  Statute  requiring  license  of  agent  or  broker:  when  commissions 
not  recoverable :    when  recoverable :    unconstitutional  statute. 

§  697k.  When  agent's  right  to  renewal  commissions  assignable :  trustee  in 
bankruptcy. 

§  6971.  Annuity  in  compromise  of  claim  of  manager  for  breach  of  employ- 
ment contract :    priority  over  general  creditors. 

§  697m.  Insurer  not  liable  on  oral  contract  of  precident  to  pay  agent  annu- 
ally for  life. 

§  698.     Rights  of  agents  as  to  the  premium. 

§  699.     Set-off:   agent. 

§  700.     Same  subject :    English  authorities. 

§  701.     Same  subject :    English  and  American  authorities. 

§  702.     Agency:    attorney  of  foreign  company. 

§  703.     Service  of  papers  or  process:    agent  of  foreign  company. 

§  704.     Recovery  back  of  loss  paid  by  company's  agent. 


CHAPTER  XXX. 


AGENTS— RIGHTS    AND   REMEDIES— CONTINUED— TERMINA- 

TION  OF  AGENCY. 


§  705.     Action  against  receiver  by  agent. 


CONTENTS  xli 

§  705a.  Agent's  action  for  damages  for  anticipatory  breach  of  contract. 

§  705b.  Same  subject:  liability  of  purchasing  insurer  to  agent  of  selling 
insurer. 

§  705c.  Action  bj-  agent  for  damages :    breach  of  contract. 

§  705d.  Action  bj'  agent :    overpayments :    time  limitation  in  contract. 

§  705e.  Action  by  agent  for  compensation  for  insurer's  use  of  new  system 
of  soliciting. 

§  706.     Action  against  company  by  average  adjusters. 

§  707.     Indictment  of  agent  for  larceny. 

§  707a.  Indictment  of  agent  for  unlawful  conversion  or  embezzlement. 

§  708.     Action  on  agent's  bond. 

§  709.     Same  subject:    laches  of  principal:    notification  of  sureties. 

§  710.     Action  on  agent's  bond :    prior  defaults. 

§  711.     Action  on  local  agent's  bond. 

§  712.     Action  on  agent's  bond :    defenses. 

§  713.  Actions  against  agents  of  foreign  companies  acting  without  license: 
statutes. 

§  713a.  Same  subject. 

§  714.  When  agent's  right  may  not  be  abridged  though  acting  for  unli- 
censed companj'. 

§  715.     Indictment  of  agent  for  paying  rebate :    statute. 

§  716.     Reformation  of  policy  for  agent's  mistakes,  etc. 

§  717.     Agent's  defenses. 

§  718.     Proof  of  agent's  authority. 

§  719.     Termination  of  agency :    war, 

§  719a.  Termination  by  destruction  of  subject  matter:    earthquake. 

§  719b.  Termination  of  agency :    death. 

§  720.     Termination  of  agency  as  to  assured. 

§  721.     Termination  of  agency  as  to  assurer :  revocation. 


CHAPTER  XXXI. 

BENEFICIARIES— GENERALLY. 

WHO  MAY  BE— INTEREST— DESIGNATION  OF— CHANGE  OF. 

§  727.     ''Beneficiary"  defined :    same,  industrial  insurance. 

§  728.     Beneficiaries,  generally :  designation  of :  specified  classes :  equities. 

§  728a.  Same    subject :     whether    statutes    or    charter    controls :     by-laws : 

same;  foreign  corporation. 
§  729.     Insurable  interest  in  beneficiary :  necessity  of. 
§  729a.  Same  subject. 


xlii  CONTENTS 

§  730.     Interest  of  benefieiary  in  regular  life  policy  is  vested:    cannot  be 
defeated  without  consent. 

§  730a.  When  beneficiary's  vested  interest  under  life  policy  dependent  upon 
its  nonforfeiture. 

§  730b.  Vested    interest    or   beneficiary:     industrial    or   burial    insurance: 
change  of  beneficiary :    payment. 

§  731.     Vested  interest  defeated  by  contract:    right  to  change  beneficiary. 

§  732.     Statements  as  to  beneficiary  in  application. 

§  733.     When  member  may  designate  or  change  beneficiary  by  will. 

§  734.     Disposition  by  residuarj'  clause  of  widow's  will :    statute. 

§  735.     When  member  may  not   desig-nate  or  change  beneficiary  by  will: 
effect  of  designation  by  will. 

§  735a.  Disposal  of  benefit  certificate  by  will. 

§  736.     Right  of  insured  under  regular  life  policy  to  dispose  of  same  by 
will. 

§  737.     Who  may  be  benefieian.^ :  order  of  Knights  of  Pythias :  widow  and 
children :  creditors'  interest :  Knights  of  Honor. 

§  738.     Designation    of   beneficiary:   how    construed:    analogous   to   testa- 
mentary disposition. 

§  739.     Where  no  beneficiary  is  designated:    ineffectual  designation:    lapse 
to  society. 

§  740.     When  insured  in  regular  life  policy  may  change  beneficiar>\ 

§  740a.  Provisions  of  life  policy  as  to  changing  beneficiary  .must  be  com- 
plied with. 

§  740b.  Industrial  insurance:    compliance  with  conditions  as  to  change  of 
beneficiary. 

§  740c.  Accident  policy:  reserved  right  and  mode  of  changing  beneficiary. 

§  740d.  Change  of  beneficiary:    statements  as  to  age,  etc.,  conditions  as  to 
assignment :    changes :    waiver,  etc.,  not  applicable. 

§  741.     Right  to  change  beneficiary  under  mutual  or  fraternal  benefit  cer- 
tificate:   whether  interest  of  beneficiarj'  a  vested  interest. 

§  741a.  Same  subject:    specified  classes. 

§  742.     Beneficiary  may  acquire  vested  interest  under  contract  with  mem- 
ber. 
§  742a.  Mutual  promises  of  parents  not  to  change  beneficiaries:    children 

may  not  enforce  contract. 
§  743.     No  vested  right  though  beneficiary  has  possession  of  certificate. 
§  744.     Provisions  as  to  designation  or  change  of  beneficiary  in  charter, 

by-laws,  etc.,  must  be  complied  with  if  possible. 
§  744a.  Same  subject :   what  is  and  is  not  sufficient  compliance. 
§  745.     When  mode  prescribed  by  charter  differs  from  general  rule  of  law. 
§  746.     Change  of  beneficiary:   exceptions  to  the  rule  that  by-laws  must  be 

followed. 
§  746a.  Same  subject:    when  formalities  waived:    estoppel. 
§  746b.  Same  subject :  when  no  waiver  or  estoppel  as  to  formalities. 


CONTENTS  xliii 

§  746e.  Same  subject:    waiver  by  payment  of  fund  into  court. 

§  746d.  Same  subject:    equity. 

§  747.  Mere  regulation  or  matter  of  practice  not  binding  as  to  change  of 
beneficiary. 

§  748.     Effect  of  subsequent  change  of  by-laws  or  statutes. 

§  749.  Amendment  as  to  payee  does  not  necessitate  changing  of  benefi- 
ciary. 

§  750.  Where  provision  as  to  mode  of  change  of  beneficiary  cannot  be 
complied  with:    loss  or  wrongful  retention  of  certificate. 

§  751.     Where  member  dies  before  change  of  beneficiary  is  complete. 

§  752.     Where  designation  of  beneficiary  is  invalid. 

§  753.     Effect  of  an  invalid  or  inoperative  change  of  beneficiary. 

§  754.     When  society  only  can  set  up  noncompliance  with  by-laws. 

§  754a.  Eight  of  beneficiary  to  object  to  noncompliance  with  by-laws. 

§  755.     Statutes  relative  to  designation  of  beneficiary. 

§  756.     Statutes  relative  to  change  of  beneficiary. 


CHAPTER   XXXII. 


BENEFICIAEIES-PARTICULAR    DESIGNATIONS    AND    EFFECT 

OF  SAME. 

§  763.     "Absent  brother"  as  beneficiary. 

§  764.     "Affianced  wife:"  betrothed  as  beneficiary. 

§  765.     "As  he   may   direct:"    "shall   direct:"   "may   have    directed:"    "as 

directed   by   will." ' 
§  765a.  Brother:    brothers  and  sisters. 
§  765b.  Brother-in-law. 

§  766.     "Children:"  where  no  children  survive. 
§  767.     "Children"  does  not  generally  include  grandchildren. 
§  767a.  Same  subject :    "children  surviving." 

§  7CS.     "Children"  does  not  include  children  of  wife  by  former  marriage. 
§  769.     "Children :"  where  children  are  born  subsequent  to  the  issuance  of 

the  certificate  or  policy. 
§  76Da.  Same  subject :   children  of  first  and  second  wife :   or  of  second  wife. 
§  769b.  Posthumous  child  of  second  marriage. 

§  770.     "Children,"  when  includes  adopted  child :    release  of  rights. 
§  771.     "Children :"  "his  children :"  who  included  generally :    includes  child 

by  former  wife.* 
§  772.     Children :    "their  cliildren." 

§  772a.  Children :  their  children :  subsequent  man-iage  of  insured. 
§  772b.  Church. 
§  773.     "Dependents:"  "legal  dependent." 


xUv  CONTENTS 

§  773a.  "Dependents:"  who  are:    instances. 

§  773b.  "Dependents:"  who  are  not:    instances. 

§  773c.  "Dependents:"  when  relation  terminated  by  marriage. 

§  774.     "Devisees:"  "devisees  or  heirs  at  law." 

§  775.  "Devisees,"  or  in  case  of  their  prior  death,  to  "legal  heirs  or  dev- 
isees of  certifieate  holder." 

§  776.     "Estate:"  "my  estate:"  creditors. 

§  777.     "Executor." 

§  778.     "Executors  and  administrators." 

§  779.     "Family"  as  benefieiarj'. 

§  779a.  "Family:"  "immediate  family." 

§  780.     "Families,  widows,  orphans,  or  other  dependents." 

§  780a.  "Family  of  deceased:"  "family  or  families"  in  connection  with 
other  class  designations. 

§  781.     "Friends." 

§  782.     "Guardian." 

§  783.     "Heirs:"  "lawful  heirs:"  "legal  heirs." 

§  784.     "Heirs  or  assigns." 

§  785.     Heir:  husband  as  heir. 

§  786.     "Heirs  and  legal  representatives:"  "heirs  or  representatives." 

§  787.     "Himself,  executors,"  etc. 

§  787a.  Husband  and  children:    sole  and  separate  use. 

§  787b.  Illegitimate  child. 

§  788.     Infant  as  beneticiary. 

§  788a.  Legal  heirs  or  representatives. 

§  789.     "Natural  heir." 

§  789a.  Niece. 

§  790.     "Orphans." 

§  790a.  Parents. 

§  790b.  Parents:    putative  father. 

§  791.     Partnership  as  beneficiary. 

§  792.     "Relatives :"  "related  to." 

§  793.     "Representatives:"  "legal  representative." 

§  793a.  Same  subject:    statutory'  exemptions. 

§  794.     "Resident  brother"  sCs  beneficiary. 

§  795.     Son  as  beneficiary. 

§  795a.  Stepfather:   stepson. 

§  796.     "Survivor." 

§  796a.  Trust  created  in  equity  for  friend. 

§797.     "Trustees:"  "in  trust." 

§  797a.  Undertaker  as  beneficiary. 

§  798.  "Widow  and  children:"  proceeds  paid  to  administrator:  extent  of 
his  liability. 

§  799.  "Widow  and  children :"  proceeds  paid  to  administrator  of  insured 
a  trust  for  widow  and  children. 


CONTENTS  xlv 

§  800,     "Widow  and  children :"  afterward  in  order  named. 

§  801.     "Widow,  orphans,  or  heirs." 

§  802.     "Widows,  orphans,  and  heirs  or  devisees." 

§  803.     "Widow  or  relatives,"  funeral  benefit. 

§  804.     "Wife  and  children:"  "widow  and  children:"  how  they  take. 

§  805.     Wife  and  children :  construction  of  contract  by  parties  and  bene- 
ficiaries. 

§  805a.  Wife  and  children :    contract  rights  in  benefits. 

§  806.     Wife  and  daughters :    survivor :    who  entitled  to  fund. 

§  807.     "Wife,  if  living"  and  "if  not  living,  to  children." 

§  808.     Wife  or  any  wife  that  may  survive,  and  minor  children. 

§  809.     "Wife"  or  "widow"  as  beneficiary. 

§  809a.  Wife  as  beneficiary :    creation  of  separate  estate  in  her. 

§  809b.  Wife's  interest :   endowment  policy. 

§  809c.  Wife's  right  as  beneficiary  in  mortuary  fund   dependent  on  hus- 
band's being  member  at  death. 

§  809d.  Widow :   where  insured  compelled  to  marry. 

§  810.     When  wife  entitled  against  husband  to  proceeds  of  surrender  policy. 

§  811.     Wife's  rights:    delivery  of  policy  as  security. 

§  812.     When  wife  has  only  equitable  lien. 

§  813.     Wife's   rights   where   husband's   misrepresentations   induce   her   to 
join  assignment. 

§  814.     "Wife:"  effect  of  payment  to  woman  designated  as  wife  while  law- 
ful  wife   living. 

§  815.     "Wife"  as  beneficiary :    no  marriage  ceremony  performed. 

§  81."3a.  Wife:    agreement  to  become  mistress. 

§  816.     "Wife"  or  "widow"  as  beneficiary  where  insured  has  married  when 
lawful  wife  living. 

§  817.     "Wife"  or  "widow"  as  beneficiary:    regular  life  policy:    effect  of 
divorce. 

§  817a.  Same  subject:   statutes. 

§  818.     "Wife"  or  "widow"  a.s  beneficiary :  mutual  benefit  certificate :   effect' 
of  divorce. 

§  819.     Wife :    articles  of  separation. 


CHAPTER  XXXIII. 


BENEFICIARIES,  CONTINUED. 

§  825.     Subsequent  marriage  of  insured. 
§  826.     Widow  and  surviving  children :    second  marriage. 
§  827.     AVliere    beneficiary    under    mutual    benefit    certificate    dies    before 
assured. 


xlvi  CONTENTS 

§  828.     Where  beneficiary  under  life  policy  dies  before  assured. 

§  829.     Where  beneficiary  dies  before  insured :  life  policy :  conclusion. 

§  830.  Death  of  wife:  subsequent  marriage  of  insured  or  member:  effect 
where  wife  is  designated  as  beneficiary. 

§  830a.  Where  wife  dies  before  husband:  resulting  trust  in  favor  of 
husband's  estate. 

§  831.  Where  death  of  beneficiary  occurs  after  that  of  insured  but  before 
payment  of  fund. 

§  832.     Death  of  beneficiary  and  insured:   common  disaster. 

§  833.     Where  beneficiary  kills  insured. 

§  834.     Killing  assured  by  insane  beneficiary. 

§  835.     Where  killing  is  involuntary. 

§  836.     Killing  by  sane  assignee. 

§  837.     Assignment  by  beneficiary. 

§  837a.  Equitable  assignment  by  beneficiary. 

§  838.     Ratification  by  beneficiary  of  assignment. 

§  839.     Assignment  to  creditor. 

§  840.     Assignment  of  endowment  policy :   wife  as  beneficiary. 

§  841.  Assignment  by  beneficiary  of  life  policy  to  one  having  no  insurable 
interest. 

§  842.     Lien  of  assignee  on  paid-up  policy. 

§  843.     Where  wife  joins  in  assignment  of  policy  on  husband's  life. 

§  844.     Same:    statute  forbidding  married  woman  becoming  surety. 

§  845.     Assignment  by  wife  of  policy  on  husband's  life. 

§  846.  Classes  entitled  to  benefit  fund:  control  in  case  of  assignment: 
benefit  certificate. 

§  847.     Effect  of  permission  permitting  assignment. 

§  848.     Beneficiary  charged  with  notice  of  contents  of  policy. 

§  849.     Possession  by  beneficiary  of  mutual  benefit  certificate. 

§  850.     Beneficiary  may  be  trustee  of  fund  though  not  so  designated. 

§  851.  Where  policy  provides  payment  to  insured  if  he  lives  to  certain 
date :    if  not  to  beneficiary  designated. 

§  852.  Maturity  of  poliej^  when  beneficiary  certain  age:  debt  of  associa- 
tion. 

§  853.  Polic}^  cannot  be  surrendered  without  consent  of  beneficiary  in  life 
policy. 

§  853a.  Surrender  of  policy:  trustee  of  proceeds. 

§  854.     Surrender  of  policy  avoided  for  mental  incapacity. 

§  855.  Minor  children  beneficiaries :  consent  to  surrender  policy  by  in- 
sured not  binding. 

§  855a.  Death  of  beneficiary  before  surrender  of  policy  for  reduction  of 
amount. 

§  856.  Policy  to  wife  and  children :  death  of  wife :  executor  has  no  power 
to  surrender  policy. 

§  856a.  Insured  cannot  delegate  reserved  power  to  surrender  policy. 


CONTEXTS  xlvii 

§  857.     "Wife  and  children:"  "wife"  deceased  at  time  of  issuance:    paid- 
up  policy. 

§  858.     Rights  of  creditors  of  insured:    regular  life  polic\':    exemptions: 
statutes. 

§  859.     Rights   of   creditors   of   members:    benefit   societies:     exemptions: 
statutes. 

§  860.     Rights  of  creditors  of  wife  when  beneficiary. 

§  861.     Creditor  as  payee  in  policy  on  debtor's  life. 

§  862.     Society  not  bound  by  secret  agreements  by  member  with  children 
as  beneficiaries. 

§  863.     Where  bequest  bj'  wife  will  not  pass  interest   in   policy  on  hus- 
band's life. 

§  864.     Tontine   policy:    when   beneficiary  not  bound   by   action   of  com- 
pany's officers. 

§  865.     Suspension  of  member:    right  of  beneficiary  to  recover. 

§  866.  Funeral  benefits :    who  entitled :    funeral  expenses :    same,  industrial 
insurance. 

§  867.     Beneficiary :    benefits  payable  in  case  of  sickness  or  disability :    in- 
sanity of  member. 

§  868.     Railroad  relief  association:    provision  as  to   release   of  company 
for  damages :  when  beneficiary  may  not  recover. 

§  868a.  Same  subject:    rule  modified  by  employers'  liability  acts. 

§  869.     Beneficiary  not  liable  for  premiums   paid  by  stranger. 

§  870.     Whether    payment    of    premiums    or    a.ssessments    by    beneficiary 
gratuitous. 

§  871.     Amount  of  policy  and  premiums  or  assessments:    advancements  to 
beneficiary. 

§  872.     Payment  of  benefit  fund. 

§  872a.  Same  subject:    general  instances. 

§  872b.  Same   subject:    presumption   as   to   insured's   death:     compromise 
agreement. 

§  873.     Beneficiary  entitled  to  fund :   fund  cannot  be  garnished. 

§  874.     Two  or  more  beneficiaries:    joint  tenancy. 

§  874a.  Where  one  of  two  or  more  beneficiaries  ineligible:    contract   not 
invalid. 

§  875.     Beneficiary  may  sue  on  policy. 

§  876.     Where    money    due    beneficiary    has    been    paid    administrator    of 
assured. 

§  877.     Right  of  beneficiary:    premiums  paid  with  misappropriated  money 
or  funds. 

§  878.     Statutory   provisions   limiting  beneficiaries   of  benefit   certificates: 
certain  classes. 


xlviii 


CONTENTS 


wife  and  children:    exemptions. 


§  879.     Statutes:    beneficiaries; 

(a)  Alabama. 

(b)  California, 
(e)   Colorado. 

(d)  Florida. 

(e)  Georgia. 

(f)  Illinois. 

(g)  Indiana, 
(h)   Iowa. 

(i)   Kentucky. 

(j)  Louisiana. 

(k)   Maryland. 

(I)   Massachusetts.  , 

(m)   Michigan. 

(n)   Minnesota. 

(o)   Mississippi. 

(p)  Missouri. 

(q)   Nebraska. 

(r)   New  Jersey. 

(s)  New  York. 

(t)   North  Carolina. 

(u)   Ohio. 

(v)   Pennsylvania. 

(w)    South  Dakota. 

(x)   Tennessee. 

(y)   Texas. 

(z)   Washington. 

(aa)   Wisconsin. 

(bb)   Ontario. 
§  879a.  Same  subject:  whether  exemption  applies  after  proceeds  or  funds 

become  payable:  property  purchased  therewith. 
§  879b.  Same  subject :    supplementary  proceedings. 
§  880.     Where  amount   exempted   is   unreasonable :    unconstitutionality   of 

law. 
§  881.     Statute :   insurance  of  husband's  life :   sole  benefit  of  wife :    mutual 

benefit  society:    vested  interest  in  wife. 
§  882.     Statute :   rights  of  children :    declaration  of  new  trust. 


CONTENTS  xlix 

TITLE  V. 

INSURABLE  INTEREST. 

CHAPTER  XXXIV. 


INSURABLE  INTEREST,  GENERALLY. 

§  887.     Insurable  interest  defined. 

§  888.     Insurable  interest :    generally. 

§  889.     Necessity  of  an  insurable  interest. 

§  890.     Insurable  interest  distinguisbed  from  the  property  or  life  insured. 

§  891.     Insurable  interest  at  common  law. 

§  892.     No  insurable  interest  under  unenforceable  contract. 

§  893.     Interest  must  be  neither  illegal  nor  immoral. 

§  894.     Wager  policies. 

§  894a.   (§  154)   Wager  policies:  what  are. 

§  894b.  Wager  policies:  what  are  not. 

§  894c.  Wager  policies:  industrial  insurance. 

§  894d.  Wager  policies:  title  guaranty   insurance. 

§  894e.  Profit-sharing  bonds  issued  by  insurer  not  speculative  or  invalid. 

§  894f.  Wager  policy:   illegality  not   pleaded  or  relied  upon  in   defense: 

deletion  of  vitiating  clause. 
§  894g.  Wager  policies:  incontestable  clause. 
§  894h.  Wager  policies:  foreign  statute:  extraterritorial  effect. 
§  895.     Insurable  interest  does  not  necessarily  imply  property. 
§  896.     Legal  or  equitable  title:    qualified  interest. 

§  897.     Conditional  or  contingent  interest:    expectancy:    inchoate  rights. 
§  898.     Liability  to  others:    railroad  companies,  etc. 
§  899.     Pecuniary  interast:    consanguinity  or  alfinity. 
§  900.     Whether  insurable  interest  need  be  stated. 
§  901.     As  to  the  time  when  the  interest  must  exist. 
§  902.     Same  subject:    life  insurance. 
§  903.     Continuity  of  interest. 

§  904.     Where  interest  is  devested :  partial  interest  remaining. 
§  905.     The  interest  need  not  be  indefea.sible. 
§  906.     Obligation  of  insurer  to  ascertain  insurable  interest  in  property. 


CONTENTS 


CHAPTER   XXXV. 


PARTICULAR  INSURABLE  INTERESTS  CLASSIFIED. 

§  912.     Different  parties:  several  interests. 

§  913.     Interest  of  administrators  and  executors. 

§  914.     Whether  assignee  of  life  policy  must  have  an  insurable  interest: 

points  involved  generally. 
§  914a.  Same  subject:  the  Federal  case  of  Grigsby  v.  Russell. 
§  914b.  Same  subject :  assignment  in  furtherance  of  agreement. 
§  914c.  Same  subject :  assignment  as  security  or  collateral :  for  advances, 

etc.,  or  to  creditor. 
§  915.     Same  subject :  paj-ment  of  premium  as  a  factor. 
§  916.     Same  subject :  consent  of  insurer  to  the  aissignment. 
§  917.     Same  subject :  mutual  benefit  societies. 
§  918.     Same  subject:  conclusion. 
§  919.     Same  subject :  summary  of  the  decisions. 

§  920.     Insurable  interest :  policy  payable  "as  his  interest  may  appear." 
§  921.     Interest  of  donor  or  contributor. 
§  922.     Interest  of  bailor  and  bailee :  generally. 
§  923.     Pledgor  and  pledgee :  pawnbroker. 
§  924.     Innkeepers. 
§  925.     Carriers. 
§  925a.  Pipe  lines  company. 
§  926.     Warehousemen :  wharfingers.  > 
§  927.     Commission  merchants:  consignees. 
§  928.     Merchant  furnishing  dealer  with  stock. 
§  929.     Agents. 
§  930.     Consignor. 

§  931.     Consignees  and  factors :  supercargo. 
§  932.     Trustees. 
§  933.     Cestui  que  trust. 
§  933a.  A  cotrustee:  joint  trustee. 
§  934.     Assignee  or  trustee  of  insolvent. 
§  934a.  Receivers. 
§  935.     Stockholders. 

§  935a.  Corporation  in  life  of  stockholder. 
§  935b.  Corporation  in  life  of  its  officer. 
§  936.     Sureties. 

§  937.     Receiptor  for  goods  attached :  surety  on  appeal. 
§  938.     Indorser  of  note. 

§  939.     Holder  of  note  or  bill  of  exchange:  drawee. 
§  940.     Indorser  and  indorsee  of  bill  of  lading. 


CONTENTS  li 

Inter&st  of  insurer:  reinsurer. 

Interest  in  solvency  of  insurer. 

Interest  in  royalties. 

Copartners:  joint  owners. 

Partner:  life  risk. 

Part  owner. 

General  creditors. 

Simple  contract  creditor  in  estate  of  deceased  debtor. 

Creditors  as  assignees. 

Creditor  attaching  or  levying  execution. 

Attaching-  creditor  must  insure  his  interest. 

Judgment  creditor. 

Creditor  in  life  of  debtor. . 

Same  subject:  wager  policy:  amount  recoverable. 

Owner  of  goods  concealed  from  creditors. 

One  whose  goods  are  levied  on. 

Insolvent :  life  risk. 

Insolvent  debtor:  property. 

Officer  serving  attachment  or  making  levy. 

Lessor. 

Lessee :  sublessee. 

Tenant,  lessee  or  sublessee:  improvements:  right  of  removal. 

Sub-tenant:  lessee:  insurance  against  loss  of  rents:  wager  policy. 

Purchaser  from  lessee. 

Tenant  at  sufferance. 

Tenant  at  will. 

Life  tenant. 

Life  tenant;  assignee  of,  in  life  of. 

Remainderman. 

Tenant  for  life   and  remainderman  joining  in  insurance. 

Tenant  per  autre  vie:  life  risk. 

Tenant  in  common. 

Tenant  by  curtesy. 

Vendee  or  one  under  contract  for  purchase  or  for  deed  of  tenancy. 

CHAPTER  XXXVI. 

PARTICULAR  INSURABLE  INTERESTS,  CLASSIFIED, 

CONTINUED. 

§  977.     Vendee  or  one  under  contract  for  purchase,  or  for  deed. 

§  978.     Same  subject:  one  holding  possession  under  contract  of  purchase 

from  equitable  owner. 
§  979.     Same  subject :  parol  agreement. 
§  980.     Same  subject:  quahfications. 
§  981.     Same  subject:  cases. 


§ 

L/^  J.. 

942. 

§ 

943. 

§ 

944. 

§ 

945. 

§ 

946. 

§ 

947. 

§ 

948. 

§ 

949. 

§ 

950. 

§  9yL 

§ 

952. 

§ 

953. 

§ 

954. 

§ 

955. 

§ 

956. 

§ 

957. 

§ 

958. 

§ 

959. 

§ 

960. 

§ 

961. 

§ 

9Gla. 

§ 

961b. 

§ 

962. 

§ 

963. 

§ 

963a. 

§ 

964. 

§ 

964a. 

§ 

965. 

§ 

966. 

§ 

967. 

§ 

968. 

§ 

969. 

§ 

970. 

lii  CONTENTS 

§  981a.  Vendee  or  one  under  contract  for  purcliase:  conditional  sale. 
§  981b.  Purchaser  of  goods  on  credit:  same,  married  woman. 
§  981e.  Parties  under  agreement  to  exchange  property. 
§  982.     Vendor  or  one  who  has  contracted  to  convey. 
§  983.     Vendor. 

§  983a.  Seller  or  purchaser  of  goods  to  arrive. 
§  984.     Vendee. 

§  984a.  Vendor  and  vendee :  improvements. 
§  985.     Purchaser  under  execution  or  judicial  sale. 

§  986.     Purchaser  in  possession  of  land,  title  not  to  pass  till  building  com- 
pleted. 
§  987.     One  in  possession  under  claim  of  right. 
§  988.     One  in  possession  with  power  of  sale. 
§  988a.  Government  stamps :   insurable  interest  in. 
§  989.     One  in  possession  to  care  for  and  rent  property. 
§  990.     One  in  possession  or  occupation :  generally. 
§  991.     Mere  intruder  or  trespasser. 
§  992.     Disseisor. 

§  993.     Purchaser  of  legacy:   life  risk. 
§  994.     Owner :  absolute  interest. 
§  994a.  Easement  of  support  in  party  wall. 
§  995.     Owner  of  land :  buildings  constructing  .under  contract. 
§  996.     Contractors :   builders :   materialmen :   mechanics. 
§  997.     Advances. 

§  998.     Ship's  general  agent  has  no  insurable  interest  in  advances. 
§  999.     Voluntary  advances  on  vessels. 

§  1000.     One  expending  money  for  his  own  benefit  on  another's  property. 
§  1001.     Liens. 
§  1002.     Mechanic's   lien. 
§  1003.     Meelianics  and  materialmen  in  ship. 
§  1004.     Shipowner  in  ship  and  cargo. 
§  1005.     Shipowner  in  special  cargo:  lien, 
§  1006.     Charterer. 

§  1006a.  United  States  in  vessel  hired  with  option  to  purchase:  war  risk. 
§  1007.     Vendor  and  vendee  in  ship  and  freight. 
§  1008.     What  interest  of  shipowner  in  freight  includes. 
§  1009.     Requisites  of  an  interest  in  freight. 
§  1010.     Sliipowner  in  freight. 

§  1010a.  Chartered  owners  in  freight :  vessel  subchartered. 
§  1011.     Charterer  who  is  part  owner. 
§  1012.     Charterer  in  expected  freight. 
§  1013.     Cliarterer  and  shipowner:  separate  risks. 
§  1014.     Charterer  insuring  against  special  peril. 
J5  1015.     Advances  by  charterer  on  freight. 
§  1016.     When  charterer  has  no  insurable  interest  in  freight  advanced. 


CONTENTS 


liii 


§  1017.     Owner  in  case  of  bottomry  or  respondentia. 

§  1018.     Lender  in  holtomry  or  respondentia. 

§  1019.     Expected  profits. 

§  1020.     Profits  made  and  earned. 

§  1021.     Passage  money. 

§  1021a.  When  interest  insured  is  disbursements  not  passage  money. 

§  1022.     Mariners'  wages. 

§  1023.     Supercargo. 

§  1024.     Fishing  voyage:  outfits. 

§  1025.     Captors. 

§  1026.     Mortgagor  and  mortgagee:  generally. 

§  1027.     Mortgagor. 

§  1028.     Mortgagor  of  personal  property. 

§  1029.     Extent  of  mortgagor's  insurable  interest. 

§  1030.     Mortgagor  of  ship. 

§  1030a.  Owner  of  equity  of  redemption. 

§  1031.     Mortgagee. 

§  1032.     Mortgagee  under  mortgage  only  valid  in  equity. 

§  1033.     Relation   mortgagee's   insurance   sustains   to   the    debt. 

§  1034.     Mortgagee  of  ship. 

§  1035.     Mortgagee   of   goods   and   freight. 

§  1035a.  Mortgagee  in  possession  of  goods  as  security. 

§  1036.     Extent   of  mortgagee's   insurable  interest. 

§  1037.     Several  mortgagees. 

§  1038.     Mortgagor's  interest  after  judgment  or   decree. 

§  1039.     Mortgagor   after   foreclosure   sale. 

§  1040.     Effect    of   sale    or    conveyance    on   mortgagor's    interest:    devest- 
ment  of  interest. 

§  1041.     Cessation  of  mortgagor's  interest. 

§  1042.     Effect  on  mortgagee's  interest  of  sale  and  assignment. 

§  1042a.  Same  subject:  purchaser  from  vendee  of  note  and  trust  deed. 

§  1042b.  Assignment  by  mortgagor  to  mortgagee. 

§  1043.     Disclosure  of  interest  by  mortgagee. 

§  1044.     Assignee  of  mortgagee. 

§  1045.     Mortgagor  for  mortgagee. 

§  1046.     Mortgagee  after  foreclosure  sale. 

§  1047.     Interest  in  homestead. 

§  1048.     Husband  in  personal  community  property. 

§  1048a.  Estate  by  entirety. 

§  1048b.  Husband  and  wife:  wife's  personalty:  household  furniture. 

§  1049.     Husband  in  property  of  wife. 

§  1049a.  Same  subject:  when  husband  has  insurable   interest:   instances. 
§  1040b.  Same  subject:  when  husband  has  no  insurable  interest:  instances. 
§  1049c.  Husband  in  property  held  jointly  with  wife  under  contract:  in- 
surance  authorized  or  ratified  by  wife. 


liv  CONTENTS 

§  1049d.  Where  statute  permits  husband  to  insure  wife's  separate  property. 

§  1050.     Husband  in  property  of  wife:  disclosure  of  interest. 

§  1051.     Husband  in  life  of  wife. 

§  1051a.  Same  subject :  joint  insurance  by  husband  and  wife :  married 
woman's   property   act. 

§  1052.     Husband  for  benefit  of  wife  or  child. 

§  1053.     Wife  in   her   own   property. 

§  1054.    Wife  in  husband's  life. 

§  1055.  Wife  without  marriage  ceremony  in  husband's  life:  mistress: 
common-law  marriage. 

§  1055a.  ^lan  in  woman's  life  when  not  lawfully  married  to  her. 

§  1055b.  Holder  of  purchase-money  mortgage,  in  wife  of  mortgagor. 

§  1055e.  Wife:  effect  of  divorce. 

§  1056.     Dower  interest. 

§  1057.     In  life  of  betrothed. 

§  1057a.  In  employee's  life:  employer's  liability  insurance. 

§  1058.     In  servant's  life :   actor's  life. 

§  1059.     In   master's  life. 

§  1060.     Earnings  of  another:  life. 

§  1€61.     Promise  of  support  one  not  a  relative:  life. 

§  1062.     Promise  to  support  relative:  life. 

§  1062a.  Person  in  loco  parentis. 

§  1063.     Parent   and   child:   life. 

§  1063a.  Same  subject :  mourning  or  funeral  expenses :  industrial  or  col- 
lecting society :   validating  statute :   fraud  of  agent :   rescission. 

§  1064.     Unborn  child. 

§  1064a.  Illegitimate  children. 

§  1065.     Son  in  father's  property. 

§  1065a.  Parent  in  child's  separate  property:  .statute. 

§  1066.     Son-in-law :  mother-in-law :   stepson :  stepfather :  life. 

§  1067.     Grandparent  and  grandchild. 

§  1068.     Brother  and  sister:  brother-in-law:  stepsister. 

§  1069.     Uncle  and  nephew  or  niece :  aunt  and  nejDhew  or  niece. 

§  1069a.  Half-uncle. 

§  1070.     Cousin. 

§  1071.     Friend's  insurable  interest. 

§  1072.     Religious  societies  in  member's  life. 

§  1072a.  Building   association   in   member's   life. 

§  1072b.  Undertaker  in  lives  of  members  of  burial  association :  statute. 

§  1073.    Benefit  societies:  insurable  interest. 


CONTENTS  Iv 


TITLE  VI. 

PREMIUMS  AND  ASSESSMENTS. 

CHAPTER  XXXVII. 

PREMIUMS,  GENERALLY. 

§  1083.     Premium,  "net  premium,"  "gross  premium,"  defined, 

§  1084.     Premium  or  rate  per   cent  mu.st   be  expressed  in   policy. 

§  1085.     Premium  and  conditions  as  consideration. 

§  1086.     Premium  is  of  the  essence  of  the  contract. 

§  1087.     Premium  not  due  unless  risk  attaches. 

§  1088.     The  rate  of  premium. 

§  1088a.  Same  subject:  employers'  liability  insurance. 

§  1088b.  Same  subject:  premium  based  on  "traffic  earnings"  parol  evi- 
dence. 

§  1080.     Premium  as  test  of  amount  or  character  of  risk. 

§  1090.     Agreement  as  to  rate  must  govern. 

§  1091.     Discrimination  as  to  rates  of  premium:  rebate  of  premium.^ 

§  1092.     Same  subject:   such  statutes  constitutional. 

§  1092a.  Same  subject :   object  or   intent  of  sucli   statutes. 

§  1092b.  Same  subject:  construction. 

§  1092c.  Same  subject:  what  companies  or  associations,  etc.,  included 
and   excluded. 

§  1092d.  Same  subject :  agreements  for  services. 

§  1092e.  Same  subject:  agreements  for  services:  advisory  boards. 

§  1092f.  Same  subject:   allowance  by  agent   of  commissions. 

§  i092g.  Same  subject:  what  is  not  a  discrimination  or  rebate:  other  in- 
surances. 

§  1092h.  Same  subject :  effect  as  to  recovery  of  premiums,  notes,  or  com- 
missions. 

§  10921.    Same  subject:  liability  for  penalty. 

§  1093.  Premium  to  cover  additional  risks:  augmentation  or  diminution 
of  premium. 


Ivi 


CONTENTS 


CHAPTER  XXXVTII. 


PKEMIUMS— PAYMENT,  FORFEITURE   AND    TENDER— LIENS. 


§  1097. 
§  1098. 

§  1098a. 
§  1098b. 

§  1099. 
§  1100. 
§  1101. 
§  1102. 
§  1103. 
§  1103a. 
§  1104. 
§  1104a. 
§  1105. 


§  1106. 
§  llOGa. 
§  1107. 
§  1108. 
§  1109. 
§  1109a. 
§  1109b. 
§  1110. 

§  1110a. 


§ 

1111. 

§ 

1112. 

§ 

111.3. 

§  1114. 

§ 

1115. 

§ 

1115a 

§ 

1116. 

§ 

1117. 

§ 

1118. 

§  1119. 

Payment  of  premium:  generally. 

No  forfeiture  for  nonpayment  of  annual  premium  unless  so 
agreed :  whether  premium  a  debt. 

Mere  agreement  to  pay  premiums  insufficient  to  prevent  forfeiture. 

That  policy  lapses  for  nonpayment  of  premiums  where  no  con- 
dition for  forfeiture. 

Whether  payment  condition  i^recedent. 

Conditions  as  to  payment  of  premium  valid. 

Whether    contract    entire    when    premium    entire. 

Whether  life  contract  entire  or  from  year  to  year. 

Failure  to  pay  premium  on  day  stipulated,  forfeits. 

Same  subject :  incontestable  provision. 

Equity  will  not  relieve  from  forfeiture  so  incurred. 

Payment   of  weekly   premiums:    industrial   insurance:    forfeiture. 

Subsecjuently  enacted  nonforfeiture  statute :  payment  of  premiums 
into  court. 

No  notice  or  formal   declaration   of  forfeiture   necessary. 

That  stipulation  as  to  forfeiture  means  voidable  only. 

Premium  payable  on  demand. 

Forfeiture  for  nonpayment  of  instalments  of  premium  when  due. 

Company  may  extend  time  of  payment  of  premium. 

Paj-ment  of  premium :  days  of  grace. 

Payment  of  premiums:  days  of  grace:  statutes. 

Extension   of  time   of   payment:    computation   of   time:    days   of 

grace. 

Extension  by  agent  of  time  for  payment  of  premiums :  days  of 
grace. 

Acceptance  of  entire  annual  premium  in  advance. 

Prepayment   of  premiums. 

Offset :   premium  and  rents  due  from  agent. 

Part  payment  of  premium  will  not  prevent  a  forfeiture. 

Nonpayment   of  j^remium  may   only   suspend   risk. 

Conflicting  dates:  date  from  which  computation  as  to  forfeiturn 
based :   death  of  insured. 

Death  or  loss  after  suspension :   payment    of  premium. 

Payment  of  overdue  premium  after  loss,  death,  injury  or  sickness. 

Death  or  loss  within  time  extended  for  payment  or  days  of  grace. 

Review  of  cases  generally  relied  on  as  holding  such  payment  of 
no  effect. 


CONTENTS  Ivii 

§  1120.     Cases  ,  supporting  opposite  view. 

§  1121.     Same  subject :   conclusion. 

§  1122.     Tender  of   premium:   tender  to   agent. 

§  1123.     Frequency  of  tender. 

§  1124.     Tender  after  delivery  up  of  policy  fraudulently  induced  by  agent. 

§  1125.     Actual  production  of  money  unnecessary  after  peremptory  refusal 

to  accept. 
§  1125a.  Tender  by  bank  cheek. 

§  112b'.     Ratification  of  payment  may  relate  back  to  time   of  tender. 
§  1127.     Tender  after  payment  of  overdue  premiums  unconditionally  re- 

Cjuested. 
§  1128.     Tender  as  prerequisite  to  action:  judgment. 
§  1129.     Payment  due  Monday  when  premium  matures  Sunday:  death  of 

insured. 
§  1129a.  Same  subject:  days  of  grace. 
§  1130.     Holidays:  Thanksgiving  Day. 
§  1131.     Lien   for  premium. 
§  1132.     Maritime  lien  for  premium. 


CHAPTER  XXXIX. 


PREMIUMS— MANNER  AND  MODE  OF  PAYMENT— BY  AND  TO 
WHOM  PAYABLE— MORTGAGOR  AND  MORTGAGEE— MIS- 
CELLANEOUS MATTERS. 

§  1137.     In  what  the  premium  may  be  paid. 

§  1138.     Cash  premiums:  mutual  company. 

§  1139.     Payment  in  depreciated  funds,  Confederate  money. 

§  1140.     Payment  in  foreign  money:   equivalent  in  United  States   money 

may  be  shown. 
§  1141.     Payment  of  premium:  credit  may  be  given. 
§  1142.     Payment  by  order   on   third   party. 
§  1143.     Effect  of  order  on  third  party:  demand:  notice  of  nonpayment: 

forfeiture:   order  on   employer. 
§  1144.     Payment  by  check  or  draft. 

§  1144a.  Premium  paid  out  of  income  or  rents:   infant   life  tenant. 
§  1145.     Payment  with  misappropriated   funds. 
§  1146.     By  whom  premium  payable. 
§  1147.     Premiums   paid   by   debtor   in   fraud   of   creditors:   husband   and 

wife. 
§  1148.     Payment   by   and   liability   of   third   party:    beneficiary:   lien   on 

policy. 
§  1149.     Same  subject:  rules  stated  in  Leslie  v.  French. 


Iviii  CONTENTS 

§  1150.     Payment  by  and  liability   for  premium  of  agent   or  broker. 

§  1150a.  Payment  to  agent  or  broker. 

§  1151.     Premiums    paid   out   of   partnership   funds   during   solveney. 

§  1152.  Payment  of  premium  by  mortgagee:  liability  of  mortgagee  for 
premium. 

§  1153.     Payment   of  premium  by  mortgagor:   right   to  proceeds. 

§  1154.  When  mortgagor  may  be  charged  for  premiums  paid  by  mort- 
gagee. 

§  1155.     When  premiums  not  chargeable  to  mortgagor. 

§  1156.  Payment  of  premium  as  connected  with  subrogation:  mortgagor: 
mortgagee. 

§  1157.     Payment  of  premium  by  assignee  of  mortgage. 

§  1158.  Forfeiture  for  nonpayment  of  premium  by  mortgagor:  defense  by 
mortgagee. 

§  1159.  Amount  of  premium  for  which  mortgagor  is  chargeable  may  be 
limitea. 

§  1160.  Policy  taken  as  collateral :  right  of  mortgagee  to  charge  pre- 
miums :  right  to  deposit  premium. 

§  1161.     Right  of  mortgagee  to  recover  premiums  paid  after  decree. 

§  1162.     Purchaser  of  mortgaged  premises:  previously  advanced  premiums. 

§  1163.     Payment  of  premium :  sending  by  mail. 

§  1164.     Check  mailed  on  last  day  for  payment. 

§  1165.     Payment  of  premium :  delivery  to  express  company. 

§  1166.     Payment  of  premium  by  dividends  or  profits. 

§  1166a.  Payment  of  premium  on  new  policy  by  surrender  value:  agent's 
powers. 

§  1167.     To  whom  premiums  may  be  paid. 

§  1168.     Place  of  payment. 

§  1169.     Liability  for  premiums :  liability  after  forfeiture. 

§  1170.     Revival  of  policy. 

§  1171.     Recovery  of  premiums  by  unauthorized  company. 


CHAPTER  XL. 


THE  PREMIUM— PAID-UP  AND  NONFORFEITABLE  POLICIES. 

§  1178.     Paid-up    and    nonforfeitable   policies:    extended    insurance:    gen- 
erally. 
§  1178a.  Paid-up,  extended  and  temporary  insurance  distinguished. 
§  1178b.  Invalid   contracts:   surrender  value:   paid-up   policies:   loans. 
§  1179.     Nonforfeiture  statutes. 
§  1179a.  Such  statutes  constitutional. 


CONTENTS  lix 

§  1179b.  Whether  policy  becomes  automatically  paid  up:  extended  in- 
surance. 

§  1179c.  Forfeiture  rule  not  applicable  to  policy  stipulating  for  loan 
value  charge:  "automatically  nonforfeitable  clause." 

§  1180.     Death  as  affecting  right  to  paid-up  policy. 

§  llSOa.  Insanity  as  affecting  right  to  paid-up  policy. 

§  1181.  When  only  paid-up  policy  can  be  claimed,  and  when  the  full 
amount   of   insurance. 

§  1181a.  Paid-up    policy:    surrender  cannot   defeat   beneficiary's   rights. 

§  1182.     Right  to  claim  paid-up  policy:  demand:  surrender  value. 

§  1183.     Right  of  infants:   paid-up   policy. 

§  1183a.  Paid-up  policy:  husband  and  wife. 

§  1184.     When  right  to  claim  paid-up  policy  must  be  exercised. 

§  1185.     Right  to  paid-up  policy  must  be  exercised  within  specified  time. 

§  1186.     Exceptions  to  last  rule  and  cases  contra. 

§  1187.     Whether  payment  of  note  required  to  entitle  to  paid-up  policy. 

§  1188.     When    paid-up    policy   forfeited:    eases. 

§  1189.     When  paid-up  policy  not  forfeited:  cases. 

§  1190.     Whether   it   is  new   contract  or  continuation   of   old   one. 

§  1191.     Amount  of  premium  under  statutes  "deducting  indebtedness." 

§  1192.     Amount  of  paid-up  policy. 

§  1193.     Endowment   policy:   nonforfeiture   statutes. 

§  1194.     Refusal  to  issue   paid-up   policy. 

§  1195.     Refusal  to  issue  paid-up   policy:   measure  of  damages. 


CHAPTER  XLI. 


NOTES  FOR  PREMIUMS,  AND  PREMIUM,  ETC.,  NOTES. 

§  1202.     Payment   by   note. 

§  1202a.  Same  subject :  to  what  extent  note  constitutes  payment. 

§  1202b.  Same  subject:  when  note  does  not  constitute  payment. 

§  1202c.  Same  subject:  receipt  for  premium. 

§  1202d.  Same  subject :   note  as  equivalent  to  or  in   lieu   of  cash. 

§  1202e.  Same  subject:  effect  as  loan  where  agent  advances  premium  and 

takes  note. 
§  1202f.  Same  subject:  stipulation  that  note  not   payment  but   extension 

only. 
§  1203.     Premium  note  and  policy  one  contract. 
§  1204.     Condition  as  to  forfeiture  for  nonpayment  of  note  at  maturity : 

generally. 
§  1204a.  When  such  condition  not  applicable  to  note. 
§  1205.     Validity  of  sucli  provisions. 


Ix  CONTEXTS 

§  1206.     Payment  by  negotiable  paper:  demand  or  notice,  etc.:  forfeiture. 
§  1206a.  Same  subject :  that  policy  not  ipso  facto  void  for  nonpayment  of 

note. 
§  1206b.  Same  subject:  statutory  notice. 

§  1206c.  Same  subject:  place  of  payment, 

§  1207.     Payment  by  negotiable  paper:  cases  holding  no  demand  or  notice 
necessary:   forfeiture. 

§  1208.     Same  subject:  the  rule. 

§  1208a.  When  insurer  not  bound  to  notify  assignee  of  maturity  of  note 
of  assignor. 

§  1209.     When  stipulation  is  that  policy  void  or  risk  suspended  for  non- 
payment of  note. 

§  1210.     Note  for  entire  premium:  suspension  risk. 

§  1211.     When  condition  for  forfeiture  is  in  note  only. 

§  1212.     When  there  is  no  condition  as  to  forfeiture  for  nonpayment  of 
note. 

§  1213.     Subsecjuent  parol  agreement:  nonpayment  of  note:  forfeiture. 

§  1213a.  Right  to  loan  after  nonpayment  of  note. 

§  1214.     Power  of  mutual  company  to  take  note. 

§  1215.     Validity  of  notes  for  premium  and  premium  notes. 

§  1216.     Premium  note  given  unauthorized  company. 

§  1217.     Premium,   etc.,   notes:    generally. 

§  1218.     Negotiability  of  notes  for  the  premium  and  premium,  etc.,  notes. 

§  1219.     When  note  is  payable. 

§  1219a.  Same  subject:  conflicting  dates:  erroneous  date. 

§  1219b.  Same  subject:  extension  of  time. 

§  1219c.  Same  subject:   days  of  grace. 

§  1219d.  Payment   of   note   by   mail. 

§  1220.     Validity  of  provisions  as  to  liability  on  premium,  etc.,  notes. 

§  1221.     Lien  on  premium  notes  and  funds. 

§  1221a.  When  insured  liable  on  note  for  premium. 

§  1221b.  When  insured  not  liable  on  note  for  premium. 

§  1222.     Liability  on  premium,  etc.,  notes :  generally. 

§  1223.     When  liability  absolute  on  premium,  etc.,  notes:  when  not. 

§  1224.     Liability  for  losses  prior  to  membership. 

§  1225.     When  liability  continues  until  policy  surrendered  and  all  assess- 
ments paid. 

§  1226.     Liability  after  termination  of  contract  or  surrender  of  policy. 

§  1227.     Liability  after  suspension  on  note  for  entire  premium. 

§  1228.     Extent  of  liability  after  part  payment  of  note. 

§  1229.     Liability  after  loss. 

§  1230.     Liability  incurred  by  default  in  payment  of  assessment. 

§  1231.     Liability  in  case  of  insolvency  of  company. 

§  1232.     Insolvency  of  maker  of  note. 

§  1233.     Interest  on  premium  notes:  forfeiture. 


CONTENTS  Ixi 

§  1234.     Tender:    premium  notes. 

§  1235.     Payment  of  premium  notes  or  interest  thereon  by  dividends  or 

profits. 
§  1235a.     Application   to   unpaid   notes,   of   amounts   due   for   claims   for 

injuries :  accident  policy. 
§  1236.     Effect  of  nonpayment  of  note  upon  beneficiary. 
§  1237.     Deduction  of  note  from  loss. 
§  1238.     Counterclaim  on  note  of  owner  of  vessel  insured  for  benefit   of 

mortgagee. 
§  1239.     Amount  of  recovery  on  premium  notes. 

CHAPTER  XLII. 

ASSESSMENTS  AND  DUES. 

§  1245.     Assessment   defined:    consideration. 

§  1245a.  "Assessments  upon   surviving  members,"   construed. 

§  1245b.  When  decree  is  assessment  and  not  an  order  for  an  assessment. 

§  1245c.  Whether  or  to  what  extent  assessments  are  debts. 

§  1246.     Assessments:  generally. 

§  1247.     Distinction  between  premiums  and  assessments. 

§  1248.     Membership  fees  and  dues:  generally. 

§  1249.     Validity  of  provisions  as  to  assessments  and  dues. 

§  1250.     Assessment  premium,  etc.,  notes:  generally. 

§  1251.     Who  liable   to   asses.sments :   what   membera. 

§  1252.     Who  liable  to  assessment :  mortgagee :  assignee. 

§  1253.     Liability  of  member:  generally. 

§  1254.  Nonpayment  of  assessment  or  dues  after  date  of  accident  insured 
against. 

§  1255.  Liability  to  assessments:  agreement  or  provisions  contrary  to 
statute. 

§  1256.  Liability:  prior  and  subsequent  losses:  liability  after  loss,  for- 
feiture or  suspension. 

§  1256a.  Same  subject. 

§  1257.  Members  joining  between  loss  and  rendition  of  judgment  against 
company. 

§  1258.     When  dues  payable:  dues  in  arrears:  forfeiture. 

§  1259,     Assessment  falling  due  on  Sunday. 

§  1260.     Assessments :   suspension  of  member. 

§  1261.  When  nonpayment  of  dues  or  assessments  forfeits  or  suspends: 
self -executing  provisions. 

§  1261a.  Same  subject. 

§  1262.     Assessments  paid  in  advance  in  excess  of  mortuary  assessments. 


Ixii  CONTENTS 

§  12G3.     No   forfeiture:   assessments   in   advance   of   death   losses. 

§  1264.     Forfeiture  or  suspension  :  when  affirmative  act  of  society  necessary., 

§  1265.     When  member  is  in  good  standing:    when   not. 

§  1266.     Nonpayment  of  assessments :  when  no  forfeitures. 

§  1267.     Assessments  by  unauthorized  company. 

§  1268.     Liability   to   assessments :    cancelation :    surrender :    withdrawal. 

§  1269.     Right  of  member  to  withdraw  and  avoid  liability  for  assessments. 

§  1270.     Whether  contract  to  pay  assessments  unilateral. 

§  1271.     Right  to  deny  liability  for  losses  on  policies  to  nonmembers. 

§  1272,     Dues  and  assessments:  effect  of  insolvency  upon  liability. 

§  1273.     Assessments :  receiver. 

§  127-4.     What   receiver   may   include   in    assessment :    premium    notes. 

§  1275.     Assessments  by  trustee  of  unauthorized  company. 

§  1276.     Restoration  to  membership ;  reinstatement :  revival. 

§  1276a.  Same  subject :  good  health. 

§  1276b.  Same  subject :  incontestable  clause. 

§  1276e.  Same  subject :  when  reinstatement  not  effected. 

§  1276d.  Same  subject :  when  new  contract,  when  not. 

§  1277,  Reinstatement  by  way  of  waiver  and  not  as  new  contract :  cred- 
itor's rights. 

§  1278.     To  whom  dues  and  assessments  are  payable. 

§  1279.     Mode   of   remittance. 

§  1280.     Tender  of  assessments:  frequency  of  tender. 

§  1281.  Assessments  and  dues:  death  before  time  specified  for  payment 
e:j(pires :  loss  after  suspension. 

§  1281a.  Days  of  grace:  death  within  days  of  grace. 

§  1282.     Death  of  member  during  suspension  of  lodge. 

§  1283.     Death  while  ''dues  in  arrears." 

§  1284.     Payment  assessment  after  loss. 

§  1285.     Right  to  have  assessment-  made. 

§  1286.     No  authority  to  receive  less  than  the  amount  of  assessment  duo. 

§  1287.     Assessments  and  dues :  safety  fund :  reserve  fund. 

§  1288.     Refusal  to  pay  assessments:  right  to  have  fund  distributed. 

§  1289.     Application  or  appropriation  of  funds  by  society  or  lodge. 

§  1290.     Necessity  for  assessment  must  exist. 

§  1291.     Prescribed  mode  must  be  followed  in  levj'ing  assessment. 

§  1292.     Who  empowered  to  levy  assessments. 

§  1293.  Notice  of  intention  to  assess  not  necessary  for  directors'  regular 
meeting. 

§  1294.     Power  of  directors  to  assess  cannot  be  delegated. 

§  1295.     When  power  to  assess  may  be  delegated :  exceptions  to  rule. 

§  1296.     Assessment   by  illegally  elected  board. 

§  1297.     Intentional  omission  of  members. 

§  1298.     Assessments  where  risks  are  classified. 


CONTENTS  Ixiii 

§  12D9.  Assessment  invalid  of  certificate  changed  to  life  policy  with  regular 

premiums. 

§  1300.  When  assessment  may  be  made. 

§  1301.  Assessment  to  pay  unearned  premium. 

§  1302.  Slight  errors  do  not  invalidate :  material  errors  or  omissions  do. 

§  1303.  Second  assessment  of  note. 

§  1304.  Assessment:   new  policy  substituted  for  old  one   through   fraud. 

§  1305.  Levying  assessments :  amount :  inequality. 

§  1303a.  Right  to  increase  assessments. 

§  1306.  Examination  and  allowance  of  claims. 

§  1307.  What  may  be  included. 

§  1308.  What  need  not  and  may  not  be  included. 

§  1309.  Anticipated  losses. 

§  1310.  Regularity  of  assessment  must  be  affirmatively  shown:  allegation 

and  proof :  evidence. 

§  1311.  Defenses  to  actions :  assessments :   premium  notes. 

§  1312.  Statute  of  limitations:  assessments. 


CHAPTER  •  XLIII. 


NOTICE— PREMIUMS,  ASSESSMENTS,  AND  DUES. 

§  1320.     When  notice  must  be  given :  generally. 

§  1321.     When  notice  need  not  be  given :  generally. 

§  1321a.  Notice  necessary  when  insured  entitled  to  profits  or  reduction 
of  premiums. 

§  1322.     Failure  to  give  written  notice :  tender  unnecessary. 

§  1323.     Statutory  notice. 

§  1321.     Stipulation    contrary    to    statute-  requiring    notice:    waiver. 

§  1324a.  Waiver  of  notice  in  other  cases. 

§  1325.     Constitutionality  of  statute  requiring  notice. 

§  1325a.  Statutory  notice:  place  of  contract. 

§  1325b.  Statutory  notice:   effect  of  repeal  of  statute. 

§  1326.     To  what  class  of  policies  New  York  and  other  statutes  apply. 

§  1326a.  Same  subject:  paid-up  policy. 

§  1327.     Stipulation  in  guaranty  fund  note  as  to  notice. 

§  1328.     Sufficiency  of  notice. 

§  1329.     Sufficiency  of  statutory  notice.    • 

§  1330.     Authorities   holding  notice   sufficient. 

§  1330a.  Right   to    notice:    effect   of   subsequently   enacted    by-law. 

§  1331.     To  whom  notice  should  be  given. 

§  1331a.  Notice  to  assignee  who  had  contracted  to  pay  assessments:  lia- 
bility of  assignee  for  failure  to  pay  same. 


Ixiv 


CONTENTS 


§  1332.     Ccoses  holding  that  usage  to  send  notice  necessitates  giving  notice. 

§  1333.     Authorities  holding  the  contrary  doctrine. 

§  1334.     Same  subject :  conclusion. 

§  1335.     Personal   notice:   whether  notice  must  be   actually   received. 

§  1336.     Service  by  mail. 

§  1336a.  Same  subject :  validity  of  provisions  as  to. 

§  1336b.  Same  subject :  last  known  address :   change  of  address. 

§  1337.     Notice  wrongly  addressed. 

§  1338.     Notice  by  publication. 

§  1338a.  Same  subject :  validity  of  provisions  as  to. 

§  1339.     Computation  of  time. 


CHAPTER  XLIV. 


PREMIUMS,  ETC.— EXCUSES,  WAIVER  AND  ESTOPPEL. 


§  1345.     Whether  war  excuses  nonpayment  of  premium. 

§  1346.  What  excuses  nonpayment  of  premiums  and  assessments :  gen- 
erally. 

§  1347.     Excuses :  omitting  customary  statement :   amount   unknown. 

§  1348.     Excuses :  change  of  agency  without  notice. 

§  1349.     Excuses:  insolvency:  company  ceasing  to  do  business. 

§  1349a.  Acts  ultra  vires  corporation's  powers  no  excuse. 

§  1350.  Act  of  God :  sickness :  death :  accident :  insanity :  no  excuse :  ex- 
ceptions. 

§  1351,  Death  of  agent :  failure  to  find  agent :  agent's  neglect  or  misrep- 
resentations no  excuse. 

§  1352.  What  is  not  an  excuse :  absence  of  assured :  lapse  of  policy  by 
accident:   other  instances. 

§  1353.  Waiver  of  punctual  payment  of  premiums,  assessments,  and  dues: 
estoppel :  generally. 

§  1354.  Waiver  and  estoppel:  prior  parol  agreements  as  to  payment  of 
premiums,  etc. 

§  1355.  Waiver  and  estoppel :  subsequent  parol  agreements  as  to  pay- 
ments and  premiums,  etc. 

§  1356.     Payment  of  premiums :  waiver  and  estoppel,  custom,  acts,  etc. 

§  1357.     Waiver:  holding  overdue  premium  notes  and  demanding  payment. 

§  1357a.  Holding  overdue  notes  and  requesting  payment. 

§  1358.     Custom  not  to  treat  nonpayment  of  premium  notes  as  forfeiture. 

§  1359.     Enforcing  payment  of  note  after  forfeiture. 

§  1360.     Assured  must  liave  known  of  custom. 

§  1361.     Payment  of  assessments:  waiver  and  estoppel,  custom,  acts,  etc. 

§  1362.     Waiver  of  prepayment. 


CONTENTS  Ixv 

§  1363.     Where  receipt  of  premiums  and  assessments  is  an  act  of  favor. 
§  1364.     Waiver  and  estoppel:  acceptance  and  retention  of  overdue  pre- 
miums  and   assessments :    cases. 
§  1365.     Right   or  obligation   to   accept  and   retain   overdue   premium   or 

assessment :  no  waiver. 
§  1366.     Unconditional  offer  to  accept  overdue  premium:  tender. 
§  1367.     Conditional  acceptance  of  overdue  premiums,  etc. 
§  1368.     When  custom  to  receive  overdue  payments  may  be  availed  of  by 

insured :  general  custom :  proof.  i 

§  1369.     Waiver  of  forfeiture  generally  by  receipt  of  overdue  premiums, 

assessments  and  dues. 
§  1369a.  Demand  or  recjuest  for  payment. 
§  1369b.  Express  waiver:  knowledge  of  assured. 
§  1370.     Waiver  by  collecting   assessments   on   notes   or  by   collecting   or 

suing  on  notes. 
§  1371.     Whether   levy  and   receipt   of   subsequent  assessments   and   dues 

waive  forfeiture. 
§  1372.     Same  subject :  authorities  holding  a  waiver. 
§  1373.     Same  subject :   authorities  contra. 
§  1374.     Waiver:    custom:    acceptance    of    premium    or    assessment    after 

loss  or  death. 
§  1375.     W^aiver:   payment  of  premium  note:   generally. 
§  1376.     Waiver  by  failure  to  declare  a  forfeiture. 
§  1377.     Failure  to  insist  promptly  on  payment  of  premium  note. 
§  1378.     Waiver:   collecting  loss:   adjustment  and   allowance   of  loss. 
§  1379.     Waiver  by  recognition  of  the  policy  as  in  force. 
§  1380.     Waiver  by  giving  credit   for  the   premium. 
§  1381.     Defense  that  waiver  induced  by  fals.e  representations. 
§  1382.     Waiver  by  agents :  subordinate  lodges. 
§  1383.     Waiver  by  assured  of  exemption  from  assessment :   illegality   of 

assessment. 
§  1384.     Waiver  by  assured  of  defective  notice  and  service  of  same. 


CHAPTER   XLV. 


RETURN  OF  PREMIUMS  AND  ASSESSMENTS. 

§  1390.     Principles  governing  right  to  return  of  premiums  where  risk  baa 

not  attached. 
§  1391.     Stipulation  for  return  of  premium:  generally. 
§  1392.     Stipulations:   statutes  governing  the  right   to   a  return   of   the 

premium. 


Ixvi  CONTENTS 

§  1393.  Return  of  proportionate  premium:  surrender,  rescission,  cancela- 
tion, etc. 

§  1394.  Stipulation  may  entitle  to  proportionate  return  of  premium,  al- 
though there  be  a  partial  or  total  loss  of  goods,  etc.:  sailing 
with  convoy. 

§  1395.  Where  underwriter  discharged  before  performance  of  condition 
on  which  return  of  proportionate  premium  based. 

§  139G.  Where  condition  satisfied  but  underwriters  discharged  from  loss: 
pi-emiums  returnable  although  loss  by  excepted  risk. 

§  1397.     No  return  if  risk  has  attached. 

§  1397a.  Election  to  refund  premium  or  pay  insurance:  waiver. 

§  1398.     Premium  returnable  where  policy  ab  initio  void:  generally. 

§  1399.     Insurance  contract  with  infant:  return  of  premium. 

§  1400.  Premium  returnable  where  contract  voidable  or  void  for  mis- 
representations or  fraud  of  assurer. 

§  1400a.  Premium  returnable  where  contract  voidable  or  void  fur  misrep- 
resentation or  fraud  of  assurer's  agent. 

§  1401.  Premium  returnable  wlien  paid  by  mistake  of  facts:  policy  based 
upon  mistake:  mistake  of  law. 

§  1401a.  Return  of  premium  where  policy  does  not  conform  with  agree- 
ment. 

§  1401b.  Premium  not  returnable:  voluntary  payments  under  claim  of  right. 

§  1402.  Whether  premium  returnable  where  foreign  company  has  not 
complied  with  state  laws. 

§  1403.     Return  of  premium:  breach  of  warranty. 

§  1404.  Premium  returnable  for  misrepresentation  or  concealment  of 
assured  without  fraud. 

§  1404a.  Same  subject :  knowledge  of  insurer's  agent  where  both  parties 
act  in  good   faith. 

§  1403.     Premium  not  returnable:  policy  illegal:  parties  in  pari  delicto. 

§  1405a.  Return  of  premiums:  ultra  vires  contracts. 

§  1406.  Premium  not  returnable:  policy  void  for  fraud  or  material 
misrepresentations  of  assured  or  his  agent. 

§  1407.     Premium  not  returnable :   material  alteration  of  policy. 

§  1407a.  Return  of  premiums:  demand  for  additional  medical  examination. 

§  1408.     Return  of  premium:  breach  of  contract  by  assurer. 

§  1408a.  Same  subject :  transfer  of  assets  to  another  company :  winding 
up :  reorganization :  change  of  insurance  plan. 

§  1408b.  Same   subject :    insolvency. 

§  1408e.  Same  subject:  insolvency  of  foreign  nuitual  fire  insurance  com- 
panies. 

§  1408d.  Same  su!)jeet :  insolvency  of  title  insurance  company:  credit  in- 
surance  company. 

§  1408e.  Same  subject:   discrimination  as  to  rates:   rebates. 

§  1408f.  Same  subject :  reduction  of  amount  of  insurance. 


CONTENTS  Ixvii 

§  1408g.  Same  subject:  increase  of  assessments. 
§  1408h.  Same   subject:    reinsurance. 
§  1409.     Return  where  note  is  given. 
§  1409a.  When  no  return  where   note  is  given. 
§  1410.     Return  for  want  of  interest. 
§  1410a.  Same   subject:    when   no   return. 

§  1410b.  Return   where   insurance   without   consent   of   insured. 
§  1410c.  Same   subject:    statutes, 

§  1410d.  Payment    by    check    of    municipal   corporation:    misappropriated 
funds :  recovery  back. 

Proportionate  return:  overvaluation:  short  interest. 

Whether   premium   returnable   for   overinsurance   by   several   in- 
surers: pro  rata  contribution. 

Same  subject:   opinions  of  the  text-writers. 

Same  subject:  the  case  of  Fisk  v.  Mastermaji. 

Same  subject:  Code  provisions. 

Same   subject:   the   rule   as   to   double   insurances. 

Same  subject :  summary  and  conclusion. 

Stipulations  for  return  of  premium:    prior   and   subsequent   in- 
surances :  the  American  clause. 

When  no  return  in  case  of  several  policies. 

Premium   not   returnable   when   risk   entire. 

Premium   returnable  when  risk  divisible. 

Return  of  premium:  effect  of  usage:  review  of  authorities. 

Same  subject:   conclusion. 

Stipulation  for  return  of  premium:   "sold  or  laid  up." 

Return  of  premium:  retention  of  a  certain   per  centum   by   the 
insurer. 

Return   of   premium:    insurance   by    voluntary   agent. 

Recovery  back  of  premium  from  agent. 

Who  may  recover  back  premium. 
§  1428a.  Same  subject:   beneficiaries. 

§  1429.     Return  of  premium:  assignment:  right  of  assignee. 
§  1429a.  Tender  or  return  of  premium  as  prerequisite  to  defense  or  for- 
feiture. 
§  1429b.  Return  or  tender  of  premiums  as  affecting  waiver. 
§  1430.     Return  of  premium :  miscellaneous  authorities. 


§ 

1411. 

§ 

1412. 

§ 

1413. 

§ 

1414. 

§ 

1415. 

§ 

1416. 

§ 

1417. 

§ 

1418. 

§ 

1419. 

§ 

1420. 

§ 

1421. 

§ 

1422. 

§ 

1423. 

§ 

1424. 

§ 

1425. 

§ 

1426. 

§ 

1427. 

§ 

1428. 

Ixviii  CONTENTS 

TITLE  VII. 

ATTACHMENT  AND  DURATION  OF  RISK. 

CHAPTER  XLVI. 

ATTACHMENT   AND   DURATION   OF   RISK. 

§  1436.     Attachment  and  duration  of  risk:  generally. 

§  1437.     ''Receipt' and  acceptance"  of  application  and  fee. 

§  1438.     Countersigning   policy:    death   before. 

§  1439.     Attachment  and  duration  of  risk :  parol  contract. 

§  1440.     Necessity  of  fixing  duration  of  the  risk. 

§  1440a.  Where  duration  of  risk  not  specified. 

§  1440b.  Attachment  of  risk  by  waiver  of  stipulation  as  to. 

§  1441.     Attachment  and  duration  of  risk:  date  of  contract. 

§  1441a.  Date  of  policy :  "issuance"  of  policy. 

§  1442.     Attachment  and  duration  of  risk:  the  date:  reinsurance. 

§  1443.     Attachment  and  duration  of  risk:  insurance  retroactive. 

§  1443a.  Attachment   and   duration   of  risk:    fidelity   guaranty   insurance: 

credit   guaranty   insurance. 
§  1444.     Attachment  of  risk:   time  policy  may  be  retroactive. 
§  1445.     Risk  may   attach  although   mistake   in   description   of   property. 
§  1446.     Attachment  and  duration  of  risk:  computation  of  time. 
§  1447.     Attachment  of  risk:  goods  shipped  "between"  two  dates. 
§  1448.     Attachment  and   termination   of  risk:   necessity   of   an  insurable 

interest. 
§  1449.     Termination  by  change  of  risk:   breach  of  condition. 
§  1450.     Policy  may  terminate  by  its  own  limitation  or  by  actual  loss  or 

death. 
§  1451.     Where   attachment    of   risk    not    postponed    by    condition    as    to 

rejjair  of  vessel. 
§  1452.     Attachment  of  risk:  de  facto  and  de  jure  existence  of  corporaliuii : 

compliance  with  statutory  requirements  as  to  organization,  etc. 
§  1453.     Duration  of  risk :  expiration  of  charter  during  life  of  policy. 
§  1454.     Attachment   and    determination   of   risk:    insolvency:    dissolution. 
§  1455.     Dissolution :  reserve  fund. 
§  1456.     Termination    of    contract    by    expulsion    of    member    of    mutual 

benefit   society. 
§  1457.     Termination  by  withdrawal  of  member  of  mutual  benefit  society. 


CONTENTS  •  Ixix 

§  1438.  Reinstatement  by  waiver  not  by  new  contract. 

§  1439.  Renewal  of  policy :  amount  must  be  fixed. 

§  1460.  Presumption   that  renewal   policy   is  like   original. 

§  1461.  Misrepresentations  and  warranties  in  application  for  revival. 

§  1462.  Immaterial  oral  representations  not  inducing  risk:  renewal  valid. 

§  1463.  Where  renewal  is  on  same  terms  and  conditions  as  old  contract. 

§  1464.  Renewal :  cases. 

§  1465.  New  policy  may  be  only  a  renewal. 

§  1466.  Renewal  or  revival  may  be  conditional. 

§  1467.  Agreement  or  waiver  necessary  to  renewal  or  revival  after  for- 
feiture. 

§  1468.  Agreement  to  renew   not  within   statute  of  frauds. 

§  1469.  Renewal  need  not  be  under  seal. 

§  1470.  Agent's  agreement  to  renew:   delivering  renewal   receipt. 

§  1470a.  Renewal:  fidelity  guaranty  insurance:  credit  guaranty  insurance. 

§  1471.  Right  to  reinstatement  may  pass  to  beneficiary. 

§  1472.  Reinstatement  of  member. 

§  1472a.  When  no  reinstatement  effected. 

§  1473.  Suspension  of  risk. 

§  1474.  Duration  of  risk:   effect  of  war. 


CHAPTER   XLVII. 


ATTACHMENT  AND  DURATION  OF  RISK— THE  SHIP. 

§  1483.     Attachment  and  duration  of  risk  on  ship:  generally. 

§  1484.     Detention  by  embargo  after  voyage  commenced. 

§  1485.  Attachment  of  risk:  vessel  building:  "W^aterborne :"  "safely 
launched,"  etc. 

§  1486.     Attachment  of  risk  "at  and  from"  home  port. 

§  1487.  Prior  parol  agreement  as  to  time  of  commencement  of  risk  can- 
not change  policy. 

§  1488.  Attachment  and  duration  of  risk  where  voyage  insured  is  changed 
or  abandoned. 

§  1489.     Attachment  and  duration  of  risk:  time  policy. 

§  1490t     Attachment  and   duration   of  risk:    mixed   policy. 

§  1491.  Intent  to  insure  vessel  on  time  irrespective  of  place  where  she 
may  be. 

§  1492.  Time  specified  for  continuance  of  risk  after  arrival  on  voyage 
insured. 

§  1493.  Attachment  and  duration  of  risk  under  time  policies,  the  voyage 
being  described. 


Ixx  CONTENTS 

§  1494.     Attachment  of  risk  "at  and  from :  "  delay  in  port  should  not  be 

unreasonable. 
§  1495.     Attachment  of  risks:  sailing  on  voyage:  departure. 
§  1496.     Attachment  of  risk  "at  and  from"  foreign  port. 
§  1497.     What   is   sufficient   repair   and   seaworthiness   for   ship   to   lie  in 

safety  "at"  outport. 
§  1498.     Whether   ri.^k    attaches    upon    first    arrival    "at"    or    after   vessel 

has  been  moored  twenty-four  hours,  etc. 
§  1500.     Same  subject :   cases  and  opinions  of  the  courts. 
§  1501.     Same  subject :   attachment   and  duration   of  risk  "at   and   from" 

island,  etc. 
§  1502.     Usage  may  suspend   attachmeiit   of  risk   "at   and   from"   bej'ond 

time  of  ship's  first  arrival. 
§  1503.     Stipulation  that  risk  commence   "at   and   from"    on   termination 

of  cruise  and  preparing  for  voyage. 
§  1504.     Opinions    of    the    courts   as    to    attachment    of    the    risk    in    the 

preceding  cases. 
§  1505.     Meaning  of  the  word  "port"  generally:  "port  risk." 
§  1505a.  "Port   or  ports,"   "place  or  places,"   construed. 
§  1506.     Duration  of  risk:  time  policies  "at  sea:"  "on  a  passage." 
§  1507.     Attachment  risk  "at  and  from"  vessel  lying  long  in  foreign  port 

or  stated  to  be  there  in  safety:   where  she  now  is. 
§  1508.     Homeward  policy  "at  and  from:"  general  designation  of  ports: 

case  of  island  or  district. 
§  1509.     Homeward  policy  "at  and  from:"  specific  designation  of  port  or 

place. 
§  1510.     Attachment  of  risk  "at  and  from"  foreign  port :    ownership  ac- 

cjuired  while  vessel  lying  in  port. 
§  1511.     "At  and  from"  any  one  of  several  ports:    voyage  from  one  port 

to  another  before  risk  attaches. 
§  1512.     Attachment  of  risk  "from"  a  port. 
§  1513.     Attachment  and  duration  of  risk:    entirety  of  risk. 
§  1514.     The  words  "thence"  or  "from"  used  in  reference  to  intermediate 

ports. 
§  1515,     "At  and  from"  to  a  port  named  and  "a  market." 
§  1516.     Commencement  of  voyage  insured  to  specified  port  with  liberty 

to  call  at,  etc. 


CHAPTER  XLVIII. 


CONTINUANCE  AND  TERMINATION  OF  RISK— THE  SHIP. 

§  1523.     Continuance  of  risk:    liberty  to  "touch  and  stay"  etc.:    interme-^. 
diate  voyage :    usage  of  trade. 


CONTENTS  Ixxi 

§  1524.  Termination  of  risk  on  ship  to  island,  with  liberty  of  several  ports 
or  to  port  or  ports  of  discharge. 

§  1525.  Insurance  to  several  successive  ports  of  discharge :  election  of 
port. 

§  1526.  Continuance  of  risk  where  completion  of  voyage  insured  is  com- 
pelled to  be  temporarily  delayed. 

§  1527.  Risk  continues  although  vessel  be  compelled  to  stop  without  the 
harbor  by  municipal  or  like  regulations :    quarantine. 

§  1528.  Ship  insured  to  designated  port  without  provision  as  to  duration 
of  risk  after  arrival. 

§  1529.  Insurance  "at  and  from"  a  port:  several  ports  within  one  clas- 
sification. 

§  1530.     Termination  of  risk  :   time  policy. 

§  1531.     Risk  terminates  by  abandonment  or  change  of  voyage  insured. 

§  1532.  Risk  terminates  in  case  of  island  or  district  at  first  port  of  dis- 
charge, etc. 

§^1533.     Continuance  of  risk  while  loading  at  specified  port. 

§  1534.  Continuance  of  risk  on  fishing  voyage :  part  of  cargo  arriving 
by  another  ship. 

§  1535,     Continuance  of  risk  on  furniture,  etc.,  of  ship. 

§  1536.  Putting  into  port  other  than  that  of  original  destination  and  dis- 
charging small  part  of  cargo. 

§  1537.     Moored  twenty-four  hours  in  good  safety. 

§  1538.     What  constitutes  being  moored  twenty-four  hours  in  good  safety. 

§  1539.     Limiffltion  of  the  rule. 

§  1540.     When  vessel  has  arrived. 

§  1541.  Ves.«5pl  may  have  arrived  and  yet  never  have  been  moored  in 
saf*»ty. 

§  1542.     Mere  temporary  mooring  not  sufficient. 

§  1543.     Degree  and  kind  of  physical  safety  required. 

§  1544.     Degree  and  kind  of  safety  required  :    seizure,  etc. 

§  1545.  Ship  moored  at  outer  harbor  or  outside  place  of  usual  discharge 
and  unable  to  enter. 

§  1546.  Mere  liability  to  damage  does  not  of  itself  prevent  the  ship  from 
being  in  safety. 

§  1547.     Port  of  discharge :   last  port  of  discharge. 

§  1548.  Until  she  shall  arrive  in  safety  in  any  port  or  harbor  of  a  partic- 
ular place. 

§  1549.     Risk  may  be  terminated  by  substituting  another  port  of  delivery. 

§  1550.  To  port  or  ports  of  discharge :  usage  of  trade  to  keep  cargo  on 
board  for  a  time  after  arrival. 

§  1551.     Ship  insured  to  one  or  two  ports  in  alternative. 

§  1552.  Termination  of  risk  by  undertaking  distinct  voyage  before  com- 
mencing voyage  insured. 

§  1553.  Loss  incurred  before  expiration  of  risk :  expense  incurred  there- 
after to  repair  injury. 


Ixxii  CONTENTS 

§  1554.     Mutual  insurance  association :    termination  of  risk :    nonpayment 

of  contribution. 
§  1555.     Expiration   by  limitation  of  "binding"   memorandum. 


CHAPTER  XLIX. 


ATTACHMENT  AND  DURATION  OF  RISK  ON  GOODS. 

§  1562,     Attachment  and  duration  of  risk  on  goods :    generally. 

§  1563.     Insurance  on  goods  may  be  retrospective. 

§  1564.  Risk  will  not  attach  until  assured  acquires  an  interest  in  the 
goods :    excejDtion. 

§  1565.  Goods  on  shore  in  warehouses:  on  the  wharf  awaiting  shipment: 
for  trading  voyages:  temporarily  landed  in  government  ware- 
houses :    landed  for  transportation   to   port :     quarantine. 

§  1566.     "Safely  landed"  defined  and  construed. 

§  1567.     "Safely  landed:"  risk  of  craft  while  waiting  for  transshipment. 

§  1568.     Goods  "to  be  shipped :"  time  policy. 

§  1569.  Goods  in  transit  in  boats  or  lighters,  etc. :  usage :  attachment  and 
termination  of  risk. 

§  1570.  Attachment  of  risk:  substituted  goods:  goods  laden  at  interme- 
diate port:    trading  voyages. 

§  1571.  Where  goods  subsequently  loaded  at  intermediate  port  are  not 
substituted  goods. 

§  1572.     Outward  goods  and  proceeds  home :    attachment  risk. 

§  1573.  "At  and  from :"  undisposed  of  outward  cargo  may  be  protected 
by  the  words  "wheresoever  loaded." 

§  1574.  "At  and  from :"  outward  cargo  to  be  considered  homeward  interest, 
etc.:    loading  "at." 

§  1575.     Laden  or  to  be  laden  between  designated  points. 

§  1576.  Shipments  to  be  subsequently  declared :  risk  attaches  in  order  of 
shipment:    usage  to  correct  declaration. 

§  1577.     The  insurance  applies  to  tlie  first  voyage  or  the  one  commenced. 

§  1578.  "At  and  from"  a  specified  port :  commencement  of  the  risk  from 
loading,  etc. :    what  is  port  of  loading. 

§  1579.     Cases  relied  on  in  support  of  the  last  rule. 

§  1580.  Construction  of  jjolicy  may  warrant  loading  elsewhere  than  "at" 
designated  place. 

§  1581.     Attachment  of  risk  on  goods  "at  and  from." 

§  1582.  "At  and  from"  on  goods:  several  ports  within  one  legal  classifi- 
cation. 

§  1583.  Goods  on  board  ship  or  ships :  certain  ports  named :  attaches  at 
port  where  loaded,  etc. 


CONTENTS  '  Ixxiii 

§  1584.     Unloading  and  reloading  goods  to  make  vessel  seaworthy  or  for 

other  purposes. 
§  1585.     Attachment  and   duration   of  risk   on   goods:     abandonment   and 

change  of  voyage  insured. 
§  1580.     Homeward  policy  "at  and  from:"  case  of  island  or  district:    from 

the  loading  aboard  ship  "at"  port  or  ports. 
§  1587.     Duration  of  risk:    liberty  to  make  port  or  ports:    insurance  to 

several  ports,  island  or  district. 
§  1588.     Attachment  of  risk  from  a  port  from  loading:    duration  of  risk: 

usage. 
§  1589.     To  specified  port :   anchoring  outside  of  harbor. 
§  1590.     Till  safely  landed:  final  or  last  port  of  discharge. 
§  1591.     Goods  partly  landed :  whether  the  risk  is  entire. 
§  1592.     Within  what  time  goods  must  be  landed. 
§  1593.     Termination  of  risk:    voyage  stopped  or  delayed  by  ice:    inland 

navigation. 
§  1594.     Risk  terminates  where  goods  are  transshipped  without  necessity 

or  agreement. 
§  1595.     Risk  does  not  terminate  where  goods  transhipped  from  necessity. 
§  159G.     Risk  does  not  terminate  when  transshipment  is  by  agreement. 
§  1597.     Termination  of  risk :    outfits  of  whaling  voyage. 
§  1598.     Till  arrival  of  goods  to  a  market  at  final  port  of  discharge. 
§  1599.     Termination   of   risk   by  consignee   or   owner  taking   possession : 

consignees :   lighters. 


CHAPTER   L. 


ATTACHMENT  AND  DURATION  OF  RISK  ON  FREIGHT. 

Attachment  and  duration  of  risk  on  freight :    generally. 

The  case  of  Tonge  v.  Watts. 

Risk  on  freight  will  only  attach  from  loading  of  the  vessel  where 
so  stipulated. 

Risk  on  freight  will  attach  only  on  goods  laden  where  no  contract 
for  the  goods  exists. 

Risk  on  freight  attaches  under  valued  policy  where  part  only  of 
goods  are  laden. 

Risk  on  freight  under  valued  policy  may  attach  only  proportion- 
ately to  goods  and  freight  actually  at  risk. 

Risk  attaches  on  freight  if  cargo  purchased  or  contracted  for, 
and  both  ship  and  cargo  are  ready. 

Risk  on  freight  will  not  attach  where  loss  is  incurred  on  voyage 
other  than  that  insured. 


§  1G06. 

§ 

1607. 

§ 

1608. 

§ 

1609. 

§ 

1610. 

§ 

1611. 

§  1612. 

§ 

1613. 

Ixxiv 


CONTENTS 


§  1614.     Risk  on  froight  "at  and  from:"  homeward  voyage. 

§  1615.  Valued  policy  on  freight  outward  and  homeward  covers  each 
voyage. 

§  1616.  Freight  where  voyage  insured  consists  of  distinct  or  successive  pas- 
sages:  valued  policy. 

§  1617.     Risk  terminates  where  freight  is  earned:    freight  partly  earned. 

§  1618.  Risk  on  freight  terminated  by  assured  accepting  goods  at  inter- 
mediate port. 

§  1619.  Risk  on  freight  against  total  loss  only  not  terminated  by  delivery 
of  some  goods  at  intermediate  port. 

§  1620.     Termination  of  risk  on  freight  at  port  or  ports  of  discharge. 

§  1621.     General  rule  as  to  attachment  of  risk  on  freight :  chartered  freight. 

§  1622.     Extension  of  the  rule  last  stated. 

§  1623.  Attachment  of  risk  where  vessel  is  being  fitted  at  place  of  loading 
to  receive  contraeted-for  cargo. 

§  1624.  Risk  on  chartered  freight  attaches  by  inception  of  voyage  even 
in  ballast  to  port  of  loading. 

§  1625.     Contract  stipulation  may  supersede  the  abov*  rule. 

§  1626.     Where  there  is  a  second  charter  party  at  and  from  outport. 

§  1627.  Outward  and  homeward  freight  where  contract  for  freight  is 
entire. 


CHAPTER   LI. 


RESCISSION  AND  CANCELATION. 


§  1634.     Rescission  and  cancelation  generally. 

§  1634a.  Construction  of  cancelation  provision  against  insurer. 

§  1635.     Statutory  provisions  relating  to  rescission  or  cancelation. 

§  1635a.  Same  subject:    mortgagee  included   and  consent   of  necessary. 

§  1636.  Rescission  or  cancelation  before  contract  delivered  or  finally  com- 
pleted. 

§  1637.     Rescission  or  cancelation  by  consent. 

§  1637a.  Action  for  breach  of  agreement  to  surrender  and  cancel  lost 
policy. 

§  1638.     Agreement  to  cancel  marine  risk  need  not  be  in  writing. 

§  1639.     Option  reserved  by  company  to  cancel. 

§  1640.  Cancelation  for  nonpayment  of  premiums  or  assessments,  or  other 
breach  of  condition. 

§  1640a.  Cancelation  or  rescission  for  misrepresentations,  breach  of  war- 
ranty or  fraud. 

§  1641.     Cancelation  where  policy  is  assigned. 

§  1642.     Effect  as  to  cancelation  of  repeal  of  charter. 


CONTENTS  Ixxv 

§  1643.  Cancelation  by  mutual  company:  authority  of  directors  or  secre- 
tary. 

§  1644.  Rescission  and  cancelation:  insolvency:  appointment  of  receiver: 
teraiination  of  business  and  transfer  of  assets. 

§  1644a.  Cancelation:    insolvency:    appointment  of  temporary  receiver. 

§  1645.  Cancelation  by  receiver :  statutory  provision :  certificates  of  in- 
debtedness. 

§  1646.     What  acts  do  not  effect  a  cancelation  :    instances. 

§  1646a.  Surrender  and  cancelation :   guardian  and  ward :   infant. 

§  1647.     Rescission  by  assured  and  surrender  of  policy. 

§  1648.     Cancelation  by  request  of  assured  under  terms  of  policy  or  statute. 

§  1648a.  Surrender  and  cancelation  by  person  insane  or  mentally  incompe- 
tent. 

§  1649.     Right  to  reject  policy  not  of  class  ordered. 

§  1649a.  Surrender  and  cancelation  where  policy  does  not  conform  to  appli- 
cation. 

§  1650.  Rescission  and  surrender:  mutual  company:  withdrawal  of  mem- 
ber. 

§  1650a.  Cancelation :  unincorporated  association :  withdrawal  of  member. 

§  1650b.  Surrender  and   cancelation :    effect   of   death    of   assured. 

§  1651.  Right  of  assured  to  surrender  life  policy  dependent  upon  bene- 
ficiary's consent. 

§  1652.  Proposition  to  cancel  must  be  accepted  or  declined  as  a  whole  if 
indivisible. 

§  1653.  Want  of  insurable  interest  as  a  ground  of  rescission  or  cancela- 
tion. 

§  1654.     Rescission  or  avoidance  of  com}-)romise  or  release. 

§  1655.  Right  of  agent  to  rescind  or  cancel :  notice  of  cancelation  to 
agent  or  broker. 

§  1655a.  Cancelation:  when  other  insurance  or  substituted  policy  does  not 
attach. 

§  1655b.  Cancelation :    when  other  insurance  or  substituted  policy  attaches. 

§  1656.     Cancelation  by  mistake  of  agent. 

§  1657.     Partner's  consent  to  cancelation  or  substitution  binds  firm. 

§  1658.     Release  by  part  of  the  insured  parties. 

§  1659.     Wrongful  cancelation  or  termination  of  contract  by  assurer. 

§  1659a.  Rescission  or  cancelation  :  increase  of  assessments  or  reduction  of 
policy  amount. 

§  1660.  Strict  compliance  with  stipulation  as  to  rescission  or  cancelation 
required  unless  waived :    wlien  stipulation  not  binding. 

§  1661.  Rights  relating  to  rescission  or  cancelation  must  be  exercised  with- 
in a  reasonable  time. 

§  1()()2.     Company  cannot  cancel  when  loss  is  imminent. 

§  1663.     Cancelation  and  rescission  after  loss  or  forfeiture. 

§  1664.     Cancelation  in  equity  after  iiolicy  lias  become  void  or  inoperative. 


Ixxvi  CONTENTS 

§  1665.     May  the  policy  be  terminated  eo  instanti  on  notice:    reasonable 

time. 
§  1665a.  Same  subject:   specified  time  must  intervene:   computation  of  time. 
§  1665b.  Entire  or  divisible  contract :    notice. 
§  1666.     Cancelation  of  parol  contract:    notice. 
§1667.     Cancelation:   notice  to  insurer. 
§  1668.     Cancelation:    notice   to  the   assured:    to   mortgagee:    to   one   of 

several. 
§  1668a.  Notice  by  publication:    decree  of  foreign  court. 
§  1669,     Cancelation :   notice  by  mail  must  be  received. 
§  1669a.  When  mailing  notice  and  unearned  premium  to  foreign  company 

sufficient. 
§  1669b.  Notice  of  registered  letter:  when  insured  not  put  on  inquiry. 
§  1670.     Cancelation':    company  must  give  notice:    sufficiency  and  service 

of  same. 
§  1670a.  Same  subject :    when  notice  sufficient. 
§  1670b.  Same  subject:    when  notice  insufficient. 

§  1671.     Cancelation:    company  must  return  or  tender  unearned  premium. 
§  1672.     Cancelation:    what  is  not  a  sufficient  payment  or  tender  of  the 

unearned  premium. 
§  1673.     Cancelation:  when  actual  payment  or  tender  of  unearned  premium 

unnecessary. 
§  1673a.  Cancelation:    waiver. 

§  1673b.  Same  subject :  surrender  of  policy  upon  assurer's  request. 
§  1674.     When  equity  will  rescind  or  cancel:    generally. 
§  1675.     When  equity  will  rescind  or  cancel :    cases. 
§  1676.     When  equity  will  not  rescind  or  cancel :    cases. 
§  1677.     Equity  may  rescind  cancelation  made  by  mistake. 
§  1678.     Where  equity  will  refuse  to  cancel  after  loss  or  death. 
§  1679.     When  equity  will  cancel  after  loss  or  death. 
§  1680.     Same  subject:    conclusion. 
§  1680a.  Effect  of  cancelation  upon  liability. 
§  1681.     Proof  as  to  cancelation  or  rescission. 
§  1682.     Whether  question  of  rescission  or  cancelation  is  one  of  law  or  fact. 


CONTENTS  Ixxvii 

TITLE  VIII. 

SUBJECT  OF  INSURANCE. 

CHAPTER  LIT. 

DESCRIPTION  OF  PARTIES   AND   SUBJECT  MATTER. 

§  1689.     Description  of  parties. 

§  1690.     Description  of  the  property :   general  rule. 

§  1691.     Extent  of  interest  need  not  be  specifically  described. 

§  1692.  Same  subject:  carriers:  shipowner:  consignee:  undivided  inter- 
est :  assignee. 

§  1692a.  Same  subject :  bailees,  or  agents. 

§  1693.     Same  subject:    joint  owners:    partners. 

§  1694.  Same  subject :  trustee :  tenant  by  curtesy :  administrator :  execu- 
tor :   agent :   charterer. 

§  1695.     Same  subject:    mortgagor  and  mortgagee:    reinsurer. 

§  1696.     Goods  shipped  by  carriers:    owner's  interest  covered. 

§  1697.  Specific  description,  how  far  exclusive:  the  terms  "including"  and 
"consisting  of." 

§  1698.     When  specific  designation  of  interest  or  property  is  required. 

§  1699.     Same  subject :    particular  words  and  phrases :   instances. 

CHAPTER  LIlI. 

DESCRIPTION  OF  PROPERTY. 

§  1705.  Accounts :    evidences  and  securities  of  property. 

§  1706.  Advances:   advancements  by  charterer  and  master:   advances   on 

freight. 

§  1707.  "All  or  either :"   "both  or  either." 

§  1708.  Alterations  and  repairs  of  property. 

§  1709.  Banknotes  and  bills  of  exchange. 

§  1710.  Bottomry  and  respondentia. 

§  1711.  Captor's  interest :    prize  of  war. 

§  1712.  Cargo. 

§  1713.  Contingent  or  special  interest  in  property  of  others. 

§  1714.  Contraband  of  war:    belligerent  and  neutral  property. 

§  1715.  Curiosities:    scientific  cabinets  and  collections. 


Ixxviii  CONTEXTS 

§  1716.     Equitable  interest  may  be  covered  by  the  term  "property." 

§  1717.     Freight  must  be  insured  eo  nomine. 

§  1718.  Freight :  right  reserved  by  owner  and  vendor :  whether  such 
interest  covered  by  insurance  on  freight. 

§  1719.  Freight:  wiiether  charterer  may  insure  eo  nomine:  difficult  to 
formulate  a  rule. 

§  1720.     Same  subject :   eases. 

§  1721.     Same  subject :   opinions  of  the  text-writers. 

§  1722.     Same  subject :    conclusion. 

§  1723.     Freight :    designation  of  shipowner's  interest. 

§  1724.     Fi'eight :   other  interests. 

§  1725.     Goods,  wares  and  merchandises:    cargo. 

§  1726.     Goods  laden  on  deck. 

§  1727.  Goods,  wares  and  merchandise  "in  trust  or  on  commission :"  on 
consignment. 

§  1728.  Clause  "in  trust  or  on  commission"  may  be  limited  and  controlled 
by  other  words  in  the  policy. 

§  1729.     Goods,  etc.:   "sold  but   not  delivered:"  "sold  but   not   removed." 

§  1730.  Goods,  etc. :  "in  trust  or  on  commission :"  on  storage :  where  policy 
requires  specific  declaration  or  separate  insurance. 

§  1731.  Where  policy  stipulates  specific  insurance  of  goods  "in  trust"  and 
specifies  what  interests  those  words  cover. 

§  1732.     Goods  and  merchandise :    shifting  and  successive  cargoes. 

§  1733.  Goods  or  merchandise :  shifting  and  successive  goods :  after  ac- 
quired property :    fire  risks. 

I  1734.  What  goods  are  covered  maj-  be  determined  by  custom  between  the 
parties. 

§  1733.  What  goods  are  covered  may  be  determined  bj-  known  usage  of 
a  particular  place. 

§  1736.  Goods  or  merchandise  to  be  described  by  indorsement :  approval 
of  risks:  goods  to  be  thereafter  declared  and  valued:  marine 
risks. 

§  1737.     Gunpowder :   marine  risk. 

§  1738.     House  of  building:  dwelling  house. 

§  1739.     Houses  and  buildings:   connected  structures  and  additions. 

§  1740.     Household  furniture:    hotel  furniture. 

§  1741.     Live  stock :  marine  risks. 

§  1742.     Locality  important  in  fire  risks. 

§  1743.     Locality :    property  "contained  in." 

§  1744.  Locality :  property  "contained  in"  connected  or  adjoining  build- 
ings :    new  buildings  substituted  for  old. 

§  174o.     Locality:    "contained  in:"  goods  in  dift'erent  parts  of  building.  ' 

§  1746.  Locality:  "contained  in:"  removal  of  goods  from  a  specified  loca- 
tion :    permanent  removal. 

§  1747.     Locality:    temporary  removal  of  property  from  specified  location. 

§  1748.     Locality:    i^roperty  on  premises. 


CONTEXTS  Ixxix 

Locality:    premises  owned  and  occupied:    property  on  wharf. 

Locality:    occupation,  ownership,  or  use  of  premises  acquired  sub- 
sequently to  issuing  policy. 

Manufactories :    factories :    mills. 

Materials  not  included  in  "building:"    unfinished  vessel. 

Medals:    models:    specific  description :    standard  policy. 

Money,  specie,  bullion,  coin,  treasure,  jewels. 

Paintings :    patterns :    specific  description :    standard  policy. 

Passage  money. 

Personal  effects :    money,  jewelry,  etc. :  master's  effects. 

Personal  property:    wearing  apparel:    master's  clothes:    baggage. 

Plate :    specific  description  :    standard  policy. 

Profits  and  commissions. 

"Property." 

Provisions  and  provender  under  marine  risk. 

Scientific   cabinets   and   collections:     sculpture:     specific   descrij:)- 
tion :    standard  policy. 

Ship. 

Ship's  stores  and  outfits:   what  ship  includes. 

Ship's  boat  or  launch. 

Ship:    character  or  kind, of  vessel:    rating. 

Ship's  name  important:    master's  name. 

Change  of  ship  or  master  or  name  of  ship. 

Shiji's  enrolment  as  affecting  validity  of  policy. 

Ship  as  privateer  or  letter  of  marque. 

Ship  or  ships. 

Shij)  or  ships:    right  to  apply  policy  in  case  of  different  shipments 
and  losses. 
§  1774.     Stock    of    goods,    etc.,    in    manufacturing:     stock    in    trade    of 

mechanic :    fire  risk. 
§  1775.     Stock  in  trade :    goods  or  merchandise  for  sale :    fire  risks. 
§  1776.     Stock  in  trade:    stock  in  building:    owner  and  goods  of  others. 
§  1777.     Stock  in  trade,  etc.,  may  cover  property  specifically  excluded  or 

the  keeping  of  which  is  prohibited. 
§  1778.     Whaling  and  fishing  voyages :    outfits :    stores,  catchings,  etc. 


CHAPTER  LIY, 


CONCEALMENT— MARINE  RISKS. 

§  1786.     Concealment  in  marine  insurances:    generally. 

§  1787.     Concealment    arising    from    negligence,    accident,    mistake,    etc., 

avoids. 
§  1788.     Concealment:    voluntary  ignorance  will  not  excuse. 


§ 

1749. 

§ 

1750. 

§ 

1751. 

§ 

1752. 

§ 

1753. 

§ 

1754. 

§ 

1755. 

§  1756. 

§^ 

1757. 

§  1758. 

§ 

1759. 

§  1760. 

§ 

1761. 

§  1762. 

§ 

1703. 

§ 

1764. 

§ 

1765. 

§ 

1766. 

§ 

1767. 

§  1768. 

§ 

1769. 

§ 

1770. 

§ 

1771. 

§  1772. 

§ 

1773. 

Ixxx  CONTENTS 

§  1789.  A  specific  and  full  disclosure  is  required,  not  an  evasive  one  or 
one  in  general  terms. 

§  1790.     Concealment  is  referred  to  the  time  of  making  the  contract. 

§  1791,  What  constitutes  a  "material  fact :"  must  it  be  a  fact  material  to 
the  risk. 

§  1792.     Same  subject:    opinions  of  the  text-writers. 

§  1793.     Same  subject :    conclusion. 

§  1794.  Whatever  affects  the  state  and  condition  of  the  ship  at  the  time 
is  material. 

§  1795.  Facts  and  information  affecting  the  condition  or  safety  of  the 
ship  on  her  voyage :    subsequently  occurring  events. 

§  1796.  Suspicions:  rumors:  reports:  apprehensions:  opinions:  general 
intelligence. 

§  1797.     Same  subject:    cases. 

§  1798.  Facts  implied  from,  or  underwriter  put  on  inquiry  by  informa- 
tion given :    waiver. 

§  1799.     Information,  belief,  or  expectation  of  third  person. 

§  1800.  Failure  to  communicate  a  fact  which  would  show  known  informa- 
tion is  material. 

§  1801.     Where  intelligence  or  report  proves  untrue. 

§  1802.     Intelligence,  reports,  or  rumors  of  loss. 

§  1803.  Whether  time  of  sailing  must  be  disclosed:  opinions  of  text- 
writers. 

§  1804.     Same  subject :    cases. 

§  1803.     Same  subject :    the  general  rule. 

§  1806.  Underwriter  i^resumed  to  know  causes  which  occasion  natural 
perils. 

§  1807.     Kestrictions  on  commerce:  commercial  foreign  regulations. 

§  1808.  UndeiTvriter  presumed  to  know  causes  which  occasion  political 
peril. 

§  1809.  Degree  of  publicity  which  will  bind  underwriter  with  knowledge  of 
material  fact. 

§  1810.     Same  subject :    the  English  rule. 

§  1811.     Same  subject :    the  case  of  Bates  v.  Hewitt. 

§  1812.     Same  subject:    opinions  of  Mr.  Arnould  and  Mr.  Maclachlan. 

§  1813.     Usage  need  not  be  disclosed. 

§  1814.     Exceptions  to  last  rule. 

§  1815.  Ownership  of  vessel  need  not  be  stated  when  not  material  and 
insurance  is  on  cargo. 

§  1816.     Nature  and  condition  of  cai'go. 

§  1817.  Cases  where  entire  contract  is  not  vitiated,  but  only  that  part 
relating  to  risk  concealed. 

§  1818.  Whether  it  need  be  disclosed  that  goods  are  contraband:  belliger- 
ent risks :    neutral :    national  character. 


CONTENTS  Ixxxi 

§  1819.  Presumption  concerning  underwriter's  knowledge  of  ports  and 
places. 

Repairs  consequent  upon  outward  voyage. 

Disclosure  of  interest  in  ship  or  goods. 

Must  an  equitable  title  be  disclosed. 

Facts  not  within  assured's  knowledge :  degree  of  diligence  re- 
quired of  assured. 

Need  not  disclose  matters  of  express  or  implied  warranty. 

Whether  information  which  falsifies  a  warranty  must  be  disclosed. 

Mode  of  construction  of  vessels. 

Destination  of  vessel :    port  or  ports. 

By-gone  calamities :   previous  condition  of  ship  :  latest  intelligence. 

That  goods  are  to  be  stowed  on  deck  need  not  be  disclosed. 

Particular  language  of  bill  of  lading. 

Excepted  risks. 

Ship's  papers:  false  clearance,  etc. 

Whether  the  fact  that  letters  of  marque  are  on  board  need  not  be 
disclosed. 

Ship's  true  port  of  loading. 

Other  matters  not  necessary  to  be  disclosed. 

Other  matters  necessary  to  be  disclosed. 

Where  inquiries  are  made. 


CHAPTER  LV. 


CONCEALMENT  IN  OTHER  THAN  MARINE  RISKS. 

§  1844.  Concealment  in  other  than  marine  risks:  absence  of  inquiries: 
fraud :   materiality :   other  tests :   generally. 

§  1845.     English  decisions. 

§  1846.  Assured's  knowledge :  nondisclosure  aifecting  increase  of  risk 
or  rate. 

§  1847.  Assured's  knowledge:  concealment  arising  from  negligence,  acci- 
dent or  mistake,  etc. 

§  1848.     Assured's  knowledge :   his  belief  as  to  materiality  of  facts. 

§  1849.     Same  subject :    conclusion. 

§  1850.     Insurer's  knowledge. 

§  1851.  Insurer's  knowledge:  constructive  knowledge  from  examination 
by  surveyor. 

§  1852.     Insurer's  knowledge :   use  of  insurance  map  in  fire  risks. 

§  1853.     Insurer's  knowledge :    public  records  of  title. 

§  1854.     Insurer's  knowledge :    political  perils. 

§  1854a.  Knowledge  of  insurer's  agents. 


§  1820 

§ 

1821, 

§ 

1822, 

§ 

1823 

§ 

1824. 

§ 

1825. 

§ 

1826. 

§ 

1827, 

§ 

1828. 

§ 

1829. 

§ 

1830. 

§  1831, 

§ 

1832. 

§ 

1833. 

§ 

1834. 

§ 

1835. 

§  1836. 

§ 

1837. 

Ixxxii  CONTENTS 

• 

§  1855.     A  specific  and  full  disclosure  is  required,  not  an  evasive  one. 

§  1856.     Concealment  must  l)e  referred  to  I  he  time  of  making  the  contract 

and  not  to  a  subsequent  event. 
§  1857.     Disclosure  of  assured's  interest. 
§  1858.     Same  subject :    exception  to  rule. 
§  1859.     Must  an  equitable  title  be  disclosed. 
§  1860.     Unusual  or  extraordinary  circumstances  of  peril  to  which  property 

is  exposed. 
§  1801.     Same  subject :    distinctions  to  be  observed. 
§  1862.     Apprehensions  that  property  is  exposed  to   danger:    suspicions, 

rumors,  opinions,  and  speculations. 
§  1863.     Where  insured's  belief,  apprehension,  or  fear  of  danger  is   the 

moving  cause  in  effecting  insurance. 
§  1804.     When   moral   character  of  assured   may  become   material :    rein- 
surance :    moral  risk. 
§  1865.     Belief  that  property  has  been  destroyed. 
§  1806.     Facts   implied   fi-om   or   assurer   put   on   inquiry   by   information 

given :   waiver. 
§  1867.     Whatever  affects  the  state  or  condition  of  the  property  at  time: 

materiality:    facts  affecting  risk  or  premium. 
§  1868.     What  constitutes  a  material  fact:    must  it  be  material  to  the  risk: 

facts  affecting  risk  or  premium  as  test  of   materiality. 
§  1869.     Inquiries.   • 
§  1870.     Inquiries:  no  inquiries:  limited  inquiries:  questions  in  application 

unanswered  or  incompletely  answered:  waiver. 
§  1871.     Same  subject  continued. 
§  1872.     Same  subject :    distinctions  to  be  observed. 

§  1873.     When  subsequent  reception  of  premium  no  waiver  of  concealment. 
§  1874.     Concealment  of  same  facts  from  other  insurers. 
§  1875.     Other  matters:    Code  provisions,  etc.:    general  statements. 


CHAPTER  LVI. 


REPRESENTATIONS  AND  MISREPRESENTATIONS. 

§  1882.  Representations:    misrejiresentations:    distinction    between   repre- 
sentations and  warranties:  generally. 

§  1883.  Representations   defined. 

§  1884.  Misrepresentation  defined. 

§  1885.  Representation  may  be  oral  or  written. 

§  1886.  Representation  precedes  the  contract. 

§  1887.  Representation  is  collateral  to  but  no  part  of  the  contract. 


CONTENTS  Ixxxiii 

§  1888.     Same  subject :   the   view  that  representations  are  a  part   of   the 

contract. 
§  1889.     What  weight  should  be  given  the  theory  that  representations  are 

a  part  of  the  contract. 
§  1890.     Statements  "Avhich  are  part  of  contract  may  sometimes  be  repre- 
sentations by  express  stipulation,  or  implied :  construction. 
§  1891.     When  statements  in   application   are  representations:   references 

to  application :  generally. 
§  1892.     Test    of    materiality    of    representation:    facts    affecting    risk    or 

premium. 
§  1893.     Re])resentation  only  relates  to  material  facts  except  it  be  other- 
wise stii^ulated. 
§  1894.     False  representations  in  regard  to  material  matters  avoid  contract. 
§  1894a.  Same  subject :  presumptions. 
§  1895.     Misrepresentations  or  false  rep'resentations   must   be  of  material 

facts. 
§  1896.     Same  subject:   where   statement   is  intentionally   false:   effect   of 

the  fraud  as  to  materiality  of  fact  to  risk :  burden  of  proof. 
§  1896a.  Material  false  representations  vitiate  binding  slip. 
§  1897.     Where  positive  representation  is  false  and  material  fraud  need  not 

be  proven. 
§  1898.     Representation   may  be   of   facts   actually    material   to   the   risk: 
question  for  jury. 
Representations  may  be  of  facts  in  no  way  material  to  the  risk. 
Representation  may  be  of  facts  intentionally  false:  when  material. 
Positive  statement  of  fact  which  assured  does  not  know  to  be  true. 
Representations  through  mistake,  ignorance,  or  negligence. 
Cases  qualifying  the  last  rule. 

Representations :   expectation,   belief,   or   opinion,   without    fraud. 
False  representations  owing  to  fault,  etc.,  of  agent :    knowledge 

of  agent :   waiver  and  estoppel. 
Statements  founded  on  information  from  agent. 
Positive  statements  founded  on  information  derived  from  others. 
Statements  not  positive  based  on  information  from  others. 
Positive  statement  defining  time  of  commencement  of  risk. 
Facts  actually  material  but  not  relied  on  by  insurer. 
Matters  of  description  or  facts  relating  to  property. 
§  1912.     Facts   rendered    material   by   stipulation:    stipulation    to    be   true 

and  basis  of  contract:  statement  stipulated. 
§  1913.     Statement  limited  as  to  its  effect  by  assured. 
§  1914.     Facts  stated  in  answer  to  inquiries. 
§  1914a.  Same  subject:   presumptions:   false  answers. 
§  1914b.  Same  subject :  where  answer  incomplete  or  inaccurate. 
§  l!)14c.  Where  no  inquiries  made. 
§  1914d.  Statements  in  other  applications. 


§ 

1899. 

§ 

1900. 

§ 

1901. 

§  1902. 

§ 

1903. 

§ 

1904. 

§  1905. 

§  1906. 

§ 

1907. 

§  1908. 

§ 

1909. 

§ 

1910. 

§ 

1911. 

Ixxxiv  CONTENTS 

§  1914e.  Adoption  of  original  insured's  representations  by  assignees  on 
renewal. 

§  1915.  When  the  stipulated  materiality  of  statements  is  qualified:  war- 
ranties  thereby  construed  as  representations. 

§  1915a,  Qualified  statements  continued:  best  of  assured's  knowledge  and 
belief:  other  qualifications. 

§  1915b.  Same  subject :  fidelity  guaranty  insurance. 

§  1916.     Statements  under  statutory  provisions. 

§  19i7.     Promissory  representations :  ^statement  of  proposition. 

§  1918.     Opinions  of  text-writers  as  to  promissory  representations. 

§  1919.     Same  subject :  eases  and  opinions. 

§  1920.     Same  subject:  conclusion. 

§  1921.     To  what  time  the  representation  refers. 

§  1922.  Representation  falsified  in  the  future  does  not  operate  retro- 
actively. 

§  1923.  Representations  true  when  made,  but  untrue  when  contract  com- 
pleted. 

§  1924.     Representation  must  be  substantially  true. 

§  1925.  Loss  need  not  be  connected  with  misrepresentation  to  avoid 
contract. 

§  1926.     Misrepresentations  to  other  insurers. 

§  1927.     Representation  must  not  be  evasive. 

§  1928.     Statements  volunteered  and   irrelevant :    iri'esponsive  answers. 

§  1929.     Ambiguous  or  doubtful  representations. 

§  1929a.  Answer  illegible  or  ambiguous  in  original  application  but  plain 
in  attached  copy. 

§  1930.     Answers  to  ambiguous  or  doubtful  questions. 

§  1931.  Representations  false  as  to  part  of  property :  entire  or  severable 
contract. 

§  1932.     Representations  of  third  parties:  parties  referred  to. 

§  1933.     Representations  may  be  changed,  modified,  altered  or  withdrawn. 

§  1934.     Construction  of  representation. 

§  1934a.  Construction  of  questions. 

§  1935.     Rules  as  to  representations  apply  to  modification  of  contract. 


CIJAPTER   LVII. 


WARRANTIES. 

§  1942.  Warranties:  general  statement. 

§  1943.  Division   of  warranties. 

§  1944.  Express  warranty  defined. 

§  1945.  Implied   warranty   defined. 

§  1946.  Affirmative  warranty  defined. 


CONTENTS  Ixxxv 

§  1947.     Promissory  warranty  defined. 

§  1948.     Warranty  of   intention:   the   ease   of   Bilbrough   v.   Metropolitan 

Insurance  Company. 
§  1949.     Form  of  warranty :   distinctions :   construction. 
§  1950.     In   cases   of   doubt   construction   against   warranty:    intention    of 

parties. 
§  1951.     Warranty  in  effect  condition  precedent. 
§  1951a.  Same   subject :    other   views :    special   distinctions,   etc. 
§  1952.     Condition    j^recedent    continued:    loss    occurring    prior   to    breach 

of  promissory  warranty :  whether  contract  ab  initio  void. 
§  1953.     Same  subject:  decisions  on  which  proposition  based. 
§  1954.     Same  subject:  additional  authorities. 
§  1955.     Same  subject:  conclusion. 
§  1956.     Express  warranty  must  appear  on  face  of  policy  or  be  made  a 

part  of  contract. 
§  1956a.  Material  or  immaterial  statements  made  warranties  by  stipulation. 
§  1956b.  Same  subject:  such  stipulations  reasonable. 
§  1957.     Warranties :   statements  in  application. 
§  1958.     Applications    and    other    papers:    what    constitutes    a    sufficient 

reference :   marginal   writings    on   policj^,   etc. 
§  1959.     Reference  to  application,  plan,  survey,  etc.,  eoiitinued. 
§  1960.     Same  subject :  cautionary  suggestions. 
§  1961.     Whether    stipulation    on    face    of    policy    as    to    preservation    of 

property  after  loss  is  warranty. 
§  1962.     Wan-anty   not   necessarily   material :    its   materiality   not   subject 

of  inquiry. 
§  1963.     Materiality  of  fact  to  the  risk  may  in   certain  cases  be  subject 

of  inquiry. 
§  1964.     Warranty :  mistake :  want  of  knowledge  of  untruth  :  fraud :  good 

or  bad  faith. 
§  1965.     Warranty  may  be  qualified  by  other  words  in  the  contract. 
§  1966.     When   matters  of  description  or   facts   relating  to   property   are 

warranties. 
§  1966a.  Time  to  which  warranty  refers. 
§  1966b.  Warranties  subsequent  to  completion  of  contract. 
§  1967.     Where  time  to  which  affirmative  warranty  relates  is  specified. 
§  1968.     Where   time   to   which   affirmative   warranty   in   life   risk   relates 

is  indefinite. 
§  1969.     Partial  answers. 

§  1970.     Breach :   warranty   must  be   strictly  true   and   exactly    and   liter- 
ally fulfilled. 
§  1971.     Is  there  a  tendency  to  relax  the  above  rule? 
§  1972.     Exceptions  to  above  rule :  what  excuses  compliance  with  warranty. 
§  1973.     What  excuses  compliance :   waiver  and  estoppel. 
§  1973a.  Same  subject :  when  no  waiver  or  estoppel. 


Ixxxvi  CONTENTS 

§  1974.  Neglect  to  read  or  have  ajiplication  read  no  excuse. 

§  1975.  Breach  of  warranty  avoids  though   not  cause  of  loss. 

§  1976.  Policy  avoided  hy  breach  o£  warranty  is  not  revived  by  subse- 
quent compliance. 

§  197Ga.  Warranties  by  infant :  recovery  by  beneficiary. 

§  1977.  Burden  of  proof:  express  warranties. 


CHAPTER  LVllI. 


PARTICULAR  REPRESENTATIONS  AND  WARRANTIES. 

§  1987.     General  statement. 

§  1987a.  "Abortions:"  inquiry  concerning. 

§  1988.     Account  of  stock:  not  continuing  warranty. 

§  1989.     Merchandise  accounts:  inventory, 

§  1990.     Accounts  settled  monthly :  guaranty  against  embezzlement. 

§  1991.     Age  and  character  of  building. 

§  1991a.  Age  and  tonnage  of  ves.sel. 

§  1991b.  Age   of   automobile:   "year  model:"   "year   of   manufacture." 

§  1992.     Age  of  insured:  age  of  relatives:  life  risk. 

§  1992a.  Same  subject:  good  or  bad  faith,  intention,  mistake. 

§  1992b.  Same  subject :  statements  qualified :  best   of  assured's  jinowledgo 

.  and  belief. 
§  1992c.  Same  subject:  statutes. 
§  1992d.  Same  subject :  waiver  and  estoppel. 
§  1992e.  Same  subject:  mistake  or  knowledge  of  assurer's  agent. 
§  1992f.  Same  subject :  when  recovery  may  be  based  on  amount  premium 

would  have  purchased. 
§  1992g.  Age  of  beneficiary:  "double  indemnity  insurance." 
§  1993.     Anchorage  ground:  marine  risk. 
§  1994.     Armament  of  ship :   warranty. 
§  1995.     Ashes. 

§  199oa.  Automatic   sprinkler  system. 

§  1996.     Bodily  or  mental  infirmities:   life  and  accident  policy. 
§  1997.     Books  of  account :   keeping  books  in   safe. 
§  1997a.  Books  and  accounts :  burglary  insurance. 
§  1997b.  Building:   dimensions  and   material   of. 
§  1998.     Cargo  of  .ship :  warranty. 

§  1998a.  Carrier:  warranty  that  insurance  shall  not  inure  to  benefit   of. 
§  1998b.  Clear  space  clause :  w-arranty. 
§  1998c.  Same  subject :   waiver. 
§  1999.     Convoy:  warranty  to  sail  or  depart  with. 
§  2000.     "Depart,"   warranty  to,   in   marine  risk. 


CONTENTS  Isxxvii 

§  2000a.  Dividends,  earned:   misrepresentations   as   to. 

§  2001.     Examination  of  property  after  work:  representation. 

§  2001a.  Explosives:    warranty   tliat    none  used:    indemnity   policy. 

§  2002.     Fires:  heating:  stoves:  continuing  warranty, 

§  2002a.  Guaranty  insurance. 

§  2003.     Health:   disease:   life  risk. 

§  2004.     Health:  "good  health:"  "sound  health:"  "sound  body:"  "perfect 

health,"  etc. 
§  2005.     Same  subject :  renewal  of  policy. 

§  2006.     Same  subject:  refusal  of  assured  to  accept  renewal  receipt  con- 
ditioned as  to  good  health. 
§  2007.     Health  of  assured  need  not  be  disclosed  at  time  of  renewal  ex- 

•  cept   on  inquiry. 
§  2008.     Health:  "spitting  of  blood:"  consumption. 
§  2009.     Health:  previous  sickness  or  disease. 
§  2010.     Health:   assured's  knowledge:   latent   disease. 
§  2011.     Health :   parents :   relations. 
§  2012.     Health:  rupture:  hernia:  wearing  truss. 
§  2013.     "In  port,"  as  relating  to  commencement  of  risk:  marine  policy: 

warranty. 
§  2014.     Incendiarism :    tire  risk. 
§  2015.     Encumbrances:    disclosure    of    title    not    necessary    unless    asked 

or  otherwise  required :  fire  risk. 
§  2016.     Encumbrances:  generally. 

§  2017.     Encumbrances   on  property  by   verbal   agreement. 
§  2018.     Encumbrances   made   after  the   policy. 
§  2019.     Encumbrances:   judgments:   execution. 
§  2020.     Encumbrances:  lien:  mechanic's  lien:  judgment  lien,  etc. 
§  2021.     Encumbrance:  lien  for  taxes:   delinquent  taxes. 
§  2022.     Encumbrances:  mortgage. 
§  2023.     Encumbrance:   mortgage:  knowledge  of  insurer  or  his  agent. 

§  2024.     Encumbrance:    mortgage   obtained   by  fraud. 
§  2025.     Encumbrance  pending  litigation. 

§  2026.     Interest  and  title :  no  disclosure  necessary  where  no  inquiry. 

§  2027.     Interest  and  title :  generally. 

§  2028.     Interest  and  title:  title  which  will  enable  assured  to  transfer  by 
abandonment:    marine    risk. 

^  2029.     Interest  and  title:  assignee's  policy. 

§  2030.     Interest  and 'title:  as  interest   may   appear   for  account   of. 

§  2031.     Interest  and  title:  bill  of  sale. 

§  2032.     Interest  and  title:  collateral. 

§  2033.     Interest  and  title:  contract  of  purchase. 

§  2034.     Interest  and  title:  conditional   sale. 

§  2035.     Interest  and  title:  deed  as  related  to  title. 

§  2036.    -Interest  and  title:  devisee:  charge  created  by  will. 

§  2037.     Interest  and  title:  dower   right. 


Ixxxviii  CONTENTS 

§  2038.  Interest  and  title:  easement  in  property. 

§  2039.  Interest  and  title :  equitable  interest. 

§  2040.  Interest  and  title:  fraudulent  as  against  creditors. 

§  2041.  Interest  and  title:  homestead. 

§  2042.  Interest  and  title:  joint  owners:  undivided  interest. 

§  2043.  Interest  and  title:  judgment  creditor:  execution  sale:  foreclosure 

sale:  sheriff's  sale. 

§  2044.  Interest  and  title :  leasehold  interest :  building  on  leased  ground. 

§  2045.  Interest  and  title:  lien. 

§  204G.  Interest  and  title:  minor  child's  interest. 

§  2047.  Interest  and  title:  mortgage:  mortgagor  and  mortgagee. 

§  2048.  Interest  and  title:  ownership:   property. 

§  2040.  Interest  and  title :  partnership  interest :  exclusive  ownership. 

§  2050.  Interest  and  title:  pending  litigation. 

§  2051.  Interest  and  title:  possession. 

§  2052.  Interest  and  title:  trust  deed:  parol  trust. 

§  2053.  Interest  and  title:  in  trust  or  on  commission. 

§  2054.  Interest  and  title:  stored  property. 

§  2055.  Interest  and  title:  tenant  by  the  curtesy:  joint  occupancy. 

§  2056.  Interest  and  title:  tenant   for  life:   tenant   in   tail. 

§  2057.  Interest  and  title:  united  interests   of   assured. 

§  2058.  Interest  and  title:  vendee    under    contract    for    purchase:    bond 

for  deed. 

§  2059.  Interest  and  title:  wife's   property. 

§  2000.  Intention  to  navigate:   marine  risk. 

§  2061.  Insanity:  life  risk. 

§  2002.  Insurance  beyond  specified  amount  contrary  to  agreement. 


CHAPTER  LIX. 


PARTICULAR   REPRESENTATIONS   AND   WARRANTIES,   CON- 
TINUED—IRON-SAFE, INVENTORY,  BOOKKEEPING  CLAUSES. 

§  2063.     Iron-safe   clause   reasonable,   valid    and    enforceable. 

§  2063a.  Object  or  purpose  of  iron-safe  clause:  to  what  applicable. 

§  2063b.  Nature  of  iron-safe  clause:  whether  representation,  warranty,  etc. 

§  2063c.  Iron-safe  clause:  account  of  stock:  not  continuing  warranty. 

§  206.3d.  Construction  of  iron-safe  clause. 

§  2063e.  Iron-safe  clause:   whether  contract   divisible   or  entire:   effect   of 

breach. 
§  2063f.  Whether  strict  or  substantial  compliance  with  clause  required. 
§  2063g.  Iron-safe  clause:   custom  of  place:   customary  business  methods. 


CONTENTS  Ixxxix 

§  2063h.  Iron-safe  clause:  effect  of  assurecFs  negligence  or  inadvertence 
as  to  compliance. 

§  2063i.    Iron-safe  clause:  effect  of  statutes:  generally. 

§  2063J.    Iron-safe  clause:  inventory  generally. 

§  2063k.  Iron-safe  clause:  inventory  defined. 

§  20631.    Iron-safe  clause:   "last  preceding  inventory"   defined. 

§  2063m.  Iron-safe   clause:    "complete"   "itemized"    inventory   defined. 

§  2063n.  Iron-safe  clause:  "inventory"  and  "invoice"  distinguished. 

§  2063o.  Invoice  not  a  substitute  for  inventory. 

§  2063p.  Same  subject:  whether  new  store  with  new  goods  constitutes 
exception  or  qualification. 

§  2063q.  Inventory:  compliance  with  reference  to  location  of  property. 

§  2063r.  Iron-safe  clause:  what  constitutes  substantial  or  sutFicient  com- 
pliance as  to  inventory :  instances. 

§  2063s,  Iron-safe  clause:  what  does  not  constitute  substantial  or  suffi- 
cient  compliance   as   to   inventory:   instances. 

§  2063t.  Bookkeeping  clause:  ordinary  intelligence  as  test  of  compliance. 

§  2063u.  Bookkeeping  clause :  what  constitutes  substantial  or  sufficient  com- 
pliance :  instances. 

§  2063v.  Bookkeeping  clause:  what  does  not  constitute  a  substantial  or 
sufficient  compliance :   instances. 

§  2063w.  Computation  of  time :  inventory  and  bookkeeping  clauses. 

§  2063x.  Iron  safe:  keeping  of  books,  etc.,  in. 

§  2063y.  What  constitutes  a  fireproof  safe. 

§  2063z.  Keeping  books,  etc.,  in  safe  "or  in  some  secure  place:"  "some 
place  not  exposed  to  a  fire." 

§  2063aa.  Removal  of  inventories,  etc. :  emergency  created  by  threatened 
fire. 

§  2063bb.  Demand  by  assurer  for  production  of  books,  etc. 

§  2064.     Iron  safe :  keeping  books,  etc.,  in :  waiver  and  estoppel. 

§  2064a.  Same  subject :   agent's  knowledge,  etc. 

§  2064b.  Same  subject :   agent's  knowledge,  etc. :   when   no  waiver. 


CHAPTER  LX. 


PARTICULAR  REPRESENTATIONS  AND  WARRANTIES 

CONTINUED. 

§  2065.  Iron  shutters:  fire  risk. 

§  2066.  Lading:  dunnage:  registered  tonnage:  marine  risk. 

§  2067.  Lights:  fire  risk. 

§  2068.  Location. 

§  2069.  Master's  certificate :  warranty :  marine  risk. 


xc  CONTENTS 

§  2070.     Medical  attendant :  medical  treatment :  life  risk. 

§  2071.     Medical  examiner:  statements   to. 

S  2072.     Medical  examiner:  subject   of  inquiry. 

§  2073.     Moored  safely  in  certain  harbor:   warranty:   marine  risk. 

§  2074.  Occupation  :  life  and  accident  risks :  representation  and  warranty : 
continuing  warranty. 

§  2075.  Other  insurance :  refusal  of  other  insurers :  prior  applications, 
etc. 

§  2076.     Opium  habit:  life  risk. 

§  2077.  Personal,  accidental,  or  serious  injury:  wounds:  hurts:  prior 
losses:  prior  indemnity. 

§  2078.     Pumps :  water :  tanks  filled,  etc. :  fire  risk :  continuing  warranty. 

§  2079.     Residence :   birthplace :  life  risk. 

§  2080.  Relative  situation  and  distance :  other  buildings :  variance  in  de- 
scription no  warranty  that  location  of  other  buildings  shall 
remain  unchanged. 

§  2081.     Relationship:   life  risk. 

§  2082.     Sailing:  warranty  to  sail:  marine  risk. 

§  2083.     Sailing :  representation  as  to  time  of. 

§  2C84.  Sailing:  representation  as  to  time  of  may  be  merely  of  expecta- 
tion or  belief. 

§  2085.  Sailing:  warranty  to  sail  may  not  be  engrafted  on  policy  by 
parol  evidence. 

§  2086.     Sailing:  what  constitutes. 

§  2087.     Sailing:  what  does  not   constitute. 

g  2088.     Sheathing  vessel. 

§  2089.     Ship's  safety:   warranty:  marine  risk. 

§  2090.     Smoking  on  premises:  continuing  warranty:   fire  risk. 

§  2091.  Spirits  on  board  ship :  carrying  prohibited  articles :  reasonable 
construction :   marine  risk. 

§  2092.     Stay  of  vessel  at  certain  place  limited  by  warranty :  marine  risk. 

§  2093.     Stock  kept  up  to  specified  amount. 

§  2094.     Stowage  of  cargo :  warranty :  marine  risk. 

§  2095.     Suicide:  effect  of  warranty  against. 

§  2096.     Temperate  habits :   drunkenness :  use  of  intoxicating  liquors. 

§  2097.     Tobacco:   moderate  use  of. 

§  2098.     Trade  and  employment  of  ship :  marine  risk. 

§  2099.     "Uninsured:"  policy  on  another  subject  matter:  "honor  policy." 

§  2100.     Unmarried:    married:   widoAver:    wife. 

§  2101.     Use  and  occupation :  whether  continuing  warranty :   fire  risk. 

§  2102.  Use  and  occupation :  constantly  worked :  unlawful  act  not  im- 
plied. 

§  2103.     Use  and  occupation :  dwelling-house :  boarding-house :  hotel,  etc. 

§  2104,     Use  and  occupation :  hazardous  trade   or  business. 

§  2105.  Use  and  occupation :  house  of  ill-fame :  disorderly  or  bawdy 
house. 

§  2106.     Use  and  occupation :  manufactory. 


CONTENTS  xci 

§  2107.  Use  and  occupation :  manufactory' :  incidental  uses. 

§  2108.  Use  and  occupation :  running  factory  nights. 

§  2109.  Use  and  occupation :  stores :  storehouse :  storage. 

§  2110.  Use  and  occupation :  stores :  when   continuing   warranty. 

§  2111.  Use  and  occupation :  tenants :  continuing  warranty. 

§  2112,  Watchman  on  premises :  watch-clock :  sleeping  in  store :  continu- 
ing warranty. 


CHAPTER  LXI. 


NEUTEALITY  AND  NATIONAL  CHARACTER. 

§  2122.     Warranty  of  neutrality :  generally. 

§  2123.     Object  and  meaning  of  this  warranty. 

§  2124.     Neutral  property  defined :  who  is  a  neutral :   domicil. 

§  2125.  Warranty  true  when  made  not  forfeited  by  subsequent  hostili- 
ties. 

§  2126.     Warranty  of  neutrality  as  affected  by  barratry. 

§  2127.     Documents,  papers,  etc.,  required. 

§  2128.  Character  of  documents  and  insignia  of  national  character  re- 
quired. 

§  2129.     Description  in  policy  or  representation  as  to  national  character. 

§  2130.     Goods  shipped  from,  a  neutral  to  a  belligerent. 

§  2131.  Goods  shipped  from  a  belligerent  to  a  neutral:  transfer  after 
capture. 

§  2132.     Agreement  to  claim  property  as  neutral  in  ease  of  capture. 

§  2133.     Neutral  vessels  employed  in  belligerent  ser\dce. 

§  2134.  May  neutrals  avail  themselves  in  time  of  war  of  trade  prohibited 
during  peace? 

§  2135.     Vendee  of  vessel. 

^  2136.     Neutrality  violated  by  breach  of  blockade. 

§  2137.     Notice  to  neutral  of  blockade  required. 

§  2138.     AVhere  existence  of  blockade  is  notorious  or  it  has  long  continued. 

§  2139.     What  constitutes  a  blockade. 

§  2139a.  Same  subject :  British  orders  in  Council,  etc. 

§  2140.     Continuance  of  blockade. 

§  2141.  Effect  of  sailing  for  blockaded  port:  intention  to  enter:  breach 
of  blockade:  what  is  and  is  not. 

§  2142.  Simulated  or  false  papers:  concealment,  suppression,  or  spoli- 
ation of  papers. 

§  2142a.  Same  subject:  "liberty  to  run  blockade:"  seizure. 

§  2143.  Carrying  contraband  goods:  contraband  of  war:  breach  of  neu- 
trality. 

§  2144.     Breach  of  neutrality  from  resistance  to  lawful  right  of  search. 


xcu  CONTENTS 

CHAPTER  LXII. 

SEAWORTHINESS. 

§  2151.     Warranty  of  seaworthiness  implied:  voyage  policy:  general  rule. 

§  2152.     Whether    warranty    of    seaworthiness    implied    in    time    policies: 
the  English  rule. 

§  2153.     Whether    warranty    of    seaworthiness    in    time    policies    in    this 
country. 

§  2154.     Same  subject:  conclusion. 

§  2155.     Implied  warranty   of   seaworthiness  in  time   policies:    code   pro- 
visions :  stipulation. 

§  2155a.  Warranty  of  seaworthiness:   policy  on  cargo  or  freight. 

§  2156.     Innocence  of  assured:  unknown  defects. 

§  2157.     Effect    of    exception    of    losses    occasioned    by    unseaworthiness: 
knowledge. 

§,  2158.     Effect  of  previous  survey :  certificate  of  seaworthiness :  subsequent 
survey:  condemnation. 

§  2159.     Different  degrees  of  seaworthiness. 

§  2160.     What  constitutes  seaworthiness. 

§  2161.     What   constitutes   seaworthiness   and   unseaworthiness:    cases. 

§  2161a.  Seaworthiness:  refrigerating  plant:  insurance  on  insulation  for. 

§  2161b.  Loss  of  vessel  while  moored:  duty  of  assured:  negligence. 

§.  2162.     Effect  of  noncompliance  with  statute. 

§  2162a.  Injury  in  collision   as  evidence   of   unseaworthiness:   statute. 

§.  2163.     Effect  of  usage  upon  seaworthiness  of  foreign  vessel  in  foreign 
port. 

§  2163a.  Overloading:  effect  of  practice  or  custom  to  understate  measure- 
ments. 

§  2164.     Manning  vessel. 

§  2165.     Whether  inferior  officers  must  be  competent  to  fill  master's  posi- 
tion. 

§  2166.     Whether  vessel  must  .when  she  sails  have  a  full  complement  of 
men  engaged  for  whole  voyage. 

§  2167.     Negligence   or   misconduct   of   master   or  crew:    continuing   war- 
ranty. 

§  2168.     Employment  of  pilot. 

§  2169.     Warranty  may  be  superseded  by  stipulation:  waiver  and  estoppeh 
latent  defects. 

§  2169a.  Latent  defects:  Inchmaree  clause. 

§  2169b.  When  warranty  not  superseded  by  stipulation. 

§.  2169c.  Same  subject :  effect  of  Harter  act. 


CONTENTS  xciii 

§  2170,     Seaworthiness:  estoppel  against  insurer:  certificate  of  board  of 

underwriters. 
§  2170a.  Assurer's  knowledge  of  condition  of  vessel  and  nature  of  risk. 
§  2171.     Successive  voyages  or  stages  of  the  voyage. 
§  2172.     To  what  time  the  warranty  of  seaworthiness  refers. 
§  2173.     Continuing  warranty  as  to  seaworthiness:   the  English  rule. 
§  2174.     Continuing    warranty    as    to    seaworthiness:    the    rule    in    this 

country. 
§  2175.     Continuing  warranty  as  to  seaworthiness :  time  policies. 
§  2176.     Continuing  warranty  as  to  seaworthiness:  repairs. 
§  2177.     Whether  cases  as  to  necessity  for  repairs  can  be  reconciled  with 

other   doctrines   and   cases    apparently    in    conflict   therewith. 
§  2177a.  Moored  in  safety:  breach  of  warranty:  repairs. 
§  2178.     Assurer's  approval  of  ship  at  port  of  departure :  subsequent  re- 
pairs. 
§  2179.     Subsequent   noncompliance   as  to   seaworthiness   no   retrospective 

effect. 
§  2180.     Vessel  seaworthy  for  port. 

§  2181.     Whether  original  unseaworthiness  may  be  cured  before  loss. 
§  2182.     Policy  at  and  from  vessel   sailing  unseaworthy:   may   defect  be 

remedied   before   loss  ? 
§  2183.     Vessel   becoming   unseaworthy   after   commencement    of  risk  and 

defect  cured  before  loss. 


TITLE  IX. 

CONDITIONS  VOIDING  THE  POUCY. 

CHAPTER   LXIII. 

CONDITIONS  VOIDING  THE  POLICY— GENERAL  CONDITIONS. 

§  2190.  Conditions  in  policy :   generally. 

§  2191.  Alterations  and  repairs:  employing  mechanics,  etc.:  generally. 

§  2192.  Permission  to  make  alterations  or  repairs. 

§  2193.  Whether  loss  was  occasioned  by  the  alterations  cannot  be  inquired 

into:  materiality  of  alteration, 

§  2194.  Materiality  of  alteration. 

§  2195.  Alteration  by  act  of  proprietors. 


,  xciv  CONTENTS 

§  2196.     Alteration  conditioned  to  be  at  risk  of  insured. 

§  2197.     Repairs  upon  the  insured  premises:  builder's  risk. 

§  2197a.  Unauthorized  additions  to  building-:  proximity  to  other  houses. 

§  2198.     Specially    prohibited    articles    under    policy    on    stock    of    goods, 

etc. :  generally. 
§  2199.     "Stock  in  trade:"  "goods  usually  kept." 
§  2200.     Storing  of  prohibited  articles. 

§  2201.     Keeping  of  prohibited  articles:  hazardous  and  extrahazardous. 
§  2202.     Specially  prohibited  articles :  benzine :  burning  fluid  :  camj^ihene : 

dynamite :  fireworks :  gasolene. 
§  2203.     Specially  prohibited  articles :  gunpowder :  hay :  kerosene  :  lights  : 

naptha. 
§  2204.     Specially    prohibited    articles:    petroleum:    saltpeter:    spirituous 

liquors :   turpentine. 
§  2205.     Erection  of  buildings  adjacent  to  insured  premises. 
,  §  2206.     Erection  of  adjacent  buildings  to  which  insured  is  not  a  party. 
§  2206a.  Erection  or  occupation  of  adjacent  buildings :  change  in  exposure. 
§  2206b.  Requirement  to  build  chimneys. 
§  2207.     Increase  or  change  of  risks. 

§  2207a.  Same  subject :  conspiracy  to  burn  property :  fraud. 
§  2207b.  Same  subject :  attempt  to  burn  property. 
I  § ,  2208.     Notice  of  increase  of  risk :   waiver. 
§  2209.     Prohibited  use  of  premises. 
§  2210.     Meaning  of  "premises"  as  used  in  condition. 
§  2211.     Prohibited  uses:  hazardous  and  extrahazardous. 
§  2212.     Where  policy  is  only  suspended  during  a  temporary  prohibited 

use. 
§  2213.     Uses  not  violation  of  the  conditions  as  to  prohibited  use. 
§  2214.     Change  in  "situation  or  circumstances  affecting  the  risk." 
§  2215.     Condition  as  to  smoking  upon  the  premises, 

§  2216.     Ceasing  to  operate  factory,  etc. :  operating  factory,  etc.,  at  night. 
§  2216a.  Same  subject :  when  condition  violated :  instances. 
§  2217.     Use  of  stoves  on  premises :  fires.  • 
§  2218.     Use  of  premises  for  unlawful  purposes. 
§  2219.     Prohibited  uses  which  will  avoid  the  policy. 
§  2220.     Waiver  of  forfeiture  on  account  of  prohibited  use. 
§  2221.     Notice  in  case  of  change  of  use :   waiver. 
§  2222.     Effects  of  acts  of  tenant   upon  insured  property. 
§  2223.     Change  of  occupancy:   tenancy. 
§  2224.     Effect  of  nonoccupation  of  insured  premises   where  policy  only 

prohibits  increase  of  risk. 
§  2224a.  Increase  of  risk :  material  to  risk :  clauses  as  to  vacancy,  etc. 
§  2225.     Vacant  or  unoccupied  and  similar  clauses :  validity,  construction 

and  meaning'  thereof. 


CONTENTS  xcv 

§  2225a.  "Vacant,  unoccupied   and   uninhabited:"   "vacant,   unoccupied   or 

uninhabited," 
§  2225b.  "Untenanted   or  vacant." 

§  2225c.  Temporary  vacancy  or  absence:  owner,  tenant,  or  occupant. 
§  2225d.  Vacancy,  etc.:   several  buildings   or  kinds  of   property:   entirety 

or  divisibility  of  risk. 
§  2225e.  Premises  untenantable  or  unfit  for  occupancy :  vacancy  enforced. 
§  2226.     Provision  as  to  notice  in  case  premises  become  vacant  or  unoc- 
cupied:  permit. 
§  2227.     "Unoccupied  premises." 
§  2228.     "Vacant"  premises. 

§  2228a.  Vacant  by  removal:  personally  unoccupied. 

§  2229.     Conditioned   to   be   void   if   premises   become   "vacant   and   unoc- 
cupied." 
§  2230.     Conditioned  to   be   void   if  the   premises   become  "vacant    or   un- 
occupied." 
§  2230a.  Same  subject :  when  premises  "vacant  or  unoccupied :"  instances. 
§  2230b.  Same  subject:   when   premises   not   "vacant   or   unoccupied:"    in- 
stances. 
§  2230c.  Same  subject:  watchman  acting  under  legal  process. 
§  2231.     Waiver  of  condition  as  to  premises  being  vacated. 
§  2232.     Restrictions  in  life  policy   as  to   residence:   travel,   etc.:   waiver. 
§  2233.     Same  subject:  construction  of  phrase  "settled  limits  of  the  United 

States." 
§  2234.     Restriction    as   to   travel:    construction   of   permit   to   go   beyond 

prescribed   limits. 
§  2235.     Where   insured  is   prevented   by  sickness   from   returning   within 

time  limited  by  permit. 
§  2236.     Prohibiting   change   of  occupation:   prohibited   occupations:   haz. 

-   ai-dous,  extra-hazardous:  construction  of  clauses  as  to. 
§  2236a.  Same  subject. 

§  2236b.  Engaging  in  liquor  or  saloon  business. 
§  2236c.  Prohibited  occupations:  waiver  and  estoppel. 
§  2237.     Prohibition  as  to  entering  military  or  naval  service. 
§  2237a.  Same  subject:  subsequently  enacted  prohibitory  law  by  successor 

society. 
§  2237b.  Same   subject:    armed  resistance  or   insurrection   in   territory   of 

United  States. 
§  2238.     Change  in   possession,  title,  or  interest. 
§  2239.     Effect    of    temporary   increase    of   risk:    temporary    violation    of 

condition. 
§  2240.     Same  subject:  authorities. 


XCVl 


CONTENTS 


CHAPTER  LXIV. 


ALIENATION. 


§  2246.    Alienation:  generally. 

§  2246a.  Conditions  as  to  alienation  change  of  title,  etc.,  valid. 

§  2247.     Conditions  as  to  alienation :  construction  of. 

§  2248.     Consent  to  transfer  or  sale  and  assignment :  notice  to  company. 

§  2248a.  Notice  continued :  sale,  transfer  or  mortgage :  mortgage  clause. 

§  2248b.  Alienation:  encumbrance:  statutes. 

§  2249,     Void  sale:  deed  of  insured  property. 

§  2250.     Voidable  and  set-aside  sale  no  alienation. 

§  2251.  Sale  of  part  of  subject  of  insurance  where  policy  contains  no  con- 
dition as  to  alienation, 

§  2252.  Sale  of  part  of  proi3erty  insured  where  policy  stipulates  against 
alienation  or  transfer  of  subject  of  insurance. 

§  2252a.  Sale  or  deed  with  reservation  of  interest :  reversion  of  title. 

§  2253.     Alienation  of  part  where  contract  severable. 

§  2254.     Alienation  of  part:  whether  contract  entire  or  severable. 

§  2255.     Conclusion :  alienation  of  part  of  subject  of  insurance. 

§  2255a.  Alienation :  where  title  or  possession  does  not  pass,  or  is  not 
intended  to  pass. 

§  2256.     Changes  by  encumbrances  on  property. 

§  2257.  Meaning  of  clause  "encumbrance  in  any  way:"  liens  created  by 
operation  of  law. 

§  2258.     Lease  of  insured  property. 

§  2259.     Conveyance  by  deed  of  property  as  collateral. 

§  2260.  Sale  of  insured  property  with  mortgage  back:  change  of  interest 
or  title. 

§  2261.  Sale  and  mortgage  back  where  policy  prohibits  alienation  of  in- 
terest. 

§  2261a.  Conveyance  and   reconveyance. 

§  2262.  Deed  and  reconveyance  in  trust  to  secure  payment  of  purchase 
money. 

§  2263.  Trustee,  purchaser  at  his  own  sale  under  power  of  sale  in  mort- 
gage: no  alienation. 

§  2263a.  Conve3'ance  from  mortgager  to  mortgagee. 

§  2264.     Mortgage  not  alienation,  sale  or  transfer  of  title. 

§  2264a.  Same  subject:   decisions  contra. 

§  2264b.  Same  subject:  effect  of  accumulated  interest  on  mortgage. 

§  2265.     When  mortgage  not  encumbrance. 

§  2266.     Mortgage  under  different  conditions  in  different   policies. 


CONTENTS  xcvii 

§  2267.     Mortgage  an  "alteration." 

§  2268.     Chattel  mortgage  under  alienation  clause. 

§  2269.     Chattel  mortgage  by  partner:  change  of  interest. 

§  2270.     Commencement   of   foreclosure   proceedings. 

§  2270a.  Same  subject:  validity  and  construction  of  clause:  "knowledge:" 

"be  commenced." 
§  2270b.  Same   subject:    advertisement   for   sale:    "proceedings    on    sale:" 

notice  of  sale. 
§  2270c.  Same  subject:  when  policy  avoided,  when  not:  instances. 
§  2271.     "Entry  of  a  foreclosure  of  a  mortgage:"  advertisement  and  sale: 

construction. 
§  2272.     Decree  of  foreclosure:   sale  thereunder. 
§  2273.     Notice  may  operate  as  consent  to  mortgage. 
§  2274.     Judgment   generally:   mechanic's   lien:    judgment  lien. 
§  2275.     Sale  of  equity  of  redemption :  where  policy  assigned  to  mortgagee. 
§  2275a.  Expiration   of  time   limit   for  redemption   not  an   alienation- 
§  2275b.  Transfer  of  equitable  title. 
§  2276.     Writ  of  attachment:  "process." 

§  2277,     "Levied  on:"  "taken  into  possession  or  custody:"  construction. 
§  2278.     Levy  of  execution :  sale  on  execution. 
§  2279.     Waiver   of  forfeiture:    sheriff:'?,   sale. 
§  2280.     Effect  of  dissolution  of  partnership:  receiver. 
§  2281.     Accident   insurance   on   lives   of   partners:    dissolution. 
§  2282.     Sale  between  tenants  in  common:  eotenants. 
§  2283.     Partition   of   insured   property:   effect   of. 
§  2284.     Executory  contract  of  sale:  conditional  sale. 
§  2284a.  Option  contract. 
§  2284b.  Contract  to  exchange  property. 
§  2284c,  Unconsummated  sale   in  satisfaction   of  mortgage. 
§  2284d.  Bill   of  sale. 

§  2285.     Acts  of  vendor  where  person  holds  under  contract  of  purchase. 
§  2286.     Where  sale  not  confirmed  as  required. 
§  2286a.  Judicial  sale  confirmed. 
§  2286b.  Administrator's  sale  confirmed. 
§  2287.     Where  insurance   on  changing  stock  of  goods. 
§  2288.     Effect  of  bankruptcy  or  insolvency. 
§  2288a.  Same  subject:  appointment  of  receiver. 
§  2289.     Death  of  insured:  descent  of  title  to  heirs. 
§  2290.     What  amounts  to  an  alienation,  sale,  transfer,  or  change  of  title; 

instances. 
§  2291.     What  does  not  amount  to  an  alienation,  sale,  transfer,  or  change 

of  title:  instances. 
§  2291a.  Alienation,  change  of  title,  etc.:  waiver, 
§  2292.     Change  in  possession. 

§  2293.     Sales  by  partner:  alienation,  assignment,  and  change  of  title  or 
possession  clauses. 


XCVlll 


CONTENTS 


§  2293a.  Sale  by  one   partner  to   another:   introduction   of  new   partner: 

Federal  decisions. 
§  2293b.  Sale  by  one  partner  to  another:  Alabama. 
§  2293c.  Sale  by  partner  to  third  party :  California. 
§  2293d.  Sale  by  one  partner  to  another:  Colorado. 
§^  2293e.  Introduction :  new  partner :   Connecticut. 
§  2293f.  Introduction  of  new  partner:    Florida. 
§  2293g.  Sale  with  reservation  of  interest  to  partner:  mortgage  of  entire 

interest :  Georgia. 
§  2293h.  Sale  to  partner  or  third  person :  Illinois. 
§  2293i.    Sale  by  one  partner  to  another:  Indiana. 
§  2293J.    Sale  with  reservation  of  interest  to  partner:  sale  by  one  partner 

to  another :  division  of  goods :  Iowa. 
§  2293k.  Sale  by  one  partner  to  another:  Louisiana. 

§  22D31.    Sale  by  one  partner  to  another  and  mortgage  back:  Massachusetts. 
§  2293m.  Introduction  of  new  partner:  Michigan. 
§  2293n.  Sale  by  one  partner  to  another:  Mississippi. 
§  2293o.  Sale  by  one  partner  to  another:  mortgage  back:  Missouri. 
§  2293p.  Sale  by  one  partner  to  another:  Nebraska. 
§  2293q.  Sale  by  one  partner  to  another:   New   Hampshire. 
§  2293r.  Sale  by  one   partner  to   another:   introduction   of  new   partner: 

New  York. 
§  2293s.  Introduction  of  new  partner:  North  Carolina. 
§  2293t.  Sale  by   one  partner  to  another:    introduction   of   new   partner: 

Ohio. 
§  2293u.  Sale  by  one  partner  to  another:  Pennsylvania. 
§  2293v.  Sale   by    one   partner    to    another:    business    sold    but    continued 

under  trade  name :  Tennessee. 
§  2293w.  Sale  by  one  partner  to  another :   sale  with  mortgage  back :   sale 

with  vendor's  lien :   Texas. 
§  2293x.  Sale  by  one  partner  to  another:   bequest   by  partner:   Virginia. 
§  2293y.  Agreement  for  partnership  not  consummated :  Washington. 
§  2293z.  Sale  by  one  partner  to  another :  Wisconsin. 
§  2294.     Summary  of  decisions. 
§  2295.     Conclusion. 


CHAPTER   LXV. 


ASSIGNMENT  AND  TRANSFER   OF  POLICY. 


§  2304.     Assignment  of  policies:  fire  insurance. 

§  2305.     Assignment  of  fire  policies :  "loss  if  any  payable  to." 

§  2306.     Assignment    of  fire   policies :    consent :   generally. 


CONTENTS  xcix 

§  2306a.  Same  subject :  statutes. 

§  2306b.  Distinction  between  assignment  and  executory  contract:  covenant 

to  keep  property  insured. 
§  2307.     Sale  of  property  does  not  transfer   policy  to   purchaser. 
§  2307a.  Adoption  of  policy  by  vendee:  "for  account  of  whom  it  may  con- 
cern." 
§  2308.     Assignment:  legal  effect  of  assent  to  in  fire  policy. 
i  2309.     Manner    of    procuring    assent    to    assignment    of    policy:    same: 
mutual  company. 

§  2309a.  Consent  by  assurer's  agent. 

§  2309b.  Agreement  of  vendor  to  obtain  insurer's  consent   to  assignment. 

§  2310.     Notice  of  assignment :   fire :   marine. 

§  2311.     What  constitutes  equital)le  assignment   of  fire  policy. 

§  2312.     Indorsements  upon  policy. 

§  2313.     Fraud  in  ma-king  assignment:  in  procuring  assent  thereto. 

§  2314.     Assignment  to  mortgagee:  rights  of  mortgagee. 

§  2314a.  Same  subject :  instances. 

§  2314b.  Assignment   by  mortgagee :   form   of :   effect  of. 

§  2315.     Assignment  of  fire  policy  as  collateral. 

§  2316.     Assignment  to  partner. 

§  2317.     By-laws   of  mutual   company   as  affecting   assignment   of   policy. 

§  2318.     Rights  of  creditor  of  assignor  attaching  subsequently  to  assign- 
ment of  fire  policy. 

§  2319.     Effect  of  acts  of  assignor  upon  rights  of  assignee :  generally. 

§  2320.     Effect  of  acts  of  assignor  upon  rights  of  assignee  who  is  mort- 
gagee. 

§  2321.     Effect  of  acts  of  mortgagor  after  loss  upon  rights  of  assignee. 

§  2322.     Legal  effect  of  assignment  after  loss. 

§  2323.     Assignment  of  void  policy. 

§  2324.     Limitation  clauses:  assignment. 

§  2325.     Clause  as  to  assignment :  waiver  of  breach  thereof :  forfeiture. 

§  2325a.  Same  subject :  agent's  acts  or  knowledge. 

§  2326.     Assignment  of  life  policies :  generally :  written  assignment :  parol 
assignment. 

§  2326a.  Life  policies:   right  to  assign. 

§  2326b.  Life   policies :    nature   of   assignment :    construction. 

§  2326c.  Life  policies:   consideration  for  assignment. 

§  2326d.  Life  policies :  valid  and  invalid :  assignments. 

§  2326e.  Life    policies:    material    alteration    of  assignment 

§  2326f .  Life  policies :  executory  contract  to  assign. 

§  2326g.  Life  policies:  equitable  assignment. 

§  2326h.  Life  policies :   assignment  by  assignee :  generally. 

§  23261.    Assignment  to  undertaker,  tradesmen,  etc. 

§  2326J.    Life  jDolicies :  rights  of  assignee:  generally. 

§  2326k.  Life  policies:  reassignment. 


e  CONTENTS 

§  23261.    Life  policies:  gift. 

§  2327.     No  assignment  by  insured  where  interest  in  policy  has  vested  in 

beneficiary. 
§  2327a.  Distinction  between  assignment  and  change  of  beneficiary. 
§  2328.     No  assignment  if  policy  forbids. 
§  2329.     Notice  of  assignment:  life  policy. 

§  2330.     What  is  sufficient  notice:  life. 

§  2331.     Assignment  of  life  policy:  consent. 

§  2331a.  Same  subject:  manner  or  mode  of  assignment. 

§  2332.     Delivery  of  assignment  of  life  policy. 

§  2333.     Possession  of  policy:  life. 

§  2334.     Assignment  of  mutual   benefit    certificate. 

§  2335.     Fraud  in  procuring  or  making  assignment  of  life  policy. 

§  2335a.  Assignment:   mental   capacity:    undue   influence. 

§  2336.     Absolute  assignment  of  life  policy  to  creditor:  agreement  to  re- 
tain only  amount  due. 

§  2336a.  Assignment  of  life  policy  to  creditor:  amount  recoverable:   con- 
tinued. 

§  2337.     Assignment  of  life  policy  as  collateral. 

§  2337a.  Power  of  attorney:  pledge  of  policy:  loan  obtained  by  forgery: 
set-off. 

§  2338.     Assignment   of   policy    payable   to   executors,    administrators,    or 
assigns :  estate. 

§  2339.     Assignment  of  policy  to  trustees. 

§  2340.     Assignment  of  policy  pro  tanto. 

§  2341.     Effect  of  insolvency  or  bankruptcy  upon  policy:  assignment  for 
benefit  of  creditors:  rights  of  assignee  or  trustee. 

§  2342.     Rights  of  company  where  policy  assigned. 

§  2343.     Assignment  by  husband  to  wife  of  life  policy. 

§  2344.     Assignment   of   life   policy   to   wife   or   dependents   by   insolvent 
bankrupt:  creditors'  rights. 

§  2345.     Right  of  husband  to  assign  policy  issued  for  benefit  of  wife  or 
children. 

§  2346.     Right  of  guardian  to  assign  policy  issued  for  benefit  of  ward, 

§  2347.     Right  of  wife  to  assign  a  policy  on  life  of  husband. 

§  2347a.  Same  subject :  where  wife  has  contingent  interest  only. 

§  2348.     Assignment  by  wife  of  policy  on  husband's  life:    continued. 

§  2349.     Assignment  by  husband  and  wife  jointly  of  policy  on  husband's 
life:  joint  assignment  by  husband,  wife  and  children. 

§  2349a.  Assignment   to   husband   and   wnfe:    joint    ownership:    survivor's 
rights. 

§  2349b.  Assignment  of  employers'  liability  policy. 

§  2350.     Assignment  and  transfer  of  marine  policy:  generally. 

§  2351.     Assignment  of  marine  policy  where  assignor  has  parted  with  entire 
interest  in  property  insured. 


CONTENTS  ci 

§  2352,  Assignment    of   marine   policy   subsequent    to    absolute    sale    and 

transfer  oC  subject  of  insurance. 

§  2333.  Assignment  of  marine  policy:  delivery  to  assignee. 

§  2354.  Notice  of  assignment  of  marine  policy. 

§  2355.  Prohibition  in  marine  policy  as  to  assignment. 

§  2350.  Rights  of  insurers  to  set-off  against  assignee. 

§  2357.  What  constitutes  assignment :  cases  generally. 

§  2358.  What  is  not  an  assignment:  cases  generally. 


CHAPTER  LXVI. 


CHANGE   OF  VOYAGE— DEVIATION— LIBERTY  CLAUSES 

Description  of  the  voyage. 

Distinction  between  voyage  of  ship  and  voyage  insured. 

Where  course  of  voyage  insured  is  not  fixed  by  mercantile  usage. 

Determination  as  to  which  of  two  routes  is  usual  one:   case  of 
several  routes. 

Deviation  defined. 

Effect  of  deviation  and  basis  of  underwriter's  discharge. 

Insurer  liable  for  prior  loss. 

Temporary  deviation  and  return  to  course  prior  to  loss. 

Same  subject :  certain  class  of  cases  distinguishable. 

Time  policy:  navigation  limited. 

Intention  to  deviate:  change  of  voyage. 

Abandonment   of  voyage:   peril   not  insured  against. 

Effect  of  intention  fixed  at  or  after  sailing  to  change  destination. 

Voyage  shortened. 

Voyage  "at  and  from"  port  or  ports. 

Preliminary   voyage:    completing   loading   at   different    ports. 

Alternative  ports  of  destination. 

The  word  "thence"  from  port  or  ports  of  discharge  in  two  speci- 

■    fied  localities  will  cover  either  locality. 
§  2383.     Election  of  ports:  specified  or  geographical  order  of  visiting  ports 

of  discharge. 
§  2384.     Ports  of  discharge:  revisiting  or  returning  to  port. 
§  2385.     Returning  to  terminus  a  quo  for  clearance. 
§  2386.     "Near  open  port"  refers  to  geographical  order. 
§  2387.     To  an  island  and  a  market. 
§  2388.     To  a  port  in  an  island  or  district,  thence  to  a  port   of  advico 

or  discharge. 
§  2389.     Vessel   captured    and   carried    out    of   her    course:    false    papers. 
§  2390.     Deviation  to  supply  or  repair  defect  in  fitting  for  original  voyage. 


§ 

2365. 

§ 

2366. 

§ 

2367. 

§ 

2368. 

§ 

2369. 

§ 

2370. 

§ 

2371. 

§ 

2372. 

§ 

2373. 

§ 

2374. 

§ 

2375. 

§ 

2376. 

§ 

2377. 

§ 

2378. 

§ 

2379. 

§ 

2380. 

§ 

2381. 

§ 

2382. 

cii  CONTENTS. 

§  2390a.  Placing  vessel  in  drydock  without  maritime  necessity. 

§  2391.  Reshipment  of  goods  on  the  voyage  not  of  itself  a  deviation 
under  liberty  to  reship. 

§  2392.     Transshipment. 

§  2393.     Liberty  of  port  and  places:  purposes  of  voyage. 

§  2394.  Distinction  between  purposes  of  voyage  and  acts  done  to  insure 
success  of  adventure, 

§2395.  When  trading,  etc.,  at  port  may  be  allowed,  although  not  in  fur- 
therance of  adventure. 

§  2396.     Liberty   of  ports:    course   of  voyage:   change   of  voyage. 

§  2397.     Liberty  of  ports:  trading,  discharging,  or  taking  in  cargo. 

§  2398.     Liberty  of  ports  and  to  tow  and  assist  vessels. 

§  2399.  Liberty  to  touch  and  stay  or  of  port  or  ports  may  be  limited 
by  other  words  in   policy. 

§  2400.     Prohibited    ports    or   waters:    restricted    waters. 

§  2401,  Liberty  of  ports  where  employmeht  of  ship  is  limited  by  the 
policy. 

§  2402.     Not   touching  at  privileged   port. 

§  2403.     River  navigation :   departure   from   river  channel. 

§  2404.  River  navigation :  vessel  may  make  usual  stops  for  landing  and 
loading  goods,  etc, 

§  2404a,  Vessel  constructed  for  river  navigation :  trial  trips :  delay :  usual 
course  of  voyage. 

§  2405.  Masters  and  mariners :  negligence  or  mismanagement :  remote 
cause. 

§  2406.     Departure  from  course  through  ignorance  of  master. 

§  2407.     Master's  judgment  and  discretion, 

§  2408.     Instructions  to  master:  generally. 

§  2409.  Departure  from  route  to  avoid  seizure  in  pursuance  of  instructions, 

§  2410.     Liberty  of  ports  for  orders :  revisiting  port. 

§  2411.     Visiting  port  for  information  or  orders. 

§  2412.     Delay  or  departure  from  route  for  political  infoi'mation. 

§  2413.  Delay  to  await  orders  as  to  port  of  discharge  under  permission 
in  policy, 

§  2414.     Instructions  to  deviate:  whether  must  be  disclosed. 

§  2415,     "Whether  an  act  be  deviation,  change  of  voyage,  or  barratry. 

§  2416.     Vessel  forced  to  deviate  by  barratrous  acts. 

§  2417.     What  justifies  deviation  generally:  statutory  or  code  provisions. 

§  2417a.  Agreement  or  clause  permitting  deviation :  "due  notice"  of  devia- 
tion, 

§  2418.     Effect  of  usage  and   exigencies  of  trade. 


§  2419 
§  2420 
§  2421 
§  2422 


Necessity  for  repairs. 

Stress  of  weather:  port  of  necessity. 

Stress  of  weather:  vessel  need  not  return  to  point  whence  driven. 

Compulsory  delay  or  deviation  by  superior  authority. 


CONTENTS  ciii 

§  2423.  Turned  away:  blockade. 

§  2424.  Compulsory  delay  or  deviation  by  acts  of  crew. 

§  .2425.  Departure  from  route  or  delay  to  save  life  or  property. 

§  2426.  Delay  at  port  or  place  or  in  prosecuting  voyage. 

§  2427.  Delay  for  towing  vessel. 

§  2428.  Vessel  turned  away,  and   delay   in  port  which   she  has   entered. 

§  2429.  Departure  from  route  or  delay  to  avoid  da^ger,  cruisers,  or  cap- 
ture. 

§  2430.  Vessel  delayed  by  ice. 

§  2431.  Deviation  to  comply  with  warranty. 

§  2432.  Departure   from   course   or  delay   to   seek   protection    of   convoy. 

§  2433.  Eight  to  convoy  prize  under  liberty  clauses  to  cruise,  capture,  etc. 

§  2434.  Deviation  to  recapture  vessel. 

§  2435.  Letter  of  marque:   cruising  and  making  prizes. 

§  2436.  Instructions  as  to  cruising. 

§  2437.  Understood  purpose  for  which  letters  of  marque  taken  is  im- 
portant. 

§  2438.  Liberty  clauses  to  cruise,  capture,  etc.:   construction. 

§  2439.  Carrying  letters  of  marque  no  deviation  in  itself. 

§  2440.  Liberty   clauses  to   cruise,   capture,   etc.   for  designated  time. 

§  2441.  Whether  the  peril  which  will  justify  a  deviation  must  be  one 
insured  against. 

§  2442.  Loss  need  not  be  connected  with  deviation. 

§  2443.  Whether  any  exception  exists  to  last  rule. 

§  2444.  Waiver  of  deviation. 

§  2445.  Deviation:  acts  of  third  person. 


CHAPTER   LXVII. 


OTHER  OR  DOUBLE  AND  OVER  INSURANCE. 

§  2455.     What  is  other  or  double  insurance. 

§  2456.     Overinsurance. 

§  2456a.  "Existing  insurance:"  marine:  mutual  societies. 

§  2457.     Conditions  as  to  other  insurance. 

§  2458.     Construction  of  conditions  as  to  other  insurance. 

§  2459.     Where  other  insurance  is  only  temporary. 

§  2460.     Subsequent  marine  policy  susj .ended  where  property  fully  covered 

by  other  insurance  at  time  of  issuance. 
§  2461.     Warranted  "uninsured  :"  "honor  policy :"  marine  risk. 
§  2462.     Representations  or  concealment  concerning  other  insurance. 
§  2462a.  Effect  of  want  of  knowledge  of  other  insurance. 
§  2462b.  Same  subject:  mortgagor  and  mortgagee. 


§ 

2464. 

§ 

2465. 

§ 

2466. 

§ 

2467. 

§ 

2468. 

§ 

2469. 

§ 

2470. 

§ 

2471. 

§ 

2472. 

civ  CONTENTS 

§  2463.     Policy  outstanding  at  time  of  application  for  insurance  surren- 
dered befox'e  issuance  of  subsequent  policj'. 
Subsequent  policy  must  cover  same  or  part  of  same  property. 
Insurance  on  ship  and  on  advances. 
Insurance  against  ditt'erent  perils. 
Where  insurances   are  upon   different  interests  or  do   not   cover 

same  subject. 
Policy  to  different  joint  owners  of  property:  tenants  in  common. 
Insurance  by  owner  of  land  and  person  holding-  under  contract 

for  deed. 
Different  interests :  mortgagor  and  mortgagee. 
Insurance  by  stranger  will  not  constitute  other  insurance. 
Subsequent  insurance  covering  propert}'  first  insured   and  other 
property. 
§  2473.     Where  part  of  insured  property  covered  by  subsequent  policy: 

entire  or  divisible  contract. 
§  2473a.  Other  insurance :  whether  contract  divisible  or  entire :  statute. 
§  2474.     Where  insured  goods  are  removed  and  joined  with   other  goods 

also  insured. 
§  2475.     Where  other  insurance  is  void  or  voidable :   prior  or  subsecjuent 

policies  conditioned  against  other  insurance. 
§  2476.     Effect  of  interim  receipts. 

§  2477.  Where  subsequent  voidable  policy  is  treated  as  valid  after  a  loss. 
§  2478.  Prohibition  against  other  insurance,  whether  "valid  or  invalid." 
§  2479.     Renewals  of  prior  policies. 

§  2480.     Where  policies  are  simultaneous :  concurrent  insurance :  fire  risks. 
§  2480a.  Distinction  between  concurrent  insurance  and  coinsurance. 
§  2481.     Rule  where  marine  policies  of  same  date  are  issued:  jiriority  in 

date  may  be  shown. 
§  2482.     Provisions  in  charter  or  by-law§  as  to  other  insurance. 
§  2483.     Notice  of  other,  etc..  insurance :  what  is  and  is  not  sufficient. 
§  2484.     Permission  to  obtain  other  insurance. 
§  2484a.  Permission  continued:  concurrent  insurance. 
§  2485.     Consent  to  other  insurance :  indorsement  on  policy. 
§  2485a.  Same  subject :  when  indorsement  effects  new  contract. 
§  2486.     Return  of  premium  in  case  of  refusal  to  indorse  consent  to  other 

insurance. 
§  2487.     Waiver   of   provisions   as   to   other   insurance:    estoppel:    notice: 

consent :  indorsement  on  policy. 
§  2487a.  When  no  waiver  of  provisions  as  to  other  insurance. 
§  2487b.  Waiver   continued:   agents. 

§  2488.     Insurer  is  chargeable  with  knowledge  of  prior  policies  issued  by  it. 
§  2489.     Recovery:  prior  policies:  marine  insurance:   contribution:  where 
iio  pro  rata  clause. 


CONTENTS  cv 

§  2490.     To  enforce  contribution  policies  must  cover  same  interest  to  same 

property. 
§  2491.     Rules   as   to   recovery   and   contribution    in   fire   insurance   where 

there  are  several  policies  constituting  other  insurance. 
§  2492.     Rule  where  fire  policy  contains  pro  rata  clause. 
§  2493.     Specific  insurance  and  general  policy. 

§  2494.     Agreement  between  insurers  to  share  expenses  of  defense  pro  rat;i. 
§  2495.     Effect  under  pro  rata  clause  of  payment  by  any  company  of  more 

than  its  share. 
§  2496.     "American  clause:"  "shall  only  be  liable  for  deficiency." 
§  2496a.  Other  insurance  as  affected   by  coinsurance:    "average"   or   "dis- 
tribution" clause. 
§  2496b.  Effect    of   three-fourths    value    provisions :    valued    policy    hiws : 

concurrent  insurance :  other  or  double  insurance :   coinsurance : 

prorating. 
'§  2497.     Where  policies  of  different  dates  attach  and  property  subsequently 

diminished. 
§  2498.     Presumption    as   to   basis   of    settlement    where    settlement    made 

with  one  of  two  insurers. 
§  2499.     Double  insurance  for  "whom  it  may  concern." 


TITLE  X. 


VOID  AND   ILLEGAL   INSURANCES   AND    EXCEPTED 

RISKS   AND  LOSSES. 


CHAPTER   LXVIII. 


VOID  AND  ILLEGAL  INSURANCES. 

§  2506.     General  principles  as  to  void  or  illegal  contracts. 

§  2507.     Distinctions  to  be  observed. 

§  2508.     Sanitary   inspection   of  buildings   not   within   insurance   law. 

§  2509.     Life  insurance  a  valid  contract. 

§  2509a.  Policy  payable  to  "estate"  valid. 

§  2509b.  Policy  on  life  of  minor. 

§  2509c.  Policy  issued  to  person  over  age  limit:   statute. 

§  2509d.  Insurance  without  insured's  consent. 


cvi  CONTENTS 

§  2510.     Stipulation  valid  suspending  policy  while  matured  premium  note' 
remains   unpaid. 

§  2511.     Waiver  of  condition  rendering  policy  void  from  inception:  title 
insurance. 

§  2512.     Insurance  contract  based  on  fraud  invalid. 

§  2513.     Marriage  insurance. 

§  2514.     Constitutionality    of    statute    regulating    printing    conditions    in 
policies. 

§  2515.     Statute  requiring  insurer  to  pay  losses  in  full  constitutional. 

§  2516.     Illegality  of  contract  insuring  mercantile  credits. 

§  2517.     When  insurance  of  growing  grain  ultra  vires. 

§  2518.     When  endowment  insurance  by  beneficiary  association  ultra  vires. 

§  2519.     Stipulations  limiting  place  of  bringing   suits:    ousting  courts  of 
jurisdiction. 

§  2520.     Statute  may  effect  right  of  recovery  by  enlarging  rights  of  assured 
under  its  stipulations. 

§  2521.     Where  assured  has  no  such  interest  as  statute  requires. 

§  2522.     Navigation  and  convoy  acts  of  England. 

§  2523.     Effect    upon   valid   contract   of   statute   laying   embargo. 

§  2524.     Effect  of  subsequently  enacted  statutes  upon  void  or  illegal  in- 
surances. 

§  2525.     Whether  policy  void:  stamp,  when  required  by  statute. 

§  2526.     Engaging  in  trade  in  expectation  of  repeal  of  existing  law  in- 
terdicting it. 

§  2527.     Effect   of  subsequently  enacted  prohibitory  law. 

§  2528.     Same  subject:  cases. 

§  2529.     (Omitted). 

§  2530.     Effect  of  arbitration  clauses. 

§  2531.     Insurances  contrary  to  policy  of  the  law :   public  policy. 

§  2531a.  Insurance   against   capital   conviction   or   execution   for   crime   is 
void. 

§  2531b.  Fidelity  guaranty:  validity  of. 

§  2531c.  Usury. 

§  2532.     Condition  upholding  suicide  is  void. 

§  2533.     Insurance  by  common  can-ier  against  losses  from  negligence,  etc., 
not  against  public  policy. 

§  2534.     Policy  executed  on  Sunday. 

§  2535.     Newspaper  company  cannot  carry  on  accident  insurance  business. 

§  2536.     Where  traffic  insured  unlawful,  or  unlawful  business  can'ied  on 
upon  insured  property :  fire  risk. 

§  2537.     Illegal    use    of    property    when    susceptible    of    legitimate    use: 
public  policy. 

§  2538.     Illegal  occupation  of  insured:  life  risk. 

§  2539.     Goods  the  importation  or  exportation  of  which  are  prohibited. 
§  2540.     Trade  prohibited  by   foreign  laws:   effect   of  treaties. 


CONTENTS  cvii 

§  2541.  Exportation  otherwise  legal  may  become  illegal  by  subsequent 
execution  of  agreement  in   evasion  of  revenue  laws. 

§  2542.     Effect  of  prohibitory  statute  imposing  penalty :  collateral  acts. 

§  2543.  Trade  which  would  otherwise  be  invalid  because  interdicted  may 
be  valid  through  necessity. 

§  2544.     Contract   of  indemnity   against   embargo   valid. 

§  2545.     Effect   of   violation    of    embargo. 

§  2546.  Cargo  procured  with  proceeds  of  former  illegal  cargo:  prior 
separate  voyage  illegal. 

§  2547.     Trade  with  enemy :  prior  valid  character  of  cargo. 

§  2548.     Where  prior  part  of  same  voyage  is  illegal. 

§  2549.     Illegality  after  risk  attaches  "at  and  from." 

§  2550.     Where  subsequent  part  of  same  voyage  is  illegal. 

§  2551.     Effect  of  partial  illegality  upon  contract. 

§  2552.  Last  rule  qualified  where  illegality  removed  as  to  part  of  cargo 
by  permission  of  government. 

§  2553.     Partial  illegality :  shipowners  under  same  policy. 

§  2554.  Insurance  by  common  agent  covering  goods  of  hostile  and  neutral 
owner. 

§  2555.  Effect  of  illegal  employment  of  ship  where  neutral  goods  trans- 
ported therein. 

§  2556.  Goods  of  several  owners  under  same  policy  effected  by  common 
agent. 

§  2557.     Transportation  by   same  vessel:  lawful   and  unlawful  goods. 

§  2558.     Effect  of  intention  to  do  illegal  act. 

§  2559.     Trade  with  enemy,  absence  of  intent  to  violate  law  no  excuse. 

§  2560.     When  possibility  of  executing  illegal  intention  is  removed. 

§  2561.     Insurance  upon  a  cartel  ship  while  employed  as  such. 

§  2562.     Insurance  to  ports  some  hostile  some  not. 

§  2563.     Contract  excepting  interdicted  port  unlawful. 

§  2564.  Subject  of  one  or  two  or  more  allied  powers  may  not  trade 
with   common   enemy. 

§  2565.  Trade  with  port  occupied  by  enemy's  forces:  power  of  govern- 
ment to  determine  what  are  hostile  relations. 

§  2566.     Illegality   to   which   insurer   is   in   privity   may  affect   his   rights. 

§  2567.     Goods  shipped  to  neutral  port. 

§  2568.     Insurances  on  contraband  of  war. 

§  2569.     Wliat  articles  contraband  of  war. 

§  2569a.   Same  subject  :  British  Orders  in  Council,  etc. 

§  2570.     Definition  of  license  and  autlHuity  conferred  thereby. 

§  2571.     By  what  authority  license  granted. 

§  2572.  Misdescription  of  land  on  which  building  located  does  not  avoid 
policy. 

§  2573.     When    failure  to   name   destination    does   not    avoid   marine   risk. 

§  2574.     Policy  to  himself  by  agent  of  insurer  and  receiver  void. 


CVIU 


CONTENTS 


CHAPTER  LXIX. 


EXCEPTED  RISKS  AND  LOSSES. 


§  2581. 

§  2582. 

§  2582a. 
§  2582b. 

§  2582c. 
§  2582d. 
§  2582e. 

§  2582f. 


§ 


2582g, 


§  2583. 
§  2583a. 
§  2583b. 
§  2584. 
§  2585. 

§  2586. 

§  2587. 

§  2588. 


§ 

2589. 

§ 

2590. 

§ 

2591. 

§ 

2592. 

§ 

2593. 

§ 

2594. 

§ 

2595. 

§ 

2595a 

§ 

2596. 

§ 

2596a. 

What  constitutes  invasion,  insurrection,  riot,  civil  commotion,  or 
usurped  power. 

Excepted  risks:  fire  caused  by  invasion,  insurrection,  riot,  or 
mobs,  civil  commotion,  or  by  military  or  usurped  power. 

Same  subject:  waiver. 

"Directly  or  indirectly"  by  "riot:"  dynamite  explosions:  unless 
fire  ensues. 

Loss  directly  or  indirectly  caused  by  order  of  any  civil  authority. 

Same  subject:  loss  of  rentals:  "interruption  of  business." 

When  policy  excepting  one  of  a  number  of  like  accidental  causes  of 
damage   covers   damage  from   other   like   causes :   floods. 

Effect  of  specially  excepted  peril :  immediate  cause  of  loss :  earth- 
quake :  statute. 

Earthquake:  fire  started  on  other  property  and  spread  by  con- 
flagTation. 

Falling  of  building  except  as  result   of  fire. 

Same  subject :  earthquake. 

Falling  of  building :  explosion :  lightning  clause. 

Explosion:  no  stipulation:  insurers  not  liable. 

Insurers  not  exempt  where  building  blown  up  to  prevent  spread 
of  conflagration. 

Explosion  occurring  upon  other  premises :  loss  to  insured  property 
result  of  earthquake  only. 

Explosion  occurring  upon  other  premises  from  which  fire  ensues 
communicating  to   insured  premises. 

"Loss  by  explosion  of  any  kind:"  insurer's  liability  under  such 
clause  where  fire  ensues :  New  York  rule. 

Same  subject:  rule  in  Ohio. 

Same  subject:  rule  in  Illinois. 

Same  subject :  rule  in  Pennsylvania. 

Same  subject:  conclusion. 

No  liability  for  explosion  "unless  fire  ensues." 

Construction  of  other  provisions  as  to  explosion. 

Conclusion  as  to  excepted  liability  in  case  of  explosion. 

Liability  excepted  where  fires  built  within  specified  limits:  es- 
toj^pel. 

Loss  by  theft  excepted. 

Exception  of  liability:  duty  of  assured  to  preserve  or  save  prop- 
erty. 


CONTENTS  eix 

§  2597.     Exception  of  liability  for  "fire  caused  by  hurricane." 

§  2598.  Exception  of  liability  for  fire  resulting  from  use  of  steam- 
engine. 

§  2598a.  Excepted  liability:   fires  from  locomotives. 

§  2599.  Credit  insurance :  insolvency  of  debtors :  exception  of  liability : 
discontinuance    of   business:    death    of   partner. 


CHAPTER   LXX. 


EXCEPTED  RISKS  AND  LOSSES— LIFE,  ACCIDENT,  CASUALTY 

AND  TORNADO. 

§  2606.     Death  "in  known   violation  of  law." 

§  2607.  "Death  in  known  violation  of  law:"  construction:  refers  to  vol- 
untary criminal   acts. 

§  2608.     Same  subject :   refers  to   both   civil   and   criminal  law. 

§  2609.     Same  subject :   conclusion. 

§  2610.     Death  or  injury  in  violation  of  law. 

§  2610a.  Same   subject :    carrying    concealed    weapons. 

§  2610b.  Conviction   of   felony. 

§  2611.     Excepted  liability  where  death  occurs  "by  the  hands  of  justice." 

§  2611a.  Same  subject :  killing  adulterer  by  husband :  wife's  paramour. 

§  2612.     Death :  use  of  intoxicants. 

§  2613.  Intemperance:  "if  the  insured  becomes  so  far  intemperate  as  to 
impair  his  health." 

§  2613a.  If  insured  becomes  "so  far  intemperate  or  use  drugs  to  such  an 
extent  as  to  impair  his  health." 

§  2613b.  "Under  the  influence"  of  intoxicants  or  narcotics:  limitation  of 
liability. 

§  2613c.  Intemperance:  degree  of  intoxication. 

§  2614.     Death :  intemperance :  waiver  of  provision. 

§  2615.     Death :  intemperance :  use  of  drugs :  by-laws  of  society. 

§  2616.     Death  caused  by  submission  to  illegal   operation. 

§  2617.     Accident  policy:  injuries  where  no  visible  mark. 

§  2617a.  Visible  marks  of  contusions  or  wound.s:   "wounds"   defined. 

§  2618.  Excepted  liability  where  death  or  injury  "may  be  caused  by  in- 
tentional injuries  inflicted  by  assured  or  any  other  person." 

§  2619.     Dueling  or  fighting. 

§  2619a.  Death  in  assault,  quarrel,  or  fight. 

§  2619b.  Assault:  death  or  injury  in  self-defense:  aggressor:  offending 
party. 

§  2619c.  Assault  upon  oflieer  of  the  law :  resisting  arrest. 

§  2619d.  Injuries  while  hunting. 


ex  CONTENTS 

§  2620.  Excepted  liability:  taking  of  poison:  contact  with  poisonous 
substances :   inhaling  gas. 

§  2621.     Poison  or  anything  accidentally   taken,  administered  or  inhaled. 

§  2622.  Entering  or  leaving  moving  train  or  car:  riding  as  passenger: 
standing  or  riding  on  steps  or  platform. 

§  2623.  Rules  and  regulations  of  common  carriers  and  employer:  vio- 
lation of  "a  rule  of  corporation." 

§  2624.     Voluntai'y  exposure  to  obvious  or  unnecessary  danger. 

§  2624a.  Same  subject:  negligence  or  contributory  negligence. 

§  2624b.  Voluntary  exposure  to  unneciessary  danger:  death  in  attempt  to 
save  life :  negligence. 

§  2624c.  Voluntary  exposure  to  unnecessary  danger:  waiver. 

§  2625.     Walking  or  being  on  railway  bridge,  track,  or  "roadbed." 

§  2625a.  Walking  or  being  upon  a  railroad  track  or  bridge:  voluntary  ex- 
posure to  unnecessary  danger. 

§  2626.     Instances  within  the  exception  of  voluntary  exposure. 

§  2627.     Instances  not  within  the  exception  of  voluntary  exposure. 

§  2628.     Death  by  disease  excepted:  fits, 

§  2629.  Disease  caused  by  accident :  death  superinduced  by  other  causes 
not    death   by   excepted   disease. 

§  2629a.  Pre-existing   disease:    disease   and   accidental   injury    concurring. 

§  2629b.  Death  from  disease  as  primary,  secondary  or  final  cause. 

§  2630.     Death  from  disease  as  a  "secondary-  cause"  not  death  by  accident. 

§  2630a.  Death  by  drowning  excepted :   presumptions. 

§  2631.  Death  caused  by  "medical  treatment  for  disease"  or  "surgical 
treatment,"  excepted. 

§  2631a.  Unnecessary   lifting   and   voluntary   overexertion. 

§  2632.     Occupation :   exception   of  liability   for  "wrecking." 

§  2632a.  Employers'  liability  policy:  injuries  while  making  extraordinary 
repairs. 

§  2632b.  Employers'  liability  policy:  violation  of  law. 

§  2632c.  Same  subject :  waiver. 

§  2633.     Accident  to  property :  loss  by  fire   excepted. 

§  2633a.  Excepted  risks :  automobiles  or  motor  vehicles :  fires :  violation  of 
law. 

§  2634.     Plate  glass:  fire:  explosion:  tornado  insurance. 

§  2634a.  Automatic  fire  extinguishers:  exception  of  injury  from  leakage: 
earthquakes,  cyclones,  etc. 


CHAPTER   LXXI. 

EXCEPTED  RISKS  AND  LOSSES,  CONTINUED— SUICIDE. 
§  2635.     Effect   of  words   "sane  or  insane"  in   suicide   clause. 


CONTENTS  cxi 

§  2635a.  Same  subject:  validity  and  nature  of  stipulation. 

§  2635b.  Same  subject:   effect   of   voluntary  starvation. 

§  2636.     "Sane  or  insane:"  that  suicide  committed  deliberately  or  hastily 

immaterial. 
§  2637.     Suicide  "felonious  or  otherwise,  sane  or  insane." 
§  2638.     Suicide  while  intoxicated. 

§  2G39.     Suicide:    accidental   or   unintentional   self-killing. 
§  2640.     Doubt  as  to  "suicide"  or  accidental  or  unintentional  self-killing. 
§  2641.     Suicide  under  clause  benefiting  third  parties   acquiring  interests 

prior  thereto. 
§  2642.     Suicide  as  defense  in  connection  with  statute. 
§  2642a.  Same  subject:   validity  of  statute:   stipulation  contrary  thereto: 

statute   part   of   contract. 
§  2643.     Suicide:  option  reserved  to  pay  amount  of  insurance  or  refund 

premiums:   recovery  limited  to  amount   of  premiums. 
§  2644.     Stipulation  as  to  part  payment  or  incontestability  after  specified 

time. 
§  2644a.  Validity    of    stipulations    limiting    amount    of   recovery    or    time 

within  which  policy  void  for  suicide:  incontestability. 
§  2644b.  Suicide:   incontestability  after  specified   time:   substituted  policy 

or  new  policy. 
§  2644c.  Stipulation   that   liability    suspended    while    insured   insane:    dis- 
tinction. 
§  2645.     Suicide:  by-law  as  part  of  contract. 
§  2646.     Taking  his  own  life  by  unlawful  act :  dies  by  his  own  hand,  etc. : 

by-laws. 
§  2647.     Amendment    or    changes    in    by-laws,'  etc.:    adoption    of    by-law 

against  suicide  after  contract  made. 
§  2648.     Suicide:  policy  to  be  void  in  case  of  death  by  violation  of  law. 
§  2648a.  Suicide:  external,  violent  and  accidental  means. 
§  2649.     Suicide:  intentional  injuries  by  assured  or  another. 
§  2650.     Suicide  in  absence  of  stipulation :  contra. 

§  2651.     Suicide  by  insane  person  in  absence  of  stipulation  against  suicide. 
§  2652.     Suicide  where  policy  obtained  with  that  intent:  fraud:  creditor. 
§  2653.     Suicide  for  benefit  of  assured's  estate  or  third  person. 
§2654.     Suicide:  temporary  insanity. 

§  2655.     Suicide:   temporary  insanity:   "sane  or  insane,  voluntary  or  in- 
voluntary." 
§  2656.     Suicide:    temporary    insanity,    "felonious    or    otherwise,    sane    or 

insane." 
§  2657.     Suicide:  "self-destruction,"  "in  any  form:"  "disease:"  "voluntary 

act  of  insured." 
§  2658.     Stipulation  as  to  "suicide:"   death  "by  his  own   hand,"   and  the 

like. 
§  2659.     "Suicide"  and  like  clauses:   rule  in  United  States  Supreme  Court. 


cxii  CONTENTS 

§  2660.     Same  subject:  English  rule. 

§  2661.     Same  subject :  rule  in  this  country. 

(a)  Same  subject:  rule  and  eases  in  United  States  courts. 

(b)  Same  subject:  English  rule  and  cases. 

(c)  Same  subject:  rule  in  Alabama. 

(d)  Same  subject:  rule  in  Georgia. 

(e)  Same  subject:  rule  in  Illinois. 

(f)  Same  subject:  rule  in  Indiana. 

(g)  Same  subject:  rule  in  Iowa. 

(h)  Same  subject:  rule  in  Kentucky. 

(i)  Same  subject:  rule  in  Louisiana. 

(j)  Same  subject:  rule  in  Maine. 

(k)  Same  subject:  rule  in  Maryland. 

(1)  Same  subject:  rule  in  Massachusetts. 

(m)  Same  subject:  rule  in  Michigan. 

(n)  Same  subject:  rule  in  Minnesota. 

(o)  Same  subject:  rule  in  Missouri. 

(p)  Same  subject:  rule  in  New  York. 

(q)  Same  subject:  rule  in  Ohio. 

(r)  Same  subject:  rule  in  Pennsylvania. 

(s)  Same  subject:  rule  in  Tennessee. 

(t)  Same  subject:  rule  in  Texas. 

(u)  Same  subject:  rule  in  Vermont. 
§  2661a.  Whether  suicide  question  for  court  or  jury. 
§  2661b.  Waiver  of  defense  of  suicide. 


CHAPTER  LXXII. 


EXCEPTED  RISKS  AND  LOSSES— MARINE. 

§  2670.     Excepted  risks  and  losses :   marine  risks  generally. 

§  2671.     Excepted  risks  and  losses:    repugnant  stipulations. 

§  2672.  Excepted  liability  for  loss  caused  by  negligence,  want  of  ordi- 
nary care,  etc. :  gross  negligence. 

§  2673.     Excepted  liability  for  damage  unless  caused  by  negligence  of  ship. 

§  2674.     Warranted  free  from  mortality. 

§  2675.  Exception  of  loss  from  specified  cause  followed  by  qualifying 
clause, 

§  2676.     Exception  of  loss  or  damage  from  ice. 

§  2677.     Exception  of  loss  by  barratry. 

§  2678.  Excepted  liability  in  bill  of  lading  from  damages  arising  from 
sweating,  heat,  steam,  etc. 


CONTENTS  exiii 

§  2678a.  "Warranted  "free  from  any  claim  consequent  upon  loss  of  time:" 

freight. 
§  2679.     Explosion :    loss  from  bursting-  of  boilers  or  breaking  or  derange- 
ment of  machinery :   steamboat  clause. 
§  2679a.  Perils  of  the  harbor:    exclusion  of  loss  from  bursting  or  explosion 

of  boilers,  unless,  etc. 
§  2680.     Warranted  free  from  insurrection. 
§  2681.     Limited  or  prohibited  trade :    prohibited  waters. 
§  2681a.  Risk  suspended  while  loading  at  specified  island. 
§  2682.     Warranty  against  illicit,  prohibited,  or  contraband  trade:  against 

seizure  therefor. 
§  2683.     Exception  of  perils  of  the  sea. 
§  2684.     Warranted  free  from  capture,  etc. :    capture  by  authority  of  de 

facto  government. 
§  2685.     A  technical  or  actual   capture   or  seizure  not   necessarily  within 

the  exception  of  these  risks. 
§  2686.     Capture  and  seizure  may  be  synonymous. 
§  2687.     Exception  of  loss  by  detention. 

§  2688.     Other  cases  as  to  exception  of  capture,  seizure,  and  detention. 
§  2689.     Exception   none  the  less  binding  because  written   on  margin   of 

policy. 
§  2690.     Illegal  seizure  or  attempt  to  seize  within  exception. 
§  2691.     Warranted  free  from  loss  or  damage  arising  out  of  collision  of 

foreign  powers  or  of  our  government  with  others. 
§  2692.     Exception  of  loss  from  existing  regulations  does  not  include  sub- 
sequently enacted  decrees. 
§  2693.     Warranted  free  from  confiscation  in  ship's  ports  of  discharge. 
§  2694.     Exception  of  risk  of  blockaded   port:    turned   away,   etc.:    free 

of  loss  if  not  permitted  entry,  etc. 
§  2695.     Exception  of  loss  or  damage  to  goods  or  property  on  deck  unless, 

etc. 
§  2696.     The  memorandum  clause :    generall}^ 
§  2697.     What  articles  are  within  the  clause. 
§  2697a.  ''Free  from  particular  average:"  "average  unless  general:"  when 

the  ship  has  stranded :    statutes. 
§  2697b.  Loss  from  defective  condition  of  frozen  meat  cargo:    "free  from 

particular  average  and  loss,"  etc. 
§  2697c.  Effect  of  rider:  "free  of  particular  average:"  "absolute  total  loss 

of  part"  amounting  to  —  per  cent. 
§  2698.     W^arranted  free  from  average  unless  general. 
§  2699.     Or  the  ship  be  stranded   or  burns :    "unless  the   vessel  be  sunk^ 

burned,  stranded." 
§  2699a.  Where  the  words  "on  fire"  instead  of  "burned,"  or  "burnt"  are 

used. 


cxiv  CONTENTS 

§  2700.  Warranted  "free  from  average  under  —  per  cent  unless  general" 
and  like  clauses. 

§  2701.     Unless  it  amounts  to  —  per  cent  and  happens  by  stranding. 

§  2702.  Exception  of  "loss  or  average"  under  specified  per  cent:  expense 
of  repairs. 

§  2703.     Percentage:    aggregate  of  losses  in  case  of  collision. 

§  2704.  Value  only  of  cargo  at  risk  and  not  of  whole  cargo  forms  basis 
of  percentage. 

§  2705.  "Each  ]>ackage  subject  to  its  own  average"  and  similar  clauses: 
separately  valued. 

§  2705a.  Same  subject:    effect  of  rider. 

§  2706.     '^Average  recoverable  on  each  package  separately  or  on  the  whole." 

§  2707,  Effect  of  separate  valuation  of  each  package,  etc. :  when  there  is 
and  when  not  an  insurance  on  each  separate  package,  etc. 

§  2708.     Where  articles  of  different  kinds  are  each  separately  valued. 

§  2709.  Where  percentage  is  fixed  for  each  particular  class  or  impliedly 
fixed  upon  each  enumerated  article. 

§  2710.  Where  insurance  is  upon  cargo  in  bulk:  general  designation  of 
"all  other  goods:"  goods  of  distinct  kinds  under  one  general 
designation. 

§  2711.  The  cjuestion  of  addition  of  successive  losses  to  reach  the  limita- 
tion :   cases. 

§  2712.     Same  subject :    conclusion. 

§  2713.     Where  liability  is  limited  to  invoice  value. 

§  2714.  Particular  and  general  average  losses  cannot  be  aggregated,  nor 
are  general  average  charges  included  in  partial  loss. 

§  2715.     Addition  of  loss  by  jettison  and  salvage  expenses. 

§  2710.  Percentage  clause  qualified  by  agreement  as  to  salvage  and  ex- 
penses. 

§  2717.     Whether  certain  other  charges  and  expenses  may  be  added. 

§  2718.     Exception  of  loss  under  specified  percentage :  other  insurers. 

§  2719.     Exception  as  to  leakage,  breakage,  dampness,  etc. 

§  2720.  Wfiether  under  exception  of  loss  under  specified  percentage  the 
premium  should  be  deducted. 

§  2721.     Exception  of  liability  under  specified  percentage:    deviation. 

§  2722.     Exception  of  claim  arising  from  canceling  of  charter. 


CONTENTS  cxv 

TITLE  XL 

RISKS  AND  LOSSES. 

CHAPTER  LXXIII. 

RISKS  AND  LOSSES. 

5  2730.     What  risks  and  losses  may  be  insured  against :   liability:   generally. 

§  2731.     Abortion:    public  policy. 

§  2732.     Accident   disabling  ship:    chartered   freight. 

§  2733.     Advances:     bottomry   draft:    entire  contract:    freight   earned  at 

intermediate  port:    salvage:    owner's  liability. 
§  273-1.     "All  risks:"  general  policy:    war  risks. 
§  2734a.  "All  risks"  mortality:    policy  on  dog. 

§  273.5.     "All  other  perils,"  etc. :  "all  unavoidable  perils :"  "all  such  perils." 
§  2736.     Same  subject :   instances. 

§  2737.     "Arrests,  restraints,  and  detainments,"  etc.:  marine  risk. 
§  2738.     "Arriving  in  port"  does  not  cover  arrival  in  cove. 
§  2739.     "Unlawful"  arrests,  restraints,  detainments,  etc. 
§  2739a.  Automatic  sprinkler  system:   location:    leakage:  notice  of  defects. 
§  2739b.  Automobile  or  motorcycle:  "collision." 
§  2739c.  Automobile  or  motorcycle:  rented  or  used  for  passenger  service 

or  for  hire:    temporary  use. 
§  2740.     Bank's  default:    money  deposited  in   bank:    vested   rights  upon 

default. 
§  2740a.  Bankers'  policy:  Lloyd's:  loss  through  forged  bills:  fraud. 
§  2741.     Barratry  defined:    marine  risk. 
§  2742.     Barratry  covers  what :    instances. 
§  2743.     Barratry,  what  losses  are  not  covered :    general  rules. 
§  2744.     Barratry,  what  losses  are  not  covered:    instances. 
§  274.").     Bilging:  marine  risks:  "all  other  perils,"  etc. 
§  2746.     Birth  of  issue. 

§  2747.     Breach  of  promise  of  third  party  does  not  render  insurer  liable. 
§  2748.     Capture  or  seizure:    marine  risk. 

§  2749.  Cargo  :  taking  on  board  additional  cargo :  marine  risk. 
§2750.  Carriers:  liability  of  warehousemen :  conflict  of  laws. 
§  2730a.  Carriers:    insurance  against  derailment  during  transportation  of 

goods :    auto  truck. 
§  2751.     Collision:    marine  risk:    generally. 


cxvi  CONTEXTS 


§  2 

§  2 

§  2' 

8  o 


§  2 

§  2 

§  2 

§  2 


§  2' 

§  2' 

§  2' 

§  2' 

§  2' 

§  2' 

§  2' 

§  2' 

§  2 

§  2' 

8  5» 


§  2 
8   o 


§  2 

§  2 

§  2 

§  2' 

§  2' 

§  2 


'^'^52.     What  does  and  does  not  constitute  collision :   generally :   instances. 

53.  Collision  with  "piers  or  stages  or  other  structures,"  when  not 
stranding. 

54.  Collision  as  loss  by  perils  of  the  sea :-  proximate  cause :  damage  to 
other  vessel. 

55.  Collision :    running  down  clause. 

■55a.  Collision :  sums  paid  for  removal  of  obstructions :  statutory  com- 
missioners. 

2756.     Confounding  of  goods  by  breaking  open  o£  packages,  etc.:  marine 
risk. 

57.  Contingent  liability  of  insurer:    carrier:    construction  of  policy. 

58.  Conversion:    recovery  and  disposal  of  property  by  underwriter. 

59.  Decayed,  rotten,  etc.:  marine  risks. 

60.  Delay  in  voyage. 

61.  Electrical  machinery  and  fixtures:  electric  lighting:  fire  risk: 
knowledge  of  insurers. 

62.  Embargo,  w^hat  constitutes. 

63.  Embargo :  effect  upon  charter  party. 

64.  Embargo:    domestic  and  foreign. 

65.  Embargo :   acts  of  foreign  assured's  own  government. 

66.  Employee's  fidelity:  fidelity  guaranty. 

67.  Expenditures  necessitated  by  the  loss:    marine  risk. 

68.  Explosion  defined. 
68a.  "One  explosion:?  boilers  in  battery  form:    "explosion"  defined  in 

policy:    Pabst  Brewing  Co.  Case. 

69.  Explosion  under  fire  risks:    steam  boiler. 

70.  Same  subject :    spontaneous  combustion. 

71.  Same  subject :  where  combustion  and  explosion  inseparably  con- 
nected. 

72.  Same  subject:    where  fire  precedes  or  causes  the  explosion. 
■72a.  Boiler  explosion  "caused  by  unavoidable  external  violence:"  ma- 
rine risk. 

73.  Fallen  building:    what  constitutes. 

74.  Falling  walls,  buildings,  and  structures. 

75.  Fallen  building,  etc.:  wall  weakened  by  previous  fire. 

76.  Fear  of  danger:  blockade:  apprehension  of  embargo,  etc.:  mar- 
ine risk. 

77.  Same  subject :    cases. 

78.  Same  subject :    conclusion. 

79.  Fire. 
'80.     Fire:    marine  risk. 

81.  Freight. 

82.  Hail. 

83.  Hire:  chartered  freight:  delay:  derangement  of  machinery  or 
engines :  want  of  repairs :  "free  from  any  claim  consecjuent 
on  loss  of  time." 


CONTENTS  exvii 

§  2784.     "Hull  and  machinery"  does  not  cover  "disbursements." 

§  2784a.  Hull  and  machinery:   "latent  defects:"  perils  of  "trial  trips." 

§  2785.     Improper  navigation  of  ship. 

§  2786.     Insolvency  of  purcha-sers:   returns  from  trade:   credit  insurance. 

§  2787.     Insolvency  of  debtors:  meaning  of  "loss:"  credit  insurance. 

§  2788.     Land  dangers:    marine  risks. 

§  2789.     Leakage  and  breakage:    marine  risks. 

§  2789a.  Ordinary  leakage  and  "extraordinary  leakage"  distinguished. 

§  2790.     Lightning. 

§  2791.     Live  stock:  same  slaves  classed  as  animals. 

§  2792.     Loss  after  termination  of  risk  consequent  upon  injury  during  life 
of  policy. 

§  2793.     Same  subject :    conclusion. 

§  2794.     Mortgage:    unmarketableness  by  reason  of  liens,  defects  of  title, 
etc. 

§  2794a.  Mortgage  clause:    distinctions,  validity  and  construction:   gener- 
ally. 

§  2794b.  Mortgagor's  and  mortgagee's  rights:    generally. 

§  2795.     When  mortgagee's  interest  not  affected  by  mortgagor's  acts. 

§  2795a.  Same  subject:    instances. 

§  2795b.  When   mortgagee's  interest   affected   by   mortgagor's   acts:    when 
mortgagee  not  insured  party,  but  appointee. 

§  2796.     Overheating  without  combustion. 

§  2797.     Perils  of  the  seas  and  rivers:    dangers  of  navigation. 

§  2798,     Same  subject:    what  losses  are  covered. 

§  2799.     Same  subject:    what  losses  are  not  covered. 

§  2800.     Personal  injuries  to  employees:  against  liability  or  for  losses  paid. 

§  2801.     "Personal  injury  and  loss  of  human  life"   caused  by  explosion: 
recovery  back  of  money  paid  therefor  by  insured. 

§  2802.     Personal  injuries  to  several  by  one  cause  constitutes  separate  acci- 
dents and  not  one  accident. 

§  2803.     Personal  injuries  to  persons  not  employees:   against  liability  or 
for  losses  paid. 

§  2804.     Pirates,  rovers,  assailing  thieves :   marine  risks. 

§  2805.     Passage  money:    loss  of. 

§  2805a.  Plate  glass  insurance. 

§  2805b.  Plate   glass   insurance:    window    bioaking  by   suffragists:     "civil 
commotion"  or  "rioting." 

§  2806.     Profits. 

§  2807.     Profits  of  lessee. 

§  2808.     Promise  of  insurer  to  pay  although  loss  not  covered  by  policy. 

§  2809.     Promissory  note. 

§  2810.     Railroad,  right  to  recover  from,  although  insurance  paid. 
§  2811.     Removal  of  goods  in  case  of  threatened  fire:  damages  and  expenses 
incurred. 


exviii  CONTENTS 

§  2812.     Same  subject:   duty  of  assured :   stipulation. 

§  2813.  Same  subject :  how  far  assured  must  exert  himself  to  save 
property. 

§  2814.     Rents. 

§  2814a.  Repairs  of  building  by  assurer :   assured's  liability  to  third  persons. 

§  2815.     Ship-owner's  liability. 

§  2815a.  Smallpox:    assumption  by  assured  of  ri.sk  of:   warranty. 

§  2816.     Stranding  defined:    marine  risk. 

§  2817.     Stranding:    cases. 

§  2818.     Sue  and  labor  clause :   rescue  clause :    marine  risk. 

§  2819.     Telegi-aph  cable. 

§  2820.     Tenant's  liability  to  pay  rent:    release  of  insurer. 

§  2821.     Theft :  fire  risk,  burglary  or  automobile  risks. 

§  2822.     Title  insurance:  same  mortgagee:  defects  in  mortgagor's  title. 

§  2823.  Warehouseman :  storage  of  goods  in  which  assured  has  no  inter- 
est :    limited  liability. 

§  2824.     Water  used  to  extinguish  fire  and  save  property. 

§  2824a.  Water  supply  system  useless. 

§  2825.     Wind :   tornado :   hurricane. 

§  2825a.  W^orkmeu's  compensation :    insurance  risk. 


CHAPTER   LXXIV. 


PROXIMATE   AND   REMOTE    CAUSE— NEGLIGENCE,   ETC. 

§  2832.     Proximate  and  remote  cause  of  loss :    generally. 

§  2832a.  Same  subject :    opinions  of  courts. 

§  2832b.  Same  subject :   statutes. 

§  2833.     Same  subject :   cases. 

§  2833a.  Same  subject :    earthquake-caused  fire :    explosion. 

§  2834.     Same  subject :    rules. 

§  2835.     Same  subject :    consequential  losses. 

§  2836.     Same  subject :  pro  rata  freiglit :  increase  of  freight. 

§  2837.     Proximate,  etc.,  cause :   effect  of  qualifying  or  enlarging  words. 

§  2837a.  Proximate  cause:    accidental  death:    "not  the  result  of  assured's 

own  vicious  conduct :"  assault. 
§  2838.     Negligence:    proximate  and  remote  cause:    marine  risks. 
§  2838a.  Same  subject :    opinions  of  courts. 
§  2839.     Same  subject :    cases. 

§  2840.     Negligence:    proximate  and  remote  cause:    fire  risks. 
§  2840a.  Same  subject :    opinions  of  courts. 
§  2841.     Same  subject :    cases. 
§  2842.     Negligence :    acts  of  insane  person :    fire  risks. 


CONTENTS  cxix 

§  2843.     Negligence:    habitual  carelessness  of  servants. 

§  2844.     Negligence  partly  ascribable  or  aseribable  to  insurer. 

§  2845.     Negligence:    accident  insurance. 

§  2846.     Same  subject :    where  policy  stipulates  for  due  care. 

§  2846a.     Negligence :    accident  to  property :    automatic  sprinkler. 

§  2846b.  Negligence:  duty  to  save  and  preserve  property:  accident  to 
property. 

§  2847.     Negligence :  fidelity  guaranty. 

§  2848.     May  gross  negligence  evince  a  fraudulent  design. 

§  2849.  Shipowners'  protective  associations:  indemnity  for  losses  by  neg- 
ligence, etc. 

§  2850.  Loss  directly  caused  by  negligence  of  assured  or  his  agents:  ma- 
rine risks. 

§  2850a.  Negligence  insured  against :  exception  of  "want  of  due  diligence 
by  owners"  etc. :    marine  risk. 

§  2851.  Wrongful,  fraudulent  and  criminal  acts  of  assured:  attempts  to 
defraud :    burning  vessel. 

§  2852.     Malicious  acts  of  insurance  officers  in  refusing  to  insure. 


CHAPTER  LXXV. 


SPECIAL  RISKS  AND  LOSSES— ACCIDENT  INSURANCE. 

§  2862,     Risk  and  loss  in  accident  insurance:    generally. 

§  2863.  "Accident"  defined:  distinction  between  accidental  death  and 
accidental  means. 

§  2803a.  "Accident"  and  "accidental"  defined  by  the  courts,  etc. 

§  2864.     What  constitutes  an  accident :    cases. 

§  2805.     When  presumption  against  suicide. 

§  2866.     What  does  not  constitute  an  accident :    cases. 

§  2867.  Locomotive  engineer  may  be  protected  by  general  ticket  covering 
accidents  to  travelers :    construction :    intent  of  parties. 

§  2868.  Against  accidental  injuries  which  shall  not  be  fatal :  computation 
of  time :    construction. 

§  2869.  Accident  to  employee  in  performance  of  services  or  while  doing 
acts  incident  to  employment. 

§  2870.     Occupation  of  insured :    loss  of  time :    change  of  occupation. 

§  2870a.  Same  subject :    limitation  of  liability. 

§  2871.  Accident  while  boarding  moving  conveyance :  commencing  or  con- 
tinuing travel:    traveling:    "passenger." 

§  2871a.  "In"  "in  or  on"  a  "public  conveyance:"  "passenger  convej'anee" 
etc. 

§  2871b.  "Passenger  car:"  train  "used  for  passenger  service." 


exx  CONTEXTS 

§  2872.  Walking  as  part  of  a  continuous  journey  to  make  necessary  con- 
nections while  traveling  by  i^ublic  or  private  conveyance. 

§  2873.  Traveler  not  bound  to  remain  inside  cars  stopping  several  minutes 
at  intermediate  station. 

§  287-4.  Accident  while  doing  necessary  act  as  passenger  at  time  of  com- 
pletion of  journey. 

§  2875.  Accident  after  completion  of  travel  as  passenger  on  a  public  con- 
veyance. 

§  2876.  Walking  not  for  purpose  of  making  traveling  connections,  but 
to  terminate  journey  after  leaving  public  conveyance. 

§  2876a.  "Walking  on  a  public  highway:"  when  includes  platform  of  rail- 
way station. 

§  2S76b.  Accident:  riding  in  automobile,  taxicab  or  carriage  as  "public 
conveyance"  for  passenger  service :   common  carrier. 

§  2876c.  "Passenger"  in  elevator. 

§  2877.     Taking  poison  or  an  overdose  of  medicine. 

§  2878.  Character  of  death,  whether  accident  or  disease  caused  from  con- 
tact with  "bacilli,"  putrid  matter,  etc.,  malignant  pustule:  in- 
oculation of  virus :  blood  poisoning. 

§  2879.  Disease  causing  death  "directly  or  jointly  with  such  accidental 
injury." 

§  2879a.  Where  death  is  not  by  disease  but  from  accident. 

§  2880.     Where  death  is  not  from  accident  but  by  disease. 

§  2881.     Asphyxiation  caused  by  the  action  of  water  or  inhaling  gases. 

§  2882.  Injury  or  death  inflicted  through  felonious  act  of  another  or  in- 
flicted by  wrongdoer. 

§  2883.  Internal  injury:  voluntary  act  for  convenience,  pleasure,  or  in 
daily  routine  duties  unaccompanied  by  extraneous  accidental 
cause :    rupture :    strains,  etc. 

§  2884.     Same  subject :    conclusion. 

§  2885.     Other  cases  of  external,  violent,  and  accidental  means. 

§  2885a.  Burning  building:  injury  to  assured. 

§  2885b.  Miscellaneous  cases  of  special  risks  and  losses  in  accident  insur- 
ance. 


CHAPTER  LXXVI. 


ABANDONMENT  AND   TOTAL  LOSS— MARINE   RISKS. 

§  2892.     Abandonment  and  constructive  total  loss :   generally. 
§  2892a.  Loss  and  abandonment :   marine  insurance  act  of  1906  of  England. 
§  2893.     Abandonment  and  total  loss  in  case  of  freight :    generally. 
§  2894.     Distinction  between  absolute  and  constructive  total  loss :    absolute 
total  loss:    srenerallv. 


CONTENTS  •  cxxi 

§  2895.     Election  to  abandon:    recovery  for  total  or  partial  loss. 

§  2896.     Election  to  abandon  necessary  to  recovery  of  constructive  total 

loss. 
§  2897.     Election  to  al)andon  necessary,  notwithstanding  fifty  per  cent  and 

actual  or  technical  total  loss  clause. 
§  2898.     When  abandonment  may  be  made:    generally, 
§  2899.     How  far  right  to  abandon  favored  by  courts. 
§  2900.     Invalid  abandonment  of  no  effect. 
§  2901.     Abandonment  unnecessary  in  ease  of  absolute  total  loss:    same, 

goods,  commission,  and  profits :    freight. 
§  2902.     Abandonment  by  owner  of  part  interest:  joint  owner:  eotenant: 

mortgagor :    mortgagee :    lienor. 
§  2903.     Successive  perils. 
§  2904.     Effect  of  clause  requiring  assignment   and  transfer  of   interest: 

extent  of  interest  transferred. 
§  2905.     Abandonment  extends  to  assured's  interest  or  amount  of  risk. 
§  2906.     Part  of  cargo  discharged,  balance  on  board:    freight  at  risk. 
§  2907.     Actual  freight  pending  less  than  valuation:    freight  on  board  or 

not  on  board. 
§  2908.     Freight    earned    or    due:     successive    passages:     freight    valued: 

freight  out  or  home. 
§  2909.     Freight  valued:    loss  of  vessel  and  specie  on  board  to  purchase 

cargo. 
§  2910.     Freight  valued  in  excess  of  value  of  carriage  of  goods. 
§  2911.     Assured  must  have  some  interest  to  abandon :    consignee. 
§  2912.     Abandonment  of  profits:    total  and  partial  loss:    commissions. 
§  2913.     Several  kinds  of  merchandise  insured  for  one  sum,  parts  cannot 

be  abandoned. 
§  2914.     Several  kinds  of  merchandise  insured   distinctly  and  separately: 

separate  valuation. 
Separate  interest  in  ship,  cargo,  and  freight. 
Constructive  total  loss :    outfits  of  whaling  ship. 
Abandonment   and   constructive   total   loss   of   ship    and   freight: 

apportionment :    English  doctrine. 
Abandonment  and  constructive  total  loss :    ship  and  freight :    ap- 
portionment :  doctrine  in  this  country. 
Assignment  to  assured  by  underwriters  on  vessel  on  compromise: 

recovery  of  freight  loss  pro  rata. 
Insurer  as  assignee  of  owner  of  cargo  may  be  liable  for  freight 

money  to  owner  who  has  settled  with  insurer  on  vessel. 
How  far  freight  upon  cargo  a  charge  upon  underwriter  on  cargo 

as  between  insured  and  insurer. 
Surrender  of  cargo  or  voluntary  abandonment  of  voyage  where 

freight  due  or  might  have  been  earned :    master's  right  to  earn 

freight  and  dutv  to  forward  goods. 


§ 

2915. 

§ 

2916. 

§ 

2917. 

§ 

2918. 

§ 

2919. 

§ 

2920. 

§ 

2921. 

§ 

2922. 

cxxii  CONTENTS 

§  2923.     Freight  earned. 

§  2924,     Claim  for  pro  rata  freight. 

§  2925.     Freight  earned:  goods  transshipped:  new  or  substituted  voyage. 

§  2926.  Freight  earned:  part  of  cargo  reaching  abandonee  on  cargo 
equivalent  to  reaching  owner. 

§  2927.     Freight  for  forwarding  less  than  original  freight. 

§  2928.     Freight  for  forwarding  same  as  original  freight. 

§  2929.     Freight  for  forwarding  same  as  original  freight:    river  risk. 

§  2930.     Freight  for  forwarding  in  excess  of  original  freight. 

§  2931.  Clause  not  to  abandon  vessel  except  loss  exceeds  one-half  value 
not  applicable  to  freight  claim  based  on  loss  of  cargo:  same, 
cargo. 

§  2932.  Vessel  arriving:  obligation  of  consignee  to  obtain  permission  to 
land  cargo :   freight  earned. 

§  2933.  Freight  {)aid  in  advance:  specie  and  returns  thereof:  "cash  on 
account  of  freight." 

§  2934.  Freight  valued:  carried  or  not  carried:  laden  or  to  be  laden: 
part  of  cargo  laden. 

§  2935.  Affreightment:  freight  which  might  have  been  earned:  cargo 
partly  loaded :   contract  for  freight :    cargo  ready,  etc.- 

§  2936.     Policy  against  "absolute"   or  "actual"  total  loss  only. 

§  2937.     "Absolute  and  total  loss  only"  and  jettison. 

§  2937a.  "Disbursement"'  policy :  actual  or  constructive  total  loss  paid  by 
insurers:    clause  construed. 

§  2938.  Whether  abandonment  excluded  by  clauses  "free  from  partial 
loss,"  "free  of  average,"  etc.:  same  perishable  goods. 

§  2939.  Same  subject:  cases  favoring  a  constructive  total  loss  and  aban- 
donment. 

§  2940.     Same  subject:   opinions  of  textwriters. 

§  2941.     Same  subject:    conclusion. 

§  2942.     Total  loss  of  value. 

§  2942a.  Freight:  abandonment:  constructive  total  loss:  "free  from  par- 
tial loss  and  particular  average:"  expenses  of  transshipment. 

§  2943.  Shall  not  abandon  until  "ascertained  that  the  recovery  and  re- 
pairs of  said  vessel  are  impracticable." 

§  2944.     Peril  removed  before  loss  takes  place. 

§  2945.  Ultimate  state  of  facts  when  action  brought  control  in  England 
as  to  abandonment. 

§  2946.     State  of  facts  existing  at  time  of  abandonment  controls  here. 

§  2947.  Total  cannot  be  changed  into  a  partial  loss  by  acts  of  insurer  or 
agent  after  justifiable  abandonment. 

§  2948.  Recovery  or  restoration  of  property  or  indemnity  received  before 
abandonment. 


CONTENTS  cxxiii 

CHAPTER  LXXVII. 


ABANDONMENT  AND  TOTAL  LOSS— MARINE  RISKS, 

CONTINUED. 

§  2955.     Abandonment  has  reference  to  property  at  risk  at  time. 

§  2956.     Effect  of  parting  with  interest. 

§  2957.  Abandonment  to  second  or  different  assurers:  salvage  apportion- 
ment. 

§  2958.     Cargo  and  profits  insured  separately:  double  abandonment. 

§  2959.     Voyage  defeated  or  loss  caused  by  a  peril  not  insured  against. 

§  2960.  Notice  and  proof  of  abandonment  necessary:  object  and  pur- 
pose of  notice:  how  far  claim  for  total  loss  implies  aban- 
donment. 

§  2960a.  Abandonment  and  constructive  total  loss:  reinsurance:  notice: 
"pay  as  may  be  paid :"  compromise. 

§  2961.     Assured  must  not  await  results:   must  abandon  in  reasonable  time.. 

§  2962.     Where  property  would  perish  before  notice  could  be  received.. 

§  2963.     What  constitutes  reasonable  time. 

§  2964.     What  is  not  reasonable  time. 

§  2965.  How  far  notice  in  reasonable  time  affected  by  available  means  of 
speedy  communication. 

§  2966.     Abandonment  by  mortgagee:    reasonable  time. 

§  2967.  Effect  of  stipulation  as  to  time  of  abandonment  or  agreement 
keeping  right  in  abeyance. 

§  2968.     How  far  delay  affected  by  fact  that  insurer  not  prejudiced  thereby. 

§  2969.     Loss  total  at  date  of  abandonment :    revival  of  right  to  abandon. 

§  2970.  Advice  of  loss  necessary :  source  and  means  of  information  au- 
thorizing notice. 

§  2971.     Character  of  the  information:    actual  state  of  facts. 

§  2972.  Abandonment  not  validated  by  subsequent  events:  new  aban- 
donment. 

§  2973.  Sufficient  grounds  and  true  causes  must  be  assigned:  bound  by 
cause  assigned. 

§  2974.     Though  wrong  cause  assigned  may  recover  actual  loss. 

§  2975.  Noncommunication  of  additional  causes  or  of  all  causes  when  suffi- 
cient cause  stated.  ' 

§  2976.     Sufficiency  of  abandonment  and  cases. 

§  2977.  Sufficiency  of  abandonment :  subject  matter  clearly  indicated 
though  not  expressly  named :    "advances  on  board." 

§  2978.  Abandonment  must  be  positive,  absolute,  and  unconditional :  as- 
sured's  acts  of  ownership:  form  immaterial  and  writing  unnec- 
essary. 


cxxiv  CONTENTS 

§  2979.     How  far  abandonment  transfers  title, 

§  2980.     Liens,  encumbrances,  contracts  with  third  persons:    charges,  ex- 
penses, and  liabilities  arising  from  abandonment. 

§  2981.     Freight  valued:    accounting  for  freight  as  salvage:    goods  of  as- 
sured and  other  shippers  on  board. 

§  2982.     Abandonment  where  assured's  possession  has  never  been  parted 
with :    salvors  as  agents  of  assured. 

§  2983.     Abandonment:    English  registry  acts:    vesting  of  title  to   ship. 

§  2984.     Sails,  etc.,  saved  not  a  fund  in  assured's  hands  to  defray  expenses 
of  getting  off  stranded  vessel. 

§  2985.     Acceptance  binds  both  parties. 

§  2986.     Acceptance  under  circumstances  of  doubt  as  to  right  to  abandon. 

§  2987.     Implied  acceptance:    taking  possession  of  vessel. 

§  2987a.  Stipulation  to  recover  and  repair  vessel :    duty  of  assured  and  as- 
surer:   abandonment:    implied  acceptance. 

§  2988.     Constructive   acceptance   regardless    of   fifty    per   cent   total   loss 
rule. 

§  2989.     Acquiring  and  holding  title  under  distinct  right  not  an  acceptance. 

§  2990.     What  acts  of  assurer  by  his  agents  do  and  do  not  constitute  ac- 
ceptance. 

§  2991.     Merely  taking  possession  of  vessel  and  deficiency  of  repairs   as 
affecting  acceptance. 

§  2992.     Assured  not  bound  to  refuse  acceptance:    silence:    cases  of  non- 
acceptance. 

§  2993.     Abandonment  validly  made  continuing  though  acceptance  refused. 

§  2991.     Retroactive  effect  of  abandonment  and  acceptance. 

§  2995.     Effect  upon  assured's  rights  and  assurer's  liabihty  of  nonaccept- 
ance:    disclaimer  of  interest  in  salvage. 

§  2996.     Arrests,  restraints  and  detainments:  embargo,  etc. 

§  2996a.  Declaration  of  war  as  "restraints"  of  princes,  etc. :  abandonment : 
loss  of  "adventure:"  goods  remaining  in  assured's  possession. 

§  2997.     Blockade. 

§  2998.     Freight:    stipulation  not  to  abandon:    case  of  blockade. 

§  2999.     Abandonment,   how   far   justified   by    fear   of   danger:     capture, 
detention,  etc.:  imminent  danger. 

§  3000.     Same  subject :    acceptance  of  cargo  at  another  port  by  consignee. 

§  3001.     Right   to   abandon   may   be   taken  away   by   capture   after   right 
accrues. 

>§  3002.     Abandonment  for  capture:    how  far  restrained  by  stipulations. 
§  3003.     Capture  and  seizure. 
§  3001.     Recapture. 
§  3005.     Vessel  and  cargo  held  as  security,  captured  and  recaptured,  and 

expensive  and  doubtful  litigation  necessary  to  recover  her. 
§  3000.     Abandonment:  jettison:  contribution  need  not  be  first  demanded. 
§  3007.     Stranding:    submersion. 


CONTENTS  cxxv 

§  3008.     Fifty  jDer  cent  rule:    repairs. 

§  3009.     Extreme  and  imminent  danger  of  destruction. 

§  3010.     Fraudulent   and   designed   exposure   to   peril   distinguished   from 

mere  negligence  of  master  and  mariners. 
§  3011.     Vessel  deserted  by  mariners  because  of  inability  to  extricate  her 

from  peril,  or  in  ease  of  mutiny  or  to  save  tlieir  lives,  etc. 
§  3012.     Place  of  peril  may  enhance  probability  of  total  loss. 
§  3013.     Arrival   of  ship:    continuation   of  risk:    completion   of  voyage: 

ship  on  arrival  not  worth   repairing  or  repairs  exceeding  fifty 

per  cent :   freight. 
§  3014.     Arrival  of  part  of  goods:    fifty  per  cent  rule  in  .'^ucli  case. 
§  3015.     Loss  or  retardation  of  voyage:    ship,  cargo,  and  freight. 
§  3016.     Total,  subsequent   to   partial   loss:   successive  losses. 
§  3017.     Waiver  of  abandonment :    purchase  by  assured,  etc. 
§  3017a.  Abandonment :   non-waiver  clause. 
§  3018.     Waivei",  revocation,  and  estoppel :    insured  and  insurer  generally : 

miscellaneous  cases. 


CHAPTER  LXXVIII. 


TOTAL  LOSS  AND  TOTAL  DISABILITY— FIRE  AND  ACCIDENT. 

§  3025.     Total  loss,  building:  fire  risk. 

§  302G.     "Wholly    destroyed:"    "totally    destroyed:"    fire    risk:    how    far 

marine  cases  analogous. 
§  3027.     "Wholly    destroyed:"    "totally    destroyed,"    continued:    how    far 

valued  policy  cases  analogous. 
§  3028.     "Wholly  destroyed:"  "totally  destroyed:"  cases. 
§  3029.     "Wholly  destroyed  :"  "totally  destroyed :"  conclusion. 
§  3030.     Total  loss  under  policj'  issued  after  loss  by  fire,  and  before  build- . 

ing  repaired. 
§  3031.     "Total    disability:"    "permanently    disabled:"    "wholly    disabled, 

etc. ;  accident  and  benefit  insui'ances. 
§  3032.     Construction  of  the  words,  "total  and  permanent  disability." 
§  3033.     "Wholly  disabled,"  insured  under  two  occupations. 
§  3034.     "Total"  and  "partial  total"  disability :  loss  of  a  foot  or  feet,  eye 

or  eyes. 
§  3035.     "Permanent"  disability  excludes  that  which  is  merely  temporary. 


cxxvi  CONTENTS 


CHAPTER  LXXIX. 


REPAIRS— FIFTY  PER  CENT  RULE— SALE— TRANSSHIPMENT- 
MARINE. 

§  3040/    Repairs  of  sliip:    generally. 

§  3041.     Ship   not  worth   repairing:     cost   of  repairs   exceeding   repaired 

value. 
•§  3042.     Abandonment  after  repairs  by  assured. 
§  3043.     Repairs  by  mortgagor  in  possession  of  vessel. 
§  3044.     Repairs  and  retaining  control  by  owner. 
§  3045.     Insurer's  right  to  repair. 
^  3046.     Same  subject  continued. 
§  3047.     Same  subject:    conclusion. 
§  3048.     Repairs,    etc.,    by    insurer   under   nonwaiver,    etc.,    clause    giving 

right  to  interfere. 
§  3049.     Same  subject:    deficiency  in  repairs. 
§  3050.     Shipowners  obligation  to  repair  to  send  on  cargo. 
§  3051.     Assurer's    agreement   with    wreckers    or    salvors    to    save    vessel: 

assured  on  ship  or  cargo. 
§  3052.     Salvors:  sale  of  part  of  jettisoned  cargo  saved:  total  loss:  dili- 
gence to  avoid  sale. 
§  3053.     Underwriter's  objections  to  repairs. 
i§  3054.     "Not  to  be  liable  for  repairs  made"  at  specified  place. 
i§  3055,     Liability   of   several  underwriters   for   repairs   separate   and   not 

as  partners. 
§  3056.     Character  of  repairs. 

§  3057.     Want  of  materials,  etc.,  at  place:    impossibility  of  repairs  there. 
§  3058.     Failure  to  make  complete  repairs  at  intermediate  port. 
§  3059.     Repairs:    liability   of  insurers   where  funds   raised   therefore   on 

bottomry. 
§  3060.     Liens  for  repairs,  etc.,  bottomry. 
§  3061.     Where  loss  exceeds  fifty  per  cent. 
§  3062.     Where  loss  is  less  than  fifty  per  cent. 

§  3063.     Whether  loss  must  merely  equal  or  must  exceed  fifty  per  cent. 
§  3064.     Stipulation  affecting  fifty  per  cent  rule. 
§  3064a.  ''Disbursement"   policy:   conflicting  stipulations:   rider:   fifty   per 

cent  rule. 
§  3065.     Code  provisions  as  to  abandonment  for  half  value. 
§  3066.     Exceptions  to  fifty  per  cent  rule. 

§  3067.     Fifty  per  cent  rule:    cargo:    memorandum  and  other  articles. 
§  3068.     Fifty  per  cent  rule:    free  of  partial  loss. 
§  3069.     Fifty  per  cent  rule:    arrival  of  vessel  or  cargo. 


CONTENTS  cxxvii 

§  3070.     Fifty  per  cent  rule:    value  at  time  and  place  of  loss  or  repairs: 

same  freight. 
§  3071.     Stipulation  that  valuation  in  policy  the  test  under  tifty  per  cent 

rule. 
§  3072.     Rule  in  England  as  to  valuation  in  policy  and  repairs. 
§  3073.     Rule  in  this  country  as  to  valuation  in  policy:    fifty  per  cent  rule 

and  repairs. 
§  3074.     Opinions  of  text-writers  as  to  valuation  or  value  of  vessel  being 

test. 
§  3075.     Conclusion:    repaired  value  and  not  valuation  in  policy  the  test. 
§  3076.     Fifty  per  cent  rule :    expense  of  raising  vessel  and  taking  to  port 

of  repairs. 
§  3076a.  Test  of  constructive  total  loss:   whether  value  of  wreck  may  be 

included:    cost  of  repair:    effect  of  English  statute. 
§  3076b.  Where  stipulated   that   cost  of  repairs  shall   exceed  seventy-five 

per  cent  exclusive  of  raising  vessel,  etc. 
§  3077.     Stipulation:    liability  exceeding  half  amount  insured  "under  ad- 
justment as  of  a  partial  loss:"  one  third  new. 
§  3078.     Repairs:    particular  average  adjustment:     one-third  new. 
§  3079.     One-third   new:     interior  and   steamboat  navigation:     iron   ships. 
§  3080.     One-third  new:    labor  and  materials  included:    steamboat  towage, 

and  like  incidental  expenses  excluded. 
§  3081.     One-third  new :  Code  provisions. 
§  3082.     One-third  new:    anchors,  remetaling,  dockage,  calking,  ironwork, 

etc. 
§  3083.     Recalking  and  recoppering  exceeding  vessel's  repaired  value. 
§  3084.     One-third  new :   five  per  cent  stipulation. 
§  3085.     One-third  new:    new  ship:    rule  here. 
§  3086.     Same  subject :    English  rule. 

§  3087.     One-third  new:    shij)  worth  more  repaired  than  before  disaster. 
§  3088.     One-third  new :    proceeds  of  old  materials :    rule  here. 
§  3089.     Same  subject:    English  rule. 

§  3090.     One-third  new:   temporary  and  permanent  repairs. 
§  3091.     Decisions  that   one,  third  must   be   deducted   from   cost:   repairs: 

three-fourths  value:    fifty  per  cent  rule. 
§  3092.     Same  subject:    deci-sions  that  one-third  need  not  be  deducted. 
§  3093.     Same  subject:    opinions  of  text-writers. 
§  3094.     Same  subject:    conclusion. 
§  3095.     One-third  new:  marine  interest:  bottomry  or  respondentia  money 

for  repairs:  repairs  defrayed  by  sale  of  goods. 
§  3096.     Addition  of  salvage  charges  due  salvors:    estimation  of  repairs: 

half  value. 
§  3097.     When    expenses    of    temporary   repairs    enter    into    general    and 

when  into  particular  average. 
§  3098.     Repairs:   general   average:   jettison   and  fifty   per   cent   rule. 


cxxviii  CONTENTS 

§  3099.     Cargo:    transshipping,  etc.:  aggregation  of  losses,  etc. 

§  3100.     Expenses   for  insuring  cargo  from   wreck  to   destination:     fifty 

per  cent  rule. 
§  3101.     Loss  of  goods  by  jettison :  fifty  per  cent  rule :  contribution. 
§  3102.     Allowance  for  custody  of  vessel  during  repairs. 
§  3103.     Depreciation  in  value  when  added  to  expense  of  repairs. 
§  3101.     Repairs:    averages:    age,  unsoundness,  decay  of  vessel:    one-third 

new :    fifty  per  cent  rule. 
§  3105.     Where  repairing  injurj'  will  place  vessel  though  unsound  in  same 

condition. 
§  3106.     Expense  of  survey  to  ascertain  extent  of  repairs. 
§  3107.     Expenses  consequent  upon  peril  necessarily  incurred  preparatory 

to  repairs :    averages :    constructive  total  loss. 
§  3108.     Expense   of   raising   submerged   vessel:     averages:     contribution 

by  cargo. 
§  3109.     Commissions  and  disbursements:    repairs. 
§  3110.     Premium  and  fifty  per  cent  rule :    repairs. 
§  3111.     Increased  expense  of  repairs  abroad  over  what  they  might  have 

cost  at  home. 
§  3112.     Vessel  disabled  at  sea  and  expenses  consequent  upon  seeking  port 

of  distress. 
§  3113.     Obligation  to  employ  master  of  skill  and  judgment. 
§  3114.     Obligation  of  master  to  inform  owner  of  vessel's  loss. 
§  3115.     Master's  agency  prior  to  abandonment. 
§  3116.     Master's  agencj^  after  abandonment. 

§  3117.     Abandonment  not  accepted:    agency  or  trusteeship  of  insured. 
§  3118.     Funds  for  repairs. 
§  3119.     Master's  authority:    pledge  of  owner's  credit  for  necessaries,  etc., 

to  procure  repairs,  etc. 
§  3120.     Sale  of  cargo  or  part  thereof  to  repair. 
§  3121.     Sale  after  abandonment. 
§  3122.     Sale,  when  justifies  an  abandonment. 
§  3123.     Sale :   when  abandonment  necessary  to  recover  total  loss. 
§  3124.     Sale :    when  abandonment  unnecessary  to  recover  total  loss. 
§  3125.     Sale :    total  and  partial  loss. 

§  3126.     Sale :   unreasonable  exertions  not  required  to  prevent. 
§  3127.     Illegal  sale  and  abandonment  confers  no  rights. 
§  3128.     Sale,  whether  justifiable:    cases. 
§  3129.     Sale  whether  justifiable:   opinions  of  text-writers. 
§  3130.     Sale,  whether  justifiable:    the  rule. 
§  3131.     Sale :   master,  owner,  or  part  owner. 

§  3132.     Bottomry  bond  and  sale:    assurer's  refusal  to  pay  bond. 
§  3133.     Sale :    obligation  to  communicate  with  owner  or  insurers :    notice. 
§  3134.     Sale  of  cargo:    how  far  justifiable. 
§  3135.     Sale  of  cargo :    cases. 
§  3136.     Sale:    right  or  obligation  to  transship  or  forward  goods. 


CONTENTS  cxsix 

CHAPTER   LXXX. 

REPAIRS  AND  REBUILDING:  FIRE  RISK 

§  3150.  Repairs  and  rebuilding :  nature  of  condition :  stipulated  indem- 
nity not   exhausted. 

§  3151.     Contract  to  repair  or  rebuild  is  between  insurer  and  insured  only. 

§  3152.     Right  to  rebuild  must  be  expressly  reserved. 

§  3153.     Character  of   repairs  obligated  by  reservation. 

§  3154.     Character  of  repairs  may  be  affected  by  ordinance. 

§  3155.  Construction  of  clauses  to  rebuild  and  that  specif\4ng  time  of 
payment. 

§  3156.     Assignment  of  loss  and  right  to  rebuild. 

§  3157.     No  time  specified,  election  must  be  made  in  reasonable  time. 

§  3158.  Option  exercised  to  repair  or  rebuild :  effect  of  election :  defense : 
pleading. 

§  3159.     Repairs  unauthorized  unless  election  made. 

§  31G0.  Time  specilled  for  exercise  of  option  after  proofs  of  loss  com- 
pleted :    corrected   proofs. 

§  3161.     Delay  followed  by  refusal  after  notice  of  election. 

§  3162.     Rebuilding  or  repairs:  delay:  reasonable  time. 

§  3163.  Remedy:  damages:  unreasonable  delay  in  rebuilding:  failure  to 
complete :   defective  work. 

§  3164.     Assured,  refusal  to  permit  rebuilding  or  repairs. 

§  3165.     What  constitutes  an  election  to  rebuild. 

§  3166.     Rebuilding:   several  insurers. 

§  3167.     Rebuilding :  arbitration  clause :  waiver, 

§  3168.     Parol  waiver  of  right  to  rebuild:  arbitration. 

§  3169.     Election  to  rebuild  waives  defense  of  misrepresentation. 

§  3170.     Rebuilding  prevented  by  ordinance  or  municipal  authority. 

§  3171.     Rebuilding  clause :  equities :  widow's  life  interest. 

§  3172.     Rebuilding:  injunction. 

§  3173.     Action  by  assurer  against  building  contractor. 

§  3174.     ProjDerty  destroyed  after  rebuilding  and  v.'ithin  term  of  policy. 


cxxx  •  CONTENTS 

TITLE    XII. 

CONDITION  AFFECTING  LOSS  AND  ACTIONS. 

CHAPTER  LXXXI. 

LIMITATION  CLAUSES  AFFECTING  ACTIONS. 

§  3181.  Stipulations  as  to  the  time  of  bringing  suit  are  valid:  construc- 
tion of. 

§  3182.     Provision  making  loss  payable  after  certain   number  of  days. 

§  3183.     Waiver  of  limitation  may  be  by  agent  of  insurer. 

§  3184.     When  limitation  as  to  time  of  bringing  suit  may  be  void. 

§  3185.     Provision  making  time  dependent  on  act  of  insurer. 

§  3186.     When  time  of  limitation  commences  to  run :  life :  mutual  benefit. 

§  3187.     When  action  is  deemed  to  be  commenced. 

§  3188.     Limitation  to  certain  time  "after  the  loss  shall  occur." 

§  3189.  "After  the  happening  of  the  death  on  account  of  which  the 
action  is  brought." 

§  3190.     Within  a  certain  time  "after  the  fire." 

§  3191.     After  the  loss  "shall  have  become  due." 

§  3192.     "One  year  from  the  time  of  the  alleged  injur}-." 

§  3193.     "Unless  prosecuted  within  one  year  from  the  date  of  the  loss." 

§  3194.  Effect  of  stipulation  in  contract  limiting  action  to  particular 
forum. 

§  3195.     Effect  of  provision  in  charter  limiting  action  to  particular  foi-um. 

§  3196.     Limitation   runs  against   infant   beneficiaries. 

§  3197.     Effect  of  limitation  on  action  to  recover  back  premiums. 

§  3198.     Limitation  does  not  bar  action  against  company  for  fraud. 

§  3199.     Mistake  in  date  of  policy  no  excuse. 

§  3200.     Plaintiff's  prosecution  for  arson  no  excuse. 

§  3201.  Validity  of  charter  provision  limiting  time  for  issuing  execu- 
tion. 

§  3202.     Where  last  day  of  time  limited  falls  on  Sunday. 

§  3203.     Effect    of   garnishment    proceedings. 

§  3204.  Dismissal  of  suit  brought  before  expiration  of  time  and  bring- 
ing of  another  suit  after  expiration  of  period  limited. 

§  3205.  Same  subject :  exceptions  in  statutes  of  limitation  not  appli- 
cable. 

§  3206.     Effect  of  attempt  to  sue  in  foreign  court  having  no  jurisdiction. 


CONTENTS  exxxi 

§  3207.     Waiver  by  acts  of  insurer:   negotiations  for  adjustment. 

§  3208.     Provision  that  if  adjustment  not  satisfactory  suit  must  be  brought 
within  certain  time:  effect  of  adjustment. 

§  3209.     Request  for  further  proof  waives  limitation  as  to  time  of  bring- 
ing suit. 

§  3210.     Effect  of  waiver  of  proof  where  policy  provides  that  no  suit  can 
be  brought  until  certain  number  of  days  after  proofs  furnished. 

§  3211.     That    denial    of   liability    waives    provision    that    suit    cannot    be 
brought  until  a  certain  time. 

§  3212.     That  denial  of  liability  does  not  waive  bringing  suit  within  speci- 
fied time. 

§  3213,     Effect  of  injunction  preventing  payment  and  receipt  of  money. 

§  3214.     Where  impossible  to  comply  with  provision  on  account  of  war. 

§  3215.     Where  suit  commenced  within  time  but  summons  cannot  be  served : 
absence  of  defendant. 

§  3216.     Payment  to  mortgagee  of  his  amount  of  loss  no  waiver  of  limi- 
tation as  to  mortgagor. 

§  3217,     Effect  of  clause  where  company  insolvent. 

§  3218.     Substitution   of  new  party   plaintiff   or  defendant   after   expira- 
tion of  time. 

§  3219.     Where    insurer   agrees   to   transfer   of   action   to    another   court : 
waiver. 

§  3220.     W^hat  will  excuse  failure  to  comply  with   limitations:   other  in- 
stances. 

§  3221.     When   failure   to   comply  with  limitation   is   not   excused:    cases 
generally. 

§  3222.  Bill  for  reformation  of  policy, 

§  3223.     Breach  of  condition  is  matter  of  defense:  excuses  for  noncom- 
pliance need  not  be  pleaded. 

§  3224.     Where  time  for  bringing  action  is  controlled  by  statute. 


CHAPTER  LXXXII. 


ARBITRATION  AND  AWARD. 

§  3231.  Arbitration   and  award  clauses :   generally. 

§  3232.  Validity  of  provision:  condition  precedent,  when. 

§  3233.  Same  subject:  cases. 

§  3234.  Same  subject:  cases  contra. 

§  3235.  Other  provisions  as  to  arbitration  and  award:  invalidity  of. 

§  3236.  General  rule  as  to  validity:  arbitration  and  award  clauses. 

§  3237.  When  compliance  is  not  condition  precedent. 

§  3238.  Same  subject:  "At  written  request." 


cxxxii  CONTENTS 

§  3239.  What  constitutes  proper  request  for. 

§  3240.  Manner  of  obtaining  an   award  should  comply  with  policy  pro- 
visions. 

§  3241.  Provision  as  to  arbitration  where  loss  is  total. 

§  3242.  Who   is   disinterested  person :   competency   of   appraisers. 

§  3243.  Demand  for  appraisal:  notice  of. 

§  3244.  Demand  where  loss  occurs  by  distinct  fires. 

§  3245.  Where  se\eral  insurers  liable  for  same  loss :  separate  demand. 

§  3246.  Estimate   of   loss:    prerequisite   to   arbitration. 

§  3247.  Award  binding,  when. 

§  3248.  Award  not  binding,   when. 

§  3249.  When  mortgagee  bound  by  award. 

§  3250.  Agreement   for  arbitration    subsequent    to   loss. 

§  3251.  Additional    award,   where    prior   award    approved. 

§  3252.  Where  company  elects  to  build  or  repair. 

§  3253.  Where  arbitrators   exceed   authority. 

§  3254.  Arbitration  clause:  limitation  of  time  for  bringing  suit. 

§  3255.  Refusal  to  appoint  appraisers  or  comply  with  arbitration  clause. 

§  3256.  Refusal  to  comply   with  provision   except   on   new  terms. 

§  3257.  Denial  of  liability  is  waiver  of  provision. 

§  3258.  Instances  of  waiver  of  arbitration  provision  by  company. 

§  3259.  When  there  is  no  waiver  of  provision. 

§  3260.  Failure  to  agree  upon  arbitrators. 

§  3261.  Arbitration  waives  defects  in  proof  of  loss. 

§  3262.  Award  may  be  set  aside,  when. 

§  3263.  Averments  in  complaint  as  to  arbitration  clause. 

§  3264.  Noncompliance :   arbitration   and   award   clauses :   defense. 

§  3265.  Where  insured  dies  after  submission. 

§  3266.  Appraisers  may  call  in   experts. 


CHAPTER  LXXXIII. 


NOTICE  AND  PROOFS  OF  LOSS. 

§  3275.  Notice  and  proofs  of  loss:  generally:  fire:  substantial  compli- 
ance only  necessary :  construction. 

§  3276.     Proofs  of  loss :  parol  contract. 

§  3277.     Notice  and  proofs  of  death. 

§  3278.     Notice  and  proofs  of  death  condition  precedent  to  recovery. 

§  3279.     Proof  of  loss :   marine  risk :   certification  by  insurer's  agent. 

§  3280.     Notice  and  proofs  must  be  in  time  limited  by  policy,  when. 

§  3281.  Notice  and  proofs  within  certain  specified  time:  insured  must 
show  compliance. 


CONTENTS  cxxxiii 

Where  stipulation  for  notice  and  proofs  within  certain  time,  but 

no  forfeiture  imposed  for  failure  to  furnish. 
Accident  policy:   notice  "within  ten   days"  from  date  of  injury 

or  death  construed. 
Accident  policy:  injury  causing  total  disability:   death  resulting 

therefrom:  proof  of  death  when  time  for  notice  commences. 
Proofs  of  loss  may  operate  as  notice,  but  notice  alone  will  not  dis- 
pense with  proofs. 
Notice  and  proofs  of  death:  condition  precedent  to  right  of  ac- 
tion: both  notice  and  proofs  must  be  furnished. 
Place  of  notice  and  proofs. 
Notice  of  loss  in  writing. 
Notice:  proofs:  "As  soon  as  possible." 

Nature  of  the  proofs  of  death:  "due  notice  and  proof  of  death." 
Notice  "forthwith." 
"Immediate  notice." 

"Immediate  notice:"  when  verbal  notice  is  sufficient. 
"Give  immediate  notice  and  render  particular  account." 
"Immediate  notice:"  reinsurance. 
"Satisfactory  proof:"  what  constitutes. 
Where  policy  does  not  prescribe  time  within   which   notice  and 

proofs  must  be  furnished. 
Provisions  in  by-laws  of  company  as  to  notice  and  proofs. 
Furnishing  of  proof  required  is  a  demand  for  payment. 
Notice  and  proofs:  service  by  mail. 
Nature  of  interest  need  not  be  stated  in  proof s  .unless  required 

by  jDolicy. 
By  whom  notice  and  proofs  should  be  given. 
Proofs  of  loss  by  creditor. 

Mortgagor  and  mortgagee:   who  may  furnish  proofs  of  loss. 
Policy  to  trustee:  change  of  tiiistee:  who  may  make  proofs  of 

loss. 
Proofs  of  loss  Avhere  policy  is  issued  to  partners. 
Proofs  of  loss  signed  by  insured. 
Policy   payable    to   another   than    original    insured:    when   proof 

must  be  by  original  insured. 
Notice  and  proofs  of  death:  life  policy:  who  may  furnish. 
Where  constitution  of  fraternal  order  requires  subordinate  lodge 

or  secretary  of  such  lodge  to  make  proofs  of  death. 
Notice  and  proofs:   accident  policy:  who  may  furnish. 
To  whom  notice  or  proofs  may  be  given:  notice  to.  "secretary," 
agent. 
§  3313.     Stipulation  that  proofs  of  loss  must  state  other  insurance. 
§  3314.     Where  statute  requires  notice  to  be  accompanied  by  affidavit  as 
to  cause  of  loss. 


§ 

3282. 

§ 

3283. 

§ 

3284. 

§ 

3285. 

§ 

3286. 

§ 

3287. 

§ 

3288. 

§ 

3289. 

§ 

3290. 

§ 

3291. 

§ 

3292. 

§ 

3293. 

§ 

3294. 

§ 

3295. 

§ 

3296. 

§ 

3297. 

§ 

3298. 

§ 

3299. 

§ 

3300. 

§ 

3301. 

§ 

3302. 

§ 

3303. 

§ 

3304. 

§ 

3305. 

§ 

3306. 

§ 

3307. 

§ 

3308. 

§ 

3309. 

§ 

3310. 

§ 

3311. 

§ 

3312. 

cxxxiv  CONTENTS 

§  3315.     Where  policy  requires  proofs  to  state  origin   of  fire. 

§  3316.     Policy  covering  goods  in  separate  building :  form  of  proofs. 

§  3317.     Notice  and  proofs  of  loss:  loss  during  war. 

§  3318.     Before  whom  verification  shall  be  made. 

§  3319.     Statements  in  proofs  of  loss:  how  far  conclusive:  mistakes. 

§  3320.     Statements  in  proofs  of  loss  as  to  amount  of  loss :  mistakes. 

§  3321.     Notice  and  proofs  may  be  condition  precedent  to  garnishment. 

§  3322.     Magistrate's  certificate:  construction  of  this  provision  generally. 

§  3323.     Magistrate's  certificate :  "if  required." 

§  3324.     "Nearest"  magistrate  or  notary :  generally. 

§  3325.     Magistrate  or  notary  "nearest  to  the  fire:"  "most  contiguous"  to 
the  fire :  rule. 

§  3326.     Certificate  of  magistrate  "not  concerned  in  the  loss." 

§  3327.     Sufficiency  of  magistrate's  certificate. 

§  3328.     Effect  of  statements  in  certificate  of  magistrate  or  notary. 

§  3329.     Statements  by  physician  as  part  of  proofs  of  death. 

§  3330.     Submission  of  insured  to  an  "examination  under  oath." 

§  3331.     Copies  of  bills,  invoices,  etc. :  books  of  account. 

§  3332.     Where  books  of  account,  invoices,  etc.,  are  lost. 

§  3333.     "Particular  account:"  "Full  and  detailed  statement." 

§  3333a.  Notice  of  sickness  or  disease. 

§  3333b.  Accident  policy:  notice  and  proofs:  generally. 

§  3334.     Accident  policy:  full  particulars:  does  not  require  details  of  sub- 
sequent injuries. 

§  3335.     Accident  policy :  notice  of  injury  causing  total  disability :   death 
resulting  therefrom. 

§  3335a.  Employer's  liability  insurance, 

§  3335b.  Live  stock  insurance. 

§  3336.     Notice   and   proofs  of  loss :   notice  affecting  loss :   guarantee  in- 
surance. 

§  3337.     Must  furnish  all  "documentary  evidence." 

§  3338.     Where  loss  is  total,  "sufficiency  of  proof." 

§  3339.     Fraud  and  false  swearing:  generally. 

•  §  3340.     Effect  of  false  statements  as  to  amount  of  loss  where  actual  loss 
exceeds  amount  of  insurance. 

§  3341.     Discrepancy  between  amount   claimed  in  proofs  and   amount   of 
verdict. 

§  3342.     Where  fraud  and  false  swearing  enters  into  some  of  the  items 
only. 

§  3343.     False  statements  by  agent  of  insured  in  proofs  of  loss. 

§  3344.     False  swearing:  after  commencement  of  suit. 

§  3345.     Subsequent  proofs  to  be  taken  in  connection  with  former  proofs. 

§  3346.     Where    laws    of    association    require    approval    of    subordinate 
lodge :  power  to  reject. 

§  3347.     Statutory'  provisions. 

§  3347a.  Separation  of  damaged  from  undamaged  goods. 


§  3354. 

§ 

3355. 

§  3356. 

§ 

3357. 

§ 

3358, 

§ 

3359, 

§ 

3360, 

§ 

3361, 

§ 

3362, 

CONTENTS  cxxxv 


CHAPTER   LXXXIV. 


WAIVER  AND  ESTOPPEL— PROOFS  OF  LOSS. 

Waiver  of  notice  of  proofs  of  loss. 

Acts  amounting   to    waiver   or   estoppel:    proofs    of    loss:    cases. 

Acts  not  amounting  to  waiver"  or  estoppel:  proofs  of  loss:  eases. 

Waiver  by  agent  of  company:  by  adjuster. 

Waiver  of  notice  not  waiver  of  proofs. 

Acting  on  oral  notice  waives  written  notice. 

Stipulations  in   policy   that   waiver   must   be   in   writing   do   not 

apply  to  proofs  of  loss. 
Mere  silence  no  waiver. 

Failing    to    give    notice    of    defects   within    reasonable    time    and 
specifying   particular   defects:    retention   of   proofs. 
§  3363.     Only   defects   specified   can   be  relied  on   as   defense,   othei^s   not 

specified  are  waived. 
§  3364.     Where  insurer  objects  to  proofs  and  refers  to  policy. 
§  3365.     Failure  of  insurer  to  respond  to  inquiries. 
§  3366.     Where    insurer    requires    corrections   which    cannot    be    made    in 

time  limited  for  furnishing  proofs. 
§  3367.     Receipt   of   proofs   after   time  limited   by   policy   for   furnishing 
same. 
Request  by  insurer  that  proofs  be  furnished. 
Same  subject :  conclusion. 
Effect  of  requiring  additional   proofs. 
Waiver  not  acted  upon,  etc. 
Where  person  insured  dies  without  knowledge  of  beneficiary  or 

insurer  and  proofs  are  not  furnished  within  time  limited. 
Denial  of  liability  is  waiver  of  proofs  or  defects  in  proof. 
Denial  of  lia])ility:  charge  of  incendiarism. 
Denial  of  liability  may  not  operate  as  waiver. 
Refusal  to  pay  loss  because  of  pendency  of  garnishment  proceed- 
ings. 
Denial  of  liability  may  be  by  agent. 

Refusal   by   insurer  to   accept   proofs  of  loss   on   ground   of   no 
liability  is  waiver. 
§  3379.     Where  company  declines  to  receive  proofs  as  not 'being  in  time 

or  not  by  .proper  person. 
§  3380.     Refusal  to  furnish  blanks:  life  policy. 
§  3381.     Examination  under  oath  as  waiver  of  notice  or  proofs. 
§  3382.     Waiver  of  provision  as  to  particular  account  of  loss. 


§ 

3368. 

§  3369. 

§ 

3370. 

§ 

3371. 

§ 

3372. 

§ 

3373, 

§ 

3374, 

§ 

3375, 

§ 

3376, 

§ 

3377 

§ 

3378, 

cxxxvi  CONTENTS 

§  3383.     Waiver  of  magistrate's  certificate. 

§  3384.     Where  insurer  estopped  from  setting  up  that  insured  has  sworn 

falsely  in  his  proofs:  adjustment  of  loss. 
§  3385.     Adjustment  as  waiver. 
§  3380.     Promise  to  pay:  waiver. 
§  3387.     Offer  by  company  to  pay  in  settlement  of  loss  part  of  amount 

claimed. 
§  3388.     Payment  of  part  of  loss. 
§  3389.     Submission  to  arbitration:   waiver. 
§  3390.     Appearance  and  pleading  by  insurer:  waiver. 
§  3391.     Statutory  provisions:  notice  and  proofs. 
§  3392.     Letters  showing  waiver  of  proofs  of  loss. 
§  3393.     Waiver:    right    to    insist    that    proofs    were    not    furnished    by 

proper  person. 
§  3394.     Company  estopped  after  payment  of  money  into  court  to  claim 

proofs  insufficient. 


TITLE  XIII. 


AVERAGE,  ADJUSTMENT,  AND  DAMAGES  OR 

RECOVERY. 


CHAPTER  LXXXV. 

GENERAL   AVERAGE— ADJUSTMENT   AND    DAMAGES    OR 

RECOVERY. 

Art.  I.  General  Average  and  Jettison:  Generally. 
Art.  II.     General  Average,  Jettison  and  Adjustment. 

Suhdiv.  I.  York- Antwerp  Rules. 
Siihdiv.  II.  Other  Matters  Relating  to  General  Average. 

Art.  til  Adjustment  and  Measure  of  Damages  or  Recovery. 

Art.  I.  General  Average  and  Jettison:  Generally. 

§  3400.     Contribution:  laws  of  Rhodians  and  Romans:  Oleron:  generally. 
§  3401.     Etymology  of  the  word  "average." 


CONTENTS  cxxxvii 

§  3402.  Divergent  usages  among  maritime  countries. 

§  3403.  Jettison  generally. 

§  3404.  Jettison  defined. 

§  3405.  Essentials  of  general  average. 

§  3406.  Claim  to  contribution  is  equitable  one. 

§  3407.  General  average  defined. 

§  3408.  Distinction :  general  and  particular  average. 

§  3409.  General  average :  fire  policies. 

§  3410.  Previous  consultation  not  prerequisite  to  sacrifice. 

Art.  IL  General  Average,  Jettison  and  Adjustment. 

Subdiv.  I.  York-Antwerp  Rules. 

§  3417.  Cautionary  remarks. 

§  3418.  Jettison  of  deck  cargo. 

§  3419.  Exceptions  to  last  rule. 

§  3420.  Damage  occasioned  by  jettison :  water  getting  down  hatches,  etc. 

§  3421.  Damage  by  fire  or  consequent  thereupon. 

§  3422.  Cutting  away  wrecks  or  remains  of  spars,  etc. 

§  3423.  Voluntary  stranding  or  running   ship   on   shore. 

§  3424.  Damage  or  loss :   sails  and  sjjars :   ship's  engines :   press  of  sail : 

refloating  ship. 

§  3425.  Expense  of  lightening  to  refloat  ship  and  of  reshipping. 

§  3426.  Sacrifices'  made  for  fuel. 

§  3427.  Port  of  refuge  expenses. 

§  3428.  Port  of  refuge  expenses :    English   rule. 

§  3429.  Cost  of  repairs :  deductions  allowed :  temporary  repairs :  new  for 

old. 

§  3430.  When  loss  of  freight  shall  be  made  good  as  general  average. 

§  3431.  Loss  of  goods :  amount  to  be  made  good  as  general  average. 

§  3432.  Basis   and  amount  of  contributory  values  and   deductions. 

§  3433.  Adjustment   as   affected   by  general  average   clause   in   contract: 

affreightment. 


o* 


Suhdiv.  II.  Other  Matters  Relating  to  General  Average. 

§  3440.  To  what  extent  sacrifice  must  be  successful :  subsequent  accident. 

§  3441.  Other  sacrifices  and  expenses  in  general  average. 

§  3442.  AVhat  is  not  included  in  general  average. 

§  3443.  Who  contributes. 

§  3444.  What  contributes. 

Art.  III.  Adjustment  and  Measure  of  Damages  or  Recovery. 

§  3451.     Settlement  includes  adjustment:  fifty  per  cent  of  goods  of  sound 
value  delivered. 


cxxxviii  CONTENTS 

§  3452.     Adjustment  of  partial  loss:  measure  of  damages  or  recovery. 

§  3453.     General  average:  adjustment:  values. 

§  3454.     Measure  of  damages  or  recovery. 

§  3454a.  Employers'  liability:  measure  of  indemnity. 

§  3454b.  Guaranty  insurance. 

§  3455.     Damages   or  recovery:    deductions:   exchange:    duties. 

§  3456.     Same  subject:  continued. 

§  3457.     Compound  policies:  prorating  loss. 

§  3458.     Damages  or  recovery:  interest  on  amount  of  loss. 

§  3459.     Same  subjects:  continued. 

§  3459a.  Refusal  to  pay  loss:  attorneys'  fees. 

§  3460.  Measure  of  damages  or  recovery:  proportionate  amounts:  limit- 
ed liabilities. 

§  3461.     Same  subject:  continued. 

§  3462.     Same  subject:  continued. 

§  3463.  Damages  or  recovery:  mutual  insurance  companies,  benefit  socie- 
ties, etc. 

§  3464.  Law  of  place  or  termination  of  adventure  governs  adjustment: 
general  average. 

§  3465.     Adjustment  settled  in  foreign  port. 

§  3465a.  Compromise  or  settlement:  accord  and  satisfaction:  release. 


TITLE  XIV. 

RIGHTS,  REMEDIES,  PROCEDURE  AND  EVIDENCE. 

CHAPTER  LXXXVI. 

RIGHTS  AND  REMEDIES. 

§  3467.     Rights  and  remedies:  preliminary  statement. 

§  3468.  Right  of  action  by  insured :  commencement  of  action  or  suit :  gen- 
erally. 

§  3469.  Action  when  contract  completed  but  policy  not  delivered :  trover  for 
policy  executed. 

§  3470.     Forms  of  action, 

§  3470a.  Form  of  remedy :  anticipatory  breach  or  renunciation  of  contract. 

§  3471.     No  action  against  insurers :  refusal  to  insure :  conspiracy. 

§  3471a.  Conspiracy  to  ruin  competitor  insurer's  business  by  employing  its 
agents. 

§  3471b.  Fraudulent  combination  to  obtain  policy :  one  party  cannot  recover 
share  of  proceeds  from  the  other. 


CONTENTS  cxxxix 

§  3472.     Several  policies  upon  same  property:  double  insurance:  pro  rata 
clause. 

§  3473.     Failure  or  refusal  to  levy  assessment :  action  for  breach  of  contract. 

§  3473a.  Same  subject :  decisions. 

§  3474.     Failure  or  refusal  to  levy  assessment:  mandamus:  conclusion. 

§  3474a.  When  insurer  not  obligated  to  continue  issuing  assessment  policies. 

§  3474b.  Right  of  action  to  compel  issuance  of  paid-up  policy. 

§  3475.     Election  of  insurers  to  rebuild :  garnishment. 

§  347(3.     Attachment  and  garnishment. 

§  3476a.  Garnishment  of  judgment:  employers'  liability  policy. 

§  3477.     Recovery :  insurer  in  one  state,  company  cannot  be  garnished  in 
another. 

§  3478.     Action  against  foreign  company :  quo  warranto :  mandamus. 

§  3479.     Action  by  foreign  company  to  recover  money  paid  agent. 

§  3480.     Action  where  insured  enters  into  contract  induced  by  fraud. 

§  3481.     Action  by  insured  after  settlement. 

§  3482.     Carriers :  rights  of :  remedies  against. 

§  3483.     Transfer  of  member  to  another  class:  wrongful  refusal  of  benefit 
society. 

§  3484.     Wrongful  refusal  to  transfer  policy. 

§  3484a.  Beneficiaries'  rights  and  remedies:  generally. 

§  3484b.  Beneficiary  not  entitled  to  personal  judgment  for  money  contracted 
to  be  paid  for  erection  of  monument. 

§  3484c.  Right  of  wife  to  proceeds:  ante-nuptial  contract:  right  by  succes- 
sion. 

§  3484d.  Right  of  action  for  fraudulently  inducing  member  to  change  bene- 
ficiary. 

§  3485.     Rights  and  remedies  of  assured:  general  matters. 

§  3485a.  Lloyds  and  individual  underwriters:  right  of  action  and  recovery. 

§  3486.     Recovery  back  by  insurer  of  money:  payment  made  or  procured 
by  fraud:  mistake  of  facts. 

§  3487.     Actions  for  assessment :  premium  notes. 

§  3488.     Recovery  by  creditor  as  beneficiary  or  a.ssignee  of  life  policy. 

(a)  General  statement. 

(b)  Where  recovery  limited  to  debt,  advances,  etc. 

(c)  Recovery  when  transfer  absolute  in  form. 

(d)  When  tru.st  against  creditor  created  under  agreement. 

(e)  When  policy  proceeds  may  be  recovered. 

(f)  Recovery  where  debt  barred  by  limitation:  presumption  of 

payment. 

(g)  Other  matters  affecting  recovery. 
§  3488a.  Same  subject :  illegality  of  contract. 

§  3488b.  Same  subject:  recovery  limited  by  policy  clause. 
§  3488c.  Riglit  to  i)roceeds:  vendor  and  vendee. 
§  3488d.  Bailor:  right  to  benefit  of  insurance. 


cxl  CONTENTS 

§  3488e.  Right  to  dividends:  surplus. 

§  3488f.  Right  to  abandon  contract. 

§  3J89.  Where  "sue  and  labor"  clause  furnishes  additional  remedy  for  sal- 
vage claims. 

§  3490.     Actions  by  insurers:  generally. 

§  3491.     Right  to  make  post  mortem:  exhumation:  accident  risk. 

§  3491a.  Examination  of  person  of  assured  in  respect  to  injury:  negligence 
of  medical  examiner. 

CHAPTER  LXXXVII. 

JURISDICTION  INCLUDING  REMEDIES  IN  EQUITY. 

§  3495.     Jurisdiction  :  generally. 

§  3495a.  Jurisdiction  and  venue:  statutes  affecting  accident  insurance: 
same,  guaranty  insurance. 

§  3495b.  Ousting  jurisdiction:  policy  stipulations  as  to  jurisdiction. 

§  3496.  Jurisdiction:  judgment  in  Federal  court  after  property  in  custody 
of  state  courts. 

§  3497.  Statute  as  to  foreign  companies:  service  of  process  and  exclusive 
jurisdiction  of  state  court. 

§  3498,     Statute  as  to  foreign  companies:  removal  to  Federal  court. 

§  3499.     Administrators  appointed  in  different  states :  separate  actions. 

§  3500.     Jurisdiction:  marine  insurance:  admiralty. 

§  3501.  Provision  in  charter  of  company  as  to  where  suits  are  to  be 
brought. 

§  3502.  Jurisdiction  of  tribunals  of  mutual  benefit  societies:  resort  to 
courts. 

§  3502a.  Same  subject :  distinctions  as  to  gTounds  of  action. 

§  3502b.  Jurisdiction  of  tribunals  of  railway  relief  associations  or  depart- 
ments :  resort  to  courts. 

§  3503.     Jurisdiction :  where  action  may  be  brought :  generally. 

§  3503a.  Same  subject:  mutual  companies  or  associations. 

§  3503b.  Mutual  company:  when  court  will  not  entertain  jurisdiction. 

§  3504.     When  court  may  order  exhumation:  accident  policy. 

§  3505.     Jurisdiction:  garnishment. 

§  3506.     Same  subject:  foreign  insurer:  agent  in  state. 

§  3507.     Submission  to  jurisdiction:  appearance:  waiver:  practice. 

§  3508.     Jurisdiction  of  equity:  generally. 

§  3508a.  Equity:  multiplicity  of  suits:  several  insurers. 

§  3508b.  Equity:  multiplicity  of  suits:  suit  by  receiver  of  insolvent  insur- 
ance company. 

§  3508c.  Equity  jurisdiction:  fraud  and  misrepresentation. 

§  3509.     Reformation  of  policy. 

§  3510.     Mistake  in  name,  or  date,  or  description  of  property. 


CONTENTS  cxli 

§  3511.     Correction  of  mistakes :  reformation  of  policy :  generally. 

§  3512.     Correction  of  mistake  of  agent  of  insured  in  procuring  policy. 

§3513.     Mistake  in  stating  interest  of  insured. 

§  3514.     Reformation  of  renewal  policy  to  conform  to  former  one. 

§  3514a.  Reformation  or  cancelation  of  policy  after  loss  or  death. 

§  3514b.  Ecjuity :  revival  or  restoration  of  policy. 

§  3515.     When  equity  will  not  reform  policy. 

§  3516.     Specific    perforaiance   of   contract   of   insurance:    mutual   benefit 
societies. 

§  3517.     Action  to  compel  delivery  of  policy  where  contract  has  been  com- 
pleted. 

§  3518.     Accounting:    same,    bill    for    discovery:    apportionment:    tontine 
policy. 

§  3519.     Decree  apportioning  loss. 

§  3519a.  Equity:  enforcement  of  rights  under  mutual  benefit  certificates, 

§  3519b.  Equity :  failure  or  refusal  to  levy  assessment. 

§  3520.     Where  member  has  been  expelled. 

§  3521.     Change  of  beneficiary :  bill  of  interpleader. 

§  3522.     Rejection  of  claim  by  tribunal  of  society. 

§  3523.     Equitable  lien  by  mortgagee  on  insurance  money. 

§  3524.  Recovery  by  mortgagor  where  insurance  paid  to  mortgagee :  appli- 
cation money  on  mortgage  debt. 

§  3525.     Right  to  proceeds:  vendor  and  vendee:  trustee. 

§  3526.     Right  to  proceeds:  creditors. 

§  3527.     Injunction  cases:  generally. 

§  3527a.  Bill  in  equity  against  insolvent  insurer  by  person  injured  by  auto- 
mobile :  third  party  policy. 

§  3528.     Particular  cases  where  equity  will  grant  remedy  to  insured. 

§  3529.     Particluar  cases  where  equity  will  grant  remedy  to  insurers. 

§  3530.     Cases  where  equity  will  not  act. 

CHAPTER  LXXXVIII. 
SUBROGATION. 

§3537.     Subrogation:  right  to,  of  insurer:  generally. 

§  3538.  Payment  of  total  loss  or  entire  destruction  of  subject  insured 
equipollent  with  abandonment  in  giving  right  of  subrogation: 
negligence:  third  parties. 

§  3539.     Insurance  on  advances :  rights  of  insurer. 

§  3540.  Effect  of  release  by  insured  to  third  parties  upon  insurer's  right  of 
subrogation  where  release  is  prior  to  execution  of  insurance  con- 
tract. 

§  3541.  Same  subject :  where  release  is  subsequent  to  execution  of  insurance 
contract  and  before  payment  of  loss. 


cxlii  CONTENTS 

§  35-ila.  Same  subject :  where  insurer  has  knowledge  of  pending  settlement 
or  of  settlement. 

§  3541b.  Same  subject:  refusal  to  assign   insurer:   release  to  wrongdoer: 
defense. 

§  3542.     Effect  of  reservation  of  rights  to  indemnity  in  release  to  wrong- 
doers. 

§  3543.     Where  policy  provides  as  to  effect  of  release  by  insured  to  third 
parties. 

§  3544.     Release  to  third  party  who  has  knowledge  of  payment  of  loss  by 
insurer. 

§  3544a.  Release  by  insured:  effect  of,  upon  his  right  of  action  against  in- 
surer. 

§  3544b.  Payment:  insurer  to  receive  what  insured  recovers:   insured  as 
trustee:  when  insurer  equitable  assignee. 

§  3545.     AgTeements  between  insured  and  carriers  for  benefit  of  insurance 
to  latter  may  be  valid. 

§  3546.     Same  subject:  no  violation  of  provision  in  policy  against  sale  or 
transfer  of  interest. 

§  3546a.  Can-iers :  rights  of  insurers :  where  policy  excludes  subrogation. 

§  3547.     Abandonment:  right  to  be  subrogated  subjects  insurer  to  agree- 
ment and  equities  under  carrier's  contract. 

§  3547a.  Provisions  in  bill  of  lading :  carrier  to  have  benefit  of  insurance. 

§  3548.     Provisions  in  bills  of  lading:  carrier  to  have  benefit  of  insurance: 
effect  where  insurer  pays  loss. 

§  3549.     Rights  of  insurers  against  carriers:  where  no  provision  for  subro- 
gation. 

§  3550.     Pohcy  providing  for  subrogation:  contract  with  carrier  limiting 
value  of  consignment. 

§  3551.     Where  provision  in  bill  of  lading  giving  carriers  benefit  of  insur- 
ance conflicts  with  policy  provisions. 

§  3552.     Stipulation  for  benefit  of  insurance  where  loss  caused  by  carrier's 
negligence. 

§  3553.     Stipulation  in  bill  of  lading  that  carrier  shall  have  benefit  of  insur- 
ance does  not  compel  owner  to  insure. 

§  3554.     Where  no  stipulation  for  subrogation  of  carrier. 

§  3555.     Where  owner  has  insurance  but  refuses  carrier  the  benefit  thereof. 

§  3555a.  Whether  money  advanced  is  loan  and  repayable,  or  a  payment  by 
insurer :  receipt :  subrogation. 

§  35.36.     Subrogation  of  insurer  to  rights  of  mortgagee:  policy  to  mort- 
gagor: "loss  payable  to"  mortgagee. 

§  3557.     Same  subject :  policy  void  as  to  mortgagor,  valid  as  to  mortgagee : 
stipulation  for  subrogation. 

§  3557a.  Same  subject :  acquisition  of  legal  title  by  mortgagee. 

§  3557b.  Same  subject :  refusal  of  mortgagee  to  assign  to  insurer. 


CONTEXTS 


cxliii 


§  3j57c.  Same  subject :  rights  of  assignee :  purchaser  of  equity  of  redemp- 
tion. 

§  3558.  Same  subject:  where  deficiency  due  on  debt  after  foreclosure  sale 
exceeds  amount  of  insurance. 

§  3558a.  Sale  by  owner,  subject  to  trust  deed:  vendor's  lien  reserved:  in- 
surer's right  of  subrogation. 

§  3559.  Insurance  by  mortgagee  where  mortgagor  pays  or  under  provision 
of  mortgage  may  be  chargeable  with  premium. 

§  35G0.     Same  subject:  conclusion. 

§  3561.     Policy  to  trustees:  agreement  to  subrogate  insurer. 

§  3562.  Policy  payable  to  sureties:  subrogation  of  debtor  on  payment  of 
debt. 

§  3563.  Right  of  insurer  to  subrogation  where  no  provision  therefor  in 
policy  issued  to  mortgagee  and  nothing  inconsistent  therewith: 
contract  between  mortgagor  and  mortgagee. 

§  3564,     Same  subject :  Massachusetts  decisions  :  contrary  view. 

§  3564a.  Rights  of  one  of  several  insurers:  settlements  by  mortgagee  with 
other  insurers. 

§  3564b.  Same  subject :  effect  of  contribution  clause. 

§  3565.  Effect  upon  insurance  right  to  subrogation  when  mortgage  debt 
exceeds  amount  of  loss. 

§  3566.     When  mortgagor  entitled  to  subrogation  against   insurer. 

§  3567.     Policy  to  mortgagor:  mortgagee  no  right  of  subrogation. 

§  3568.  Foreclosure  proceedings:  subsequent  loss:  sale  under  foreclosure 
and  deficiency. 

§  3568a.  Subrogation  of  insurer  to  rights  of  creditors  of  assured. 

§  3568b.  Policy  payable  to  lien  holder:  when  insurer  not  entitled  to  subro- 
gation. 

§  3568c.  Judicial  bond:  joint  or  severable  liability:  surety's  right  of  subro- 
gation. 

§  3569.  Rights  of  insurer,  vendor  and  vendee:  where  sale  incomplete: 
executory  contract  of  sale. 

§  3570.     Vendor  and  vendee:  goods:  seller's  risk. 

§  3571.     Repairs:  insurer's  right. 

§  3572.  Rights  of  insurers  to  subrogation  to  contract  rights  of  insured 
with  third  parties. 

§  3572a.  Insurer's  right  of  subrogation:  illegal  contract  with  city  to  fur- 
nish water  supply. 

§  3573.     Insurance  by  lessor:  rights  to  proceeds. 

§  3573a.  Insurance  by  lessee:  liability  of  lesser:  subrogation:  defense. 
§  3574.     Loss  by  negligence:   wrongdoer:   carrier:   rights  of  subrogation: 

fire  and  marine  insurance. 
§  3574a,  Same  subject  liability  of  railroads  for  fires,  etc.:  subrogation  of 

railroad  or  insurer:  constitutional  law:  retroactive  statute. 
§  3575.     Same   subject:   marine   insurance:   collision. 


exliv  CONTENTS 

§  3575a.  Effect  of  part  payment  by  insurer :  negligence  of  third  person. 

§  3576.     Collision  between  vessels  owned  by  same  person :  insurer's  rights. 

§  3577.     Fidelity  guaranty :  right  to  subrogation. 

§  3578.  Foreign  company :  failure  to  comply  with  statutory  requirements : 
right  to  subrogation  against  wrongdoer. 

§  3578a.  Right  of  subrogation  against  wrongdoer:  insurer  member  of  un- 
lawful combination :   defense. 

§  3579.  Deatli  caused  by  negligence  or  wilful  act  of  another:  insurer's 
rights. 

§  3579a.  Personal  injury:  negligence,  etc.,  of  another:  accident  policy  with- 
out stipulation  for  subrogation. 

§  3579b.  Right  of  subrogation  under  emploj^ees'  liability  insurance. 

§  3580.     Subrogation  of  insurer's  agent  to  their  rights :   premium. 

§  3580a.  Right  of  subrogation  of  insurer's  agent  who  pays  premiums  under 
a  mortgage  clause. 

§  3581.  Contract  by  bailee  to  insure  goods:  right  of  company  insuring 
owners. 

§  3581a.  Theft  of  an  automobile :  insurer's  right  of  subrogation. 

§  3582.  Vessel  impressed  into  naval  service:  subrogation  of  insurer  against 
government. 

§  3583.     Insurance  of  pretended  interest :  recovery :  real  owner  no  rights. 

§  3583a.  Waiver :  insurer's  right  of  subrogation :  adjuster. 

§  3583b.  Subrogation :  form  of  remedy. 


CHAPTER  LXXXIX. 
BANKRUPTCY— INSOLVENCY— DISSOLUTION. 

§  3590.     Bankruptcy  and  insolvency. 

§  3591.     Effect  of  insolvency. 

§  3592.     General  powers  of  receiver:  assignee. 

§  3593.  Powers  of  receivers :  collection  of  assets :  receiver  in  state  of  domi- 
cil  of  company. 

§  3594.  Trustee  in  insolvency  may  recover  where  company  has  released  a 
stockholder  in  violation  of  creditor's  rights. 

§  3595.     Rights  of  policyholders  after  dissolution :  generally. 

§  3596.  Priority  of  claims:  where  death  of  insured  occurs  before  insol- 
vency of  company:  after  insolvency:  preferences. 

§  3597.  Payment  and  priority  of  claims:  cheek  given  before  insolvency: 
dividend   declared  before:   generally. 

§  3598.     Dissolution  of  benefit  society:  mutual   companies. 

§  3598a.  Mutual  marine  insurance  company:  effect  of  insolvency  upon 
policies :   cancelation. 

§  3598b.  Credit  guaranty  insurance:  insolvency  of  insurer:  excess  losses. 


CONTENTS  cxlv 

§  3599.     Insolvency   of   maker   of   premium   note   of   debtor   holding   life 

policy. 
§  3600.     General  matters  in  bankruptcy  and  insolvency. 
§  3601.     Distribution   of  assets. 

CHAPTER  XC. 

PARTIES— PLEADINGS— PRACTICE— DEFENSES. 

SuBDiv.      I.  Parties — Practice — Rights    and    Remedies. 
II.  Pleadings. 

III.  Practice, 

IV.  Defenses. 

SuBDiv.  I.  Parties — Practice — Rights  and  Remedies. 

§  3607.  Who' may  be  parties  to  the  action:  generally. 

§  3608.  Contract  under  seal:  who  may  sue. 

§  3609.  "For  whom  it  may  concern:"  who  may  sue. 

§  3610.  Parties:  in  name  of  a.ssured. 

§  3611.  When  mortgagor  may   sue. 

§  3612.  When  mortgagee  may  sue. 

§  3613.  Same  subject:    mutual   companies. 

§  3614.  Same  subject :   mortgagee  clause. 

§  3615.  Assignor  and  assignee:   who  may  sue. 

§  3616.  Same  subject:  life  policies. 

§  3617.  Parties:  assignee:  mutual  companies. 

§  3618.  Sale  of  property :  assignee  of,  may  sue. 

§  3619.  Parties:  assignor  and  assignee:  collateral  security. 

§  3620.  Parties:  assignment  after  loss. 

§  3621.  Parties:  trustees:  "sold  but  not  removed:"  "their  own  but  held 

in  trust." 

§  3622.  Parties:   consignor  and   consignee. 

§  3623.  Parties:  carriers. 

§  3624.  Beneficiaries:  who  may  sue. 

§  3625.  Same  subject:   wife:   widow. 

§  3626.  Same  subject:  children. 

§  3627.  Same  subject:  children:  guardian. 

§  3628.  Same  subject:   partners. 

§  3629.  Insurance  as  members  of  a  club. 

§  3630.  Parties:  personal  representatives:  administrator:  executor. 
§  3631.     Same  subject :  mutual  companies. 

§  3632.  Parties:  agents. 

§  3633.  Parties :   principal :   disclosed  :   undisclosed. 
§  3634.     Parties:  policy  to  husband  on  wife's  property. 


cxlvi  CONTENTS 

§  3634a.  Parties:  joinder:  husband  and  wife:  community  property:  home- 
stead. 

§  3634b.  Partiei^:  husband:  wife:  mistake  in  name. 

§  3635.     Parties:  partners. 

§  3636.     Parties:  part  owner:   owner. 

§  3637.     Renewals:   who   may   sue. 

§  3638.     Parties:  sale  under  sheriff's  certificate. 

§  3639.     Joinder  of  parties:  who  may  be  joined. 

§  3640.     Same  subject :  nominal  partners. 

§  3641.     Joinder :  owner,  agent,  or  otherwise :  "for  whom  it  might  concern." 

§  3642.     Joinder :  mortgagor  and  mortgagee. 

§  3643.     Joinder :   heirs :  children  :   husband :  wife. 

§  3644.  Libelant :  insurer  may  be  made  colibelant  or  joined  with  insured 
or  made  party  defendant  in  certain  cases. 

§  3645.     Joinder:  jDolicy  as  collateral:  stockliolders. 

§  3646.     Joinder  of  parties:  statutes. 

§  3646a.  Joinder  of  parties :  guaranty  insurance. 

§  3647.     Misjoinder  of  parties:  who  need  not  be  joined. 

§  3648.     Open  policy:  who  may  sue. 

§  3649.     Double  insurance:  parties  defendant. 

§  3650.     Parties :  charterers. 

§  3651.     Parties:  bonds  with  state  treasurer. 

§  3652.     Suit  by  treasurer  of  mutual  insurance  company. 

§  3653.     Parties :  insolvency :  stockholders :  attorney  general. 

§  3654.     Parties :  manager  of  mutual  insurance  company. 

§  3655.     Parties:  receivers. 

§  3656.     Corporate  franchise:    usurpation:   parties. 

§  3657.     Parties  defendant:   mutual  insurance  company. 

§  3658.     Parties :  insurance  company  against  wrongdoers. 

§  3658a.  Parties :  indemnity  against  liability,  or  for  losses  paid  employees 
or  third  persons. 

§  3658b.  Same  subject :  privity  of  contract :  employee  against  insurer. 

§  3658c.  Same  subject :  employee  against  insurer  continued. 

§  3658d.  Same  subject :  employee  against  insurer  continued :  insolvency  of 
assured. 

§  3658e.  Same  subject :  stipulation  that  insurer  defend. 

§  3658f .  Same  subject :  withdrawal  of  insurer  from  defense  of  suit. 

§  3658g.  Same  subject:   dismissal  of  parties. 

§  3658h.  Same  subject :  employer  against  insurer. 

§  36581.  Real  party  in  interest:  legal  owner:  beneficial  owner:  elevator 
policy. 

§  3658J.    Same  subject:  assignee  of  insured:  misjoinder. 

§  3658k.  Same  subject:  joinder:  insurer  and  employee:  employee  and  re- 
ceiver. 


CONTENTS  cxlvii 

§  36581.    Privity   of  contract:   parties:   lessee   or  his   assignee  against   in- 
surer. 
§  SG.jSai.  Parties:  insurer:   intervention. 

SuBDiv.  II.  Pleadings. 

§  3665.  Declaration:   complaint  or   petition. 

§  3666.  Sufficiency  of  declaration,  complaint,  or  petition, 

§  3667.  Declaration,  etc.:   benefit  societies:   mutual  companies. 

§  3668.  Declaration:  under  statutes  or  codes. 

§  3669.  Declaration :  foreign  companies. 

§  3670.  Embodying  the  terms  of  the  policy  in  the  declaration. 

§  3671.  Declaration:  application. 

§  3672.  Averment  of  interest. 

§  3673.  Averment  of  interest :  life  policies. 

§  3674.  Averment :   performance  of  conditions  precedent. 

§  367.").  Conditions  precedent:  statutes. 

§  3676.  Declaration:  conditions:  notice  and  proof  of  loss. 

§  3677.  Declaration:  conditions:  suing  after  proofs  of  loss  furnished. 

§  3678.  The  loss:  damage:  value  of  property. 

§  3679.  Loss  by  barratry  not  recoverable  under  averment  only  of  loss  by 
capture. 

§  3680.  Averment  of  ownership. 

§  3681.  Declaration,  etc.,  insufficient. 

§  36S2.  Insufficient   declaration,  etc.:   mutual   benefit   societies. 

§  3683.  Declaration,  etc. :  pleading  waiver. 

§  3684.  Declaration,  etc.:   need  not  aver  matters  of  defense:   conditions 
subsequent. 

§  368.3.  What  declarations  need  not  aver:  generally. 

§  3686.  Admissions  by  the  pleadings:  what  they  do  not  admit. 

§  3687.  Amendments. 

§  3688.     Multifariousness. 

§  3689.     The  answer. 

§  3690.     Answer:  insufficient;  no  defense. 

§  3690a.  Replication. 

§  3691.     Matters  specially  pleaded:  general  issue. 

§  3692.     Plea  in  l)ar :  abatement. 

§  3693.     Demurrer. 

§  3693a.  Demurrer  to  answer. 

§  3694.     Bill  of  particulars:  of  discovery. 

§  3695.     Bill  of  interpleader. 

§  3696.     Replication:  traverse. 

§  3697.     Variance. 


cxlviii  CONTENTS 

SuBDiv.  III.  Practice. 

§  3705.  Practice. 

§  3706.  Service  of  process. 

§  3707.  Consolidation  of  actions. 

§  3708.  Interrogatories. 

§  3709.  Order  of  reference  of  case. 

§  3710.  Admission  of  newly  discovered  evidence  after  evidence  bad  closed. 

§  3710a.  Whether  question  for  court  or  jury. 

§  3711.  Instructions  to  jury. 

§  3712.  Instructions:  cases  where  not  erroneous. 

§  3713.  Instructions:  cases  where  erroneous. 

§  3714.  Arguments  of  counsel. 

§  3715.  Special  findings:  special  verdict. 

§  3715a.  Objections  to  findings. 

§  3710.  Defects  in  declaration  cured  by  verdict. 

§  3717.  Judgment  of  trial  court  final  as  to  matters  of  fact. 

§  3718.  Verdict :  contrary  to  evidence :  excessive  damages :  new  trial. 

§  3718a.  Verdict :  correction  of,  after  separation  of  jury. 

§  3710.  Appeals :  discretion  of  court  as  to  motions. 

§  3720.  Appeals :  questions  not  raised  at  trial  of  ease, 

§  3721.  Appeals. 

§  3722.  New  trials. 

§  3723.  Incidental  matters  of  practice. 

SuBDiv.  IV.  Defenses. 

§  3731.  Waiver:  estoppel. 
§  3732.  Fraud  and  deceit. 
§  3733.     Fraud   between   third   party   and    assured   no    defense    in    action 

against  the  company. 
§  3733a.  Incontestability:   fraud:   false  and  fraudulent  misrepresentations 
or  warranties:  review  of  decisions. 

(a)  Arkansas. 

(b)  California, 
(e)   Georgia. 

(d)  Idaho. 

(e)  Illinois. 

(f)  Indiana. 

(g)  Iowa. 

(h)   Kentucky, 
(i)   Louisiana, 
(j)  Massachusetts. 
(k)   Missouri. 


CONTENTS  cxlix 

§  3733a— cont'd. 

(1)   New  Jersey. 

(m)   New  York. 

(n)   Rhode  Island. 

(o)   Tennessee, 

(p)   Texas. 

(q)    Wisconsin. 
§  3733b.  Same  subject:  summary  and  conclusion. 

§  3733c.  Incontestability:   insured   not   in   good   liealth  when   contract   in- 
cepted. 
§  3733d.  Incontestability:  other  instances. 
§  3733e.  Incontestability:  statutory  provisions. 
§  3733f.  Incontestability:  what  parties  entitled  te  protection. 
§  3733g.  Incontestability:  when   period   of,   begins:   computation   of   time. 
§  3733h.  Incontestability:  renewal  or  revival  of  policy:  reinstatement. 
§  3734.     Sufficient  defenses  to  actions  on  premiums,  etc.,  notes. 
§  3735.     Defenses  which  are  not  good  to  actions  on  premium,  etc.,  notes 

or  assessments. 
§  3736.     Set-off:  recoupment:  counterclaim. 
§  3737.     Set-off  in  action  on  premium  notes. 
§  3738.     Defense  to  action  by  mortgagee:  tender. 
§  3739.     Policy  to  cover  consignor's  interest. 

§  3740.     Noncompliance  with  by-laws  as  a  defense:  conditions  subsequent. 
§  3741.     Election  by  company  to  repair. 
§  3742.     Amount  of  loss  received  from  another  than  insurer:  no  defense 

in  action  against  company. 
§  3743.     Matters  of  defense  after  adjustment  of  loss. 
§  3744.     Defenses:  general  matters. 

CHAPTER  XCI. 

EVIDENCE. 

§  3755.  Best  evidence. 

§  3756.  Proof  in  support  of  pleadings:  evidence  admissible. 

§  3757.  Admissions  by  pleadings:  payment  of  money  into  court. 

§  3758.  The  policy  or  certificate. 

§  3759.  Application  in  evidence. 

§  3760.  Oral  contract:  contract  to  insure. 

§  3761.  Insurable  interest:  generally. 

§  376]  a.  Same  subject :  wager  policy. 

§  3762.  Insurable  interest  in  ship :  the  ship's  register. 

§  3763.  Insurable  interest:  goods,  bill  of  lading,  freight:   generally. 

§  3764.  Insurable  interest :  burden  of  proof. 

§  3765.  Evidence  of  sufficient   proofs  of  loss:   receipt   of   by   company: 

burden  of  proof. 

§  3766.  Proofs  of  loss  as  evidence. 


el  CONTENTS 

§  3767.     Marine  insurance:  proof  of  loss:  master's  protest. 

§  3768.  Evidence  of  loss:  proximate  and  remote  cause:  within  tbe 
policy. 

§  3769.     Evidence  of  value  of  property :  amount  of  loss :  fire  insurance. 

§  3769a.  Evidence  of  loss  to  growing  crops  and  extent  thereof :  hail  in- 
surance. 

§  3770.  Evidence  to  show  what  goods  are  covered :  case  of  shifting  and 
successive  goods. 

§  3771.  Evidence  of  loss:  amount  of:  value  of  property:  marine  in- 
.surance. 

§  3772.     Evidence  of  death :  proofs  of  as  evidence :  disease. 

§  3772a.  Evidence  of  death :  coroner's  verdict  or  finding. 

§  3773.     Presumption  as  to  suicide  or  murder. 

§  3774.     Suicide:   evidence  of. 

§  3775.     Insanity :  presumption  against :  evidence  of. 

§  3776.  Proof  of  matter  in  defense:  life  insurance:  burden  of  proof: 
character. 

§  3777.  Proof  of  matters  in  defense:  fire  insurance:  burden  of  proof: 
increase  of  risk:  breach  of  conditions. 

§  3778.     Evidence  of  other  insurance. 

§  3779.     Proof  of  matters  in  defense:  marine  insurance. 

§  3730.     Misrepresentations :  materiality  of. 

§  3780a.  Misrepresentations  as  to  age :  presumptions :  evidence. 

§  3781.  Evidence:  clause  in  policy  as  to  false  swearing  or  attempt  at 
fraud. 

§  3782.     Evidence  to  show  fraud :  wilful  burning. 

§  3783.     Evidence  of  fraud :  generally. 

§  3784.  Burden  of  proof:  compliance  with  conditions  and  warranties: 
fire  insurance. 

§  378o.     Marine  insurance:  compliance  with  warranties:  burden  of  proof. 

§  3786.  Presumption  as  to  seaworthiness  and  unseaworthiness:  burden  of 
proof. 

§  3787.     Same  subject:  cases. 

§  3738.     De<?rees  and  surveys:  rotten  clause:  evidence  of  seaworthiness. 

§  3739.     Other  matters  of  evidence  and  practice :  seaworthiness. 

§  3790.     Burden  of  proof:  life  insurance. 

§  3791.  Burden  of  proof:  death  as  result  of  external,  violent,  and  acci- 
dental means :  accident  insurance  generally :  instances. 

§  3792.     Evidence  whether  insured  was  temperate:  application. 

§  3793.  Evidence :  fidelity  guaranty :  breach  of  warranty :  dishonest  acts 
of  employee. 

§  3794.     Evidence:  burglary  insurance.  , 

§  3795.     Evidence:  live  stock  insurance. 

§  3796.     Evidence:  prohibited  employment  or  occupation. 

§  3796a.  Excepted  risks:  burden  of  proof:  evidence  as  to. 


CONTENTS  eii 

§  3797,     Life  and  annuity  tables:  mortality  tables. 

§  3798.     Oilers  of  compromise  or  settlement. 

§  3799.     Burden  of  proof  of  waiver:  evidence  of, 

§  3800.     Judicial  notice  of  custom  as  to  written  application,  etc:  life  in- 
surance, 

§  3801.     Evidence  to  show  who  are  beneficiaries. 

§  3802.     Ambiguities:  evidence. 

§  3803.     Evidence  to  identify  subject  of  insurance. 

§  3804.     Parol  evidence:  waiver  and  estoppel:  custom  or  usage. 

§  3805.     Evidence  to  correct  mistake. 

§  3806.     Parol  evidence  to  ascertain  intention. 

§  3807.     Parol  evidence  to  explain  phrase  and  words. 

§  3808.     Parol  evidence  to  explain  contract. 

Jj  3809.     Parol  evidence:  when  inadmissible. 

§  3810.     Expert  and  opinion  evidence. 

§  3811.     Expert  and  opinion  evidence:  increase  of  risk. 

§  3812.     Expert  and  opinion  evidence:  life  insurance. 

§  3813.     Experts:  physicians  and  surgeons:  life  insurance. 

§  3814.     Opinions  of  nonexperts. 

§  3815.     Evidence :  expert  and  opinion  :  as  to  premium :  material  facts. 

§  3816.     Evidence:  expert  and  opinion  evidence:  marine  insurance. 

§  3817.     Evidence:  expert  and  opinion:  generally:  when  admissible. 

§  3818.     Evidence:  expert  and  opinion:  generally:  what  is  not  admissible. 

§  3819.     Declarations  and  admissions  of  insured  or  beneficiary. 

§  3820.     Declarations  of  member  of  mutual  benefit  society:  to  physician. 

§  3820a.  Statements  to  physicians:  prolonged  communications:  physicians' 
certificates. 

§  3821.     Res  gestae :  declarations. 

§  3821a.  Hearsay. 

§  3822.     Declarations  and  acts  of  agents. 

§  3823.     Evidence:  agents:  conversations. 

§  3824,     By-laws:   rules  of  company:    prospectus:   books:   surveys:    dia- 
grams, etc, 

§  3825.     Letters :  correspondence :  ship's  papers. 

§  3826.     Evidence:  assessments:  levy  of:  forfeiture. 

§  3827.     Payment  of  premium:  receipts. 

§  3828.     Payment  of  premium :  recital  in  policy :  generally. 

§  3828a.     Payment  of  premiums  by  wife:   statutory  exemptions:  burden 

of  proof. 
§  3829.     Foreign  judgment. 

§  3830.     .Judgments:  authentication  of:  conclusiveness  of. 
§  3831.     Assignment  of  policy. 

§  3832.     Corporation  estopped  from  denying  its  authority  to  act. 
§  3833.     Presumptions, 


3 


clii  CONTENTS 

§  3834.     Evidence   of  consent   of  partner   to   insurance   procured   by   one 

with  money  stolen  from  the  firm. 
§  3834a.  Emj)lo\'ers'  liability. 
§  3834b.  Credit  guaranty. 

§  3835.     Other  cases  of  admissibility  of  evidence. 
§  3836.     Other  cases  of  inadmissibility  of  evidence. 
§  3837.     Evidence :  general  matters. 
^  3S38.     Competency  of  witnesses. 


APPENDICES. 


A.  Federal  War  Risk  Insurance  Statutes. 

B.  Form  of  Policy  under  War  Risk  Statute. 

C.  English  Marine  Insurance  Act  of  1906. 

D.  Rules  of  Practice  of  Associations  of  Average  Adjusters. 


LAW  OF  INSURANCE 


TITLE  I. 


PRELIMINARY  CHAPTER. 

THE  SOURCES  AND  ORIGIN  OF  INSURANCES. 

§  I.  Sources  of  insurance. 

§        II.  Orig-in  of  insurance  generally. 

§      III.  Origin  of  marine  insurance. 

§      IV.  Adoption  of  marine  insurance  in  modern  times. 

§       IVa.  Marine  insurance  continued:    origin  of  Lloyds. 

§      IVb.  Marine  insurance :  summary. 

§      IVc.  Lloyds  associations  in  United  States:  American  Lloyds. 

§      IVd.  Inter-insurance:  reciprocal  insurance:  inter-indemnity  contracts. 

§        Y-  Origin  of  mutual  insurance  system. 

§         Va.  Origin  of  cattle  insurance  societies. 

§       VI.  Origin  of  fire  insurance. 

§       Via.  Boards  of  fire  or  marine  underwriters. 

§     VII.  Origin  of  life  insurance. 

§     Vila.  History  of  industrial  insurance. 

§     Vllb.  History  of  workmen's    industrial    insurance:    state    insurance: 

compnlsorv  ijisurancc :  workmen's  compensation. 

§     VITc.  Savings  liank  insurance  and  annuity  law  of  Massachusetts. 

§  VIII.  Oi'igin  of  accident  insurance. 

§  Villa.  History  of  casualty  insurance. 

§  Vlllb.  History  of  employers'  liability  insurance. 

§       IX.  Origin  of  guaranty,  fidelity  guaranty,  etc.,  insurances. 

§       IXa.  History  of  title  guaranty  insurance. 

§       IXb.  History  of  credit  guaranty  insurance. 

*;         X.  Origin  of  other  insurances. 

§  I.  Sources  of  insurance. — TUv  princii);!!   sources  of  insurance 
law  are  to  be  fuinid  in  the  marine  law  and  the  cnstoms  of  mer- 
ehantvs,  to  be  collected  from  ancient   and   modern  codes  or  ordi- 
nances of  commercial  law,  elementary  treatises?  on  the  subject  in 
Joyce  Ins.  Vol.  I. — 1.  l 


§  I.  JOYCE  ON  INSURANCE 

our  own  and  foreign  languages,^  and  the  judicial  decisions  in  the 
courts  of  this  and  other  countries  which  follow  the  general  marine 
law  and  tho  law  of  nations. ^  The  origin  of  insurance,  however, 
necessarily  includes  a  reference  to  many  of  its  sources,  and  we 
shall  hereafter  mention  them  in  the  consideration  of  that  question. 
Whatever  may  have  been  the  origin  of  insurance,  this  much  is 
true,  that  it  is  to  marine  law  and  marine  insurance  that  we  nuist 
look  for  a  long  period  of  time,  especially  in  England,  for  the  most 
certain  developments  of  the  system  of  insurance  and  the  enuncia- 
tion and  regulation  of  the  principles  governing  the  contract.^  Jus- 
tice Park,  writing  in  1796,  says  that  where  insurance  is  mentioned 
by  professional  men,  marine  insurance  is  meant.^  Hopkins  de- 
clares that  the  indemnity  afforded  by  insurance  was  for  a  long 
period  confined  to  the  dangers  of  marine  insurance,^  and  Walford 
asserts  that  it  is  admitted  by  all  writers  that  maritime  casualties 
were  the  first  to  which  the  principles  of  assurance,  as  distinguished 
from  the  mutual  protection  idea,  were  applied.^  Other  authors, 
writing  on  the  subject,  refer  it  to  such  sources  that  it  is  through 
the  medium  of  marine  insurance  that  we  must  look  for  the  funda- 
mental principles  governing  the  contract.  Thus  Emerigon  '  de- 
clares that  ''the  ancient  laws  of  the  sea  ^  are  the  sources  which  are 
open  to  them,  and  the  same  whence  they  should  draw  wlio  wish 
to  recur  to  first  principles ;"  and,  he  adds,  that  research  into  the 
antiquity  of  maritime  jurisprudence  is  necessary,  since  many  of 
the  ancient  doctrines,  though  now  obsolete,  are  still  the  founda- 
tion of  those  now  in  force,  and  that  it  is  difficult  to  comprehend 
many  rules  of  the  modern  law  without  recourse  to  the  ancient.* 
As  to  legislative  action,  or  particular  ordinances,  Marshall  says 
these  have  seldom  gone  further  than  to  define  and  sanction  those 
principles  which  were  already  received  in  all  commercial  coun- 
tries ;  that  some  have  added  regulations  dictated  by  national  policy 
or  particular  interest,  but  these  are  disregarded  elsewhere.  Al- 
though the  ordinances  of  other  countries  are  not  in  force  in  Eng- 
land, or  this  country,  they  are  of  authority  as  expressing  the 
usage  of  other  countries  upon  a  contract  which  is  presumed  to  be 

1  Tor  history  of  insurance  treatises,  *  Park   on   Ins.    (4th   ed.)    "Intro- 
see  3  Kent's  Comm.  (13th  ed.)  *342,  duction."  ii. 

342,  487,  *487;  1  Duer  on  Ins.   (ed.  ^  Hopkins'  Mar.  Ins.  (ed.  1867)  47. 

1845)  lect.  ii.  pp.  45  et  seq.;  1  Mar-  MValford's  Ins.  Guide  (2d  ed.)  4. 

shall  on  Ins.  (5th  ed.)  15  et  seq.    See  "^Emerigon  on  Ins.  (Meredith's  ed. 

note  at  end  of  this  section.  1850)  xxsi. 

^1    Duer    on    Ins.    (ed.    1845)    19  ^  See  note  8,  pp.  4,  5,  to  this  sec- 

et  seq.;   1  Marshall's  Ins.    (5th  ed.)  tion. 

13.  *  Emerigon  on  Ins.  (Meredith's  ed. 

^  See  note  at  end  of  this  section.  1850)  xli. 

2 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  L 

governed  by  general  rnles  that  are  understood  to  constitute  a  branch 
of  pubhc  la\v.^°  Iveferring  again  to  Emerigon,^^  he  says  that  while 
the  contract  of  insurance,  and  the  mode  for  interpreting  the  obli- 
gations it  involves,  belong  to  the  usage  of  mercantile  places  rather 
than  to  the  civil  law,  or  what  was  known  to  Blackstone  and  other 
English  writers  as  municipal  law,  yet,  ''though  it  did  not  become, 
till  very  late,  the  special  object  of  legislation,  it  is  not  the  less  regu- 
lated by  the  general  principles  of  justice  and  equity  that  abide  in 
the  written  reason  of  the  law."  ^^  He  also  declares  that  the  con- 
tracts of  maritime  loan  and  insurance  often  depend  on  the  same 
principles.  This  author,^^  and  Marshall,^*  both  give  an  account 
of  the  various  systems  and  progress  of  marine  law^  promulgated  by 
the  different  maritime  states  of  Europe,  state  at  about  what  period 
laws  for  the  regulation  of  the  contract  of  insurance  first  began  to 
make  a  part  of  these  systems,  and  show  that  the  law  of  insurance 
is  a  branch  of  the  law  of  merchants  and  the  marine  law.^^  The 
French  writers  also  assert  that  marine  insurance,  in  its  essential 
principles  and  leading  maxims,  is  a  part  of  the  law  of  nations;  ^^ 
to  these  may  be  added  the  authoritative  statement  of  Blackstone, 
that  in  ''all  marine  causes  relating  to  freight,  average,  denmrrage, 
insurance,  bottomry  .  .  .  the  law-merchant,  which  is  a  branch 
of  the  law  of  nations,  is  constantly  adhered  to,"  and  that  "there 
is  no  other  rule  of  decision  but  this  great  universal  law"  (the  law 
of  nations),  "collected  from  history  and  usage,  and  such  writers 
of  all  nations  as  are  generally  approved  and  allowed  of."  ^'^  Flan- 
ders ^*  also  declares  that  the  maritime  jurispmdence  of  England  is 
founded  on  the  law-merchant,  which  is  a  branch  of  the  law  of 
nations.  That  the  foregoing  should  be  so  is  reasonable,  since 
navigation  is  a  state  matter. ^^  and  necessarily  all  maritime  states 
would  be  interested  in  fostering  and  promulgating  laws  which 
would  tend  to  encourage  adventures  at  sea  and  commerce  between 
nations.     Justice   Park  ^o   referring,    from   the   context,    to   1756, 

io:Marshairs  Ins.    (5th   ed.)    13.  i' Blackstonc's  Comm.  Book  iv.  c. 

11  Emerigon  on  Ins.  (Mererlith's  ed.  5;  Jd.  4  Hammond's  ed.    (18f)())   89; 
1850)  1.  Id.  Chase's  2d  ed.  880. 

12  See  note  at  end  of  this  section.  i^  Flanders'     Maritime     Law     (ed. 

13  Emerigon  mi  Ins.  (Meredith's  ed.  1852 )  26. 

1850)  xxxi.  et  seq.,  19  et  seq.  i^  Emerigon    on    Ins.     (Meredith's 

1*  Marshall  on  Ins.   (5th  ed.)   3  el.  ed.  1850)  4,  5.     See  also  opinion  of 

seq.  Mr.  Chief  Justice  Marshall,  in  Gih- 

1^  See  also  Mr.  Justice  Bradley  in  hons  v.  Ogden,  9  Wheat.   (22  U.  S.) 

Insurance  Co.  v.  Dunham,  11  AVall.  1,  189  et  seq.,  6  L.  ed.  23. 

(78  U.  S.)  1,  31.  34,  20  L.  ed.  90.  20  gee  Park  on  Ins.  (4th  ed.)  xliii., 

1^  Emerigon  on  Ins.  (Meredith's  ed.  xlif.,  xlviii.,  xlix. 

1850)    19    et   seq.;    1   Duer   on    Ins. 

(ed.  1845)   2. 

3 


§  I.  JOYCE  OX  INSURANCE 

asserts  "tliat  as  there  ba\e  been  but  few  positive  regulations  upon 
insurances,  the  principles  on  which  they  were  founded  could  never 
liave  been  widely  diffused  nor  very  generally  known;"  that  no  ques- 
tion had  arisen  upon  them  in  the  superior  courts;  that,  as  late  as 
the  30th  and  31  st  Elizabeth,  it  became  a  question  where  an  action 
upon  a  policy  should  1)6  tried,  and  speaks  of  a  certain  case  ^  as  tlie 
most  ancient  one  he  had  ever  found  on  insurance.  lie  fiu'tber 
d(M-Uires  that,  down  to  IToG,  there  were  not  more  than  sixty  de- 
cisions upon  insurance,  and  "even  those  cases  which  are  reported 
are  such  loose  notes  .  .  .  that  little  information  can  be  gathered 
uj)on  the  sul)ject,"  and  Marshall  ^  is  an  authority  for  the  stateuient 
that  insurance  was  little  litigated  in  the  courts  of  Westminster  till 
toward  the  close  yf  l"]lizabeth"s  reign,  speaks  of  the  decisions  of  tlie 
superior  courts  as  of.nonbinding  effect,  and  adds,  that  before  the 
statute  43  l^^lizabeth.  chapter  12,  of  date  1601,  almost  all  disputes 
were  settled  by  arbitration.^ 

Such  being  the  state  of  the  law  of  insurance  in  England  in  1756, 
Eord  Mansfield,  who  in  that  year  came  to  the  bench,  where  he 
continued  till  1788,  had  recourse  to  marine  law,  foreign  treatises 
and  authorities,  as  well  as  to  the  customs  and  usages  of  merchants, 
for  those  leading  principles  upon  which  the  English  authorities 
then  furnished  little  or  no  information.*  In  writing  of  this  learned 
jurist.  Parsons*  says  that  he  set  a  wise  example  in  this  res[)ect, 
and  since  then  the  jurisprudence  of  England  and  .Vmerica  has 
done  little  else  than  adopt  the  usage  of  merchants,  and  given  it 
the  force  of  authority.^ 

As  illustrations  of  the  above  we  find  that  Brough  v.  Whitmore '' 
refers  to  Eombard  Street  as  giving  a  construction  to  policies  of 
insurance,  which  tlie  uniform  practice  of  merchants  and  under- 
writers had  made  intelligible.  So  the  Khodian  Laws,  the  Con- 
solato  del  Mare,  the  laws  of  Oleron  and  Wisby,  Iloccus,  and  the 
Ordonnance  of  Louis  XiV.     (1681),*  are  cited  in  Luke  v.  Lyde,' 

1  Decided.  1588;  4  Inst.  142,  cited         ^See  note  5,  p.  16,  §  IV.  herein, 
in  Dowdale's  case,   Coke's  Rep.   pts.        "An    exhaustively    critical    edition 
(i.  46,  48;  Id.    (3  Frazer)    351.     See  of  the  Rhodian  sea  law  (given  in  vol. 
note  13,  p.  11),  *^  IV.  herein.  I.  of  Pardessus)    by  W.  Ashburner, 

2  ]\raishall  on  Ins.  (5th  ed.)  16,  appeared  in  1909  (Oxford,  University 
17,  19.  Press).    It  contains  valuable  material 

'  See     Maylnes'     Lex     Mercatoria,  not  only  on  the  Rhodian  sea  law,  but 

106.  on  the  various  other  sea  laws  in  force 

^  See   note  at   end  of  this  section,  on    the    IMediterranean    coast.''      24 

,     sp.^i.pons'  Mar.  Ins.   (ed.  1868)   5.  Ency.  Britannica   (11th  ed.)   p.  537. 

^  See   Marshall   on   Ins.    (5th    ed.)  Consolato   del   Mare,  see  note  11, 

20;     Flanders'     ^Ntaiitime    Law     (ed.  p.  14,  §  IV.  herein. 

1852)  25.  Laws  of  Oleron.    "This  justly  eele- 

■^4  Dum.  &  E.  206-9   (1791).  hrated   Code  was  originally  promul- 


SOURCES  AND  ORIGIN  OF  INSURANCES 


§  1. 


by  Lord  Mansfield.  Tlii.s  ca.se  is  cited  in  Bork  v.  Norlr-nj^"  as  are  al- 
so the  laws  of  Oleron;  "  T.uke  v.  I.yde  is  also  cited  in  The  Sarato- 
ga,"* as  are  likewise  Koccus,  Straccha,  Clcirac,  INjthier,  Emerigon, 


gated      by      Eleanor,      Duchess      of 
(luienne,  the  mother  of  Richard  I.  of 
lOno-laiid,     .     .     .     who  inherited  the 
dukedom  of  Guienne  from  his  moth- 
er.''   This  Code  was  improved  by  him 
"and  introduced  into  England.    Some 
additions  were  made  to   it  by  King 
John;   it  was  promulgated   anew   in 
the  50th  year  of  Henry  HI."     Laws 
of    Oleron    (with    headnote)    1    Pet. 
Adm.    (U.    S.)    Append,    i.-lxiii.,    .30 
Fed.  Cas.  Append,  pp.  1171  et  seq. 
See  also  24  Ency.  Britannica   (11th 
ed.)   pp.  535,  536.     Laws  of  Oleron 
are  usually  ascribed  to  Richard  I.,  but 
it  is  declared  that  no  satisfactory  au- 
thority   exists    therefor.      There    are 
forty-seven   articles  or  short   regula- 
tions, for  average,  salvage,  etc.,  said 
to  have  been  copied  from  the  ancient 
Rhodian   maritime   laws,   or  perhaps 
from   those  of  Barcelona.      Larned's 
Hist,   for   Readv    Ref.    and    Topical 
Reading,  "Oleron,"  p.  2398,  citing  D. 
Macpherson,    Annals    of    C'ommerce, 
.  vol.  1,  p.  358.     See  Harpers  Book  of 
Facts     (1906)     "Oleron,"    for    brief 
mention    only    that    alleged    fact    of 
tliese   laws   having   been    enacted   b.v 
Richard   I.   in    1194   is    "now    doubt- 
ed."     Compare  24  Encj'.   Britannica 
(11th  ed.)  "Sea  Laws,"*pp-  535,  536. 
Wisby,   Visby,   or    AVisbuy.      "The 
town  of  Wisby,  situated  on  the  west 
coast  of  the  Island  of  Gotland,    ... 
is  chiefly  famous  from  its  nanu^  hav- 
ing become  identified  with  a  Code  of 
maritime  laws  that  was  long  of  jjara- 
niount  authority  in  the  Baltic.     .     .     . 
The    jirincipal    noiihern    jurists    and 
historians    regard    the    Wisby    Code 
or    compilation,    as    anterior    to    the 
Code  or  coni])ilation  deiu)minated  the 
Rules  or  Judgments  of   Olei-on.  and 
as    being    in    fact    the    most    ancient 
monument   of   the   maritime   laws   of 
the   ^Middle    Ages.      But    no    learning 
or  ingenuity  can  give  plausibility  to 
so    iinpi'ol)abl('    a    Iheorv."      Larned's 
Hist,    for    Heady    Ref."  and    Topical 


R^^ading,  "Hansa  Towns,"  pp.  1624- 
1626,  (fuoliuff  \'vom  History  of  the 
Hanseatic  League  (Foreign  Quart. 
Rev.  Jan.  1831),  citing  also  other 
authorities.  "Wisbuy  was  the  an- 
cient capital  of  Gothland,  an  island 
in  the  Baltic."  "Northern  writers 
have  contended  that  the  laws  of  Wis- 
buy are  more  ancient  than  the  Role 
d'Oleron  and  have  even  asserted  the 
('onsolato  del  Mare  to  have  been 
composed  subsequent  to  them.  These 
claims  are  opposed  with  some  irrita- 
tion by  Cleirac,  who  denies  their  hav- 
ing been  promulgated  prior  to  the 
year  1266.  In  this  opinion  he  is  sup- 
ported by  many  historical  facts." 
Laws  of  Wisbuy  (with  brief  historv), 
1  Pet.  Adm.  (IJ.  S.),  Append.  Ixvii.- 
xc,  30  Fed.  Cas.  pp.  1189  et  seq.  See 
24  Ency.  Britannica  (11th  ed.)  "Sea 
Laws,"  p.  536. 

Laws  of  Hanse  Towns  were  found- 
ed evidently  on  those  of  the  neigh- 
lioring  city  of  Wisbuy  and  the  cele- 
brated Role  d'  Oleron.  They  appear 
lo  have  been  first  enacted  and  pro- 
mulgated in  the  year  1597,  at  Lii- 
beck,  which  is  stvled  the  "Mother  of 
the  Hanse  Towns."  1  Pet.  Adm. 
(U.  S.)  Append,  xciii-exi.  30  Fed. 
Cas.  Append,  pp.  1197  et  seq. 

Marine  Ordinances  of  Louis  XIV. 
To  the  genius  of  Colbert,  the  cele- 
brated minister  of  Louis  XIV.,  France 
is  indebted  for  this  excellent  Code. 
The  ordinances  were  published  "by 
the  Fi-encli  King  in  1681."  Marine 
Oi'dinaiK-es  of  Louis  XIV.  (witii 
headnote)  2  Pet.  Adm.  (U.  S.)  Ap- 
pend, iii.,  .'K)  Fed.  Cas.  Append,  pp. 
120:;  et    seq. 

9  2  Bui-r.  882,  889. 

10  2  McLean  (U.  S.  C.  C.)  422, 
42(),  Fed.  Cas.  No.  1659. 

11  See  note  8,  ante,  under  this  sec- 

11*2  Gall.  (U.  S.  C.  C.)  164,  179, 
Fed.  Ca.s.  No.  12,355. 


§  I.  JOYCE  ON  INSURANCE 

Valin,  and  the  laws  of  Oleron,  which  laws  are  an  authority  in  the  de- 
cisions of  Walton  V,  Ship  Neptune,"^  and  Sims  v.  Jackson. ^^  In 
Davy  V.  Hallett,"  Kent,  C.  J.,  relies  upon  Emeri,<>on,  A'alin, 
and  Pothier.  So  in  Franklin  Ins.  Co.  v,  Lord,^*  Story,  J., 
.says  the  doctrines  of  Valin,  Pothier,  and  Emerigon  are  en- 
titled to  great  weight  and  cites  from  Emerigon,  whose  treatise 
is  also  considered  in  Vandenheuvel  v.  United  Ins.  Co.  ^*  Of 
the  repoi*ts  of  Mason  and  Gallison,  in  which  appear  two  of 
the  above  ca.^^es.  Chancellor  Kent  ^^  declares  that  they  may 
fairly  be  placed  upon  a  level  with  the  best  ])roductions  of  English 
admiralty,  for  deep  and  accurate  learning,  as  well  as  for  the  high- 
est ability  and  wisdom  in  decision.  So,  in  the  Star  of  Hope  "  the 
court,  in  discussing  the  question  of  general  average,  cites  Emeri- 
gon. Again,  the  Ordonnance  of  Louis  XIV.  (1681),^*  and  the 
commentary  thereon  by  Valin,  is  referred  to  by  the  court  in  Mor- 
gan V.  The  Insurance  Company  of  North  America, ^^  decided  in 
1806.  It  says:  ''These  ordinances  and  the  commentaries  on  them 
l-ave  been  received  with  great  respect  in  the  courts  both  of  England 
and  the  United  States,  not  as  containing  any  authority  in  them- 
selves, but  as  evidence  of  the  general  marine  law.  Where  they  are 
contradicted  b}'  judicial  decisions  in  our  own  country  they  are 
not  to  be  respected,  but  on  points  which  have  not  been  decided 
they  are  worthy  of  great  consideration.  I  am  strongly  inclined 
to  adopt  the  rule  laid  down  by  Valin.  because  I  think  it  reason- 
able.'' This  case  is  cited  on  the  point  decided,  on  the  above  authori- 
ties, in  King  v.  The  Debuvare  Insinance  Company. '^^  In  Odlin 
v.  The  Insurance  Company  of  Pennsylvania,^  the  court  says  the 
opinions  of  French  jurists  on  the  question  there  under  consid- 
eration had  no  inconsiderable  weight  with  it,  and  although  founded 
u]^on  positive  ordinances,  yet  they  were  evidence  of  the  general 
law  of  merchants  upon  the  subject,  no  judicial  decision  and  no 
custom  appearing  to  the  contrary.  "The  sea  laws  and  state  ordi- 
nances of  many  of  the  maritime  countries  of  Europe  have,  with 
some  exceptions,  gradually  become  incorporated  with  the  coni- 
ng 1  Pet.  Adni.  (U.  S.)  142.  Fed.  U.  S.)  203,  230,  Ifl  L.  ed.  638,  per 
Cas.  No.  17,135.  Mr.  Justice  Clitt'ord. 

12  1  Pet.   Adni.    (U.   S.)    157,  Fed.        ^^  ^ec  uote  8,  ante,  under  this  sec- 
Cas.  No.  12,801.  tion. 

"3Caines  (N.  Y.),  21.  ^^  4   Ball.    (4   U.   S.)    455,   458,   1 

1*4  Mason  (U.  S.  C.  C.)  248,  255,   L.  ed.  907,  per  Tilghman,  C.  J. 
Fed.  Cas.  No.  5,057.  20 -^  ^Vash.  (U.  S.  C.  C.)  300,  307, 

«2  Johns.  Cas.   (N.  Y.)   127,  150    Fed.  Cas.  No.  7,788. 
etseq.  ^2  Wash.   (U.  S.  C.  C.)   312,  315, 

16  3  Kent's  Comm.   (13th  ed.)   *20.  Fed.  Cas.  No.  10,4.33. 
"The  Star  of  Hope,  9  Wall.   (76 

6 


SOURCES  AND  ORIGIN  OF  INSURANCES       §  I. 

mercial  law  of  England  by  a  kind  of  tacit  adoption,  and  are  in 
these  cases  considered  as  evidence  of  the  customs  of  merchants. 
These  regulations  are  used  in  the  British  and  American  courts, 
and  have  frequently  furnished  rules  of  decision  where  the  posi- 
tive law  of  the  country  or  former  decisions  upon  the  point  had 
not  prescribed  a  different  one."  And  the  court  refers  to  Roccus, 
Le  Guidon,  A'alin,  Emerigon.  Pothier,  and  the  Ordonnance  of 
Louis  XIV.2  S5  in  Hone  v.  Tlie  Mutual  Safety  Insurance  Com- 
pany ^  the  court  considers  the  Ordonnance  de  la  Marine  of  Louis 
XIV.,*  Valin,  Emerigon,  Boulay  Paty,  and  Alauzet,  upon  the 
question  of  reassurance.  An  examination  of  the  insurance  cases 
of  England  further  shows  that  for  the  most  part,  certainly  until 
comparatively  recent  times,  they  have  concerned  marine  insur- 
ance ;  ^  and  the  earlier  statutes  of  England,  which  legislate  con- 
cerning insurance  as  such,  relate  to  marine  insurance. 

It  is,  therefore,  these  ancient  usages  and  customs  of  merchants, 
digested  and  compiled  into  sea  laws,  ordinances,  and  treatises, 
which  have  furnished  the  leading  principles  for  the  adjudication 
of  insurance  cases,  and  which  are  the  sources  from  which  Lord 
Mansfield,  Story,  and  other  learned  jurists,  have  drawn  in  the 
determination  of  marine  cases  of  insurance,  and  so  marine  law 
and  marine  insurance  for  a  long  period  of  time  furnished  the  most 
certain  developments  of  the  principles  governing  the  contract  of 
insurance.^* 

2  See  note  8,  ante,  under  this  sec-  "The  legal  principles  of  marine  in- 
tion.  surance,   siu-li    as    those    relating-    to 

3  1  Sand.   (N.  Y.)   137,  145.  fraud,     coueealment,     misrepresenta- 
*  See  note  8,  ante,  under  this  see-   tion,  warranties,  subrog-ation,  agency, 

tion.  reinsurance,    rectitication    of    policy, 

^  For    cases    down    to    1795,    see  and  return  of  premium,  apphj,  with 

Beawes'  Lex  Mercatoria,  302,  et  seq.  certain  few  exceptions,  to  all  insur- 

5a  "Until  the  year  1907  the  law  of  auccs,  so  far  as  their  application  is 

marine  insurance  was  derived  mainly  not  excluded  or  modified  by  the  terms 

from  the  decisions  of  the  courts  and  of  the  policy.     ,     .     .     The  main  ex- 

the  treatment  of  textwriters ;  but  its  ceptions  above  referred  to  are:      (1) 

leading  principles  are  now  contained  The  doctrine  of  constructive  total  loss 

in  the  marine  insurance  act  1906   (6  and  notice  of  abandonment,  the  rules 

Edw.   VII.   c.   41),  the   full   title   of  as   to   adjustment   of  a  partial  loss, 

which  is  'An  Act  to  Codify  the  Law  and  the  doctrine  that  a  policy  may  be 

Relating  to  Marine  Insurance'    (the  ratified  after  a  loss.     (2)  Life  insur- 

title  of  an  act  of  Parliament  is  now  ance  is  not  a  contract  of  indemnity, 

part  of  the  act,  and  may  be  taken  and  the  prin('ii)le  of  subrogation  does 

into  consideration  for  the  purpose  of  not  apply  to  it.     The  practice  as  to 

construing   it).      The   act    came   into  discovery  of  ship's  papers  is  peculiar 

force  on  the  1st  of  January,  1907."  to    marine    insuraiu-e,    and    does    not 

1  Arnould  on  Marine  Ins.   (8th  ed.  extend  to  any  other  cases  of  insui-- 

Hart  &  Simev)  see.  1.  ance."     17  Earl  of  Halsbury's  Laws 

7 


§§  II.,  III.  JOYCE  ON  INSURANCE 

§  II.  Origin  of  insurance  generally. — The  origin  of  insurance  is 
wrapped  in  such  obscurity  that  an  exliau.stive  examination  of  the 
works  of  the  most  learned  authors  on  this  subject  fails  to  discover 
the  exact  time  when  insurance  Avas  first  known  or  practised.  Some 
of  the  most  eminent  Avriters  contend  that  it  was  known  to  the 
ancients;  others,  that  it  had  its  inception  in  the  necessities  of  mari- 
time commerce,  and  the  risks  and  hazards  consequent  tliereon ; 
although  none  of  these  fix  detinitelv  the  date  of  its  invention  and 
first  practice.  It  is,  however,  argued  by  other  prominent  writers 
that  tlie  present  nuitual  insurance  system  had  its  origin  in  those 
artilicial  alliances  or  clubs,  which  are  said  to  have  existed  from 
time  immemorial  for  nuitual  benefit  and  assistance  in  different 
exigencies,  in  China,  among  the  Teutons,  the  early  Christians,  and 
the  ancient  Greeks  and  Romans.  That  from  these  alliances  or 
clubs  sprang  what  were  known  as  "guilds,"  between  which  and  the 
Friendly  Societies  of  England,  mutual  benefit  societies,  and  the 
nuitual  insurance  system,  the  connection  can  be  traced.  There  are 
certainly  many  points  of  resemblance  between  some  of  the  alli- 
ances or  clubs  and  the  mutual  insurance  system,  as  will  be  noticed 
hereafter;  and,  if  mutual  insurance  is  a  lineal  descendant  there- 
from, then  the  date  of  the  earliest  existence  and  practice  of  insur- 
ance can  be  somewhat  more  definitely  fixed  than  it  can  upon  the 
theory  that  it  owes  its  inception  to  maritime  commerce. 

In  view,  then,  of  the  preceding  remarks,  we  will  consider  spe- 
cifically the  origin  of  the  ditt'erent  kinds  of  insurance,  placing 
marine  insurance  first,  because  the  most  replete  references,  legal 
and  historical,  are  to  that  branch  of  the  contract  of  true  insur- 
ance, and  also  because  that  concrete  idea  known  as  marine  insur- 
ance first  took  tangible  shape,  grew,  and  was  more  extensively 
known  and  practised  among  nations  than  any  other  kind  of  inT 
surance  until,  perhaps,  recent  times.  We  shall  next  consider  the 
origin  of  the  mutual  insurance  system,  and  follow  with  the  origin 
of  the  several  kinds  of  insurance  in  that  order  which  their  priority 
of  existence,  coupled  with  their  relative  development  and  growth, 
as  governed  by  the  weight  of  authority,  'shall  warrant. 

§  III.  Origin  of  marine  insurance. — Whether  insurance  .was 
used  among  the  Koniaus  is  a  disputed  question,  and  one  upon 
which  there  is  no  certain  evidence. 

of  Engf.  p.  513  {citing  Tannel)aum  &  papers  is   peculiar  to   marine  insur- 

Co.  V.  Heath,   [1908]   1  K.  B.  1032,  ance").     See  also  Id.  p.  335,  as  to 

C.  A.  77  L.  J.  Iv.   B.  634,  99  L.  T.  construction  of  marine  insurance  act 

237,  13  Com.  Cas.  264,  24  T.  L.  R.  1906,  and  extent  of  legal  principles 

450-C.  A.,  wliei-e  Eai'well,  L.  J.,  says:  embodied  therein.      See  also  note  2, 

"It  appears  from  all  the  cases  that  ante,  herein, 
the  right  to  claim  discovery  of  ship's 

8 


SOURCES  AND  ORIGIN  OF  INSURANCES      §  III. 

The  pi'iiieijial  armmieiits  adduced  in  its  favor  are:  1.  Pa.s'^ages 
from  Livy  ®  and  Suetonius,''^  iini)lying  that  the  government  of 
Home,  during  tlie  Kepubhc  on  two  occasions,  and  the  reign  of  the 
Emperor  Claudius  on  one  occa^fion,  had  assumed  the  risk  of  losses 
that  might  arise  during  the  course  of  certain  voyages,  by  storms 
oi-  enemies.  2.  That  Cicero,  in  a  letter  Avritten  to  the  Proqua_\stor 
Caninius  Sallust.  at  Laodicea,  asks  him  to  procure  himself  sure- 
ties for  treasure  he  should  be  sending  home.*  3.  That  the  laws 
i-elating  to  usury  in  the  Justinian  Code  and  Pandects,^  and  else- 
where, specified  the  rate  of  interest  granted  to  nautical  insurance. 
4.  That  the  extensive  u.^^e  of  bottonny  and  respondentia  affords  a 
strong  presumption  that  insurance  in  its  simpler  forms  was  known 
and  practised  among  the  ancients.  5.  That  the  nauticum  fanms, 
the  trajectitia,  or  nautica  pecunia,  which  were  terms  used  to  indi- 
cate a  form  of  obligation  connected  with  carriage  by  sea  or  marine 
adventure,  wherein  entered  the  element  of  risk,  resembled  insur- 
ance. 6.  That  the  Romans  possessed  ships  and  commerce,  and 
wherever  foreign  connnerce  was  introduced  some  protection  or  se- 
curity of  the  nature  of  insvu'ance  would  be  necessitated,  especially 
in  times  of  war,  to  encourage  merchants  to  undergo  the  risks  and 
hazards  of  adventures  at  sea.  7.  That  insurance,  as  a  wager,  was 
not  unknown  to  the  Romans.  8.  That  the  above  evidences,  scat- 
tered through  the  Roman  law  and  Roman  history,  if  not  suflicient 
in  themselves,  taken  separately,  are  the  several  constituents  which, 
aggregated,  disco\er  the  existence  among  the  Romans  of  the  sys- 
tem of  insurance. 

Opposed  to  these  facts  and  the  proposition  they  are  advanced  to 
prove  are  arguments  to  .show:  1.  That  the  passages  from  Livy  and 
Suetonius  have  no  application  to  insurance;  that  the  inference 
therefrom  is  that  contractors  were  only  to  transport  the  stores  i)ur- 
chased  of  them  to  their  destination  at  the  risk  of  the  government, 
or,  in  other  words,  that  the  government  became  purchasers  of  the 
commodities  or  merchandise  before  embarked,  and  consequently 
the  actual  owner  during  the  voyage.  2.  That  no  inference  is  to 
be  deduced  from  Cicero's  letter  in  favor  of  the  proposition,  but 
that  the  reference  therein  has  a  nnich  stronger  atlinity  to  bills  of 
exchange  than  to  insurance.     3.  That  the  laws  relating  to  usury 

6  T.  Livius,  lib.  23,  n.  49;  lib.  25,  n.  Facts,  p.  378;  Id.  (1900)  "Insurance," 
3.  whore  it  is  said:     "Siu-tonius  conjec- 

'  Lib.    25,   n.   21.      "The   origin    of    lures  that   Chuidius,  the  Koman  Kni- 
insuraiice  is  unknown;  it  has,  on  the    peroi-,  was  (he  first  contriver  of  the 
authority  of  Suetonius,  been  ascribed    insurance  of  ships,  43  A.  D." 
fo  the  Emperor  Claudius,  .\.   n.  43."        *  Cicero,  lib.  2,  epis.  17. 
Haydn's   Diet,   of  Dates    (25th   ed.)        ^  pubiiyij(>j  respectively  A.  D.  529, 
p.  728.     See  also  Harper's   Book  of    533. 

9 


§  III.  JOYCE  ON  INSURANCE 

in  the  Code  and  Pandects  deferred  only  to  maritime  interest,  the 
fonyideration  given  in  a  bond  of  bottomry  or  hypothecation,  and 
not  to  premium  of  insurance.  4.  That  impignoratio  embraced 
what  is  knoAvn  as  bottomry,  hypothecation,  and  respondentia ;  that 
the  foundation  of  these  was  merely  a  loan  or  pledge,  either  per- 
sonal or  on  property.  5.  That  foenus  nauticum,  trajectitia,  or 
nautica  pecunia  were  only  payments  for  money  advanced,  or  were 
terms  used  to  indicate  the  loan,  and  as  the  creditor  ran  a  risk 
during  the  voyage,  and  as  the  risks  might  apply  to  the  ship  or  part 
of  it,  or  to  the  cargo  pledged  for  the  payment  of  the  debt,  the  rate 
of  interest  nauticum  foenus  usurse  maritimae  might  be  higher  than 
ordinary.  6.  That  there  is  no  evidence  that  any  premium  was 
paid  in  these  transactions.  7.  That  ancient  maritime  commerce 
was  limited  and  exposed  to  a  paucity  of  risk,  and  that  the  naviga- 
tion of  the  Romans  was  for  war,  and  not  for  peace  or  commerce. 

8.  That  insurance  is  not  a  Avager,  and  the  knowledge  of  wagers 
among  the  Romans  would  not  imply  a  knowledge  of  insurance. 

9.  That  there  is  no  positive  information,  historical  or  otherwise, 
that  insurance  was  in  use  among  the  Phoenicians,  Carthaginians, 
or  Greek  republics,  and  that  the  Roman  laws,  the  laws  of  Oleron, 
of  Wisby,  and  of  the  llanse  Towns,  are  silent  as  to  insurance. 
It  is  also  argued  that  Coke,  in  1588,^°  notices  the  practice  as  a 

novelty. 

With  some  or  all  of  the  above  aflrirmative  facts  as  the  principal 
basis,  it  is  deduced  that  insurance  existed  among  the  Romans  by 
Emerigon,"  Rcklarride,^^  Duer,^^  Elliott,"  and  others.     Gibbon  ^^ 

1°  Rep.  pt.  6,  pp.  46,  48.  of  law.     With  the  Italians  it  is  held 

11  Emerigon    on    Ins.     (Meredith's  in   the  highest   credit,"   and  he   also 

ed.     1850)      xxxii.       Emerigon,     the  refers  to  other  authorities  which  show 

French  jurist,  had  a  well-earned  rep-  the  great  value  of  the  work.     Valin, 

utation  for  skill  and  learning  in  the  the  coniiuentator  of  the  Ordonnanee 

maritime  law,  and  his  researches  as  de  la  Marine,  speaks  of  Emerigon's 

to   the  origin   and   law   of  insurance  learning,  and  Justice  Park  (Park  on 

were    laborious   and    exhaustive.      In  Insurance,  4th  ed.,  xv.)  refers  to  him 

the  early  part  of  1783  his  work  on  as  a  distinguished  writer,  and   lie  is 

"Marine  Insurances"   was  published,  cited   as   an   authority  in   the   courts 

"It    is    a    work    that    has    long    been  botli  in  England  and  this  country, 
held  in  esteem  in  all  commercial  coun-       ^^  Comm.    de    Code    de    Commerce, 

tries  in   Europe  and  America,"  says  sec.  1004. 

Meredith   in    the   introduction   to  his        ^^  Diier    on    Ins.    (ed.    1845)    7    et 

edition  of  date  1850  of  the  work  (p.  seq. 

xxix.),  and  he  adds  (  id.,  n.  1.)  :  "Es-  i*  Elliott  on  Ins.  (ed.  1907)  sec.  2, 
trangin  (Disc,  prelim.,  p.  32)  af-  p.  7,  where  he  says :  "It  is  thus  more 
firms  that  in  France  it  is  regarded  as  than  probable  that  the  Romans  were 
a  sure  oracle  in  the  matter  of  insur  familiar  with  the  practice  of  insur- 
ance; that  it  is  cited  in  the  tribu-  ance.  .  .  .  Insurance  seems  to 
nals  as  an  authority  having  the  force  grow  naturally  out  of  an  extensive 

10 


SOURCES  AND  ORIGIN  OF  INSURANCES      §  III. 

connects  the.  usury  liuv-^  with  nautical  insurance.  Walford,^^  rely- 
ing upon  Ilendriks,"  docs  not  go  as  far  as  Gibbon,  but  .states  that 
the  contract  of  nautical  interest  or  loan  on  bottomry  or  respondentia 
was  used  from  very  remote  ages  by  the  Greeks,  Romans,  and  other 
nations  as  their  ordinary  insurance  contract,  and  that  it  formed  the 
traditionary  groundwork  of  the  insurance  system;  and  this  author 
quotes  from  Leybourn's  Parnarithmologia  that  insurance  was  es- 
tabhshed  by  a  law  under  Claudius  Csesar;  and  Maylnes  ^'  declares 
Claudius  "did  bring  in  this  most  laudable  custom  of  assurances." 
Richards  ^'  has  briefly  declared  that  the  practice  of  underwriting 
by  individuals  lays  claim  to  great  antiquity,  although  he  adds  that 
its  origin  is  a  matter  of  doubt ;  ^°  while  among  those  who  assert 
that  insurance  was  unknown  to  the  Romans,  Hopkins  ^  admits 
tbat  the  transactions  relating  to  interest  or  usury  and  maritime 
loans,  above  mentioned,  bore  a  resemblance  to  insurance  in  the  in- 
troduction of  risk  as  an  element  in  the  pretium  or  rate  of  interest. 
He  also  says:  ''Unquestionably  within  the  compass  of  the  Roman 
law  and  the  details  of  Roman  history  may  be  found  scattered  the 
se\eral  constituents  which,  when  built  together,  form  the  system  of 
marine  insurance."'  So,  Marshall  ^  also  admits  that  the  observa- 
tion of  Ulpian  in  the  Pandects  gives  color  for  insurance  having 
been  known  among  the  Romans;  that  bottomry  was  a  species  of 
insurance,  and  was  well  understood  by  them;  and  we  would  add 
that  it  is  generally  conceded  that  bottomry  and  respondentia  were 
well  understood  by  the  ancients;  and  the  American  Cyclopedia 
says  it  is  possil)le  that  in.surance  was  common  among  merchants 
centuries  before  it  was  recognized  by  law.^  Again,  in  answer  to  the 
negative  argument  of  silence  of  the  Roman  laws  and  Ronian  juri.sts 
on  this  subject,  Duer,*  by  an  exhaustive  course  of  reasoning,  and 
Meredith,*  in  an  excellent  short  note,  show  that  this  argument  is 

commerce,  and  it  is  almost  impossil)lc  Diet,    of    Dates    (25tli    ed.    1911)  ^p. 

to  believe  that  without  its  protection  728;  Harper's  Diet,  of  Facts,  p.  378. 

the    tlourishing    commerce    of    Tyre,  i^  Richards  on  Ins.   (ed.  1892)  .sec. 

Carlhage,    Corinth,    Athens,    Rhodes,  5,  p.  .5. 

and  Alexandria  could  have  been  sue-  ^'^  f^ee  Id.    (3d  ed.)    sec.   9,   p.   12, 

cessfuUy  carried  on  through  so  many  where  it  is  said:    "Loans  on  bottomry 

ages."  tire   of   ancient    date,   and    from   this 

15  Decline   and  Fall    (Milnuiu's  ed.  maritime  usage  the  earliest  forms  of 
18(^0 )  vol.  4,  368.               .  insurance  may  have  developed." 

16  Watford's  Ins.  Guide  (2d  ed.)  3.        ^  Hopkins'  Mar.  Ins.  (ed.  1867)   6, 
"  Assur.  Mag.  vol.  ii.  9,  10. 

"Lex  Mercatoria   (ed.  1(322)    146.        2  T^farshall's  Ins.  (.jth  ed.)  r,  et  seq. 

As   to    bottomry   being   conunence-        ^9  American  Cyclopedia,  314. 
ment  of  marine  insurance,  see  ^Mar-        ■*  Duer  on  Ins.  (ed.  1845)  7  et  seq. 
tin's    History    of    Lloyds    &    Marine       *  Eraerigon  on  Ins.  (Meredith's  ed. 
Ins.  pp.  3  et  seq.     See  also  Haydn's    1850)  xxxiii.  n.  a. 

11 


§  111.  JOYCE  OX  INSURANCE 

not  conclusive,  and  that  notwithstandinii;  there  is,  says  the  former, 
a  fair  presumption,  and  the  hitter,  an  extreme  probability,  that  in- 
surance was  known  to  the  Eomans.  That  insurance  is  of  great 
antiquity  is  further  evidenced  by  the  works  of  Bacon,^  and  also 
by  the  jn-eamble  to  the  earliest  English  statute  on  insurance,  of 
date  1()017  in  both  of  which  it  is  spoken  of  as  a  usage  which 
had  existed  "•time  out  of  mind." 

In  support  of  some  or  all  the  propositions  for  the  negative  above 
mentioned  and  of  the  claim  that  insurance  was  unknown  to  the 
Romans,  are  Marshall,^  Park,»  Hopkins,i°  Parsons,"  and  the  Ameri- 
can Cyclopedia.^^ 

Kichards  ^^  says  the  practice  of  marine  underwriting  probably 
started  in  the  r2thor  loth  century.  Hunter  ^^  speaks  of  maritime 
loans  pecunia  trajectitia.  and  says  Justinian  fixes  in  them  the 
maximum  of  interest.  Ortolan  ^^  defines  trajectitia  or  nautica  pe- 
cunia as  a  loan  or  pledge  duinng  a  voyage,  and  asserts  that  on  ac- 
count of  the  risk  a  higher  rate  of  interest  was  allowed.  The  same 
author  also  says  the  .Justinian  Code  hxed  the  rate  of  interest  for 
maritime  loans,^^  and  Justice  ^"^  speaks  of  money  lent  to  sea  or 
upon  the  sea  as  foenus  nauticum,  pecunia  trajectitia,  usura  mari- 
tima,  and  translat&s  foenus  nauticum,  naval  interest,  and  gives  as 
a  reason  that  "there  seems  to  be  such  a  difference  between  the  foenus 
nauticum  of  the  Rhodians  and  our  bottomry  that  the  latter  would 
not  be  a  proper  term  for  the  other." 

From  an  examination  of  the  authorities  and  of  the  arguments 
on  both  sides  we  are  strongly  inclined  to  the  belief  that  there  are 
many  traces  of  the  existence  among  the  Romans  of  the  contract 
of  insurance,  and  we  are  more  especially  led  to  this  conclusion  by 
reason  of  the  learning  and  laborious  researches  of  Emerigon  and 
the  great  value  of  his  work  on  insurance,  as  also  by  the  arguments 
adduced  in  favor  of  tlie  proposition  by  Meredith,  Duer,  and  others, 
as  well  as  by  the  admissions  of  those  of  the  opposite  view.  But  we 
are  unal)le  to  determine  to  what  degree  of  perfection  the  system 

6Biif-oii"s     Abnd<rment     (4th     vd.)        ^3  i^idnirds  on  Ins.   (ed.  1892)   sec. 

598,  599.  O,  p.  5;  Id.  (3rd  ed.)  sec.  9,  p.  12. 
743  p^iix.  c.  12.  ^*  Hunter's  Roman  Law,  472,  uote. 

8  Marshall's  Ins.  (5th  ed.)  2  et  seq.        ^^  Ortolan's   Roman   Laws    (Mears' 

9  Park  on  Ins.  (4th  ed.)  iii.  et  seq.  cd.  18 ^(i)  258. 

10  Hoi)kins'   Mar.   Ins.    (ed.   1867)        ^^  id.  300,  n.  1658. 

2-1(1  I'.lustice's  Treatise  on  the  Sea  (ed. 

"  iiJParsons'  Mar.  Ins.   (ed.  1868)  1    1705)  iii.  259,  and  see  Id.  255. 
et  seq.    See  1  Parsons'  ^larilinie  Law, 
c.  1. 

12  9  American  Cyclopedia,  314. 

12 


SOUKCKS  AND  OiilGIN  OF  1NSUKANCP:S  §  IV. 

niay  liavc  attaiiiod,  or  to  conieetare  lliat  it  existed  in  anv  other 
tliaii  a  most  siiii[)le  form,  because  of  the  absence  of  positive  ju'oof 
thereon. 

§  IV.  Adoption  of  marine  insurance  in  modern  times. — As  to 
marine  insurance  in  modern  times,  altliougli  tliere  is  no  certain 
evidence  as  to  the  exact  time  and  place  of  its  adoption,  nor  as  to  the 
exact  period  of  its  introduction  into  the  several  countries  of  Eu- 
rope, nevertheless  it  is  generally  agreed  that  the  best  evidences  of 
its  lirst  recognition,  or,  as  some  writers  say,  of  its  invention,  point 
to  Italy  and  the  latter  part  of  the  12th  or  the  beginning  of  the 
loth  centuries  as  the  place  and  time.^*  So  Emerigon.i^  speaking 
of  the  Ordonnance  de  la  Marine,  says:  "It  was  principally  for  the 
contract  of  insurance  that  the  franiers  of  the  Ordonnance  had  re- 
course to  the  laws  of  the  middle  ages,"  etc.  It  is  supposed  by 
some  that  insurance  was  invented  by  the  Jews,  who  found  a  refuge 
in  Italy  after  their  exile  from  France  by  Philip  'Augustus,  a.  d. 
1182,^°  and  that  the  merchants  in  northern  Italy  .saw  its  success 
and  extended  its  use.^  Justice  Fark,^  however,  says  that  if  tlie 
Lombards  were  not  the  inventors,  they  were  the  first  who  brought 
the  contract  to  perfection  and  introduced  it  to  the  world.  But 
Emerigon  ^  declares  that  it  may  be  that  the  contract  only  from  thai 
time  acquired  a  name  and  particular  form,  but  that  the  policy 
or  instrument  is  another  matter  from  the  contract.  Hopkins  ^ 
considers  that  the  idea  may  not  be  rejected,  but  that  it  is  con- 
jectural only,  and  adds  that  it  is  possible  the  Florentines  received 
the  germ  of  the  system  from  the  Jews,  although  insurance  was  in 
general  use  in  Italy,  a.  d.  1194,  four  years  earlier  tlian  even  the 
date  of  the  Florentine  Republic,  and  Marshall  *  rejects  the  narra- 

^*  Marshall's    Ins.    (5tli    ed.)    7    et  ishment   of   the  Jews  as  A.   d.   1143. 

seq.;  1  Duer  on  Ins.   (ed.  1845)   28;  1  Historv  of  Commerce,  82. 

1  Parsons'  Mar.  Ins.  (ed.  18(18)  2;  ^1  Diier  on  Ins.  (ed.  1845)  33; 
1)  America  Cyclopedia,  314.  See  8  Walford's  Insurance  Guide  (2d  ed.) 
Americana  "Insurance;  Marine,"  Id.  5,    6;    Jacobs'    Law   Diet,    title   "In- 

2  Suppl.  (1911),  p.  G68.   "■Marine  in-  surance.'' 

surance  was  in  use  at  the  l)('<i^inniiig  ^  Park   on    Ins.    (4lh   ed.)    xxvii. 

of  the  15th  century."     Havdn's  Diet.  ^  I^merigon     on     Ins.     (Mt^reditli's 

of  Dates    (25th  ed.)    "Insurance,"  p.  ed.   1850)    2. 

728.  ■*  Hopkins'  Mar.  Ins.  (ed.  18G7)  17 

"Villani,  a  14th  century  Florentine  et  seq. 
historian,    speaks    of    marine    insur-  ^  I^tarshaH's    Ins.    (5th    ed.)    2,    3. 
ance   as   havinpf   originated    in    Fvom-  See    also    Knierigon    on    Ins.    (Mere- 
hardy  in  1182."     14tli  Ency.  Britan-  dith's  ed.  1850)    10,  11:  14th  Ency. 
nica  (11th  ed.)   p.  674.  Briiannica  (11th  ed.)  p.  ()74  (quoted 

^^  Emerigon     on    Ins.     (Meredith's  from    in    tirst    note    under    this    sec- 

ed.  1850)  xxxi.  tion);      Harper's     Book     of     Facts 

2°  Anderson  fixes  the  date  of  ban-  (lf)06)    "Insurance." 

13 


§  IV.  JOYCE  ON  INSURANCE 

tive  as  improbable.  He  further  declares  that  the  word  "assecuratio" 
is  a  barbarism  adopted  in  Italy  about  the  12th  or  13th  century. 
It  also  appears  that  the  word  ''policy"  or  "polizza"  is  of  Italian 
derivation,  and  signifies  a  note  or  memorandum  in  writing,  or 
note  or  bill  of  security,  creating  an  evidence  of  a  legal  obligation,® 
althougli  Lord  Mansfield  declares  that  "policy"  is  derived  from  a 
French  word  which  means  a  promise.'  The  Ordonnances  of  AVis- 
by  *  are  said  to  mention  the  contract  of  marine  insurance.^  As 
to  the  date  of  these  Ordonnances  there  is  much  doubt,  one  writer 
jilacing  it  as  early  as  1250.^°  Other.s  declare  that  it  is  more  an- 
cient than  the  Consolato  del  Mare,  which  was  recognized  at  Rome 
in  1075,^^  while  some  refer  its  date  to  a  period  near  1288,  and 
others  to  a  time  anterior  to  or  about  1320. ^^  ^Nlarshall,^^  however, 
criticizes  Cleirac's  version  of  the  laws  of  AVisby,  which  version 
mentions  insurance,  and  says  Maylnes's  translation  does  not  men- 
tion it.  He  further  asserts  that  the  earliest  ordinance  on  the  sul)- 
ject  of  insurance  is  that  of  Barcelona,  which  he  considers  must 
have  been  published  about  the  year  1435,  differing  herein  from 
Emerigon,^*  who  fixes  its  date  as  1484.    It  is  also  said  that  a  ''Cham- 

6  1  Duer  on  Ins.  (ed.  1845)  29;  (ed.  1852)  12,  wliich  asserts  that  the 
Angell  on  Fire  and  Life  Ins.  (2d  ed.)  Spaniards  cfaim  paternity  of  the 
3,  sec.  4;  Marshall's  Ins.  (5th  ed.)  Consolato  del  Mare,  and  that  it  Avas 
228.  proDuilgated   in    the    Catalan    tongue 

"The  earliest  form  of  policy  j^bout  the  middle  of  the  13th  cen- 
Inown  is  that  given  in  the  Floren-  tnr\-.  Meredith,  however,  in  his  in- 
tine  statute  of  1523.''  14th  Ency.  Iroduction  to  Emerigon's  Insurance 
Britannica  (11th  ed.)  p.  674.  For  (ed.  1850)  xiv.  says  that  the  oldest 
form  of  "Marine  policy,  established  copy  of  this  Ordonnance  exists  in  the 
by  statute  of  Florence,  January  28,  Catalan  tongue,  which  is  taken  to  be 
1523,"  see  Richards  on  Ins.  (3rd  ed.)  a  translation  from  a  long  lost  and 
p.  766.  unknown   original,  and  that  the  age 

'  Cited  in  Good  v.  Elliot,  3  Durn.  of  the  Ordonnance  ranges  from  a 
&  E.  703,  12  Eng.  Rul.  Cas.  389.         period  anterior  to  1075  to  1150,  or 

^  "The  Ordonnances  made  by  the  1220;  but  Emerigon,  who  translated 
merchants  and  masters  of  the  mag-  a  large  portion  of  it,  says  it  was  rec- 
nificent  town  of  Wisby,  a  city  of  ognized  as  law  in  Rome  in  1075. 
Sweden,  in  the  Island  of  Gotland,  See  also  next  note, 
formerly  the  most  renowned  fair  and  ^^  Emerigon  on  Ins.  (Meredith's  ed. 
market  in  Europe,  but  at  this  day  1850)  xxxv.,  xxxviii.,  157,  n.  a.  160, 
almost  in  ruins:"  Emerigon  on  Ins.  n.  b,  and  authorities  cited;  9  Ameri- 
( Meredith's  ed.  1850)  xxxviii.  See  can  Cyclopedia,  314;  Flanders'  Mari- 
note  8,  pp.  4,  5,  §  I.  herein.  time  Law  (ed.  1852)  11,  12,  21,  28;  3 

^9     American     Cyclopedia,     314;    Kent's  Comm.  (13th  ed.)  13;  Park  on 
Emerigon    on    Ins.     (Meredith's    ed.    Ins.  (4th  ed.)  xxxii.  et  seq.;  1  Smith's 
1850)    xxxviii.   160,  n.   b;   Flanders'    ^Fercantile  Law   (Macdonell  &  Hum- 
Maritime  Law    (ed.  1852)    21;   Park   phrev's  ed.  1890)   Ixviii. 
on  Ins.  (4th  ed.)  xxxiii.  ^^  Marshall's  Ins.    (5th  ed.)    12  et 

^•^  9  American  Cyclopedia,  314.         seq. 

^^  But  see  Reynolds'  Maritime  Law        ^*  Emerigon    on    Ins.     (Meredith's 

14 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  IV. 

ber  of  Assurance"  was  established  in  the  city  of  Bruges  as  early 
as  1310,^^  Hopkins  ^^  cites  Bedarride,  commentator  on  the  French 
Code  de  Commerce,  as  asserting  that  the  insurance  system  ''takes 
no  place  in  legislature  till  the  14th  century."  While  Duer  "  de- 
clares that  no  certain  inference  arises  that  the  existence  of  insur- 
ance is  owing  to  express  legislation.  An  early  document,  of  dale 
1411,  refers  to  insurance  as  an  established  practice,  recites  that  a 
dangerous  custom  of  the  inhabitants  and  citizens  of  Venice  to  in- 
sure foreign  vessels  had  been  introduced,  and  prohibits  such  in- 
surances.^^ Although  Hopkins  ^^  asserts  that  the  attempt  is  fruit- 
less to  ascertain  the  exact  time  when  insurance  was  first  introduced 
and  practised  in  England ;  although  Anderson  2°  and  Maylnes  ^ 
both  declare  that  insurance  was  in  use  in  England  earlier  than 
upon  the  Continent,  and  even  though  Marshall  ^  supposes  that  in- 
surance must  have  been  in  use  in  that  country  long  before  the 
middle  of  the  l~)th  century,  yet  we  can  safely  say  that  the  most 
certain  indications' of  its  first  use  in  England  point  to  its  intro- 
duction there  by  the  Lombards  or  Italians  from  Lombardy,  who 
settled  in  London  somewhere  about  the  13th  century.^  In  this 
connection  it  is  also  noted  that  policies  issued  at  Antwerp  in  1620 
refer  to  insurances  made  in  Lombard  Street,  London.*  In  view 
of  the  above  facts  it  can  be  reasonably  concluded  that  marine  in- 
surance came  into  general  use  as  a  system  or  contract  as  early  as 
the  12th  or  13th  centuries,  although  there  is  much  which  points 
to  an  anterior  date  for  its  existence  and  use. 

Passing  over  the  growth  of  insurance  in  other  foreign  countries, 
except  to  notice  that  the  Ordonnance  of  Louis  XIV.,  established 

ed.  1850)    xxxix.;   see  Park  on  Ins.  2  ^yjaj-j^iu^n-^  j^js.   (5th  ed.)  7. 

(4th  ed.)  xxxiv. ;  Griswold's  P'ire  Un-  ^  ^^ngell  on  Fire  and  Life  Ins.  (2d 

derwriters    (ed.   1872)    10;  2  Araeri-  ed.)   4,  see.  4;  Mayhies'  Lex  Meroa- 

can  Cyclopedia,  303,  304;  Walford's  toria,  ed.  1622,  146;  1  Duer  on  Ins. 

Insurance     Guide,     (2d    ed.)     3;     1  (ed.  1845)   33;   Griswold's  Fire  Un- 

Smith's  Mercantile  Law    (Mac-donell  dcrwnters    (ed.   1872)    13;    Park  on 

&  Humphrey's  ed.  1890)  Ixviii.  Ins.    (4th   ed.)    xlii.     See   Marshall's 

"Richards  on   Ins.    (ed.  1892)    6,  Ins.   (5th  ed.)    6,  7;  1  Smith's  Mer- 

see.  5;  Id.    (3rd  ed.)   note  to  sec.  9,  cantile   Law    (Macdonell   &   Humpli- 

p.  12;  Griswold's  Fire  Underwriters  rey's  ed.  1890)  Ixviii.;  Insurance  Co. 

(ed.  1872)  10.  v.   Dunham,  11  Wall.   (78  U.  S.)    1, 

16  Hopkins'   Mar.   Ins.    (ed.   1867)  32,  20  L.  ed.   90;   13  New  Inernat. 

19.  Ency.  (1908)  p.  64. 

"1  Duer  on  Ins.  (ed.  1845)   33.  *  Waif ord's  Ins.  Guide  (2d  ed.)  5; 

18  Hopkins'   Mar.   Ins.    (ed.   1867)  GriswoWs    Fire    Underwriters     (ed. 

20.  1872)   13;  see  also  Justice's  Treatise 
1^  Hopkins'   Mar.   Ins.    (ed.   1867)  on  the  Sea  (ed.  1705)  appendix  and 

28.  forms;  Angell  on  Fire  and  Life  Ins. 

202  History  of  Commerce.  109,  203.    (2d  ed.)   sec.  4;  1  Duer  on  Ins.  (ed. 
1  Maylnes'  Lex  Mereatoria,  105.         1845)  33. 

15 


§  IV. 


JOYCE  OX  INSURANCE 


ill  1G81,  contains  lengthy  regulations  concerning  insurances,  as 
does  also  the  Ctuidon  de  la  Mer,  of  date  somewhere  between  1556 
and  1584,^  we  find  in  England  that  in  1512  a  Venetian  merchant 
ofi'ected  insurance  there  on  property  from  Candia,  capital  of  the 
island  of  Crete;  that  in  1548  and  1558  insurance  is  mentioned  in 
luigland;  ®  that  in  1560  or  1561  Guicciardini  an  Italian  historian, 
speaks  of  the  commerce  between  England  and  the  Netherlands, 
and  the  insuring  their  merchandise  from  losses  at  seaJ 

The  earliest  English  statute  on  insurance  is  the  43  Elizabeth, 
chapter  12,  of  date  1601,  by  virtue  of  wliich  commissioners  con- 
sisting of  the  judge  of  admiralty,  the  recorder  of  Eondon,  two  doc- 
tors of  the  civil  law,  two  common  lawyei's,  and  eight  merchants,  or 
any  five  of  them,  were  appointed  to  hear  and  determine  causes 
arising  upon  policies  of  assurance  in  the  city  of  Eondon.  The 
])0wers  of  these  commissioners  were,  however,  so  limited  and  the 
statute  so  defective,  that  the  act  13  and  14  Car.  IE,  chapter  23, 
was  pa,ssed  in  1662,  enlarging  their  powers  and  otherwise  attempt- 
ing to  remedy  the  defects  of  the  prior  enactment.  But  a  judgment 
of  the  commissioners  was  held  no  bar  to  an  action  at  law ;  ^  "prti- 
hibitions  to  restrain  them  were  issued,  and  tlie  court  fell  into 
disuse."  ^ 


*  Of  date  1578,  says  Griswold : 
Griswold's  Fire  Underwriters  (ed. 
1872)  9.  Written  not  long  before 
the  loth  century,  says  Marshall:  Mar- 
shall on  Ins.  "(oth  ed.)  15.  While 
Meredith  fixes  the  date  somewhere 
l)etween  1556  and  1584:  Emerigon 
on  Ins.  (Meredith's  ed.  1850)  157, 
n.  a. 

For  a  translation  on  the  sea  laws 
of  the  Rhodians,  the  Romans,  of 
Oleron,  of  the  Hanse  Towns,  and  the 
sea  laws  of  the  French  of  1681,  see 
Justice's  Treatise  on  the  Sea,  also 
.Maylnes,  also  translations  with  head- 
notes  as  follows :  Laws  of  Oleron 
(47  articles)  1  Pet.  Adm.  (U.  S.), 
Append,  i.-lxviii.  30  FetT  Cas.  Ap- 
pend, pp.  1171  et  seq. ;  Laws  of 
Wishuy,     1     Pet.     Adm.      (U.     S.) 


Append.  Ixvii.-xc. 
pend.    pp.    1189 


30  Fed.  Cas.  Ap- 
et  seq.;  Laws  of 
Hanse  Towns,  1  Pet.  Adm.  (U.  S.) 
Append,  xciii.-cxi.  30  Fed.  Cas.  Ap. 
pend.  pp.  1197  et  seq.;  Marine 
Ordinance  of  Louis  XIV.  2  Pet. 
Adm.   (U.  S.)   Append,  iii.,  30  Fed. 


IG 


Cas.  Append,  jip.  1203  et  seq.  As  to 
the  Rhodian  and  other  ancient  sea 
laws  see  also  24  Ency.  Britannica 
(11th  ed.)  p.  537.  See  also  note  8, 
pp.  4,  5,  §  I.  herein. 

^  Walford's  Insurance  Guide  (ed. 
1867)  5;  Richards  on  Ins.  (ed.  1892) 
sec.  5;  Id.   (3rd  ed.)  sec.  7,  p.  12. 

U  Parsons'  Mar.  Ins.  (ed.  1868) 
10;  2  Anderson's  History  of  Com- 
merce, 108,  109;  Hopkuis'  Mar.  Ins. 
(ed.  1867^  29.  See  Marshall's  Ins. 
(5th  ed.)  7, 

8  Carne  v.  Moye,  2  Sid.  121  (1658)  ; 

3  RIackstone's  Com.  c.  vi.  75  (Ham- 
mond's ed.  1890)  p.  102. 

^1  Smith's  Mercantile  Law  (Mac- 
donell  &  Humphrey's  ed.  1890)  Ixix.: 

4  Bacon's  Abridgment  (4th  ed.)  251; 
Beiidyr  v.  Oyle,  Sty.  166,  172 
(1()49)  case  of  lite  assurance.  Pro- 
hibition granted  to  court  of  assurance 
on  ground  that  it  had  jurisdiction 
only  on  such  contracts  as  related  to 
merchandise;  Dalbve  v.  Proudfoot,  1 
Show.  .396  (1692).  Rule  to  show 
cause  why  prohibition  should  not  be 


SOURCES  AND  ORIGIN  OF  INSURANCES      §  IV. 

The  statute  6  George  I.,  chapter  18,  of  date  1719,  under  pre- 
tense of  remedying  certain  alleged  evils  ari.^ing  by  reason  of  "many 
particular  persons,"  insurers,  becoming  bankiaipt  and  otherwise 
failing  to  meet  their  losses,  granted  to  two  companies  the  monopoly 
of  marine  insurance  and  lending  money  on  bottomry.  The  stat- 
ute did  not  extend  to  private  persons,  and  also  contained  some 
other  exceptions.  However,  the  statute  5  George  IV.,  chapter  114, 
of  date  1824,  repealed  so  much  of  the  prior  act  as  restrained  other 
corporations  from  underwriting,  but  did  not  otherwise  abridge 
the  rights  or  privileges  of  the  tw^o  companies  which  had  been  en- 
hirged  by  other  enactments,  especially  that  of  the  11  George  I., 
chapter  30,  of  date  1724,  by  virtue  of  which  the  right  to  plead  the 
general  issue  was  granted.^"  This  privilege  would,  however,  seem 
to  be  impliedly  abrogated,  or  at  least  so  far  abrogated  as  to  be  of 
little  or  no  practical  value  by  the  changes  resulting  in  the  present 
system  of  pleading  in  England."  The  other  statutes  affecting 
these  companies  were  those  of  7  George  I.,  chapter  27,  passed  in 
1720,  and  that  of  8 'George  I.,  chapter  15,  enacted  the  next  year 
under  the  first  of  which  a  large  proportion  of  the  sum  which  each 
company  had  agreed  to  pay  was  remitted  each  company,  and  un- 
der the  latter  tliey  were  excepted  from  liability  to  certain  costs 
and  damages.  In  1746.  the  statute  19  George  II.,  chapter  37,  pro- 
vided that  any  insurance  made  on  ships  or  on  "any  goods,  mer- 
chandises, or  effects  laden,  or  to  be  laden,  on  board  any  such  ship 
or  ships,  interest  or  no  interest,  or  without  further  proof  of  in- 
terest than  the  policy,  or  by  w^ay  of  gaming  or  w^agering,  or  with- 
out benefit  of  salvage  to  the  assurer,"  should  be  void,  with  certain 
exceptions.  This  act  further  prohibited  reassurance,  unless  the  in- 
surer be  insolvent,  become  a  bankrupt,  or  die.  In  1864  the  27 
and  28  Victoria,  chapter  56,  amended  the  last  act  by  providing 
that  reassurance  of  sea  risks  might  lawfully  be  made.^^ 

granted  "was  issued:     Park   on   Ins.  panies,    formed    soon     after    1824; 

(4th  ed.)  xliv.,  xlv.,  xlviii.  necessity   of  companies   being   regis- 

^^  See  Carr  v.  Royal  Excli.  Assur.  tered  under  companies  acts,  see   §§ 

Co.  31  L.  J.  Q.  B.  '93;  1  Best  &  S.  IV.   178,   herein;    5   Earl_of   Hals- 

956;  17  Earl  of  Halsbury's  Laws  of  bnry's  Laws  of  Eng-.  p.  61  (. 

England,  p.  339;   5  Id.  p.  620,  and  The  insurance  statutes  in  England 

note  17  under  §  VII.  herein.     "Fir.'^t  in  force  in  1889  Avere:    1745-46  (E. 

marine    insurance,    the    Royal     Ex-  S.)  19  Geo.  II.  e.  37  (marine)  ;  1774 

change  and  the  London   Insurance,"  (E.   S.)    14   Geo.   III.   c.   48    (life); 

1720,  Harper's  Book  of  Facts  (1906)  1774  (E.  S.)  14  Geo.  III.  c.  78,  sec. 

"Insurance."  83    (fire)  ;  1787-88    (E.  S.)    28  Geo. 

"  See  5  and  6  Vict.  e.  97,  sec.  3;  III.  c.  56  (nuirine)  ;  1854-55,  18  &  19 

22  Earl  of  Halsbury's  Laws  of  Eng-  Viet.   c.   119,   sec.    55    (emigration)  ; 

land,  pp.  417  ot  seq.  amended,  26  &  27  Vict.  c.  51;  35  & 

^^  As     to     illeqal    insurance    com-  36  Vict.  e.  73;  36  &  37  Vict.  c.  85; 
Joyce  Tiis.  Vol.  T.— 2.                17 


§  IV.  JOYCE  ON  INSURANCE 

Passing  from  these  statutory  regulations  in  England  to  the  ad- 
judicated cases,  we  find  in  that  country  no  reported  decision  prior 

38  &  39  Viet.  c.  66;  39  &  40  Viet.  1876,   see.   7(m)     (39   &  40   Viet.   c. 

c.  80;  18G2,  25  &  26  Viet.  c.  63,  see.  22);    also    employers    liability    ins. 

55    (merchant  shipping)  ;   1866    (I.)  eo.'s  aet  1907  (7  Edw.  VII.  c.  46).   2 

29  &  30  Vict.  c.  42   (life);  1867,  30  Butterworth's  20th  Cent.  Stat.  (1900- 

&   31  Viet.  e.  23    (inland  reyenne)  ;  1909)  "Insurance,"  pp.  394,  427,  428, 

3867,  30  &  31  Viet.  e.  144   (assign-  430,    446,    476.      Under   the    sayings 

ment  of  life)  ;  1868,  31  &  32  Vict.  c.  clause  of  the  marine  ins.  act  of  1906, 

86   (marine)  ;  1870,  33  &  34  Vict.  c.  the  stamp  aet  1891    (54  &  55  Vict. 

97  (stamps);  1876,  39  &  40  Vict.  c.  e.  39)   or  reyenue  acts  in  force;  the 

6  (marine);  1880  (S.)  43  &  44  Viet,  companies   act   1862    (25  &   26    Viet. 

c.   26    (life,   maiTied  women);    1881,  e.  89)  and  amendts.  thereto;  the  pro- 

44  &  45  Viet.  e.  12,  sec.  44  (inland  visions  of  statutes  not  expressly  re- 
reyenue) ;  1881  (E.  I.)  44  &  45  Vict,  pealed;  and  the  rules  of  the  common 
e.   41,   see.   14    (tire);   1882    (E.   I.)  law,  including  the  law  merchant,  not 

45  &  46  Viet.  e.  75,  sec.  11  (married  inconsistent,  to  appl}\  Id.  p.  423. 
women's  property)  ;  1884,  47  &  48  See  also  15  Chitty's  Stat.  Eng.  pp. 
Vict.  e.  62,  sees.  8,  11  (marine  life);  881  et  seq.;  17  Earl  of  Halsbury's 
1887,  50  &  51  Viet.  e.  15,  sees.  5,  6  Laws  of  England,  "Insurance."  "Be- 
( marine) ;  1889,  52  &  53  Viet.  e.  42,  fore  1907  three  statutes  only  (all  now 
see.  20  (accident).  See  also  act  1892,  repealed)  relating  to  life  insurance 
55  Viet.  e.  39.  From  Chronological  companies  were  in  force,  most  of 
Table  and  Index,  Statutes  (11th  ed.)  these  provisions  are  re-enacted  with 
title  "Insurance."  That  these  stat-  more  or  less  modifieation  by  the  as- 
utes  were  not  greatly  changed  in  suranee  companies  act  of  1909."  Id. 
1895  appears  from  Chronological  p.  513.  See  note  18,  §  IVa.  herein. 
Table  and  Index  of  Statutes  (13th  As  to  marine  insurance  aet  of  1906, 
ed.)  covering  the  years  1235-1895.  embodying  some  but  not  all  the  legal 
In  1906  the  marine  insurance  act  of  principles  of  marine  insurance,  see 
that  date  (6  Edw.  VII.  c.  41)  in  17  Earl  of  Halsbury-'s  Laws  of  Eng. 
effect  January  1,  1907,  repealed  the  p.  335. 

following  acts:  19  Geo.  II.  c.  37  The  nssiironce  companies  act  1909 
(whole  aet);  28  Geo.  IIL  e.  56  (7  Edw.  VII.  e.  49)  entitled  "An 
(whole  act  so  far  as  relates  to  mar-  Aet  to  Consolidate  and  Amend  and 
ine  insurance)  and  31  &  32  Viet.  e.  Exterfd  to  Other  Companies  Carry- 
86  (whole  act — the  policies  of  marine  ing  on  Assurance  or  Insurance  Busi- 
assurance  aet  1868).  For  other  ness  the  Law  Relating  to  Life  Assur- 
statutes  see:  employers  liability  ins.  anee  Companies,  and  for  Other  Pur- 
company's  act  1907  (7  Edw.  VII.  e.  poses  Connected  Therewith,''  applies 
46) ;  marine  ins.  (gambling  policy)  to  all  companies,  coi-porate  or  uniu- 
act  1909  (9  Edw.  VII.  e.  12)  and  corporate,  not  being  registered  under 
the  assurance  companies  aet  1909  (9  the  acts  relating  to  friendly  societies 
Edw.  VII.  e.  49)  in  effect  July  1,  or  to  trade  unions,  who  carry  on 
1910,  except  see.  36,  which  went  into  within  the  United  Kingdom  assur- 
effect  on  passage  of  the  act.  This  anee  business  of  all  or  any  of  the 
last  statute  repealed  the  following  life  following  classes:  Life  assurance 
assurance  company's  acts:  33  &  34  business,  including  granting  of  an- 
Viet.  e.  61  (1870);  34  &  35  Vict.  c.  unities;  fire  insurance  business;  ae- 
58  (1871);  35  &  36  Vict.  c.  41  eident  insurance  business;  employers' 
(1872).  Said  last  act  of  1909  also  liability  insurance  business;  and  bond 
repealed   the  trade   union   amdt.   act  investment   business;    subject    as   re- 

18 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  IVa. 

to  1588,^3  ai-jj  the  number  of  cases  down  to  the  middle  of  the  18th 
century  are  com]>aratively  few.^* 

We  have  mentioned  the  earliest  grant  to  insurance  companies  in 
England,  and  it  may  be  stated  here  that  in  the  United  Sfates  it 
appears  that  a  marine  insurance  office,  which  did  underwriting  un- 
der Lloyds  system,  was  established  in  New  York  in  1754;  and 
that  in  1794  the  Insurance  Company  of  North  America  and  the 
Insurance  Company  of  the  State  of  Pennsylvania  were  the  first 
corporations  that  undertook  marine  underwriting.^**  In  New  York 
the  first  general  statute  in  relation  to  marine  insurance  was  passed 
in  1849."" 

§  IVa.  Marine  insurance  continued:  origin  of  Lloyds. — A  con- 
sideration of  the  origin  of  marine  insurance  would  not  be  complete 
without  a  mention  of  Lloyds,  which  may  be  referred  in  the  be- 
ginning to  the  date  1688,  in  which  year  appears  the  earliest  notice 
thereof.  In  1692  Lloyd  removed  his  cofteehouse  to  Abchurch  lane, 
London,  Avhich  became  the  resort  for  underwriters  and  merchants,^* 


B 

ness 


peets  any   class  of  assurance  busi-  Cavalicant  v.  Maynard,  in  1550,  Id. 

less  to  the  special  provisions  of  this  p.   Ixxiii.     The   case   of   Emerson   v. 

act  relating  to  that  class.     Tiie  act  Sallanova,  which  was  a  claim  upon 

(with    exception    of    sec.    36    which  an  indemnity  given  against  the  with- 

came   into   operation   on   passage   of  drawal  of  a  safe  conduct  by  the  King 

act)    went   into   operation   July   1st,  of  France  1545,  is  thus  briefly  mtu- 

1910.     See    5     Earl    of    Halsbury's  tioned  in  11  Id.   p.   Ixvi.  as   having 

Laws    of    Eng.    pp.    620    et    seq.;    2  been  litigated  in  admiralty,  altliougb 

Butterworth'  20th  Cent.  Stat.  p.  430.  not  elsewliere  mentioned  in  said  vol- 

^'4  Inst.   142;   cited  in  Dowdale's  umes. 

ease.  Coke's  Rep.,  pt.  6,  46,  48,  Id.  "See  Park  on  Ins.  (4th  ed.)  xliii. 

3    Frazer,    351.      Crane    v.    Bell,    7  "« 13  New  Internat.  Ency.   (1908) 

Coke's    Inst,    (part    4)    cap.    22,    p.  p.  64. 

139,  sometimes  cited  to  this  point  as  As    to    legislation,    statistics,    etc., 

of  an  earlier  date,  Avas  a  case  where,  marine    insurance    (1912)     see    New 

according   to    Coke,    a   promise    was  International  Year  Book,  pp.  333,  et 

made     at     Dartmoutli     that     a    ship  seq.;  Id.   (1911)   pp.  360  et  seq.;  Id. 

should  pass  safely  without  taking  and  (1910_)    pp.  376  et  seq.;   Id.    (1909) 

surprising,  etc.,  which  ship  was  after  pp.  3/4,  375:  Id.   (1908)   pp.  3G1  et 

taken  by  the  Spaniards  super  altum  se(|.;    Id.    (1907)    p.   400   et   seq.;   2 

mare:    Held,  not  determinable  in  ad-  Suppl.  Americana  (1911)  "Insurance 

miralty  for  that  albeit  the  taking  was  IMarine,"   p.   668.     As  to  history   of 

upon  the  high  seas,  and  yet  the  prom-  nuu'ine,     see     8     Americana     (1905) 

ise  was  made  u|)on  the  land  and  the  "Insurance-^Marine."     As  to  increase 

action  was  at  common  law.    This  case  of  marine  insurance  in  United  States 

is,  however,  incorrectly  reported  ex-  from  1880  to  1889,  see  Harper's  Book 

cept  as  to  the  words  ""that  the  prom-  of  Facts  (1906)   "Insurance." 

ise  was  made  ui^on  land  and  within  ""  N.  Y.  Laws  1849,  c.  308,  p.  441. 

the  body  of  a  county."     6   Pul)lica-  For  wording  of  this  act,  see  note  at 

tions  of   Selden's    Soc,   y>\).   Ixxviii. ;  end  of  §  5  herein, 

see  also  Id.  pp.  129,  229.     Tlie  first  ^^  ]\f  j^^.tin's    History    of   Lloyds    & 

libel  upon  a  policy  of  insurance  is  Marine    Ins.   p.    57;    16    Ency.    Bri- 

19 


§  IVa 


JOYCE  ON  INSURANCE 


marine  insurance  having  been  carried  on  for  a  long  time  prior 
thereto  by  individual  merehants,^^  in  Lombard  street.  The  name 
"Lloyds,"  therefore,  was  identified  with  the  underwriters  and  in- 
surance, and  so  became  known  throughout  tlie  insurance  world. ^''' 
The  name  had  become  so  attached  to  the  house  as  a  resort  of  un- 
derwriters that  it  clung  to  them  when  they  removed  in  1774  to  the 
Royal  Exchange,  where,  with  the  exception  of  a  period  from  1838 
to  1844,  they  permanently  located  an  office  for  carrying  on  their 
business.  This  society  was  incorporated  by  an  act  passed  in  1871.^* 


tannica   (11th  ed.)  "Lloj'ds,"  pp.833,  Britannioa,  180;  Hopkins'  Mar.  In.«;. 

834.      See   also   11   Id.   "Insurance,"  (ed.   I8(i7)    ;i2;   Reynolds'  Life  Ins. 

subhead  "Lloyds,"  p.  661,  as  to  the  (ed.    1853)    3.      But   the   statute   of 

practice  of  insurance  at  Lloyds  be-  1719,  6  George  I.,  chapter  IS,  would 

inj?  the  earliest  which  was  successful  warrant  the  inference  that  corpora- 

as   business,   etc.     See   also   11   New  tions  had  carried  on  insurance  as  a 

Internat.  Encv.    (1903)   "Lloyds,"  p.  business  Ions:  before  its  date,  althouri:h 

398,  12  Id.  (1908)   "Lloyds,"' p.  368.  Watford's  Insurance  Guide   (2d  ed. ) 

"In  the  time  of  William  HI.  and  10,  speaks  of  the  two  companies  a- 

of  Queen  Anne,  Lloyd's  Coffeeliouse,  the    first    marine    corporations.      See 

at  the  corner  of  Abchurch  lane,  in  further  on  first  point  §§  325  et  scq. 

Lombard  street,  became  the  celebrat-  herein. 

ed  resort  of  seafaring  men  and  those  ^^  As  to   Lloyds;   competition   and 

that  did  business  with  them.     There,  conflict*  within    England,    ending    in 

and  subsequently  in  Po]je's  Head  Al-  1720   in   compromise   and   monopoly, 

lev,  and  ultimately  on  the  west  side  see   6   Insurance    Times    (Ncav   York 

of  the  old  Royaf  Exchange,  at  this  1873)   pp.  201-203. 

coffeehouse    congregated    the    under-  ^^34  Vict.  c.  21;  see  also  schedule 

writers  of  London.     .     .     .     Llovd's  of  act  for  fundamental  rules  of  so- 


underwriters  now  meet  and  caiTy  on 
their  business  in  spacious  rooms  over 
the  Royal  Exchange."  1  Arnould  on 
Mar.  Ins.  (9th  ed.  Hart  &  Simev) 
.sec.  77,  p.  101;  Id.  (6th  ed.  Mac- 
hichlan's)  pp.  148  et  seq. 

"The  Austrian  Llovds,   an  asocia- 


ciety. 

For  many  years  prior  to  its  act  of 
incorporation  in  1871,  Lloyds  had 
existed  as  a  voluntary  incorporation 
in  the  nature  of  a  club  consisting  of 
underwriters,  insurance  brokers,  mer- 
chants,  and  others,  for  the  purpose 


tion  for  general  commercial  and  in-    of  effecting  marine  insurance  and  for 


dustrial  purposes,  was  founded  at 
Trieste,  by  Baron  Bruck,  in  1833. 
It  has  regular  connnunication  be- 
tween Trieste  and  the  Levant,-  by 
means  of  a  fleet  of  steamers  carrying 


other  purposes.  In  1863,  under  the 
bA'-laws  then  in  force,  Lloyds  was  a 
voluntary  association,  governed  by 
certain  by-laws,  imder  wliich  a  per- 
son  once   admitted    a  member   could 


the  mails,  and  publishes  a  journal."    not  be  excluded  from  membership  ex- 


ITavdn's  Diet,  of  Dates  (25th  ed.) 
p.  835,  "Austrian  Llovd's."  See  11 
New  Internat.  Encv.  (1903)  p.  398; 
12  Id.  (1908)  p.  368. 

^^  As  to  insurance  being  carried  on 
by  individuals,  see  Richards  on  Ins. 
(ed.  1892)  sec.  5,  pp.  5,  7;  Id.  (3d 
ed.)  sec.  9;  Griswold's  Fire  Under- 
writers (ed.  1872)   11,  35;  13  Enc}^ 


cept  in  the  case  of  his  bankruptcy  or 
insolvency.  The  association  consist- 
ed of  (1)  underwriting  members  (2) 
nonunderwriting  members,  (3)  an- 
nual subscribers  and  (4)  none  but 
merchants,  shipowners,  1)anker3, 
traders,  underwriters,  and  insurance 
agents  were  eligible  as  members  of 
Llovds    or    annual  subscribers.     The 


20 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  IVa 

Their  affair.'^  are  managed  by  a  committee  appointed  from  their 
members,  wjiieli  appoints  agents  who  are  located  in  all  the  prin- 
cipal ports  of  the  world.  It  is  the  duty  of  these  agents  to  keep 
the  society  constantly  informed  of  all  matters  of  importance  re- 
lating to  the  departure  and  arrival  of  ships,  losses,  casualties,  and 
general  shipping  and  insurance  information/^  and  these  accounts 

practice   of   the    underwriting   mem-  Lloyds  v.  Harper   [1880]   16  Ch.  D. 

hers   was   to   underwrite   policies   of  290,  1  Eng.  Rul.  Cas.  686,  C.  A.;  17 

marine  insurance  for  the  benetit  of  Earl  of  Halsbury's  Laws  of  England, 

various    owners    of    property,    both  p.  339,  note  i. 

members  of  tlie  association  and  out-  "Lloyds  is  supported  by  subscrib- 

siders,    but    the    policies    with   out-  ers  who  now  pay  annually   5£  5s." 

siders      could       only      be      et¥ected  Haydn's   Diet,    of  Dates    (25th   ed.) 

through    the     agency    of    insurance  p.  835. 

brokers  who  were  either  members  of  "The  members  are  of  two  classes, 

or  subscribers  to  the  association.  The  underwriting   members   who   pay   an 

association   as  such  incurred  no  lia-  entrance  fee  of  £100  and  are  required 

bility  on  the  policies  underwritten  by  to  deposit  securities  to  the  value  of 

its  members.     In  1871  (34  &  35  Vict.  £5,000  to  £10,000  as  a  guaranty  of 

c.  xxi.;  entitled  "An  Act  for  Incor-  their    engagements,    and    nonunder- 

porating  the  IMembers  of  the  Estab-  writing  members  who  pay  a  fee  of 

lishment   or   Society   Formerly   Held  12  guineas.     Subscribers  pay  an  an- 

at  Lloyds  Coffee  House,  in  the  Boyal  nual   subscription   of  5  guineas,  but 

Exchafige,  in  the  City  of  London  for  no  entrance  fee,  and  have  no  voice  in 

the    Etfecting   of   Marine    Insurance,  the  management  of  the  affairs  of  the 

and  Generally  Known  as  Lloyds  and  association."        11      New      Internat. 

for   other   purposes").      The   society  Ency.    (ed.  1903)    "Lloyds,"  p.  308; 

was   incorporated  by  act  of  Parlia-  12  Id.   (1908)   "Lloyds"  p.  368. 

ment,  all  the  rights  of  the  committee  19  Lloyds     Agents — "The     associa- 

on    behalf    of    the    members    being  tion  appoints  agents  in  all  the  prin- 

vested  by  the  act  in  the  corporation,  cipal  parts  of  the  world,  whose  duty 

Llovds  V.  Harper   (1880)   16  Ch.  D.  is  to  forward  regularly  to  Lloyds  ae- 

290',  1  Eng.  Rul.  Cas.  686,  C.  A.  counts  of  all  departures  from  and  ar- 

lu  1871  an  act  was  passed  "grant-  rivals   at  their   ports,  as  well  as  of 

ing  to  Lloyds  all  the  rights  and  priv-  all  losses  and  casualties  and  general 

ileges    of  "a    corporation    sanctioned  information  relating  to  shipping  and 

by   Parliament."     16   Ency.   Britan-  insurance,  but   these  agents  are  ap- 

nica    (11th   ed.)    "Lloyds,"   pp.   833,  pointed  hy  tJie  corporation  of  Lloyds, 

8.34.     See    also    14  Id.   "Insurance"  and  are  not  agents  of  the  underwrit- 

subhead   "Lloyds,"   p.   661;   11  New  ers    (Wilson   v.    Salamandra    Assur- 

Tnternatl.   Encv.    (1903)    p.   398,  12  ance  Co.  of  St.  Petersburg  [1903]  8 

Id.  (1908)  p.  3G8.  Com.  Cas.  129)"  88  L.  T.  96,  9  Asp. 

"The  peculiar  value  of  such  a  pol-  M.  C.  370 ;  Id.  N.  S.  370.     17  Earl 

icy"    (Lloyds)    lies   in   the   fact  that  of  Halsbury's  Laws  of  England,  p. 

great  care  is  exercised  in  the  election  339,  note  i. 

of  members  of  the  society,  and  that  "By  the   derelict   vessels    (report) 

each  member  is  required  on  election  act  1896,  masters  of  British  ships  are 

to  deposit  securities  of  the  value  of  required    to    give    notice    to  'Lloyds 

at  least  £5,000  to  cover  his  engage-  agents  of  derelict  vessels,  which  in- 

ments."     Arnould  on  Mar.  Ins.   (9th  formation  is   published   by  Lloyds." 

ed  Hart  &  Simey)  sec.  10,  p.  17.   See  16     Ency.     Britannica     (11th     ed.) 

21 


§  IVa  JOYCE  ON  INSURANCE 

are  forwarded  by  the  agents  and  posted  ujd  in  Lloj^d's  rooms.^° 
The  information,  thus  daily  received  and  posted,  is  methodically 
compiled  and  at  once  published  in  a  newspaper  known  as  the 
"Shipping  and  Mercantile  Gazette,"  which  incorporates  therein 
what  was  formerly  "Lloyds  List,"  and  is  easily  available  by  means 
of  numbered  columns  and  indexed  volumes.-'  As  to  the  subjects  of 
insurance  undertaken  at  Lloyd's,  it  is  asserted  by  eminent  authority 
of  recent  date  that  there  is  scarcely  any  risk  that  cannot  be  insured 

"Lloyds,"  pp.  833,  834.  See  also  14  shipping"  9  Americana  (1904) 
Id.  "Insurance,"  subhead  "Lloyds,"  "Llovds;"  see  also  11  New  Internat. 
p.  661.  Ency.     (ed.    1903)    p.    398;    12    Id. 

20  These  rooms  at  Lloyds  over  the  (1908)  "Lloyds,"  p.  368. 
Royal  Exchange  are:  the  underwrit-  "Lloyds  Register  of  British  and 
ing  rooms  where  the  "slips"  are  sub-  Foreign  Shipping  is  a  society  whose 
mitted;  an  apartment  where  the  primary  object  is  the  classification  of 
latest  telegrams  are  exhibited  for  the  vessels.  It  is  managed  by  a  commit- 
information  of  members,  and  a  large  tee  composed  of  merchants,  shipown- 
reading  room  containing  tabulated  ers,  and  underwriters,  elected  at  the 
and  alphabetically  arranged  vol-  principal  ports  of  the  country, 
uraes  of  information.  1  Arnould  on  .  .  .  Lloyds  Register  maintains  a 
Mar.  Ins.  (9th  ed.  Hart  &  Simey)  large  and  highly  skilled  staff  of  sur- 
sec.  77,  p.  102.  veyors  at  the  principal  ports  of  every 

"The  books  kept  here  contain  an  country."  7  Nelson's  Ency.  (1907 
account  of  the  arrival  and  sailing  of  "Loose  Leaf"  ed.)  p.  362.  See  also 
vessels,  and  are  remarkable  for  their  11  New  Internat.  Ency.  (1903) 
early  intelligence  of  maritime  af-  "Lloyds,"  p.  398. 
fairs,"  Haydn's  Diet,  of  Dates  (25th  "A  register  of  ships  began  about 
ed.)  p.  835.  1764;  and  the  terms  'A. I.'  etc.  were 

^  Arnould    on   Mar*.    Ins.    (9th   ed.   used  about  1775.     Two  societies  (un- 
Hart  &  Simey)  sec.  77,  p.  102.  derwriters     and     merchants)      were 

As  to  "Llovds  Written  Lists,"  imited  and  one  register  issued  Oct. 
"Lloyds  Books,'"'  and  "Lloyds  Print-  1834.  Jubilee  celebrated,  Oct.  31, 
ed  Lists,"  see  1  Parsons'  Mar.  Ins.  1884.  .  .  .  Lloyds  have  many 
(ed.  1868)  12;  Hopkins'  Mar.  Ins.  signalling  stations.  First  annual  is- 
(ed.  1867)  33;  Richards  on  Ins.  sue  of  their  'Universal  Shipping 
(ed.  1892)  sec.  6;  Griswold's  Fire  Register'  published  here  May,  1886." 
Undenvriters  (ed.  1872)  14,  et  seq.,  Haydn's  Diet,  of  Dates  (25th  ed.) 
10;  1  Arnould  on  Mar.  Ins.  (Per-  p.  835.  "Earliest  copv  extant"  is 
kins'  ed.  1850)  83,  84,  *82.  *83,  sec.  dated  1761-65-66,  11  New  Internat. 
50;  Id.  (Maclachlan's  ed.  1887)  148-  Ency.  (1903)  "Lloyds,"  p.  .398.  See 
51;  14  Enev.  Britannica  (9th  ed.)  also  Id.  as  to  classification  of  ves- 
741,  title  "Llovds"  Century  Diet.  sets.  See  12  Id.  (1908)  "Lloyds,"  p. 
3490,  "Llovds."  368. 

As  to  "Lloyds  News,"  "Lloyds  "By  Lloyds  signal  station  act  1888. 
Lists,"  and  "Lloyds  Registry  of  powers  were  conferred  on  Lloyds  to 
Shipping,"  their  origin  and  history,  establish  signal  stations  with  tele- 
see  Martin's  Ilistorv  of  Llovds  &  graphic  communications"  16  Enev. 
Marine  Ins.  pp.  76,  104-120',  324-  Britannica  (11th  ed.)  Lloyds,"  pp. 
354.  833,   834.     See   also    14   Id.    "Insur- 

"Lloyds  Registry  is  an  independent   ance,''  subhead  "Lloyds,"  p.  661. 
association   for   the   classification   of 


SOURCES  AND  ORIGIN  OF  INSURANCES  §§  IVb,  IVe 

against  by  that  corporation,  and  that  ahiiost  all  insurances  in  the 
United  Kingdom  are  framed  on  Lloyd's  policy.^ 

§  IVb.  Marine  insurance:  summary. — We  have  traced,  so  far  as 
the  main  facts  enable  us,  the  origin  of  marine  insurance,  as  well 
as  its  adoption  in  modern  times  down  to  the  date  of  the  earliest 
reported  English  case,  also  to  that  of  the  earliest  English  statute, 
mentioned,  in  addition,  the  statutes  in  England,  down  to  the  pres- 
ent time,  relating  to  the  subject,  together  with  a  brief  statement  of 
some  other  facts  bearing  upon  its  growth  in  that  country,  and  have 
also  considered  the  origin  and  history  of  Lloyds  in  England.  From 
the  dates  whicli  we  have  given  the  sources  of  the  law  are  easier  of 
access  to  those  who  wish  to  recur  to  principles,  and  will  be  referred 
to  hereafter,  as  far  as  necessary  in  treating  of  the  law  governing 
the  contract. 

§  IVc.  Lloyds  associations  in  United  States:  American  Lloyds. — 
As  we  have  before  stated,  a  marine  insurance  oflice  was  established 
in  the  United  States  in  1754  in  New  York,  which  did  underwrit- 
ing under  Lloyds  system.^  A  case  was  also  decided  in  South  Caro- 
lina in  1802,  upon  a  policy  issued  in  1777  by  the  South  Carolina 
Insurance  Company,  which  was  formed  by  several  subscribers  or 
members  upon  lines  somewhat  similar  to  the  plan  of  some  of  the 
later  Lloyds  associations  or  underwriters  in  the  United  States. 
And  in  a  case  decided  in  New  York,  in  1806,  the  United 
Insurance  Company  were  insurers  on  the  cargo  and  freight, 
and  S.  and  twenty-two  others  were  separate  underwriters  on 
the  ship  under  a  policy  issued  in  1798.*  It  was  not.  how- 
ever, until  the  latter  part  of  the  nineteenth  century  that  asso- 
ciations designated  as  "American  Lloyds"  and  also  by  various 
names  using  the  word  "Lloyds"  as  a  part  thereof,  organized  in  any 
number  in  this  country.  But  for  a  number  of  years  thereafter 
they  were  before  the  courts  principally,  though  not  exclusively,  up- 
on the  question  of  their  right  to  do  business  which  was  opposed 
under  state  insurance  laws.  As  long  as  tliey  were  not  under  super- 
vision or  control  of  the  insurance  departments  they  flourished,  and 
this  seems  to  have  been  especially  true  in  New  York,  where  they 
were  expressly  exempted  for  a  time,  and  were  so  favored  that  they 
were  in  1892  granted  certain  privileges.^ 

^  17   Earl  of  Halsbury's  Laws   of  *  The    general    provisions    of    the 

England,  pp.  340,   r)12;   examine  1-t  New  York  Insurance  Laws  of  1892 

Eney.  Britannica   (11th  ed.)   661.  ( fn.s.  Laws  N.  Y.  1892,  c.  690,  sec.  57. 

^§  lY.,  at  end  of  section.  Approved  May   18,   1892.     In   effect 

*  United  Ins.  Co.  v.  Scott,  1  Johns.  Oct.   1.   1892)    were   expressly   made 

(N.  Y.)  106.  not  applicable  "to  any  individual  or 

23 


§  IVc  JOYCE  ON  INSURANCE 

A  case  was,  however,  determined  in  1898  in  that  state,  wherein 
the  protection  afforded  by  the  statute  of  1892  was  denied  a  Lloyds 
association.  It  was  as  follows:  Certain  individuals  had,  about 
six  months  prior  to  October  1,  1892,  organized  thirty  different 
Lloyds  associations  identical  in  form,  except  that  the  names  dif- 
fered, with  one  attorney  and  a  general  manager  for  the  whole. 
The  original  organization  was  not  made  for  the  bona  fide  purpose 
of  conducting  the  insurance  business  through  the  thirty  different 
organizations,  but  for  the  purposes  of  sale  to  purchasers  to  be 
found.  Such  original  associators  were  not  actually  engaged  in 
business,  and  were  not  within  the  protection  of  the  statute,  and  an 
assignee  or  transferee,  in  1894,  of  the  rights  of  the  original  associa- 
tors, said  original  associators  having  then  resigned  and  so  sus- 
pended business,  was  held  to  take  no  better  right  than  the  assignor, 
and  so  was  unlawfully  engaged  in  transacting  the  business  of  in- 
surance, and  was  not  within  the  statutory  exception.^  This  case 
was  cited  in  a  decision  rendered  in  1910,  where  four  individuals 

pai'tnership  or  association  of  under-  death,  retirement,  or  withdrawal  of 
writers  known  as  Lloyds,  or  as  in-  any  such  underwriters,  or  by  the  ad- 
dividual  underwriters  which,  at  the  mission  of  others  to  said  assoeia- 
time  of  the  passage  of  this  chapter,  is  tion'  "  Laws  1892,  c.  690,  57,  Laws 
lawfully  engaged  in  the  business  of  1894,  c.  684.  The  privileges  con- 
insurance  within  this  state,  and  not  fei-red  upon  such  Lloyds  comijanies, 
required  by  law  to  report  to  the  su-  and  not  before  especially  referred 
perintendent  of  insurance  or  the  in-  to,  are  described  as  consisting  'of  an 
suranee  department,  or  subject  to  exemption  from  the  conditions  and 
their  supervision  or  examination,  nor  prohibitions  prescribed  and  provided 
to  any  such  association,  notwith-  bj^  section  54  of  said  chapter  690, 
standing  any  change  hereafter  made  Laws  1892,  whereby  they  may  trans- 
therein  by  the  death,  retirement,  or  act  the  business  of  fire  insurance  and 
withdrawal  of  any  such  underwriters,  issue  policies  in  the  state  of  New 
or  by  the  admission  of  others  to  such  York  without  being  possessed  of  the 
association."  capital  required  of  a  lire  insurance 

The  N.  Y.  Laws  of  1894,  c.  684,  corporation    doing    biLsiness    in    this 

see.  57,  changed  the  words  in  the  law  state,  and  invested  in  the  same  man- 

of  1892;  "at  the  time  of  the  passage  ner,  and  without  a  certificate  to  the 

of  this   chapter"   is  lawfully   to   the  effect  that  they  have  complied  with 

words:  "on  the  first  day  of  October,  all  the  provisions  which  a  fire  insur- 

1892  was"  lawfully.     This  law  went  ance   corporation    doing   business   in 

into  effect  IMay  12,  1894.  this  state  is  required  to  observe,  and 

Lloyds  associations  were  so  favored  that  the  business  of  insurance  speci- 

in  New  York  "that  those  which  on  fled  therein  mav  be  safelv  intrusted 

October  1,   1892,  were   lawfully   en-  to   them.'"     Balli   v.   White    (1897) 

gaged  in  the  business   of  insurance  47  N.  Y.   Supp.   197,  203,  21  Misc. 

were  granted  certain  privileges,  and  285,  292,  per  McAdam,  J. 
exempted    from    supervision    by   the       ^  People  v.  Loew,  52  N.  Y.  Supp. 

insurance    department,    and    not    re-  799,  23  Misc.  574,  44  N.  Y.  Supp.  42, 

quired    to    report    thereto,    'notwith-  19  Misc.  248,  26  Civ.  Proc.  132. 
standing  anv  change  made  therein  by 

"24 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  IVc 

claimed  "to  own  a  sort  of  charter  or  franchise  to  do  business  as 
individual  underwriters,  under  the  name"  of  the  New  York  & 
New  En[!,land  Underwriters  at  Lloyds  of  New  York  City,  ''which 
they  used  as  merchandise,  granting  rights  to  do  business  there- 
under to  successive  individuals,  preferably,  apparently,  those  who 
are  financially  irresponsible.  These  four  so-called  owners  do  not 
underwrite  themselves,  and  in  the  contract  with  or  licenses  to 
others  carefully  protect  themselves  against  any  liability  upon  in- 
surance losses."  ' 

It  is  noteworthy,  that  Lloyds  rapidly  decreased  in  numbers  in 
that  state  from  one  hundred  and  twenty-five  companies  in  1895  to 
seven  companies  in  1904  oAving  to  their  having  been  made  sub- 
ject, to  a  certain  extent,  to  the  insurance  department.^ 

■^  In  re  Hotcbkiss,  123  N.  Y.  Supp.  of    underwriters   to    file    annually    a 

511,  138  App.  Div.  877,  per  Scott,  J.  verified  statement  of  its  affairs  with 

8  See  7  New  Internat.  Eney.  (1908)  the  superintendent  of  insurance, 

p.  640,  where  it  is  also  said  tliat  ''dur-  N.  Y.  Laws  1905,  c.  566  (in  effect 

ing    the    last    few    years,    however,  May  19,  1905),  further  amended  said 

Lloyds  have  been  appearing  in  con-  insurance    law   by   inserting    therein 

siderable  numbers  under  the  lax  pro-  two  new  sections,  requiring  (sec.  138) 

visions  of  the  lUinois  insurance  law."  every  such  individual  or  partnership, 

See  also  10  Id.  p.  685.  etc.,  to  create  and  maintain  a  reserve 

On  restriction  on  insurance  by  un-  fund  equal  to  its  liabilities.     It  also 

incorporated  associations  or  individ-  (sec.  139)  contained  provisions  as  to 

uals;  Lloyds  .associations,  see  note  in  change  of  name;  as  to  similar  names; 

25  L.R.A.  238.  establishment  of  branches  under  dif- 

Advance  in  state  supervision  over  ferent  names;  changes  in  subscribing 

Llot/ds  in  New  York,  since  the  above  underwriters    or    their    attorneys    in 

favoring  and  exempting  statutes  of  fact;    false    or    fraudulent    reports; 

1892  and  1894  appears  from  the  fol-  right  of  attorney  general  to  enjoin ; 

lowing  enactments :  also  certain  exceptions  as  to  attorneys 

N.  Y.  Laws  1902,  e.  297   (in  effect  in  fact  or  agents;  failure  to  comply 

April  2,  1902),  amended  the  preced-  Avith    requirements    a    misdemeanor, 

ing  laws  by  requiring  every  such  as-  These    two    new  sections   (sees.  138, 

sociation    'lawfully    engaged    in    the  139)      were     made    applicable    (sec. 

business    of    insurance   in   that   state  162)   to  every  individual  or  partnev- 

on  April  1,  1902,  to  file  on  Sept.  1,  ship    or    association    of    individuals 

1902,  with  Uie  superintendent  of  in-  known  as  Lloyds    or    as    individual 

surance     a     verified     copy     of     its  undenvriters   then    authoiazed   to   do 

original  articles  of  association  or  eo-  marine  insurance  business  in  the  state 

partnership     agreement,     with     any  as   defined    (sec.   loO)    and  to  every 

'amendments,  staling  where  its  princi-  agent    or    attorney   in    fact   for    the 

pal  office  was  located,  the  kinds  of  same. 

business  in  which  engaged,  and  the  N.  Y.  Insurance  Law,  Consol.  Laws 

name  or  names  under  which  it  was  or  1909,  c.  33,  sec.  57   (as  amended  by 

had  been  doing  business.  Laws  1909,  c.  240,  sec.  48,  in  effect 

N.  Y.  Laws  1903,  c.  471  (in  effect  April   22,   1909),   contains  the   same 

May  7,  1903),  further  amended  said  provision  or  exemption  as  the  above 

insurance  laws  by  requiring  such  in-  law  of  1892,  as  amended  by  the  Law 

dividual    partnership    or   association  of  1894,  and  also  requires  such  asso- 

25 


§  IVc  JOYCE  OX  INSURANCE 

In  Alabama  under  the  Civil  Code  of  1907,  Lloyds  are  permitted 
to  transact  insurance  business,  other  than  life,  upon  the  same  terms 
and  conditions  as  other  companies  regularly  organized,  but  if  they 

are  without  paid  up  cash  capital  they  are  required  to  make  a  de- 

|)o.sit.^    In  Louisiana,  under  the  statute  of  1902,  a  deposit,  etc.,  is 

required  of  Lloyds  associations.^"  In  Maine  under  the  statute  of 

elation   to    file    annually    a  verified  (e)  as  to  reserve  fund;  (f)  as  to  in- 

statemeut  of  its  affairs  with  the  su-  vestment    of    assets;     (g)    requiring 

lierintendent  of  insurance.    Sees.  142.  each  underwriter  to  be  worth  in  his 

143,    162,    are    same    as    sees.    138,  own  right  not  less  than  $20,000  above 

139,    162,    of    above    Laws    of    1005.  all    liabilities.     Provisions   were   also 

N.   Y.   Laws  1910,  c.   638    (in  effect  made    as    to    change    of    location    of 

June  24,  1910),  amends  c.  33,  Laws  principal  office;  as  to  change  in  un- 

1909      (constituting      Consol.      Laws  derwriters,      inter-insurers,      or      at- 

1909,  e.  28),  by  adding  new  article  tornej-s  in  fact;   and  as  to  deposits 

(art.  10,  Lloyds  and  Inter-insurers)  and    liability    in    reports.     See.    303 

which  provides   (sec.  300)    that  not-  specifies   what   other   sections   of  the 

withstanding  sec.   54,   c.   28,   Consol.  chapter  are  applicable. 

Laws,   1909,    '"persons,    partnerships,  N.  Y.  Laws  1911,  c.  502  (in  effect 

()r  associations  which  on  Oct.  1,  1892,  July  1,  1911)    sec.  300,  changed  tlic 

were  lawfully  and  actually  engaged  clause  in  the  Law  of  1910  as  to  ob- 

in  the  business  of  insurers  as  Lloyds  taining  the  certificate,  under  sec.  301 

or    inter-insurers    or    individual    un-  thereof,  to  obtaining  a  license  under 

derwriters,  may,  after  Jan.  1,  1911,  sees.  304,  305,  of  Laws  1911,  Laws 

continue    to    do    the   business    of   in-  1911  only  amended  sec.  302  of  Laws 

surers  in  this  state,  provided"   they  of     1910,     by     adding     the     word< 

then  became  authorized  to  engage  in  "licensed  under  the  preceding  section'' 

the  business  of  insurance  as  Lloyds  to   the  headline.      It  also   added  the 

or  inter-insurers.  Agents,  subagents,  words,  "who  claim    that    they    were 

and  representatives  of  such  persons,  lawfully  and  actually  doing  the  busi- 

etc.,   were   included.     Noncompliance  ness  bt  insurance    in    this    state    as 

with  provisions  of  article  constituted  Lloyds  or  inter-insurers  on   October 

a    misdemeanor.     Sec.    301    required  1,    1892."      Otherwise    provisions    of 

(a)  an  application  for  a  certificate;  Law  of  1911,  sec.  302,  were  same  as 

(b)  a  verified  statement  of  condi-  Laws  1910,  sec.  302.-  Laws  1911,  e. 
tion;  (c)  an  agreement  providing  for  502,  added  two  new  .sections;  sec. 
personal  service  of  process;  (d)  304  being  general  provisions  affect- 
"such  other  matters  as  the  superin-  ing  Lloyds  and  inter-insurance  as- 
tendent  of  insurance  may  prescribe."  sociations  organized  after  July  1, 
An  examination  of  the  financial  con-  ]911,  and  sec.  305  being  provi- 
dition  of  such  persons,  etc.,  and  the  sions  for  the  admission  of  Lloyds  and 
granting  of  a  certificate  of  authority  inter-insurers  associations  domiciled 
was  also  provided  for.  Sec.  302  in  other  states.  Said  Law  of  1911 
contained  provisions  (a)  as  to  filing  also  provided  for  the  forwarding  of 
original  verified  certificate  of  articles  process  by  the  superintendent  of  in- 
of  association,   copartnership   agree-  surance. 

ment,     or    inter-insurance     contract,  ^  2  Ala.  Code  (Civ.)  1907,  sec.  4568 

with  amendments;    (b)    as  to  chang-  (2592)  Id.  4563  (2587). 

ing    name;     (e)     as    to    establishing  i"  Wolff's  Const.  &  Rev.  Laws  La. 

branches;   (d)   as  to  similar  names;  1904,  p.  884  (acts  112,  1902,  p.  181. 

26 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  IVc 

1903,1^  Lloyd's  associations,  for  the  purpose  of  transacting  marine 
insurance  business,  were  granted  all  rights,  powers,  privileges,  etc., 
under  the  Massachusetts  laws  ^^  these  associations  are  authorized 
to  transact  insurance  business,  other  than  life.  The  ]Minne- 
sota  Statute  also  contains  provisions  as  to  Lloyd's  associations."  In 
Tennessee,  in  1896,  companies  on  Lloyd's  plan,  ^'whereby  each  as- 
sociate underwriter  becomes  liable  for  a  proportionate  part  of  the 
whole  amount  insured  by  policy/'  were  authorized  to  do  business, 
but  were  required  to  make  deposit  ''where  they  have  not  an  actual 
paid-up  cash  capital."  ^* 

In  Mississippi  in  1910  a  law  was  enacted  entitled  "An  Act  to 
Raise  Revenue  and  to  More  Clearly  Define  what  are  Insurance 
Companies  in  This  State  and  to  Place  a  Tax  and  Bring  a  Class  of 
Companies,  Associations,  and  Organizations  under  Supervision^  of 
the  Insurance  Department,  Heretofore  Claiming  Exernption,"  ^^ 
and  it  included  within  fire  and  marine  insurance  companies  or  cor- 
porations "all  corporations,  partnerships,  individuals,  associations, 
or  organizations,  known  as  Lloyds,  engaged  in  placing,  writing,  or 
soliciting  any  and  all  kinds  of  fire  and  marine  insurance."  Said 
statute  of  1910  authorized  such  corporations,  etc.,  known  as  Lloyds, 
to  solicit,  sign,  issue,  deliver,  and  to  execute  policies  of  insurance, 
contracts,  and  guaranties  against  loss  by  fire,  water,  lightning,  or 
tornado,  etc.  It  also  made  it  unlawful  for  any  corporation,  part- 
nership, individual  association,  known  as  Lloyds,  to  solicit  insur- 
ance, make  such  contracts  and  guarantee  against  loss  by  fire,  water, 
lightning  or  tornado:  rate  or  classify- risks,  etc.,  except  upon  au- 
thority of  the  commissioner  and  compliance  with  the  law.^^ 

Another  reason  given  for  the  early  failure  of  so  many  of  these 
associations  was  that  it  was  not  due  to  the  practice  of  individual 
underwriting  in  itself,  but  that  the  ostensible  reserve  for  the  pro- 
tection of  the  policy  holders  was  usually  of  little  or  no  value."  And 

^^  P.  471   e.  49,  sec.  1.  "luter-insurance  contracts  to  be  re- 

12  Rev.  Laws  1902,  1908,  p.  1211  ported  under  oath  once  a  year— Tax- 
(R.  L.  118,  sec.  86),  sec.  91,  cited  in    ation  of  same." 

Opinion  of  the   Justices,   190   ]\Iass.  ^^  See  State  v.  Alley,  96  Miss.  720, 

603,  85  N.  E.  .545,  upon  point  of  ex-  51   So.   402,   39   Ins.  L.  J.   629.     In 

cise  tax  against  "Individuals"  and  "a  this  case  an  organization  of  inter-in- 

person"   as  well   as   corporations.  snrcrs  claimed  that  they  were  not  do- 

13  Minn.  Rev.  Stat.  Suppl.  1909,  ing  insurance  business  in  the  state, 
Annot.  p.  592,  sec.  (1647—)  1  (Minn,  and  that  they  were  not  an  "insurance 
Laws  1913,  c.  534,  sees.  1-4,  pp.  772-  company,  corporation,  partnership, 
3.)  association    of    individuals,"    within 

1*  Shannon's  Annot.  Code  Laws  Code  1906,  sec.  2559.  See  §  336a 
1896    (p.  766),  sec.  3298.  herein. 

15  Chap.  103,  Laws  1910,  p.  76,  "10  New  Intemat.  Ency.  (1908) 
amending     Code     1900,     cliap.     69.  jp.  685. 

27 


§  IVd  JOYCE  ON  INSURANCE 

there  would  seem  to  be  no  reason  why  such  practice  of  individual 
underwriting  shoidd  not  be  successful,  even  though  subject  to  law- 
ful state  supervision  intended  to  protect  the  insured. 

The  plan  of  insurance  or  the  system  upon  which  these  associa- 
tions carry  on  their  business,  and  the  distinction  between  the  Eng- 
lish Lloyds  and  the  Lloyds  in  the  United  States,  will  be  herein- 
after fully  considered. 

§  IVd.  Inter-insurance:  reciprocal  insurance:  inter-indemnity 
contracts. — The  contract  of  inter-insurance  involved  in  a  Missis- 
sippi cafie,  decided  in  1910,  is  declared  to  be  the  first  of  its  kind  ever 
reviewed  by  any  court.^* 

In  Missouri  a  case  was  decided  in  1912,  in  w^hich  it  appeared 
that  in  1906  certain  copartnership  firms  and  individuals  organized, 
under  the  name  of  "The  Printers'  and  Publishers'  Reciprocal  Un- 
derwriters at  Printers'  Exchange,"  for  the  purpose  of  insuring 
each  other's  business  establishments.  One  hundred  and  seven  dif- 
ferent concerns  in  different  cities  became  members  of  the  associa- 
tion.^' 

In  California  a  statute  was  passed  in  1911  entitled  "An  Act  De- 
fining Certain  Classes  of  Contracts  for  the  Exchange  of  Indemnity, 
Prescribing  Regulations  Thereof,  and  Fixing  a  License  Fee,"  and 
it  provided  that  "individuals,  partnerships,  or  corporations  may  ex- 
change reciprocal  or  inter-insurance  contracts  providing  indemnity 
among  each  other  from  fire  loss  or  from  other  damage  to  their- 
property  in  accordance  with"  the  provisions  of  the  act.^° 

"  State  V.  Alley,  96  Miss.  720,  51  Mo.  Laws  1913,  p.  382 ;  Mo.  Laws 
So.  462,  39  Ins.  L.  J.  629,  per  Mayes,    1915,  p.  321. 

J.  As  to  inter-insurance:  It.s  legal  2°  Cal.  Stat.  1911,  c.  669  (in  effect 
aspects  and  business  possibilities,  see  July  1,  1911),  Stat.  &  Amdts.  to 
Article  by  Mr.  Robert  J.  Brennen,  in  Codes  of  Cal.  1911,  p.  1279;  Id.  (ex- 
58  Cent.  "Law  Jour.  pp.  323-329.  tra   session   1911,   p.   Ill)    chap.   22 

"Isaac  H.  Blanchard  Co.  v.  (approved  Dec.  24,  1911).  Plans 
Hamblin,  162  Mo.  App.  242,  144  S.  known  as  reciprocal  or  inter-insur- 
W.  880.  ^nce  or  interindemnity  contracts  be- 

On  contracts  bv  which  individuals  ^ween  tirms  and  corporations  not  af- 
or  firms  undertake  to  indemnify  each    ^^(^^^(^  by  Cal.  Stat.  1913,  c.  177,  sec. 

other   as   insurance,   see   note   in   47        '  P'         '  ^;,.?^*^'  ^'  ?i-,^^?TV 
LRA  (NS)   "^97  '^''   ^       1909,  p.   311    (Herrons 

'  Inter-indemnity    contracts    not    to  ^^^jf'' ^f^^'^^''':^^^^^'  ^,^^^^^^ 

...   ,     •  •        ,      .  .     ,,.  1910,  Lit.  o8,  c.  17,  sec.  17).  does  not 

constitute  insurance  business  m  Mis-  „      i     (u  i  1"       •   i. 

.      rpu-  1  •  ^  ^PPly     to  purely  co-operative  inter- 

soun      This   covers   making  of  con-  i^Surance   and   reciprocal   exchanges 

tracts  between  individuals,  firms,  or  ^^^.^ed  on  by  members  thereof  solely 

corporations      providing      indemnity  for  the  protection  of  their  own  prop- 

among  each  other  from  casualty  or  erty,  and  not  for  profit." 
other  contingency,  or  from  fire  loss        tnter-insurance :      See    Laws    Me. 

or  other  damage  to  their  own  prop-  1913,    p.    172,   c.    135;    Laws    Minn, 

erty.     Mo.  Laws  1911,  p.   301.     See  1913,  p.  671,  c.  464. 

28 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  V. 

§  V.  Origin  of  mutual  insurance  system. — The  mutual  insurance 
system  is  claimed  to  be  of  very  ancient  origin.  This  claim  is  based 
upon  the  assumption  that  there  is  an  analogy  between  it  and  the 
Friendly  Societies  of  England;  that  bet\Yeen  the  latter  and  the 
guilds  there  is  a  great  similarity,  and,  to  go  one  step  farther,  the  ori- 
gin of  guilds  is  attempted  to  be  traced  to  those  artificial  alliances  or 
clubs  which  existed  in  ancient  times,  in  China,  among  the  Teutons, 
the  German  tribes  of  Scandinavia,  the  ancient  Greeks  and  Romans, 
and  the  early  Christians,  for  mutual  protection  and  assistance  in 
various  exigencies,  and  for  other  purposes.  The  eflort,  however,  to 
discover  the  origin  of  guilds,  as  well  as  of  the  word  ''guild"  itself, 
has  been  productive  so  far  only  of  disagreement.^  It  is  not  neces.^ary. 
though,  to  inquire  here  as  to  the  origin  of  guilds  or  of  the  word 
''guild."  It  is  sufficient  that  the  essence  of  the  guild  was  mutual 
protection  or  benefit,  social,  political,  or  pecuniary.  We  may  also 
note  tliat  guilds  are  said  to  be  mentioned  in  the  laws  of  Ina  and 
Alfred.2  While  Brentano^  speaks  of  the  guilds  shown  by  the  Judi- 
cia  Civitatis  Lundoniae,  the  statutes  of  the  London  guilds  reduced 
to  writing  in  King  Athelstan's  time,*  and  says  one  might  call  these 
guilds  "assurance  companies  against  theft,"  owing  to  their  regula- 
tions against  violence,  especially  of  theft;  and  guilds  have  also 
been  defined  as  "the  nmtual  assurance  societies  of  the  poorer 
classes."  *  The  Fortnightly  Review^  states  that  the  "Fraternitie," 
or  "Bretherede,"  of  "St.  James  at  Garlekhith,  London,"  begun  in 

1  Lambert's   Two    Thousand   Years  ^  gj-pntano  on  Guilds,  etc.  11. 

of  Guild  Life,  and  see  bibliographic  *  925  a.  d.  to  941  a.  d. 

note    appended    thereto;     11    Encv.  ^  Baton's  Benefit  Societies  and  Life 

Britannica,  259,  "Guilds;  "  9  Id.  780,  Ins.  (ed.  1888)  sec.  10;  Id.  (3rd  ed.) 

"Friendlv    Societies ;  "    12   Id.    ( 11th  sec.  10. 

ed.)     "Gilds;"    11    Id.     (11th     ed.)  As  to   Saxon  Guilds,  see  Irancis 

"Friendly  Societies,"  p.  217.     Brent-  Annals  of  Life  Assurance  (ed.  1853) 

ano   on   Guilds  and   Trades  Unions;  y.p.  27  et  seq.    See  also  chapters  on 

Old  Guilds  and  New  Friendlv  Trades  Medieval  Guilds  of  England   (188/) 

Societies,   0   Fortnightly   Review,  N.  pp.  113  et  sec].;  Jack's  Introduction 

S   Oct.  1869,  p.  391;  Workmen's  Ben-  to    History   of   Life   Assurance    (ed. 

efit  Societies.  Quarterly  Review,  Oct.  1912)    sub-title   "The   Gild   System," 

18(54,  p.  318;  Bacon's' Benctit  Socio-  pp.  15-149. 

ties  and  Life  Ins.  (ed.  1888)  sec.  10,  As   to    Guild's    Sick    Clubs    under 

Id.      (.'?rd  ed.  19041   .^^ecs.  (5,  10;   sec  German     laws     prior    to     1911,    see 

Cvclopedia    of    Fraternities     (1899)  Boyd's      Workmen's      Compensation 

pp   112  et  seq.;  Walford's  Insurance  (ed.  1913)  sec.  581:  as  to  same  under 

Guide  (2d  ed.)   3.  German   Code  of   1911,  see   Id.   sec. 

2  Ina,  In i,  or  Ine,  688  A.  D.  to  72(1  001.                                   ,.  ,     .„    ^    o 

A.  D.;  Alfred,  871  A.  n.  to  901  A.  d.  ^  Vol.  6,  N.   S.  or  Vol.   12,  0.   S. 

See  Lambert's  Two  Thousand  Years  Ludlow's  article  on  Old  Guilds,  etc. 

of    Guild    Life,    43;  Walford's  Ins.  Oct.  1869,  p.  394. 

Guide  (2d  ed.)  3. 

29 


§  V.  JOYCE  ON  INSURANCE 

1375,  provided  for  relief  in  sickness,  for  old  age,  for  burial,  arbi- 
tration clauses,  and  relief  under  false  imprisonment.  The  same 
author'  asserts  that  "the  whole  vast  group  of  Friendly  Societies 
scarcely  looks  back  beyond  the  first  act  which  authorized  the  forma- 
tion of  such  bodies  toward  the  close  of  the  last  century,  1793,  *  and 
if  the  existence  of  a  Friendly  Society  here  and  there  can  be  estab- 
lished in  the  earlier  years  of  the  century,  it  is  reckoned  a  matter 
worthy  to  be  recorded."  Notwithstanding  this  assertion,  there  is 
authority  for  stating  that  the  system  of  Friendly  Societies  in  Eng- 
land may  be  traced  to  within  a  few  years  of  the  suppression  of  re- 
ligious guilds  in  the  16th  century,  since  the  last  recorded  guild  was 
in  1628,  and  Friendly  Societies  existed  in  1634,  and  although  there 
is  no  directly  connecting  link  between  the  two,  yet  it  may  reason- 
ably be  believed  that  the  latter  are  an  outgrowth  of  the  former.^ 
Numerous  acts  have  been  passed  in  England  containing  provisions 
in  relation  to  these  societies.^" 

'Id.    391.      See    article    bv    same  (1863)  26  &  27  Vict.  c.  87,  sees.  60, 

writer  on  Guilds  and  Friendly  Socie-  68;   (1870)   33  &  34  Vict.  c.  61.  sec. 

ties,  21  Contemp.  Rev.  553,  737.  2;  (1875)  38  &  39  Vict.  c.  60;  (1870 

8  The  act  was  33  Geo.  III.  c.  54;  40  &  41  Vict.  c.  13,  sees.  16,  17; 
repealed  1855,  18  &  19  Vict.  c.  63,  (1882)  45  &  46  Vict.  c.  72,  sec. 21; 
sec.  1;  latter  act  repealed  1875,  38  &  (1883)  46  &  47  Vict.  c.  47;  (1884) 
39  Vict.  c.  60,  sec.  5,  but  see  sec.  7:  47  &  48  Vict.  c.  43,  sec.  4:  (188/)  50 
this  act  amended  1876,  39  &  40  Vict.  &  51  Viet.  c.  56;  (1888)  51  &  52  Vict. 
c.  32;  last  act  repealed  1887,  50  &  c  15,  sec.  6;  (1889)  52  &  53  Vict.  c. 
51  Vict   c   56,  sec.  17.  22.     Acts  were  also  passed  in  1819, 

9  9  Encv.  Britannica,  780,  "Friend-  1829,  1834,  1846,  1850.  1855  and 
Iv  Societies;"  11  Id.  (11th  ed.)  1876.  These  acts,  from  1819  to  1850, 
''Friendly  Societies,"  pp.  217,  221.  inclusiye,  as  well  as  the  act  of  1793 
Examine  12  Id.  p.  14,  and  see  Bib-  (already  noted),  were  repealed  by 
liography,  12  Id.  p.  17;  see  also  6  act  of  1855  (18th  &  19th  Vict.  c.  63, 
Ludlow 'on  Old  Guilds  and  New  sec.  1),  but  as  to  acts  of  1829  and 
Friendly  Trade  Societies,  Fortnioflit-  1834,  see  17  &  18  Vict.  c.  56,  and  6 
ly  Reyiew,  N.  S.  Oct.  1869,  p.  391;  &  7  Will.  IV.  e.  32  (1836),  and  as  to 
Workmen's  Benefit  Societies.  Quar-  acts  of  1846  and  1850,  see  17  &  18 
terlv  Reyiew,  Oct.  1864,  p.  318:  16  Vict.  c.  56.  The  act  of  1855  was  re- 
Am"  &  Eng.  Ency.  of  Law,  19;  Ba-  pealed  by  act  of  1875  (38  &  39  Vict, 
con  on  Benefit  Societies  and  Life  Ins.  c.  60),  which  was  amended  in  1876 
(ed.  1888)   16,  17.  by  39  &  40  Vict.  c.  32,  which  in  1887 

I'*  For  synopsis  of  Friendly  Socie-  was  repealed  by  50  &  51  Vict.  c.  56, 

ty  statutes  prior  to  10  Geo.  IV.  c.  56,  sec.  17;  Chronological  Table  and  In- 

see  4  Crabb's  Dig.  &  Index  (of  Eng-  dex    of     Statutes     (11th     ed.)     title 

lish  Stat.  ed.  1847)  p.  257;  Id.  Part  "Friendly  Societies."     As  to  statutes 

11.  p.  653.  in   force   in  1895,   see  Id.    (13th   ed. 

A.s  to  the  acts  relating  to  Friendly  1235-1895).      See    Bunyon    on     Ins. 

Societies    which    were    in    force    in  (ed.  1854)  176,  177.  As  to  the  assur- 

1889.  see:     (1833)  3  &  4  Will.  TV.  c.  ance    companies    act.    1909    (9    Edw. 

14,  sec.  25;   (1854)   17  &  18  Vict.  c.  VII.  c.  49,  sec.  36)  ;.the  Friendly  Soc. 

56;    (1860)    23   &   24   Viet.   c.   137:  act  1896  (8  Edw.  VII.  c.  32),  amd'g 

30 


SOURCES  AND  ORIGIN  OF  INSURANCES  %  V. 

The  purpose  of  Friendly  Societies  under  the  English  insurance 
corporation  act  of  1892  was  mainly  by  voluntary  subscriptions,  with 
or  without  donations,  for  relief  in  sickness  or  other  infirmity,  in 
old  age,  widowhood,  or  orj^hanhood,  for  payments  on  birth  or 
death,  for  payments  in  distress,  to  seekers  for  employment,  and  in 
case  of  damage  or  shipwreck  at  sea,  for  endowments  and  for  insur- 
ance of  tools  against  fire,  and  these  societies  include  under  the  act 
every  such  corporation  not  required  by  law  to  be  licensed  for  the 
transaction  of  insurance,  and  if  the  contract  it  offers  to  undertake 
is  a  contract  of  insurance,  the  society  is  an  insurance  corporation." 

In  so  far,  then,  as  the  object  of  guilds  and  Friendly  Societies  is 
mutual  benefit  and  assistance,  pecuniary  and  otherwise,  there  are 
many  points  of  resemblance  in  them  to  the  mutual  insurance  sys- 
tem, even  if  there  were  no  other  connecting  link.^^  Taking  this 
analogy  as  a  basis,  then,  upon  the  question  of  priority  between  this 
^3'stem  of  insurance  and  marine  insurance,  there  is  more  direct  and 
certain  evidence  in  favor  of  the  mutual  system.  Tlius,  Hopkins, ^^ 
who  gives  credit  therefor  to  a  paper  read  ^*  before  the  Institute  of 
Actuaries,  in  1864,  notices  to  some  extent  a  Latin  inscription  on  a 
marble  slab  found  at  Lanuvium,  an  ancient  town  in  Latium,  a  short 
distance  from  Rome,  dated  during  the  reign  of  Hadrian,  a.  d.  117- 
138;  This  inscription  shows  that  the  club  Avas  ostensibly  for  the 
worship  of  Diana  and  Antinous,  but  in  reality  it  was  to  provide  a 
sum  at  death  of  a  member  for  burial.  There  was  also  an  entrance 
fee  provided.  It  was  constituted  under  a  decree  of  the  Roman  sen- 
ate and  people,  granting  it  the  privilege  of  assembling  and  acting 
collectively.  It  met  not  more  than  once  a  month ;  whoever  omitted 
payment  for  a  certain  number  of  months  had  no  claim  on  the  so- 
ciety for  his  funeral  rites,  although  he  should  have  made  a  will. 
No  claim  was  allowed  by  the  club  to  any  patron,  patroness,  master, 

act  1890  (59  &  60  Vict.  e.  25,  sec.  2),  Friendly  Societies— statistics  show- 
and  the  collecting  society  and  indus-  ing  membership,  funds,  etc.  1897- 
trial  assurance  companies  act  1896  1907,  in  United  Ivingdom,  see  Webb's 
(59  &  60  Vict.  c.  26,  which  consoli-  New  Diet,  of  Statistics  (ed.  1911), 
dated  the  enactments  relating  to  pp.  292  et  seq.  See  also  as  to  Friend- 
Friendly  Societies  and  industrial  as-  ly  Societies,  Jack's  Introduction  to 
surance  companies),  see  Butter-  History  of  Life  Assurance  (ed. 
worth's  20  Cent.  Stat,  of  England,  1912), "pp.  223  et  seq.  • 
pp.  243;  2  Id.  p.  446.  As  to  present  ^^  As  to  development  of  the  insur- 
statutes  of  England,  see  also  15  Earl  ance  idea  from  the  early  guilds,  Ger- 
of  Halsburv's  Laws  of  England,  pp.  many,  see  Boyd's  Workmen's  Com- 
119-204;  Chitty's  StAtutes  of  Eng.  pensation  (ed.  1913)  see.  30. 
see  note  12.  pp.  17,  18,  §  IV.  herein.  ^^  Hopkins'   Mar.   Ins.    (ed.   1867) 

"  Act  1892,  55  Vict.  c.  39 ;  Hunt-  7-11. 

ers'  insurance  corporation  act  1892,  ^*  By  M.  N.  Adler. 
12,  13. 

31 


§  V. 


JOYCE  ON  INSURANCE 


mistress,  or  creditor  except  lie  were  named  in  a  will,  and  no  funeral 
rites  could  be  had  by  one  who  had  inflicted  death  upon  himself. 
The  resemblance  between  this  club's  system  and  that  of  the  modern 
benefit  society  is  noticeable.  Hopkins  remarks  that  it  is  "probably 
the  nearest  api)roximation  on  record  to  the  insurance  system  dur- 
ing the  Roman  period,  and  a,«  containing  the  feature  of  a  present 
payment  for  a  larger  deferred  sum,"  but  he  adds  that  it  difiers  from 
insurance  in  some  important  respects.  There  also  existed  in  the 
third  century,  at  Alexandria,  a  Christian  brotherhood  for  nursing 
the  sick.^*  Other  instances  might  be  mentioned,  but  the  above  are 
sufficient  to  show  that  this  system  may  claim  more  positive  evidence 
of  an  anterior  date  when  compared  with  marine  insurance  in  this 
respect  than  can  the  latter. 

We  have  already  noted  the  granting  by  statute,  in  England  in 
1719,  monopolies  to  two  companies  for  insuring  sea  risks  and  loan- 
ing money  on  bottomry.  It  appears  that  while  these  monopohes 
existed,  clubs  or  associations  of  shipowners  were  established  in  many 
of  the  seaports  of  England  for  the  insurance  of  ships  of  their  mem- 
bers, being  in  fact  mutual  insurance  clubs.^^    These  clubs,  however, 


i^Bi-entano  on  Guilds  and  Trades 
Unions,  9. 

16  Marshall  on  Ins.  (5th  ed.)  35. 

Origin  and  history  of  mutual  in- 
surance chihs.  "In  1719  two  com- 
panies, the  London  Assurance  Com- 
pany and  the  Royal  Exchange  As- 
surance Company,  were  incorporated 
with  the  exclusive  right  of  making 
marine  insurances  in  their  corporate 
capacity.  This  monopoly  gave  rise 
to  shipowners'  clubs  for  the  mutual 
insurance  of  their  own  vessels.  In 
such  clubs  each  member  is  both  as- 
sured and  insurer;  he  is  insured  as 
to  his  own  property  in  the  club  by  all 
the  other  meml)ers  in  proportion  to 
their  respective  properties  in  it,  and 
he  is  at  the  same  time  an  insurer  in 
the  proportion  of  his  own  property 
in  the  club  for  the  property  of  eacli 
of  the  others,  their  mutual  agreement 
being  the  consideration  of  the  con- 
tract. By  reason  of  the  monopoly  of 
the  two'  insurance  companies  aliove 
mentioned,  it  was  essential  to  the 
legality  of  the  mutual  insurance  clubs 
that  their  members  should  be  liable 
individually,  only,  each  for  his  own 
proportion  and  not  jointly,  or  one  for 


others  of  them.  Moreover  the  man- 
agers of  the  club  had  no  right  of  ac- 
tion against  a  member  for  premiums 
or  for  his  contributions  to  losses  paid. 
.  .  .  The  monopoly  granted  to  the 
two  insurance  companies  was  taken 
away  in  1824,  and  thenceforth  until 
1862  no  restriction  was  placed  on  tho 
formation  of  mutual  associations  or 
joint  stock  companies  to  carry  o!i 
the  business  of  marine  insurance. 
But  the  companies  act  of  1862  (25 
&  26  Vict.  c.  89,  sec.  4,  repealed  and 
re-enacted  by  the  companies  [consol- 
idation] act,  1908  [8  Edw.  VII.,  c. 
69]  sec.  [1]  2)  produced  the  result 
that,  as  a  marine  insurance  associa- 
tion is  a  comi)any  for  the  acquisition 
of  gain  within  the  meaning  of  that 
act,  it  is  when  consisting  of  more 
than  twenty  members,  an  illegal  as- 
sociation unless  registered  as  a  com- 
pany. Mutual  insurance  associations 
are  now,  therefore,  always  registered 
under  the  companies  acts,  usually  as 
a  company  limited  by  shares  or  as  a 
company  limited  by  guaranty.  .  .  . 
In  general,  it  is  now  the  association 
itself  which  is  the  insurer,  and  the 
assured's  right   of  action  is  against 


32 


SOURCES  AND  ORIGIN  OP^  INSURANCES  §  Y. 

while  they  may  still  retain  their  mutual  feature,  are  obligated  to  be 
registered  in  order  to  carry  on  the  business  of  insurance. ^''^  There 
are  many  reported  cases  in  which  such  clubs  or  associations  were 
interested,  and  in  which  various  questions,  including  that  of  their 
legality,  the  subscription  to  the  policy,  its  validity,  the  liability  of 
members,  etc.,  are  considered."  The  premiums  on  insurance  in 
these  clubs,  so  far  as  their  liability  could  be  called  premiums,  were 
merely  nominal,  the  absence  of  regular  premiums  being  one  fea- 
ture of  their  organization,  the  liability  of  each  member  being  based 
upon  the  expenses  and  their  contributions  to  losses.^^  Hopkins,^" 
speaking  of  mutual  iur^urance  clubs  or  societies,  says  their  nature 
is  that  of  benefit  societies.  He  distinguishes  the  protection  they 
afford  from  insurance  properly  so-called,  and  adds,  ''their  resem- 
blance to  true  assurance  consists  in  the  protection  mutual  clubs  give 
against  similar  losses  and  contingencies  subject  to  local  rules  and 
usages,  and  in  their  attaching  their  'rules'  frequently  to  the  com- 
mon form' of  the  policy  with  some  necessary  modifications."  In 
this  connection  we  notice  a  statement  of  Guicciardini,  before  re- 
ferred to,  of  date  loGO  or  1561,  that  a  vast  commerce  existed  be- 
tween England  and  the  Netherlands,  and  that  the  merchants  had 
"fallen  into  a  way  of  insuring  their  merchandise  from  losses  at  sea 
by  joint  contribution."    This  passage  is  cited  by  Anderson  and  also 

Ihe  association  and  not  aj^ainst  the  N.  543  (1858)  ;  Bromley  v.  Williams, 
other  members."  Earl  of  Halsburv's  32  L.  J.  Ch.  716  (18G3) ;  Turnbull 
Laws  of  England,  Vol.  17,  pp.  504,  v.  Woolfe,  9  Jur.  N.  S.  57  (1863)  ; 
505  and  notes;  4  Td.  i)p.  405  et  seq.    In     re     London     Mar.     Ins.     Assn. 

1'^  See  the  companies'  act  1862;  25  (Smitli's  case)  L.  R.  4  Ch.  611 
&  26  Vict.  e.  89;  30  &  31  Vict.  c.  26,  (1869)  ;  In  re  London  Mar.  Ins. 
sec.  9;  7  &  8  Vict.  c.  110.  See  also  Assn.  (Andrews'  case)  L.  R.  8  Eq. 
last  preceding  note  herein,  and  §  IV.  176  (1869)  ;  Re  Arthur  Average 
herein  for  English  statutes.  Assn.  L.  R..  10  Ch.  542  (1875) ;  Mar- 

As  to  illegal  insurance  companies  ine  Mutual  Ins.  Assn.  v.  Young,  43 
in  England— necessity  of  being  regis-  L.  T.  N.  S.  441  (1880)  ;  Re  Padstow 
tered'  under  companies'  acts  1862-  Total  Loss  Assn.  L.  R.  20  Ch.  D.  137 
1908,  see  17  Earl  of  Halsburv's  Laws  (1882)  ;  Lion  Assn.  v.  Tucker,  L.  R. 
of  England,  pp.  339,  340  and  notes.    12  Q.  B.  D.  176,  53  L.  J.  Q.  B.  185 

"Reed  v.  Cole,  3  Burr.  1512  (1883);  Ocean  Iron  Steamship  Ins. 
(1754)  ;  Hari'ison  v.  Millar,  7  Term  Assn.  v.  Leslie,  6  Asp.  Mar.  Rep.  N. 
Rep.  340  (1796)  ;  Lees  v.  Smith,  7  S.  226  (1887)  ;  Jones  v.  Bangor  Mut. 
Teim  Rep.  338  (1797) ;  Dowell  v.  Shipping  Ins.  Soe.  Lim.  6  Asp.  Mar. 
Moon,  4  Camp.  166  (1815);  Strong  Rep.  N.  S.  456  (1889). 
V.  Harvey,  3  Bing.  34  (1825) ;  Mead  ^^  See  Marsliall  on  Ins.  (5th  ed.) 
V.  Davison,  3  Ad.  &  E.  303  (1835);  35;  Hopkins'  Mar.  Ins.  (ed.  1867) 
Turpin  v.  BiUon,  5  Man.  &  G.  455  405. 

(1843);   London  Monetary   Advance       20  ]Xopkins'   Mar.   Ins.    (ed.   1867) 
and  Life  Assn.  v.  Smitli,*:!  Hurl.  &  .3:)1,  392. 
Joyce  Ins.  Vol.  I.— 3.  33 


§  V.  JOYCE  ON  INSURANCE 

by  Plopkins,  who  speaks  of  it  as  being  a  meager  account  of  insur- 
ance.^ 

Mr.  Justice  Bradley  ^  says  the  earliest  form  of  the  contract  of  in- 
surance was  that  of  mutual  insurance.  Griswold  ^  says  mutual  in- 
surance was  earliest  in  use,*  and  Richards  *  asserts  that  back  in  An- 
glo-Saxon times  there  is  evidence  of  attempts  among  friendly  guilds 
to  guarantee  protection  against  fire  and  other  calamities  by  mutual 
contribution,^  and  that  in  1710  the  earliest  mutual  and  stock  com- 
pany was  organized  in  London.'  Other  companies  had,  however, 
fonned  prior  thereto  on  the  mutual  plan;  thus,  in  1686,  the 
''Friendly  Society  for  Insuring  Houses  from  Fire"  was  formed;  in 
1696  the  "Amicable  Contribution  for  the  Assurance  of  Houses  and 
Goods  from  Fire"  was  organized,  and  the  policy  of  this  company 
is  said  to  contain  the  germ  of  perpetlial  insurance,  and  to  throw 
some  light  upon  the  decisions  of  the  courts  upon  successive  losses. ^ 
and  in  1706  the  "Amicable  Society  for  a  Perpetual  Assurance  Of- 
fice," a  life  company,  was  founded.  The  scheme  was  mutual,  and 
provided  for  a  fixed  rate  of  contribution,  which  was  the  same  lor 
all  members,  the  ages  of  whom  were  limited  from  twelve  to  fifty, 
afterward  changed  to  forty-five,  and  a  certain  sum  was  distributed 
each  year  among  representatives  of  deceased  meml>ers.  The  plan 
was,  however,  changed  in  1734,  so  as  to  fix  more  definitely  the  sum 
to  be  paid  at  death,  but  it  was  not  until  1807  that  the  company  be- 
gan rating  members  according  to  age  and  other  circumstances.^ 
Coming  to  the  United  States,  the  earliest  insurance  company  was 

^2  Anderson's  History  of  Com-  ^  Richards  on  Ins.  (ed.  1892)  sec.  9; 
merce,  109;  Hopkins'  Mar.  Ins.  (ed.  Id.  (3rd  ed.)  sec.  13;  Hoplvins'  Mar- 
1807)  29.  ine  Ins.  (ed.  1867)  392,  393;  13  En- 

2  Insurance  Co.  v.  Dunham,  11  cyclopedia  Britannica,  1 80-82 ;  9 
Wall.  (78  U.  S.  1)   32,  20  L.  ed.  90.    American    Cyclopedia,    424    ct    seq.; 

^  Griswold's  Fire  Underwriters  (ed.  Bliss  on  Life  Ins.  (ed.  1872)  sees.  1, 
1872)   74,  84.  2;  Reynolds'  Life  Ins.   (ed.  1853)  4, 

*  See  also  Watford's  Insurance  5;  Watford's  Insurance  Guide  (2d 
Guide  (2d  ed.)  198.  ed.)     25;    Harpers    Book    of    Facts 

^  Richards  on  Ins.   (ed.  1892)   see.  (1906)    "Insurance"      Amicable    So- 

8;  Id.  (3rd  ed.)  sec.  12,  p.  16.  ciety  was  oldest  English  company  es- 

^  See     also     Watford's     Insurance  tablished  at   Sergeants  Inn  London. 

Guide  (2d  ed.)   3,  13.  See  Historical    Sketch  of  the   Corp. 

'  See  also  13  Enev.  Britannica,  180,  for  Relief  of  Widows,  etc.,  bv  John 

182;   11   Id.    (llth   ed.) ;    Griswold's  Wm.   Wallace    (Phila.   1870) 'p.   12. 

Fire    Underwriters     (ed.    18/2)     24;  Amicable  Society  incepted  at  begin- 

Walford's  Insurance  Guide   (2d  ed.)  ning    of   1705,    obtained    charter   on 

25.                  ^  July  25,  1706,  Jack's  Introduction  to 

*  Griswold's  Fire  Underwriters  (ed.  History  of  Life  Assurance  (ed. 
1872)  20,  23.    See  §  VI.  herein.  1912)  p.  234. 

34 


I 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  V. 

the  "Philadelphia  Contributionship  for  the  Insurance  of  Houses 
from  Loss  by  Fire,"  organized  on  the  mutual  jjlan  in  1752.^° 

As  to  fraternal  societies  in  the  United  States,  including  su(!h  asso- 
ciations as  rely  upon  benefit  features  for  relief  and  aid  in  case  of 
sickness,  etc.,  or  what  are  known  as  Friendly  Societies  in  England, 
in  fact  including  all  kinds  of  benefit  and  mutual  insurance  associa- 
tions, their  history  may,  it  seems,  be  started  at  a  period  beginning 
within  the  last  half  of  the  nineteenth  century. ^^ 

^°  Griswold's  Fire  Undorwriters  Assessment  system  made  its  ap- 
(ed.  1872)  36  et  seq.  See  §  M.  liere-  pearance  about  1865  as  an  insurance 
in.  For  the  history  of  mutual  eompa-  business  aside  from  fraternal  organ- 
nies  and  their  phins  of  organization  izations,  and  has  rapidly  extended, 
in  New  York,  and  the  statutes  relat-  Harpers  Book  of  Facts  (1906)  "In- 
ing   thereto   down   to   and   including  surance." 

that  of  1849,  see  opinion  of  Denio,  C.  History,  etc.,  Assessment  com- 
J.,  in  White  v.  Haight,  16  N.  Y.  310.  panies  were  started  in  the  United 
As  to  date  of  organization  of  mutual  States  over  thirty  years  ago.  8 
companies  in  United  States  to  1845,  Americana  (tOO"))  "Insurance-life- 
see  Jack's  Introduction  to  History  assessment."  Flan  of  meeting  cost  of 
of  Life  Assurance  (ed.  1912)  p.  245.  life  insurance  by  assessments  was 
^^11  Eney.  Britannica  (11th  ed.)  fir.st  used  in  United  States  about 
p.  221.  1867  by  local  bodies.     Id. 

For  History  of  Missouri  State  In  the  United  States,  "Three  acts 
legislation  as  to  fraternal  beneficiary  passed  in  1907  relative  to  assessment 
associations  (lodge  system),  see  State  life  insurance,  deserve  special  men- 
(ex  rel.  Supreme  Lodge  K.  of  P.)  v.  tion,  namely,  those  of  Iowa  ('07  c. 
Vandiver,  213  Mo.  187,  204  et  seq.,  83),  Wiscoiisin  ('07,  e.  447),  and 
111  S.  W.  911;  Kern  v.  Supreme  Minnesota  ('07,  c.  318).  The  Iowa 
Council  Amer.  Legion  of  Honor,  167  and  Wisconsin  acts  seek  to  place  as- 
Mo.  471,  479  et  seq.,  67  S.  W.  2.")2.  sessment  life  insurance  upon  a  safer 
The  assessment  plan  or  si/sfem  of  basis,  by  forbidding  all  such  soeie- 
insurance: — A  new  form  of  benefit  ties,  other  than  fraternal  beneficiary 
organization,  said  to  have  come  into  associations,  from  transacting  any 
existence  about  1870,  assessments  business  in  the  state,  unless  they  shall 
being  levied  when  a  member  dies;  value  their  assessment  policies  or 
but  this  plan  not  having  proved  sue-  certificates  of  membership  as  yearly 
eessful,  assessments  were  then  levied  renewable  term  policies,  according  to 
in  advance  of  death.  "There  arc  the  standard  of  valuation  of  life  pol- 
about  200  mutual  benefit  insurance  licies  prescribed  by  the  laAvs  of  the 
companies  or  organizations  in  the  states."  Year  Book  of  Legislation, 
United  States  conducted  on  the  'lodge  Vol.  10  (New  York  State  Library, 
system.'  .  .  .  This  form  of  in-  Legislation  Bulletins  37-39)  ]).  323; 
surance  may  be  called  co-operative.  Review  of  Legislation  on  Insurance, 
and  has  many  elements  which  make  1907-1908,  by  S.  Huebner.  See  also 
the       organizations       practising       it    9  Id.  p.  366. 

stronger  than  the  oixlinarv  assess-  For  hislory  of  legislation  as  to 
ment  insurance  companies  having  no  assessment  insurance  companies  in 
stated  meetings  of  members."  11  Missouri,  see  Aloe  v.  Fidelity  Mutual 
Ency.  Britannica  (11th  ed.)  p.  222.  Life  Assoc.  164  Mo.  675,  681  et  seq. 
See  also  Id.  as  to  the  advantages  and   55  S.  W.  993. 

disadvantages  of  these  svstems.  When  policy  is  on  assessment  plan 

35 


§  V.  JOYCE  ON  INSLTvA>iCE 

In  New  York,  fraternal  beneficiary  societies,  orders  or  associa- 
tions were  recognized  by  the  act  of  1883,^2  ^^(j  ^q  1339  is  ^i^q\^.  fo^.. 
mation  and  regulation,  fis  a  separate  and  distinct  class,  was  first 
provided  for.^^  In  1881,  however,  an  act  ^^  entitled  "An  Act  Con- 
cerning Charitable  Benevolent  and  Beneficiary  Associations, 
Societies,  and  Corporations."  was  passed  in  that  state,  relating 
to  associations  and  societies  issuing  certificates  to  members, 
promising  to  pay,  upon  disease,  sickness,  or  other  physical  disabil- 
ity, relief  or  aid,  etc.,  to  such  member,  or  to  others  dependent  upon 
him,  or  beneficiary  designated  by  him,  where  such  money,  relief, 
or  aid,  etc.,  were  derived  from  admission  fees,  dues,  and  assessments, 
etc.  This  statute  was,  however,  not  applicable  to  life  insurance  com- 
panies; that  is,  only  certain  societies  and  associations  were  subject 
to  the  provisions  of  the  act. 

The  earliest  benefit  assurance  case  in  the  United  States  appears 
to  be  of  date  1871.^^  and  the  next  decision  seems  to  be  of  date  1875." 

While,  therefore,  the  idea  of  mutual  protection  or  mutuality  as 
a  principle  of  insurance  is  of  very  ancient  origin,  yet  it  has  not  ap- 
proximated to  true  insurance  until  within  a  comparatively  short 
time,^^  and  it  furnishes  no 'adjudications  in  this  country  until'  re- 
cent years.  It  appears,  then,  that  the  principle  of  mutuality  or 
reciprocity  had  been  applied  to  protection  against  various  emergen- 
cies certainly  before  marine  insurance  came  into  general  use,  if  not 
before  it  had  been  used  at  all,  and  that  even  in  England  it  became 
the  basis  of  incorporation  of  several  life  and  fire  companies  before 
marine  insurance  had  assumed  any  proportions  as  an  organized 
system,  and  thus,  also,  before  marine  insurance  decisions  com- 
menced, under  that  eminent  jurist.  Lord  Mansfield,  from  175G.  to 
make  that  marked  progress  which  they  then  did  in  establishing 
leading  principles  of  insurance.     Whatever  defects  may  have  exist- 

and   not    an    endowment   policy,    see  ment;  the. growth  of  the  system:  the 

Haydel  v.  ^Mutual  Reserve  Fund  Life  requirements  for  soundness  and  per- 

Assoc.  104  Fed.  718,  44  C.  C.  A.  109.  manence,  set  forth  in  a  series  of  ar- 

12  Chaj^ter  175.  tifles,    see    The    Fraternal    Monitor 

13  Laws  of  1889,  c.  520,  p.  711."  (Rodiester,  K  Y.)  in  31  pages. 
"Report    of   Board   of    Statutory  ^^  Laws  1881,  e.  2.3G. 

Consolidation,   N.   Y.  vol.   3    (1907)  ^^  ^Vetmore  v.   Mutual   Aid  &  Be- 

p.  2950.     Such  societies  are  now  gov-  nevolent    Life    Ins. ,  Assoc.    23    La. 

erned  by  Consol.  Laws,  Laws  1909,  Ann.  770. 

c.  33,  art.  7,  sees.  230  et  seq.  which  "  IVIaryland    Mut.     Ben.     Soc.     v. 

latter  is  repealed,  and  a  new  art.  7,  Clendinen,  44  Md.  429,  22  Am.  Rep. 

sees.  230-249,  added  bv  Laws  1911,  c.  521. 

198,    ]).    448 ;    sees.    242,    245,    ain'd  ^^  See    Tabor's    Three    Systems   of 

Law.s  1913,  c.  410.  Life  Ins.  11,  120  et  seq. 
For  historv  of  fraternal  develop- 

36 


SOURCES  AND  ORIGIN  OF  INSURANCES      §  Va 

ed  in  the  infancy  of  the  assessment  system  or  mutual  system  of  in- 
surance, great  strides  have  been  made  toward  placing  the  same  on 
a  scientific  basis,  so  that  now  some  of  the  largest  and  most  success- 
ful companies  are  mutual  companies.^^ 

§  Va.  Origin  of  cattle  insurance  societies. — It  is  proper  to  men- 
tion here  the  origin  of  cattle  insurance  societies,  which  in  their  con- 
stitution and  management  resemble  Friendly  Societies.  They  were 
introduced  during  the  panic  caused  by  the  cattle  plague,  and  were 
established  and  regulated  under  the  Friendly  Societies  act  of  ISTo.^'^ 
Their  purpose  is  to  provide,  by  insurance  against  loss  of  neat  cattle, 
sheep,  swine,  horses,  and  other  animals  by  death  from  disease  or 
otherwise.^  In  New  York  the  first  general  law  which  provided  for 
insurance  upon  the  lives  of  domestic  animals  was  passed  in  1853.^ 
It  is  noteworthy,  however,  that  in  1873  it  was  declared  in  a  New 
York  periodical  that  every  attempt  or  trial  that  had  been  made  to 
introduce  or  conduct  ''live  stock  insurance"  or  "cattle"  insurance 
in  the  United  States  had  proved  an  utter  failure,  and  had  resulted 
in  the  downfall  of  the  companies  who  had  endeavored  to  create  this 
class  of  insurance.^  But  coming  down  to  1889  we  find  that  the  laws 
of  that  state  *  provided  for  the  organization  and  regulation  of  co-op- 
erative or  assessment  companies  for  insurance  of  domestic  animals, 
and  these  are  now  regulated  by  statute,^  the  Laws  of  1912  provid- 
ing for  insurance  upon  the  lives  of  horses,  cattle  and  other  live 
stock.^ 

19  See  Tabors'  Three  Systems  of  "  Co^goi  La^g,  N.  Y.  Laws  1909, 
Life  Ins.  24;  Richards  on  Ins.  (ed.  c.  33,  art.  8,  as  am'd  by  Laws  1910, 
3892)  sees.  7,  9,  p.  14.  c  318,  p.  .504;  Id.  c.  63^  see.  70,  sub- 

20  38  &  39  Viet.  c.  60,  sec.  8,  subd.  div.  8,  p.  1702;  Laws  1911,  c.  324,  see. 
2.  See  Friendly  Society  act  1896  70,  subd.  8,  p.  758.  See  Report  of 
(59  &  60  Vict,  e."  25)  ;  see.  8  (2)  ;  15  Board  of  Stat.  Consol.  N.  Y.  vol.  3 
Earl  of  Halsbury's  Laws  of  England,  (1907)  p.  2950. 

p.  125,  see.  2.33.  ^  Laws  N.  Y.  1912,  e.  2.32,  p.  444 

iRapalje  &  Lawrence's  Diet.  179;  (in  effect  April  9,  1912).    /The  Laws 

15  Earl  of  Halsbury's  Laws  of  Eng-  of  1912,  c.  231,  p.  444,  provide  for 

land,  p.  125.     "Cattle  insurance  so-  insurance  upon   the  lives   of   horses, 

cieties"     are     among     the     class     of  cattle  and  other  live  stock,  or  against 

Friendly   Societies  capable  of  regis-  loss  by  theft  of  any  such  property  or 

tration""The   expression    'other  ani-  both,   but   this   amendment   is   disre- 

mals,'  it  is  conceived,  includes  only  garded  in  the   above  amendment,  c. 

animals  ejusdcra  generis."'  Id.  p.  125.  232. 

On  animal  insurance,  see  note  in  44  A  company  authorized  to  issue  pol- 

L.R.A.(N.S.)  569.  ieies  against  accidents  to  individuals 

2  Laws  N.  Y.  1853,  c.  463,  p.  887.  may    likewise   issue    policies   against 

'6   Insurance   Times    (New   York,  accidents  to  live  stock.     In  re  Penn- 

Dee.  1873)  p.  859.  sylvania  Casualty  Co.  36  Pa.  Co,  Ct. 

*  Laws  N.  Y.  1889,  c.  454.  p.  635  (Opinion  of  Att'y  Gen.). 

37 


§  VI.  JOYCE  OX  INSURANCE 

§  VI.  Origin  of  fire  insurance. — Although  Hfe  assurance  may 
claim  an  earlier  date  for  its  origin,  yet  the  idea  of  security  in 
case  of  fire  seems  to  have  followed  more  closely  upon  marine 
insurance  than  the  adoption  of  life  insurance.  It  is  said  that 
efforts  were  made  among  the  early  Saxon  guilds  to  guarantee 
protection  against  fire,  and  we  have  seen  that  Friendly  Societies 
offer  this  indemnity  in  some  measure.  It  is  also  said  that  in- 
sui-ance  was  applied  to  fire  risks  as  early  as  1G09;  that  there  is 
a  recorded  proj)osal  made  in  1635  for  the  estahlishment  of  a  fire 
insurance  company;  and  in  1670  there  is  a  record  of  a  comi)any 
formed  at  Edinburgh  for  "Friendly  Assurance  against  Fire." 
But  it  was  not,  however,  till  after  1666,  when  the  great  fire  in 
London  occurred,  that  the  idea  of  fire  insurance  assumed  in  lOng- 
land  any  organized  shape  as  a  system  and  the  earliest  office  for  in- 
suring property  was  opened  in  1667,  in  London,  on  the  plan  of 
individual  underwriting.  In  1680  a  proprietary  company,  the 
"Fire  Office,"  formed  in  London.  In  1681  the  corporation  of  Lon- 
don opened  books  for  securing  and  entering  sul<scri])tions,  for  fire 
insurance,  although  the  scheme  was  dropped,  but  in  that  year  there 
was  also  a  joint  stock  company  organized  for  protection  against  fire 
losses.  Then  came  in  1686  the  "Friendly  Society  for  Insuring 
Houses  from  Fire."  But  the  first  regular  office  which  is  said  to 
have  transacted  any  business  was  the  "Amicable  Contribution,"  or- 
ganized in  1696.  The  LTand  in  Hand,  however,  appears  to  date 
l)ack  to  1696  as  the  first  or  oldest  regular  office  in  London,  founded 
in  that  year.  In  1710  the  first  mutual  and  stock  company,  "The 
Sun  Fire  Office,"  was  formed,  while  the  Union  is  declared  to  have 
been  the  second  fire  office,  under  date  1714.  Passing  down  to  the 
two  companies,  the  Royal  Exchange  and  London  Assurance,  char- 
tered in  1720,  we  find  that  they  added  fire  risks  to  their  scheme  of 
insurances.''^ 

In  the  United  States  fire  insurance  took  an  early  start,  since  an 
agency  or  fire  office  is  said  to  have  existed  in  Boston  in  1724.  It 
is  stated,  however,  that  the  Sun,  an  English  company,  at  Boston, 
1728,  was  the  first  insurance  company.  But  the  earliest  fire  com- 
pany organized  here  was  the  Philadelphia  Contributionship  of  date 
1752,  incorporated  1768;  although  it  is  asserted  that  the  first  fire 
policy  was  issued  at  Hartford,  Connecticut,  in  1794,  by  a  company 
designated  as  the  Hartford  Fire  Insurance  Company,  which  organ- 
ized subsequently,  in  1810.*  ■ 

'See  authorities  cited  next  follow-  1872)  19-48;  13  Encyclopedia  Brit- 
in^  note.  annica,  IGl  et  seq.;  14  Id.  (lltb  ed.) 

"8  Reynold's  Life  Ins.  (ed.  1853)  2;  pp.  057,  660;  Richards  on  Ins.  (ed. 
Griswold's    Fire    Underwriters     (ed.    1892)  sec.  8;  Id.  (3rd  ed.)  sec.  12,  p. 

38 


I 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  VI. 

In  New  York,  as  we  have  stated  elsewhere,  the  earlier  jstatutes 
consisted  of  charters  to  individual  companies,  etc.,  and  in  that  state 
the  first  general  statute  relating  to  the  incorporation  of  fire  insur- 
ance companies  was  passed  in  1849.^  This  was  followed  by  another 
enactment  in  1853,^"  and  these  Laws  now  form  Article  Nine  of  the 
Consolidated  Laws  ^^  as  amended  by  inserting  a  new  article  to  be 
Article  Nine.^^  In  1857  a  law  was  passed  in  that  state  authorizing 
the  formation  of  town  mutual  fire  insurance  companies. ^^  County 
and  town  co-operative  companies  were  first  authorized  in  1879  ^* 
I'or  the  purpose  of  co-operative  insurance  against  loss  or  damage  by 
lire  or  lightning,  and  also  by  Laws  of  1880,^^  which  were  consolida- 
ted by  Laws  of  1886,^^  and  now  form  Article  Nine  as  amended  of 
the  present  general  law.^'^ 

It  is  noteworthy  that  the  first  fire  companies  also  undertook  to 
extinguish  fires. ^^ 

The  above  facts  show  that  fire  insurance,  as  a  systemized  plan, 
cannot  date  its  growth  from  a  date  anterior  to  1G66  in  England, 
nor  does  it  appear  to  have  become  an  organized  system  in  this  coun- 

16;  Watford's  Insurance  Guide    (2d  equivalent;      conduct      of      business 

ed.)   3,  13,  14;  Hopliius'    Mar.    Ins.  tlirough  United  States  mails,  etc.,  see 

(ed.  1867)  47,  48;  Jacobs'  Law  Diet.  31  Reports  of  American  Bar  Assoc, 

title  "Insurance,  v."  Harper's  Book  (1907)    p.    654;    33   Id.    (1908)    pp. 

of  Facts  (1906)  "Insurance."  529-531;    discussion    of,    Id.    p.   51; 

List  of  oldest  e.^isting  fire  assur-  draft  Of  act  on,  Id.  p.  534.     As  to 

ance  companies,  see  7  New  Internatl.  meaning  of  "ivildcat"  insurance  com- 

Ency.   (1908)  pp.  638-9.  pany  when  used  with    reference    to 

It  is  claimed  in  "A  History  of  The  the    standing    of    another    insurance 

Insurance  Company  of  North  Amer-  company,   see   Wells    v.    Payne,   141 

iea    of    Philadelphia,"    published    in  Kv.  578,  133  S.  W.  575. 

that  city,  that  said  company  is  "the  '^  Laws  N.  Y.  1849,  e.  308,  p.  441. 

oldest  fire  and  marine  insurance  com-  ^°  Laws  N.  Y.  1853,  c.  466,  p.  904. 

pany   in   America;"   that   it   "began  ^^  Consol.  Laws  (Laws  N.  Y.  1909, 

business   as   an   association   in   1792,  c.  33)  sees.  260-280. 

Incorporated  1794."  12  j^^^^g  1910^  ,,.  .328,  sec.  2. 

As  to  legislation,  history,  etc.  fire  "  Laws  N.  Y.  1857,  c.  739,  p.  574, 

insurance,     see     New     International  repealed  by  Laws  1862,  c.  347,  sec.  1, 

Year  Book    (.1912)   pp.  333  et  seq.;  p.  559.     But  companies  in  existence 

Id.  (1911)  pp.  360  et  seq.;  Id.  (1910)  at  the  time  of  such  repeal  were  ex- 

pp.  376  et  seq.;  Id.  (1909)   pp.  374-  cepled  from  effect  thereof,  and  were 

5;   Id.    (1908)    pp.   361  et  seq.;   Id.  continued  in  existence  by  subsequent 

(1907)  pp.  400  et  seq.  amendments  of  original  act. 

As  to  increase  of  fire  and  tornado  ^*  Laws  N.  Y.  1879,  c.  287,  p.  378. 

insurance    in     United     States,    from  ^^  Chapter  362,  p.  540. 

1880  to  1889,  see  Harper's  Book  of  ^^  Chapter  573,  p.  801. 

Facts  (1906),  "Insurance."  ^^  See   Report   of   Board   of    Stat. 

As  to  Underground  or  Wildcat  In-  Consol.  N.  Y.  vol.  3  (1907)   p.  2949. 

surance: — Incorporation     of     insur-  "^^  1?)  Eucy.  Britannica,  166;  Wal- 

ance  companies,  both  stock  and  mu-  fords  Insurance  Guide   (2d  ed.)    25. 
tual,    without    cash    deposit    or    its 

39 


§  via  JOYCE  ON  INSURANCE 

try  prior  to  1752.  It  is  also  said  that  there  was  no  organized  system 
of  insurances  against  losses  of  houses  by  fire  in  England,  outside 
of  London  and  We^itminster,  until  the  organization  of  the  Sun  Fire 
Office  above  mentioned,  and  that  there  were  no  insurances  against 
losses  of  goods  by  fire  prior  to  that  time,  and  that  the  insurances 
issued  by  this  office  were  contracts  only  between  it  and  the  persons 
insuring,  the  loss  being  confined  to  the  contracting  parties  only.^' 

§  Via.  Boards  of  fire  or  marine  underwriters. — It  is  said  that  it 
is  a  matter  of  connnon  knowledge  that,  prior  to  any  legislation  on 
the  subject,  associations  called  "boards  of  underwriters"  (either  fire 
or  marine)  existed  in  various  cities.  These  were  voluntary  associa- 
tions, composed  exclusively  of  those  engaged  in  that  particular  line 
of  business.  Their  general  object  was  consultation  and  co-opera- 
tion in  matters  aft'ecting  their  common  business.^" 

An  act  to  incorporate  the  New  York  Board  of  Fire  Underwriters 
was  passed  May  9, 1867,^  the  purpose  being :  "To  inculcate  just  and 
equitable  principles  in  the  business  of  insurance;  to  establish  and 
maintain  uniformity  among  its  members  in  policies  or  contracts 
of  insurance,  and  to  acquire,  preserve,  and  disseminate  valuable  in- 
formation relative  to  the  business  in  which  they  are  engaged."  Said 
corporation  has  power  to  provide  a  fire  patrol  with  a  competent  su- 
perintendent to  discover  and  prevent  fires,  with  suitable  apparatus 
to  save  and  preserve  property  or  life  at  and  after  a  fire ;  with  other 
powers  to  enable  them  to  act  with  promptness  and  cfliciency,  etc. : 
but  they  are  not  permitted  to  interfere  with  firemen  in  their  duties, 
and  are  subordinate  to  the  fire  commissioners.  Power  is  also  given 
to  require  a  statement  to  be  furnished,  semiannually,  by  all  corpora- 
tions, associations,  underwriters,  agents,  or  persons  engaged  in  the 
business  of  fire  insurance  in  the  city  of  New  York,  of  the  aggregate 
amount  of  premiums  received  for  insuring  property  in  said  city. 
A  penalty  is  provided  for  failure  of  fire  associations,  etc.,  to  make 
said  statement.  The  corporation  created  by  this  act  was  also  given 
the  general  powers,  and  was  subject  to  certain  restrictions  under 
the  then  Revised  Statutes.^ 

^^  Lynch  v.  Dalzell,  3  Bro.  Par.  Cas.  concerning  the  business  of  fire  insur- 
497.  ance  in  the  city  of  New  York.     It  has 

^°  Childs  V.  Firemens  Ins.  Co.  66  the  power  to  require  a  statement 
Minn.  393,  35  L.R.A.  99,  69  N.  W.  to  be  furnished  semiannually  by  all 
141,  per  Mitchell,  J.,  citing  13  Ency.  corporations,  associations,  and  per- 
Brit.  "Insurance;"  Ency.  Ins.  U.  S.  sons  respecting  the  aggregate 
1894,  1895.  amount    of    premiums    received  for 

^  Laws  N.  Y.  1867,  c.  846,  p.  2113.    insuring    property    in    the    city    of 

^  As  is  declared  in  a  comparatively  New  York,  in  order  to  make  a  ratable 
recent  ease,  the  purpose  of  the  cor-  assessment  to  supply  fimds  for  the 
poration    is    to    exercise    supervision   maintenance  of  its  business  of  super- 

40 


SOURCES  AND  ORIGIN  OF  INSURANCES 


§  VII. 


In  Illinois  a  statute  was  passed  in  1874  entitled  "An  Act  to  En- 
able Boards  of  Underwriters  Incorporated  by  or  under  the  Laws  of 
Illinois  to  Establish  and  Maintain  a  Fire  Patrol.^ 

§  VII.  Origin  of  life  insurance. — It  is  asserted  by  some  writers 
that  life  insurance  had  its  beginning  in  the  16th  century.*  Life 
insurance  is  said  to  claim  a  very  ancient  origin.  Meredith  ^  asserts 
that  the  Ordinance  of  Wisby  mentions  insurance  upon  life.    As  we 

vision.     Amongst     other     things     it  Rev.  Stat.   (111.)   1912,  p.  2351,  Rev. 

maintains  a  fire  patrol  for  the  pur-  Stat.  111.  1874,  p.  1087,  c.  142 ;  Myers 

l)ose    of    minimizino-    loss    by     tire.  ed.  1895,  p.  1519;   Starr  &  Curtis's 

New  York  Board  of  Fire  Underwrit-  Annot.  Stat.  p.  2437. 

ers  V.  Higgins  (1909)  130  App.  Div.  As  to  boards  of  fire  underwriters, 

78,  114  N.  Y.  Supp.  506,  aff'd  (1910,  etc.,  see  also  2   Burns's  Annot.  Ins. 

without  opinion)   198  N.  Y.  634,  92  Stat.     (Rev.    1908)     pp.    518,    519, 

N.  E.  1093,  per  Houghten,  J.,  a  case  sec.  4853   (4959)— see.    4856    (4962) 

where  attorneys  in  fact  or  agents  of  (1877  sec.  p.  21,  in  force  March  14, 

an  incorporated  association  known  as  1877)  ;  Mass.  Laws  1874,  c.  61;  Wis. 

the    "United    States    Lloyds,"    doing  Law.s  1870  (Sanb.  &  B.  Annot.  Stat.) 

business  in   the  city  of  New   York,  sees.  1922  et  seq. 

were  held  liable  for  the  penalty  ere-  Insurance  Patrol  New  York  Corps 

ated  by  said  law  of  1867  for  failure  was  organized  in  1835 ;  controlled  by 

to  furnish  said  board  of  fire  under-  insurance   companies   through   board 

writers   a   semiannual  report   of  the  of    fire    under^vriters,    8    Americana 

aggregate    amount   of   premiums   re-  (1905)  "Insurance  Patrol." 
ceived  for  insuring  property  in  said 
city. 

When  company  is  engaged  in  busi- 
ness of  insuring  property  in  city 
against  fire  within  above  statute. 
See  New  York  Board  of  Fire  Under- 


Fire  insurance  patrol  of  New  Or- 
leans is  not  a  public  charitable  or- 
ganization, and  is  liable  for  its  serv- 
ants negligence  in  so  driving  its 
patrol  wagon  as  to  collide  with  a  city 
truck  and  cause  injury.  Rady  v. 
writers  v.  Higsins  (1909)  130  App.  Fire  Ins.  Patrol,  126  La.  273,  52  So. 
Div.  78.  114  N.  Y.  Supp.  506,  aff'd   491. 

(1910,  without   opinion)    198   N.   Y.        As  to  fire  prevention  bureau,  see 
634,  92  N.  E.  1093.  Wolff's  Const.  &  Laws  La.  1904,  p. 

As  to  board  of  fire  underwriters  in  900  (act  183,  1902,  p.  350). 
Minnesota  under  Laws  1895,  c.  175,  "An  Act  to  Incorporate  the  'New 
e.  178,  see  Childs  v.  Firemen's  Ins.  York  Underwriters  Guild'"  was 
Co.  66  Minn.  393,  35  L.R.A.  99,  66  passed  May  9,  1867,  Laws  N.  Y. 
N.  W.  141,  deciding  that  the  Minne-  1867,  c.  847,  p.  2118,  giving  power  to 
apolis  Board  of  Fire  Underwriters  New  York  fire  insurance  companies, 
and  the  Merchants  Board  of  Fire  not  less  than  five,  to  associate  to- 
Underwriters  were  not  boards  of  fire  gether  for  the  purpose  of  guaranty- 
underwriters  within  the  meaning  of  ing  the  contracts  of  insurance  which 
the  above  statute  of  1895.  either  of  them  may  lawfully  make. 

Fire  insurance  patrol  is  neither  a       *  See    14    Ency.    Britannica    (11th 
public  corporation  nor  a  public  char-   ed.)      "Insurance,"     pp.     658,     665, 
ity.     Coleman  v.  Fire  Ins.  Patrol  of   Harper's  Book  of  Facts  (1906)  "In- 
New  Orleans,  122  La.  626,  21  L.R.A.   surance." 
(N.S.)  810,  48  So.  130.  ^  Emerigon     on     Ins.     (Meredith's 

^Act    was    approved    March    28,   ed.  1850)  160,  n.  b. 
1874,  in  force  July  1,  1874.     Kurd's 

41 


§  YII. 


JOYCE  ON  INSURANCE 


have  already  stated,  there  is  much  disagreement  as  to  the  date  of 
this  Ordinance,  it  being  placed  anterior  to  1075,  and  as  late  as  1320. 

It  is  said  that  about  the  time  of  the  division  of  the  Roman  Em- 
pire,^ a  table  was  in  existence  by  which  annuities  could  be  valued,' 
and  this  is  noteworthy  in  this  connection  since  annuities  are  based 
upon  the  principles  of  life  contingency  upon  calculations  made  by 
means  of  the  mortality  tables,^  although  an  annuity  transaction  is 
the  very  reverse  of  a  life  transaction,  it  being  to  the  interest  of  a 
life  company  that  the  insured  should  live,  but  contra  in  the  ca^e  of 
an  annuitant.^ 

The  Guidon  de  la  Mer,  of  date  somewhere  between  1556  and 
1584,  mentions  life  assurance  as  a  long-established  and  familiar 
custom  in  certain  countries.  Saccia,  in  De  Commerciis,  in  an  edi- 
tion of  1620,  which  is  not  the  earliest,  refers  extensively  to  the  con- 
tract, and  gives  a  form  of  policy  then  in  use.  France  and  several 
other  countries  prohibited  insurances  on  lives.  Although  it  was 
forbidden  in  France  from  an  early  period,  and  such  assurances  were 
void  upon  the  proposition  that  "man  cannot  be  estimated  at  a  price," 
and  that  '"'the  life  of  man  is  not  an  object  of  commerce,  and  it  is 
odious  that  his  death  should  form  matter  of  mercantile  specula- 
tion ;  "  and  although  such  contracts  were  considered  mere  wagers 
by  Emerigon,  yet  at  Naples,  Florence,  and  other  places  life  assur- 
ances were  permitted;  and  even  in  France  ''all  navigators,  pa.ssen- 
gers,  and  others"  were  permitted  to  insure  the  freedom  of  their 
persons ;  that  is.  the  liberty  of  persons  and  not  the  persons  were  per- 
mitted to  be  insured  by  fixing  in  the  policy  a  definite  sum  to  be  paid 
as  a  ransom,  or  to  stipulate  generally  that  the  insurers  should  pro- 
cure the  freedom  of  the  person.  It  is  also  conjectured  that  insur- 
ance was  employed  during  the  Middle  Ages  in  assuring  the  personal 
liberty  of  pilgrims  to  the  Holy  Land.  However,  insurance  on  life 
has  been  permitted  in  France  since  1820.^°  It  is  to  the  year  1706, 
though,  that  we  must  look  for  the  first  definite  scheme  of  life  as- 


^  This  date  is  variously  fixed  at 
A.  D.  305,  364,  395.  See  Montes- 
(|uieu's  Grandeur  and  Decline  of  the 
IJomans,  Baker's  Notes  (ed.  1882) 
358,  et  seq.,  3G8,  et  seq. ;  Gibbon's 
Decline  and  Fall,  vol.  2,  529,  vol.  3, 
127,  165;  Smith's  Gibbon,  98,  c.  8; 
14  American  Cyclopedia,  title 
"Rome,"  408;  8  Chambers'  Encyclo- 
pedia, title  "Rome,"  793;  6  Histor- 
ians' History  of  the  World,  pp.  535 
et  seq. ;  Id.  pp.  433  et  seq. 

'  Wal ford's  Insurance  Guide  (2d 
ed.)  15. 


8  13  Eney.  Britannica,  161,  14  Id. 
(11th  od.)  p.  665  et  seci. 

^  Watford's  Insurance  Guide  (2d 
ed.)  25. 

As  to  rents  or  annuities,  see  .Tack's 
Introduction  to  Historv  of  Life  As- 
surance  (ed.  1912)    pp.  165-187. 

See  note  at  end  of  §  7  herein. 

1°  Elmerigon  on  Ins.  (Meredith's 
ed.  1850)  157  et  seq.,  and  notes  a 
and  b;  Bliss  on  Life  Ins.  (ed. 
1872)  sees.  1,  2.  Life  assurances 
were  forbidden  in  France  by  the 
Ordonnance  of  Louis  XIV.,  of  date 


42 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  VII. 

surance,  which  was  that  of  the  amicable  company  ah-eady  noted, 
whicli  society  changed  its  system  in  1734,  and  again  in  1807,  wliich 
last  lease  of  corporate  life  was  based  more  upon  the  scientific  prin- 
ciples of  true  insurance  than  it  had  before  possessed. ^°^  It  is  prob- 
ably upon  the  basis  of  the  establishment  of  this  company  that  Hop- 
kins declares  that  life  insurance  did  not  take  its  rise  before  the  1 8th 
century.  The  progressive  step  taken  by  the  Amicable  in  1807  was 
the  rating  of  new  members  '^according  to  age  and  other  circumstan- 
ces.'"' This  plan,  however,  had  been  anticipated  by  the  Royal  Ex- 
change and  London  Assurance  Companies,  chartered  in  1720;  while 
the  Equitable,  started  in  1762,  is  said  to  have  "possessed  from  the 
.  outset  all  the  essential  features  of  a  life  assurance  office."  "  It  is 
unnecessary  to  pursue  our  investigations  further  as  to  foreign  coun- 
tries other  than  England,  and  there  we  find  that  Maylnes,^^  in  the 
edition  1622,  mentions  assurance  upon  life,  although  earlier  and 
later  dates  for  such  an  assurance  are  given,  it  being  asserted  tliat 
the  first  life  policy  of  which  there  is  any  positive  information  was 
made  in  London,  in  the  Royal  Exchange,  on  .June  18th,  lo83,i^ 
by  several  underwriters  acting  individually,^*  while  1697  has  also 
been  fixed  as  the  earliest  recorded  date  of  an  insurance  upon  a  life.^^ 
However,  the  fipst  life  company  had  its  birth  in  1698  by  the 
Mercers,  as  a  widow's  fund,  an  annuity  scheme,  and  this  was  quick- 

1681 ;    in    the    Netherlands    by    the  Jack's    Introduction    to    History    of 

Ordonnance  of  Philip   II.   of  1570;  Life   Assurance    (ed.   1912)    p.   236; 

by   the   civil   statutes    of   Genoa,   of  12   New   Internat.    Ency.    (1908)    p. 

1588;  by  the  Amsterdam  Ordonnance  224.     In   1762,  Equitable  Assurance 

of  1598,  and  by  the  Rotterdam  Or-  Society    of    London,    began    to    rate 

donnances  of  1604  and  1635;  Reyn-  m.embers  according-  to  ase.    Harper's 

old's  Life  Ins.   (ed.  1853)   10:  Wal-  Book  of  Facts    (1906)    "Insurance." 

ford's  Insurance  Guide  (2d  ed.)   22;  The  first  meeting  of  the  Equitable 

Bunyon'.s  Life  A.ssurance  (ed.  1854)  for   assurance  of  life   and   survivor- 

7.     The  last  author  says  life  assur-  ship  was  held  at  the  White  Lion  in 

ance  was  not  reintroduced  in  France  Cornhill  in  1762,  when  only  four  as- 

till  the  latter  part  of  the  18th  cen-  surances  were  etfeeted  and  in  the  next 

tury.  four  months  the  members  did  not  ex- 

^°*  See  §  V.  herein,  and  notes.  ceed  thirtv.    Francis'  Annals  of  Life 

11  Bliss    on    Life    Ins.    (ed.    1872)  Assurance  (ed.  1853)   p.  108. 

sees.  1,2;  13  Encv.  Britannica,  169,  ^^  Marines'  Lex  Mercatoria,  149. 

180,  182:  14  Id.  (llth  ed.) :  Hopkins'  "24  Encv.  Britannica   (11th  ed.) 

Marine  Ins.    (ed.   1867)    32.   33.  47,  p.  658. 

48;  Richards  on  Ins.   (ed.  1892)   sec.  1^2  New  Internat.  Ency.    (1908) 

9;  Id.    (3rd  ed.)   sec.  13;   Reynolds'  p.  224.     Policy  insured  life  of  Wil- 

Life  Ins.    (ed.  1853)   2,  4,  et  seq.:  9  liam  Gibbons  for  12  months. 

American  Cyclopedia,  424 ;  Walford's  ^^  Francis'  Annals  of  Life  Assur- 

Insurance  Guide  (2d  ed.)  24,  25;  Ja-  ance  (ed.  1853)  p.  56.    Policy  issued 

cobs'  Law  Diet,  title  "Insurance,  v.;  "  on  life  of  Sir  Robert  Howard. 
33    Geo.    III.,    c.    14    (1793).     See 

43 


§  VII. 


JOYCE  ON  INSURANCE 


ly  followed  in  1699,  when  a  "Society  of  Assurances  for  Widows  and 
Orphans"  was  formed.^^ 

In  1774,  it  having  ''been  found  by  experience  that  the  making 
insurances  on  lives  or  other  events  wherein  the  assured  shall  have 
no  interest  hath  introduced  a  mischievous  kind  of  gaming,  for 
remedy  whereof,"  etc.,  says  the  preamble,  an  act  was  passed  in  Eng- 
land," prohibiting  insurance  on  lives  or  any  other  event  or  events, 
w^herein  the  person  to  be  benefited  should  have  no  interest,  "or  by 
way  of  gaming  or  wagering."  The  act  further  provided  that  the 
name  of  the  beneficiary  should  be  inserted  in  the  policy."    In  the 


^^  Bliss    on    Life    Ins.    (ed.    1872)  or  nearly  one  every  twelve  days.    See 

sees.   1,  2;   13  Encj'clopedia  Britan-  "abstracts  of  all  the  documents  reg- 

nica,  180,  182;  14  Id.   (11th  ed.)   p.  istered    by    London     life    assurance 

(558;  Reynolds'  Life  Ins.   (ed.  1853)  eomi^anies   from   act   7   and   8   Vict. 

3  et  seq. ;  Watford's  Insurance  Guide  Cap.  110   ( Sept.  5,  1844,  to  Feb.  5, 

(2d  ed.)  24;  9  American  Cyclopedia,  1852)    "with    alphabetical    index    of 

424  et  seq.;  Haydn's  Diet,  of  Dates  names"    of    London    life    assurance 

(25th  ed.)    "Insurance."     The   Inde-  institutions,  by  Robert  Christie.     See 

pendent     &     West     Middlesex     Co,  Historical  and  statistical  account  of 

is  claimed  to  have  been  founded  in  different  svstems  of  life  assurance  bv 

1696,  9  Dublin  Review  (1840)  p.  86.  Alfred  Burt    (London,  1849). 

"Reference  is  usually  made  to  the  See  article:  "Prospectuses  of  New 

Amicable  Society  as  the  earliest  in-  Life  Assurance  Companies  (various) 

stitution  for  the  assurance  of  lives;  and  "necessity  of  legislation  for  life 

but   the  Mercers  companj',  in   1698,  assurance,"  9  Dublin  Review  (1840). 

commenced    a    scheme    for    granting  Etidowment  insurances  increased  in 

life  annuities  to  the  nominees  of  the  the  United  Kingdom,  in  amount  from 

assurers,  in  place  of  paying  down  a  less  than  three  per  cent  of  the  total 

fixed  sum"  Francis'  Annals  of  Life  life     business     in     1870,     to     nearly 

A.ssurance    (ed.    18531    p.    56.     See  twentv-five  per  cent  in  1900.    "Webb's 

note  9,  p.  34,  §  V.  herein.  New  Diet.  Statistics  (ed.  1911)   "In- 

See  further  as  to  the   "Mercers,"  surance,"  pp.  337  et  seq. 

Jack's    Introduction    to    History    of  Tontine  insurance  history  of,   see 

Life  Assurance   (ed.  1912)     p.    233;  Jack's    Introduction    to    History    of 

12  New  Internatl.  Ency.    (1908)    p.  Lif«  Ins.   (ed.  1912)  pp.  211  et  seq. 

224.  17  14  Geo.  III.,  c.  48.   As  to  wager 

At  close  of  18th  centurv,  there  were  policies;  gambling  act  of  1774.     See 

eight  companies  in  Great  Britian  and  17  Earl  of  Halsbury's  Laws  of  Eng- 

Ireland,    Harpei''s    Book    of    Facts  land    "Insurance,"    pp.   514  et   seq. 


(1906)   "Insurance." 

It  appears  that  there  were  105  as- 
surance companies  registered,  44  ex- 


As  to  gambling  insurances,  see 
Jack's  Introduction  to  History  of 
Life  Assurance   (ed.  1912)   pp.  "196- 


elusively    life    companies    being    in  205. 

London,  between  June  1845  and  De-  ^^  Life   insurance   statutes   will   be 

cembor  31st,  1851 ;  that  the  life  insur-  noted  hereafter  under  their  appropri- 

anee  institutions  in  operation  in  the  ate  heads. 

LT^nited   Kingdom   in   February,  1852  As   to   bubble  life   companies   and 

were  about  180  in  number,  and  that  list  of  assurance  projects   of   South 

from  1844  to  1852,  no  fewer  than  241  Sea  era,  see  Francis'  Annals  of  Life 

new  insurance  offices  were  projected  Assurance   (ed.  1853)   pp.  63,  81. 

44 


SOURCES  AND  ORIGIN  OF  INSURANCES     §  VII. 

United  States  a  charter  was  granted  in  1759  to  "the  Coq)oration  for 
the  Relief  of  Poor  and  Distressed  Presbyterian  Ministers,  and  of  the 
Poor  and  Distressed  Widows  and  Children  of  Presbyterian  IMinis- 
t<3rs;  "  and  in  1769  there  was  incorporated  ''the  Corporation  for  the 
Relief  of  Widows  and  Children  of  Clergymen  of  the  Protestant 
Episcopal  Church, '^^  and  in  1784  a  society  for  the  benefit  of  Episco- 
pal clergy  was  established  in  New  Jersey.^"  But  the  Pennsylvania 
Company  for  Insurance  upon  Lives  and  Granting  Annuities  was 
the  first  general  life  company.  It  was  chartered  in  1812,  in  Phil- 
adelphia.^ Reynolds,  however,^  says  that  life  insurance  was  intro- 
duced here  by  a  company  formed  in  1814,  followed  by  anotlier  com- 
pany in  1815,  both  of  which  added  life  to  marine  and  fire  risks.^ 
and  that  it  was  not  till  1818  that  a  corporation  was  formed  in  the 
United  States  having  for  its  sole  object  the  insurance  of  lives.* 

19  Historical  Sketch  (of  the  last  States,  1880-1905,  covering  number 
named  corporation)  by  John  Wm.  of  companies;  number  of  policies;  in - 
Wallace,  Phila.  1870;  Id.  p.  14  (cleri-  surance  in  force;  assets;  and  sur- 
cal  life  annuity).  -See  also  9  Ameri-  plus,  see  12  New  Intemat.  Ency. 
can  Cyclopedia.  424  et  seq.;  Richards  (1908)  p.  225. 

on  Ins.   (ed.  1892)   see.  9;  Harper's  As  to  history,  legislation,  statistics, 

Book    of   Facts    (1895)    p.    380;    Id.  etc.,  life  insurance,  see  New  Interna- 

(1906)       "Insurance;"       12       New  tional  Year  Book  (1912)  pp.  333  et 

Internatl.  Eney.   (1908)   p.  22.').  seq.  Id.   (1911)   pp.  360  et  seq.;  Id. 

20  12  New  Internatl.  Encv.  (1908)  (1910)  pp.  376  et  seq.;  Id.  (1909) 
p.  225.                                      '  pp.    374-5;    Id.    (1908)    pp.    361    et 

1  Harper's  Book  of  Facts  (1906)  seq.;  Id.  (1907)  pp.  400  et  seq.:  2 
"Insurance;"  12  New  Internatl.  Suppl.  Americana  (1911)  "Insur- 
Ency.  (1908)  p.  225.  ance;"     8     Americana,     "Insurance, 

2  Reynolds'    Life    Ins.    (ed.    1853 ;i  Ufe,  statistics." 

7,  8.  As  to  history  of  legislation  in  ]\Iis- 

^Viz. :  The  Dutchess  County  Insur-  souri  upon  subject  of  life  insurance, 

ance    Company,    chartered    in    1814,  see  brief  of  counsel  for  appellant  in 

and    the   Union   Insurance   Companv  Logan  v.  Fidelity  &  Casualty  Co.  146 

in  1815.                                                   ^  ]\ro.    114,   115,    47    S.   W.    948    (but 

*  Viz. :  The  Massachusetts  Hospital  brief  not  giyen  in  S.  W.).     See  also 

Life     Company,     Boston.     See     also  Aloe  y.  Fidelity  Mutual  Life  Assoc. 

Harper's  Book  of  Facts  (1906)  "In-  164  Mo.  675.  681  et  seq.,  55  S.  W. 

surance;"   12   New    Intemat.    Ency.  993.  29  Ins.  L.  J.  679. 

(1908)  p.  225.  In  New  York  the  first  general  law 

As  to  life  insurance  companies  or-  relating  to  the  incorporation  of  com- 

ganizod  in  the  United  States  to  date  panics  "to  make  insurance  upon  the 

1845,  see  Jack's  Introduction  to  His-  health    or    liycs    of    individuals    and 

tory   of  Life   Assurance    (ed.    1912)  every  insurance  appertaining  thereto 

p.  244.  or  connected  with  health  or  life  risks. 

As  to  "old-line"  insurance  compan-  and  to  grant,  purchase,  or  dispose  of 

ies   in   United    States   fx'om   1830    to  annuities,"     was     enacted     in     1849. 

1867,  see  list  with  date  of  charters,  Laws  1849,  c.  308,  p.  442.     The  next 

Harper's  Book  of  Facts  (1906)   "In-  general   law  which   ])rovided   for  the 

Burance."  incor])oration   of  life  and  iiealth  in- 

As    to    life    insurance    in    United  surance  companies  in  that  state  was 

45 


§  Vila 


JOYCE  ON  INSURANCE 


At  the  beginning  of  the  present  century  but  few  cases  of  value 
on  life  insurance  had  been  reported  in  the  EngUsh  books,^  while 
the  earliest  life  case  in  the  United  States  was  decided  in  ]\Iassachu- 
setts.^  Life  assurance,  therefore,  did  not  assume  any  great  import- 
ance, either  in  a  legal  aspect  or  as  a  business,  until  within  a  com- 
paratively few  years.  In  fact,  it  is  asserted  that  its  growth  did  not 
become  marked  in  the  United  States  till  as  late  as  1843  or  perhaps 
1858.' 

§  Vila.  History  of  industrial  insurance. — The  system  of  indus- 
trial insurance,  or  insurance  issued  upon  life  for  small  sums  with 
weekly  or  other  short  periodical  payment  of  premiums,'  seems  to 
relate  back  in  its  origin  to  the  early  guilds,  burial  societies,  or  clubs.^ 
It  is  said  to  be  the  business  of  the  burial  societies  over  again  on  a 
large  scale,  occupying  a  position  between  the  friendly  society  as  to 
its  objects,  and  the  ordinary  life  assurance  office  as  to  its  organiza- 
tion. A  Parhamentary  Report  in  1853  gave  it  impetus  by  drawing 
attention  to  the  insufficiency  of  the  protection  afforded  the  working 
class  by  burial  clubs  and  friendly  societies.^" 

The  collecting  societies  and  industrial  assurance  companies  act 
of  England  of  1896 "  consolidated  the  enactments  relating  to 
Friendly  societies  and  industrial  assurance  companies.^^     In  that 


passed  in  1853.  Laws  1853,  e.  463, 
p.  887.  See  also  Laws  1912,  c.  232, 
sec.  70,  subd.  1.  See  §  9  (V.) 
lierein.  The  earliest  statutes  eon.sist- 
c(\  of  charters  to  individual  com- 
panies. See  Keport  of  Board  of 
Stat.  Consol.,  N.  Y.  vol.  3  (1907)  pp. 
2040,  20.30. 

5  Jacobs'  Law  Diet,  title  "Insur- 
ance," which  is  apparently  compiled 
from  Justice  Parks"  work  on  Insur- 
ance (ed.  1802)  notes  only  twelve 
cases,  while  Comyn's  Digest  (4th  ed.) 
published  in  1800,  notes  only  four 
cases.  In  1649  the  case  of  Bendye  v. 
Oyle,  stj'.  166,  172,  was  a  life  case, 
although  no  principle  of  life  insur- 
ance was  involved,  it  being  only  a 
question  of  prohibition  to  the  court 
of  commissioners.  For  insurance 
cases  to  1705,  sec  Beawes'  Lex  'Sler- 
catoria,  302  et  seq. 

6  Lord  V.  Dall,  12  Mass.  115,  7  Am. 
Dec.  38. 

■^  9  American  Cycloiiedia,  424  et 
seq. 

®  See     Definition,     §     7b     herein, 


"The  German  term  for  it,  'insurance 
of  the  peo]de'  (volksversicherung),  is 
an  apt  one."  Jack's  Introduction  to 
History  of  Life  Ins.  (ed.  1912)  p. 
239.  it  is  also  called  family  insur- 
ance of  laboring  people  (14  Ency. 
Britannica  [11th  ed.]  p.  671),  and 
"family  insurance  at  retail."  (8 
Americana,.  "Insurance :  Industrial" ) . 
See  article  by  Louis  D.  Brandeis 
(now  Justice  of  United  States  Su- 
preme Court),  in  Bvdlock's  Selected 
Articles  on  Compulsory  Insurance 
(1912)  p.  43. 

'  As  to  guilds,  "the  mutual  assur- 
ance societies  of  the  poorer  classes," 
burial  societies,  friendly  societies, 
etc.,  see  §  V.  herein.  See  8  Ameri- 
cana "Insurance:  Industrial." 

^•^  Jack's  Introduction  to  History 
of  Life  Ins.  (ed.  1912)  p.  239. 

"59  and  60  Vict.  c.  26.  As  to 
English  statutes  on  this  subject,  see 
§  V.  herein. 

^2  See  also  the  assurance  companies 
act  1009  (0  Edw.  VII.  c.  49,  sec.  Mi) 
2  Butterworlh's  20  Cent.  Stat.  p.  446; 


46 


SOURCES  AND  ORIGIN  OF  INSURANCES 


§  Vila 


country  (lie  first  company  formed  was  the  Prudential  Assurance 
Company  in  1848,  although  it  did  not  undertake  industrial  insur- 
ance until  18.")4.  The  Industrial  and  General  was  founded  in  1849, 
and  in  1852  the  Britisli  Industry  Life  Insurance  Company  was  or- 
ganized.^^ In  the  United  States,  in  1873,  the  Insurance  Times  of 
New  York  urged  that  companies  be  established  in  that  stat€  to  carry 
on  the  business  of  industrial  life  insurance/*  and  the  system  is  said 
to  have  been  introduced  here  in  1876.^* 

In  1873,  however,  "the  Widows  and  Orphans  Friendly  Society" 
was  organized  by  a  special  act  of  the  legislature  of  New  Jersey  ap- 
proved April  3.  In  1875  its  name  was  changed  to  "the  Prudential 
Friendly  Society,"  by  another  special  legislative  act,  and  on  March 
30,  1877,  by  a  certificate  pursuant  to  a  statute  then  in  force  it  again 
changed  its  name  to  "the  Prudential  Insurance  Company  of  Amer- 
ica." In  1907  the  company  had  outstanding  three  classes  of  pol- 
icies: (1)  industrial  policies;  (2)  ordinary  policies;  (3)  deferred 
dividend  policies. ^^ 


Earl  of  Halsbury's  Laws  of  Eng. 
See  Engli.sh  Statutes  given  under  see. 
§  V.  herein. 

^^  8  Americana,  "Insurance :  In- 
dustrial ; "  Jack's  Introduction  to 
Ilistorv  of  Life  Ins.  (ed.  1912)  p. 
239. 

1*6  Insurance  Times  (N.  Y.  1873) 
p.  83. 

"14  Ency.  Britannica  (11th  ed.) 
p.  671. 

"The  most  simple  and  primitive 
form  of  industrial  insurance  is  found 
in  the  numerous  mutual  benefit  asso- 


great  firms  or  corporations.  (3) 
Private  insurance  companies  which 
sell  sickness  and  accident  insurance 
to  workmen,  'industrial  insurance 
companies'  collecting  small  premium 
weekly  or  montlilv.  and  furnisiiing 
chiefly  funeral  benefits.  .  .  .  (4) 
Organizations  of  municipal,  state, 
and  Fodci-al  employee^;  for  pension 
funds,  as  those  of  teachers,  firemen, 
policemen,"  etc.  Henderson's  In- 
dustrial Insurance  in  United  States 
(ed.  1911)  p.  308.  The  Appendix 
contains   regulations   of   several   im- 


ciations  which  exist  everywhere  and   portant  schemes  of  insurance  drawn 
under  many   forms.     Some  of  these   up  by  actuaries  with  legal  advice. 


are  aided  by  the  employers,  and 
others  are  supported  entirely  by  the 
contributions  of  tlie  members."  Hen- 
derson's Industrial  Insurance  in  the 
United  States  (ed.  1911)  p.  63. 

"Systems  and  Schemes  of  Indus- 
trial Insurance.  (1)  The  working- 
men  have  themselves  created  ore:ani- 


Aa  to  industrial  insurance  gener- 
ally. See  Dryden  on  Life  Insurance, 
etc.,  as  follows:  (1)  The  inception 
and  early  problems  of  industrial  in- 
surance. (2)  The  first  quarter  cen- 
tury of  industrial  insurance  ia  the 
United  States.  (3)  The  social  econ- 
omy of  industrial  insurance.   (4)  The 


zations  for  insurance  .  .  .;  local  practice  of  industrial  insurance, 
mutual  benefit  societies,  with  or  with- 
out aid  from  employers,  national 
brotherhoods  or  fi'aternals,  and  trades 
unions  with  local  branches.  (2)  Em- 
ployers have  promoted  the  movement 
by  various  methods;  local  societies  of 


1^  See  Blanchard  v.  Prudential  Ins. 
Co.  78  N.  J.  Eq.  471,  472,  79  Atl.  733, 
per  Howell,  V.  C.  (s.  c.  on  app^l 
80  N.  J.  Eq.  209,  83  Atl.  220). 

In  1875  the  Prudential  Insurance 
Company  of  America,  then  a  small 


employees,  insurance  departments  of  corporation  in  New  Jersey  known  as 

47 


§  Vllb  JOYCE  ON  INSURANCE 

§  Vllb.  History  of  workmen's  industrial  insurance:  state  insur- 
ance: compulsory  insurance:  workmen's  compensation. — Within 
very  recent  times  there  has  been  an  extended  and  comprehensive 
movement  in  this  country  for  the  purpose  of  providing,  upon  some 
specific  basis,  compensation  for  industrial  accidents,  non-fatal  and 
fatal,  also  for  sickness,  disability,  etc.,  suffered  by  employees,  and  a 
number  of  slates  have  enacted  statutes  embracing  what  are  gener- 
allv  designated  as  workmen's  industrial  insurance,  state  insurance, 
compulsory  insurance,  and  workmen's  compensation.  Inasmuch, 
however,  as  these  statutory  provisions,  except  where  they  provide 
for  insurance  which  is  not  compulsory,  either  express  or  implied, 
as  we  liave  stated  elsewhere,-^'''  relate  rather  to  economic  or  sociologic 
conditions  than  to  the  principles  governing  the  contract  of  insur- 
ance, or,  at  the  most,  create  new  remedies  or  are  but  an  evolution 
of  the  employers'  liability  principle,  covering  the  law  of  master  and 
servant,  we  shall  only  briefly  notice  here  and  only  in  the  appended 
notes  the  history  of  the  development  of  this  class  of  compensation 
or  insurance.^^ 

the  Widows  &  Orphans  Friendly  So-  229;  Id.  p.  409  Id.  (1908)  p.  228; 
C'iety,  changed  its  name  to  the  Pru-  Id.  (1907)  p.  246. 
dential  Friendly  Society.  This  was  On  the  constitutionality  appliea- 
followed  by  the  John  Hancock  Mu-  tion  and  etfeet  of  the  federal  em- 
tual  Life  Insurance  Com))any  of  Bos-  plovers'  liability  act,  see  notes  in  47 
ton,  the  Germania  Life  Insurance  L.R.A. (N.S.)  38,  L.I\.A.191.')C,  47. 
Company  of  New  York,  which  did  On  workmen's  compensation  acts 
not  follow  up  the  business,  and  the  generally,  see  note  in  L.R.A. 1916 A, 
Metropolitan  Life  Insurance  Com-  23  and  notes  following, 
pany  of  New  York,  8  iVmericana  "In-  As  to  ^'Recent  European  legisJa- 
surance:  Industrial."  tion  with  regard  to  compenfation  for 
The  Prudential  Insurance  Com-  inchtslrial  accidents,"  including  com- 
pany of  America,  organized  in  New  pulsory  insurance  instituted  by  Ger- 
Jersey,  conducted,  under  a  decision  in  many  in  1883,  followed  by  Austria, 
190.')  (Russell  X.  Prudential  Ins.  Co.  Norway,  Finland,  and  the  workmen's 
176  N.  Y.  178,  98  Am.  St.  Rep.  656,  compensation  act  in  Enc'land  in 
()8  N.  E.  252),  two  classes  of  insur-  1897,  followed  by  Denmark,  Italy, 
anee,  one  known  as  the  "industrial"  and  France  in  1898,  by  Spain  in 
and  the  other  "ordinary  insurance."  1900,  by  Holland,  Greece,  and 
Under  the  former  plan  small  policies  Sweden  in  1901,  and  by  Russia  and 
were  issued,  upon  which  weekly  pay-  Belgium  in  1904,  and  the  workmen's 
ments  were  made;  under  the  latter  compensation  act  in  England  in  1906, 
large  policies  were  issued,  the  ]n'em-  — see  article  by  Ivenelm  E.  Digby 
iums  Ijeing  payable  annuallj',  semi-  in  17  Yale  L.  Jour.  pp.  485-498. 
annually,  or  quarterly.  -Great  Britain  enacted  lier  emplov- 
"  See  §  7d  herein."'  •  ers'  liability  act  in  1880  (43  &  44 
^^  Progress  of  Employers'  Liabilitg  Viet.  c.  42),  her  compensation  acts  in 
and  Workmen's  Compensation.  See  1897  and  1900  (60  and  61  Vict.  c. 
New  Internatl.  Year  Book  (1912^  pp.  373;  63  &  64  Vict.  e.  22;  6  Edw.  VII. 
209-212;  Id.  (1911)  pp.  238-243;  Id.  c.  58,  in  effect  Julv  1,  1907),  which 
(1910)    pp.  232-235;   Id.    (1909)    p.  was  foUowed  bv   the  insurance   law   ' 

48 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  VIIc 

§  VIIc.  Savings  bank  insurance  and  annuity  law  of  Massachu- 
setts.—In  1907  a  statute  was  enacted  in  Massachusetts  entitled  "An 

(Lloyd  George)  National  Insurance  funds.  The  employers  pay  the  whole 
act  i911  (1  &  2  Geo.  V.)  c.  55,  49  cost  of  the  latter  funds."  Webb's 
Brit.  Stat.  p.  337  (operative  Julv  15,  New  Diet,  of  Statistics  (1911)  "In- 
1912),  am'd  1913  (3  &  4  Geo.  V.)  surance,"  pp.  343  et  seq. 
c.  37;  1914  (4  &  5  Geo.  V.)  e.  57;  Stale  insurance.  "In  view  of  the 
1914  (5  Geo.  V.)  c.  15  (as  respects  great  activity  shown  in  foreign  coun- 
present  war)  ;  1915  (5  Geo.  V.)  e.  29.  tries  during  recent  years  in  favor  of 
See  28  Earl  of  Halsbury's  Laws  of  government  insurance  it  is  a  note- 
England  905 ;  14  Ency.  Britannica  worthy  fact  that  very  little  legislation 
(11th  ed.)  p.  358;  7  New  Internatl.  was  attempted  along  this  line  in 
Ency.  p.  52;  New  Internatl.  Year  America  during  the  years  1907  and 
Book  (1911)  pp.  800-803.  1908."  Year  Book  of  Legislation 
"Insurance  against  accidents  is  (1908)  vol.  10,  pp.  332-3,  article  by 
compulsorv   for   certain   workpeople,  S.  Huebner. 

in      Germany,      Austria.      Hungary,  It  is  said  by  a  recent  writer  that 

France,     Italy,     Denmark,     Holland,  "every    civilized    nation    in    Europe, 

Belgium.    Norway,    and    other    conn-  ^^^^    "^^^^    o^her    nations    m    other 

tries.     The  classes  of  workpeople  in-  gf  ^  ^^  ^^'^  T^^^ T^^x!  *'?^  ^"'/'"^ 

,     J  in  ,  States,  have  discarded  the  old  system 

volved  vary  much  from  one  country  ,,  ,  ,    ,.  ,  .,.,      ,        ,  -^ 

,,      -^    T     T-i  ^  i"  ot    employers     hability    based    upon 

to  another.     In  France,  for  example,  ^^^^^j^^  and  substituted  a  system  under 

seamen    are    affected;     in     Belgium  ^,^^^^^  ^^^^  industry  bears  the  bur- 

rainers;     in     Hungary,     agricultural  ^^^    ^f  relieving  the   distress  caused 

laborers;    in    Germany,    workers    in  y^^,  injuries  to  workers  in  any  given 

many  trades  and  industrie.s,  such  a.s  industry,   practically    without    litiga- 

mining,    building     agriculture,    ship-  ^-^^  „    '^^^.^^^    Workmen's    Compen- 

ping,  etc.     The   obligation   to  insure  ^^^^^^^    j^j^^^^    j„^     ^^^^^    ^^^     ^^^ 

IS  generally  restricted  to  persons  re-  ^g^g^        ^^   ^^^^  §_     rp,^-^  ^^,^-^^^  ^j^,, 

ceiving  less  than  a  certain  defined  in-  (.^nsiders  the  origin  and  development 

come.     .....  In  Austria  and  Hoi-  ^f  industrial  insurance  from  the  early 

land  no  limit  is  fixed.  .     .      fhe  Qei^an  guilds   (Id.  pp.  47-51,  sees, 

system   IS  most  highly  developed  in  30^  31)  .  discusses  the  economical  ba- 

Germany  and  Austna-Hungarv-.     In  .^jg  ^f  ^^^^^  j^ws,  with  statistics   (Id. 

Germany  all  accidents  in  the  course  pp.  53.82,  sees.  33-53)  ;   states  that 

of  work  are  covered,  except  those  in-  ^he  workmen's  insurance  acts  of  Ohio, 

tentionally    brought    about    by    the  Washington,    and    even    of    Ma^^sa- 

worker,  and   (since  1900)    those  due  chnsetts,  are  specific   adaptations  of 

lo  gross  misconduct.  In  Austria  only  the  German  industrial' insurance  law 

the  first  t.vpe  of  accident  appears  to  of  1884,  and   that  the  compensation 

be  excluded  from  the  benefits  of  in-  acts   of   California,   Illinois,   Kansas, 

surance.     In  the  earlier  period  of  dis-  Nevada,   New   Hampshire,  New  Jer- 

ablement    the    injured    workers    are  sey,  New  York   (Law  unconstitution- 

oompensated  out  of  the  sickness  in-  al,  see  Ives  v.  South  Buffalo  Ry.  Co. 

surance  funds,  to  which  workers  con-  201  N.  Y.  271,  284,  Ann.  Cas.  i912B 

tribute  two  thirds  and  the  employers  150,  34  L.R.A.(N.S.)    162,  94  N.  E. 

one  third.     This  period  of  compensa-  431,  40  Ins.  L.  J.  637)  Rhode  Island, 

tion    out    of    the    sickness    insurance  and    Wisconsin,    are    adaptations    of 

funds  lasts  in  Germany  for  thirteen  the  British  workmen's  compensation 

weeks,    after   which    the    liability    is  acts.  (Id.  pp.  412,  413,  sec.  167.) 
transferred  to  the  accident  insurance       Employers'      Liability  —  Proposed 
Joyce  In3.  Vol.  I. — 4.                49 


VIIc 


JOYCE  ON  INSURANCE 


Act  to  Permit  Savings  Banks  to  Establish  Life  Insurance  Depart- 
ments; "  the  words  "savings  and  insurance  bank"  meaning  a  sav- 


Constitntional    Amendment    (to    art. 
I.  of  the  State  Const.)  rolating.there- 
to  passed  by  New  York  Legislature 
of  1912,  to  be  known  as  sec.  19.  Laws 
1912,  vol.  2,  p.  1382.     Becommenda- 
tion  of  committee   (dated  March  17- 
'13)   that  such  proposed  amendment 
he     disapproved.        (Judge     Dillon, 
chairman  of  committee.)      See  48  N. 
Y.  Law  Jour.  No.  140,  of  date  March 
20th,  1913.     Amendment  to  Constitu- 
tion of  New  York,  art.  1,  by  adding 
at  the  end  a  new  section  (sec.  19)  to 
road :     "sec.  19.  Nothing  contained  in 
this  constitution  shall  be  construed  to 
limit  the  power  of  the  legislature  to 
enact  laws  for  the  protection  of  the 
lives,  health,  or  safety  of  employees; 
or  for  the  pa^Tuent,  either  by  employ- 
ers, or  by  employers  and  employees 
or     otherwise,     either     directly     or 
through  a  state  or  other  system  of  in- 
surance, or  otherwise,  of  compensa- 
tion for  injuries  to  employees  or  for 
death    of   employees   resulting   from 
such  injuries,  without  regard  to  fault 
as  a  cause  thereof,  except  where  the 
injury  is  occasioned  by  the  wilful  in- 
tention of  the  injured  employees  to 
bring  about  the  injury  or  death  of 
himself  or  of  another,  or  where  the 
injury  results  solely  from  the  intoxi- 
cation of  the  injured  employee  while 
on  duty;  or  for  the  adjustment,  de- 
termination, and  settlement,  with  or 
without  trial  by  jury,  of  issues  which 
may  arise  under  such  legislation;  or 
to    provide    that   the    right    of   such 
compensation,  and  the  remedy  there- 
for, shall   be  exclusive  of   all   otlier 
rights  and  remedies  for  injuries  to 
employees    or    for    death    resulting 
from    such    injuries;    or    to    provide 
that  the  amount  of  such  compensa- 
tion   for    death    shall    not    exceed    a 
fixed  or  determinable  sum;  provided 
that  all  monies  paid  by  an  employ- 
er to  his  employees  or  their  legal  rep- 
resentatives, by  reason  of  the  enact- 
ment of  any  of  the  laws  herein  au- 


thorized, shall  be  held  to  be  a  proper 
charge  in  the  cost  of  operating  the 
business  of  the  employer."  2  Laws  of 
New  York,  1912,  Appendix,  p.  i:J82. 
But  amendment  was  adopted  Nov.  4, 
1913,  and  became  sec.  19,  art.  I.  of 
Constitution. 

Workmen's  Compensation  Law, 
Consol.  L.  N.  Y.  C.  67,  Laws  1914, 
e.  41,  is  constitutional.  Jensen  v. 
Southern  Pacific  Co.  215  N.  Y.  514, 
L.R.A.1916A,  403,  109  N.  E.  600, 
aff'g  152  N.  Y.  Supp.  1120,  167  App. 
Div.  945. 

Insurance  against  unemployment. 
"The  insurance  of  workingmen 
against  unemployment  has  been  most 
largely  tried  in  Switzerland.  An  in- 
surance scheme  was  first  started  in 
Berne  in  1892  by  the  League  of  Man- 
ual Laborers.  Municipal  aid,  how- 
ever, was  soon  asked  for,  and  in  1893 
the  scheme  passed  under  control  of 
a  municipal  bureau.  Insurance  in 
this  bureau  is  voluntary,  and  is  open 
to  all  ablebodied  Swiss  citizens  not 
over  sixty  years  of  age,  living  in 
Berne."  The  monthly  premium  pay- 
able by  those  insured  is  about  7d.  If 
insured  for  eight  months,  and  all 
premiums  are  paid,  and  if  in  employ- 
ment for  at  least  six  months  in  the 
year,  insurers  may  claim,  during  the 
winter  months,  a  daily  allowance  of 
about  Is.  2d.  if  single,  and  Is.  7d.  if 
married.  The  allowance  continues 
for  a  maximum  period  of  ten  weeks. 
Incapacity  to  work  gives  no  claim 
to  the  benefit.  Germany  has  also  one 
or  two  examples  of  insurance  schemes 
against  unemployment.  That  of 
Cologne  is  most  important.  A 
bureau  was  opened  at  Leipzig  in  1903. 
In  several  towns  and  provinces 
in  Belgium,  s^'stems  of  insurance 
against  unemployment  have  been  in 
force  for  several  years.  The  best- 
known  scheme  is  that  at  Ghent.  The 
Ghent  system  was  copied  in  Ant- 
werp  in   1902.     In   France  a   some- 


50 


SOURCES  AND  ORIGIN  OF  INSURANCES 


§  YIIc 


ings  Lank  which  has  established  an  insurance  department;  and  the 
words  ''insurance  department"'  meaning  the  department  of  a  sav- 

what  similar  sclieme  to  tliat  at  Ghent,  1907.     Contents : — British     Statistics 

paying     unemployed     benefits,     was  for   1906.     The   new   British   act   in 

adopted,  although  prior  to  that  date  common    paralance;    bibliography — 

many  local  authorities  had  been  niak-  Avorknien's  compensation  acts ;  a  list 

ing  subsidies  to  funds.     Webb's  New  of  sources  where  either  the  English 

Diet.   Statistics   (ed.  1911)   pp.  613-  or    French    texts    of    all    workmeirs 

614.  compensation  acts,  excepting  those  of 

Bibliography :    Workmen's    Indus-  Great  Britian,  can  be  found.     Also, 

trial    Insurance:     State     Insurance:  Compensation    for    Industrial    Acci- 

Workmen's      Compensation      Laivs:  dents,  Report  of  Commission,  1911. 

Compulsory  Insurance.     The  follow-  Mavor    (Jumes).      Report    on    work 

ing  brief  bibliography  covers  in  itself  men's     compensation     for     injuries, 

and  by  reference  a  very  complete  list  Toronto,  1900.    Printed  by  order  leg- 

of    authorities.      Atkinson    (J.    M.)  islative    assembly    of    Ontario,    with 

Law  of  Industrial  Insurance.     Com-  bibliography.     Great  Britain.     Seag- 

parative  review  of  employers'  liabili-  er    {Henry    R.)    Professor    Political 

ty  insurance  in   European  countries  Economy,  Columbia  University,  Ar- 

and  United  States.     (1909)  Missouri  tide  by,  New  York  Tribune,  January 

Bar  Assoc.    Boyd  (James  H.)  AVork-  11,   1914,   on   New   York   workmen's 

men's     Compensation     Direct     Pay-  compensation    act    passed    Dec.    12, 

ment.     State    Insurance.     Procedure.  1913.      Snoiv    (Alpheus   H.    [United 

Forms,  with  text  of  statutes.  (1913).  States  delegate  to  International  Con- 

Bradhury     {Harry    B.)     Workmen's  ference  on   Social  Insurance  held  at 

Compensation    and    State    Insurance  The  Hague,  Sept.  1910] )  Art.  on  So- 

Law  with  text  of  statutes.     (1912).  cial    Insurance,    43    Chicago    Legal 

Brooks    {John   Graham)     Report   on  News,  280.  United  States.  "Library  of 


German  Workingmen's  Insurance 
Nat.  Conference  of  Charities  and 
Correction  Proceedings,  1905,  pp. 
452-7;  also,  by  same  author,  Com- 
pulsory Insurance  in  Germany  1895 


Congress — Select  List  of  References 
on  Employers  Liability  and  Work- 
men's Compensation,  complied  under 
direction  of  Herman  Henry  Bernard 
Meyer,  Cliief  Bibliographer,"  Wa-sh- 


Bullock  {Edna  D.)  Selected  Articles  ington.  Government  Printing  Ottiee, 
on  Compulsory  Insurance  (1912)  1911.  Covering  also,  especially  as  to 
with  bibliography,  pp.  XVII.  foreign  countries,  other  forms  of  so- 
XXXV.  Henderson  {Charles  Bich-  cial  insurance. — sucli  as  insurance 
-mond)  Industrial   Insurance  in  Unit-   against  unemployment,  sickness,  and 


ed  States.  (1909-1911) ;  also  Id.  (ed. 
1911)  Bibliography  pp.  323-326; 
also  (same  autlior)  Amer.  Jour. 
Sociol.,  1907-08,  Id.  vol.  12,  pp.  470- 


old  age.  The  Library  of  Congress  al- 
so published  in  1906  a  "Select  list  of 
works  relating  to  employers'  liabil- 
ity," and  in  1908,  a  "Select  list  of  ref- 


486,  757-778;  Id.  vol.  13,  pp.  34-47,  erences  on  workingmen's  insurance." 
183-199,  .349-379,  489-507,  584-016,  The  list  of  1911  (above  noted)  is  based 
841-854;  Id.  vol.  14,  pp.  64-77,  194-  on  the  recent  literature,  certain  titles 
212,  451-464.  Lloyd-George  (Darid)  being  also  drawn  from  the  lists  of 
People's  insurance  explained  (Bri-  1908  and  1906.  See  also  Employer's 
tish  act,  1911,  operative  July  15th,  Liability  and  Workmen's  Compensa- 
1912).  Speech  in  House  of  Com-  tion  Commission  Report.  Govern- 
mons.  Massachusetts.  —  Bureau  of  ment  Printing  Office,  1912.  Mem- 
labor  statistics,  workmen's  compensa-  orandum  showing  law  and  conditions 
tion    acts.     Its    labor    bulletin,    Oct.   in  United  States,  Germanj',  and  Eng- 

51 


§  VIII. 


JOYCE  ON  INSURANCE 


ings  and  insurance  bank  in  which  the  business  of  issuing  life  in- 
surance and  the  granting  of  annuilies  is  conducted. ^^ 

§  VIII.  Origin  of  accident  insurance. — We  have  abeady  noted 
under  jDreceding  sections  cattle  insurance,^"  and  that  form  of  casual- 
ty insurance  known  as  insuring  the  liberty  of  persons/  but  insur- 
ance which  relates  to  the  loss  of  life  or  limb,  or  other  personal  in- 
jury by  accident,  is  of  modern  origin.  Accident  insurance,  in  its 
original  form,  seems  to  have  comprehended  railway  accidents  only, 
for  which  purpose  a  compan}'^  was  established  in  London  in  1840. 
known  as  the  liailway  Passengers'  Assurance  Company,  but  in 
1856  it  extended  its  plans  to  embrace  accidents  of  all  kinds,  and  the 
first  American  company  was  said  by  a  writer  in  1873  to  have  been 
then  onh'  ten  years  old.^    The  first  accident  insurance  company  in 


land  (by  Mr.  Packer,  Secy,  of  Com-  compulsory  old  age  insurance  more 
miss.)  :  also  Bureau  of  Labor.  Work-  than  a  quarter  of  a  century  ago,  di- 
men's  insurance  and  compensation  viding  the  burden  between  employer, 
systems  in  Europe.  Washington,  employee,  and  the  state.  England 
Government  Printing  Office,  1911  has  just  txu'ned  to  old  age  pensions 
(Annual  Report  of  Commissioner  of  charged  wholly  upon  general  taxa- 
Labor.  Bibliography  at  end  of  each  tion,  a  sort  of  general  outdoor  relief, 
section) ;  also  Library  of  Congress —  Massachusetts  is  seeking  to  avoid 
Division  of  bibliography.  Select  both  alternatives.  The  aim  of  the 
list  of  works  relating  to  employers'  recent  savings  bank  insurance  and 
liability.  Complied  under  direction  annuity  law  is  to  secure  to  her  wage- 
of  Appleton  Prentiss  Clark  Griffin,  earners  voluntary  instead  of  compul- 
Wishington.  Government  Printing  sory  old  age  insurance."  Louis  D. 
Office.  1906.  Brandeis     (now    Justice    of    United 

19  Rev.     Stat,     of    Mass.     (Suppl.    States  Supreme  Court)   in  42  Amer. 
1902-1908)  pp.  1088  et  seq.  acts  and    Law  Rev.  (1908)  p.  904. 
Resolves  of  Mass.  1907,  pp.  7i5,  et       ^°§  Va.  herein, 
seq.  561.  ^  S  VII.  herein. 

See  article  as  to  merits  and  demer-  ^  Bunyon's  Life  Assurance  (2d  ed.) 
its  of  plan,  .42  Amer.  Law  Rev.  pp.  100;  13  Ency.  Britannica,  101,  14  Id. 
901-4,  by  Alfred  L.  Aiken.  (11th   ed.)    p.    659;    1   Am.   &   Eng. 

Bank  Commissioners'  Re^jort  of  Ency.  of  Law,  87;  Richards  on  Ins. 
Massachusetts  for  1912,  summarizing  (ed.  1892)  sec.  9;  Id.  (3ded.)  sec.  14; 
savings  bank  insurance  in  1909,  Walford's  Ins.  Guide  (2d  ed.)  10,  11; 
shows  that  the  two  savings  banks  1864,  27  &  28  Vict.  c.  125;  7  Amer- 
writing  such  insurances  issued  1299  ican  Law  Review,  585 ;  Porter's  Law 
policies  (People's  Savings  Bank)  and  of  Ins.  (ed.  1884)  c.  24,  431.  See 
1,710  policies  (The  Whitman  Sav-  Travelei-s'  Insurance  Machine  Co.  v. 
ings  Bank).  The  kind  of  policies  is-  Travelers'  Ins.  Co.  142  Ky.  523,  528, 
sued  are  also  set  forth.  See  sum-  134  S.  W.  877,  879,  per  Lassing,  J. 
mary  27  Banking  L.  J.  1076,  1077,  by  "The  insurance  of  railicaij  travel- 
W.  H.  Kniffen,  Jr.  ers  against  injury  upon  trains  was 

"Massachusetts  is  the  first  of  the  the  first  form  of  accident  insurance 
slates  to  recognize  by  legislation  that  whidi  proved  widely  acceptable."  14 
an  adequate  system  of  old  age  annui-  Ency.  Britannica  (11th  ed.)  "Insur- 
ties  for  wage-earners  is  a  pressing  ance,"  p.  659.  As  to  in:*urance 
social    need.     Germany    resorted    to    against    accidents    and    death    from 

52 


SOURCES  AND  ORIGIN  OF  INSURANCES        §  Villa 

the  United  States  was  the  Travelers  of  Hartford,  Connecticut  in 
1863.3 

Accident  ingurance  was  first  ofiered  in  Massachusetts  in  1864  by 
a  foreign  corporation.  In  1865  an  accident  insurance  company 
was  specially  chartered  there,  but  seems  never  to  have  written  any 
policies.  The  business,  however,  was  carried  on  by  a  number  of 
foreign  companies,  eleven  being  represented  in  it  in  1867,  although 
all  but  two  had  retired  in  1869.  The  form  of  accident  policy  at 
lirst  introduced  was  substantially  that  known  as  the  general  accident 
policy  insuring  against  accidents  to  the  person  of  insured.'* 

§  Villa.  History  of  casualty  insurance. — Inasnuich  as  a  distinc- 
tion has  been  made,  in  decisions  based  on  certain  statutes,  between 
accident  and  casualty  insurance,  the  former  being  held  to  relate  to 
accidents  resulting  in  bodily  injury  or  death,  and  the  latter  to 
property  losses  resulting  from  accident  or  casualty,  such  as  insur- 
ances in  reference  to  boilers,  plate  glass,  injury  to  property  by  street 
cars,  etc.,  and  perhaps  injury  to  domestic  animals,^  we  may  state 
here  that  the  first  steam  boiler  insurance  company  existed  in  Hart- 
ford, Connecticut,  and  was  chartered  in  1866.^  The  first  plate 
glass  insurance  company  in  the  United  States  Avas  organized  in 
New  Jersey  in  1868,  and  the  first  New  York  company  was  started 
in  1874.'  In  Massachusetts,  casualty  insurance  against  explosion 
of  steam  boilers  and  the  breakage  of  plate  glass  appeared  some 
yesiTQ  prior  to  1879,*  although  it  is  stated  that  plate  glass  was  first 

traveling,  see  N.  Y.  Laws  1879,  c.  485,       ^  Employers'    Liability    Assurance 
p.  530.     See  also  §  X.  herein.  Corp.  v.  Men-ill,  155  Mass.  404,  406, 

''Since  the  passings  of  the  employ-    29  N.  E.  529,  per  Barker,  J. 
ers'  liability  act,  1880  (43  &  44  Vict.        History  of  legislation  in  Missouri 
c.  42)  and  the  workmen's  compensa-    9ipo)i   subject  of  accident  insurance. 
tion  act  1897   (60  &  61  Vict.  c.  37,    See  brief  of  counsel  for  appellant  in 
now  replaced  bv  tlie  workmen's  com-   Logan  v.  Fidelitv  &  Casuakv  Co.  14(i 
pen.sation  act  1906   [6  Edw.  VI T.  c.    Mo.  114,  115,  47^S.  W.  948  (brief  not 
58])  tlie  practice  of  insuring  against   given  in  S.  W.  Rep.), 
liability  for   accidents   to   ihird  per-        ^  fiee  §§  VIIL,  Villa,  herein.    As 
sons  has  been  very  largely  extended."   to  origin  of  cattle  insurance  societies, 
17  Earl  of  Halsbury's  Laws  of  Eng-   see  §  Va.  herein, 
hnul,  p.  571.  6  jj.ii,p(.^.'g  p,,^„i,   yf  Pjjgj.g    (1906) 

3  Harper's  Book  of  Facts    (1906)  "Insurance;"    8    Americana    (1905) 

"Insurance;"    8    Americana     (1905)  "Insurance." 

"Insurance."      On    January   1,   1904,  '^  8  Americana  (1905)  "Insurance." 

twenty-five     stock     companies     were  As    to    s|)rinkler    leakage    insurance, 

writing  accident  and  health  insurance  and  tly-wheel  insurance,  see  Id. 

in  the  United  States.    Id.  As  to  nnm-  8  Employers'    Liability    Assuranr-e 

her  of  accident  policies,  and  amount,  Co.   v.   Merrill,   155  Mass.  404,  406, 

in  force  at  end  of  ]907,  see  AVebb's  29  N.  E.  529,  per  Barker,  J. 
New  Diet.  Statistics   (ed.  1911). 

53 


§  Vlllb 


JOYCE  ON  INSURANCE 


insured  in  1879.'  As  to  legislation  in  New  York,  it  appears  that 
the  formation  of  companies  to  insure  against  breakage  of  plate  glass 
WHS  provided  for  by  the  Laws  of  1877,^°  now  covered  by  provisions 
of  law  relating  to  life  and  casualty  companies. ^^ 

In  New  York  in  1883,^^*  the  formation  of  life  and  casualty  com- 
panies on  the  co-operative  or  assessment  plan  was  authorized. ^^ 

§  Vlllb.  History  of  employers'  liability  insurance. — The  Em- 
ployers' Liability  Assurance  Corporation  of  London,  founded  for 
that  purpose,  in  1880  very  shortly  after  the  enactment  of  the  em- 
ployers' liability  act  of  that  year/'  which  was  the  earliest  statute  of 
that  character  modifying  the  common  law,  was  the  first  company 
to  undertake  on  a  large  scale  the  insurance  of  employers  against 
liability  or  loss  on  account  of  personal  injury  from  accidents  sus- 
tained by  their  employees  while  engaged  in  their  service.^*  In 
America,  liability  insurance,  such  as  employers'  liability,  seems  to 
have  been  unknown  earlier  than  1887.^^ 


^Harper's  Book  of  Facts    (1906)  As   to   laws    of   Iowa    authorizing- 

"Insurance."  casualty  insurance  for  tlie  benefit  of 

^^  Chapter  439,  p.  506.  enaployers  of  labor,  the  repeal  Ihere- 

^^  Report  of  Board  of  Stat.  Consol.  of,  and  the  law  including-  insurance 

N.  Y.  Vol.  3   (1907),  p.  2950.     See  against    personal    injuries    generally. 

Laws  1912,  c.  232,  sec.  70,  subdiv.  6;  as  well  as  indemnity  against  the  lia- 

Laws  N.   Y.   1916,   pp.   292-4,   sees,  bility    of   employers    on    account    of 

204— 204a.     See  §  V.  herein.     As  to  the  acts  or  omissions  of  their  em])loy- 

legislation,    statistics,    etc., — casualty  ees,  see  statutes  noted,  in  connection 

insurance,    see   New    Internat.    Year  with    "casualty"    insurance    and    the 

Book    (1912),   pp.    333    et    se(|.;    Id.  different  kinds  of  insurance  author- 

(1911)    pp.  360  et  seq.;   Id.    (1910)  ized  by  the  Iowa  statutes,  in  Bank- 

pp.  376  et  seq.;  Id.  (1909)  pp.  374-  ers  Mutual  Casualty  Co.  v.  First  Nat. 

5;   Id.    (1908)    pi).   361  et   seq.;   Id.  Bk.  131  Iowa,  456,  459,  460,  108  N. 

(1907)  pp.  400  et  seq.;  as  to  number  W.  1040. 

of  policies  in  force  at  end  of  1907,  Right  of  mutual  insurance  compa- 
see  Webb's  New  Diet.  Statistics   (ed.  nies  organized  prior  to  April  0,  1911, 
1911).  to  transact  employers'  liability  busi- 
"«  Laws  N.  Y.  1883,  e.  175,  p.  172.  ness,    see   Mass.    acts    1912,    e.    311, 
^^  Report   of   Board    Stat.    Consol.  amd'g  acts  1911,  c.  251,  sec.  1. 
N.  Y.  Vol.  3  (1907)  p.  2949.  An  English  publication   (56  Solic- 
it 34  &  44  Viet.  c.  42.  itors'   Journ.   &   W'kly   Reporter,  p. 
1*14  Ency.   Britannica    (11th  ed.)  249)   under  date  Feb.  3,  1912,  says: 
p.  659;  5  Universal  Cyc.  "Guarantee  "Recent  attacks  by  American  judges 
Companies,"  p.  327,  article  by  Clar-  upon  employers'  liability  policies  as 
ence  H.  Kelsey    (designated  in  said  infringing   the   law    of   maintenance, 
article  as  Employers'  Liahilily  Guar-  aiid,   so   far   as    employees   are    con- 
antee)  ;     7     New     Internatl.     Ency.  cerned,    encouraging   listlessness,   in- 
"Employers'  Liability,"  p.  52.  ditlerence,  and  neglect,  have  not,  we 
1*8     Americana      (1905)      "Insur-  lielieve,    received    much    attention    in 
ance."  this  country.     We  are,  indeed,  dis- 
On  question  whether  employers'  in-  posed  to  lliink  tliat  some  of  the  abus- 
demnity    contract    constitutes    insur-  es  which  have  been  referred  to  in  the 
ance,   see   note   in    47    L.R.A.(N.S.) 
294. 

54 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  IX. 

§  IX.  Origin  of  guaranty,  fidelity  guaranty,  etc.,  insurances.^^'* — 
These  and  kindred  insurances  have  become  an  important  and  useful 
branch  of  the  system  of  insurance. ^^  The  earhest  mention  of  fidel- 
ity guaranty  insurance  appears  to  have  been  an  advertisement  in 
1720  in  the  London  Daily  Post,  giving  notice  of  the  opening  of  books 
for  subscriptions  to  stock  for  the  information  of  a  company  to  in- 
sure masters  and  mistresses  for  whatever  loss  they  might  sustain  by 
theft  from  servants,  ticketed  and  registered  in  the  society.^'''  But 
although  certain  security  was  required  by  statute  to  be  given  by  per- 
sons appointed  to  oflices  of  public  trust  under  the  Crown,  or  by 
those  concerned  in  the  collection,  etc.,  of  public  monies,^^  and  even 
though  in  1840  the  ''Guarantee  KSociety,"  the  earliest  organized 
company,  was  first  started,^^  still  up  to  1842  persons  appointed  to 

United   States   have  no   existence  in   ited  after  the  Grant  of  such  Offices," 
the  United  Kingdom."  requiring'  a  "Bond  or  Bonds,  or  other 

An  employees'  guaraiitij  company  Security  or  Securities  in  such  Sum 
for  the  purpose  of  hghling  employers  and  with  such  suFlicient  Surety  or 
is  said  to  have  been  formed  in  1889  Sureties  as  shall  be  approved  of  by 
in  New  York,  although  without  sue-  the  Ijords  Commissioners"  etc.  The 
cess,  and  in  1892,  a  ''legal  pro-  52  Geo.  III.  c.  66  (June  9th,  1812) 
tection  guarantee  company,"  having  extended  same  to  Scotland.  The  act 
the  same  purpose,  was  started  in  Lon-  6  &  7  Wm.  IV.  c.  28  (1836)  was  en- 
don,  5  Universal  Cyc.  "Guarantee  titled  "An  Act  to  enable  Persons  to 
Companies,"  p.  327,  article  by  Clar-  make  Deposits  of  Stock  or  Exchequ- 
encc  H.  Kelsey.  er  Bills  in  lieu  of  giving  Security  by 

15a  "Guarantee"  is.  the  word  used  Bond  to  the  Postma.ster  General  anil 
in  English  statutes,  text  books,  etc.,  Commissioners  of  Land  Revenue, 
although  in  the  United  States  "guar-  Customs,  Excise,  Stamos  and  Taxes." 
anty"  is  used.  The   act    1    &    2    Vict!    c.    61    (Julv 

1^9  Am.  &  Eng.  Ency.  of  Law,  65;    31st,  1838)    was  an  act  entitled  the 
13  Ency.  Britannica,  161 ;  14  Id.  (11th   same  as,  and  amending  6  &  7  Wm. 
ed.)    p.   659;   Richards   on  Ins.    (ed.    IV.  c.  28  (July  4,  1836). 
1892)  sec.  10;  Id.  (3rd  ed.)  sees.  466       ^^  Francis'  Annals  of  Life  Assur. 
et  seq.  pp.  652  et  seq.  p.  285. 

^'Frost's  Law  of  Guaranty  Ins.  It  is  also  worthy  of  note  that  a 
(ed.  1909)  pp.  1,  2,  giving  copy  of  writer,  in  1840,  (Dublin  Review  of 
advertisement.  Francis  states  that  1840,  vol.  9,  p.  61,  in  an  article  en- 
the  "Guarantee  Company"  adopted  a  titled :  "Prospectuses  of  New  Life 
scheme  for  "insuring  to  all  masters  Insurance  Co.'s  (Various)"  and  tlie 
and  mistresses  the  losses  they  may  "Necessity  of  Legislation  for  Life  As- 
sustain  by  their  servants."  Francis'  surance.")  states  that  "we  have  some 
Annals  of  Life  Assur.  p.  83.  reason   to   suppose   tliat   an   attempt 

^*  Under  the  following  acts:  Act  will  be  made  to  establish  a  society 
50  Geo.  III.  c.  85  (June  15th,  1810)  :  for  insuring  the  honestij  of  clerks, 
"An  act  to  regulate  the  taking  of  Se-  secrelaries,  collectors,  and  all  those 
curities  in  all  Oflfiees  in  respect  to  i^ei-sons  who  usually  are  obliged  to 
which  Seciirity  ought  to  be  given  and  find  a  friend  to  become  security  (that 
for  avoiding  the  Grant  of  all  such  is  insurance)  for  them.  This  at  first 
Offices  in  the  Event  of  such  Securi-  sight  may  seem  a  strange  and  haz- 
tv  not  being  within  a  Time  to  be  lim-   ardous  undertaking;  but  a  little  con- 

55 


§  IX. 


JOYCE  OX  IXSUKAXCE 


or  employed  in  offices  of  trust  were  usually  obliged  to  rely  upon 
private  individuals,  friends,  or  relatives  for  sureties,  when  re- 
quired for  their  integrity,  fidelity,  faithful  discharge  of  their  duties, 
and  good  conduct.^"  But  in  that  year  an  act  was  passed  wherein 
it  was  declared  that  "it  is  expedient,  as  well  for  the  greater  Ea.se  of 
Persons  required  to  give  Security  as  aforesaid,  as  for  the  better  se- 
curing the  public  Interest,  the  further  Provisions  should  be  made 
in  this  respect,"  etc.,  and  a  statute  was  enacted  granting  to  the 
"Guarantee  Society"  the  power  to  issue  and  to  certain  public  of- 
ficers the  power  to  accept  the  security  of  said  society  for  persons 
appointed  to  certain  offices  oC  trust  under  the  Crown.  Further 
provisions  were  made  as  to  the  form  of  the  policy,  subject  to  the 
approval  of  said  public  officers,  in  whose  name  the  policy  should 
be;  also  that  a  certificate  of  loss  should  be  granted,  specifying  the 
nature  of  its  contents,  its  conclusive  elfect  as  proof  in  an  action  and 
the  recover}'-  thereupon;  and  a  final  provision  relieving  such  public 
ofiicers  from  personal  liability.^     Fidelity  guaranty  insurance  may, 


sideration  will  make  it  obvious  that 
all  objections  which  appear  inciden- 
tal to  the  scheme  might  have  been 
made  to  a  life  assurance  company,  if 
such  a  thing  were  now  to  start  for 
the  first  time,"  and  the  writer  adds  in 
a  note  -that  "gince  thi.s  was  written, 
the  office  has  begun  to  act."  That 
lidelity  guarantee,  as  the  first  devel- 
opment of  this  class  of  insurance 
originated  in  London  in  1840,  see  5 
Universal  Cyc.  "Guarantee  Compa- 
nies," p.  326,  art.  by  Clarence  H. 
Kelsey. 

^°  See  Pamphlet  on  Private  and 
Public  Guarantee  for  persons  Ap- 
pointed to  Otlices  of  Trust,  by  James 
Knight,  London,  1847. 

1  In  1842  an  act  entitled  "An  Act 
for  Regulating  Legal  Proceedings  by 
or  again.st  'The  Guarantee  Society,' 
jind  for  Granting  Certain  Powers 
thereto,"  was  passed  in  England, 
(local  &  personal  acts,  5  Viet.  Sess. 
2,  c.  Ixiv.  June  18,  1842.)  This  en- 
actment mentions  the  fact  of  the  as- 
sociation of  several  persons  into  a 
company  under  the  name  of  "The 
Guarantee  Society,"  the  objects 
thereof  "being,  in  consideration  of 
an  annual  Premium,  to  become  Sure- 
ty for  the  Integrity  of  Clerks,  Col- 


lectors, Receivers,  and  other  Persons 
of  Reputation  approved  by  the  said 
Society,  in  whom  pecuniary  Trust  is 
or  shall  be  imposed."     The  statute, 
in  addition  to  the  provisions  therein 
regulating  legal  proceedings,  empow- 
ered the  lords  of  the  treasury,  or  the 
principal  oflRcers  of  any  other  pub- 
lic  office,  to   accept  the  security   of 
said  "Society"  for  persons  appoint- 
ed to  certain  offices  or  employments 
of  public  trust  under  the  Crown,  "or 
wherein  he  shall  be  concerned  in  the 
Collection,  Receipt,  Disbursement,  or 
<'xpenditure  of  anj'  public  Monies." 
"The   Guarantee  or   Security  of  the 
said  Guarantee  Society,  to  be  given 
and  executed  in  and  by  their  Policy 
or  Policies,  in  the  usual  Form  of  such 
Policy  or  Policies,  or  in  such  other 
Form    and    subject    to    such    Condi- 
tions" as  the  said  lords  of  the  treasu- 
ry or  said  princijial   officers   of  any 
public  office  "shall  require,  approve, 
and   direct"    Said  security  to   be   in 
lieu  of  the  securitv  required  bv  acts 
50  Geo.  in.  c.  8.5;"52  Geo.  IILc.  66; 
6  &  7  Wm.  IV.  c.  28 ;  1  &  2  Vict.  e. 
61).     It  Avas   further   provided   that 
tho.se  policies  should  be  in  the  name 
of  the  secretary  or  any  other  officer 
named  bv  said  lords  of  tlie  treasury 


4 


56 


SOUKCKS  AND  OKIGIN  OF  INSURANCES 


§  IX. 


lliorefure.  in  so  far  a^  it  offers  security  for  the  integrity,  fidelity,  or 
lionesty  of  persons  holding  otlices  of  public  trust  and  concerned 
with  the  receipt,  disbursement,  or  control  of  public  monies,  be 
traced  directly  to  this  act  as  its  source,  and  to  Ihis  act,  also  for  the 
iirst  statement  showing  that  even  at  this  early  date  the  contract,  at 
least  as  to  its  form  or  terms,  was  subject  to  the  supervision  of  public 
officers  of  the  state.  The  "British  Guarantee  Association"  was  es- 
tablished in  Edinburgh  in  February  1845,  and  in  London  was  in- 
c(jrporated  under  an  act  passed  in  1846.^  Later  on  ''The  European 
Society's  act  1859"  was  passed,  reciting  that  the  People's  Provident 
Assurance  Society  was  established  in  1854,  with  power  to  transact 
every  description  of  business  ordinarily  transacted  or  capable  of 
being  transacted  by  an  assurance  or  guaranty  company  or  societ}'.^ 


A  certificate  of 


to  be  granted  to 


or  principal  officers 
loss  sustained  was 
enable  the  assured  to  recover  the 
same  with  costs.  Said  certificate  un- 
der the  respective  hands  or  hand  of 
Ihe  said  lords  of  the  tveasary  or  prin- 
cipal ollicers  or  ollicer  of  the  oJllce  or 
department  under  which  the  policy 
was  taken  and  accepted  was  "to  de- 
clare that  the  Revenue  has  been  dam- 
nified, and  to  state  the  Amount  of  the 
Loss  occasioned  by  any  Act  done,  or 
any  Payment  or  Duty  omitted,  in 
contravention  of  the  Duty  or  Pur- 
]iose  for  the  Performance  of  which 
sucli  Policy  shall  have  been  taken 
and  accepted;  and  that  the  Produc- 
tion of  sucli  Certificate,  and  Proof 
of  the  Handwriting-  of  the  Person  or 
Persons  subscribing-  the  same  (whom 
it  shall  not  be  necessary  to  prove  to 
have  been  at  the  Date  of  such  Sub- 
scription, or  to  be,  an  Officer  or  Offi- 
cers of  the  Office  or  Department  in 
wiiich  such  Policy  shall  be  taken  and 
accepted  as  aforesaid),  shall  be  final 
and  conclusive  Evidence,  in  every 
sucli  Action,  Snit,  or  Proceeding,  of 
the  Truth  of  the  Contents  of  the  said 
Certificate,  and  that  the  said  Policy 
lias  become  forfeited  tliereby  to  the 
Amount  of  the  Loss  stated  in  the 
said  Certificate;  and  thereupon  the  as- 
sured shall  be  entitled  to  recover 
such  Amount,  together  with  the  Costs 
of  sucli  Action,  suit,  or  other  Pro- 
ceeding.''     Tlie    said    lords    of    the 


treasury  and  other  principal  officers 
were,  by  said  Act,  relieved  from  all 
personal  liability  for  any  act  done 
by  them  or  any  of  them  under  the 
Act.  Other  powers  were  also  grant- 
ed to  said  "Guarantee  Society."' 

29  &  10  Vict.  c.  375  (Aug.  13th, 
1846),  entitled  "An  Act  to  Incorpo- 
rate the  British  Guarantee  Society," 
by  which  the  proprietors  and  share- 
holders of  the  Company  were  incor- 
porated by  designation  of  the  "Brit- 
ish Guarantee  Association."  See 
Pamphlet  on  Private  and  Public 
Guarantee  for  Persons  Appointed  to 
Offices  of  Trust,  by  James  Knight, 
of  London,  1847. 

^  "The  European  Assurance  Socie- 
ty'.s  act  1859"  (22  Viet.  c.  xxv.  1859, 
vol.  42,  Stat,  at  Large  p.  401)  re- 
cites that  the  People's  Provident  As- 
surance Society  was  established  and 
regulated  by  a  deed  of  settlement 
dated  Sept.  2,  1854,  and  the  objects 
for  which  it  was  established  com- 
l^rised  in  addition  to  life  assurance, 
endowment,  annuity,  fire  insurance 
and  other  business,  the  "guarantee- 
ing and  becoming  Security  or  Sure- 
ty to  such  Extent  or  witliin  sucli 
Limits  as  the  Directors  for  the  Time 
being'  of  the  Society  deem  expedi- 
ent, for  the  Integrity,  Honesty,  and 
Fidelity,  and  the  Absence  of  Negli- 
gence, Defaults,  and  Irregularities  in 
the  Conduct  of  Persons  holding  or 
about  to  enter  into  Offices  or  Situa- 


57 


IX. 


JOYCE  OX  IXSURANX'E 


The  ''guarantee  Ijy  companies  act''  was  j^assed  in  18G7.*  This  act 
was  repealed  with  certain  exceptions,  and  other  provisions  in  lieu 
thereof  made  by  the  government  officers  (security)  act  1875.^ 
Prior  to  187-'  attempts  to  carry  on  fidelity  guaranty  insurance  in 
the  Uriiled  ►States  were  a  failure,^  although  a  Canadian  corpora- 


tions of  pecuniary  Trust  or  Confi- 
dence, and  the  guaranteeing'  against 
Loss  of  Persons  bound  as  Sure- 
ties, or  otherwise  responsible  for 
others  liolding  such  Offices  or  Situa- 
tions, and  generally  the  transacting 
of  every  Description  of  Business  or- 
dinarily transacted  or  capable  of  be- 
ing transacted  by  an  Assurance  or 
Guarantee  Company  or  Societ}"-,  or 
appertaining  or  incidental  thereto, 
and  the  uniting  and  combining  to- 
gether of  those  Several  Objects  or 
Purposes,  and  to  that  Intent  the 
making  or  granting  of  Assurances, 
of  any  Kind  or  Description,  respec- 
tively dependent  or  conditional  upon 
the  integrity,  Honesty,  or  Fidelity, 
or  the  Absence  of  Negligence,  De- 
faults or  Irregularities  in  the  Con- 
duct of  Persons  in  or  about  to  enter 
into  Offices  or  Situations  of  pecuni- 
ary Trust  or  Confidence,  and  for 
whose  Honesty,  Fidelity  or  Integri- 
ty or  the  Absence  of  Negligence,  De- 
faults, or  Irregularities  in  whose 
Conduct  the  Society  might  be,  or  be 
about  to, become  directly  or  indirectly 
responsible;  that  the  Society  ob- 
tained a  Certificate  of  complete  Reg- 
istration under  the  Act  for  Registra- 
tion, Incorporation,  and  Regulation 
of  Joint  Stock  Companies,  and  be- 
came and  are  incorporated  thereun- 
der accordingly,"  etc.  It  was  pro- 
vided also  that  the  guarantee  of  the 
society  might  be  taken  instead  of 
other  security  required  from  persons 
in  public  offices  and  employments 
(Id.  see.  10) ;  also,  instead  of  security 
required  from  persons  administering 
the  poor  laws  (Id.  sees.  13,  14) ;  also 
from  officers  of  savings  banks  (Id. 
§  17)  :  public  officers  not  to  be  per- 
sonally liable  for  anything  done  un- 
der act  (Id.  see.  15).  An  act  to  effect 
a   settlement    of   the    affairs    of    the 


European  Assurance  Society  and  of 
other  companies,  .35  &  36  Vict.  c. 
cxlv.  1872,  is  noted  in  The  Law  Re- 
ports, 1872,  Statutes,  vol.  VII. 

^Havdn's  Diet,  of  Dates  (25th 
ed.)  p.  C49.  Under  the  30  &  31  Vict. 
c.  108  (1867)  (The  Law  Reports 
1867,  Statutes,  Vol.  2.)  entitled  "An 
Act  to  Provide  for  the  Guarantee  of 
Persons  holding  Situations  of  Trust 
under  Government  by  Companies, 
Societies,  or  Associations,"  cited  as 
"the  guarantee  bv  Companies  Act 
1867."  "The  Term  'Company'  shall 
mean,  and  include  any  Company, 
Corporation,  Society,  or  Association 
incorporated  by  Act  of  Parliament 
or  by  Royal  Charter,  or  under  any 
Act  relating  to  Joint  Stock  Compa- 
nies." It  provided  that  security  for 
certain  officers  ("Office  or  Emploti- 
ment  in  the  Public  Service")  might 
be  accepted  from  companies  comply- 
ing with  cei'tain  conditions. 

5  38  &  39  Vict.  c.  64.  The  Law 
Rep.  Stat.  1875,  vol.  X.  Every  cer- 
tificate granted  by  the  Treasury  to  a 
company  under  said  act  canceled. 
Security  given  by  any  company  be- 
fore passing  the  act  was  to  continue 
to  be  received  as  security  subject  to 
the  power  of  the  officer  of  the  de- 
partment to  require  other  security. 
Power  was  vested  in  the  Treasury 
(commissioners  thereof)  to  vary  se- 
curity in  respect  to  pei"sons  holding 
office  or  employment  in  the  public 
service. 

^  As  late  as  1873  it  was  declared 
that  it  would  seem  that  the  fidelity  or 
guarantee  insurance  business  oueht 
to  be  introduced  into  the  United 
States,  but  that  it  "has  been  tried  al- 
ready in  America,  and  has  proved  an 
utter  failure.  .  .  .  Every  trial  that 
has  been  made  to  conduct  'guarantee' 
insurance      ...      in    the    United 


58 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  IXa 

tion,  the  Guarantee  Company  of  North  America,  had  introduced 
this  insurance  here  in  1872,  it  having  existed  in  Canada  from  18»)8. 
In  1875,  however,  a  company  chartered  in  New  York  was  the  first 
to  actually  undertake  this  business.'  In  1880  "an  act  to  authorize 
the  Knickerbocker  Casualty  Insurance  Company  of  New  York  to 
chanoe  the  name  thereof  to  'the  Fidelity  and  Casualty  Company  of 
New  York.'  "  was  passed.' 

§  IXa.  History  of  title  guaranty  insurance. — The  Law  Property 
A.«surance  and  Trust  Society  is  mentioned  in  a  work  published  in 
1853,  the  purpose  of  said  society  being  the  insurance  of  defective 
titles,  and  guaranteeing  repayment  of  loans  and  mortgages.  It  was 
said  to  be  similar  in  character  to  rent  insurance.^  In  the  United 
States  in  1871  there  was  published  ^^  ''a  plan  for  the  insurance  of 
titles  and  mortgages"  by  means  of  a  corporation  to  be  called  the 
Title  Warranty  Company."  In  1876  title  guaranty  insurance  was 
undertaken  in  Philadelphia  by  the  Real  Estate  Title  and  Trust 
Company,  said  to  be  the  pioneer  in  the  United  States,  and  the  for- 
mation of  that  company  was  followed  in  Washing-ton,  then  in  suc- 
cession in  Baltimore,  Boston,  and  New^  York,  and  then  throughout 
the  principal  cities  in  this  country.  In  1883  the  Title  Guarantee 
and  Trust  Company  was  organized,  its  purpose  being  to  copy  the 
records  of  real  estate,  in  the  counties  of  New  York  and  Kings  and 
to  examine  and  guarantee  titles.  In  1885  the  Lawyers'  Title  In- 
surance Company  of  New  York  was  organized  under  the  general 
act  of  1885,  noted  below,  to  examine  and  insure  titles,  and  has  car- 
ried on  business  since  1887.^2     j^  iggS  an  act  ^^  f^j.  ^i^q  organiza- 

States  has  resulted  in   llie   downfall  ^  Francis'  Annals  of  Life  Ins.  p. 

of  the  companies  nnderlaking-  to  ere-  291.        "Copyholds,     lifeholds,      and 

ate  this  class  of  insurance.     The  truth  leaseholds    are    made    equal    to    free- 

is  the  losses  by  defalcations  in  'guar-  holds    for    all    purposes    of    sale    or 

antee'    busine.ss    would    break    down  mortgage."     Id. 

any  company  making  the  attempt  to  i°  By  Theodore  Aub. 

do'  fidelity    business)'      6    Insurance  "  "Several  features  of  some  of  the 

Times  (N.  Y.  Dec.  187.3)  850.  l)ranches  of  the  proposed  company's 

'See  5  T^niversal  Cvc.  "(Juaran-  1)usiness  are  borrowed  from  the  by- 
tee  Companies,"  p.  .320,'  art.  by  Clar-  laws  .of  the  'Prussian  Insurance 
ence  H.  Kelsey.  Stock   Company.'  "     Id. 

"Passed  March   31,  1880,  to  take  ^^ .')     Universal     Cyc.     "Guarantee 

effect    immedialelv.      1    Laws   N.    Y.  Companies,"    p.    326,   art.   by    Clar- 

1880,  p.  109,   c.  87.     In  New  York  once  H.  Kelsey.     See  also  History  of 

the  first  guarantee  insurance  act  au-  Title    Insurance    in    New    York    and 

thorizing'the  guaranteeing  lidclily  of  Brooklyn,  Title  Guarantee  &  Invest, 

persons  holding  places  of  public  or  Co.,   Lotus   Press,   1890.      The    Title 

private    trust    was    passed    in    1879.  Guarantee  and   Trnst   Company,  or- 

Laws   N.    Y.    1879,    c.    485,    p.    530,  ganized  on  the  same  principle  as  the 

amd'g  Laws  1853,  c.  403.     See  §  X.  Real     Estate     Title     Insurance    ami 

note  13  herein,   for   N.   Y.   statutes.  Trust  Company  of  Philadelphia,  the 

59 


§  IXb 


JOYCE  ON  INSURANCE 


lion  of  title  guaranty  companies  was  enactecl,  for  the  purpose  of 
examining  titles  to  real  estate,  of  procuring  and  furnishing  infor- 
mation in  relation  there-to,  and  of  guaranteeing  or  insuring  bonds 
and  mortgages,  and  the  owners  of  real  estate  and  others  interested 
therein  against  loss  by  reason  of  defective  titles  and  other  encumb- 
rances of  or  upon  such  real  estate.  This  law  was  revised  and  ap- 
pears in  the  Consolidated  Laws.^* 

§  IXb.  History  of  credit  guaranty  insurance. — The  Commercial 
Credit  Mutual  Assurance  Company  is  mentioned  in  1853  as  fairly 
representing  in  England  the  insurance  of  bad  del)ts.^^  Credit 
guaranty  was  first  tried,  though  without  success,  in  1887,  in  New 
York.  The  United  States  Credit  System  Company  in  New  .Jersey, 
however,  tried  a  safer  plan  of  insurance  in  1889.^^  The  statute 
of  1886  was  the  first  general  enactment  in  New  York  to  provide 
for  the  incorporation  of  credit  guaranty  and  indemnity  companies. 
They  were  authorized  by  that  act  to  incorporate  for  the  purpose 
of  guaranteeing  and  indemnifying  merchants,  manufacturers, 
traders,  and  those  engaged  in  business  and  giving  credit,  from  loss 
or  damage  by  reason  of  giving  and  extending  credit  to  their  cus- 
tomers and  those  dealing  with  them.^''^     This  law  was  revised  and 


pioneer     company     in     the     United  and  mortgages    (Francis'  Annals  of 

States,  the  Baltimore  Title  Company,  Life  Ins.   (lSo3),  p.  288),  is  said  to 

and  the  Boston  Title  Insurance  Com-  have  originated  as  an  independent  line 

pany,  to  examine  titles  to  real  estate,  in  New  York  in  1892,  although  com- 

and  issue  an  insurance  or  guarantee  panics  in  Great  Britain,  formed  for 

policy  on  the  same,  and  to  pay  loss  other    purposes,    had    undertaken    it 

np     to     amount     of     policy.       From  prior  tliereto  as  part  of  their  busi- 

]jamphlet  issued  by  Company.     Date  ness.     Investment  guarantee  authori- 


does  not  appear,  but  prior  to  1899. 

13  l.aws  N.  Y.  1883,  c.  338.  ]i.  905. 

"  Consol.  Laws,  Laws  1909,  art.  v. 
sees.  170-184,  as  am'd  Laws  1911,  e. 


tatively  classed  as  offering  corporate 
protection  to  lenders  on  mortgage 
and  ]nirchasers  of  bonds  against  loss 
by  reason  of  poorly  selected  invest- 


.525.  p.  1198.     See  Laws  1912,  c.  232,  meiits,  is  said  to  have  been  first  ap- 

sec.  70,  subd.  4;  sec.  170  am'd  LaAvs  plied  in  London  in  188G.     5  Univer- 

1913,  c.  81,  c.  215 :  sec.  172  am'd  Laws  sal  Cyc.  "Guarantee  Companies,"  p. 

1913,  c.  49:  sees.  181,  182  am'd  Laws  327,  art.  by   Clarence  H.  Kelsey. 
1913,  c.  182;  sec.  183  rep.  Laws  1913,        On   contract   insuring  against  loss 

c.  182 ;  sec.  184  am'd  and  renumbered ;  of   rents   as   insurance   contract,   see 

sec.  183,  Laws  1913,  c.  182.     See  Re-  note  in  47  L.R.A.(N.S.)  29fi. 


port  of  Board  of  Slat.  Cons(»l.  N 
Y.  Vol.  '3  (1907),  p.  2950.  See  §§ 
X.  13  herein. 

lient    (iuaranlee    and    Investment 


16  -; 


Guarantee  Insurances.  Rent  guaran-   293. 
tee.  wl)icli  is  mentioned  by  a  Avritor  in 
]853  as  being  of  a  cliaracter  similar 
to  the  insurance  of  defective  titles  and 
the  guaranteeing  repayment  of  loans 


1^  Francis'  Annals  of  Life  Assur. 
(ed.  1853),  p.  283.  On  securing 
against  loss  Ijy  giving  ci'edit  as  in- 
^urance,  see  note  in  47  L.R.A.(N.S.) 


.)  T"^niversal  Cyc.  "Guarantee 
Companies,"  p.  327»,  art.  by  Clarence 
H.  Kelsev. 

17  Laws  N.  Y.  1886,  e.  Gil,  p.  871. 


60 


SOURCES  AND  ORIGIN  OF  INSURANCES       §  X. 

a^jpears  in  the  Consolidated  Laws.^'  In  England  a  decision  was 
made  in  1858,  which  seems  to  be  the  earliest  case  of  insurance  of 
mercantile  credits.  It  apj^eared  that  defendants  had  delivered  to  a 
guarantee  compan}^  a  declaration  in  writing  containing  a  statement, 
of  the  amount  of  their  business  and  losses  thereon  for  a  certain  num- 
l)er  of  years  preceding,  and  they  were  desirous  of  being  guaranteed 
hy  the  company  in  respect  of  their  future  annual  sales  in  their  busi- 
ness, in  accordance  with  the  deed  of  settlement  of  the  company  and 
tlie  rules  and  by-laws  thereof,  and  that  the  company  had  agreed  to 
enter  into  the  giiarantce  thereinafter  contained,  upon  the  terms 
thereinafter  mentioned.  There  were  certain  conditions,  upon  the 
fulfilment  of  which  by  defendants  the  subscribed  funds  of  the  conir 
pany  were  to  become  liable  to  pay  a  proportionate  share  of  tlieir 
losses  ill  respect  to  goods  sold  by  them  during  a  specified  term  of 
years  up  to  a  designated  date,  and  diu'ing  any  further  period  upon 
compliance  with  certain  conditions.  There  were  other  provisions 
as  to  notice  of  renewal,  etc.  No  notice  having  been  given,  the 
agreement  was  held  to  have  continued  for  the  agreed  period.  An- 
other point  decided  was  that  it  did  not  appear  that  the  company 
was  not  empowered  to  amalgamated^  It  is  declared,  however,  in  a 
case  decided  in  the  United  States  Circuit  Court  of  Appeals,  that 
''insurance  against  mercantile  losses  is  a  new  branch  of  the  business 
of  underwriting,  and  but  few  cases  dealing  with  policie:?  of  that 
character  have  as  yet  found  their  way  into  the  courts.  The  neces- 
sarily nice  adjustments  of  the  respective  proportions  of  loss  to  be 
borne  by  insurer  and  insured,  the  somewhat  intricate  provisions 
which  are  required  in  order  to  make  such  business  successful,  and 
the  lack  of  experience  in  formulating  the  stipulations  to  be  entered 
into  by  both  the  parties  to  such  a  contract,  have  naturally  tended 
to  make  the  forms  of  ])oli('y  crude  and  difficult  of  interpretation."  ^^ 

§  X.  Origin  of  other  insurances. — In  England  the  earliest 
schemes  of  insurances  covered  almost  every  conceivable  subject  or 
contingency,^  but  the  progress  of  modern  insurances  and  the  safe- 
See  Re]:)ort  of  Board  of  Stat.  Con-  ^^  Solveiiev  Guarantee  Co.  v.  York, 
sol.  N.  Y.  Vol.  .3  (1907)  p.  2950.  3  Hurl.  &  Norm.  588. 

^8  Laws  1909,  c.  33,  art.  5,  sees.  20  Xebbets  v.  Mercantile  Credit 
170-184,  as  am'd  Laws  1911,  c.  .525,  Co.  (U.  S.  C.  C.  A.  189G)  73  Fed.  95, 
p.  1198.  See  Law.s  1912,  c.  232,  see.  9(j,  19  C.  C.  A.  281,  quoted  in  People 
70,  subdv.  4;  sec.  170  am'd  Laws'{exrel.  Kasson)  v.  Rose  (1898)  174 
1913,  c.  81,  c.  215;  see.  172  am'd  Laws  111.  310,  315,  44  L.R.A.  124,  51  N. 
1913,  e.  49;  sees.  181,  182,  am'd  Laws  E.  24(),  per  Wilkin,  J. 
1913,  c.  182;  see.  183,  Rep.  Laws  ^  See  Watford's  Insurance  Guide 
1913,  c.  182;  see.  184,  am'd  and  re-  (2d  ed.)  1-3,  24  et  seq.  As  to  the 
numbered  .sec.  183,  Laws  1913,  c.  182.  act  of  1774  in  England  against  gam- 
See  §  X.  13  herein,  ing  or  wagering,  and  as  to  gaml)ling 

61 


§  X.  JOYCE  ON  INSURANCE 

guards  thrown  around  them  for  the  protection  of  the  public  have 
done  much  to  place  insurance  on  a  legitimate  basis,  and  the  neces- 
sities of  business  have  given  rise  to  the  outgrowth  of  many  branches 
of  the  system  designed  to  cover  special  emergencies.  In  England, 
in  addition  to  the  insurance  already  considered  herein,  such  as 
marine,  fire,  life,  accidents  to  insured  and  third  persons,  insurance 
of  animals,  plate  glass,  and  other  property,  industrial,  employers' 
liability,  and  workmen's  compensation  insurances,  and  guarantee 
insurance  against  loss  by  dishonesty  or  insolvency,  there  are  at  the 
present  time  insurances  against  theft  or  burglary,  also  against  birth 
of  issue,  and  as  we  have  before  stated  there  is  scarcely  any  risk  that 
will  not  be  underwritten  at  Lloyds.^  Throughout  the  United 
States  there  are  also  numerous  statutory  provisions  intended  to 
cover  almost  every  contingency  to  which  insurance  is  or  may  be 
applicable.^  It  is  unnecessary,  however,  to  enumerate  them,  al- 
though some  of  the  enactments  may  be  briefly  considered.  To 
illustrate:  In  Michigan  an  act  was  passed  iii  1887  providing  for 
the  organization  and  regulation  of  log  and  timber  insurance  conn 
panics.  Such  insurances  are  intended  to  indemnify  against  the 
risk  of  lake  and  river  navigation  in  the  transporting  and  towing  of 
such  property.*  And  in  that  state  there  are  also  certain  enact- 
ments as  to  Michigan  millei^s'  fire  insurance  companies;  manufac- 
turers' fire  insurance  comj^anies;  merchants'  fire  insurance  com- 

insurances,  see  §§  VI.,  VII.  herein  ^  "Few  branches  of  industry  were 
and  notes.  As  to  prohibition  of  gam-  characterized  during  the  years  1907 
bling  on  loss  by  maritime  perils,  see  and  1908  by  such  a  mass  of  new  leg- 
marine  insurance  (gambling  policy)  islation  as  the  insurance  business, 
act  1909  (9  Edw.  VII.  c.  12).  See  During  these  two  years  the  legisla- 
2  Buttcrworth's  20th  Cent.  Stat,  tares  of  forty-two  states  passed  400 
(1900-1909)  "Insurance,"  428.  As  acts  covering  a  great  multitude  of 
to  avoidance  of  wagering  or  gaming  subjects.  ...  Of  these  400  acts, 
contracts,  see  Marine  Insurance,  act  333  were  passed  in  the  year  1907  and 
1906  (6  Edw.  VII.  c.  41)  sec.  4;  2  67  in  1908.  ...  Of  these  400 
Buttcrworth's  20th  Cent.  Stat,  acts,  317  or  nearly  SO  per  cent  of  the 
(1900-1909)  p.  399.  As  to  gam-  total  number,  were  passed  by  the 
bling  insurances,  see  Jack's  Introduc-  Western  and  Southern  States,  and 
tion  to  History  of  Life  Ins.  (ed.  only  83  were  enacted  by  the  New 
1912)  pp.  196-205.  As  to  insurance  England  and  Middle  Atlantic  States." 
at  lotteries,  Besant's  London  in  the  Year  Book  of  Legislation,  Vol.  10 
181  li  Cent.  (1903)  pp.  460-462.  As  (N.  Y.  State  Library,  Legislation 
to  bubble  life  companies  and  list  of  Bulletins  37-39)  p.  311.  Review  of 
projects  of  South  Sea  era,  see  Fran-  Legislation  on  Insurance,  1907-1908 
cis'   Annals   of  Life   Assurance    (ed.   bv  S.  Huebner. 

1853)  pp.  63,  81.  On  what  consti-  "  *  Act  Mich.  April  16,  1887;  acts 
tutes  insurance,  see  note  in  47  L.I^.A.  1887,  act  73,  p.  80.  See  Howell's 
(N.S.)    290.  Annot.  Stat.  I\Iich.  Suppl.  1883-1890, 

2  17   Earl   of  Halsbury's  Laws  of   pp.  3436  et  seq.,  sees.  4323,  c.  4  et 
England,  p.  512.  seq. 

62 


SOURCES  AND  ORIGIN  OF  INSURANCES  §  X. 

panics ;  cyclone  and  windstorm  insurance  companies;  live-stock 
co-operative  insurance  companies;  plate  glass,  accident,  live-stock, 
steam  boiler,  and  fidelity  insurance  companies;  integrity  and  fi- 
delity insurance  companies ;  ^  hail  insurance ;  ^  insurance  of  auto- 
mobiles, motor  cars,  and  other  vehicles,  by  fire  and  marine  insur- 
ance companies;  insurance  against  bodily  injury  and  disease;  and 
shoe  dealers'  mutual  fire  insurance  companies,  insurance  of  shoe 
stocks^  In  New  York  the  earlier  statutes  consisted  of  charters  to 
individual  companies,  acts  relating  to  their  dissolution,  and  pro- 
hibiting foreign  companies  from  doing  business  in  that  state.  And 
the  first  general  insurance  law  was  passed  in  1849.^  At  the  risk 
of  repetition  to  g  certain  extent  it  may  be  stated  here  that  in  that 
state  the  insurance  law  of  1909  ^  contains  certain  general  provi- 
sions ;  provides  for  life,  health,  and  casualty  insurance  corporations ; 
tire  insurance  corporations;  marine  insurance  corporations;  title 
guaranty,  securities  guaranty,  and  credit  guaranty  corporations; 
life  or  casualty  insurance  corporations  upon  the  co-operative  or  as- 
sessment plan;  Lloyds  and  int«r-insurers ;  fraternal  beneficiary  so- 
cieties, orders,  or  associations;  corporations  for  insurance  of  domes- 
tic animals;  and  town  and  county  co-operative  insurance  corpora- 
tions.^" The  Laws  of  New  York,  of  1913  contain  provisions  as  to 
rate-making  associations;^^  and  the  Laws  of  1912  provide  as  to 

5  Howell's     Annot.      Stat.     Mich.    Gen'l    Index    Laws    N.    Y.     (1777- 
Suppl.  1883-1890,   pp.   3423   ct  seq.    1901),  pp.  754-781. 

See    also    public    acts    Mich.    1899-  ^  Laws  1909,  c.  33,  c.  28  of  Consol. 

1913.  Laws. 

6  Public  acts  Mich.  1911,  No.   16,  ^  2  Birdseye's,  Cum.  &  Gilb.  Con- 
pp.  18-21.  sol.   Laws   N.   Y.   Annot.   pp.   2510- 

'  Public  acts  Mich.  1911,  No.  15,  2705;  7  Id.  (Suppl.  1910)  pp.  546- 

p.  18,  No.  68,  p,  93.  599;  8  Id.    (Suppl.  1911)    pp.  423- 

As  to  the  different  kinds  of  insur-  495;  9  Id.    (Suppl.  1912)    pp.  268-. 

ance  authorized  by  laws  of  Iowa  un-  304.      See   also   Laws   1910,    c.    634, 

der   McClain's    Code  sec.   1695,   and  Laws    1911,    c.    150,    Laws    1911,    c. 

amendments,    see    Bankers'    Mutual  525,  p.  1198. 

Casualty     Co.     v.     First     Nat.     Bk.  In    New   York,    county   and   town 

(1906)  131  Iowa,  456,  459,  460,  108  co-operative     companies     were     au- 

N.  W.  1046.  thorized  in  Laws   1879,  c.   287,   and 

8  Laws  1849,  e.  308,  p.  441.     Re-  Laws  1880,  c.  362,  Avhieh  were  revised 

port  of  Board  of  Stat.  Consol.  N.  Y.  and   consolidated   by   Laws   1886,    c. 

Vol.  3   (1907),  pp.  2949,  2950.  573,  Avliich  amended  fonn  art.  9,  of 

For  list  of  New  York  statutes  re-  the  present  general  law  of  1909  as 

lating  to  insurance  corporations  and  amended.     Report  of  Board  of  Stat, 

associations   (alphabetically  arranixed  Consol.  Vol.  3   (1907)   p.  2949. 

by  name  of  corporation  or  associa-  ^^  Laws  N.  Y.  1913,  c.  26,  amd'g  see. 

tion,  and  date  of  enactment),  see  2  341  (in  effect  Feb'y  19.  1913)  amd'g 

63 


§  X.  JOYCE  ON  INSURANCE      . 

co-operative  fire  insurance  corporations  transacting  business  upon 
the  advance  prennuni  plan.^^  A  statute  enacted  in  1912  further 
provides  for  the  formation  of  corporations  for  the  purpose  of  mak- 
ing any  of  tlie  following  kinds  of  insurance:  (1)  Upon  lives  or 
health,  and  to  grant,  purchase,  or  dispose  of  annuities.  (2)  Against 
injury,  disablement,  or  death  resulting  from  traveling  or  general 
accident,  and  against  disablement  resulting  from  sickness,  and 
every  insurance  appertaining  thereto.  (3)  Against  lo.<s  or  damage 
resulting  from  accident  to  or  injury  suffered  by  an  employee  or 
other  person,  and  for  which  the  person  insured  is  liable,  and  against 
loss  or  damage  to  property  caused  by  horses  or  by  any  vehicle 
drawn  by  animal  power,  and  for  which  loss  or  daniage  the  person 
insured  is  liable.  (4)  Guaranteeing  the  fidelity  of  persons  holding 
])laces  of  public  or  i)rivate  trust.  Guaranteeing  the  performance  of 
contracts  other  than  insurance  policies;  guaranteeing  the  perform- 
ance of  insurance  contracts  where  surety  bonds  are  accepted  by 
states  or  municipalities  in  lieu  of  actual  deposits ;  and  executing  or 
guaranteeing  bonds  and  undertakings  required  or  permitted  in  all 
actions  or  proceedings  or  by  law  required.  Guaranteeing  and  in- 
demnifying merchants,  traders,  and  those  engaged  in  business  and 
giving  credit,  from  loss  and  damage  by  reason  of  giving  and  ex- 
tending credit  to  their  customers  and  those  dealing  with  them. 
(5)  Against  loss  by  burglary,  or  theft  or  both.  (6)  Upon  glass 
against  breakage.  (7)  Upon  steam  boilers  and  pipes,  fly-wheels, 
engines  and  machinery  connected  therewith  or  operated  thereby, 
against  explosion  and  accident,  and  against  loss  or  damage  to  life 
or  property  resulting  thereupon,  and  against  lo.«s  of  use  and  oc- 
cupancy caused  thereby.  (8)  Upon  the  lives  of  horses,  cattle,  and 
other  live  stock.  (9)  Against  loss  or  damage  to  automobiles  (ex- 
cept loss  or  damage  by  fire,  or  while  being  transported  in  any  con- 
veyance by  land  or  water),  including  loss  by  legal  liability  for 
damage  to  property  resulting  from  the  maintenance  and  use  of  J 

automobiles.      (10)  Against  loss  or  damage  by  water  to  any  goods  m 

or  premises,  arising  from  the  breakage  or  leakage  of  sprinklers,  ™ 

])umps,  or  other  apparatus  erected  for  extinguishing  fires,  and  of 

Laws  1912,  c.  175,  p.  317,  sec.  141  12  Laws  N.  Y.  1912,  c.  90,  p.  159 

(in    effect     April    5,    1912)     anid'g  (in  effect  April  3,  1912)  amd'o^  Laws 

Laws  1909,  e.  33    (e.  28  of  ConsoL  1909,   c.   33,  sec.   267,   as   added  by 

Laws)    sec.   141,   as    am'd    by   Laws  Laws  1910,  c.  328,  and  am'd  by  Laws 

1911,  c.  460.     See  9  Birdseye's  Cum.  1911,  c.  323.     See  9  Birdseye's,  Cum. 

&  fiilb.  Consol.  Laws  N.  Y.  Annot.  &  Gilb.   Consol.  Laws  N.  Y.  Annot. 

(Suppl.  1912)   pp.  280-282.               .  (Suppl.  1912)    pp.  289-29L 

64 


SOURCES  AND  ORIGIN  OF  INSURANCES 


§  X. 


water  pipes,  and  against  accidental  injury  to  such  sprinklers,  pumps 
or  other  apparatus.^^ 


13  Chapter  232,  Laws  N.  Y.  1912,  p. 
444  (in  effect  April  9,  1912)  amd'g 
Laws  1909,  c.  33,  see.  70 ;  sec.  70  ara'd 
by  Laws  1909,  c.  302,  Laws  1910,  c. 
<)37.  and  Laws  1911,  c.  324,  also  by 
Laws  1912,  e.  231,  p.  444,  the  amd'ts 
effected  by  that  act  being:  disregarded 
I'.ere.  See  also:  Laws  1914,  pp.  504 
et  .seq.  art.  2,  sec.  70;  Vol.  9  (Suppl. 
1912)  Birdseye's  Cum.  &_Gilb.  Con- 
sol.  Laws,  Annot.  j).  27/  ;  Id.  Vol. 
8  (Suppl.  1911)  p.  434;  Id.  Vol.  7 
(Suppl.  1910)  p.  568;  Id.  Vol.  2,  p. 
2554.     See  §  13  herein. 

As  to  sources  of  the  various  New 
York  .statutes  relating  to  insurance, 
see  2  Birdseye's,  Cum.  &  ■Gilb.  Con- 


Joyce  Ins.  Vol.  I. — 5. 


sol.  Laws  N.  Y.  (Insurance  Law 
1909,  c.  33)  Annot.  pp.  2510  et  seq.; 
Id.  Vol.  9  (Suppl.  1912),  pp.  2(38 
et  seq.;  Id.  Vol.  8  (Suppl.  1911)  p. 
423  et  seq.;  Id.  Vol.  7  (Suppl.  1910) 
pp.  2555;  Id.  Cumulative  Suppl. 
1910-1913  Vol.  1,  pp.  1297  et  seq.; 
Cummings'  &  Gilbert's  Gen'l  Laws  & 
Statutes  covering  the  Insurance  Law 
of  3892,  c.  ()90.  See  also:  Report 
of  Board  of  Statutory  Cousol.  Vol. 
3,  N.  Y.  (1907)  Schedule  of  Laws 
reported.  Id.  pp.  2929-2948,  cover- 
ing laws  repealed  thereby,  also  pre- 
vious repeals.  See  further,  notes  to 
Schedule  of  Repeals,  Id.  pp.  2953- 
2963. 


65 


TITLE  II. 

GENERAL   TERMS   AND   DEFINITIONS. 

CHAPTER  I. 
TERMS  AND  DEFINITIONS. 


§  1. 

§  2. 

§§  3, 

§  5. 

§  6. 


Va 
7b 

7c. 
7d 

8. 

9. 

9a 
10. 
11. 
12. 
13. 
13a. 
13b 


"Insured"  and  "assured"  synonymous. 

Definition  of  insurance. 
4.   (transferred  to  §§  338d,  339c  herein). 

Definition  of  marine  insurance. 

Definition  of  fire  insurance. 

Definition  of  life  insurance. 
.  Definition  of  assessment  insurance. 
.  Definition  of  industrial  insurance. 

Definition  of  burial  insurance. 
.  Definition  of  workmen's  industrial  insurance :  state  insurance : 
pulsory  insurance :  workmen's  compensation. 

Definition  of  accident  insurance. 

Definition  of  casualty  insurance. 
,  Definition  of  employers'  liability  or  indemnity  insurance. 

Definition  of  endowment  insurance. 

Definition  of  tontine  insurance. 

Definition  of  guaranty  insurance. 

Definition  of  real  estate  and  title  insurance. 

Definition  of  rent  insurance :   rent  guaranty  insuraneie. 
,  Definition  of  strike  insurance. 


com- 


§  1.  "Insured"  and  "assured"  synonymous. — Some  writers  have 
attempted  to  distinguish  between  the  terms  '^insured"  and  "as- 
sured." ^  But  an  examination  of  the  eai'ly  English  cases  and  stat- 
utes does  not  di.^eover  any  distinction  between  them  as  applied  to 
the  subject  of  insurances.^     Lord  Bacon  ^  says  this  "kind  of  con- 

^  Babba,2e  on  Assurance  of  Lives;  to  draw  tlie  parties  assured  to  .seek 
13  Encvelopedia  Britaiinica,  169.  their  moiiov.s  of  everv  several  assur- 

2  See"  preamble,  4.">  Eliz.  c.  12  er."  See  also  Stat.  6  Geo.  I.  c.  18 
(1001)  which  reads:  Whereas,  here-  (1719)  ;  Stat.  19  Geo.  II.  c.  37 
tofore,  "assurers,"  etc.,  "have  souglit    (1746);    Stat.    14    Geo.    111.    c.    48 

6G 


TERMS  AND  DEFINITIONS 


§1 


tract  is  commonly  called  'policy  of  assurance'  or  'insurance.'  "  Mr. 
Hopkins  *  asserts  that  their  meaning  is  identical,  and  bases  his  state- 
ment on  the  derivation  of  the  words.  Mr.  Arnould  *  says:  ''The 
party  indemnified,  called  the  a.ssured  in  the  act,®  is  sometimes  also 
called  the  inspired."  "^  Other  writers  use  the  term  indiscriminately. 
jMr.  Justice  Field,  in  Connecticut  Mutual  Life  Insurance  Co.  v. 
Luchs,*  declares  that  "there  are  undoubtedly  instances  where  this 
distinction  between  the  terms  'assured'  and  'insured'  is  observed, 
though  we  do  not  find  any  judicial  consideration  of  it."  In  this  case 
a  ])olicy  was  issued  on  I/s  application,  by  which  the  company  agreed 
to  insiu'e  the  life  of  D.,  and  to  pay  the  money  to  the  "assured" 
after  due  notice  and  proof  of  D's  death,  and  it  was  decided  that  the 
term  "assured"  must  be  held  as  applicable  to  L.,  as  being  the  party 
for  whose  benefit  the  insurance  was  intended,  the  court  saying: 
"The  application  of  either  term  to  the  party  for  whose  benefit  the 
insurance  is  effected  or  to  the  party  whose  life  is  insured  has  gen- 
erally depended  upon  its  collocation  and  context  in  the  policy."  ^ 


(1774) ;  Tlie  assurance  companies  act 
1909  (7  Edw.  VII.  c.  49)  noted  under 
§  4  lierein. 

"Asfiuraiices"  related  formerlif  to 
the  conveyance  of  property  in  Eng- 
land, as  is  evidenced  by  Sfieppard's 
worlv  entitled  "The  Touchstone  of 
Common  Assurances  ...  or  con- 
veyances of  the  Kingdom."  So,  in 
!1627,  Charles  I.  introduced  a  pro- 
ject "for  .  .  .  making  and  regis- 
tering    .     .     .     assurances." 

^Bacon's  Abi'idgement  (ed  1778) 
598,  r)99. 

*  Hopkins  Marine  Ins.  (ed.  1867) 
4C. 

^Arnould  on  jVIar.  Ins.  (8th  ed. 
Hart  &  Simey)  sec.  1,  p.  3. 

6  Marine  Ins.  act  19()()  (G  Edw. 
YII.  c.  41)  entitled  "An  Act  to  Codi- 
fy the  Law  Relating  to  Marine  in- 
surance." 

'In  the  earlier  edition  of  Arnould 
(6th  ed.  Maelachlan's)  it  is  said: 
"The  party  interested  in  the  proper- 
ly insured  is  called  the  insured  or  as- 
sured,"  p.  16. 

8  108  U.  S.  498,  504,  27  L.  ed.  800, 
2  Sup.  Ct.  9-19. 

^  See  also  Cvrenius  v.  Mutual  Life 
Ins.  Co.  73  Hun  (N.  Y.),  365,  26  N. 
Y.  Supp.  248,  55  N.  Y.  St.  Rep.  897 


(aff'd  145  N.  Y.  576,  50  N.  E.  225). 
In  this  case  the  court  said:  "It  is 
to  be  observed  that  in  the  policy  the 
amount  is  payable  'to  the  said  a.s- 
sured,  his  executors,  administrators, 
or  assigns.'  The  question  is.  Does 
the  term  'assured'  refer  to  George  A. 
Cvrenius,  who  is  recited  to  have  paid 
the  consideration,  or  to  Alvin  Cvreni- 
us, whose  life  was  the  subject  of  the 
insurance?  In  determining  this  qttes- 
lion  the  application  may  properly  be 
referred  to.  That  was  executed  by 
both  Alvin  and  George  A.,  and  on 
its  face  stated  that  it  was  the  basis 
and  part  of  the  contract.  It  is  re- 
ferred to  in  the  policy  as  furnishing 
in  part  the  consideration.  The  iiolicy 
is  staied  to  be  issued  upon  the  faitli 
of  the  statements  and  declarations 
made  in  the  application.  Both  are 
jiart  of  one  transaction,  and  are  to 
ite  read  together  in  determining  its 
character  and  effect.  Reading  the 
policy  and  application  together,  it  ap- 
]>ears  that  George  A.  Cyrenius  wa.s 
the  ai)idicant  for  the  insurance,  and 
was  the  person  for  whose  benelit  it 
was  to  be  effected.  Tlie  policy  re- 
cites that  the  money  consideration  is 
received  from  liim,  and  in  the  com- 
plaint it  is  alleged  that  he  paid   it. 


67 


II 


§  1  JOYCE  ON  INSURANCE 

This  case  was  expressly  followed  in  Brockway  v.  Connecticut  Mu- 
tual Life  Insurance  Company,^"  which  latter  case  wii^s  based  upon 
substantially  the  same  material  facts  and  precisely  the  same  policy, 
the  court  holding  that  the  same  construction  should  be  given  the 
term  "iissured"'  as  was  given  in  Connecticut  Mutual  Life  Insurance 
Company  v.  JaicIis.^^  So  in  other  cases  this  term  has  been  held 
to  mean  the  person  for  whose  benefit  the  insurance  was  made, 
rather  than  the  one  upon  whose  life  it  dei>ends,^2     On  the  other 

Sueli  being-  the  ease,  aecording  to  the  ers  Ins.  Co.  v.  Pacaud,  150  III.  245, 
doctrine  laid  down  in  Smith  v.  Aet-  41  Am.  St.  Rep.  o55,  37  N.  E.  400 
na  Life  Ins.  Co.  5  Lans.  (N.  Y.)  545,  (policy  was  on  o-rain,  "assured's 
the  a.ssured  should  be  deemed  to  be  property,  or  held  by  assured  in  trust 
George  A.  Cyrenius.  A  similar  view  or  on  fomniission  or  sold  but  not  dc- 
is  taken  in  Connecticut  Mutual  Life  livered."  it  was  held  that  where  the 
Ins.  Co.  V.  Luchs,  108  U.  S.  4!)8,"  27  party  contracts  for  the  insurance 
L.  ed.  800,  2  Sup.  Ct.  049.  It  also  ])a\s  the  premium,  and  the  company 
appeared  in  this  case  that  the  father  makes  tiie  loss  i)ayable  to  such  i)arty, 
iurnished  the  money  for  the  fir.st  pre-  the  agreement  to  pay  is  a  contract 
mium  and  tlie  greater  part  of  the  with  the  person  who  pays  the  con- 
other  premiums,  and  that  the  policy  sideration,  and  he  has  a  right  of  ac- 
was  delivered  by  the  son  to  the  fath-  tion  in  his  own  name,  altliough  the 
er,  but  there  was  no  evidence  of  an  insurance  is  in  the  name  of  another, 
intent  to  transfer  the  title,  and  no  no  discussion  as  to  "assured"  or  "in- 
assignment  was  alleged  in  the  com-  sured")  ;  Washington  Life  Ins.  Co.  v. 
plaint.  Hanev,  10  Kan.  525  (declarations  of 
1°  (U.  S.  C.  C.)  29  Fed.  766.  partv"  where  life  is  insured  for  the 
"  108  U.  S.  498,  504,  27  L.  ed.  800,  benelit  of  another,  made  long  after 
2  Sup.  Ct.  949.  In  tlie  Brockway  applicniion  and  policy  cannot  be  re- 
Case  it  was  held  that  "assured'.'  re-  ccived  in  evidence  against  assured 
ierred  to  the  one  on  wiiose  applica-  to  impeach  application.  Party  in- 
tion  the  policy  was  issued,  who  was  sured  was  not  a  party  to  the  record, 
the  beneficiary  and  paid  the  i)remium,  No  discussion  as  to  distinction  be- 
and  that  the  personal  representative  tween  assured  and  insured  cited  and 
of  the  per.son  on  whose  life  the  ])oli-  qnoled  from  in  N'allcy  Mutual  Lite 
cy  was  issued  could  not  maintain  an  Assoc,  v.  Teewall,  79  Va.  421,  but 
action  on  the  contract.  the  question  there  was  only  as  to  the 
See  the  following  cases:  ^Vav-  admissibility  of  certain  evidence  and 
nock  V.  Davis,  104  U.  S.  775,  26  L.  there  was  no  discussion  as  to  insured 
ed.  924  (question  here  was  one  of  or  assured).  In  Irving  v.  Manning 
right  of  person  wiio  lias  insured  his  4  II.  L.  Cas.  303,  1)07,  in  the  opinion 
own  life  to  assign  it  to  parties  hav-  of  the  judges  the  words  '"assured" 
ing  no  insurable  interest.  Mr.  .Ins-  and  "policy  of  assurance''  are  used, 
lice  Field,  who  delivered  the  opinion.  ^^  Ilogle  v.  Guardian  Life  Ins.  Co. 
[he  also  delivered  the  opinion  in  the  4  Abb.  Pr.  N.  S.  (X.  Y.)  346,  348, 
Connecticut  Mutual  Life  Ins.  Co.  6  Rob.  (29  N.  Y.  Sup.  Ct.)  567; 
Ca.se  above  noted]  uses  the  word  "as-  ^I'^tua  L.  Ins.  Co.  v.  France,  94  V.  S. 
sured"  throughout  in  reference  to  5()2,  24  L.  ed.  287.  In  this  ca.se  the 
the  fiarty  on  whose  Hie  the  |)olicy  ])olicv  provided  that  the  sum  insured 
was  issued,  but  there  is  no  discussion  should  be  paid  "to  the  said  assured, 
as  to  "assured"  or  "insured  ")  ;  Trad-  her  executors,"   etc.,   and   the   policy 

68 


II 


TERMS  AND  DEFINITIONS 


hand,  in  Campbell  v.  New  England  Mutual  Life  Insurance  Corn- 
was  effected  by  a  brother  for  a  sis-  son  who  must  pay  the  premiums,  and 
ter's  benefit.  Reynolds  on  Life  Ins.  is  therefore  obligated  to  pay  all  out- 
sec.  22.  See  also  Ferdon  v.  Cantield,  standing  indebtedness  in  case  the 
104  N.  Y.  143,  145,  10  N.  E.  140  policy  should  lapse,  and  whose  de- 
(Rapailo,  J.  said:  "Although  the  fault  forfeits  the  policy,  that  .  .  . 
life  of"  C.  "was  the  life  insured  by  in  order  to  effect  a  forfeiture  of  the 
the  policy,  he  was  not  the  party  a,s-  policy  it  was  necessary  to  be  shown 
sured  thereby.  His  life  was  the  sub-  in  the  language  of  section  3  of  chap- 
.ject  of  insurance  but  the  contract  ter  341  of  the  Laws  of  1876  'that 
does  not,  on  its  face,  purpoi't  to  have  the  notice  to  the  assured  has  been 
been  made  either  with  hiui  or  for  his  f\^^\y   addressed    and   mailed    by    the 


benefit,  nor  does  he  appear  to  have 
had  any  interest  therein  which  he 
could  assign."  Policy  was  on  the 
Tontine  plan  and  question  wa.s  of 
the  rights  of  assignee  of  the  person 
whose  life  was  insured.     The  policy 


company  is.suing  such  policy  to 
the  assured,'  and  that  in  this  case  the 
person  'assured,'  and  to  whom  the 
policy  was  issued,  wa.s  the  plaintiff, 
and  that  she,  in  this  case  also  answers 


whose  lite  was  insured      ine  poncy   ^^^^  description  of  the  'person  whose 
was  taken  out  by  and  the  premiums  »  ^^  ^g-_„ 


were  paid  by  the  beneficiaries 
to  whom  the  amount  of  insurance 
was  payable)  ;  Rowe  v.  Brooklyn 
Life  Ins.  Co.  38  N.  Y.  Supp.  621,  16 
Misc.  323  (upon  the  application  of 
the  wife,  a  policy  was  issued  and  de- 
livered to  her    upon    her    Inisband's 


life  is  assured'  in  the  act  of  1877")  ; 
New  York  Life  Ins.  Co.  v.  Ireland, 
—  Tex.  — ,  (1891)  14  L.R.A.  278, 
281,  17  S.  W.  617  (a  person  is  not 
entitled  to  the  benefit  of  a  tontine 
policy  payable  to  his  wife  and  chil- 
dren    as     the     "a.ssured."      He     has 


life,  she  paid  the  premiums,  and  was    neitiier  any  nght.s  as  tru.stee  to  said 


to  receive  the  amount  of  the  insur 
ance  in  the  event  of  her  husband's 
death,  or  in  case  she  died  first,  then 
said  insurance  was  to  be  paid  to  her 
heirs,  etc.  She  as  beneficiary  was 
held  to  be  the  "assured"  within  the 
statute  of  1876  of  that  state  requir- 
ing, in  order  to  effect  a  forfeiture 
of"  the    policy    for    nonpayment    of 


benefits,  nor  any  legal  title  to  the 
])()]icy  even  though  he  has  always 
held  possession  and  control  thereof, 
has  paid  the  premiums  and  the  bene- 
liciaries  have  never  known  of  the  in- 
surance). 

"Beneficiar}i'-  and  "assured,"  said 
io  be  syiwni/mous  terms  Fnion 
Fraternal  League  v.  Walton,  109  Ga. 


premiums  a  "notice  to  the  assured"  1,  H,  77  Am.  St.  Rep.  350,  46  L.R.A. 
and  also  that  she  was  the  "person  424,  34  S.  E.  317,  dissenting  opinion 
whose    life    is    assured"    under    the    of  Lumpkin,  P.  J.,  contract   was  bv 


statute  1877.  Wright,  J.,  said  (Id. 
p.  623)  :  "Under  the  statutes,  and  the 
authorities  construing  the  legislative 
intent,  it  must  be  held,  where  the 
contract  is  made  with  the  beneficiary. 


benefit  society  with  member,  and 
said  by  court  to  differ  from  ordinary 
life  insurance. 

The  word   "assured"  is  sometimes 
applied  to  the  beneficiary;  but  it  is 


to  whom  the  policy  is  delivered,  and  generally      synonymous      with      the 

to  whom  it  is    payalile    during    lier  word  "insured,"  and  the  meaning  of 

life,  and  after  her  death  to  her  ex-  the  term  "assured"  is  to  be  derived 

ecutors      and      administrators,      and  from  the  connection,  as  well  as  upon 

where  the  pereon  on  whose  life  the  1  he  fact  of  who  procured  the  policy, 

policy  risk  is  taken  has  no  interest—  and    with    whom    the    contract    was 

present,  future  or  contingent— there-  made,  thus  a  third  party  may  be  the 

in,    and    where    the     beneficiary     is  "a.ssured."     Chandler  v.   Traub,  159 

designated  in  the  policy  as  the  per-  Ala.  519,  49  So.  241,  the  court,  per 

69 


§  1  .lOYCK  OX   INSLl.'ANCE 

paiiy/^  the  polu  y  was  issued  upon  tlic  life  of  A.  to  him,  as  '•'the 
assured,"  and  the  promise  was  to  pay  the  sum  insured  to  the  as- 
sured, his  executors,  etc..  lor  the  henetit  of  his  brother's  wife,  and  the 
court  dechn-ed  that  tlie  phiintiff  did  not,  by  virtue  of  the  clause  de- 
claring the  policy  to  be  for  her  benefit,  become  the  assured;  that 
she  was  merely  the  person  designated  by  agreement  of  the  parties 
to  receive  the  proceeds  of  the  poHcy  on  the  death  of  the  assured. 
There  was,  however,  no  discussion  as  to  the  meaning  of  tliese 
terms."  In  a  Massachusetts  case  ^^  tlie  words  "insured"  or  ''as- 
sured" in  a  mutual  fire  insurance  policy  were  held  to  apply  to  the 
person  who  owned  the  property,  applied  for  the  insurance,  paid  the 
premium,  and  signed  the  deposit  note,  and  not  another  to  wIkhu 
the  money  was  payable  in  case  of  loss,  although  he  might  have  a 
lease  of  the  premises.  Under  the  standard  policy  the  word  '"in- 
sured" includes  ''legal  representatives."  ^® 

Simpson,    J.,    says,    however:     "We  wood  v.  Agricultural  Ins.  Co.  73  N. 

lliink  that,  in  our  statute,  the  word  Y.  447.  451.     Cited   in   Matthews    v. 

applies   to   the   person   whose  life   is  American  Central  Ins.  Co.  154  N.  Y. 

insured."     Id.  -Vi^.  449,  452,   39   L.R.A.   433,  48   N.   E. 

1^98  Mass.  381,  389.  '51,   upon   point   as   to  legal   repre- 

"  See    also    Hurlburt    v.     Pacifle  sentatives  of  assured,  including  heirs 

Ins.  Co.  2  Sum.    (C.  S.  C.  C.)   471,  at  law,  etc.,    cited    in    Matthews    v. 

479,  Fed.  Cas.  No.  6919.  American  Central  Ins.  Co.  41  N.  Y. 

15  Sanford  v.  Mechanics'  Mutual  Supp.  304,  308,  9  App.  Div.  339, 
Fire  Ins.  Co.  12  Cash.  (66  Mass.)  344;  Lawrence  v.  Niagara  Fire  Ins. 
541.  Co.  37  N.  Y.  Supp.  8il,  812,  2  App. 

16  Under  a  standard  policv  pro-  Div.  267,  269,  affirmed  (mem.)  154 
vision  that  the  word  "insured,"  N.  Y.  752,  49  N.  E.  1099,  which 
wherever  it  occurs,  shall  be  held  to  holds  that  where  a  fire  policy  upon 
include  the  "lesal  rein-esentatives  of  real  propertv  runs  to  insured's  legal 
the  insured,"  the  term  "legal  repre-  representatives,  his  executor  or  ad- 
sentatives"  refers  to  tliose  who  sue-  ministrator  may  properly  bring  an 
ceed  to  insured's  legal  rights,  by  action  for  loss  after  his  death.  This 
reason  of  his  death  or  the  transfer  of  last  case  is  cited  in  Matthews  v. 
the  policy,  and  should  not  be  eon-  American  Central  Ins.  Co.  41  N.  Y. 
strued  to  include  anyone  wlio  is  Supp.  304,  308,  9  App.  Div.  339, 
authorized  to  act  for  insured.  Metz-  344,  as  simply  holding  that  action 
ger  V.  Manchester  Fire  Assur.  Co.  may  be  brought  by  personal  repre- 
102  ]Mich.  334,  63  N.  W.  650.  See  sentatives.  The  Wyman  case  is  also 
Wvman  v.  Wvman  (de<'ided  in  cited  in  Kanes  Estate,  In  re,  77  N. 
1863)  26  N.  Y.'  253,  where  it  was  Y.  Supp.  874,  878,  38  Misc.  276. 
decided  that  if  one  ha.s  effected  in-  Legal  representatives  as  bene- 
surance  upon  a  house  against  loss  by  ticiaries,  see  §§  /86,  793  herein, 
fire,  the  interest  in  the  policy  de-  The  Georgia  Code  uses  as  part 
volves  upon  liis  lieirs  at  law,  and  the  of  the  detinition  of  insurance  upon 
damages  accrue  to  them  in  case  of  life  the  words:  "The  life  may  be 
loss.  Distinguished  in  Herkimer  v.  that  of  assured,  or  of  another  in 
Rice,  27  N.  Y.  163.  166,  see  also  Id.  whose  continuance  the  assured  has 
180,  as  to  effect  of  judgment  in  the  an  interest."  Ga.  Civ.  Code,  sec. 
Wyman  ease.    Distinguished  in  Sher-  2114  (Code  1911,  sec.  '2496).    Union 

70 


TERMS  AND  DEFINITIONS  ,  §  1 

In  determining  whether  the  word  "insured"  or  "assured"  ap- 
plies to  u  mortgagor  or  mortgagee,  the  circumstances  will  be  con- 
sidered and  the  words  construed  and  applied  in  the  sense  in  which 
they  were  understood  by  the  immediate  parties  to  the  contract 
whereby  the  insurance  was  effected.^'^ 

But  the  words  '"insured"*  and  "assured"  may  both  apply  to  a 
grantee  with  a  lien  back  to  the  grantor.^* 

Fraternal    League    v.    Walton,    109  inserted   in   the   policy,   citing   Eddv 

Ga.  1,  3,  77  Am.   St.   Rep.   350,  46  v.  London  Assur.  Co.  143  N.  Y.  311, 

L.R.A.  424,  34    S.    E.    317.      Under  25  L.R.A.  686,  38  N.  E.  307;  Hast- 

Herron's     Savle's     Tex.     Civ.     Stat,  ings  v.  Westchester  Fire  Ins.  Co.  l'.\ 

(Suppl.  1908-1910,  p.  233)   Tit.  58,  N.  Y.  141,  147,  154;  I^wis  v.  Guardi- 

chap.  11.  .sec.  1,  Tex.  Rev.  Stat.  1895,  an  Ins.  Co.  181  N.  Y.  397,  106  Am. 

Art.  3096a,  "The  'insured'  or  'policy'  St.  Rep.  557,  74  N.  E.  224)  ;  De  Witt 

holder  is  the  person  on    whose    life  v.  Agricultural. Ins.  Co.  89  Hun  (96 

the  policy  of  insurance  is  effected."  N.  Y.  Sup.  Ct.)  229,  36  N.  Y.  Supp. 

^' Liveri^ool    &    London    &    Globe  520    (where    an    owner    of    property 

Ins.  Co.  V.  Davis,  56  Neb.  684,  77  N.  obtains  insurance  thereon,  and  then 

W.  66  (where,  as  I)et\veen  the  parties  sell.s  said  property  with  a  mortgage 

to   the   contract    wlien   the   insurance  back,  and   the   policy  is  indorsed  to 

was   effected,   the   protection    of   the  said  vendee  as  the  owner,  with  loss 

policy    was    applied    and    paid    for  payable  to  the  mortgagee  as  interest 

solely  on  behalf  of  the  mortgagee,  the  may    appear,    and   said    vendee    and 

'■insured;'    in    a    clause    voiding    the  mortgagor   contracts   to   sell    to    an- 

policy  for  concealment  or  misrepre-  other  party,  who  enters  into  posses- 

sentation,  will  be  construed  to  mean  sion,  and  obtains  a  policy  in  another 

the  mortgagee,   and    not    the     mort-  company,  and  thereafter  the  original 

gagor.     In  this  case  it  was  also  held  policy  is  indorsed  to  him    as    owner, 

that  where  a  policy  was    made    out  but  without  his  knowledge  at  the  time 

describing  the   mortgagor  as   owner,  it  was  made,  said  last  owner  of  the 

with  a  mortgage  slip,  making  loss  or  property    is    not,    at    the    time    of 

damage  payable  "for  the  account  of  the  issuance  of  the  second  policy,  the 

the  fissured"  to  the  mortgagee,  such  insured  under  the  policy  issued  to  the 

clause  does   not   make   the  loss   pay-  first  owner,  although  he  was  the  in- 

ai)le  to  the   mortgagor,  but    to    the  sured,  if  at  all,  a.s  of  the    time    said 

mortgagee  to  be  applied  to  the  mort-  original  policy  was  indorsed  to  him)  ; 

gage  indebtedness)  :  Watertown  Fire  Armstrong    v.    Agricultural  Ins.  Co. 

Ins.  Co.  V.   Grover'&  Baker  Sewing  56   Hun    (63  N.  Y.   Super.  Ct.)    399 

Mach.  Co.  41  Mich.  131,  32  Am.  Rep.  ("assured''  is  mortgagee    where    the 

146,   1    N.    W.   961    (mortgagee   Avas  policy  to  owner  makes  loss  payable 

held  one  of  the  jiarties  "assured,"  un-  to    former    as    interest    may    appear, 

der  provision  of  policy  that  "in  case  and  as  such    "assured"    must    deliver 

of  loss  the  assured  shall  give  imme-  preliminary  proof  of  loss)  ;  Hastings 

diate     notice")  ;     Lewis     v.     London  v.  Westchester  Fire  Ins.  Co.  12  Hun 

Ji   Lancashii-e   Fire  Ins.   Co.   137   N.  (19  N.  Y.  Super.  Ct.)  416  {''assured" 

Y.  Supp.  887,  78    Misc.    176     {''in-  held  to  apply  only  to  the  owner  and 

sured"  under  sec.  122  of  N.  Y.  Ins.  moitgagor,    and    not    to    the    morl- 

Law,    providing    for    cancelation    of  gagee's  interest). 

policy    upon    request    of    "insured/'  ^*  The  grantee   with   lien    back    to 

etc.,  includes  a  mortgagee  for  whose  grantor  to  whom  original   policy  is 

benefit   a  mortgage   clause  has  been  assigned,  with  insurer's    consent,   be- 

71 


§  1  JOYCE  ON  INSURANCE 

Again,  the  circumstances  and  construction  of  the  policy  may 
show  that  the  owner  of  the  cargo  is  meant  by  the  "assured,"  ^'  or 
that  forwarders  of  tlie  cargo  are  the  "a.ssured,'"  ^°  or  that  a  towing 
company,  and  not  the  cargo  owner,  is  the  assured.^ 

Where  the  loss  was  payable  to  the  "assured"  under  an  agree- 
ment to  reinsure,  it  was  decided  that  by  "assured"  was  meant  the 
company  reinsured,  and  not  the  assured  under  the  original  policy.^ 
And  if  parties  agree  to  "reinsure"  loss  if  any,  "payable  to  the  as- 
sured upon  the  same  terms  juid  conditions,  and  at  same  time  as 
contained  in  the  original  policies,"  the  word  "assured"  means  the 
reinsured  company,  and  not  the  assured  in  the  original  policies.^ 

The  construction,  however,  does  not  appear  in  any  of  these  cases 
to  have  turned  upon  any  distinction  between  the  terms  themselves, 
but  rather  upon  the  relation  which  they  sustained  to  the  other 
words  of  the  policy,  and  were  construed  as  they  were  for  the  pur- 
pose of  effectuating  the  intent  of  the  parties  to  the  contract,  and  de- 
termined that  the  loss  was  payable  to  the  party  whose  interest  was 
intended  'to  be  covered  where  the  description  might  apply  to  iixjre 


romes  the  "insured''  under  the  new 
contract  thereby  created  Avith  the 
insurer,  within  a  clause  against 
other  insurance,  etc.  Such  grantee 
is  also  the  "assured"  under  a  rider 
with  a  provision  making  the  loss 
proven  due  "assured"  payable  to  the 
grantor  (original  policy  holder)  "as 
interest  may  appear."  Dumphy  v. 
Commercial  Union  Assur.  Co.  Ltd. 
—  Tex.  Civ.  App.  —  (1911),  rehear- 
ing denied  (1912)  142  S.  W.  116. 

^^  Under  a  clause,  "the  insurers  are 
to  be  subrogated  to  all  the  rights  of 
the  assured  under  their  bills  of  lad- 
ing or  transportation  receipts,"  the 
words  following  "assured"  show  that 
the  owner  of  the  cargo  is  meant  by 
the  "assured,"  where  also  the  premi- 
um was  added  to  the  freight  and 
paid  by  the  owners  of  the  cargo,  and 
it  is  evident  from  the  facts  and  the 
construction  of  the  policy  and  the 
certificate  that  said  policy  was  in- 
tended to  protect  them,  and  the  in- 
surer was  entitled  to  subrogation  to 
said  assured's  rights.  Merchants  & 
Miners  Transp.  Co.  v.  Robinson- 
Baxter-Dissowav  Towing  &  Transp. 
Co.  113  C.  C.  A.  427,  191  Fed.  7C9. 

^^  Loss  was  payable  to  *'the  assured 


or  order,  and  return  of  this  certifi- 
cate." The  forwarders  of  a  cargo 
insured  it  as  part  of  the  price  of 
freight  agreed  upon.  A  certificate 
payable  to  order  was  issued  to  them, 
and  they  indorsed  and  delivered  thi.s 
to  the  owners.  The  name  of  the 
forwarders  alone  was  entered  in  the 
policy  book  wiiliout  any  additional 
words  as  "for  whom  it  may  concern," 
nor  did  the  certificate  contain  th^se 
or  any  equivalent  words,  nor  were 
they  descnbed  as  agents.  It  Avas 
held  that  said  forwarders,  the  per- 
sons named,  were  the  "assured." 
The  Sidney  (U.  S.  D.  C.)  23  Fed. 
88 

in.  A.  Baxter,  The  (U.  S.  D.  C.) 
182  Fed.  030.  Policy  was  +akon  out 
by  towing  company  on  barge  cargo, 
but  loss  was  payable  to  cargo  owner; 
case  of  subrogation  to  assxred's 
rights,  but  recovery  not  authorized 
against  towing  company  for  in- 
surer's benefit  for  fault  for  collision. 

^  Carrin2:ton  v.  Commercial  Fire 
&  Marine  Ins.  Co.  1  Bosw.  (N.  Y.) 
152. 

^  Carrington  v.  Commercial  Fire  & 
Marine  Ins.  Co.  1  Bosw.  (N.  Y.)  152. 


72 


I 


TERMS  AND  DEFINITIONS  §  1 

than  one.  We  cannot  discover  that  any  distinction  of  practical 
vakie  has  ever  been  made  by  the  text-writers  or  the  courts  in  the 
use  of  these  words,  except  in  those  cases  where  their  meaning  or  ap- 
phcation  has  depended  upon  the  construction  of  some  particuhi: 
policy,  and  we  shall  therefore  use  the  terms  throughout  this  work 
as  synonymous.* 

§  2.  Definition  of  insurance. — Insurance,  strictly  defined,  is  a 
contract  wliereby  one  for  a  consideration  agrees  to  indonmify  an- 
other for  liability,  damage,  or  loss  by  certain  perils  to  which  the 
subject  may  be  exposed,  but  the  contracts  of  life  insurance  and  of 
accident  insurance  covering  death  are  not  strictly  contracts  of  in- 
demnity.* Emerigon  ^  defines  insurance  as  ''a  contract  by  which 
one  promises  indemnity  for  things  transported  by  sea,  deducting  a 
price  agreed  upon  between  the  assured,  who  makes  or  causes  to  be 
made  the  transport,  and  the  insurer,  who  takes  upon  himself  the 
risk  and  burdens  himself  with  the  event,"  and  he  adds:  "This 
definition  is  taken  from  the  Guidon  la  jMer,  and  is  the  doctrine  of 
all  our  authors."'  He  also  says  that  it  "is  a  contract  by  which  one 
takes  upon  himself  the  peril  which  the  property  of  others  encoun- 
ters upon  the  sea.'  This  definition,  of  course,  relates  to  marine  in- 
surance, as  do  the  early  definitions.  Many  other  definitions  of 
insurance  have  been  given.^     It  is  said  in  Funke  v.  Minnesota 

*See  Bouvier's  Law  Diet.:  Bacon's  person."     This  definition  is  given  by 

Benefit  Societies  and   Life  Ins.    (ed.  Gray,     J.,      in      Commonwealth     v. 

1888)   see.  19,  p.  22;  Id.   (ed.  1894)  Weatherbee,     105    Mass.     149,    160, 

see.  19,  p.  27;  13  Am.  &  Eng.  Eney.  cited  or  quoted  with  approval  in  the 

of  Law,  630.  following  cases : 

5  See  sees.  24  et  seq.  for  this  dis-  A  labama. — Suj^reme  Commandery 
tinction.  On  what  constitutes  in-  Knights  of  the  Golden  Rule  v.  Ains- 
:-.urance  see  note  in  47  L.R.A.(N.S.)  worth,  71  Ala.  430,  443,  46  Am.  Rep. 
290.  332,  per  Brickell,  C.  J. 

6  Emerigon  on  Ins.  (Meredith's  Jvawsas.— State  (ex  rel.)  v.  Vigi- 
ed.  1850)  "c.  i.  p.  2.  lant  ln.s.  Co.  30  Kan.  585,  587,  2  Pac. 

'  Emerigon  on  Ins.  (Meredith's  ed.  840,  per  Brewer,  J. 

1850)  c.  i.  p.  4.  Kentucky. — Sims  v.  Commonwealth, 

8  "A  contract  of  insurance    is    an  I'l-*     Ky.     827,     828,     71     S.     W. 

agreement   bv  which   one   party,  for  929.                            r^^  a-            tt   ■     i 

a    consideration     (which    is    usually  Massachusetts.— C\&^m    v.    United 

paid  in  monev  either  in  one  sum  or  States  Credit  System  Co.  16o  Mass. 

at    different    times    during    the    con-  501,  52  Am,  St.  Rep.  528,  43  N.  E. 

tinuance   of  the  risk),    promises    to  293. 

make   a   certain    payment   of   money  il//.s.soMr/.— State       v.       Merchants 

upon  the   destruction   or    injury    of  Exch.  Mut.  Ben.  Soe.  72  Mo.  146,  159, 

something  in  which  the  other  party  per     Napton,     J.;     State     (ex     rel. 

has  an  interest.      In    fire    insurance  Beach)    v.   Citizens  Benefit  Assoc.  6 

and  marine  insurance  the  thing  in-  Mo.  App.  103,  169. 

■  sured  is  property;  in  life  or  accident  Nebraska.— ^iiviQ  v.  Farmers  Ben. 

insurance  it  is  the  life  or  health  of  a  Assoc.  18  Neb.  276,  281,  25  N.  W.  81. 

73 


-f»l 


§  2 


JOYCE  OX  INSURANCE 


Suittli  Dakota. — Masonic  Aid  As- 
soc. V.  Taylor,  2  S.  Dak.  324,  329, 
50  N.  W.  93. 

"An  insurance  in  relation  to  prop- 
erty is  a  contract  whereby  the  in- 
surer becomes  bound  for  a  definite 
consideration,  to  indemnify  tlie  in- 
sured asrainst  loss  or  dama2:e  to  cer- 


Commonweahh,  87  Pa.  173,  183,  30 
Am.-  Rep.  352. 

Insurance  is  a  contract  of  in- 
demnity, in  which  the  parties  may 
stipulate  for  the  manner  and  time  in 
which  that  indemnity  sliall  be  made, 
and  the  law  will  enforce  such  con- 
tract.     Commonwealth    Ins.    Co.    v. 


tain  property  named  in  the  ])olicy,  by  Sennett,  37  Pa.  St.  205,  78  Am.  Dee. 

rea.'Jon   of  certain  perils  to  which  it  418. 

may     be     exposed."       Dover     Glass       Insurance  "is  a  contract  whereby 

Works  Co.  V.  American  Fire  Ins.  Co.  one     party     agrees     to     wholly     or 

1  ilarv.   (Del.)    32,  45,  65    Am.    St.  partially  indemnify  another  for  loss 

Rep.  264,  29  Atl.  1039,  per  Wolcott,  or    damage    which    he    may    suffer 

Chan.  from  a  specified  peril."     Shakman  v. 

"Insurance    is    an    agreement    by  United  States  Credit  System  Co.  92 

which  the  insurer,  for    a    con.'iidera-  Wis.    366,    374,    53    Am.     St.     Rep. 


lion,  agrees  to  indemnify  the  assured 
against  loss,  damage,  or  prejudice  to 
certain  property  de.'^cribed  in  the 
agreement,  for  a  specified  period,  by 
reason  of  specified  perils."  Barnes 
V.  People,  168  111.  425,  429,  48  N.  E. 
91. 

Insurance    is    "an    agreement    bv 


920,  32  L.R.A.  383,  66  N.  W.  528. 

"Insurance  is  a  contract  by  which 
the  one  party,  in  consideration  of  a 
price  paid  to  liim  adequate  to  the 
risk,  becomes  security  to  the  other 
that  he  shall  not  suffer  loss,  damage, 
or  prejudice  by  the  happening  of 
the  perils  specified  to  certain  things 
which  one  party,  for  a  con.sideration,  which  may  be  expo.sed  to  them.  If 
])romises  to  make  a  certain  payment  this  be  the  general  nature  of  the  con- 
of  money  upon  the  destruction  or  tract  of  insurance,  it  follows  that  it 
injury   of   something  in    which     the    is  applicable  to  protect  men  against 


otlier  party  has  an  interest." 
Rensinhouse  v.  Seelev,  72  Mich.  603, 
617,  40  N.  W.  765.  ' 

"A  contract  of  insurance  is  intend- 
ed as  an  indemnity  against  an  un- 
certain event,  which,  if  it  occurs,  will 
cause  loss  to  the  assured."     Cross  v. 


uncertain  events  which  may  in  any 
wise  be  of  disadvantage  to  them;  not 
only  those  persons  to  whom  posi- 
tive loss  may  arise  by  such  events, 
occasioning  the  deprivation  of  that 
which  they  may  possess,  but  those 
also    who    in     consequence    of    such 


National    Fire    Insurance    Company,    events    may    have   intercepted   from 


132  N.  Y.  133,  30  N.  E.  .390. 

Insurance  is  a  contract  whereby, 
for  an  agreed  premium,  one  party 
undertakes  to  com))ensate  the  other 
for  loss  on  a  specified  subject  by 
specified  perils  (conclusion  of  defi- 
nition is  same  as  that  given  in  Dover 
Class  Works  case,  ante).     State   (ex 


them  the  advantage  or  jirofit,  which 
but  for  such  events  they  would 
acquire  according  to  the  ordinary 
and  probable  cour.se  of  things." 
Lucena  v.  Craufurd,  5  Bos.  &  P.  269, 
300,  301,  per  Lawrence,  J.  This 
definition  down  to  and  including 
the  words  "mav  be  exposed  to  them" 


rel.  Sheets)  v.  Cincinnati,  Chicago  &  is    quoted    with    approval    in    Cum- 

St.  Louis  Rv.  Co.  68  Ohio  St.  9.  30,  mings  v.  Cheshire  Countv  Mut.  Fire 

90  Am.  St.  Rep.  635,  64  L.R.A.  405,  Ins.  Co.  55  N.  H.  457,  458,  per  Fos- 

67  N.  E.  93,  quoting  Bouvier's  Law  ter,   C.  J.,  although   the   court   gives 

Diet.    (Rawle's  Rev.)    1668.  preference  to  the  definition  of  Black- 

"A  contract  of  insurance  is  mere-  stone  (2  Blaekstone's  Commentaries, 

ly  a  guaranty  against  loss  of  prop-  458:   2  Hamond's  ed.    696:     Chase's 

erty  by  fire  or  marine  disaster."     In-  Blackstone,  567)   which  is  this:     "A 

surance    Co.    of    North    America    v.  policy  of  insurance  is  a  contract  be- 

74 


i 


TERMS  AND  DEFINITIONS  §  2 

Farmers'  Mutual  Fire  Insurance  As.<ociation  ®  that  "{he  word  'in- 
surance' in  coininon  speech  and  with  propriety  is  used  quite  as 
often  in  the  sense  of  contract  of  insurance  or  act  of  insuring,  as  in 
that  expressing  tlie  abstract  idea  of  indemnity  or  security  against 


tween  A  and  B,  that  upon  A's  paying 
a  premium  equivalent  to  the  liazard 
run,  B  will  indemnify  or  insure  liim 
against  a  particular  event."  See 
Paterson  v.  Powell,  9  Bing.  320,  per 
Tindal,  J.,  and  Mr.  Sergeant  Cole- 
ridge's argument. 

Mr.  Marsh  (ill  (Marshall  on  Ins. 
[ed.  1810]  1)  defines  the  contract  as 
one  "whereby  one  party,  in  con- 
sideration of  a  stipulated  sum,  under- 
takes to  indenuiify  the  other  against 
certain  perils  or  risks  to  which  he  is 
exposed,  or  against  the  happening  of 
some  event."  Mr.  Mail's  (May  on 
Ins.  [3d  ed.]  sec.  1)  definition  of  in- 
surance is :  ''A  contract  whereby 
one  for  a  consideration  undertakes  to 
compensate  another  if  he  shall  sutfer 
loss,"  and  he  says  it  is  substantially 
the  definition  given  long  ago  by 
Roecus.  This  last  definition  is  also 
liiven  by  Mr.  Field:  (Field  on  Dam- 
ages [2d  ed.]  see.  561.)  Mr.  Phil- 
lips (Phillips  on  Ins.  [3d  ed.]  sec. 
1)  says:  "Insurance  is  a  contract 
whereby,  for  a  stipulated  considera- 
tion, one  party  undertakes  to  in- 
denmify  the  other  against  darnage 
or  loss  on  a  certain  subject  by  certain 
])erils."  See  Bacon's  Abridg.  (4tli 
ed.)  598,  599;  Rapalje  &  Law- 
rence's L.  Diet.  667;  Smith's  Com- 
mon Law,  299. 

For  other  definitions  of  insurance 
see  the  following  cases : 

-Ufiited  States. — Physicians  Defense 
Co.  V.  Cooper,  47  L.R.A.(N.S.)  290, 
199  Fed.  576,  578,  579,  118  C.  C.  A. 
50,  case  affirm.s  188  Fed.  332  (under 
Cal.  Civ.   Code,  sec.   2527). 

California. — Whitney  Estate  Co. 
V.  Nortliern  Assur.  Co".  irjT)  Cal.  521, 
101  Pac.  911;  Union'  Ins.  Co.  v. 
American  Fire  Ins.  Co.  107  Cal.  327, 
330,  28  L.R.A.  692  (both  qvotiug 
Cal.   Civ.   Code,  sec.  2527). 

Tlli>wis. — People   (ex  rel.  Kasson) 


V.  Rose,  174  111.  310,  312,  316,  44 
L.R.A.  124,  51  N.  E.  246;  Vreden- 
burgh  V.  Physicians  Defense  Co.  126 
111.  App.  509,  512. 

7Hf//f/«a.— State  v.  Willett,  171 
Ind.  296,  23  L.R.A.(N.S.)  197,  86 
N.  E.  68. 

Kentiicki/. — New  York  Life  Ins. 
Co.  V.  Klopton,  7  Bush.  (70  Ky.) 
179,  185,  3  Am.  Rep.  290. 

Maine. — Buffalo  Fertilizer  Co.  v. 
Aroostook  Mutual  Fire  Ins.  Co.  109 
Me.  483,  84  Atl.  1078  [quoting  Me. 
Rev.   Stat.   1903,  p.   471,   c.   49,  sec. 

Minnesota. — Physicians  Defense 
Co.  V.  O'Brien,  100  ]\Iinn.  490,  495, 
111  N.  W.  396  {quoting  Minn.  Rev. 
Laws  1905,  .sec.  1596). 

Missouri. — Isaac  H.  Blanchard  Co. 
V.  Ilamblin,  162  Mo.  App.  242,  144 
S.  W.  880. 

Sew  Jersey. — Piries  v.  First  Rus- 
sian Slavonic  Greek  Catholic  Benev. 
Soc.  83  N.  J.  Eq.  29,  89  Atl.  1036. 

Pennsiilvamia. — Commonwealth  v. 
Provident  Bicvde  Assoc.  178  Pa. 
636,  638,  639,  36  L.R.A.  589,  36  Atl. 
197;  Commonwealth  v.  Equitable 
Ben.  Assoc.  137  Pa.  412,  418,  18  Atl. 
1112. 

South  Dakota. — Lawver  v.  Globe 
.Alut.  Ins.  Co.  25  S.  Dak.  549,  560, 
127  N.  W.  615. 

Tennessee. — American  Surety  Co. 
V.  Folk,  124  Tenn.  139,  141,  135  S. 
W.  778,  40  Ins.  L.  J.  1074  {quoting 
Tenn.  acts  1895,  c.  160,  sec.  2;  acts 
1899,  c.  31,  regulating  the  business  of 
all  insurance  other  than  life  and 
casualty.  The  case  gives  also  a 
general  definition  of  insurance). 

Texas. — American  Legion  of  Hon- 
or v.  Larmour,  81  Tex.  71,  16  S.  W. 
633. 

9  29  Minn.  347,  354,  43  Am.  Rep. 
216,  i3  N.  W.  164,  per  Dickinson,  J. 


75 


§§  3-5  JOYCE  ON  INSURANCE 

loss."  This  construction  was  in  a  case  where  tlie  condition  was 
against  making  any  insurance  in  any  other  coniijany.  Insurance 
was  early  delined  by  statute  in  Knghuid,^"  and  it  is  now  defined 
under  the  statutes  in  several  of  the  United  States." 

§§  3,  4.    (Transferred  to  ^S  :'.;*.Sd,  839c  herein). 

§  5.  Definition  of  marine  insurance. — Marine  insurance  is  a  con- 
tract whereby  one  for  a  consideration  agTees  to  indemnify  another 
for  loss  or  damage  on  a  certain  interest,  subject  to  marine  risks  by 
certain  perils  of  the  sea  or  specified  casualties  during  a  voyage  or  a 
fixed  period.  This  branch  of  insurance  includes  risks  of  river  navi- 
gation and  of  raihvay  and  other  land  carriage  connected  with  sea 
transit. ^2     Another  definition  is  this:    "INlarine  insurance  is  a  con- 

i"The  statute  43  Elizabetli,  cliap-  Codes    (Civ.)    1902,  Porto  Rico,  sec. 

ler  12,  declares  tliat  a  policy  of  as-  l(i93. 

surance  is  when  a  merchant  a:ive.s  a  See    also    the    following    statutory 

consideration  in  money  to  othei-s  to  definitions : 

assure    his    goods,    sliip,     or     other  Alabama. — 2     Ala.     Code      (Civ.) 

things  by  him  adventured,  upon  such  1907,  sec.  4544   (2596). 

terms  as  may  be  agreed  between  the  Dakota. — Codes  (Levisee)  p.  1027, 

merchant    and    assurers.  see.  1474. 

^^  Insurance  is  a  contract  whereby  Massachusetts. — Suppl.    1902-1908 

one  undertakes  to  indemnify  another  to  Rev.  Laws,  p.  1159,  sec.  3  jRov. 

against  loss,  damage,  or  liability  aris-  L.  118,  sec.  3 ;  Laws  1907,  c.  576,  p. 

ing  from  an  unknown  or  contingent  840). 

event:     Cat.  Civ.  Code,  see.  2527.  Montana. — Rev.  Codes  (Civ.)  1907, 

"A  contract  of  insurance — life  ex-  sec.  5545  (sec.  3370). 

cepted — is  an  agreement    by    which  North   Dakota. — Rev.    Code,   1899, 

one     party     for      a      consideration  sec.  4441. 

promises  to  pay  money  or  its  equiva-  Oklahoma. — Snyder's  Comp.  Laws 

lent  or  do  some  act  of  value  to  the  1909,  sec.  3722,  p.  883. 

assured  upon  the  destruction    or   in-  South  Dakota. — Rev.  Codes  (Civ.) 

jury  of  something  in  which  the  other  1903,  sec.  1703,  p.  805. 

party    has    an    interest."      Me.    Rev.  Tennessee.  —  Shannon's      Annot. 

Stat.  1903,  p.  471,  c.  49,  sec.  1.  Code  1896,  sec.  3275   (Laws  1895,  c. 

Insurance  is  "any  agreement  where-  160,  sec.  2)  Laws  1899,  c.  31. 
by  one  party  for  a  consideration  ^^  gp^  Hopkins  on  Ins.  (ed.  1867) 
undertakes  to  indemnify  anotlier  to  a  53.  Commonwealth  v.  Weatherbee, 
specified  amount  against  loss  or  dam-  105  Mass.  149,  160.  See  also  defini- 
age  from  specified  causes,  or  to  do  tion  of  insurance  by  Kmerigon,  given 
some  act  of  value  to  the  assured  in  under  §  2  herein, 
case  of  such  loss  or  damage."  Minn.  Application  of  principles  of  ma- 
Rev.  L.  1905,  sec.  1596.  line  insurance  to  all  insurances,  see 

"An  insurance  contract  is.  one  by  note  at  end  of  §  I.  herein, 

which    the   underwriter   is   liable   for  "Insurances   mail    he    divided   into 

the    fortuitous    damages   which    may  general  and  special.    A   general   in- 

occur  to  the  insured  personal  or  real  surance  is  Avhere  tlie    perils    insured 

property,  in  consideration  of  a  cer-  against  are  such  as  the  law  would  im- 

tain     price,    which     may    be     unre-  ply  from  the  nature  of  a  contract  of 

strictedly  fixed  by  the  parties."   Rev.  a    marine    insurance    considered    in 

76 


TERMS  AND  DEFINITIONS 


§  5 


tract  of  indemnity  against  all  losses  accruing  to  the  subject-matter 
of  the  policy  from  certain  perils  during  the  adventure."  ^^     Marine 

itself,  and  supposing  none  to  be  ex-  [Stli  ed.  Hart  &  Simey] )  defines 
pressed  in  the  policy.  A  special  in-  this  contract  as  that  ''whereby  one 
suranee  is  where,  in  addition  to  the  party,  for  a  stipulated  sum,  under- 
implied  perils,  further  perils  are  ex-  takes  to  indemnify  the  other  against 
pressed  in  the  policy;  and  they  may  loss  arising  from  certain  perils  or 
be  specified  or  the  insurance  may  be  sea  risks  to  which  his  ship,  merchan- 
agaiiist  all  perils."     Vandenheuvel  v.  dise,  or  other  interest  may  be  exposed 


United  Ins.  Co.  2  Johns.    Cas.     (N. 
Y.)   127,  150,  a  policy  on  freight. 

13  Llovd  V.  Fleming,  L.  R.  7  Q.  B. 
D.  299,  302,  per  Blackburn,  J. 


during  a  certain  voyage  or  a  certain 
period  of  time."  Mr.  Duer's  defini- 
tion (1  Duer  on  Ins.  [ed.  1845] 
1)  is  very  brief,  being  this:     "Marine 


"Insurance  has   been   described  as  insurance  is  a  contract  of  indemnity 

'a  fixed  sum  as  the  price  of  risk.'  "  jvgainst  the  perils  of  the  sea."     While 

Barnstable,  Tlie    (U.   S.    D.    C.)     84  Chancellor  Kent  (3  Kent's  Commen- 

Fed.  895,  897,    898,    a    case    where  taries   [13th  ed.]   25)   defines  marine 

there  was  a  stipulation  in  a  charter  insurance    as    "a    contract    whefeby 

party  that  "the  owner  shall   pay  for  one  parly,  for  a  stipulated  premium, 

the  insurance  on  the  vessel,"  and  the  undertakes    to    indemnify    the    other 

construction  of  the  charter  party  was  against  certain  perils  or  sea  risks  to 

involved,  and  it  was  determined  tliat  which  his  ship,  freight,  and  cargo,  or 

as     between     said     owner     and     the  some  of  them,  may  be  exposed  (luring 

charterers  the  risk  of  a  collision  lien  a  certain  voyage  or  for  a  fixed  period 

was  cast  upon  the  former.  of  time."     This  is  the  same  definition 

"A  policy  of  marine  insurance  is  a  given   by  Mr.   Field  in  his  work  on 

contract  by  wliich,  for    a    considera-  Damages,  (  2d  ed.)  sec.  562.     Anoth- 

tion  stipulated   to  be    j)aid    by    one  er  definition,  given  by  Mr.  Marshall 

interested  in  a  ship,  freight,  or  cargo,  (Marshall  on  Ins.    [ed.   1810]    2)    is 

subject     to     marine     risks,     another  as  follows :  "Marine  insurance  is  that 

undertakes  to  indemnify  him  against  which    is    applied    to    maritime    com- 

.some  or  all  of  those  risks  during  a  merce,  and  is  made  for  the  protection 

certain    period    or    voyage ;    in   other  of  persons  having  an  interest  in  ships 

words,  that,  so  far  as  the  perils  in-  or  goods  on  board   from  the  loss  or 

sured  against  are  concerned,  the  sub-  damage  which   may  happen  to  them 

jcct    insured   shall    remain,   through-  from  the  perils  of  the  sea  during  a 

out  the  terra  of  the    policy,    of    tlie  certain  voyage  or  a  fixed   period  of 

value  which  it  had  at  the  beginning  lime."     Mr.  Phillips  (Pliillips  on  Ins. 


of  the  adventure."  Matheson  v. 
Equitable  Marine  Ins.  Co.  118  Mass. 
209,  211,  19  Am.  Rep.  441,  per  Gray, 
C.  J.  See  Commonwealth  v.  Weatli- 
erbee,  105  Mass.  149,  IGO. 


1  )  says:  "Marine  insurance  is  aeon- 
tract  whereby,  for  a  consideration 
stipulated  to  be  ])ai(l  by  one  interest- 
ed in  a  ship,  freight,  or  cargo  subject 
to   marine  risks,  another   undertakes 


A   contract  of  insurance  is  merely  to  indemnify  him  against  some  or  all 

a  guaranty  against  loss  of  property  those  risks  during  a  certain  period  or 

by    marine    disaster.     Insurance  Co.  voyage."     For  other  definitions,  see  2 

of  North  America  v.  Commonwealth,  Parsons  on  Contracts  (7th  ed.)   350; 

87  Pa.  173,  30  Am.  Rep.  352.  Rapalje  &  Lawrence's  Law  Diet.  668; 

Mr.  Arnould   (Arnould  on  Marine  Bacon's  Abridgement    (4th  ed.)    598, 

Ins.  [6th  ed.  Maclachlan]  p.  161,  Id.  599,  13  Encye.  Britannica,  184. 

77 


§  5 


JOYCE  ON  INSURANCE 


insurance  is  also  defined  under  the  English  statute  of  1906.^* 
under  the  statutes  of  several  of  the  United  (States.^* 


And 


^*"(1)  A  contract  of  marine  insur- 
ance is  a  contract  whereby  the  insur- 
er undertakes  to  indemnify  the  as- 
sured, in  manner  and  to  the  extent 
thereby  agi-eed,  against  marine  losses; 
that  is  to  say,  losses  incident  to  ma- 
rine adventure.  (2)  A  contract  of 
marine  insurance  may,  by  its  express 
terms  or  by  usage  of  trade,  be 
extended  so  as  to  protect  the  assured 
agaiiits  losses  on  inland  waters  or  on 
any  land  risk  wliich  may  be  incident- 
al to  any  sea  voyage.  (3)  Where  a 
ship  in  the  course  of  building,  or  the 
launch  of  a  ship,  or  any  adventure 
analogous  to  a  marine  adventure,  is 
covered  by  a  policy  in  the  form  of  a 
marine  policy,  the  provisions  of  this 
act,  in  so  far  as  applicable  shall  ap- 
ply thereto."  Marine  Ins.  act  1906 
(6  Edw.  VII.  c.  41);  Butterworth's 
Twentieth  Cent.  Stats.  (1900-1909) 
pp.  394  et  .seq.;  15  Chittv's  Stats. 
Eng.  (1902-1907)  pp.  881  et  seq. 

*  IMaritime  perils  is  also  defined 
Marine  insurance  act  1906,  6  Edw. 
VII.  c.  41;  2  Butterworth's  20tli 
Cent.  Stat.  pp.  397,  :398;  17  Earl  of 
Hals1)urv's  Laws  of  Eng.  "Insur- 
ance," pp.  335,  336.  The  stamp  acts 
(30  Vict.  c.  23,  sec.  4;  47  &  48  Vict. 
c.  62,  sec.  8,  defined  sea  insurance). 
See  further  as  to  stamp  acts,  17  Earl 
of  Halsburj^'s  Laws  of  Eng.  "Insur- 
ance." 

^^  Marine  insurance  is  an  insurance 
against  risks  connected  with  naviga- 
tion, to  wliich  a  ship,  cargo,  freight- 
age, profits,  or  other  insurable 
interest  in  movable  property  may  be 
exposed  during  a  certain  voyage  or  a 
fixed  period  of  time.  Cal.  Civ.  Code, 
see.  2655;  Cal.  Laws  1913  c.  269,  see. 
3,  p.  484,  amd'g  c.  594  of  Polit.  Code. 

"A  contract  of  marine  insurance  is 
one  by  which  a  pei'son  or  corporation, 
for  a  stipulated  premium  insures  an- 
other against  losses  occurring  by  the 
casualties  of  the  .sea."  Ga.  Code 
1911,  p.  658,  sec.  2515  (sec.  2120). 


See  also  Levisee's  Dak.  Code  sec. 
1563;  Mont.  Rev.  Codes  (Civ.)  1907, 
sec.  5638  (sec.  3540);  N.  Dak.  Rev. 
Codes  (Civ.)  1899,  .sec.  4537;  S. 
Dak.  Rev.  Codes  (Civ.)  1903,  sec. 
1883. 

The  insurance  laws  of  New  York 
provide  for  the  incorporation  of  ma- 
rine insurance  companies  "for  the 
purpose  of  making  insurance  upon 
\essels,  freights,  goods,  wares,  mer- 
chandise, specie,  bullion,  jewels,  prof- 
its, commissions,  bank-notes,  bills  of 
exchange,  and  other  evidences  of 
debt,  bottomry  and  respondentia  in- 
terests, and  every  insurance  apper- 
taining to  or  connected  with  marine 
risks  and  risks  of  transportation  and 
navigation  including  the  risks  of  lake, 
river,  canal,  and  inland  transporta- 
tion and  navigation  (above  wording 
is  same  as  that  of  the  first  general 
insurance  in  corporation  act  in  New- 
York,  Laws  1849,  c.  308,  p.  441.  It 
is  also  the  same  as  the  California 
Stat.  1913,  c.  269,  sec.  3,  p.  484, 
amd'g  c.  594,  of  Polit.  Code.)  insur- 
ance upon  automobiles,  whether  sta- 
tionary or  being  operated  under 
their  own  power;  which  shall  include 
all  or  any  of  the  hazards  of  fire,  ex- 
plosion, transportation,  collision,  loss 
liy  legal  liability  for  damage  to  prop- 
erty resulting  from  the  maintenance 
and  use  of  automobiles,  and  loss  by 
burglary  or  theft  or  both,  but  shall 
not  include  insurance  against  loss  by 
reason  of  bodily  injury  to  the  per- 
son." N.  Y.  Laws  1911,  p.  190,  c. 
126,  sec.  150  (entitled  "An  Act  to 
Amend  the  Insurance  Law,  in  Rela- 
tion to  tlie  Character  of  the  Automo- 
bile Indemnity  which  may  be  As- 
sumed by  Eire  and  Marine  Insurance 
companies.")  See  also  Laws  N.  Y. 
]912,  p.  444,  c.  232,  sec.  70,  subdivs. 
9,  10.  Examine  1  Wolff's  Const.  & 
Rev.  Laws  La.  1904,  p.  845. 


TKKMS  AND  DEFINITIONS 


§  6 


§  6.  Definition  of  fire  insurance. — Fire  insurance  is  a  contract 
whereby  one  for  a  consideration  agrees  to  indemnify  anotlier  for 
loss  or  damage  on  pro],)erty  by  fire.^* 

16  Fire  Insurance  is  a  contract  by  Ihe  damage.  The  .sum  payable  can 
which  the  insurer  undertakes  in  con-  in  no  case  exceed  the  amount  named 
sideration  of  the  premium  to  indem-  in  the  policy;  but  as  the  contract  is 
nify  the  insured  against  all  losses  a  contract  of  indemnity,  if  the  loss  is 
■which  he  may  sustain  in  his  house,  less,  the  amount  for  which  the  insur- 
<>oods,  or  merchandise  by  fire  within  er  is  liable  will  also  be  lesi^."  Or  for 
t^he  time  limited  in  the  policy :  11  Pet-   a  proportionate  share  under  average 

clauses.     5  Renton's  Ency.  of  Laws 

of  Eng.  p.  348. 

For  other  definitions  see  the  follow- 


crsdorft's  Abridgement,  9,  note  "In- 
surance." "Fire  insurance  is  a  con- 
tract to  indemnify,  in  whole  or  part, 
one  having  an  insurable  interest  in 
property  from  loss  or  damage  caused 
by  fire  to  the  property  insured:" 
Sharp's  Lectures  on  Fire  Ins.  1.  "In- 
surance against  fire  is  a  contract  to 
indemnify  the  insured  for  loss  or 
damage  to  his  property  occasioned  by 
that  element  during  a  specified  peri- 
od:" Flanders  on  Fire  Ins.  1,  17. 
See  also  Wood  on  Fire  Ins.  (2d  ed.) 
p.  4;  2  Mar.sliall  on  Ins.  (ed.  1810) 
*784;  2  Parsons  on  Contracts  (Vth 
ed.)  418;  7  Am.  &  Eng.  Ency.  of 
Law,  1002.  "A  contract  of  fire  insur- 


United  States. — Lveoming  Fire 
Ins.  Co.  V.  Haven,  95  U.  S.  242,  24 
L.  ed.  473 ;  Durham  v.  Fire  &  Marine 
Ins.  Co.  (U.  S.  C.  C.)  22  Fed.  468, 
470,  471. 

Maine. — Donnell  v.  Donnell,  86  Me. 
518,  520,  30  All.  (i7. 

Massachusetts. — Commonwealth  v. 
Weatherbee,  105  Mass.  149,  160; 
Wilson  v.  Hill,  3  Mete.  (44  Mass.) 
66,  68. 

Mississippi. — Lee  Mutual  Fire  Ins. 
Co.  V.  State,  60  Miss.  395,  399. 

Pennsylvania. — Insurance     t'o.     of 


ance  is  a  contract  by  which  the  insur-  North  America  v.  Commonwealth,  87 
cr  agrees,  for  valuable  consideration  Pa.  173,  30  Am.  Rep.  352  (said  to 
(usually  called  a  premium),  to  in-  be  merely  a  guaranty  against  loss  of 
demnify  the  assured,  up  to  a  certain  property  by  tire  or  marine  disaster), 
amount  and  sut).ject  to  certain  terms  Wisconsin. — See  Johannes  v._Phoe- 
and  conditions,  against  loss  or  injury  nix  Ins.  Co.  66  Wis.  50,  56,  5<  Am. 
by  fire  which  may  happen  to  the  Kep.  249,  27  N.  W.  414  (where  the 
property  nisurcd  during  a  specified  (-(.urt  says:  "By  such  contract  the 
period."  17  Earl  of  Halsbury's  Laws  msurer  agrees  to  compensate  the  in- 
of  Eng.  "Insurance,"  p.  516.  "Fire  sured  for'loss  by  fire  of  certain  prop- 
insurance  is  a  contract  whereby,  in  erty  for  a  given  time"), 
consideration  of  the  ])ayment  of  an  The  insurance  laws  of  New  York 
agreed  premium,  the  insurer  under-  provide  for  the  incorporation  of  fire 
lakes  to  make  good  to  the  assured  any  insurance  companies,  "for  the  ])ur- 
loss  or  damage  which  may  happen  to  po^e  of  making  insurances  on  dwell- 
specified  property  during  a  stipulat-  inghouses,  stores,  and  all  kinds  of 
ed  period.  Fire  policies — in  this  re-  buildings  and  houseliold  furniture 
spect  differing  from  marine  policies  ;,,]d  other  property  against  loss  or 
— are  usually  for  a  specific  sum,  (hiuiage  by  tire,  lightning,  Avind, 
which  bears  no  necessary  relation  to  storm,  tornadoes  (same  as  in  Laws 
the  value  of  the  property  insured,  of  1849,  c.  308,  p.  441)  and  earth- 
The  amount  payable  in  case  of  a  loss,  quakes,  and  against  loss  or  damage 
therefore,  is  not  determined  by  the  by  water  to  any  goods  or  premises 
value  of  the  property  insured  and  in-  arising  from  the  breakage  or  leak- 
jured,  but  simply  by  tlie  amount  of  age   of   sprinklers,    pumps,   or   other 

79 


§  7 


JOYCE  OX  INSURANCE 


Fire  in^ul■an(•e  includes  ''insurance  against  lo^s  or  damage  by 
fire,  liglitning.  windstorm,  tornadoes  or  eartliquakes."  ^"^ 

§  7.  Definition  of  life  insurance. — Life  insurance  is  a  contract 
dependent  upon  lunnan  life,  whereby  one  for  a  consideration  agrees 
to  pay  another  a  certain  sum  of  money  upon  the  happening  of  a 
given  contingency,  or  upon  the  termination  of  a  specified  period.^^ 

apparatus  erected  for  extinguishing  "  Cal.  Stat.  1913,  c.  269,  sec. 
lires,  and  of  water  pipes,  and  against  2,  p.  483,  amd'g  c.  594  of  Polit. 
accidental  injury  to  such  sprinklers,    Code. 

puuip.s,  or  other  apparatu.s,  and,  up-  18  "Life  insurance  imports  a  niutu- 
on  vessels,  boats,  cargoes,  goods,  mer-  ^1  agreement,  whereby  the  insurer,  in 
chandise,  freights,  and  other  proper-  consideration  of  the  payment  by  the 
ty  against  loss  or  damage  by  all  or  assured  of  a  named  sum  annually,  or 
jtny  of  the  risLs  of  lake,  river,  canal,  at  certain  times,  stipulates  to  pay  a 
iind  inland  navigation  aand  transpor-  larger  sum  at  the  death  of  the  as- 
tation  (Laws  of  1849  also  provided  sured.  The  company  takes  into  con- 
ngainst  the  risks  of  inland  naviga-  sideration,  among  other  things,  the 
tiou  and  transportation)  as  well  as  age  and  health  of  the  parents  and  rel- 
hy  any  or  all  ol  the  risks  specilied  in  atives  of  the  applicant  for  insurance, 
section  one  hundred  and  hfty  of  this  together  with  his  own  age,  course  of 
cliapter"  (see  last  note  to  §  5  herein)  lif^^  habits,  and  present  pl"-sical  con- 
"including  insurance  upon  automo-  flition;  and  the  premium  exacted 
biles,  whether  stationary  or  oper-  fj-ojn  the  assured  is  determined  by  the 
aled  under  their  own  power,  w.hich  probable  duration  of  his  life,  calcu- 
shall  include  all  or  any  of  the  haz-  lated  upon  the  basis  of  past  experi- 
ards  of  tire,  explosion,  transporta-  pnee  in  the  business  of  insurance, 
tion,  collision,  loss  by  legal  liability  The  results  of  that  experience  are  dis- 
for  damage  to  property  resulting  closed  by  standard  life  and  annuity 
from  the  maintenance  and  use  of  au-  tables,  sliowing  at  any  age  the  prob- 
lomobiles,  and  lo.'^s  by  burglary  or  g^ie  duration  of  life."  Ritter  v.  Mu- 
Uu'tt  of  hoth,  but  shall  not  include  ti^al  Life  Ins.  Co.  I(i9  U.  S.  139,  151, 
msuranoe  against  loss  by  reason  of  ig  gup.  ct.  300,  42  L.  ed.  693,  27 
bodily  injury  to  the  person."  N.  Y.  j^s.  L.  J.  804,  813. 
Laws  1910,  p.  39(,  c.  168,  sec.  IIU  ^  contract  of  life  insurance  or  of 
(entitled  "An  Act  to  Amend  tlie  In-  ■^^^^^,,^,,^^  ,  ^n  a  life  in  the  ordinarv 
surance  Laws  m  relation  to  hre  and    ^  ...^  ^  contract  to  pav  a  certain 

.Marine      Insurance      Corporations   )    ^^^^  ^^  ^^^^^^.  ^,^    ^^^  ^^^^j^  ^^-  ^^^^ 
amending  sec.  22    c.  o3    Laws  1909   ^^^^^^^^r     g^ate    (ex  rel.   Clapp)    v. 
(entitled  "An  Act  in  Relation  to  In-    ^^^^^^,^^    Investment    Co.    48    Minn, 
surance     Corporations     Constituting   ^^^    -^j^    -^  j^.    yr    -^Q.^g 
Chapter  Twentv-eight  of  the  Consoh-        , '  ..      .  •  >.>.*. 

dated  Laws")  "as  amended  bv  chap.  "Life  insurance  is  a  con  ract  to 
301,  of  Laws  of  1909,  N.  Y.  Laws  pay  a  certain  specihc  sum  on  the  hap- 
1911,  p.  189,  c.  126,  sec.  110  (en-  P^""!"?  ^^^  a  particular  event,  which 
titled  "An  Act  to  Amend  the  Insur-  may  or  may  not  occa.sion  a  pecuniary 
ance  Law,  in  Relation  to  the  Char-  lo««-  ,  Trenton  Mutual  Life  &  F^re 
acter  of  the  Automobile  Indemnity  J"!-  ^  »•  v-  Johnson,  24  ^.  J.  L.  5^0, 
which  mav  be  Assumed  by  Fire  and  ^°'^- 
■  :\Iarine  Insurance  Companies").  N.  Life  insurance  is  a  contract  to  pay 
Y''.  Laws  1912.  pp.  444  et  seci.  c.  232.  money  upon  the  death  of  the  assured, 
See  Laws  1913,  c.  296.  See  also  Ga.  in  consideration  of  certain  payments 
Code   (Civ.)   1911,  see.  2470   (2089).    being  dulv  made  at  fixed  periods  dur- 

80 


II 


TERMS  AND  DEFINITIONS  §  7 

ing:  his  life.  Reed  v.  Provident  Sav-  of  a  reversionary  sum  in  consider- 
iii<is  Life  Assurance  Soc.  1!J0  N.  Y.  ation  of  a  present  payment  of  money, 
111,  82  N.  K.  734,  73(5,  quoted  in  or,  as  is  generally  tlie  ca.se,  on  the 
VVayland  v.  Western  Life  Indemnity  payment  of  an  annuity  during  the 
Co.KHJ  Mo.  App.  2'21,  148  S.  W.  ti26,  life  of  the  person  insuring;"  and  al- 
().)().  .so  says  it  is  not  a  disposition  of  prop- 
Life  and  accident  insurance  is  a  erty  at  all,  as  "a  mere  covenant  to 
contract  wliereljy  one  i)arty,  for  a  pay  money  is  not  a  disposition  of 
stipulated  consideration,  agrees  to  in-  pi'opeity  in  the  ordinary  sense.  The 
demnify  another  against  injury  l)y  insurance  company  does  not  die,  and 
accident,  or  death  from  any  cause  not  therefore  a  covenant  to  pay  money 
excepted  in  tlie  contiact.  State  (ex  on  the  death  of  some  other  person  is 
rel.  Sheets)  v.  Pittsburg,  Cincinnati,  a  mere  contract  to  pay  money." 
Cliicago  &  St.  Louis  Ry.  Co.  (58  Ohio  "The  term  'life  insurance'  Ls  not 
St.  9,  30,  96  Am.  St.  Rep.  635,  (J4  alone  applicable  to  an  insurance  of 
L.K.A.  40,'),  (57  N.  E.  93.  the  full  term  of  one's  life.  On  the 
A  contract  of  life  insurance  con-  contrary,  it  may  be  for  a  term  of 
templates  a  payment  by  tlie  insurer  years,  or  until  the  iussured  shall  ar- 
on  the  death  of  insured,  as  the  ])ri-  rive  at  a  certain  age."  Briggs  v.  Mc- 
niary  intent,  although  a  secondary  Cullough,  3G  Cal.  .")42,  550,  551.  In 
question  may  arise  as  to  when  the  this  ca.se  pulici/  uas  to  become  paija- 
payment  is  (hie.  Smith  v.  Metropoli-  tie  on  death  of  person  insured,  pro- 
inn  Life  Ins.  Co.  222  Pa.  22(5,  20  cided  he  ^ied  within  ten  years. 
L.R.A.(N.S.)  928,  128  Am.  St.  Rep,  "Life  insurance  may  be  defined  as 
799,  71  Atl.  11.  a  contract  by  which  the  insurer 
"Life  insurance  is  the  promise  to  agrees  upon  the  death  of  the  person 
pay  a  certain  sum  on  the  death  of  whose  life  is  insured  (commonly 
the  assured."  Ellison  v.  Straw,  119  called  the  life  insured)  to  pay  a  given 
Wis.  502,  508,  97  N.  W.  1(58.  sum,  in  consideration  of  the  jiayment 
In  an  Englisli  case  it  is  said  life  by  or  on  behalf  of  the  assured  during 
insurance  "is  simply  a  contract  that  the  continuance  of  the  life  of  certain 
on  the  consideration  of  a  certain  an-  sums  called  premiums."  17  Earl  of 
nual  payment  the  company  will  pay  Halsbury's  Laws  of  Eng.  "Insur- 
at  a  future  time  a  fixed  sum,  calcu-  ance,"  p.  543.  In  Bumjon  on  Life 
lated  by  them  with  reference  to  the  Ins.  (ed.  1868)  1,  cited  in  State  ex 
value  of  the  premiums  which  are  to  rel.  v.  Mechanics'  Exchange  Mut. 
be  paid  in  order  to  purchase  the  post-  Ben.  Soe.  72  Mo.  146,  159,  the  con- 
poned  payment.  Whatever  event  tract  is  "defined  to  be  that  in  which 
may  happen  meanwhile  is  a  matter  <>ne  party  agrees  to  pay  a  given  sum 
of  indilterence  to  llie  com})any.  They  upon  the  happening  of  a  particular 
df)  not  found  their  calculations  on  event  contingent  upon  tlie  dni'ation 
that,  but  simply  upon  the  probahili-  of  human  life,  in  consideration  of  the 
ties  of  human  life,  and  they  get  paid  immediate  payment  of  a  smaller  sum 
the  full  value  of  that  calculation."  or  certain  equivalent  periodical  i)ay- 
Law  V.  London  Indisputable  Life  ments  by  another."  Mr.  Marshall, 
Policy  Co.  1  Kay  &  J.  229,  per  Wood.  (2  Marshall  on  Ins.  [ed.  1810]  766, 
V.  C.  says:  "The  insurance  of  a  life  is  a 
In  Fryer  v.  Morland,  L.  R.  3  Ch.  contract  wheieby  the  insurer,  in  con- 
675,  685,  Jessel,  M.  R.,  in  constru-  .sidciation  of  a  certain  premium, 
ing  the  succession  duty  act  (1(5  &  either  in  a  gross  sum  or  periodical 
17  Vict.  c.  51),  and  the  meaning  of  jtayments.  underlak(>s  to  pay  the  per- 
"policy  of  insurance  on  the  life,"  etc.,  son  lor  whose  benetit  the  insurance 
says  those  words  mean  "a  contract,  no  is  made  a  stipulated  sum  or  an  an- 
doubt,  for  money.  If  is  a  ]Hirchase  nuity  equivalent  upon  the  death  of 
Joyce  Ins.  Vol.  L — G.                81 


§  7 


JOYCE  ON  INSURANCE 


Life  insurance  has  also  been  defined  by  statutes  in  some  of  the 
states.^^ 


the    person    whose    life    is    insurecl,  Ohio. — Koekley  v.  Coshocton  Glass 

whenever  this  shall  iiappen,  if  the  in-  Co.  86  Ohio  St.  213,  225,  226,  99  N. 

snranee  be  for  the  whole  life,  or,  in  E.  299. 

case  this  shall  happen  within  a  cer-  Virginia. — Cosmopolitan  Life  Ins. 

tain   period,  if  the  insurance  be  for  Assoc,  v.  Koegel,  104  Va.  619,  52  S. 

a    limited    time."      "A    contract    by  E.  166  (within  sec.  3251  of  Code), 

which  the  insurer,  in  consideration  of  England. — Dalby  v.  India  &  Lon- 

a  certain  premium,  either  in  a  gross  don  Life  Assur.  Co.  (1851)  15  C.  B. 

sum  or  by  annual  payments,  under-  365,  387,  13  Eng.  Rul.  Cas.  383,  per 

takes  to   pay  the  person  for  whose  Parke,  B. 

benefit  the  insurance  is  made  a  cer-  As  to  indemnity  see  §§  24  et  seq. 

tain  sum  of  money  or  annuity  on  the  herein. 

death  of  the  person  whose  life  is  in-  ^^  "An  insurance  upon  life  is  a  con- 

sured:"   1    Smith's   Mercantile   Law,  tract  by  wliich  the  insurer,  for  a  stip- 

( Macdonell  &  Humphrey's  ed.  1890)  ulated  sum,  engages  to  pay  a  certain 

491.  amount    of    money    if    another    dies 

See  Bliss  on  Life  Ins.    (ed.  1872)  within  the  time  limited  by  the  policy, 

sec.  3;  Cooke  on  Life  Ins.  (ed.  1891)  The  life  may  be  that  of  the  assured, 

.«ee.     1;     Petersdorff's    Abridgement,  or  of  another  in  whose  continuance 

title  "Insurance,"  16.              •  the    assured    has    an    interest.''      Ga. 

For  other  definitions  see  the  follow-  Code   (Civ.)   1911,  p.  654,  sec.  2496 

ing  cases:  (sec.  2114).     Life  insurance  includes 

California. — Briggs  v.  McCullough,  "insurance  upon  the  lives  of  persons 

36  Cal.  542,  551.  and    every    insurance     appertaining 

Connecticut. — Fuller  v.  Metropoli-  thereto,  and  the  granting,  purchasing 

tan  Life  Ins.  Co.  70  Conn.  647,  663,  and    disposing    of    annuities."      Cal. 

675,  41Atl.  4.  Stat.    1913,   c.   269,    see.    1,   p.   183, 

Georgia. — Rylander  v.   Allen,   125  amd'g  c.  594  of  Polit.  Code. 

Ga.  206,  6  L.R.A.(N.S.)   128,  53  S.  Life  annuities.     An  aleatory  eon- 

E.   1032,   35   Ins.   L.   J.   724;   Union  tract  of  annuity  binds  the  debtor  to 

Fraternal  League  v.  Walton,  109  Ga.  pay  a  pension  or  annual  rent  to  one 

1.  3,  77  Am.  St.  Rep.  350,  46  L.R.A.  or    more    specified    persons    during 

424,  34  S.  E.  317  (both  cases  quoting  their  lives,   for  a  principal   in  per- 

Ga.  Civ.  Code,  sec.  2114  [Code  1911,  sonal  or  real  property,  the  ownership 

sec.  2496] )  ;  Cason  v.  Owens,  100  Ga.  of  which    is   at    once   transferred    to 

142,  143,  28  S.  E.  75.  said    debtor    "charged    with    the    in- 

Massacliusetts. — Mutual    Life    Ins.  come."       Rev.    Codes     (Civ.)     Porto 

Co.  V.  Allen,  138  Mass.  24,  27,  52  Am.  Rico  1902,  sec.  1704.     "An  annuity 

Rep.  246;  Commonwealth  v.  Weath-  may  be  constituted  on  the  life  of  the 

erbee,  105  Mass.  149,  160.  person  who  gives  the  capital,  on  that 

J/i.ssoMr/.— State      (ex     rel.     Atty.  of  a  third  person,  or  on  that  of  sever- 

Genl.)   V.  Merchants  Exchange  Mut.  al  persons.     It  may  also  be  consti- 


Benev.  Soc.  72  Mo.  146,  159. 

New  Jerseg. — Merchants  and  Min- 
ers Transp.  Co.  v.  Borland,  53  N.  J. 
Eq.  282,  285,  31  Atl.  272. 

Neiv  York. — Columbia  Bank  v. 
Equitable  Life  Assur.  Soc.  80  N.  Y. 


tutefl  in  favor  of  the  persons  for 
whose  life  it  is  granted,  or  in  favor 
of  another  or  other  different  persons." 
Rev.  Codes  (Civ.)  Porto  Rico,  1902, 
sec.  1705. 

That  deferred  annuity  policii  redid 


Suppl.  428,  431,  79  App.  Div.  601;  and  not  contrary  to  public  policy 
St.  John  V.American  Mutual  Life  Ins.  though  payments  to  commence  in  f u- 
Co.  13  N.  Y,  31,  38,  64  Am.  Dec.  529.    ture  during  beneficiary's  lifetime,  see 

82 


i 


TEKMS  AND  DEFINITIONS  §  7a 

§  7a.  Definition  of  assessment  insurance. — Assessment  insurance 
is  that  where  tlie  benefit  to  be  paid  is  dependent  upon  the  collec- 
tion of  such  assessments  as  may  he  necessary  for  paying  the  amount 
insured,  it  constitutes  assessment  insurance  when  the  payments  are 
not  unalterably  lixed  by  the  contract.  In  old-line  policies  the 
amount  of  the  premiums  is  fixed  unalterably,  and  the  insurer's  lia- 
bility is  definitely  fixed. ^^*  A  mutual  benefit  association  provides 
insurance  "upon  the  assessment  plan,"  even  though  it  agrees  to 
pay  a  definite  sum  and  has  fixed  rates  of  assessment  which  it 
has  authority  to  receive  in  advance,  where  it  has  no  "legal  resei've," 
but  only  an  "emergency  fund,"  and  it  has  the  reserved  right, 
under  its  contracts,  to  increase  or  lower  the  rates  of  assessment.^" 
In  insurance  and  business  circles  the  words  "assessment  company," 
as  distinguished  from  "old-line  mutual"  company,  means  that 
in  such  first-named  company  the  money  to  pay  a  death  loss  is 
collected  by  an  assessment  made  upon  those  members  who  sur- 

Mutual  Life  Ins.   Co.  v.   Smitli,  184  Stat.  1909,  see.  6959  (Rev.  Stat.  1899, 

Fed.  1,  106  C.  C.  A.  593,  33  L.R.A.  see.     7901;     Rev.     Stat.     1889,     sec. 

(N.S.)  439.  5800,  was  enacted  in   1887).   quoted 

^^^  Knott  v.   Securitv  Mutual  Life  and   applied  in   Moran   v.    Franklin 

Ins.  Co.  161  Mo.  AppI  579,  592,  144  Life  Ins.  Co.  160  Mo.  App.  407,  140 

S.  W.  178,  quoting  from  Haydel  v.  S.  W.  955,  liolding  nonforfeiture  law 

Mutual    Reserve    Fund    Life    As.soc.  of  that  state  not   applicable   to   life 

(U.  S.  C.  C.)  98  Fed.  200,  203,  case  policy  in  that  case,  as  it  Avas  an  as- 

aff'd  104  Fed.  718,  44  C.  C.  A.  169.  scssnient   policy    (see  note  to   above 

Ai^sessment  or  co-operative  plan,  cited  Stat.  1909,  sec.  6950).  See 
life  insurance  defined;  statutes  con-  Haydel  v.  Franklin  Life  Ins.  Co.  136 
^ trued.  Mutual  insurance  on  the  as-  Fed.  285,  69  C.  C.  A.  423,  constru- 
sessment  plan  is  defined  under  Laws  ing  Mo.  Rev.  Stat.  1899,  sec.  7901, 
Cal.  1891,  p.  126,  c.  116,  sec.  1.  The  deciding  when  policy  is  one  under  as- 
slatute  is  construed  in  Engwicht  v.  sessnient  plan,  and  not  an  ordinary 
Pacific  States  Life  Assur.  Co.  15:'.  life  ])oliey,  and  not  within  the  non- 
Cal.  183,  96  Pac.  87,  a  case  determin-  forfeiture  law.  Examine  also  Hay- 
ing the  rights  of  members  or  "con-  del  v.  Mutual  Reserve  Fund  Life  As- 
ti-act  holders,"  and  that  a  certain  see.  104  Fed.  718,  44  C.  C.  A.  169, 
debenture  was  not  such  a  contract,  aff'g  98  Fed.  200,  determining  when 
Assessment  or  co-operative  insurance,  contract  is  not  an  endowment  policy, 
see  Wolff's  Const.  Rev.  Laws  La.  Ijut  one  on  the  assessment  plan.  Co- 
1904,  p.  845.  "Every  contract  where-  operative  or  assessment  plan,  life  in- 
by  a  benefit  is  to  accrue  to  a  person  surance  defined.  Minn.  Rev.  Laws, 
or  persons  named  therein,  upon  the  Suppl.  1909,  Annot.  p.  443,  sec. 
<leath  or  pliysical  disability  of  a  per-  [1702]  1.  (Act  1907,  c.  318,  see.  1). 
son  also  named  therein,  the  payment  ^o  State  (ex  rel.  Covenant  Mutual 
of  whicli  said  benefit  is  in  any  man-  Benefit  Assoc.)  v.  Root,  83  Wis.  667, 
ner  or  degree  dependent  upon  the  col-  19  L.R.A.  271,  54  N.  W.  33,  case  of 
lection  of  an  assessment  upon  per-  petition  for  mandamus  to  compel  in- 
sons  holding  similar  contracts,  shall  surance  commissioner  to  issue  li- 
be  deemed  a  contract  of  insurance  up-  cense;  writ  issued, 
on  the  assessment  plan."     Mo.  Rev. 

83 


§  7b  JOYCE  ON  INSUKANCE 

vive  llie  nieiiibcr,  tlie  insurance  ii|)()n  wlioso  life  is  paid.^  The 
insurance  law  of  New  York  clearly  distinguishes  between  casualty 
companies  on  the  co-operative  a.ssessment  plan,  and  fraternal  or 
beneficiary  societies?  or  associations;  one  may  be  conducted  for 
profit,  and  the  other  for  charity  only.  In  the  one  the  right  to  con- 
tract to  make  payments  at  a  certain  fixed  ])eriod  of  old  age  exists, 
while  in  the  other  it  does  not.^  A  relief  department  of  a  railroad 
is  not  carrying  on  the  business  of  life  or  casualty  insurance  on  the 
co-operati\e  or  assessment  plan,  where  the  "relief  fund"  for  tlie 
payment  of  definite  amounts  to  employees  in  the  event  of  accident 
or  sickness,  or  to  their  relatives  in  case  of  death,  is  formed  by 
voluntary  contributions  from  employees,  appropriations  by  the 
company  when  necessary  to  make  up  deficits,  income  or  profits 
from  investment  of  the  fund,  and  gifts  or  legacies,  and  where  mem- 
bership is  voluntary  and  confined  to  employees.' 

A  secret  and  fraternal  society  which  relies  for  the  means  of  pay- 
ing the  stipulated  benefits  on  assessments  levied  by  no  fixed  rule 
upon  the  ditterent  branches  of  the  order,  under  a  system  which, 
after  it  ceases  to  be  a  "going  concern,"  is  incapable  of  application, 
and  which  does  not  rely  upon  the  accumulation  of  premiums  paid, 
does  not  stand  in  the  same  relation  to  its  certificate  holders  as  that 
occupied  by  a  life  insurance  company  to  its  policy  holders.* 

§  7b.  Definition  of  industrial  insurance. — Industrial  insurance 
is,  except  where  otherwise  del  hied  by  statute,  an  insurance  upon 
life,  for  a  small  or  limited  amount  in  consideration  of  a  premium 
payable  in  small  instalments  and  collectable  weekly,  or  at  some 
other  short  periodical  interval.     It  includes  both  adult  and  child 

^Ahitual  Benefit  Life  Ins.  Co.  v.  Woll'stcrn  v.  Pennsylvania  Kailroad 
JMarye,  85  Va.  G4:j,  045,  8  S.  E.  481,  Vofuntary  Refief  Dept.  76  N.  J.  Eq.. 
per  Lacy  J.,  case  of  apjilication  for  78,  74  Atf.  533,  on  associations  pro- 
mandamus  to  compel  auditor  to  li-  viding  relief  for  railroad  employees 
cense,  assessment  fife  insurance  com-  as  insurance,  see  note  in  47  L.K.A. 
])auy  without  depositing  bonds;  de-  (N.S.)  299. 
nied.  *  Fawcett    v.    Supreme    Sitting    of 

2  People   (ex  ref.  ]Mount)  v.  Cliap-  the  Order  of  the  Iron  Ilafl,  G4  Conn, 

ter  Generaf  of  America,  Kniglits  of  170,    24    L.R.A.    815,    29    Atl.    614. 

St.  John  &  Mafta   (1910)   198  N.  Y.  Compare  dissenting  opinion  of  Ham- 

15,  90  N.  p].  1134.  mersiey,   J.,   wlio   deciares   tliat   such 

'  Coiaizzi  V.  Pennsylvania  Rd.  Co.  business     is     cfearly     distinguishabfe 

208  N.  Y.  275,  101  N.  E.  859,  aff'g  from   legitimate   insurance,   an(f   afso 

128  N.  Y.  Supjd.  312,  143  App.  Div.  from    tfiat    quasi    insurance    busine.ss 

638  (Consol.  Laws  N.  Y.  1909,  c.  28,  whicli    reaily    partakes    more   of   the 

sec.    201).      See    129    N.    Y.    Supp.  nature  of  inve.stment  or  savings  bank 

1116,  145  App.  Div.  909.  l)usiness,  cailed  endowment  insurance, 

Railroad  relief  association  contract  and  also  from  that  of  fraternal  and 

?«  not  irlthin  insurance  laws,  but  may  mutuai    aid  societies.      Id.   pp.   204— 

be  enforced   as   between    the   i)ai-tie^.  206. 

84 


TERMS  AND  DEFINITIONS 


§  7b 


insurance,  and  amounts  in  fact  to  burial  insurance.  Industrial  or 
prudential  insurance  is  more  fully  defined  under  the  statutes  of 
Georgia, ^  Louisiana,^  Missouri,'  and  Virginia.' 


^Industrial  life  iiisuranr-e  is  that  less,  or  whioli  provide  for  the  attend- 
insuraiice  lor  whicli  the  stiinihited  ance  of  a  pliysician  or  sui)ply  of 
premiums,  advance  assessments,  or  di'ugs,  or  furnisliiug  a  funeral."  La. 
dues,  ai'e  legulai-lv  i)ayabK'  and  col-  act  1906,  p.  101,  No.  (io,  sec.  1.  .Sec. 
lectable  weekly  or  biweekly,  and  the  2,  of  .same  act  sjiecities  what  corapa- 
])olicies  or  benelit  certificates  for  nies  shall  be  held  and  deemed  to  be 
which  are  for  sums  of  not  more  tiian  doini?  industrial  life  insurance  bnsi- 
.tr)00  on  a  single  life,  and  which  poli-  ness.  Act  1!)08,  p.  3(i(i,  art.  24(), 
cies  or  benefit  certihcates  may  j)ro-  further  regulates  organization  of  in- 
vide  a  weekly  benefit  for  disability,  duslrial  life  insurance  companies, 
caused  by  sickness  or  accident,  not  Tiie  act  of  lilOd  considered  in  State 
greater  than  $20  per  week."  Code  (ex  rel.  Unity  Industrial  Life  Ins.  & 
Ga.  1911  (Civ.)  sec.  2502  (acts  190.'),  Sick  Ben.  A.ssn.)  v.  Michel,  121  La. 
1>.  96,  .sec.  250G).  "All  corporations,  3.')0,  46  So.  37^2,  37  Ins.  L.  J.  587. 
associations,  relief  organizations,  so-  "^  "Industrial"  and  ''FrudentiaV 
cieties,  or  fraternal  orders,  with  or  companies  defined — patrers.  "Indus- 
without  capital  stock,  and  haxing  or  trial  or  i)rudential  life  insui'ance  com- 
not  having  a  ritualistic  form  of  gov-  panics  under  the  meaning  of  this 
crnment,  whether  operating  under  the  article  are  such  life  insurance  compa- 
present  insurance  laws  as  insurance  nies  that  issue  policies  not  exceeding 
(♦ompanies.  or  operating  under  the  .$50(1  in  amount,  the  pi-emiums  on 
laws  governing  fraternal  bencliciary  wliich  are  cominited  at  a  weekly  rate 
ordei-s,  and  issuing  policies  or  bene-  and  are  collected  and  paid  weekly 
fit  certificates,  and  conducting  their  under  the  terms  of  the  policies  of  the 
business  in  the  manner  and  within  the  c(imi>any  issuing  the  same.  Rut  the 
meaning  an(T  definition  .set  forth  in  the  coin]ianies  organized  under  the  pro- 
preceding  ]iaragraph,  shall  be  held  visions  of  this  article  may  also  issue 
and  deemed  to  be  doing  an  industrial  life  ]iolicies,  not  exceeding  .$1,000  in 
life  insurance  business,  and  shall  be  amount,  the  premiums  on  wliicli  shall 
subject  to  this  section  and  all  the  be  computed  at  a  monthly  rate,  and 
other  laws  of  this  state  not  repugnant  by  the  terms  of  the  policy  shall  be 
to  this  .section,  res'ulaling  the  business  paid  monthly  to  such  company."  Mo. 
of  life,  health,  and  accident-insurance  Rev.  Stat.  1909,  sec.  6993  (Rev.  Stat, 
in  this  state."  Code  Ga.  1911,  p.  6.V)  1899,  sec.  7943)  art.  5,  title  "Tndus- 
tCiv.)  sees.  2.")02,  2.')03.  liial  and  Prudential  Insurance."    Ar- 

^  "Industrial  life  insurance  is  here-  tide    was   enacted    by   Law    1897,   p. 

by  defined  to  be  that   insurance  for  i;{8. 

which    the   sti])ulated    premiums,   ad-  *  lUflustrial  sick  Ix'iiefit  associations 

vances,  assessments,  or  dues  are  regu-  cndiiace      associations     that      collect 

larly    payable    and    collectable    every  weekly  dues  and  assessments,  and  is- 

tour     weeks,     tri-weekly,     bi-weekly,  sue  ])olicies  ])roviding  weekly  indem- 

semi-weekly   or   at    any   other   staled  nity  on  account  of  sickness  or  acci- 

terms  less  than   a  month  aiiart,  and  dent,  in  addition  to  benefit  in  case  of 

the. policies  or  benefit  certificates  for  death    and   associations   not    j-equircd 

which  are  for  sums  of  $500  or  less  on  to   maintain   legal   reserve    for   death 

a  single  life  on  which  policies  or  bene-  l)enefits:  certain  fi'alernal  beneficiary 

fit  certificates  i)rovide  a  weekly  ca.sh  associations    excepted:    corporations, 

benefit  for  disability,  caused  by  sick-  joint -stock  companies,  or  a.^socialions 

ness  or  accident,  of  $20  per  week  or  are  included.     Va.  acts  1910,  p.  438, 

85 


§  7b  JOYCE  ON  INSUKANCE 

In  England  in  the  collectino;  societies  and  industrial  assurance 
companies  act  of  189(),^  entitled  "An  Act  to  Consolidate  the  En- 
uctnienLs  lielating  to  Eriendly  So.cieties  and  Industrial  Assurance 
Companies  which  IJeceive  Contributions  and  Premiums  by  Means 
of  Collectors,"  the  term  "industrial  assurance  company"  refers  to 
any  person  or  body  of  persons,  corporate  or  unincorporate,  grant- 
ing-  insurance  on  any  one  life  for  a  less  sum  than  twenty  pounds. 
And  the  assurance  companies  act  of  1909  ^"  provides  for  insuring 
money  to  be  paid  for  the  funeral  expenses  of  a  parent,  grandparent, 
])ayment  dependent  upon  the  length  of  time  between  the  issuance 
the  life  is  insured  for  a  specified  sum,  still,  whether  the  entire 
amount,  or  a  proportionate  part  thereof,  or  any  sum  whatever  shall 
be  paid,  may  be  governed  by  a  limitation  or  restriction  making  such 
]»ayinent  dependent  upon  the  length  of  time  between  the  issuance 
of  the  policy  and  the  death  of  the  insured.  This  is  illustrated  by 
the  limitation  that  one  half  the  benefit  is  to  be  paid  if  death  oc- 
curs within  six  months  from  date  of  tlie  j)olicy,  and  the  full 
amount  if  death  occurs  thereafter;  that  one  half  is  to  be  paid 
if  death  occurs  after  six  months  and  within  one  year;  that  one 
fourth  is  to  be  paid  if  death  occurs  after  three  months  and  within 
six  months,  and  that  no  benefit  is  to  be  paid  if  death  occurs  within 
three  months.  There  are  said  to  be  two  reasons  for  such  restric- 
tions, namely  to  keep  out  fraudulent  risks,  and  at  the  same  time 
to  keep  the  expense  of  investigations  duly  proportional  to  the 
amount  of  insurance,  and  to  kee])  the  amount  of  prei^iiums  paid 
always  within  a  reasonable  proportion  to.  the  premiums  collected, 
in  view  of  the  fact  that  only  a  small  instalment,  a.s  in  case  of  a 
weekly  premium,  is  paid  in  advance,  differing  therein  from  the 
premium  due  in  advance  imder  an  ordinary  life  policy. 

A  policy  or  contract  is  industrial,  and  not  accident,  insurance 
where  it  contains  the  liniitation  first  above  stated,  and  also  the  pro- 
vision that  in  the  c\ent  of  death  from  accident  within  six  months 
from  date  of  the  policy  "the  full  amount  of  insurance  named  in  the 
first  schedule  will  be  paid."  It  is  not  the  giving  of  direct  afiirma- 
tive  benefits  of  a  special  kind  on  account  of  the  accident.  It  con- 
stitutes 'iimply  an  excei)tion  of  this  class  of  cases  from  the  ordinary 
rights  of  an  insured  person,  which  limitation  was  established  to 
prevent  fraud  of  a  kind  bearing  no  relation  to  deaths  by  accident." 

c.    201.    entitled    "an    Aet    to    Define  Supp.  540,  145  Ai)p.  Div.  704;  Laws 

and  Classify  Industrial  Sicl^  IJenelit  X.  Y.  1892,  c.  600,  see.  55. 

Companies  and  Associations."  ^  59  &  60  Yict.  c.  2(). 

As     to     statutori/     limUation     of  ^°  0    Edw.    VTT.    c.    49.   s<?c.    36;    2 

amount  payuble  on  Ures  of  children;  Butterworth's  20tli  Cent.  Stat.  p.  446; 

ag2:regate    of    two    or   more    policies  15  Jvul  of  llalsburv's  Ijaws  of  Eng- 

may  exceed  sum.     Flynn  v.  t^ruden-  land,  pp.  llf)  et  see}. 

tial  Ins.  Co.  of  America,  130  N.  Y.  "  Metiopolitan    Life    Ins.    Co.    v. 

86 


TERMS  AND  DEFINITIONS  §§  7c,  7d 

A  policy  with  premiums  payable  monthly,  expiring  one  year  after 
its  issuance  unless  renewed,  and  which  provides  for  the  payment  of 
a  weekly  indemnity  in  case  of  accident  or  injury  from  violent  or 
external  means  in  the  industry  and  special  class  of  employment  in 
which  the  insured  was  engaged  at  the  time,  is  an  industrial  or  acci- 
dent insurance  policy,  and,  even  though  it  covers  loss  of  life  from 
''external  violent  and  purely  accidental  means,"  it  is  not  a  life  or 
endowment  policy,  within  the  meaning  of  a  legislative  act  exclud- 
ing industrial  policies  from  certain  conditions  as  to  the  application 
being  made  a  part  of  the  policy.^^ 

§  7c.  Definition  of  burial  insurance. — Burial  insurance  is  a  con- 
tract based  upon  a  legal  consideration,  whereby  the  obligor  under- 
takes to  furnish  the  obligee,  or  one  of  the  latter's  near  relatives,  at 
death,  a  burial  reasonably  worth  a  fixed  sum.  It  is  a  valid  con- 
tract, and  constitutes  life  insurance. ^^  Such  a  contract  has,  how- 
ever, been  held  void  as  against  public  policy  and  in  restraint  of 
trade,  where  the  purpose  of  the  association  was  to  provide  at  their 
death  a  funeral  and  proper  burial  for  the  members,  and  the  associa- 
tion was  organized  on  the  mutual  plan,  the  members  contributing 
u  stipulated  sum  weekly,  and  the  funeral,  certain  funeral  furnish- 
ings and  outtit  w^ere  to  be  furnished  by  and  through  a  designated 
undertaker,  or  otticial  undertaker.^* 

§  7d.  Definition  of  workmen's  industrial  insurance;  state  insur- 
ance; compulsory  insurance;  workmen's  compensation. — The  terms 
"workmen's  industrial  insurance,  state  insurance,  compulsory  insur- 
ance, and  workmen's  compensation,"  mean  those  statutory  provi- 
sions which  cover  the  relation  of  master  and  servant  and  industrial 
accidents  suffered  by  employees.  The  several  systems  embrace 
accidents,  nonfatal  or  fatal  to  employees,  sickness,  unemploy- 
ment, old  age,  and  invalidity.  ExcejU  wliere  such  enactments 
])rovide  for  insurance  which  is  noncompulsory,  either  express  or 
implied,  they  relate  rather  to  economic  or  sociologic  conditions 
than  to  the  contract  of  insurance  or  to  the  principles  governing 
that  contract,  or,  at  the  most,  they  create  new  remedies  or  are  but 

llardison,  208   Ma.ss.   380,  94  N.  E.        "  State  v.  Willett,  171  Ind.  29G,  23 

477,  40  Ins.  L.  J.  901.     Decided  un-  L.E.A.(N.S.)    197    and   note,    8G   N. 

der  Mass.  Stat.  1907,  e.  576,  sec.  34,  E.  68.     Sec  State   (ex  rel.  Attorney 

under   wiiicli   contracts  of  insurance  Gen'l)  v.  Wichita  Mutual  Burial  As- 

t'oi-  each  of  the  classes  of  in.surance  see.  73  Kan.  179,  84  Pac.  757. 
specified  in  sec.  32,  must  be  in  sepa-        ^*  Robl)ins    v.    Ilennesey,   86    Ohio 

rate  iiolicies.  St.  181,  99  N.  E.  319,  void  under  99 

^2  Pride    v.    Continental    Ca    ndtv  Oliio  Laws,  p.  131. 
Co.  69  Wash.  428,  125  Pa-c.  78/,  un- 
der  Rem.   &   Bal.    Code,   sees.   6155, 
6159. 

87 


§  7d 


JOYCE  ON  INSUKANCE 


an  evolution  of  the  employer's  liability  principle.  These  enact- 
ments, in  there  general  nature  are  dei^ignated  as  either  compulsory 
or  elective  or  voluntary  insurance  or  purely  compensation  laws, 
with  an  element  that  mi.i>,ht  be  construed  as  coercive  or  in  the  nature 
of  a  penalty.^*     it  is  said  in  connection  with  governmental  insur- 


^'  It  is  said  in  a  case  holding  the  also,  through  fear  of  discharge  if  he 

Wisconsin     act     constitutional,     that  did  not  accept. 

'Mionc  can  say  what  the  practical  "Workmen's  compensation  is  at 
operation  ot  the  law  will  be.  ]t  is  present  t)eing  presented  to  the  Anieri- 
cnough  for  our  present  purpose  that  can  people  in  three  forms,  viz.: 
no  one  can  say  with  certainty  tiiat  it  First:  In  a.  form  merely  optional, 
will  operate  to  coerce  either  employ-  i.  e.,  contemplating  that  the  employ- 
er or  employee."  Borgnis  v.  Falk  ers  and  employees  should  bring  theni- 
County,  147  Wis.  327,  37  L.K.A.  selves  under  its  provisions  (which, 
(N.S.)  489, 133  N.  W.  209,  per  AVins-  except  in  the  Ohio  bill,  provides  for 
low,  Ch.  J.  The  decision  in  this  ca,se  direct  liability  of  the  employer,  in- 
was  under  the  workmen's  compensa-  stead  of  insurance)  by  tiieir  own 
lion  act.  Laws  1911,  c.  .30;  Laws  action;  or  quasi-optional,  i.  e.,  re- 
1911,  e.  485,  and  so  far  as  is  neces-  (luiring  them,  if  not  desiring  to  be 
sary  to  state  here,,  it  divided  all  pri-  Ijouud  by  its  provisions,  to  take  af- 
ate  em])loyers  of  labor  into  two  class-  firmative  action  indicating  their 
es:  (1)  Tliose  who  elected  to  come  election.  .  .  .  Second:  A  law  sub- 
under  the  law;  and  (2)  those  who  did  stituting  for  the  present  employers' 
not  so  elect.  It  took  away  the  defens-  liability  law,  a  sj'stem  of  workmen's 
es  of  assumption  of  risk,  and  negli-  compen-sation,  the  employer  to  be 
gence  of  a  coemj)loyee  from  the  sec-  liable  for  the  payment  of  the  com])en- 
ond  class  (except  that  where  there  sations,  and  the  same  to  be  api)lica- 
were  less  than  four  co-employees  the  ble  to  all  employments.  .  .  .  Tb.ird : 
latter  defense  was  not  disturbed),  but  A  system  of  compulsory  insurance 
left  both  defenses  intact  to  the  tirst  in  wliich  the  state  lends  its  sovereign 
class.  It  prescribed  the  manner  in  ] tower  to  afford  at  least  the  compul- 
\\  Inch  an  emi)loyer  might  elect  to  sion,  and  in  wiiich  it  either  may  or 
come  under  its  terms,  and  how  an  may  not  also  a.'^sume  the  management 
employee  might  make  his  election,  and  conduct  of  tiie  business."  Art. 
and  when  silence  on  the  part  of  an  by  Miles  M.  Dawson,  in  Bnllock's 
employee  would  be  considered  an  elec-  Selected  Articles  on  Compulsory 
tion;  but  it  did  not  in  terms  compel  Ins.  (1912)  pp.  88,  90,  93.  On  work- 
either  em])loyer  or  employee  to  sub-  men's  compensation  a<-ts  generally  see 
mit  to  its  provisions.  It  Avas  urged  note  in  L.R.A.191GA,  23.  The  eonsti- 
as  an  objection  that  the  law.  wliile  tutionality  of  workmen's  comitensa- 
in  its  words  presenting  to  employer  tion  and  industrial  insnrajice  statutes 
and  employee  a  free  choice  to  accept  is  discussed  in  notes  in  37  L.K.A. 
or  not  accept  its  terms,  was  in  fact  (N.S.)  466;  L.R.A.1916A,  409. 
coercive,  so  that  neither  employer  nor  "There  are  two  classes  of  workmen's 
employee  could  be  said  to  act  volun-  compensation  laws:  One  imposes 
tarily  in  accepting  it.  As  to  the  em-  the  liability  upon  the  individual  em- 
ployer the  argument  was  that  the  ab-  ])loyer,  wiiile  tlie  other  is  l)ased  upon 
olition  of  the  two  defenses  was  a  the  principle  of  mutnal  insurance. 
club  forcing  him  to  accept:  and  as  to  I^iws  of  the  first  class  may  be  either 
the  employee  it  Avas  argued  tliat  if  optional  or  comiuilsory,"  etc.  New 
his  employer  accepted  the  law  the  eiu-  Internat.  Year  Book  (1911)  p.  239. 
ployee  would  feel  compelled  to  accept  "In  the  states  of  the  civilized  world 

88 


I 


TERMS  AND  DEFINITIONS 


§  7d 


juiee  covering  accident,  sickne.<s,  old  age,  and  invalidity:  "That 
it  is  only  by  the  loose  use  of  language  that  tlie  term  'insurance' 
can  be  applied  to  the  system.  It  is  in  realty  an  elaborate  sys- 
tem of  poor  relief,  and  its  success  or  failure  has  little  significance 
for  the  qnestion  of  practicability  of  the  public  management  of 
insurance  on  scientilic  pnncii)les.^^     It  is  also  said  that  "compul- 

Iherc  are  two  systems  of  eraplovors'  contributing  to  said  fund.    Act  is  en- 

liabiiitv  for  accidental  injuries.    The  titled  "An  Act  to  Authorize  Eniploy- 

first,  which  formerly  iirevailed  in  all,  ers  and  Employees  to   Eslalilish  ('o- 

l)ut  which  now  survives  in  the  United  oi)erative    Retirement,    Annuity,    or 

States,  and,  in  a  transition  stage  in  Pension    Systems."      See  aets   &   res. 

Switzerland,  is  that  of  tort,  or  more  liUl,  p.  54(),  c.  532,  (am'd  acts  &  res. 

Darticularlv  the  ma.ster  and  servant  tfTi,  c.  3(53)  ;  Id.  c.  ()28,  sees.  29a-33, 


L-ly 

i)ranch  of  the  law  of  negligence.  The 
second  is  that  of  'eompensation' 
which  embraces  both  'simple  compen- 
sation' and  also  its  more  comjdex 
form  of  V'ompulsory  insurance.' " 
Ai'ticle  by  Tecumseh  Slierman,  in 
Bullock's   Selected   Articles  on   Com- 


R.  L.  !()(),  110  (see  acts  &  res.  litll, 
c.  751,  sees.  23,  24;  Id.  1912,  c.  82). 
Examine  acts  &  res.  1912,  c.  571; 
1(1.  c.  311;  Id.  c.  6(5(i;  Id.  c.  721.  In 
(ieterinining  the  constitutioiu^lity  of 
the  workmen's  comjiensation  act  of 
Massachusetts     it     is     said     by     the 


pulsory  Ins.  (1912)  p.  72.  Many  of  justices  who  rendered  that  opinion 
these  statutes,  however,  contain  cer-  on  July  24,  1911,  that  "it  is  to  be  ob- 
tain provisions  relating  to  insurance,  served  that  no  lial)ility  insurance 
such  as  providing  for  the  creation  of  company  is  obliged  to  insure,  and 
an  insurance  or  state  insurance  fund,  that  if  it  chooses  to  do  so  there  is 
or  for  direct  insurance,  or  for  nothing  unconstitutional  in  requii'ing 
jnutual  insurance  associations  or  com-  that  it  and  the  policy  liolder  shall  l)e 
l.anie.s,  or  they  involve  the  doctrine  governed  by  the  provisions  of  the  act 


of  subrogation  with  resjject  to  insur- 
ance companies,  or  re(|uire  casualty 
insurance  corporations  insuring  em- 
ployers to  report  industrial  acci- 
dents to  certain  state  boards    or    of- 


so  far  as  applicable."  Opinion  of  Ihe 
.Justices,  209  Mass.  (J()7,  tUi  N.  E.  308. 
Act  declared  constitutional  on  ques- 
tions submitted. 

As    to    insurance     a;j<u)ist     claims 
arisi>i(j  under    workmen's    compensa- 


ticials,  or  make    insurance    contracts 

subject  to  the  statute,  or  even  by  the  tion  act  of  England   1900    (ni   force 

character  of  tlieir  provi.sions  preclude  July  1,  1907)   see  Wilkinson  v^  Car 

h     conti'acts,     etc.     An     act    was  &  General  Ins.  Corp.  108  L.  T.  512 


SU( 


16  10  New   Internat.   Ency.    (1908) 
]>.  088.     ''The  recent  agitation  in  the 
Cnited     States    lias     been      confined 
anv    corporation,  tirm,   or    i)ra,ctically    to    the    compensation    of 
individual,      i'md      tiie      corporation,    woi'kmen  for  injuries  received  in  in- 
firm, or  individual  by  wliich  they  were    dust  rial  accidents  and  the  liability  of 
employed,  to  form  an  a.ssociation  for   employers 


])assed  in  Massachusetts  in  1910  (c. 
.559)  acts  &  res.  1910,  p.  538,  au- 
employecs,     oflicers,      and 

or 


tlionzing 
agents  of 


the  purpose  of  pi'oviding  annuities, 
jjcnsions,  or  endowments  for  em- 
ployees retiring  from  their  employ- 
ment on  account  of  age,  the  i)artici 


for  the  same."  As  to 
foreign  countries,  the  subject  is 
"interwoven  with  other  forms  of 
social  insurance — such  as  insurance 
against  unemidoyment  and  old  age," 


l)ating  employees  to  contribute  to  tlie  etc.  Preface  to  Meyers  Select  List  of 
funds  a  certain  percentage  of  tiu'ir  Reference.s,  etc.,  noted  in  bililiog- 
wages  or  salaries,  to  be  deducted  by  raphy  in  note  p.  51,  §  VII b  herein, 
the  employer,  and  the  employer  also 

89 


§  Td  JOYCE  ON  INSUKANCE 

sory  insurance,  wlicre  and  in  so  far  as  it  is  at  the  expense  of 
employers,  is  in  effect  simply  a  liability  to  pay  compensation 
for  accidental  injuries  to  employees,  with  a  legal  obligation  added 
to  insure  its  payment,"  and  "the  principles  of  the  compensation 
law  are  developments  of  the  negligence  law."  "  Again,  it  is  de- 
clared as  to  workingmen's  compensation,  that  it  ''is  a  term  used 
to  designate  that  form  of  compensation  for  industrial  accidents 
which  has  come  to  replace  employers'  liability.  .  .  .  Most  of 
the  American  legislation  still  takes  the  form  of  employers'  liability 
laws."  ^*  INIr.  Bradbury  states,  in  the  preface,  that  the  introduction 
to  his  work  shows  the  evolution  of  the  employers'  liability  principle 
into  the  workmen's  compensation  and  the  state  insurance  doc- 
trines.^' Mr.  Boyd  considers  the  distinctions  between  the  common 
law,  employers'  liability  laws,  and  workmen's  compensation  laws  as 
remedies  for  compensating  workmen  injured  in  the  due  course  of 
their  employment;  he  also  states  that  the  relation  imposed  by  the 
workmen's  insurance  acts  is  purely  economic  in  character  as  distin- 
guished from  the  creation  of  a  new  right  in  the  employee  sounding 
in  tort,  and  that  the  obligation  fall?  within  the  domain  of  contract, 
one  thrust  upon  the  employer,  as  part  of  the  contract  of  employ- 
ment, to  become  a  party  to  an  insurance  policy  created  by  law, 
to  be  entered  into  as  an  additional  consideration  for  services  rend- 
ered by  the  employee.  ■  The  same  writer  also  notes  the  fundamental 
differences  between  the  ])rinciples  of  workmen's  industrial  insurance 
and  those  of  employers'  liability  laws  or  compensation  acts  in  cer- 
tain states.^"  It  is  said  of  the  workmen's  compensation  act  of 
England  of  1906  that:  "That  act  has  rendered  it  practically  neces- 
sary for  all  who  desire  to  avoid  the  risk  of  bankruptcy,  and  who 
cannot  afford  to  be  their  own  insurers,  to  insure.  Tens  of  thous- 
ands of  small  shopkeepers  wdth  one  assistant,  lodging-house  keep- 
ers, and  others  with  one  'general',  small  farmers,  tenants  of  small 
buildings,  and  the  like  with  one  man,  are  driven  to  insure."  ^ 

1'^  Article  by  P.  Tecumseli  Sherman  seq.;  pp.  13,  14,  sec.  6;  p.  155,  sec. 

in     Bullock's     Selected     Articles    on  67. 

Compulsory-  Ins.    (1912)    pp.  72,  73.        ^  Bradley  &  E.ssex  &  Suffolk  Acci- 

See  also  Bovd'.s  Workmen's  Compen-  dent  indemnity  Soc,  In  re,  81  L.  J. 

,<.ation  Direct  Payment  &  State  Ins.  K.  B.  523,  530,  [1912]  1  K.  B.  415, 

(ed.  1913)  p.  205,  sec.  100.  105  L.  T.  919,  28  T.  L.  R.  175,  [1912] 

18  New  Internal.  Year  Book  (1912)  W.  Kep.  6,  per  Farwell,  L.  J.,  case 

"Workmen's  Compensation,"  p.  815.  of  construction   of  policy  taken   out 

1'  BradhuryV  Workmen's  Compen-  1)y  a  earner  and  small  farmer  aaaiusl. 
sation  &  State  Ins.  Law  (ed.  1912).  liability  for  accidents  under  work- 
Preface,  p.  VI.  men's    compensation     act     of     1906. 

2"  Boyd's     Workmen's     Compensa-  Proviso  here  was  for  keeping  wages 

lion,  Direct  Payment    &    State    Ins.  book. 
(ed.   1913)    pp.  1  et  seq.   sec.  1  et 

90 


TKftMS  AND  DEFINITIONS 


§  8 


§  8.  Definition  of  accident  insurance. — Accident  insurance  is  a 
contract  whereby  one  for  a  consideration  agree?  either  (1)  to  in- 
demnify another  against  personal  injury  resulting  from  accident, 
or  (2)  to  pay  another  a  certain  sum  of  money  in  case  of  dcatli 
caused  by  accident.  It  is  said  that  accident  insurance  is  intended 
to  indemnify  for  injury  resulting  from  accident  or  to  compensate 
by  payment  of  a  fixed  sum  where  death  results  to  the  insured  in 
consequence  of  accident,  and  that  the  contract  closely  resembles 
that  of  life  insurance.^     It  is  also  declared  by  the  court,  in  Healey 

27  American  Law  Review,  585,  dental  death,  constitute  accident  in- 
.'87.  See  Cominonweallli  v.  Weatlier-  surance  nnder  the  Statute  1007,  c. 
bee,  105  Mass.  149,  KiO;  see  also  deti-  576,  see.  32,  el.  5,  specifying  kinds  of 
nition  of  life  and  accident  insurance  accident  insurance  that  companies 
in  State  (ex  rel.  Slieets)  v.  Pittsburg,    may  transact. 

Cincinnati,  Chicago  &  St.  Louis  l?d.  What  constitutes  an  accident  or  in- 
Co.  68  Ohio  St.  D,  30,  96  Am.  St.  dustrial  policy,  and  not  a  life  or  en- 
Rep.  635,  64  L.R.A.  405,  67  N.  E.  dowment  policy,  see  Pride  v.  Conti- 
93,  is  given  under,  §  /  herein,  nental  Casualty  Co.  69  Wash.  428, 
What  accident  insurance  covers,  see  125  Pac.  787,  nnder  Rem.  &  Bal. 
17  Earl  of  Halsburv's  Laws  of  Eng.  Code,  sees.  6155,  6159. 
"Insurance,"  pp.  566,  571;  compare  Under  a  decision  in  New  Jersey  in 
§  9  herein.  See  also  Miller  v.  1908  it  is  determined  that  a  contract 
JVIarvland  Casualty  Co.  193  Fed.  343,  for  life  insurance  cannot  nnder  the 
113  C.  C.  A.  267.  statute  of  that  state  be  included  in  the 

As  to  last  point  in  text,  see  Logan  .same  policy  with  insurance  against 
V.  Fidelity  &  Casualty  Co.  146  Mo.  bodily  injury  or  death  by  accident. 
114,  47  S.'  ^X.  948 ;  Maryland  Casual-  ^tna  Life  Ins.  Co.  v.  Watkins.  /  7 
ty'Co.  y.  Gehrmann,  96 'Md.  634,  650,  N.  J.  L.  223,  71  Atl.  325,  38  Ins.  L. 
54  Atl.  678;  compare  Tictin  v.  Fi-  J.  _125.  Under  Pub.  Laws  1902,  p. 
delity  &  Casualty  Co.  (U.  S.  C.  C.)  40/,  as  am'd  1907  Pub.  Laws,  128, 
87  Fed.  543;  Standard  Life  &  Acci.  specifying  among  the  classes  of  ni- 
Ins.  Co.  V.  Carroll,  86  Fed.  567,  30  C.  surance  for  which  companies  might 
C.  A.  253,  41  L.K.A.  19;  National  be  formed  in  that  state :  "(3)  Upon 
Life  &  Accident  Ins.  Co.  v.  Lokey,  the  lives  or  health  of  persons  and 
166  Ala.  174,  52  So.  45.  every   insurance   appei-taining  there- 

"An  ordinary  life  policy  includes  to,  and  to  grant,  purchase,  or  dis- 
the  occurrence  of  death  by  accident  i)o.se  of  annuities.  (4)  Against 
as  one  of  the  conditions  which  call  bodily  injury  or  death  by  accident 
for  a  payment  by  the  company,  as  (and  upon  the  health  of  ])ersons)." 
well  a.s  death  from  any  other  cause,  (^iting  ^Etna  Life  Ins.  Co.  v.  Ilardi- 
and  ordinary  accident  policies  in-  son,  199  Mass.  181,  85  N.  E.  40 < . 
dude  injuries  by  ai-cidenl  causing  Company  authorized  to  i.-^sue 
death,  and  to  that  extent  they  pro-  i)()licics  against  accidents  to  individu- 
vide  insurance  for  life."  ]\letropoli-  als  may  likewise  issue  policy  against 
tan  Life  Ins.  Co.  v.  Hardison,  208  accidents  to  live-stock.  Pennsyl- 
Mass.  386,  389,  94  N.  E.  477,  40  Ins.  vania  Casualty  Co.  In  re,  36  Pa.  C_o. 
L.  J.  901,  per  Knowlton,  Ch.  J.,  Ct.  635,  under  Pa.  act  May  1,  18/6 
holding  that  certain  jirovisions  in  a  (Pul).  L.  53)  as  am'd  by  act  July  9, 
life  and  industrial  policy  did  not,  1897  (Pub.  L.  239)  classifying  in- 
even  though   providing  against  acci-    surance.  / 

91 


§  9  JOYCE  ON  INSUKANCE 

V.  Mutual  Accident.  Association,'  tliat  ''a  policy  of  accidental  in- 
surance is  issued  and  accei)ted  for  the  ])urpose  of  furnishing  in- 
demnity against  accidents  and  death  caused  by  accidental  means."  * 
Under  the  Massachusetts  act  of  1887*  accident  insurance  policies 
include  ''liorse  or  vehicle  policies,"  ''general  liability  policies," 
"outside  liability  policies,"  and  "elevator  policies,"  all  being  in- 
tended to  coA'er  accidental  injuries  to  persons  arising  from  different 
causes,  or  under  which  the  indenniity  is  paid  for  loss  to  the  assured 
by  an  accident  for  the  effects  of  which  he  is  legally  responsible  and 
which  results  in  bodily  injury  or  death,  as  s])ecified  within  the 
policy  classification,  and  the  issuance  of  said  policies  is  not  carrying 
on  more  than  "one  class  or  kind  of  insurance."  ® 

A  statute  |)ermitting  the  insurance  of  the  health  of  persons  and 
against  accidental  injuries,  etc.,  resulting  from  traveling  and  gen- 
eral accidents  by  land  or  water  does  not  authorize  the  issuance  of  a 
policy  covering  liability  imposed  by  law  by  reason  of  bodily  inju- 
ries, including  death,  accidentally  sustained  by  reason  of  the  main- 
tenance, use,  etc.,  of  automobiles.' 

§  9.  Definition  of  casualty  insurance. — Casualty  insurance  has 
been  defined  as  an  insurance  against  loss  through  accidents  or 
casualties  resulting  in  bodily  injury  or  death,*  In  a  case  decided  in 
Massachusetts  a  distinction"  is  made  by  the  court  between  "accident" 

3  133  111.  550,  560,  9  L._R.A.(N.S.)  Stat.  1879,  which  foreign  companies 

.171,  23  Am.  St.  Eep.  637,  25  N.  E.  might    cariv    on).     Under    Ilerron's 

52.  Suppl.    1908-1910    to    Sayle's    Tex. 

*  See   Employers'   Liability   Assur.  Stat.   p.   233,   accident   insurance  re- 

Corj).    Lim.    v.    Merrill,    155    Mass.  late.s   to   the   injury,   disablement,   or 

404,  29  N.  E.  529;  Bunyon  on  Ins.  p.  death     of     persons     resulting     from 

100;  Black's  Law  Diet.  632;  Rapalje  traveling  or  general  accidents  by  land 

&  fjawrence's  Law  Diet.  668.  or  water. 

5  Cliapter  214,  sec.  29,  ck  5,  same  "^  American  Fidelity  Co,  v.  Bleak- 

also  as  to  Pub,  Stat.  c.  119,  sec  201;  k'V,  157  Iowa,  442,  138  N.  W.  508. 

Stat.  1887,  c.  214,  sec.  80;  Stat.  1889,  ''Travelers'    insurattce"    is    recog- 

c.  356;  Stat.  1891,  c.  195.  nized  as  a  line  applicable  to  that  class 

^  Einployer.s'  Lialiilily  As.sur.  Corp.  as  a  distinct  line  of  insurance.     Most 

Tjim.  v.  Merrill,  155  Ma.ss.  404,  29  N.  accident  companies  make  a  specialty 

Vj.    529.     As    to    Rev.    Laws    Mass.  of  it.     It  is  a  generic  term,  and  no 

Suppl.    1902-1908     (acts     1908)     p.  .,ne  has  an  exclusive  right  to  its  nse 

1176,  .see   note    under    next    section  wlien  sucli  use  by  another  is  not  made 

(§   9  herein).      See  People    (ex   rel.  to  operate  to  the  former's  detriment. 

Ocean   Accident  &  (luarantee  Corp.)  Travelers   Insurance   Machine   Co.   v. 

V.  Van  Cleave.  187  III.  125,  58  N.  E.  Travelers  Jns.  Co.  142  Ky.  523,  528, 

422  (as  to  kinds  oE  l)usiness  casualty  529,  134  S.  W.  877,  a  cause  of  action 

conipanies    may    transact,    under   act  to  enjoin  use  of  name. 

1899);    Peoi)le    (ex   rel.    Stevens)    v.  «  State   (ex  rel.  Clapp)   v.  Federal 

Fidelity  &  Casualty  Co.  153111.25,26  Tnve.st.  Co.  48  Minn.  110,  111,  50  N. 

L.R.A.  295,  38  N.  E.  752  (as  to  mean-  AV.  1028. 
ing  of  "any  kind  of  business,"  under 

92 


TERMS  AND  DEFINITIONS  §  9 

and  "casualty"  insurance,  it  being  said  that  the  "distingui'^liino; 
feature  of  what  is  known  in  our  legislation  a.s  'accident  insurance' 
is  that  it  indenmilie.s  against  the  eti'ects  of  accidents  resulting  in 
bodily  injury  or  death.  Its  field  is  not  to  insure  against  loss  or 
damage  to  property,  although  occasioned  by  accident.  80  far  as 
that  class  of  insurance  has  been  developed  it  has  l)een  with  reference 
to  Ijoilers,  plate-glass,  and  injnries  to  property  by  street-cars,  etc., 
and  ])erhaps  injury  to  domestic  animals,  and  is  known  as  'casualty 
insurance.'  "  ^  In  an  Iowa  case,^"  the  court,  per  A\'eaver,  J.,  in  con- 
sidering the  statutes  of  that  state  and  the  words  ''other  casualty,'' 
"casualty,"  an<l  "casualty  insurance,"  says:  "It  cannot  be  said  that 
their  definition  has  been  very  accurately  settled  by  the  courts. 
Strictly  and  literally  'casualty'  is  i)erhaps  to  be  limited  to  injiu'ies 
which  arise  solely  from  accident  without  any  element  of  conscious 
human  design  or  intentional  human  agency;  or,  as  it  is  sometimes 
expressed,  inevitable  accident,  something  not  to  be  foreseen  or 
guarded  against."     But  in  ordinary  usage  'casualty,'  like  'accident,' 

^  Employors'  Lialiility  Assar.  Corp.  age  to  proi)erty  insured  shall  lie  tried 
Lim.  V.  Merrill,  155  Mas.s.  404,  29  N.  in  a  certain  county,  etc.  Mullen  v. 
E.  520.  Under  Rev.  Laws  Mass.  Northern  Accident  Ins.  Co.  20  S. 
Suppl.  1902-11)08  (acts  1908)  p.  Dak.  402,  128  N.  W.  483,  40  Jus.  L.  d. 
117(3,    accident    insurance    companies    122. 

are  authorized  to  insure  ai^ainst  CasnaUji  insurance  on  assessment 
breakage  of  plate  glass.  As  to  Mass.  plan  apjilies  to  accidental  deatli  or 
Statute  1907,  c.  57(),  sec.  32,  cl.  5,  physical  disability  from  accident  or 
specifying  kinds  of  accident  insurance  sickness.  Me.  Rev.  Stat.  1903,  ]>. 
that  companies  may  tran.sacf.  See  497,  c.  49,  sec.  122.  "Casualty  insur- 
Metropolitan  Life  Ins.  Co.  v.  Ilardi-  ance''  defined,  under  detinition  of  as- 
son,  208  Ma-ss.  380,  389,  94  N.  E.  477.  sessnieid  plan  of  insurance:  Suppl. 
40  Ins.  L.  J.  901,  considered  under  1888,  Pub.  Stat.  Mass.  c.  183,  pp.  291, 
note  to  last  ])receding  section  herein.  292.  Casualty  insurance,  upon  co- 
Accident  and  casualty  insurance  in-  operative  or  assessment  i)lan,  includ- 
clude-s  plate  glass  insurance.  JMetro-  ed  in  accident  insurance  covering  ac- 
politan  Casualty  Ins.  Co.  v.  Basford,  cident,  sickness  or  other  physical 
31  S.  Dak.  149,'  139  N.  W.  795.  See  disability.  Minn.  Rev.  Laws,  Suppl. 
also  Laws  S.  Dak.  1911,  c.  170,  1909,  annot.  p.  443,  sec.  (1702—]  1 
amd'g  Laws  1905,  c.  73.  Under  (act  1907,  c.  318,  sec.  1).  By  N.  Y. 
Herron's  Sup|)l.  (to  Sayle's  Tex.  Civ.  Laws  1883,  c.  175,  the  formation  of 
Stat.)  1908-1910,  p.  233,  accident  in-  life  and  ca.sualty  companies  in  co- 
surance  is  conditioned  upon  Uie  in-  operative  or  assessment  plan  was 
jury,  disablement,  or  deatli  of  persons  authorized.  Report  of  Board  of 
resulting  from  traveling,  or  general  Statutory  Consol.  (covering  insur- 
accidenti5  by  land  or  water.  iince)    vol.   3,   p.  2949.      See    i>resent 

Suits  on  accident  policies  insui'ing    N.    Y.    Stat,    considered   under    J;    X. 
against  accidents  to  human  beings  are   herein,  notes  8-13,  pp.  03-05. 
not  within  South  Dakota    Code    Civ.        i"  Bankers  Mutual  Casualty  Co.  v. 
Proc.  sec.  99,  subd.  5,  providing  that    First  Nat.  Bk.  131    fowa,    4,')G,    401, 
all  actions  brought  on  a  policy  of  in-   108  N.  W.  1040. 
suranee  to  recover  for  loss  or  dam-       ^^  Cititiq  Standard  Diet. 

93 


§  Oa 


JOYCE  OX  IXSUKANCE 


is  quite  commonly  applied  to  losses  and  injuries  which  happen  sud- 
denly, unexpectedly,  not  in  the  usual  course  of  events,  and  without 
any  design  on  the  part  of  the  })erson  suft'erino;  from  the  injury.  Nor 
does  the  fact  that  the  conscious  or  intended  act  of  some  other  per- 
son produces  it  take  from  such  injury  its  character  of  an  accident 
or  casualty."  ^^  The  court  concludes  that  the  insurance  against 
casualty  under  the  laws  of  that  state  has  no  reference  whatever  to 
other  than  ]»roperty  losses,' as  distinguished  from  losses  by  personal 
injury,  or  those  through  accidents  resulting  in  bodily  injury  or 
death,  and  insurance  against  loss  by  burglary  was  held  included 
within  the  words  ''other  casualty"  under  the  Code.^^ 

§  9a.  Definition  of  employers'  liability  or  indemnity  insurance. — 
An  employers'  liability  or  indemnity  insurance  is  a  contract  which, 
for  a  consideration  or  premium  and  for  a  specified  term,  insures  an 
employer  against  liability  to  an  employee  for  damages,  or  which 
agrees  to  indemnify  the  employer  for  the  loss  or  damages  actually 
sustained  by  him,  by  reason  of  his  liability  to  the  employee.^* 
This  insurance  is  considered  a  distinct  branch  of  accident  insur- 
ance.^^    The  usual  provision  seems  to  be  one  whereby  the  insurer 


'^^Citing  Richards  v.  Travelers  Ins.    Assur.  Corp.  v.  Merrill,    155    Mass. 
Co.  89  Cal.  170,  23  Am.  St.  Rep.  455,   404,  29  N.  E.  529,  where,  in  differenti- 


26  Pac.  762;  Accident  Ins.  Co.  v. 
Crandal,  120  U.  S.  527,  30  L.  ed.  740, 
7  Sup.  Ct.  685;  Schneider  v.  Provi- 
dent Lif^  Ins.  Co.  24  Wis.  28,  1  Am. 
Rep.  157. 


atin<i'  Ijetween  accident  companies 
and  casualty  companies,  it  classes 
under  the  latter  head  companies  in- 
suring against  the  explosion  of  steam 
boilers  and  breaking  of  plate  glass. 


13  MeClain's  Iowa  Code,  sec.  1695,  A  casualty  by  which  a  loss  of  prop- 
providing  what  kinds  of  insurance  erty  is  occasioned  is  not  necessarily 
contracts  might  be  made  by  com-  restricted  to  a  conflagration  by  which 
panics  organized  under  the  laws  of  the  property  is  consumed,  and  we  can 
that  State.  The  language  of  the  see  no  rea.son  why,  in  the  absence  of 
court  in  concludins:  is  as  follows:  other  restrictive  provisions  in  the 
"In  State  (ex  rel.  Clapp)  v.  Federal  statute,  it  may  not  as  well  include 
Investment  Co.  48  Minn.  110,  50  N.  lightning,  toraado,  flood,  hail,  or 
W.  1028,  'casualty  insurance'  is  said  other  force  or  violence  by  which  such 
to  have  'a  well-defined    meaning    as  property   is   injured,    destroyed,    or 


insurance  against  loss  through  acci- 
dents resulting  in  bodily  injury  or 
death.'  But  it  is  perfectly  apparent 
that  the  insurance  against  casualty 
provided  for  by  our  state  .  .  . 
has  no  reference  whatever  to  injuries 
or  _loi?ses  of  this  class,  for  it  is  ex- 
pressly treating  of  propertj'^  losses,  as 


lost  without  the  agency  or  design  of 
the  owner." 

1*  This  insurance  is  classed  as  guar- 
anty insurance.  See  5  Universal  Cyc 
"guarantee  companies,"  p.  327,  ar- 
ticle by  Clarence  H.  Kelsey.  Consid- 
ered in  note  19,  p.  56,  §  IX.  herein. 

1^  Employers'    liability    "is    insur- 


distinguished  from  los.ses  by  personal  ance  taken  out  by  an  employer  to 
injury.  It  comes  rather  within  the  protect  him  against  loss  on  account 
definition  of  the  phrase  which  is  given  of  injury  to  his  employees  while  en- 
by  the  supreme  court  of  Massa-  gaged  in  his  servic.e.  It  is  recognized 
chusetts     in      iMnployers'     Liabilitv    as  a  distinct  class  of  the  accident  in- 

■94 


TERMS  AND  DEFINITIONS 


§  9a 


agi-ees  to  indemnify  the  employer,  or  assured,  against  loss  from 
conmion  law  or  statutory  liability  for  damages  on  account  of  bodily 
injuries,  fatal  or  nonfaUal,  accidentally  suffered  by  any  eniployee 
or  employees  of  the  assured.  Another  condition  or  provision  is 
that  whereby  the  insurer  agrees  to  reimburse  or  indemnify  the  as- 
sured only  for  losses  actually  sustained  and  paid  by  him  in  satis- 
faction of  a  judgment  after  a  trial  of  the  issue,  and  it  requires  the 
action  to  be  brought  by  assured  himself.^^    The  nature  or  character 

surance  business,  and  yet  it  is  com-  17  Earl  of  Halsbury's  Laws  of  Eng. 
raon  knowledge  that  most  accident  in-    "Insurance,"  p.  571. 


surance  companies  can-y  a  line  of 
(•raployers'  liability."  Travelers  In- 
surance Machine  Co.  v.  Travelers 
Ins.  Co.  142  Ky.  523,  531,  134  S.  W. 
877,  881,   per  Lassing,  J.     Employ- 


As  to  insurance  of  clmms  arising 
under  workmen's  compensation  act  of 
1906  in  England,  see  Wilkinson  v.  Car 
&  General  Ins.  Corp.  108  L.  T.  512. 
On  insurance  against  injuring  prop- 


ers' liability  is  accident  insurance,  erty  or  person  of  third  person  as  m- 
Employers'  Liability  Assur.  Corp.  v.  demnity  or  liability  insurance  see 
Merrill,  155  ]\Iass.  404,  40G,  29  N.  E.  note  in  48  L.R.A.(N.S.)  184.  On 
529.  "Employers'  Liability"  is  a  injuries  covered  by  employers  m- 
de.'^criplive  term  generally  used  to  demnity  policy,  see  notes  in  30  L.R.A. 
designate  a  certain  well-known  branch  (N.S.)  1192;  L.R.A.1915C,  155. 
of  the  insurance  business.  Employ-  ^^  ^,.7,.^„,5c^,_American  Employ- 
ers' Liability  Assur.  Corp.  Ltd.  ers'  Liability  Ins.  Co.  v.  Fordyce,  62 
V.  Employers'  Liability  Ins.  Co.  Ark.  562,  54  Am.  St.  Rep.  305,  36  S. 
16  N.  Y. 'Supp.  397,  61  Hun  (68  W.  1051  (agreement  to  pay  "all  dam- 
N.  Y.  Supr.  Ct.)  552,  10  N.  Y.  ages  with  whicli  the  insured  might  be 
Supp.  845,  24  Abb.  N.  C.  368,  ease  legally  charged,  or  required  to  pay,  or 
of  action  to  enjoin  use  of  name.  Em-  for  Avhich  it  might  become  liable;" 
ployers'  liability  insurance  is  but  a  construed) 


branch  of  accident  and  casualty  in- 
surance, and  a  foreign  company,  in 
the  absence   of  restrictive  words   in 


California. — Taxicab  Motor  Co. 
v.  Pacific  Coast  Casualty  Co.  73 
Wash.    631.    132    Pac.    393     (what 


its  charter,  may  engage  in  the  former  constitutes    payment    of    judgment), 

business  under  an  authority  to  do  the  Maine. — Fry  v.  Bath  Gas  &  Elec- 

matter.     Metropolitan  Casualty  Ins.  trie  Co.  97  Me.  241,  94  Am.  St.  Rep. 

Co.  v.  Basi'ord  (1913)  31  S.  Dak.  149,  500,  59   L.R.A.   444,  54  Atl.   39,  32 

139  N.  W.  795,  under  S.  Dak.  Laws  Ins.  L.  J.  656  (construing  both  provi- 

1911,  c.  176,  amd'g  Laws  1905,  c.  72.  ^ions). 

See  People  v.  ^tna  Life  Ins.  Co.  —  Minnesota. — Kennedy    v.    Fidelity 

111.  — ,  35  Chicago  Leg.  N.  423,  27  &  Casualtv  Co.  100  Minn.  1,  9  L.R.A. 

Nat.  Corp.  Rep.  6.  (N.S.)     478,    annot.   110   N..W.   97 

Insurance  against  liability  for  ac-  (last  above  clause  construed) ;  Anoka 

cidents  to  third  person; — employer's  Lumber  Co.  v.  Fidelity    &    Casualty 

liability.    "Under  a  policy  of  this  de-  Co.  63  Minn.  286,  30  L.R.A.  689,  65 

scription     the     insurance      company  N.  W.  353. 

undertakes  to  indemnify  the  assured  Missouri. — Conqueror  Zinc  &  Lend 

against  his  liability  to  pay  damages  Co.  v.  ^tna  Life  Ins.  Co.  152  Mo. 

and  costs,  in  case    any    person    may  App.   332,   133   S.   W.   156,  40   Ins, 

sustain  injury  by  accident,  and  claim  L.  J.  721    (clauses  construed), 

compensation  against    the    assured."  New     Hampshire.  —   Sanders     v. 

95 


§  9a. 


JOYCE  ON  INSURANCE 


of  til  is  class  of  insurance  may  be  further  illustrated  by  certain 
clauses  in  the  diflcrent  contracts  which  cover  liability  for  such  in- 
juries as  are  sustained:  While  the  employee  is  on  duty;  or  while 
prosecuting  his  work;  or  while  on  duty  in  the  occupation  specilied; 


Frankfort  Marine,  Accident  &  Plate  reason    of   liability    imposed   by   law 

(Mass  Co.  72  N.  II.  485,  101  Am.  St.  upon  tlie  a.ssured  for  damajjes  on  ac- 

Hep.    088,   57    Atl.    635    (last   clause  count  of  bodily  injuries"  sutfered  by 

construed).  iuiy  employee  tlirough  accident,  etc-. 

New    Jersey. — Travelers    Ins.    Co.  Also  tliat  no  action  sludl  lie  against 

V.    Moses,    (5:5    N.    J.    Eq.    '2t)(),    92  insurer     for     los.s     "unless     it     sball 

Am.      St.     \W\^.    663,    -19    Atl.    720  be     brougbt     by     the     a.ssured     for 

(clauses  construed);  Ross  v.  Ameri-  loss     actually     sustained     and     paitt 

can  Employers'  Liabilitv  Ins.  Co.  56  in     money     by     him     after     actual 

N.  J.  Eq.  41,  38  Atl.  22 '( undertaking  trial  of  the  i.ssue,"  Avith  an  atjsolute 

was  "that  said  company  Avill  pay  to  right  in  the  company    to    determine 

tlie  insured   all   damages  with  which  whether  an  appeal  should    be    taken, 

the  insured  may  be    legally    charged  Saratoga  Trap  Kock  Co.  v.  Standard 

under  the  common  law,  or  any  stat-  Accident  A.ssoc.  128  N.  Y.  Supp.  822, 

ute  [not  exceeding  the  amounts  here-  143  App.  Div.  852.     See  also  London 

inafter  limited],  for,  or  by  rea.«on  of,  Guarantee    &    Accident    Ins.    Co.    v. 

anv     accidental      injuries,    fatal     or  Morris,  156  111.  App.  533  ( first  above 


i.P 
otlierwise,  ha])pening  to  any  em- 
ployee or  employees  of  the  insured"). 
Oregon. — Eenton  v.  Eidelitv  &  Cas- 
naltv  Co.  36  Ore.  283,  48'  L.R.A. 
770.'     56    Pac.    1096     (clauses    con- 


clau.se  does  not  cover  injuries  suffered 
by  child  emploijed  in  riolation  of 
law.)  See  as  to  exception  of  loss  or 
expense  arising  on  account  of,  or  re- 
sulting from  injuries  or  death  to  or 
strued;  wlien  indemnity  is  created),  caused  by  any  person  empJoi/ed  in 
Tennessee. — Cavard    v.    Robertson    violation  of  law,  Buffalo  Steel  Co.  v. 


&  Hobbs,  123  Tenn.  382,  30  L.R.A. 
IN.S.)  1224,  131  S.  W.  864,  40  Ins. 
L.  J.  144  (clauses  construed;  also 
tiiat  employee  could  not  sue  indem- 
nity   company    though    employer   in- 


.l^tna  Life  Ins.  Co.  141  N.  Y.  Supi). 
1027,  156  App.  Div.  453  (aff'g  136  N. 
Y.  Supp.  977),  aff'd  (mem.)  215  N. 
Y.  638.  Insurance  against  loss  to  by 
reason    of    injury    to    tliird    persons 


solvent);    Finley    v.    United    States    while  employee  violating   city   speed 

ordinance,  not  against  puhlir  poli<\ii. 
Taxicab  ^lo'tor  Co.  v.  Pacitic  Coast 
Casualty  Co.  73  Wash.  631,  132  Pac. 
393.  As  to  excepted  loss  or  expense 
for  injuries  or  death  caused  by  failure 


Casualty  Co.  113  Tenn.  592,  83  S.  W. 
2,  34  Ins.  L.  J.  179  (clauses  con- 
st rued ) . 

Washington. — Seattle  &  San  Fran- 
cisco   R.    &    Nav.    Co.    V.    Maryland 


Casualty  Co.  50  Wash.  44,  18  L.R.A,  of  assured  to  observe  ana  statute  aj- 


(N.S.)  12L  96  Pac.  509  (last  clause 
construed ) . 

Wisconsin. — Stenborn  v.  P>rown- 
Corliss  Enijine  Co.  137  Wis.  564, 
20  L.R.A.(N.S.)  956,  110  N.  W. 
308  (la.^t  clause  construed)  ;  Hoven  v. 
Emplovers'  Liability  Assur.  Corp.  93 
AVis.  201,  32  L.R.A.  388,  67  N.  W. 
4(i  (agreement  to  pay  "all  sums  for 
which  it  shall  become  liable  to  its  em- 
ployees," construed). 

Another  form   is  "again.st  loss  by 


96 


fecting  safety  of  persons,  see  Butler 
Bros.  V.  American  Fidelity  Co.  120 
Minn.  157,  44  L.R.A.(N.S.)  609,  139 
N.  Y.  355). 

Massachusetts. — Hood  &  Sons  v. 
:\Iarvland  Casualty  Co.  20(i  Mass. 
223,'  30  L.R.A.(N.S.)  1192,  and 
note,  138  Am.  St.  Rep.  379,  92  N. 
E.  329   (fii-st  clause  construed). 

Minnesota. — Butler  Bros.  v.  Ameri- 
can Fidelity  Co.  120  Minn.  157,  44 
L.R.A.(N.S.)    609,  and  note  139  N. 


TEKMS  AND  DEFINITIONS 


§  9a 


or  while  actually  engaged  in  the  performance  of  duty  in  the  trade 
or  occupation  for  which  employed ;  or  only  for  loss  or  liability  iov 
injuries  sustained  during  the  innnediate  doing  of  certain  construc- 
tion work ;  "  or  wliile  engaged  in  certain  specilied  work  within  cer- 
tain territorial  limits;  ^^  or  for  injuries  in  a  designated  place;  ^^  or 
while  on  duty  at  the  places,  or  at  any  of  the  places  specified:  or 
covering  all  operations  connected  with  the  business  including  cer- 
tain designated  clashes  of  employees;^"  or  against  liability  on  all 
inside  or  shop  work,  and  general  liability  on  outside  work,  includ- 
ing liability  to  persons  other  than  employees;  ^  or  for  injuries  acci- 
dentally suffered  by  any  person  not  employed  by  assured,  while  at 
or  about  certain  described  work  of  assured  during  the  prosecution 
of  the  latter's  work  at  the  place  or  places  specihed;  ^  or  for  injuries 
accidentally  suffered  by  any  person  or  persons  not  employed  by 
assured,  in  and  during  the  period  of  construction  of  certain  specified 
work;'  or  to  cover,  in  addition  to  employees,  the  liability  of  as- 
sured to  thd  public  only  for  personal  injuries,  only  caused  by  as- 


W.  355  (loss  to  be  paid  in  money^ 
etc.)  ;  Patterson  v.  Adan  (Philadel- 
phia Casualty  Co.)  11!)  .Minn.  iiOS,  48 
L.R.A.(N.S.)  184,  and  note,  138  N. 
W.  281  (niitomohile  policif ;  injury 
etc.  caused  by :  los.s  payable  in  money, 
etc.:  applies  only  when  insui'er  de- 
nies liability  and  refuses  to  defend). 

Ndiih  Carolina. — Cannon  ^lanu- 
facturins:  Co.  v.  Employers  Indemni- 
ty Co.  161  N.  C.  19,  76' S.  E.  530  (to 
reimburse  for  loss  sustained  and  paid 
in  money  under  a  final  judgment: 
what  constitutes  final  judgment). 

Ohio. — Garrett  v.  Travelers  Ins. 
Co.   20   Ohio   Dec.   181,   55   Ohio   L. 


above   clause   con- 
indemnity   against 


injured   employee    cannot 


Bull.   181.     (Last 
strued  as  one   of 
loss,   etc. 
sue ) . 

Tihofle  Island. — Herbo-Phosa  Co. 
V.  Philadelphia  Casualty  Co.  34  R.  I. 
567,  84  Atl.  1093  (what  constitutes 
payment  though  not  "in  money"). 

See  Taxicab  Motor  Co.  v.  Pacific 
Coast  Casualty  Co.  73  Wa.^^h.  631, 132 
Pac.  393,  icliat  confilitules  ■payment  of 
judgment;  case  of  insurance  against 
loss  on  account  of  bodily  injuries  or 
death  accidentally  sull'eved  by  any 
person  from    operation    of   taxicabft. 

^"^  Construed  in  Camden  &  Atlantic 
Joyce  Ins.  Vol.  I. — 7.  9 


Teleph.  Co.  v.  United  States  Casualty 
Co.  227  Pa.  242,  75  Atl.  1077.  Con- 
tract here  covered  only  pei'sons  not 
employed  by  assured  in  and  during 
certain  construction  Avork. 

^^  Construed  in  connection  with  the 
right  to  recover  additional  premium.'^, 
in  Pacific  Coast  Casualty  Co.  v.  Home 
Teleph.  &  Tclcg.  Co.  11  Cal.  App. 
712,  106  Pac.  262. 

13  Construed  in  JEtna  Life  Ins.  Co. 
V.  DuParquet,  Huot  &  ]\Ioneuse  Co. 
65  Misc.  551,  120  N.  Y.  Sup  p.  759. 

^^  Con.strued  in  Humes  Const.  Co. 
V.  Philadelphia  Casualty  Co.  32  P.  I. 
246,  79  Atl.  1.  See  also  Hoven  v. 
West  Superior  Iron  &  Steel  Co.  93 
Wis.  201,  32  L.R.A.  388.  67  N.  W. 
46. 

1  Construed  in  Cornell  v.  Travelers 
Ins.  Co.  175  N.  Y.  239.  07  N.  E.  578, 
32  Ins.  L.  J.  769.  See  also  Butler 
Bios.  V.  American  Fidelity  Co.  120 
Minn.  157,  44  L.R.A.(N.S.j  609,  139 
N.  W.  355. 

2  Construed  in  Henderson  Ligliting 
&  Power  Co.  v.  Maryland  Casualtv 
Co.  153  N.  C.  275,  30'  L.R.A.  (N.S.) 
1105,  and  note,  69  S.  E.  234. 

'  Construed  in  Camden  &  Atlantic 
Teleph.  Co.  v.  United  States  Casual- 
tv Co.  227  Pa.  242,  75  Atl.  1077. 


§  9a 


JOYCE  ON  INSURANCE 


siired  or  his  workmen ;  *  or  the  policy  may  be  one  indenniifying 
l)laintifl'  again.st  loss  from  liability  imposed  by  law  upon  assured 
for  damages  on  accoimt  of  bodily  injuries,  including  death  result- 
ing therefrom,  accidentally  suffered  by  any  person  or  persons 
whomsoever,  while  within  or  upon  the  described  premises  or  the 
premises  or  wings  adjacent  thereto.^  The  contract  may  also  agree 
to  indemnify  assured  in  a  certain  sum  against  liability  for  damages 
on  account  of  fatal  or  nonfatal  injuries  accidentally  suffered  by 
employees,  and  also  against  liability  to  workmen  employed  by  other 
contractors  and  the  public,  arising  out  of  personal  injuries  caused 
by  them  or  their  workmen,  but  not  caused  by  a  subcontractor  or 
subcontractor's  workmen.^  An  indemnity  policy  may  also  be  is- 
sued to  a  earner  to  protect  it  against  loss  on  account  of  injuries  sils- 
tained  by  its  employees.'  A  liability  policy  may  also  agree  to  in- 
demnify against  loss  on  account  of  accidental  injuries  suffered  by 
persons  using  elevators}  .A  casualty  policy  against  explosion  of 
stexim  boilers  may  cover  employers,  employees  and  other  persons; 
as,  where  it  is  taken  out  to  indemnify  the  employer  against  injury 
or  loss  of  life,  ''whether  to  the  assured,  to  employee,  or  to  any  other 
person  or  persons,"  "payable  to  the  assured  for  the  benefit  of  the 
injured  person  or  persons,  or  to  their  legal  representatives  in  case 
of  death,  and  not  contingent  upon  the  legal  liability  of  the  as- 
sured." ^    But  a  law  authorizing  insurance  of  employers  against  loss 


*  Construed  in  Creem  v.  Fidelity  &  alty  Co.  of  America,  166  Mo.  App. 

Casualty  Co.  126  N.  Y.  Supp.  555,  567,  149  S.  W.  1049. 
141  App.  Div.  493,  40  Ins.  L.  J.  600;        Elevator  policy  to  indemnifj'  own- 

s.  c.  118  N.  Y.  Supp.  1102,  134  App.  er  of  legal  title  to  building  from  lia- 

Div.  949;  s.  e.  116  N.  Y.  Supp.  1042,  bility  for  damages  resulting  from  ac- 

132  App.  Div.  241.     See  Lewinthau  eident    or   injury   in   elevator,   when 

v.   Travelers'  Ins.   Co.  61  Misc.   621,  only  record  or  legal    owner   and    not 

113  N.  Y.  Supp.  1031.  beneficial  owner,  within  protection  of 

^  Harbor  &  Suburban  Bldg.  &  Sav-  policy,   the   latter   owner   not   being 

ings   Assoc,   v.    Employers'    Liability  named  therein.     McCarl  v.  Travelers 

Assur.  Corp.  140  N.  Y.  Supp.  117,  79  Ins.  Co.  151  Iowa,  669,  132  N.  W.  12, 

Misc.  150.     See  also  Graustein  &  Co.  40  In.'^.  L.  J.  1820. 
V.  Employers'  Liability  Assur.  Corp.        ^  Emliler  v.  Hartford  Steam  Boiler 

Ltd.  214  Mass.  421,  lOi  N.  E.  1073.  Inspection  &  Ins.  Co.  158  N.  Y.  431, 

6  Tolraie  V.  Fidelity  &  Casualty  Co.  44  LR.A.  512,  53  N.  E.  212,  aff'g  40 
88  N.  Y.  Supp.  717,  95  App.  Div.  N.  Y.  Suppl.  450,  8  App.  Div.  186. 
352.  Insured  was  a  contractor  for  In  this  case  recovery  against  an  em- 
erection  of  a  city  building.  ployer  for  an  employee's   death   pre- 

'  New  Orleans  &  C.  R.  Co.  v.  Mary-  eluded     recovery     by     latter's    legal 

land    Casualty    Co.    114  La.  154.  6  representatives.      Policy   was    issued 

L.R.A.(N.S.)    562  and  note,   38   So.  prior  to  the  New    York    statute    of 

89.  1892,  under  which  an  employer  was 

8  Nesson  v.  United  States  Casualty  expressly  authorized  to  take    out    a 

Co.   201   Mass.   71,   87     N.    E.    191.  policy  of  accident  insurance  covering 

See  also  Scarritt  Estate  Co.  v.  Casu-  liis    employees    collectively,   for   the 

98 


TERMS  AND  DEFINITIONS  §  10 

in  congequence  of  accidents  or  casualties  to  employees  or  other  per- 
sons or  to  property  or  both,  resulting  from  employees'  acts  occurring 
in  connection  with  the  transaction  of  business  or  from  the  operation 
of  machinery  connected  therewith,  does  not  authorize  the  issuance 
of  a  policy  covering  liability  imposed  by  law  by  reason  of  bodily  in- 
juries, including  death  accidentally  sustained  by  reason  of  main- 
tenance, use,  etc.,  of  automobiles}'^ 

In  policies  limited  to  employees'  injuries,  the  premiiun  is  based 
upon  or  bears  a  direct  ratio  to  the  gross  amount  of  wages  paid  by 
the  insured.^^ 

§  10.  Definition  of  endowment  insurance. — Endowment  insur- 
ance is,  in  general,  a  contract  to  pay  assured  a.  specitied  sum  of 
money  at  the  termination  of  a  certain  designated  period,  if  he  is 
then  living,  but  to  a  person  named  if  assured  dies  before  the  speci- 
fied time.^^    There  are,  however,  several  forms  of  endowment  pol- 

benefit  of  such  as  might  be  injured.  AUhama.—llo\-)kms  v.  Northwesl- 

The  Insurance  Law    (Laws  1892,  c.  em  National  Life  Ins.  Co.  41  Wash. 

600)  see.  55.  592,  83  Pae.  1019,  35  Ins.  L.  J.  267, 

^"American  Fidelity  Co.  v.  Bleak-  269     (contract     here     provided     iiii- 

ley,  157  Iowa,  442,  138  N.  AV.  508.  equivocally  for  endowment  policy  and 

On    insurance    against     liability     for  for  endowment   fund,  expres.sly    [iro- 

automobile  accidents,  see  notes  in  44  viding-   that   if   holder   of   certititate 

L.R.A.(N.S.)    73;    51    L.K.A.(N.S.)  kept  same  in  force  and  survived  un- 

584;  L.R.A.1915E,  575.  lil  a  certain  date  he  should  surrendei- 

As  to  different  kinds  of  insurance  certificate  to  association  and  receive  a 

other  than  life,  authorized  in   Iowa,  certain    sum    from     the     endowment 

see  Iowa  Code,  Suppl.  Annot.  1907,  fund;  question  was  one  of  waiver  of 

p.  356,  sec.  1709;  acts  1913,  p.  150,  right  to  endowment). 

c.  143,  p.  151,  e.  144.  Id.  pp.  165-171,  California.— Bviggs  v.  McCnllough, 

c.   147    (mutual   benefit— under   Em-  36  Cal.  542,  5.50,  551. 

jiloyers'  liability  and  Avorkmen's  com-  Illinois. — Rockhold  v.  Canton   Ma- 

pensation  act)."  sonic  Benev.  8oc.  —  111.  — ,  19  N.  E. 

11  So,  in  Palmer  &  Hardin  v.  Pi-  710,  aff'd  129  111.  440,  2  L.R.A.  420, 
delity  &  Casualty  Co.  137  Ky.  139,  21  N.  E.  794  (contiact  was  to  ])ay  in- 
125  S.  E.  270,  39  Ins.  L.  J.  554;  sured  upon  arriving:  at  seventy  years 
Pacific  Coast  Casualty  Co.  v.  Home  of  age,  or  after  he  had  been  a  mem- 
Teleph.  &  Teleg.  Co.  11  Cal.  App.  her  in  good  standing-  for  twenty-five 
712,  106  Pae.  262;  Empire  State  years,  or,  upon  liis  death,  to  his  wif<^ 
Surety  Co.  v.  Moran  Bros.  Co.  71  if  living-,  if  not,  then  to  his  children 
Wash.  171,  127  Pae.  1104,  case  of  or  legal  representatives;  benevolent 
action  to  recover  balance  of  premium :  society  held  to  have  no  power  to  is- 
amount  of  premium  was  based  upon  sue  endowment  insurance;  see,  in  this 
entire  amount  of  compensation  paid  connection,  Boyd  v.  Southern  Mutual 
to  employees:  "kind  of  business"  and  Aid  Asso.  145  Ala.  167,  41  So.  164). 
"kind  of  work"  defined  in  connection  Indiana. — Union  Central  Life  Ins. 
wifli  rate  of  premium.  Co.  v.  Woods,  11  Tnd.  App.  335,  37 

12  State  (ex  rel.  Clapp)  v.  Federal  N.  E.  180,  26  Ins.  L.  J.  151  {qnolinn 
Investment  Co.  48  Minn.  110,  111,  50  definitions  from  And.  L.  Diet,  and 
N.  W.  1028.  Bliss  on  Ins.   [2d  ed.]  p.  6,  sec.  6). 

See  the  following  eases:  Missouri. — State   (ex  rel.  Supreme 

99 


§  11 


JOYCE  ON  INSURANCE 


icic.^,  or  rather,  plans  of  endowment  insurance. ^^  So  a  policy  may 
he  issued  on  what  is  called  the  endowment  plan  comhinino-  an  in- 
surance of  the  life  and  an  investment  of  the  moneys  paid.^^ 

§  11.  Definition  of  tontine  insurance. — Tontine  insurance,  strictly 
so  called,  derives  its  name  from  Tonti,  an  Italian,  to  whom  its  in- 
vention is  accredited.  It  is  based  upon  survivorship)  among  a  num- 
ber who  share  an  annuity,  or  ratlier  participate  in  an  apportionment 


Lodge  of  Fraternal  Union  of  Amer- 
ica) v.  Orear,  14J:  Mo.  157,  45 
Si  W.  1081.  (In  this  ease  the  time 
for  payment  was  arbitrarily  fixed 
with  reference  to  the  age  of  assured. 
The  amount  being  ])ayable  at  the  end 
of  a  fixed  period  was,  therefore,  held 
to  be  an  endowment  insurance.) 

Endowment  policy  is  one  j^ayable 
at  a  certain  time  at  all  events,  or 
sooner  if  tlie  party  sliould  die  sooner ; 
the  premiums  all  to  be  paid  within  a 
certain  limited  time;  amount  payable 
to  the  person  whose  life  is  insured  or 
to  liis  assigns  on  a  day  certain,  or  it 
he  sliould  die  before  that  time,  then 
■  to  be  payable  to  a  person  or  persons 
designated.  Carr  v.  Hamilton,  129 
U.  S.  252,  253,  32  L.  ed.  669,  9  Sup. 
Ct.  295. 

Endowment  insurance  has  been  de- 
fined as  "that  quasi  insurance  busi- 
ness which  really  partakes  more  of 
the  nature  of  investment  or  savings 
bank  business."  Fawcett  v.  Supremo 
Sitting  of  tlie  Order  of  tlie  Iron  Hall, 
(U  Conn.  170,  205,  24  L.R.A.  815.  29 
Atl.  614,  dissenting  opinion  of  Ham- 
mersley,  J. 

IVhen  polici/  not  endoicment  in- 
mtrance.  In  Haydel  v.  iMntual  Re- 
serve Fund  Life  Assoc.  104  Fed.  718, 
44  C.  C.  A.  169.  30  Ins.  Law.  Jour. 
289,  291-293,  certain  "five-year 
Combination  option  policies"  were 
claimed  to  be  endowment  policies  be- 
cause "the  company  undertook  to  pay 
or  make  return  of  a  specified  sum  of 
money  at  the  termination  of  certain 
designated  periods  during  the  lifetime 
of  the  assured,"  but  they  were  de- 
clared not  endowment  policies  in  that 
they  lacked  some  of  the  essential  fea- 
tures of  sucli  contracts,  and  that  tliey 
were  not  so  far  variant  from  ordinarv 


policies  issued  on  the  co-operative  or 
assessment  plan  as  to  warrant  a  rul- 
ing that  a  company,  rest'"cted  to  busi- 
ness on  the  assessment  plan,  exceeded 
its  power  in  issuing  them. 

When  policy  not  an  endowment  or 
life  jjolicy,  but  an  industrial  or  acci- 
dent insurance  policy,  see  Pride  v. 
Continental  Casualtv  Co.  69  Wash. 
428,  125  Pac.  787,  under  Rem.  &  Bal. 
Code,  sees.  6155,  6159. 

^^  As  to  reserve  dividend  plan  of 
W.  P.  Stewart,  see  Fuller  v.  jNIetro- 
politan  Life  Ins.  Co.  37  Fed.  163. 

Participatiny  tontine  endowment 
policy  upon  "reserve  dividend  plan" 
— form  of,  see  Fuller  v.  Metropolitan 
Life  Ins.  Co.  70  Conn.  647,  056-659, 
41  Atl.  4.  Most  of  these  policies  were 
foi'  a  term  oE  ten  vears. 

14  Miller  V.  Campbell,  140  N.  Y. 
457,  462,  463,  35  N.  E.  651.  In  this 
case  the  policy  ditfered  from  an  ordi- 
nary life  insurance,  a  certain  period 
being  fixed  within  which  the  obli- 
gation of  the  insurer  accrued  to  the 
wife,  children,  or  pei'sonal  representa- 
tives, and  they  had  no  rights  to  re- 
ceive payment  under  it  beyond  that 
]ieriod.  It  combined  an  insurance  of 
the  life  and  an  investment  of  the 
moneys  i:>aid,  in  that  it  provided  for 
a  state  of  widowhood  or  orphanage  in 
case  of  the  death  of  the  person  whose 
life  was  insured  pending  a  specified 
period,  and  it  also  secured  to  the 
person  effecting  the  insurance  upon 
his  life  for  a  certain  period  for  the 
benefit  of  liis  family,  a  presumably 
]irofi table  return  of  the  original  in- 
vestment of  his  moneys  with  the  in- 
surer, and  might  thus  be  regarded  as 
a  provision  for  an  advanced  period 
of  liis  life. 


100 


I 


TERMS  AND  DEFINITIONS  §  11 

of  the  profits  upon  the  lapse  of  certain  intervals,  and  the  sum  rep- 
resenting the  share  of  one  deceased  is  enjoyed  by  those  who  survive 
to  this  extent,  that  the  profits  to  be  apportioned  among  the  survivors 
must,  theoretically  at  least,  increase  as  the  deaths  increase,  until 
final  division  made  among  the  survivors,  or  the  last  survivor  may 
take  the  whole  according  as  the  terms  of  the  agreement  may  pro- 
vide.^* A  tontine  contract  of  insurance  is  more  than  a  policy  of 
life  insurance.  In  addition  it  is  an  agreeenmt  on  the  part  of  the 
insurer  to  hold  all  the  premiums  collected  on  the  policies  forming 

^5  See    Pierce    v.    Equitable    Life  unity  or  a  loan  raised  on  life  annui- 

Assur.  See.  14.j  Ma.ss.  56,  1  Am.  St.  ties    with    benefit    of    survivorship:" 

Rep.  433,  12  N.  E.  858,  per  Devens,  2   Rapalje   &   Lawrence's  Law   Diet. 

J.;  Uhlman  v.  New  York  Life  Ins.  1280,  title  "Tonline."     See  definition 

Co.  109  N.  Y.  421,  4  Am.  St.  Rep.  in  Bouvier's  Law  Diet.  "Insurance," 

482,  17  N.  E.  363;  Jacks'  Introduc-  quoted  in  Romer  v.   Equitable   Life 

tion   to   History  of    Life    Ins.     (ed.  Assur.  Co.  102  111.  App.  621.    See,  al- 

1912)  pp.  211  et  seq.     "A  species  of  so,  2  Abbott's  Law  Diet.  572;  Whart- 

life  annuity  propounded  by  Lorenzo  on's   Law   Lexicon,   826,   title   "Ton- 

Tonti,  about  16.')0,  as  a  mode  by  which  tine." 

governments  might  obtain  loans.  The  The  system  of  Tontines  was  "in- 
general  idea  is  that  property  is  vented  by  Lorenzo  Tonti  or  Tontine, 
loaned,  owned,  or  invested  for  the  a  Neapolitan,  in  1653.  The  plan  was 
benefit  of  a  certain  number  of  per-  this:  A  certain  number  of  persons 
sons  who  at  first  receive  its  income,  clubbed  together  a  specified  sum  (with- 
the  share  of  a  deceased  member  in-  out  reference  to  age  or  sex)  annual- 
creasing  the  sum  divisible  among  the  ly,  and  at  the  expiration  of  each  year 
.'survivors;  the  last  survivor  taking  the  interest  of  this  fund  was  divided 
the  whole  income  or  principal,  as  the  among  the  subscribers  who  were  liv- 
case  may  be:"  Anderson's  Diet,  of  ing;  and  so  on  from  year  to  year,  un- 
Law  1039,  title  "Tontine."  "A  spe-  til  the  last  survivor  received  the  whole 
cies  of  association  or  partnership  interest.  Tliis  novel  scheme  had  all 
i'ormed  among  persons  who  arc  in  re-  the  appearance  of  a  profitable  invcst- 
ceipt  of  perpetual  or  life  annuities,  nient,  until  an  inquiry  was  instituted 
with  tlie  agreement  that  the  shares  or  ^f,  ascei-tain  whal  liecame  of  the  pvin- 
annuities  of  those  who  die  sluill  ac-  ^^.-j^.^j  g^^j^-,  subscribed,  as  the  interest 
crue  to  the  survivors :"  B/rtc/.:'.s  Law  of  the  fund  only  was  awarded.  This 
Diet.  1178,  title  "Tontine."  "Besides  ^^,.^^  ^^^^^  ^^  .^^  invention.  ...  A 
the  provision  for  payment  by  the  m-  jj^^^-^^^^  number  of  vears  was  fixed 
sured  on  the  ha.ppening  of  the  event  ^,^^.  ^j^^  eontmuation  of  the  tontine, 
on  which  the  liability  of  the  insurer  ^^^^^^  ^,^^  ^^_^^^^^^  originally  subscribed 
becomes  consummated,  P^'ovision  is  ^^^^_^;^,^^.^.  ^,^^^  ,^^^^,^^ 
.sometimes  made  tor  appropriation  ^^  ^^  t  i/-on  ,\  ^  4  ■  f 
for  the  benefit  of  the  insmvd  of  divi- ■  •  •  •  .  I^\l<>8^'  "•^'  1'^^^  ■^^^^•^■'^»  "^ 
dend.  or  i.rofits  from  ihe  business  •'  tontine  m  I  ranee  was  a  widow, 
conducted  'bv  the  insurer.  This  is  ^vlio  at  the  period  of  her  death,  at 
commonlv  done  in  what  is  known  as  Hie  age  of  ninety-six,  enjoyed  an  in- 
a  'tontine  policy,'  wherein  iirovi«ion  come  of  73,500  livres  (£3,062,  10s.) 
is  made  for  the  distribution  of  such  for  her  original  subscription  of  300 
profits  at  the  expiration  of  a  sjiecified  livres,  of  the  value  of  only  £12,  10s." 
period:"  Cooke  on  Life  Ins.  (ed.  Burt's  Life  Assur.  Historical  &  Sta- 
1891)  200,  201,  sec.  110.    "A  life  an-    tistical,  etc.  p.  45. 

101 


§  11  JOYCE  ON  INSURANCE 

that  class  for  I  lie  specified  period,  which  is  called  the  tontine  period 
or  period  of  distribution,  and  after  paying  death  losses,  expenses,  and 
other  losses  out  of  the  fund  so  accumulated,  to  divide  the  remain- 
der among  those  who  are  alive  at  the  end  of  the  tontine  period,  and 
who  have  maintained  their  policies  in  force. ^®  In  this,  as  in  other 
kinds  of  insurances,  several  plans  have  been  devised  which  dilfer  in 
a  greater  or  less  degree  from  ''Tontine"  insurance  strictly  so  called." 

^^  Equitable    Life    Assur.    Soo.    v.  dend  period  tlie  policy  was  an  ordi- 

Winn,  137  Kv.  641,  048,  28  L.R.A.  iiarv  life  policy.     Columbia  Bank  v. 

(N.S.)  558  and  note,  126  So.  153.  Equitable  Life  Assur.  Soc.  80  N.  Y. 

^""''Tontine    savings    fund    policy  Supp.  428,  79  App.  Div.  601    (ca.'^e 

plan."     Provisions  were  in  substance  of  action   in  aid   of  an   attacbment) 

as    follows:      Insurance    was    during  rev'g   61    App.    Div.   594,   70    N.   Y. 

natural    life.      If    the    person   whose  Su])p.   767.     See  also  as  to  Tontine 

life  was  insured  should  die  before  a  Savings  Fund  plan  with  term  of  fif- 

eertain    specified    time,    said    amount  teen  years;  Equitable  Life  Assurance 

was  to  be  paid  to  his  surviving  chil-  Soc.  v.  Spellnian,  22  Ky.  L.  Rep.  18)), 

dren  share  and  share  alike;  for  non-  56    S.    \V.    710,    29    Ins.    L.    J.    651. 

])ayment  of  premium,  policy  was  to  question  as  to  right  to  paid  up  poli- 

lapse.     Prior  to  the  completion  of  the  cy   and   waiver.      Gadd   v.   Equitable 

tontine     dividend    period     as     above  Life  Assurance  Soc.  (U.  S.  C.  C.)  97 

stated,    no    benetit    could    be    derived  Fed.  834. 

from  the  policy  by  either  the  assured  "Tontine  savings  fund  plan"  Con- 
or his  beneficiaries  except  in  case  of  sidered  with  reference  to  right  to  sur- 
as.sured's  death.  Said  policy  had  no  render  value  or  paid-up  insurance, 
sui-render  value,  either  in  cash  or  in  and  forfeiture  for  nonpayment  of 
a  paid-up  policy.  No  dividends  premiums  see  Banner  v.  Equitable 
were  payable  upon  the  policy  except  Life  Assurance  >Soc.  141  N.  Y.  Supp. 
assured  survived  the  completion  of  442,  156  App.  Div.  502. 
the  tnntine  dividend  period,  and  un-  Fifteen-gear  iontine  investment 
less  tlie  policy  was  then  in  force..  All  plan.  If  insured  survived  said  peri- 
surplus  or  profits  derived  from  such  od,  the  proceeds  or  value  were  never- 
policies,  on  said  plan,  as  .should  cease  Iheless  to  be  paid;  no  dividend  was 
to  be  in  force  before  completion  of  to  be  allowed  or  i)aid  on  the  policy 
their  respective  tontine  dividend  peri-  unle.^s  insured  survived  until  eorn- 
ods.  were  to  be  apportioned  equitably  pletion  of  the  tontine  dividend  peri- 
among  such  i^olicies  as  should  com-  od,  and  unless  I  lie  policy  was  then  in 
])lete  their  tontine  dividend  periods,  force;  suri^lus  or  profits  derived 
Certain  options  were  to  accrue  to  from  sucli  ])olicies  on  said  plan  as 
the  legal  Imldcr  or  liolders  of  the  should  not  be  in  force  at  the  eomple- 
policy  ujton  assured's  deatli,  or  upon  tion  of  their  respective  tontine  divi- 
the  termination  of  the  tontine  divi-  dend  periods  were  to  be  apportioned 
(lend  period,  such  as  wiilidrawal  in  eijuitaljly  among  such  policies  of  the 
ca.sh  of  policy's  entire  share  of  the  same  dale  as  should  complete  their 
assets;  receiving  a  paid-up  ]iolicy;  tontine  dividend  periods;  premiums 
continuing  the  insurance  and  pur-  were  paid  semi-annually  in  advance, 
chasing  an  annuity;  and  withdrawal  IT  assured  survived  the  tontine  peri- 
in  cash  of  accumulated  surplus  and  od,  and  the  policy  was  then  in  force, 
continuing  policy  in  force  on  ordi-  the  face  of  tlie  policy  was  to  be  paid 
nary  plan.  It  would  seem  that  prior  and  also  a  share  of  all  accrued  di- 
to  the  completion  of  the  tontine  divi-  vidends    on    the    policy.      New    York 

102 


TEILMS  AND  DKFlXITiONS  §  11 

An  insurance  company  which  by  a  policy  agrees  that  the  surplus  or 
profits  derived  from  policies  on  the  tontine  savings  fund  assurance 
plan,  that  shall  cea.se  to  be  in  force  before  the  completion  of  their 
tontine  dividend  periods,  shall  be  apportioned  equitably  among  such 
policies  as  shall  complete  their  tontine  dividend  periods,  does  not 
hold  such  surplus  or  profits  as  a  trust.  The  amount  to  be  appor- 
tioned is  not  a  dividend  in  the  limited  sense  in  which  that  word  is 
used  in  its  application  of  dividends  to  stockholders.  The  assured 
is  not  a  member  of  the  corporation,  but  its  creditor  who  has  con- 
tracted with  it.  At  tbe  end  of  the  fixed  period,  having  complied 
with  the  contract  on  his  own  behalf,  and  made  the  payments  re- 
quired, he  is  entitled  to  have  apportioned  to  him  his  share  of  a  cer- 
tain fund  to  be  computed..  This  share,  or  its  equivalent  in  value, 
is  the  assured's  own  property.^*  In  Bogardus  v.  New  York  Life  In- 
Life  Ins.  Co.  V.  Miller,  22  Ky.  L.  don  v.  Northwestern  Mutual  Life 
Rep.  230,  56  S.  W.  975,  29  Ins.L.  J.  Ins.  Co.  199  N.  Y.  188,  92  N.  E.  440. 
1033.  Where    tontine    insurance    void   as 

''Free  tontine  policy"  maturing'  in  gamblirifj  contract.  Fuller  v.  Metro- 
ten  years.  If  insured  then  living  politan  Life  Ins.  Co.  70  Conn.  647, 
and  the  policy  in  force  he  was  enti-   41  Atl.  4. 

tied  to  certain  options,  among  them  Tontine  debenture  certificates. 
being  the  right  to  withdraw  in  cash  Contracts  of  investment  security  de- 
such  policy's  entire  share  of  the  as-  bentures  or  certificates,  when  contra- 
sets;  tliat  is,  of  the  accumulated  re-  ry  to  public  policy  and  unlawful, 
serve  and  in  addition  thereto  the  sur-  State  v.'  Interstate  Savings  Inv.  Co. 
plus  apportioned  by  the  society  to  64  Ohio  St.  283,  52  L.R.A.  530,  60 
such    policy.      Donoho    v.    Equitable   N.  E.  220. 

life  Assurance  Soc.  22  Tex.  Civ.  App.  ^'  Pierce  v.  Equitable  Life  Assur. 
192,  54  S.  W.  645,  a  case  whether  Soc.  145  Mass.  56,  61,  62,  1  Am.  St. 
representations  of  agent  as  to  sur-  Rep.  433,  12  N.  E.  858,  per  Devens,  J. 
plus  were  false  and  fraudulent  or  a  Right  to  accounting  in  equity  of 
matter  of  estimate  and  opinion  only,  holder  of  matured  tontine  dividend 
Held  the  latter.  l^olicy,  see  Peters  v.   Equitable  Life 

"Tontine  policy  and  tontine  install-  Assur.  Soc.  200  ;\Iass.  579,  86  N.  E. 
ment  policy;"  meaning  of  terms  may  885  (under  Rev.  Laws  Mass.  c.  159, 
be  shown  by  oral  evidence.  Thomp-  .sec.  3,  d.  5)  See  also  Ev'erson  v. 
son  V.  Thorne,  83  Mo.  Ai)p.  241.  Life  Assur.  Soc.  71  Fed.  570,  18  C. 
Semi-tontine  policy  with  option  to  C.  A.  251,  aff'g  68  Fed.  258,  semi- 
purchase  annuity,  with  other  options  tontine  policy  {quoting  from  F^hl- 
if  policyholder  alive  and  policy  in  man  v.  New  Yoi'k  Life  Ins.  Co.  109 
force  at'  end  of  tontine  period.  See  N.  Y.  421,  432,  17  N.  E.  363,  and  cit- 
Timlin  v.  Equitable  Life  Assurance  ed  in  Grieb  v.  Equitable  Life  Assur. 
Soc.  14]  Wis.  276,  124  N.  W.  253,  Soc.  [  U.  S.  C.  C]  189  Fed.  498, 
40  Ins.  L.  J.  295  (case  of  effect  of  502,  which  is  aff'd  [U.  S.  C.  C.  A.]  on 
writing  attached  to  policy,  and  nat-  opinion  below  in  194  Fed.  1021)  ; 
ure  of  relation  of  parties  to  con-  Ilunton  v.  E(|uitable  Life  Assur.  Soc. 
tract).  (U.  S.  C.  C.)  45  Fed.  ()61  ;  Equitable 

Fifteen-year  semi-tontine  policy  Life  Assurance  Soc.  v.  Winn,  137  Ky. 
with' certain  options  at  terniiiialion  (i41,  28  L.R.A. ( X.S.)  558.  126  S.  W. 
of  accumulative  i^eriod.      See   Lang-    15.3;   Hackett   v.   Equitable  Life  As- 

103 


§  n  JOYCE  ON  INSURANCE 

surance  Company  ^^  tlie  policy  was  on  the  tontine  or  '^ten-year  divi- 
dend system;""  annual  i)iemiums  were  to  be  paid  each  year  for  a  ten 
years'  policy,  to  be  voided  in  case  of  default,  dividends  to  be  allowed 
assured  only  in  case  he  survived  the  ten-year  dividend  period,  the 
policy  being  then  in  force.  Aside  from  the  provision  for  payment 
of  amount  at  death,  it  was  stipulated,  in  case  of  surviving  the  period 
specified  and  the  policy  remained  in  force,  that  there  should  be  a 
payment  in  cash  or  annuity  bonds  of  a  proportionate  share  of  divi- 
dends, accretions,  etc..  from  a  fund  to  be  created  by  a  certain  class  of 
policyholders,  consisting  of  those  effecting  insurance  on  the  same 
plan  in  the  same  year,  and  that  the  surplus  and  profits  from  certain 
funds  of  that  class  should  be  equitably  apportioned  among  survivors 
of  that  class  holding  jDolicies,  and  it  was  held  that  the  policy  did  not 
require  a  separate  investment  of  the  funds  of  that  class  to  which  the 
policy  belonged,  and  that  the  consent  of  assured  to  placing  of  divi- 
dends in  a  reserve  fund  did  not  extend  its  obligations  in  this  respect. 
The  court  said:  ''No  ex])ress  obligations  are  assumed  by  the  defend- 
ant, either  in  the  policy  or  by  the  application,  with  reference  to  the 
management  or  investment  of  the  funds  in  question,  and  the  tontine 
plan  is  referred  to  as  a  known  and  understood  system  of  insurance 
pursued  by  all  life  companies  of  similar  character  to  determine  in  a 
certain  contingency  the  extent  of  the  company's  liability  to  a  special 
class  of  its  policyholders.  It  contem])lates  the  union  of  the  interests 
of  a  large  number  of  persons,  and  the  administration  of  a  fund  for 
their  mutual  benefit,  and  from  its  very  nature  is  incapal)le  of  being 
molded  and  managed  to  meet  the  special  requirements  of  particular 
individuals.  Upon  the  accession  of  every  person  to  this  class,  he  be- 
Ijecomes  interested  in  the  contributions  of  every  other  member,  and 
neither  of  them  can  afterward  withdraw  his  contribution  without  in- 
juiy  to  the  rights  of  all  others  interested  in  the  fund.  .  .  .  We 
therefore  think  that  the  use  of  these  moneys  in  connection  with  its 
other  funds,  and  their  investment  and  management  according  to  the 
mode  Avhich  in  the  judgment  of  the  defendant  was  best  adapted  to 
promote  the  interests  of  all  of  its  policyholders,  was  entirely  legiti- 

sur.    Soe.   63   N.   Y.    Sv^pp.   1092,  50  contention  that  remedy  in  equity  un- 

App.  Div.  266,  atf'g  63  N.  Y.  Supp.  tenable.      Hac-kett   v.   E(iuitable  Life 

847,  30  Misc.  523.  Assur.  Soe.  63  N.  Y.  Supp.  847,  30 

Tontine  polici/ — Apportionment  hrj  Misc.  523,  aff'd  63  N.  Y.  Supp.  1092, 

societif   not   reviewaJiIe   bi/   courts   in  50  App.  Div.  260,  case  of  eom|ilaint 

action    to    recover    distributive   share  at  law  by  policyholder  on  "semi-ton- 

without  showing  fraud  or  irregulari-  tine'  plan  to  reach  reserve  and  sur- 

tv  in  procedure.     Oadd  v.  Equitable  plus,  —  demurrer. 
Life  Assurance   Soc.    (U.   S.   C.   C.)        ^^  101  N.  Y.  328,  4  N.  E.  522,  per 

97  Fed.  834,  30  Tns.  L.  J.  281.  Ruger,  C.  J. 

When  accounting  unnece^san/  ami  . 

104 


TERMS  AND  DEFINITIONS 


§  12 


mate,  and  in  accordance  with  the  true  meaning  of  the  contract.  The 
tontine  plan  nndoul)ledly  contemplated  such  action  on  the  part  of 
the  in>^urer.s  a.«  would  enaljle  them  at  the  expiration  of  the  ten-year 
dividend  period  to  determine  the  aggregate  of  such  dividends,  accre- 
tions, and  interest,  and  to  divide  the  same  among  the  survivors  of 
the  class  to  which  they  belonged  according  to  their  respective  rights 
therein ;  but  it  seems  to  us  that  it  does  not  involve  the  necessity  of 
keeping  separate  from  its  other  funds  either  the  premiums  paid  by 
such  class  or  their  profits  or  accuumlations,  or  the  duty  of  separately 
handling,  investing,  or  accunmlating  such  funds. ""  2° 

§  12.  Definition  of  guaranty  insurance. — (uiaranty  insurance  is 
a  contract  whereby  one  for  a.  consideration  agrees  to  indemnify 
another  against  loss  arising  from  the  want  of  integrity,  fidelity,  or 
insolvency  of  employees  and  persons  holding  positions  of  trust, 
against  insolvency  of  debtors,  losses  in  trade.  I'osses  from  non]tay- 
ment  of  notes  and  other  evidences  of  indel)tedncss,  or  against  other 
breaches  of  contract.  It  includes  other  forms  of  insurance  which 
are  specifically  cla.s.<ified,  such  as  "lidelity  gtiaranty,"  "credit  guar- 
anty," etc.^     As  we  have  seen,  the  first  English  statute  covering 

20  As  to  uncertainty  of  amount  to  583,  85  Atl.  325  (bond  to  indemnify 
be  received,  see  Avery  v.  Equitable  fraternaf  order  for  any  toss  it  miglit 
Life  Assur.  Soe.  117  N.  Y.  451,  459, 


23  N.  E.  3.  per  Gray,  J.;  Uhlraan  v 
New  Yorlc  Life  Ins.  Co.  109  N.  Y 
421,  430,  431,  4  Am.  St.  Rep.  482, 
17  N.  E.  363,  per  Peckliam,  J. 

^  See  Bunyon  on  Ins.  107;  9  Am. 
&  Eng'.  Ency.  of  Law,  65;  13  Ency. 
Britannica,  161.  See  People  (ex  rel. 
Kasso'n)    v.  Rose,  174  111.   310,  312, 


sustain  by  reason  of  the  dishonesty 
of  its  treasurer  with  certain  condi- 
tion.s  or  requirements). 

A  policy  may  insure  against  dis- 
honesty or  fraud  of  a  factor  of  in- 
sured in  his  management  of  money 
intrusted  to  him  to  buy  merchandi.se. 
Clifton  Manufacturing  Co.  v.  Unit- 
ed States  Fidelity  &  Guaranty  Co.  60 


44  L.R.A.  124,  51  N.  E.  246;  Ameri-  S.  Car.  128,  38  S.  E.  790. 
can  Surety  Co.  v.  Folk,  124  Tenn.  As  to  cases  wliere  policy  protects 
139,  135  S.  W.  778,  40  Jns.  L.  J.  against  pecuniary  loss  re'^nlting 
1074;  Hogan,  In  re,  8  N.  Dak.  301,  from  fraud  or  dishonesty  of  an  em- 
73  Am.  St.  Rep.  759,  45  L.R.A.  166,  ployee  or  private  corporation  officer 
78  N.  W.  1051,  28  Ins.  L.  J.  520.  amounting  to  embezzlement  or  lar- 
For  illustrative  cases  showing  kind  ceny,  see  American  Bonding  &  Trust 
of  policy,  see  the  following:  Crystal  Co.  v.  Burke.  3(1  (\)lo.  49,  85  Pac. 
Ice  Co.  V.  United  Surety  Co.  159  692;  Canton  National  Bk.  v.  Auu'ncan 
Mich.  102,  123  N.  W.  619  (policy  Bonding  &  Trust  Co.  Ill  I\ld.  41,  (3 
indemnified  againsi  loss  Ihrouuh  or  Atl.  684;  Champion  Jce  Manufacfur- 
by  default  of"  employee)  ;  Rankin  v.  ing  &  Cold  Storage  Co.  v.  American 
United  States  Fidelity  &  Guaranty  Px.nding  &  Trust  Co.  115  Ky.  86.3, 
Co.  86  Ohio,  267.  99  N.  E.  314  (bond  lOi?  Am.  St.  Rep.  350,  75  S.  ^V.  19/, 
to  indemnify  bank  for  a  certain  peri-  32  Ins.  L.  J.  810;  Farmers  State  Bk. 
od  against  dishonesty  or  fraud  of  its  v,  Title  Guaranty  &  Trust  Co.  133 
cashier)  ;  Atlantic  C'itv  Aerie  No.  64,  Mo.  App.  705,  113  S.  W.  1147;  Unit- 
Fraternal  Order  of  Eagles  v.  Inter-  cd  American  Fire  Ins.  Co.  v.  Anieri- 
national  Fidelity  Ins.  Co.  83  N.  J.  L.  can   Bonding  Co.   146  Wis.  573,  40 

105 


§  12  JOYCE  ON  INSURANCE 

guarantee  insurance  related  to  fidelity  guarantee,  or  the  insuring 
the  integrity,  fidelity,  or  honesty  of  persons  holding  ofRces  of  pub- 
lic trust  and  concerned  with  the  receipt,  control,  or  disbursement  of 
public  money.-. ^ 

A  credit  indemnity  or  a  guaranty  policy  or  agreement  may  pro- 
vide that  general  assignments  of,  or  attachments  against,  insolvent 
debtors,  the  absconding  of  debtors,  or  executions  returned  nulla 
bona  shall  constitute  insolvency,  and  that,  the  appointment  of  a 
receiver,  a  sell  out  on  the  death  of  a  debtor  does  not  establish  in- 
solvency.^ 

"Loss  sustained  by  the  insolvency  of  debtors"  includes  losses  up- 
on sales  made  by  insured  to  debtors  who  have  made  a  general  as- 
signment for  the  benefit  of  their  creditors.  The  scheme  of  indem- 
nity may  cover  two  classes  of  losses,  one  an  initial  loss  to  be  first 

L.Pt.A.(N.S.)  661,  131  N.  W.  994,  1891,  entitled  "An  Act  to  Aiathorize 
40  Ins.  L.  J.  805.  Certain  Corporation.s  to  Become  Sur- 

Larceny  or  emhe^zlemenl  defined,  ety  upon  Bonds  Required  to  be  Fur- 
See  John  Lee  Clarke  v.  Fidelity  &  nislied  bv  Law,  and  Prescribing-  the 
Depo.sit  Co.  73  Wash.  62,  131  Pac.  Conditions  under  Which  They  May 
468.  "Embezzlement"  in  policy  con-  Do  So."  Wolff's  Const.  &  Laws  La. 
strned  same  a.s  in  indictment.  Deb-  1904,  p.  896  (act  41,  1894,  p.  45). 
enhams  (Lim.)  v.  Excess  Ins.  Co.  28  There  is  a  statutory  provision  in  that 
T.  L.  R.  505,  Hamilton,  J.  state  as  follows:    ^''Third—To  guar- 

Bank  cashiers  guarantee  bond  wo'  antee  the  fidelity  of  persons  in  posi- 
afjalnst  public  poJicy  because  it  lim-  tions  of  trust,  private  or  public,  and 
its  insurance  liability  to  losses  occur-  to  act  as  surety  on  official  bonds,  and 
ring:  and  discovered  within  specified  for  the  performance  of  other  obliga- 
time.  Ballard  County  Bank's  As-  tions."  .  .  .  ^'Ninth — to  carry  on 
sig-nee  v.  United  States  Fidelity  &  the  bi;siness  commonly  known  as 
Guaranty  Co.  150  Ky.  236,  150  S.  credit  insurance  or  guarantee,  either 
W.   1.  agreeing    to    purchase    uncollectable 

2  See  §  TX.  herein.  debts,  or  otherwise  to  insure  against 

In  New  York,  guarantee  corpora-  loss  or  damage  from  the  failure  of 
tions  are  divided  into:  (1)  Title  persons  indebted  to  the  assured  to 
guarantee;  (2)  Securities  guarantee;  meet  their  liabilities.  Wolff's  Const, 
and  (3)  credit  guarantee  corpora-  &  Rev.  Laws  La.  1904,  p.  845. 
tions.  See  §  13  herein."  See  also  Mr.  Frost  divides  guarantee  insur- 
§  X.  herein.  ance     into     "fidelity,"     "commercial" 

In  Georgia,  fidelity  in.suranee  com-  and  ".judicial"  insurances,  and  dc- 
panies  insure  against  losses  caused  fines  each.  Frost  on  Guaranty  Ins. 
by  the  defalcation,  default,  neglect,  (2d  ed.)  sees.  1,  2.  Sec.  2  is  quoted 
or  dishonesty  of  a  trustee,  officer  of  as  to  classification,  and  definitions 
the  law,  officers  of  courts,  agents,  or  noted  in  Cowles  v.  United  States  Fi- 
olher  employees  and  such  other  per-  delity  &  Guaranty  Co.  32  AVash.  120, 
sons  as  may  be  required  to  give  98  Am.  St.  Rep.  838,  72  Pac.  1032, 
bonds,  or  other  obligations  as  indi-  (case  aff'd  37  "Wash.  695,  79  Pac. 
viduals  do  who  sign  as  sureties.     Ga.    1134). 

Code    (Civ.)    1911,  p.   665,  sec.  2550        ^Construed  and  insolvency  defined 
(see.  2141).  in  Strou.se  v.  American-Credit  Indcm. 

In  Louisiana  an  act  was  passed  in    Co.  91  Md.  244,  46  Atl.  328,  1063. 

106 


TP]1{MS  AND  DEFINITIONS  §  13 

l)orne  by  assured,  and  the  other  a  loss  in  excess  of  said  initial  sum, 
to  be  borne  by  the  indemnitor,  both  resulting  from  the  insolvency 
of  debtors  who  owe  the  indemnified; — as  where  policy  provides  for 
an  indemnity  not  exceeding  a  certain  sum  resulting  from  the  in- 
solvency of  debtors  over  and  above  a  net  loss  of  a  specitied  amount 
lirst  to  be  borne  by  assured.* 

A  guaranty  in>urancc  Wond  may  guarantee  or  secure  the  faith- 
ful performance  of  a  private  or  public  building  contract;  ^  or  guar- 
antee payment  of  all  claims  for  labor  or  material  on  a  construction 
contract;^  and  there  may  be  an  insurance  of  securities,  or  a  con- 
tract to  insure  the  payment  of  a  sum  of  money  deposited  with  a 
bank  if  the  bank  should  default  in  paying  the  sameJ 

I'olicies  of  life  insurance  and  .^hip  policies  are  contracts  for  secur- 
ing against  losses  to  be  incurred  under  circumstances  entirely  dif- 
ferent from  the  loss  contemplated  under  guaranty  policies.* 

§  13.  Definition  of  real  estate  and  title  insurance. — Title  guar- 
anty insurance  is  a  contract  whereby  one  agrees  for  a  consideration 

*  People  V.  Mercantile  Credit  &  v.  United  States  Credit-System  Co. 
Guarantee  Co.  166  N.  Y.  416,  419,  60  64  N.  J.  L.  34,  44  Atl.  96(). 
N.  E.  24,  rev'^^  .55  App.  Div.  594,  ^  A.  R.  Shorthiil  Co.  v.  x?:Ctna  In- 
meaning'  of  'Unsolvenci//'  see  Strouse  demnity  Co.  —  Iowa,  — ,  124  N.  W. 
V.  American  Credit-In'denuiitv  Co.  91  613;  Hornel  &  Co.  v.  American  Bond- 
Md.  244,  46  Atl.  328,  1063,"  29  Jns.  ins'  Co.  112  Minn.  288,  33  L.K.A. 
L.  J.  980.  See  also  Steinwender  v.  (N.S.)  513,  128  N.  W.  12,  40  Ins.  L. 
Philadelphia  Casualtv  ('o.  141  App.  J.  137;  First  National  Bank  v.  School 
Div.  432,  126  N.  Y."  Supp.  271,  40  District,  77  Neb.  570,  110  N.  W.  349 
Ins.  L.  J.  128.  (school  district)  ;  Illinois  Surety  Co. 

I'oliditij  of  insurance  against  in-  v.  Ilildebrand,  126  N.  Y.  Supn.  651 
solveiicji     or     credit     inaarance.       In    (municipal). 

Minnesota  the  business  of  insuring'  ^  Knennan  v.  United  States  Fideli- 
against  lo.sses  resulting'  from  the  in-  ly  (luaranty  Co.  159  Mich.  122,  123 
solvency  of  those  to  whom  goods  are    N.  ^\  .  799. 

sold  oil  credit  was  authorized  1)V  ''Dane  v.  Mortgage  Ins.  Corp. 
Laws  1881,  c.  123  (G.  S.  1894,  sees.  Law  Rep.  [1894]  1  Q.  B.  54.  Surety 
3331-3337,  inclusive)  entitled  "An  companies  have  legal  right  to  insure 
Act  to  Authorize  and  Regulate  with-  payment  of  bank  deposits.  Reyioi-t 
in  this  State  the  Business  of  Insur-  of  Attorney .  General  oi'  New  \oik 
ance  Other  than  Life,  Fire,  and  Mar-    (1893)    p.  266. 

ine,"  such  enactment  l)eing  broad  And  a  bond  may  guarantee-  that  a 
enough  to  authorize  any  kind  of  in-  person  against  whom  a  judgment  has 
sui-ance  that  is  not  against  good  mor-  l)eeii  rendered  will  perform  the  judg- 
als  or  piildic  policy.  Ilayne  v.  Met-  ment  of  the  court.  United  States 
ropolifan  Trust  Co.  67  'Minn.  245.  Fidelity  &  Guaranty  Co.  v.  Barrett, 
59  N.  W.  916.  See  also  Genl.  Stat.  140  Ky.  697,  131  S.  W.  /96,  what 
Minn.  1894,  sees.  333  et  se(|.  Credit  allegations  suHicient  to  show  breach 
insui'ance  unlawful  in  Massachusetts,    of  bond. 

Claflin   y.  United    States  credit   Svs-        « 'Powle  v.  National   Guardian  Ins. 
tern  Co.  165   Mass.  501,  52  Am.   St.    Co.  7  Jur.  (N.  S.)  618,  623. 
Rep.  528,  43  N.  E.  293;  Rosenbaum 

107 


§  13  JOYCE  ON  INSURANCE 

to  guarantee  or  protect  another's  title  to  real  estate,^  or  which  in- 
sures against  all  loss  or  damage,  not  in  excess  of  a  specified  sum, 
which  assured  may  sustain  by  reason  of  existing  defects  or  unmar- 
ketableness  of  title  to  a  described  estate,  mortgage,  or  interest,  or 
because  of  liens  and  encumbrances  changing  the  same,  as  of  the  date 
of  Ihe  policy,  with  certain  exceptions;  or  by  reason  of  defects  in  the 
title  of  a  mortgagor  in  the  mortgaged  estate,  or  mortgage  interest.^" 

9  See  Hogan,  In  re,  8  N.  Dak.  301,  v.  California  Title  Ins.  Co.  153  Cal. 
73  A.  S.  7.39,  45  L.R.A.  166,  78  N.  718,  96  Pae.  500  (from  all  loss  or 
W.  1051,  28  Ins.  L.  J.  520.  Mr.  Rich-  (Uunage  not  in  excess  of  a  certain 
ards  says:  "The  Title  Guarantee''  sum  which  assured  shall  sustain  by 
&  Trust  Co.  of  New  York  by  its  reason  of  defects  of  title  of  assured 
Ijoliey  obligates  the  insurer  in  sub-  to  the  described  estate  or  interest,  or 
stance  to  do  three  thing's  for  the  pro-  by  reason  of  liens  or  encumbrances 
tection  of  the  insured:  (1)  To  de-  affecting  the  same  on  the  date  of  the 
fend  suits  against  the  title  at  the  i>olicy  with  certain  express  excep- 
expense  of  the  insurer;  (2)  To  pay  lions);  Minnesota. — Place  v.  St. 
adverse  judgments  therein  rendered;  Paul  Title  Ins.  &  Trust  Co.  67  Minn. 
(3)  and,  if 'the  in.-=ured  contracts  to  126,  64  Am.  St.  Rep.  404,  69  N.  W. 
sell  or  if  he  negotiates  a  loan,  and  706  (to  indemnify  not  in  excess  of 
the  title  is  refused,  to  test  its  validity  a  certain  amount  against  all  loss  or 
in  court  at  the  exj^ense  of  the  insurer,  damage  sustained  by  rea'Jon  of  de- 
and,  if  defeated,  either  to  pay  dam-  iects  in  the  title  of  mortgagors  in 
ages  or  else  to  take  the  property  at  the  mortgaged  estate  with  certain 
the  contract  price  where  the  insured  specified  exceptions)  ;  New  Yorlc— 
has  contracted  to  sell  it  or  to  make  Trenton  Potteries  Co.  v.  Title  Guar- 
the  loan  where  he  has  negotiated  a  antee  &  Trust  Co.  176  N.  Y.  65,  68 
loan."  Richards  on  Ins.  (3rd  ed.)  N.  E.  132  (against  all  loss  or  dam- 
sec.  467,  p.  653;  Id.  (ed.  1892)  sec.  age  not  in  excess  of  a  stipulated 
10,  ]).  14.  amount    which    insured    may   sustain 

^°  United  States. — Equitable  Trust  l)y  reason  of  any  defect  in  the  title  of 

Co.  V.  ^tna  Indemnity  Co.    (U.   S.  the  described  premises,  or  by  reason 

C.    C.)    168   Fed.   433    (to   insure   ti-  of  nnnmrketability  of  the  title  of  in- 

tles  of  mortgagees  of  a  builder  and  sured,  or  by  reason  of  liens  and  en- 

nwner   and   of   purchasers   of  build-  cnmbrances  charging  the  same  as  of 

ings   to   be  erected   on    the   builder's  tlie  date  of  the  policy)  ;  Pennsi/Jra- 

land,  to  protect  tliem  from  the  own-  'nia. — Foehrenbach  v.  German-Ameri- 

or's  defaults  in  building  operations,  can   Title  &  Trust  Co.  217  Pa.  331, 

and  fi'om  liens,  the  indemnity  com-  118  Am.  St.  Rep.  9,  12  L.R.A.(N.S.) 

pany  being  secured  by  bond  executed  465,  66  Atl.  561    (to  indenniity  and 

by  the  owner  to  a   trust  company)  ;  insure  against  all  loss  or  damage  not 

Banes  v.  New  Jersey   Title  Guaran-  exceeding  a  specified  sum  which  the 

tee  &  Trust  Co.  142  Fed.  957,  74  C.  insured    shall    sustain    by    reason    of 

C.  A.  127    (a   policy  or  contract   of  the  defects  of  the  title  of  insured  to 

guarantee    against    loss    or    damage  the  estate  mortgage  and  interest  de- 

wliich  assured  may  sustain  on  account  scribed,  or  because  of  liens  or  incum- 

of  existing  defect.s  of  title  to  a  mort-  brances    charging    the    .same    at    the 

gage  interest,  or  because  of  liens  and  date  of  the  policy)  :  Wheeler  v.  Eqni- 

encumbrances  alfecting  his  interest  at  table  Trust  Co.  206  Pa.  428,  55  Atl. 

the  date  of  guarantee  and  against  all  1065      (to     indemnify     and     insure 

loss  or  damage  not  exceeding  a  cer-  against  all  loss  or  damage  not  exceed- 

lain     amount)  ;     California. — Bothin  ing  a  specified  sura  arising  from  de- 

108 


TERMS  AND  DEFINITIONS  §  13 

The  sole  object  of  title  insurance  is  to  cover  possibilities  of  loss 
through  defects  that- may  cloud  or  invalidate  titles.  It  is  an  as- 
sumption for  a  premium,  of  risk  based  on  a  careful  examination  of 
the  muniments  of  title  and  the  exercise  of  jiKl2,ment  by  skilled  con- 
veyancers. It  means  the  opinion  of  the  company  issuing  it,  as  to  the 
validity  of  the  title,  and  an  agreement  to  indemnify  or  make  the 
title  good  in  case  loss  should  result  in  consequence  thereof  to  as- 
sured.^^  The  risks  of  title  insurance  end  where  those  of  other  kinds 
begin.  The  purpose  or  intent  of  title  insurance  is  to  protect  or  save 
the  insured  harmless  from  loss  through  defects,  liens,  or  encumbran- 
ces, ett'.,  that  may  burden  his  title  when  he  takes  it,  and  it  is  not 
designed  as  a  protocfiou  to  him  against  matters  that  may  arise  dur- 
ing a  stated  period  after  the  policy  is  issued.  As  a  general  rule, 
therefore,  it  would  follow  that  when  insured  gets  a  good  title,  the 

covenant  of  the  insurer  has  been  fultilled  and  there  exists  no  lia- 
bility. ^2 

Such  a  i)olicy  guarantees  only  the  record  title  where  it  excepts 
the  tenure  of  present  occupantsS  and  liens  and  encumbrances,  judi- 
cial proceedings,  etc.,  not  shown  by  any  public  record. ^^  Under  the 
New  York  statute,  title  guaranty  corporation.s  iriay  be  formed  for 
the  purpose  (1)  of  examining  title  to  real  property  and  chattels 
real,  to  procure  and  furnish  information  in  relation  thereto,  to  make 
and  guarantee  the  correctness  of  searches  for  all  instruments,  liens 
or  charges  affecting  the  same,  guarantee  or  insure  the  payment  of 
l)onds  and  mortgages,  invest  in,  purchase,  and  sell,  with  such  guar- 
antee or  with  guarantee  only  against  loss  by  reason  of  defective  title 
or  encumbrances,  such  bonds  and  mortgages  as  are  lawful  invest- 

feets    or    uiimarketableness    of    title,  of    liens,    a    l)uil(ling    being    then    in 

snbject  insured  was   a  mortgage  on  iiroeess  of  erection  on  the  mortgaged 

ground   rents  issuing   out   of   certain  premises  it  being  so  set  fortli  in  the 

h)ts  and  buildings  said  mortgage  was  policy). 

taken     as     collateral     security     also  ^^  Foehrenbach    v.    Gernian-Ameri- 

against    loss    from    failure    to    com-  can    Titk  &   Trust   Co.  217  Pa,  331, 

plete  certain   buildings  according  to  336,  33/,  118  Am.   St.  Rep.  OKi,  12 

plans  and  specitications  mentioned);  L.R.A.(N.S,)    4G5,   GO   Atl.   561,  per 

"Wheeler  v.  Real  Estate  Title  Ins.  &  Potter,  J.,  Id.  336,  337. 

Trust  Co.  160  Pa.  408,  28  Atl.  849  12  Trenton    Potteries    Co.    v.    Titl_c 

(construction  of  policy  upon  a  mort-  Guarantee  &  Trust  Co.  176  N.  Y.  65, 

gage.     The  covenant  in  it  was  to  in-  72,   68  N.   E.   132,   per  Werner.   J.; 

deranify  the  holder  again.st  "all  loss  Foehrenbach     v.      German-Anierican 

.     .     .'  by  reason  ot  defects  or  un-  Title  &  Trust  Co.  217  Pa.  331,  336, 

marketableness  of  the  title  to  the  es-  :!37,  118  Am.  St.  Rep.  016,  12  L.R.A. 

tate  or  interest  insured     ...     or  (N.S.)   465,  66  Atl,  561,  per  Potter, 

because    of    liens    or    encumbrances  J. 

charging  the  same  at  tlie  date  of  this  ^^  Bothin  v,  California  Title  Ins,  & 

policv,"  with  one  cla,'^s  excepted:  un-  Trust  Co.  153  Cal.  718,  96  Pac.  500. 
marketability  by  reason  of  possibility 

109 


§  13a  JOYCE  OX  INSURANCE 

nieiits  for  insurance  companies  under  tlie  act,  and  guarantee  and 
insure  the  owners  of  real  property  and  chattels  real,  and  others  in- 
terested therein,  against  the  loss  by  reason  of  defective  titles  thereto 
and  other  encunibi-ance  thereon.  8uch  corporation  to  be  known  as  a 
title  "rju-firantee''^^''  corpora' Ion.     (la)    To  guarantee  the  validity 
and  legality  of  bonds  or  other  evidences  of  indebtedness  issued  by 
any  state  or  by  any  city,  county,  town,  village,  school  district,  mun- 
icipality, or  other  civil  division  of  any  state,  or  by  any  private  or 
public  corporation ;  to  act  as  registrar  or  transfer  agent,  but  not  iis- 
cal,  of  any  such  corporation,  and  to  transfer  and  countersign  its 
certificates  of  stock,  bonds,  or  other  evidences  of  indebtedne.ss.   Such 
corporation  to  be  known  as  a  securities  gmiranty  corporation.     (2) 
To  guarantee  and  indemnify  merchants,  trader.s,  and  those  engaged 
in  business  and  giving  credit,  from  loss  and  damage  by  reason  of 
giving  and  extending  credit  to  their  customers  and  those  dealing 
with  them.    Such  corporation  to  be  known  a.s  a  credit  guaranti/  cor- 
poration.^*   As  to  the  nature  of  this  contract  it  is  said  in  Minnesota 
Title  Insurance  and  Trust  Company  v.  Drexel.^^  ^\^^^^  ^'tj^g  insurer 
is  not  a  surety.^^    In  that  case  the  defendant  company  for  an  ade- 
quate consideration  agreed  to  'indemnify,  keep  harmless,  and  in- 
sure, Drexel.  the  mortgagee,  'from  all  loss  or  damage  not  exceeding 
fifty-five  thousand  doUai-s.'  the  amount  of  the  mortgage  debt,  which 
he  or  his  assigns  might  sustain  by  reason  of  defects  in  the  title  to 
the  mortgaged  premises,  or  by  rea.«on  of  liens  or  encumbrances 
thereon  existing  at  the  date  of  the  policy.     The  contract  is  plain 
and  explicit  on  this  point.    In  a  word,  it  is  a  guaranty  that  the  mort- 
gagee should  not  suft'er  any  loss  or  damage  by  reason  of  defects  in 
the  title  to  the  property,  or  liens  or  encumbrances  thereon  existing 
at  the  date  of  the  policy,  under  this  guaranty,  if  the  mortgaged 
property  with  a  clear  title  and  free  from  encumbrances  was  worth 
the  amount  of  the  mortgage  debt,  the  mortgagee  could  confidently 
rely  upon  the  sufficiency  of  his  security."' 

§  13a.  Definition  of  rent  insurance;  rent  guaranty  insurance. — 
Rent  insurance  is  that  class  of  underwriting  which  oftVrs  indemnity 
or  a  guarantee  to  the  les.sor,  against  loss  of  rents  resulting  from  fire 
rendering  the  property  untenantable;  or  against  loss  to  a  tenant, 
where  his  lease  does  not  exempt  him  therefrom,  by  reason  of  an 
obligation  to  pay  rent  while  the  premises,  as  the  result  of  fire,  re- 

12*  So  in  oripnal.  ^^  Laws   applicable   to   sureties   do 

"  Law.s  N.  Y.  1911,  c.  525,  p.  1198,  not    apply   to    guaranty   and   .'lurety 

amd'o;  T^ws  1909.  e.  33,  see.  170,  as  eorapanies      to      indemnify     against 

am'd  by   Laws  1909.  c.  20'2.     See  2  los.ses     by     bad    debts:     Tebbets    v. 

Birdseve's  Cum.  &  Gilb.  Consol.  Laws  :\[ercantile   Credit  Guarantee  Co.  7.3 

N.  Y.  Annot.  pp.  2635  et  seq.;  7  Id.  Fed.  95.  19  C.  C.  A.  281,  38  U.  S. 

(Supp.  1910-13)    p.  1386.  App.  431.     This  question,  however,  is 

15  70  Fed.  194,  198,  17  C.  C.  A.  56,  considered  elsewhere  herein. 

iKT  Caldwell.  J. 

110 


TERMS  AND  DEFINITIONS 


13b 


main  untenantable ;  "  or  to  vendors,  against  loss  of  rentals  in  case 
the  vendee  fails  to  make  certain  improvements  on  realty  and  com- 
plete certain  buildings  within  a  specified  time."  Insurance  against 
loss  of  rentals  is  in  the  nature  of  or  analogous  to  insurance  on  prof- 
its/^ and  also  to  a  valued  policy.^" 

§  13b.  Definition  of  strike  insurance. — Strike  insurance  may  be 
defined  as  a  contract  whereby-,  for  a  consideration,  the  insurer  agrees 
to  indemnify  and  guarantee  firms^  corporations  or  other  persons 
carrying  on  manufacturing,  against  damage  or  loss,  directly  or  in- 
directly, resulting  from  any  interference  with,  or  suspension  or  in- 
terruption of  l)usincss  or  the  use  and  operation,  wholly  or  partly  of 
a  manufacturing  establishment  by  reason  of  employees  strike.^ 


"See     Whitney     P:state     Co.     v. 
Northern     Assurance    Co.    155    Cal. 
521,  523,  23  L.R.A.(N.S.)   123,  and 
note,  101  Pac.  511.     Examine  also: 
Amusement  Syndicate  Co.    v.    Prus- 
sian Nat.  Ins.'  Co.   (1911)    85    Kan. 
97,  116  Pac.  620,  40  Ins.  L.  J.  1882 
(case    of    insurance    measuring    lia- 
bility by  loss  of  rents  while  building- 
being  rebuilt  or  repaired,  unless  in- 
sured elected  not  to  rebuild  or  repair, 
when    time    necessary    therefor    de- 
termined amount  of  loss;  also  ques- 
tion involved  as  to  effect  of  valued 
policy    law    and  insurance  on  rents 
being  insurance  on  ''real  property")  ; 
Palatine  Ins.  Co.  v.  O'Brien    (1908) 
109  Md.  100,  16  L.R.A.(N.S.)   1055 
and  note,  71  Atl.  775,  38  Ins.  L.  J. 
482,  s.  c.    (1907)    107  Md.    341,    16 
L.R.A.(N.S.)    1055,   68   Atl.  484,  36 
Ins.  L.   J.   616     (case    of    insurance 
against  loss  of  rent  by  fire;  loss  to 
be  computed  from  date  of  flre  and 
to    cease    upon    premises    becoming 
tenantable,    with    agreement    to    re- 
build or  repair  within   such  a  sliort 
time  as  the  circumstances  permitted, 
but    rents    were       not  re-established 
owine  to  delay  by    civil    authority)  ; 
Helkr  v.  Roval   Ins.  Co.  (1896)   177 
Pa.  262,  34  L.R.A.  600,  35  Atl.  726 
(insurance    by    tenant    for    loss    by 
reason    of    payment    of    rent    while 
premises    untenantable.     Same    case, 
same  insurance   (1892)   151  Pa.  101, 
25  Atl.  83;    (1890)    133  Pa.  152,  7 
L.R.A.   411,   19   Atl.    349;    Carey   v. 
London     Provincial     Fire    Ins.    Co. 
(1884)  33  Hun  (40  N.  Y.  Supr.  Ct.) 


315  (insurance  upon  lease-hold  inter- 
est; action  for  profits  on  subleases; 
loss  by  fire)  ;  Cushman  v.  North- 
western Ins.  Co.  (1852)  M  Me.  487 
(insurance  by  lessee  of  interest  ac- 
quired by  lease). 

Insurance  against  loss  of  rents 
authorized:  Iowa  acts  1911,  p.  12, 
c.  18,  sec.  4,  amd'g  sec.  1709,  par.  1, 
of  Supp.  1907. 

This  contract  classed  as  rent  guar- 
antee insurance.  See  5  Universal 
Cyc.  ''Guarantee  companies,"  p. 
327,  Article  by  Clarence  H.  Kelsey. 
See  also  Francis'  Annals  Life  Assur. 
(1853)  p.  288. 

^^  Young  V.  American  Bonding  Co. 
228  Pa.  373,  77  Atl.  623;  German- 
American  Title  &  Trust  Co.  v.  Citi- 
zens Trust  &  Suretv  Co.  (1899)  190 
Pa.  247,  42  Atl.  682  (a  ease  of  insur- 
ance against  actual  loss  which  miglit 
result  to  one  as  purchaser  of  gi-ound 
rents  upon  unimproved  land,  by 
reason  of  noncompleticm  of  buildings 
to  be  erected.  No  policy  was  issued, 
l)ut  settlement  certificate  was  treated 
by  parties  as  complete  agreement). 

■  19  See  note  38  Ins.  L.  J,  491,  and 
sections  on  profits  under  chapters 
herein  covering  Description  of  Prop- 
ertv  and  Risks  and  Losses. 

20  Whitnev  Estate  Co.  v.  Northern 
Assurance  Co.  155  Cal.  521,  23 
L.R.A.  (N.S.)  123,  101  Pac.  511, 
under  definition  in  Cal.  Civ.  Code, 
see.  2596. 

1  Buffalo  Forge  Co.  v.  Mutual  Se- 
curitv  Co.  83  Conn.  393,  76  Atl.  995, 
39  Ins.  L.  J.  1347. 


Ill 


TITLE  III. 

CONTRACT  AND  POLICY. 


CHAPTER  11. 
NATURE  OF  THE  CONTRACT. 

§  16.     Risk  is  an  esseiitial  element. 

§  17.     Division  and  distribution  of  loss  are  essential. 

§  18.     Insurance  is  an  aleatory  contract. 

§  19.     Insurance  is  a  voluntary  contract. 

g  IHa.  Standaid  tire  policy  a  voluntary  contract. 

§  20.     Insurance  is  an  executory  contract. 

§  21.     The  contract  is  synalla2:matic. 

§  22.     Insurance  is  a  conditional  contract. 

§  23.     Insin-ance  is  a  personal  contract. 

§  24.     Insurance  other  than  that  of  life  and'  accident  is  a  contract  of  in- 
demnity. 

§  24a.  Standard  Are  policy  is  contract  of  indemnity:  collateral  contracts: 
mortgasres. 

§  25.     Indemnity — stipulation  as  to  value  in  policy. 

§  26.     Life  insurance  not  a  contract  of  indemnity. 

§  27.     Accident  insurance  is  not  a  contract  of  indemnity  in  all  cases. 

§  27a.  That  emploj-ers'  liability  insurance  is  contract  of  indemnity. 

§  27b.  Same  subject:  whether  contract  one  of  indemnity  or  liability  or  both. 

§  27c.  Injui-y  to  property  or  to  employees  and  others:  to  what  extent  con- 
tract i.s  one  of  indemnity. 

§  27d.  Englisli  w(n'kmen's  compensation  act  grants  complete  indemnity. 

§  27e.  Insurance  of  carriers  against  losses  from  injuries  to  passengers  is 
contract  of  indemnity. 

§  27f.  Insurance  against  burglary  and  loss  or  damage  to  property  are  con- 
tracts of  indemnity. 

§  27g.  Insurance  against  accidents,  death,  and  theft  of  animals  is  contract 
of  indenmity. 

§  27h.  Fidelity  guaranty  insurance  is  contract  of  indemnity. 

§  27i.  Title  guaranty  insurance  is  contract   of  indemnity. 

112 


i 


NATURE  OF  THE  CONTRACT  §  16 

§  27j.  Rent  or  rent  guaranty  insurance  is  contract  of  indemnity. 

§  27k.  Insurance  on  "use  and  occupancy"  of  an  elevator:  when  not  a  con- 
tract of  indemnity. 

§  271.  Credit  guaranty  insurance  is  contract  of  indemnity. 

§  27m.  Whether  contract  to  defend  physician  against  suits  for  malpractice 
is  one  of  insurance  and  indemnity. 

§  27n.  Employees'  benetit  and  reliftf  association :  contract  not  one  of  in- 
demnity. 

§  28.     Reinsurance  is  a  contract  of  indemnity. 

§  29.     Other  incidents  of  the  doctrine  of  indemnity. 

§  16.  Risk  is  an  essential  element. — There  must  be  a  rislc,  since 
that  is  an  essential  element.  It  is  of  the  very  essence  of  insurance 
and  forms  the  principal  foundation  of  the  contract.  In  other  words, 
the  insurer  takes  upon  himself  the  peril  which  the  property  or  in- 
terest of  others  is  liable  to  encounter.  The  very  life  of  the  contract 
involves  the  presumption  that  the  thing  is  or  will  be  exposed  to 
some  danger.  But  the  risk  should  be  of  a  real  loss  which  neither 
the  insurer  nor  insured  has  the  power  to  avert  or  hasten.^  If  the 
term  ''risk"  is  used  in  a  contract  of  insurance  or  reinsurance,  the 
court  must  in  case  of  doubt  determine  what  the  parties  intended, 
having  in  view  the  whole  contract,  and  the  sense  in  which  the  word 
is  used  and  the  precise  contract  relations  sustained  by  the  parties 
to  each  other  is  important.  The  word,  as  ordinarily  used,  describes 
the  liabilit}'  a^ssumed  as  specified  on  the  face  of  the  policy.^  This 
risk  or  cause  of  loss  against  which  it  is  intended  to  indemnify  the 
assured*  ma}',  as  a  general  rule,  be  any  uncertain  event  which  may 

^  See    Emerigon     on    Ins.     (Mere-  '  Continentnl  Tns.  Co.  v.  ^tna  Ins. 

dith's  ed.  1850)   c.  i.  pp.  4,  5;  Hop-  Co.  138  N.  Y.  l(i,  20,  33  N.  E.  724, 

kins'  Marine  Ins.  (ed.  1867)   53,  55;  i)er  O'Brien,  J.,  reversing,  as  to  the- 

13    Ency.   Britannica,    101;     Nye    v.  construction  of  the  word  "risk"  un- 

Grand  Lodge   A.    O.   U.    W.   9   Ind.  der  the  facts  of  the  case,  17  N.  Y. 

App.  131,  140,  141,  36  N.   E.  429;  Supp.  106.     See  also  Pitcher  v.  Hen- 

l)er  Latz,  J.     Hart  v.  Delaware  Ins.  nessey,  48  N.  Y.  415,  where  "risks  of 

Co.  2  Wash.  (U.  S.  C.  C.)  346,  350,  navigation"  were  hold   broader  than 

I'ed.  Cas.  No.  0150;  Stern  v.  Rosen-  "perils  of  navigation."     But  see  defi- 

Uial,  128  N.  Y.  Sup)).  711,  713,  71  nition   of  the  word   "peril"  in   Mar- 

Misc.  422;  Jones  &  Abbott  v.  Insui--  sliall    on   Ins.    (ed.   1810)    2,   note   a, 

ance  Co.  of  North  America,  90  Tenn.  wliich  is:     "In  insurance    the    word 

()04,  25  Am.  St.  Rep.  706,  18  S.  W.  'peril'  generally  signifies  the  liappen- 

260.  ing  of  the  event    or    misfortune    of 

As  to  meaning  of  "sum  at  risk"  in  which     danger     was     apprehended." 

marine  policy,  see   Standard  IMarine  "Perils    of  the    Seas,"    see   §§    2797- 

1ns.   Co.   V,   Nome   Beacli   Lio'literage  27(10  lierein. 

&  Transp.  Co.  133  Fed.  636,  67  C.  C.  *1   Phillips  on   Ins.    (3d  ed.)   sec. 

A.  602,  1  L.R.A.(N.S.)    1095.  905. 
Joyce  Ins.  Vol.  I. — S.               113 


§  17  JOYCE  ON  INSURANCE 

in  anywise  be  of  di.'^advantagc  to  the  party  insured.*  provided  al- 
ways that  said  party  has  an  insurable  interest  which  is  exposed 
thereto,  or  which  may  suffer  damage  or  loss  therefrom,  and  pro- 
vided further  that  the  risk  is  a  legal  one  not  in  contravention  of  the 
provisions  or  obvious  policy  of  the  law,  nor  an  infringement  upon 
the  rights  of  persons  not  parties  to  the  contract,  and  tiuit  it  doe,«  not 
arise  from  the  fraud  of  the  insured.^  These  points  will,  however, 
be  fully  considered  under  insurable  interest,  void  and  illegal  insur- 
ances, wager  policies,  description  of  subject  matter  and  property, 
risk  and  loss.  etc. 

§  17.  Division  and  distribution  of  loss  are  essential. — Another 
most  important  principle  miderlying  the  contract  of  insurance  is 
that  which  minimizes  the  loss  to  the  individual  by  a  division  and 
distribution  of  liability  among  a  large  number  of  persons  who  are 
subjected  to  like  risks,  and  it  folloAvs  as  a  neces.<ary  corollary,  that 
the  peril  ought  to  happen  only  to  a  comparatively  small  number. 
This  principle  of  division  and  distribution  of  loss  is  fully  recognized 
by  the  te.xt-writers  and  courts  as  fundamental.  Thus,  Maylnes 
writes:  "This  most  laudable  custom  of  assurances  whereby  the  dan- 
ger and  adventure  of  goods  is  divided,  repaired,  and  borne  by  many 
])ersons  consenting  and  agreed  upon  between  them  what  part  everie 
man  will  be  contented  to  assure,  make  goode,  and  pay  if  any  lo.ss 
or  casualtie  should  happen  to  the  goods  adventured,  or  to  l:>e  adven- 
tured, at  the  seas  as  also  by  land,  to  the  end  that  merchants  might 
enlarge  and  augment  their  trafficke  and  commerce,  and  not  ad- 
venture all  in  Bottome  to  their  loss  and  overthrow,  but  that  the  same 
might  be  repaired  and  answered  for  by  many."  '^  Substantially  the 
same  language  was  used  in  1601,  in  the  preamble  to  the  st<atute  43 
Elizabeth,  chapter  12,  and  also  by  Lord  Bacon  in  his  Abridgment.' 
So  Willes,  Lord  Chief  Justice,  in  Pole  v.  Fitzgerald,'  says:  Insur- 
ances 'Svere  at  first  invented  for  the  benefit  of  tiade.  that  if  a  mer- 
chant miscarried  in  one  voyage  he  might  not  be  ruined  forever,  but 
by  giving  premiums  to  other  per.-^ons  to  insure  either  his  i^hip  or  his 
goods,  the  loss,  if  it  happened,  might  be  divided  amongst  them,  and 
so  the  merchant  might  be  enabled  to  try  his  fortune  in  another  voy- 
age." Again,  the  court,  in  Kew  York  Life  Insurance  Company  v. 
Statham,^"  declares  that  "the  business  of  insurance  is  founded  on 
the  law  of  average,  that  of  life  insurance  eminently  so.    .    .    .    By 

SLucena  v.  Craufovd,  5  Bos.  &  P.        'Vol.  ?>  (4th  ed.)  598,  ."309. 
.^ni,  per  Lawrence,  J.  '  Willes,  641.  64-5. 

«See  1  Phillip.s  on  Ins.  (3d  ed.)  i°  93  U.  S.  24,  31,  32,  23  L.  ed 
905  et  seq.  '  789. 

'Maylncs'     Lex    Mercatoria     (ed. 
1C22)  146. 

114 


NATURE  OF  THE  CONTRACT  §  18 

."Spreading;  their  risks  over  a  large  niiinljer  of  oases  the  companies 
calculate  on  this  average  with  reasonable  certainly  and  safety,"  And 
tlie  court  also  says:  "The  insured  parties  are  associates  in  a  great 
scheme.  This  associated  relation  exists  whether  the  company  he  a 
mutual  one  or  not.  Each  is  interested  in  the  engagements  of  all, 
f)ut  of  (he  coexistence  of  many  risks  arises  the  law  of  average  which 
underlies  tlie  whole  business.  An  essential  feature  of  this  scheme 
is  the  mathematical  calculations  referred  to  on  which  tlio  ])ieiiiiums 
and  amounts  assured  are  based."  "  It  is  also  said  (hat:  '"The  con- 
ditions necessary  to  the  business  of  insurance  are:  (a)  The  exist- 
ence of  a  known  danger  to  which  all  property  owners  are  exposed, 
and  against  which  they  cannot  efl'ectually  protect  themselves;  (b) 
the  strong  probability  that  loss  from  this  danger  will  fall  upon  but 
few^  of  these  who  are  exposed  to  it;  (c)  the  certainty  that  when  the 
loss  happens  it  will  fall  so  heavily  on  those  to  whom  it  comes  as  to 
make  pecuniary  indemnity  a  matter  of  great  importance;  (d)  some 
knowledge  of  the  relative  value  of  the  property  annually  destroyed 
by  fire  to  serve  as  a  basis  for  calculating  the  risk  assumed  b}'  the 
insurer,  and  the  amount  of  premium  required  to  enable  the  insurer 
to  meet  losses  and  expenses  and  secure  a  fair  return  for  the  capital 
employed."  ^^ 

§  18.  Insurance  is  an  aleatory  contract. — The  derivation  of  this 
word  embodies  the  idea  of  chance  or  uncertainty,  and  the  contract 
is  aleatory  in  the  'sense  that  it  is  dependent  upon  some  contingent 
event:  That  the  obligation  of  the  insurer  is  subordinated  to  certain 
perils.  As  we  have  already  stated,^'  risk  is  an  essential  element  of 
insurance,  and  neither  the  assurer  nor  insured  can  know  whether 
the  event  will  or  will  not  h;ippen,  nor  can  either  control  the  event 
to  avert  or  hasten  it.  Therefore,  since  insurance  depends  upon  some 
contingent  event  again>t  the  occurrence  of  which  the  contract  is 
intended  to  provide,  although  it  may  never  occur,  it  is  an  aleatory 
contract.  It  must  he  inidei'stood,  however,  that  true  insurance  is 
always  concerned  with  real  value;  it  is  not  merely  speculative,  as  in 
case  of  Avager  policies,  but  is  intended  to  protect  actual  interests 
from  possible  losses.  It  is  based  u|)on  certain  facts  and  data  re- 
quired to  be  made  known  as  far  as  a.scertainal)le.  It  does  not  pro- 
ceed upon  concealed  facts,  since  the  chance  or  probability  of  the 
uncertain  event  hai)poning  or  of  the  ])eril  must  he  estimated  before- 
hand with  an  approximate  degree  of  certainty.^* 

*^  New  York  Life  Ins  Co.  v.  Stat-  ^*  See    Emerigon    on    Ins.    (Mere- 

liam.  OiVU.  S.  :U,  23  L.  ed.  TSfl.  (lilh"s  ed.  1850i  e.  i.  see.  3,  pp.  11, 

^^Commonwealth       v.       Viooman,  13;  1  May  on  Ins.    (3d  ed.)    sec.  5; 

164  Pa.  300,  318,  44   Am.   St.   Rep.  Ilopkin.s'  Marine  Ins.  (ed.  18G7)  53, 

(in3,  2.")  L.K.A.  2.')0.  30  All.  217.  58,  59,  290. 

^'  §  16  herein.  ''Contrac  t.s    of    life    insurance  fall 

115 


§§  19-21 


JOYCE  ON  INSURANCE 


§  19.  Insurance  is  a  voluntary  contract. — Insurance  is  a  volun- 
tarx'  contract,  and  insurer.s  have  the  right  to  inii)o;;e  conditions 
therein.  If  the  assured  objects  to  them,  he  is  not-bound  to  close 
the  contract,  but  if  he  voluntarily  enters  therein,  he  wih  be  bound 
thereby.^*  This  of  course  relates  to  valid  conditions,  and  those 
not  jirohibiled  ])y  positive  law  nor  against  ])nbUc  policy. 

§  19a.  Standard  fire  policy  a  voluntary  contract. — Although 
the  form  of  a  standard  policy  is  prescribed  b}^  statute,  nevertheless 
its  force  and  efficacy  is  derived  from  the  consent  of  the  parties, 
and  upon  acceptance  by  them  it  is  to  be  treated  as  a  voluntary  con- 
tract, and  not  as  a  legislative  enactment. ^^ 

§  20.  Insurance  is  an  executory  contract. — The  contract  of  insur- 
ance is  an  executor}^  contract  in  the  sense  that  it  is  executed  by  the 
payment  of  the  sum  insured  on  a  loss.^'''  And  a  benetit  society's 
contract  entered  into  with  a  member  is  executory. ^^  It  is  said  in  a 
New  York  case  that  ''the  contract  (life)  was  not  as  to  all  its  stip- 
ulations and- as  to  botli  ])arties  executory.  It  was  executed  by  the 
plaintiff  by  the  payment  of  the  amuial  premiums  from  1849  to  and 
including  1801,  while  it  was  wholly  executory  on  the  part  of  de- 
fendant, its  undertaking  being  to  pay  the  amount  specified  upon  the 
death  of  the  insured."  ^^  A  parol  contract  of  insurance  must,  it  is 
held,  take  effect  in  praesenti,  and  must  not  be  executory.  It  is  dis- 
tinguished in  this  respect  from  a  i)arol  agreement  to  issue  a  jjolicy.^" 

§  21.  The  contract  is  synallagmatic. — Inasmuch  the  contract  of 
insurance  is  a  nuitual  agreement  imposing  certain  reciprocal  ob- 
ligations upon  the  insurer  and  insured,  it  may  be  said  to  be  synal- 
lagmatic whether  the  subject  matter  be  of  a  marine  character  or  a 


within    the    ciass    of    aleatory    con-  the  legislatnre  intended  by  preserib- 

traets.''     17  Karl  of  llalsbnry'.^  Laws  ing  the  form  of  contract,    and    [)ro- 

of  England,  "Insurance,"  p.  .')14.  liibiting  any   other,  to  give  it  effect 

1^  Keim  v.  ilunie  Mut.  Fire  *.^'  'SI.  in  depriving  a  party  of  rights,  which, 

Ins.  Co.  42  ^lo.  38,  43,  97  Am.  Dec.  as  a  contract,  it  would  not  have.'  " 

201.  1''  IMutual  Life  Ins.  Co.  v.  Wager, 

i^Dunton  v.  Westchester  Fire  Ins.  27  Barb.  (N.  Y.)  354,  3(57.     See  New 

Co.   104  :\le.   372,    20    L.R.A.(N.S.)  York  Life  Ins.  Co.  v.  Statham,  93  U. 

1058,  71  Atl.  1037,  38  Ins.  L.  J.  600.  S.  24,  23  L.  ed.  789. 

Policy    in   standard   form   prescril)ed  ^*  Union      Fraternal      League      v, 

1)V  Me.  Kev.  Stat.  c.  49,  sec.  4,  par.  Walton,  109  Ga.  1,  77  Am.  St.  Rep. 

7'.     The  Court,    per    Whitehouse,  J.,  350,  44  L.K.A.  424,  34  S.  E.  317. 

savs:     "As  stated    bv    the    court    in  ^^  Cohen  v.  New  York  Mutual  Life 

Reed    V.    Washington    Ins.    Co.    138  Ins.  Co.  50  N.  Y.  (510,  10  Am.  Rep. 


Mass.  572,  Avith  reference  to  the 
standard  policy  then  prescribed  by 
their  statute:  'It  is  tiieir  contract. 
As  such  it  does  not  deprive  the  plain- 
tiff of  his  action  and  his  trial  by 
juiy.     It  is  not  to  be  presumed  that 


IIG 


522,  per  Allen,  J. 

20  Hartford  Fire  Ins.  Co.  v.  Whit- 
man, 75  Ohio  St.  312,  9  Am.  &  Eng. 
Ann.  Cas.  218,  79  N.  E.  459. 

On  validity  of  oral  contract  of  in- 
surance, see  note  in  22  L.R.A.  768. 


II 


NATURE  OF  THE  CONTRACT  §  22 

building  or  the  life  or  health  of  a  person,  or  any  other  insurable 
interest.  'Tothier  says  that  'the  contract  of  insurance  is  synal- 
lagmatic, for  it  produces  reciprocal  obligations.  The  insurer  enters 
into  an  obligation  to  the  aSvSurcd  to  guarantee  and  indemnify  him 
against  the  perils  of  the  sea,  and  the  assured  binds  himself  in  turn 
to  the  insurer  to  pay  him  the  premium  agreed  upon.'  "^ 

§  22.  Insurance  is  a  conditional  contract. — Insurance  is  a  con- 
ditional contract  in  the  sense  that  the  contract  may  never  attach 
even  though  the  terms  be  agreed  upon,  as  where  the  payment  of 
the  premium  is  a  condition  precedent  or  where  some  act  is  required 
to  be  performed  by  the  assured  in  relation  to  the  risk  before  the  con- 
tract is  completed.  It  is  also  conditional  in  the  sense  that  the  in- 
surer is  not  obligated  to  pay  unless  the  loss  arises  from  the  specified 
perils  or  Avhere  no  risk  attaches  and  no  premium  is  due.^  If  the 
contract  stipulates  that  in  certain  contingencies  it  shall  be  void  and 
insures  "against  all  direct  loss  or  damage  by  fire  except  as  herein- 
after provided,"  it  is  a  conditional  contract.  It  is  also  conditional 
when  it  insures  against  loss  to  property  ''while  located  and  con- 
tained as  described  herein  and  not  elsewhere."  ^  The  court  said  in 
this  case:  "(a)  The  contract  is  declared  upon  as  absolute  and  un- 
conditional; it  is  alleged  that  by  it  the  defendant  did  insure  the 
plaintiff  against  all  direct  loas  or  damage  by  fire  upon  or  to  the  prop- 
erty, etc.  The  contract  in  proof  insures  'against  all  direct  loss  or 
damage  by  fire  except  as  hereinafter  provided,'  and  there  are  subse- 
quent stipulations  which  provide  that  in  certain  contingencies  the 
policy  shall  be  void,  such  as  loss  caused  by  riot,  etc.  By  the  very 
terms  of  the  contract  it  is  conditional ;  it  insures  the  plaintiff  only  in 
case  the  loss  does  not  occur  from  the  excepted  causes.  A  contract  to 
insure  without  limitation  is  not  a  contract  to  insure  only  in  certain 
cases,  (b)  In  another  respect,  the  contract  in  proof  is  a  conditional 
or  qualified  one.  The  declaration  is  upon  a  contract  to  insure  the 
tinshop  building  and  its  contents.  The  company  would  be  liable 
if  the  property  burned,  situated  as  described,  when  the  policy  was 
issued,  and  it  might  be  liable  in  case  of  loss  if  the  building  was  lo- 
cated elsewhere  and  the  personal  property  contained  in  some  other 
building.*     The  contract  in  proof  insured  the  property  'while  lo- 

^Emeriq'on     on     Ins.     (Meredith's  v.  Snow,  3  Burr.  1237.     See  Hart  v. 

ed.  1850)  ^c.  i.  see.  2,  pp.  5,  6.  Delaware   Tns.   Co.   2  Wash.    (U.   S. 

2Enieri?on     on     Ins.     (MenMlitli's  C.  C.)  346,  350,  Fed.  Cas.  No.  6150; 

ed.  1850)   c.  i.  sec.  3,  p.  11;  1  Mav  Jones  &  Abbott  v.  Insurance  Co.  of 

on  Ins.    (3d  ed.)    see.   4;   McKee  v.  North  America,  00  Tenn.  604,  25  Am. 

Metropolitan  Life  Ins.   Co.   25  Hun  St.  Rep.  706,  18  S.  AV.  260. 

(N.  Y.)  583,  584;  Tyrie  v.  Fletcher,  3  Cooledge  v.  Continental  Ins.  Co. 

2  Cowp.  666,  668,  14  Eng.  Rul.  Ca.s.  67  Vt.  14,  30  Atl.  708. 

502,   per   Lord  j\ran.«field ;  Steven.son  ^Citing  Felly  v.  Royal  Exchange 

117 


§  23 


JOYCE  ON  INSURANCE 


cated  and  coiilaincd  a.<  dc.-^crihed  herein  and  not  elsewhere.'     This 
latter  clause  qualilies  tlie  contract,  making  it  conditional."  ^ 

§  23.  Insurance  is  a  personal  contract.— It  is  well  settled  that 
insurance  is  a  personal  contract,  whatever  the  subject  matter  of  the 
insurance  may  be,^  Jt  is  a  "contract  by  which  the  insurer  under- 
takes to  indemnify  or  pay  money  to  the  insured  in  the  manner  and 
subject  to  the  conditions  agreed  upon.  This  liability  of  the  insur- 
er to  pay  money  is  not  altered  by  the  fact  that  such  money  may  l)e 
expended  in  rebuilding  under  certain  circumstances,  as  in  a  hre 


Assur.  Co.  1  Burr.  341,  14  Eng.  Rul.  Michigan. — Hall   v.    Niag'ara    Fire 

Cas.  30;  Lyons  v.  Providence  Ins.  Co.  Ins.   Co.  93  Mich.  184,  I'JU,  32  Am. 

14  R.  I.  idi).  St.  Rep.  497,  18  L.R.A.  135,  53  N. 

*  Cooledo-e  v.  Continental  Ins.  Co.  W.    727;    Disbrow    v.    Jones,    Mar. 

C7    Vt.    2^    28,    30    Atl.    798,    per  (Mich.)    48. 

Taft,  J.  Nebraska. — P'armers    &    Merchants 

^  United  States. — Hurst  v.  Spring-  Ins.    Co.    v.    Jensen,    56    Neb.    584, 

tield  Fire  &  Marine  Ins.  Co.  196  U.  44  L.R.A.  861,  76  N.  W.  577,  aliC'd  58 

^5.  47,  25  Sup.  Ct.  179,  49  L.  ed.  381;  Neb.  522,  44  L.R.A.  862,  78  N.  W. 

Royal  Ins.  Co.  v.  Stinson,  103  U.  S.  1054. 

25,  28,  26  L.  ed.  473;   Carpenter  v.  New  Hampshire. — Lahitf  v.  Ashue- 

Providcnce   Washington   Ins.   Co.   16  lot  Ins.  Co.  60  N.  H.  75. 

Pet.  (41  U.  S.)  495,  503,  504,  10  L.  New    Jersey.— Kase    v.    Hartford 

ed.    1044,    per    Story,    J. ;    Columbia  Ins.  Co.  58  N.  J.  L.  34,  32  Atl.  1057. 

Ins.  Co.  V.  Laurence,  10  Pet.  (35  U.  New  York. — Lett  v.  Guardian  Fire 

S.)  507,512,  9  L.  ed.  512;  Northern  Ins.    Co.    125   N.    Y.    82,   25    N.    E. 

Trust  Co.  V.  Snyder,  76  Fed.  34,  37,  1088,  per  Gray,  J. ;  Wyman  v.  Wy- 

22  C.  C.  A.  47.  man,  26  N.  Y.  253;  Wvman  v.  Pros- 

Alabama.—8hadgett  v.  Phillips  &  ser,  36  Barb.  (N.  Y.)  368;  iEtna  F. 

Crew  Co.  131  Ala.  478,  90  xVni.  St.  Ins.  Co.  v.  Tvler,  16  Wend.   (N.  Y.) 

Rep.  95.  56  L.R.A.  461,  31  So.  20.  385,  397,  30  Am.  Dec.  90. 

Illinois.— Undley   v.   Orr,    83    111.  0/t/o.— McDonald     v.     Black,     20 

App.  70.  Ohio,  185,  192,  55    Am.    Dec.    448; 

Indiana. — Nordyke  &  Marmon  Co.  Hubbard   v.   Winshel,  6   Ohio  N.   P. 

V.  Gery,  112  Ind.  535,  2  Am.  St.  Rep.  Rep.    (41   Weekly   Law   Bull.)    249; 

219,  13  N.  E.  683.  Hubbard  v.  Austin,  9  Ohio  C.  P.  Dec. 

Kentucky. — See  Cook  v.  Kentucky  111. 

Growers  Ins.  Co.  24    Ky.    L.    Rep.  Tennessee.— American  Steam  Laun- 

1956,  72  S.  W.  764.  dry    Co.    v.    Hamburg-Bremen    Fire 

iUame.— Adams      v.      Rockingham  Ins.   Co.  121   Tenn.    13,    21    L.R.A. 

Mutual  Fire  Ins.  Co.  16   Shep.    (29  (N.S.)   442,  113  S.  W.  394. 

Me.)  292,  294,  per  Tenney,  J.;  White-  rffl/*.— McLaughlin   v.    Park    City 

house  V.  CargiU,  88  Me.'479,  34  Atl.  Bank,  22  Utah,  4/3,  54  L.R.A.  343, 

276.                 '  63  Pac.  589. 

Man/hnid.—S.Vmnor  &  Sons  Ship-  TT'/.s^;OH.siw.— Stanbilber    v.   Mutual 

building  &  Drv  Dock  Co.  v.  Hough-  :\Iill    Ins.    Co.   76   Wis.   285,   291,  45 

ton,  92^  Md.  68,  86,  84  Am.  St.  Rep.  N.  W.  221. 

485,  48  Atl.   85;   Heller  v.  National  England. — Rayner    v.    Preston,    L. 

Marine   Bank,  89    Md.   602,   73   Am.  R.  IS  Cb.  D.  1,  io,  per  Brett,  L.  J. 

St.  Rep.  212,  45  L.R.A.  438,  43  Atl.  See  note  135  Am.  St.  Rep.  743. 
800. 

118 


NATUKE  OF  THE  CONTRACT  §  23 

policy,  nor  tnat  it  may  be  paid  out  in  defending  suits  against  the 
title,  or  in  testing  its  validity  or  in  paying  judgments  rendered,  as 
in  ease  of  title  insurance.  It  is  nevertheless  a  contract  either  to  in- 
demnify the  assured  or  to  pay  him  a  certain  sum  of  money  in  case 
a  certain  casualty  happens.'  This  obligation  does  not  run  with  the 
property  whether  it  be  real  estate  or  personalty,  neither  does  it  pass 
with  the  title  unless  assigned  with  the  consent  of  the  insurer,*  or 

'  See  Rayner  v.  Preston,  L.  R.  18  Mut.  Fh-e  Ins.  Co.  43  Vt.  497,  500,  5 
Ch.  D.  1,  9,  per  Brett,  L.  J.  Am.  Rep.  207. 

Fire  insurance  is  a  purely  person-  Enghind. — Rayner  v.  Preston,  L. 
al  contract,  by  which  the  insurer  R.  18  Ch.  D.  1,  9. 
agrees  to  indenuiiiV  iu.sured  again.st  "A  contract  of  fire  insurance  is  a 
any  loss  he  may  sustain  by  destruc-  personal  contract  with  the  assured, 
lion  of  his  interest  in  the  property  and  is  not  a  contract  passing-  with  the 
insured.  Nordvke  &  Alarnion  Co.  v.  ]iroperty  insured,"  17  Earl  of  Hals- 
Gery,  112  Ind.'  535,  2  Am.  St.  Rep.  bury's  Laws  of  England,  "Insur- 
219,'  13  N.  E.  (583.  anee,"  p.  517. 

'  United  States.— llxmi  v.  Spring-  A  contract  of  insurance  does  not 
field  Fire  &  Marine  Ins.  Co.  196  U.  run  with  the  land  nor  pass  as  an 
S.  47,  50,  25  Sup.  Ct.  179,  49  L.  ed.  incident  to  it.  Carpenter  v.  Provi- 
381;  West  Norfolk  Lumber  Co.,  In  dence  Washington  Ins.  Co.  16  Pet. 
re,  112  Fed.  759.  (41  U.  S.)  495,  10  L.  ed.  1044,  cited 

Alabama. — Shadeett  v.  Pliillips  &   in: 
Crew  Co.  131  AlaT  478.  90  Am.  St.        United  States.— City    of    Norwich, 
Rep.  95,  56  L.R.A.  461,  31  So.  20.        The  (Place)  v.  Norwich  &  New  York 

California.— Xyxw-'xi^  v.  Phoenix  Ins.  Transp.  Co.  118  U.  S.  494,  .30  L.  ed. 
Co.  Ill  Cal.  409,  415,  43  Pac.  1115.        144,  (J  Sup.  Ct.  1150;  West  Norfolk 

Illinois.— Lm^ley    v.    Orr.    83    III    Lumber  Co.  In  Re,  112  Fed.  763. 
Ai)p.  70.  California. — Davis  v.  Phopuix  Ins. 

.l/„/„^._Wliitehouse  v.  Cargill,  88    Co.  Ill  Cal.  409,  415.  43  Pac  1115. 
Me.  479,  34  Atl.  276;  Adams  V.  Rock-        J/fssoxW.— Sauner  v.    Pliot>nix   Ins. 
iiigliam  Ins.  Co.  IG  Shep.   (29  Me.)    Co.  41  Mo.  App.  480,  486. 
292   294.  .V<'(c  Hampshire. — Laliiff  v.  Ashue- 

3/a.s.sar7tMse».9.— Wilson  v.  Hill,  3  lot  Ins.  Co.  60  N.  H.  76;  Cummings 
Met.   (44  Mas'^.)   66,  69.  v.   Cheshire  County  Mut.    Fire    Ins. 

.l//r///.7rrH.— Disbrow  v.  Jones,  Co.  55  N.  H.  458;  Folsom  v.  Bel- 
Har.  (Mich.)  48.  knap  County  Mut.  Fire  Jns.  Co.  30 

^'ew    numpsliire.—{A\\n'&    v.    Ash-    N.  H.  240. 
nclot  Ins.  Co.  60  N.  H.  75;  Cumming        O/^/o.— McDonahl     v.     Black,      20 
V.  Cheshire  Countv    Mut.    Fire    Ins.    Ohio  193,  55  Am.  Dec.  448. 
Co.  .55  N.  H.  457,  459.  Pen»si/lranin. — Nippc's     App.     75 

Neiv  York. — Lett  v,  Guardian  Fire   Pa.  479. 
Ins.  Co.  125  N.  Y.  82,  86,  25  N.  E.        h'liode    Island.— B.oxs{e    v.    Provi- 
1088;  .T.tna  Fire  Ins.  Co.  v.  Tvler,   dence  Mut.  Fire  Ins.  Co.  16  R.  I.  529. 
16  Wend.   (N.  Y.)   385,  397.  30  Am.        South      Carolina.— Sieinmeyvr     v. 
Dec    90  Steinmever,  64  S.  Car.  420,  92  Am. 

r>/no.— l\rcDonald  v.  Black.  20  St.  Rep.'  809,  59  L.R.A.  323.  42  S.  E. 
Ohio  St.  185,  192,  55  Am.  Dec.  448.    184;  Graliam  v.  American    Fire   Ins. 

Sotith  Carolina.— Anneh'  v.  De  Co.  48  S.  Car.  218,  59  Am.  St.  Rep. 
Saussure,  26  S.  Car.  497.  505,  4  Am.  707.  26  S.  E.  .323;  Annely  v. 
St.  Rep.  725,  2  S.  E.  490.  De  Saussure,  26  S.  Car.  50.),  4  Am. 

T'ermonf.— Plimpton    v.     Farmers    St.  Rep.  725,  2  S.  E.  490. 

119 


§  23  JOYCE  ON  INSURANCE 

unless  by  extraordinary  or  special  and  express  stipulation  of  the 
parties  it  is  made  to  run  with  the  subject  matter,^  or  unless  it  be  so 
framed  as  to  be  inseparably  attached  to  the  property  and  follow  the 
successive  owners  during  the  continuance  of  the  risk,  such  succes- 
sive owners  being  in  turn  the  parties  really  assured,  as  w'here  the 
insurance  is  on  account  of  the  "owners,"'  or  for  whom  it  may  con- 
cern, or  where  the  loss  happens  to  be  payable  to  ''bearer,"  although 
this  latter  form  rarely  exists.^"  So  where  one  insured  real  property, 
the  insurance  payable  to  himself,  his  executors,  administrators,  and 
assigns,  the  interest  in  the  policy  was  held  to  pass  to  his  executors 
in  preference  to  his  heirs. ^^ 

But  neither  a  mortgagee  nor  any  other  lien  creditor  has  any  riglit 
to  claim  the  benefit  of  a  policy  underwritten  for  the  mortgagor  or 
owner  of  the  property  unless  there  is  an  express  agreement  permit- 
ting it.^^    So  a  contract  of  insurance  upon  property  sold  at  a  fore- 

^  Cummings  v,  Cheshire  County  Michigan. — Hall  v.  Niagara  Fire 
Mutual  F.  Ins.  Co.  55  N.  H.  457,  459.   Ins.  Co.  93  Mich.  184,  32    Am.    St. 

See  also  the  following  eases:  Rep.  497,  IS  L.R.A.  135,  53  N.  W. 

United      States. — West      Norfolk   727. 
Lumber  Co.,  In  re,  112  Fed.  759.  South     Carolina. — Annely    v.     De 

California. — Davis  v.  Phoenix  Ins.  Saussure,  26  S.  Car.  497,  505,  4  Am. 
Co.  Ill  Cal.  409,  415,  43  Pac.  1115.   St.  Rep.  725.  2  S.  E.  490. 

Illinois.— Undley  v.  Orr,  83  lU.  C'^aZ/.—MoLaughlin  v.  Park  City 
App.  70.  Bk.  22  Utah,  473,  54  L.R.A.  343,  03 

Maryland. — Heller      v.      National  Pae.  589. 
Marine  Bk.  89  Md.  602,  73  Am.  St.       FermoH^— Plimpton    v.    Farmers' 
Rep.  212,  45  L.R.A.  438,  43  Atl.  800.   Mnt.  Fire  Ins.  Co.  43  Vt.  497,  500, 

Tennessee. — American  Steam  Laun-  5  Am.  Rep.  297. 
dry    Co.    V.    Hamburg-Bremen    Fire        On  right  of  mortgagee  to   benefit 
Ins.   Co.  121   Tenn.    13,    21    L.R.A.   of    insurance    taken     in     name     of 
(N.S.)  442,  113  S.  W.  394.  mortgagor,  see  note  in  25  L.R.A.  305. 

Utah. — McLaughlin  v.  Park  City  A  contract  of  insurance  is  not  in 
Bank,  22  Utah,  473,  54  L.R.A.  343,  any  manner  incident  to  the  estate, 
63  Pac.  589.  running    therewith,    but     a     special 

^°  See  Rogers  v.  Tradei-s'  Ins.  Co.  agreement  with  the  underwriters 
6  Paige  (N.  Y.)  583,  588;  2  Duer  on  against  loss  or  damage  which  as- 
Ins.    (ed.  1846)   pp.  49,  50,  sec.  31.   sured  may  sustain,  and  not  the  loss 

i^Wyman  v.  Prosser  (N.  Y.)  36  or  damage  which  may  fall  upon  any 
Barb.  368.  other    person    having  an   interest  as 

12  Heller  v.  National  Marine  Bk.  grantee,  mortgagee,  or  creditor,  or 
89  Md.  602,  73  Am.  St.  Rep.  212,  45  otherwise.  Adams  v.  Rockingham 
L.R.A.  438,  43  Atl.  800.  Examine  ^Mutual  Fire  Ins.  Co.  16  Shep.  (29 
§  24a  herein.  Me.)  292,  294;  Plimpton  v.  Farmers 

See  also  the  following  cases:  Mut.  Fire  Ins.  Co.  43  Vt.  497,  500,  5 

United  »S'<afes.— Northern  Trust  Am.  Rep.  297;  Ca_  ..enter  v.  Provi- 
Co.  V.  Snyder,  76  Fed.  34,  37,  22  C.  dence  Washington  Ins.  Co.  16  Pet. 
C.  A.  47.  (41  U.   S.)    495,    10    L.    ed.    1044. 

Maine. — Whitehouse  v.  Cargill,  88   Cited  in : 
Me.  479,  34  Atl.  270.  Illinois.  —  Pinekneyville      Mutual 

120 


NATURE  OF  THE  CONTRACT  §  23 

closure  sale  between  the  purchaser  and  an  insurance  company  is  a 
personal  contract  of  indemnity  between  such  purchaser  and  the 
company  alone,  which  does  not  inure  to  the  benefit  of  the  party 
entitled  to  redeem,  and  the  purchaser,  having  collected  the  insur- 
ance money  after  the  property  has  been  destroyed  by  fire,  is  under 
no  obligation  to  account  for  it  to  such  redemptioner.^^  The  dis- 
tinction winch  underlies  this  construction  is  that  the  thing  is  not 
insured  but  the  right  appertains  to  the  person  since  the  contract  is 
not  in  its  nature  an  incident  to  the  property.  The  term  formerly 
u.-^ed  was  "aversio  peviculi,"  it  being  the  intention  of  all  insurances 
to  avert  any  damages  or  loss  the  insured  might  sustain.^*  In  the 
case  of  Lynch  v.  Dalzell/^  Chancellor  King  says:  ^^  ''These  policies 
are  not  insurances  on  the  specific  things  mentioned  to  be  insured, 
nor  do  .^uch  insurances  attach  on  the  realty  or  in  any  manner  go 
with  the  same  as  incident  thereto  by  any  conveyance  or  assignment, 
but  they  ai'e  only  special  agreements  with  the  persons  insuring 
against  such  loss  or  damage  as  they  may  sustain.  The  party  in- 
.sured  must  have  a  property  at  the  time  of  the  loss.  Or  he  can  sustain 
no  loss,  and  consequently  can  be  entitled  to  no  satisfaction,"  ^''    So, 

Fire   Ins.   Co.   v.   Kimmell,    59    111.  renee,  10  Pet.  (35  U.  S.)  507,  512,  9 

App.  535;  Miller  v.  German  Ins.  Co.  L.  ed.  512;  Wilson  v.  Hill,  3  Met.  (41 

54  111.  App.  58.  Mass.)  66,  69;  Lab  iff  v.  Ashuelot  Ins. 

Maine. — Donnell    v.     Donnell,    86  Co.    60    N.    H.    75;     Cumming-s    v. 

Me.  518,  520,  30  Atl.  67.  Cheshire  County  Mut.  Fire  Ins.  Co. 

New  York. — Loos  v.  Wilkinson,  55  N.  H.  457,  459;  Saddlers'  Co.  v. 
113  N.  Y.  500,  10  Am.  St.  Rep.  496,  Badcofk,  2  Atk.  557;  Patterson  v. 
4  L.R.A.  359,  21  N.  E.  392;  Loos  v.  Powell,  9  Bing.  320,  322,  per  Cole- 
Wilkinson,  51  Hun,  83,  5  N.  Y.  ridge,  J.,  who  says:  "Every  policy 
Supp.  410;  AVyman  v.  Prosser,  36  of  insurance  must  insure  some  thing 
Barb.  371.  or  person   from  some  risk  to  which 

North   Carolina. — Stamps  v.  Com-  that  thing  or  person  is  liable  " 
mercial  Fire  Ins.  Co.  77  N.  Car.  210,        "  4  3^0.  Cas.  Pari.  432. 
24  Am.  Rep.  443.  ^^  This  quotation  is  as  reported  in 

Pennsylvania. — Nippe's       Appeal,  Parke  on  Insurance   (ed.  1800)   453, 

31  Phila.  Leg.  Int.  276.  and  ascribed  by   iiim    to    Chancellor 

As  to  lien  creditors,  see  also  West  King,  while  in  the  above  report  it  is 

Norfolk  Lumber  Co.,  In  re,  112  Fed.  apparently  ascribed  to  counsel. 
759.  ^''  Cited    in     Carpenter    v.     Provi- 

^^  Deming  Investment  Co.  v.  Dick-  dence  Washington  Ins.  Co.  16  Pet. 
erman,  63  Kan.  728,  88  Am.  St.  Rep.  (41  U.  S.)  49o,  503,  10  L.  ed.  1044. 
265,  66  Pac.  1029.  See  Farmers  See  also  Columbian  Ins.  Co.  v.  Law- 
Loan  &  Trust  Co.  v.  Penn  Plate  rence,  10  Pet.  (35  U.  S.)  507,  9  L. 
Glass  Co.  186  U.  S.  434,  453,  46  L.  ed.  512.  Cited  in: 
ed.  1245,  22  Sup.  Ct.  842.  United   States.— Ynrmen^   Loan    & 

On  right  to  proceeds  of  insurance  Trust  Co.  v.  Peini   Plate    Glass    Co. 

where  loss  occurs  after  foreclosure,  186  U.  S.  434,  453,  46  L.  ed.  1245, 

but  during  period  of  redemption,  see  22  Sup.  Ct.  842;  Citv    of    Norwich, 

note  in  6  L.R.A.(N.S.)  448.  The  (Place  v.  Norwich  &  New  York 

1*  Columbian  Fire  Ins.  Co.  v.  Law-  Transp.  Co.)   118  U.  S.  468,  494,  30 

121 


§  23 


JOYCE  ON  INSURANCE 


in  a  Ma^pacluisetts  case  ^^  the  court  declared  that  "it  has  been  re- 
peatedly decided  here  that  under  the  forms  of  our  policies  none  but 
the  parties  to  the  contract  or  their  legal  representatives  in  case  of 
their  death  ciiu  avail  themselves  of  the  contract  although  others  may 
in  fact  have  an  equitable  or  even  legal  interest  in  the  property  in- 
sured. The  only  exception  to  this  rule  which  has  been  admitted 
exists  where  a  policy  has  been  bona  fide  and  for  a  valuable  consid- 
eration assigned  with  notice  to  the  underwriter  and  an  assent  on 
his  part,  either  express  or  implied."  And  again  it  is  said  that  the 
contract  of  insurance  ''appertains  to  the  person  or  party  to  the  con- 
tract, and  not  to  the  thing  which  is  subjected  to  the  risk  against 
which  its  owner  is  protected.  It  is  not  a  contract  running  with  the 
land  in  the  case  of  real  estate  nor  running  with  the  i)ers()ualty,  so 
to  speak,  in  the  case  of  a  chattel  interest  of  the  insured."  ^^  There 
is,  however,  another  class  of  cases  where  the  question  arises  whether 
certain  covenants  to  insure  made  between  certain  parties  relative  to 
land  run  with  the  land.  Thus,  a  covenant  to  effect  insurance  and 
apply  the  proceeds  in  case  of  loss  by  fire  to  the  reparation  of  the  in- 
sured property  is  held  such  a  covenant  as  may  run  with  the  land.^" 
-iVgain,  it  is  determined  that  a  contract  to  }yrocure  insurance  will 
bind  legal  representatives,  successors,  and  assigns,  where  it  specially 
so  provides.^ 


L.    ed.    144,    6    Sup.  Ct.  1150;  West  premises  to  tlie  extent  of  his  interest 

Norfolk  Lumber  Co.,  In  re,  112  Eed.  in  tlie  lease,  tlie  policy  does  not  iu- 

763;   Farmers  Loan  &  Trust   Co.  v.  ure  to  the  benefit  .of  the  lessor  or  his 

Penu  Plate  Glass  Co.  10.3  Fed.  132,  assiiins,  nor  does  it  make  the  biulder 

156,  43  C.  C.  A.  138,  5(i  L.R.A.  718.  liable  on  the  covenant  of  insiu-ance 

Illinois. — Miller     v.     German     Ins.  in  the  lease.     Merchants'  Ins.  Co.  v. 

Co.  54  111.  App.  58.  Mazange.  22  Ala.  168. 

Kentucky. — Spalding      v.      .Miller,  A  covenant  to  keep    premises    in- 

103  Ky.  413,  45  S.  W.  462.  sured  for  a  certain  sum  during-  the 

Massachusetts. — Harrison   v.    Pep-  term,  in  companies  ap)iroved  by  the 

per,  166  Mass.  289,  55  Am.  St.  Rep.  lessor  or  lease  to  be  forfeited,  does 

404,  33  L.R.A.  241,  44  N.  E.  222.  not  tend  to  renew  prior  policy  cover- 


Missouri.- — Saniicr  v.  Phoenix  Ins. 
Co.  41  Mo.  App.  486. 

^'  Carroll  v.  Boston  Marine  Ins. 
Co.  8  Mass.  515,  517. 

^' Cummings    v.    Cheshire    Countv 


ing  lessor's  own  interest,  but  lessee 
may  insure  respective  interests  of 
lessor  and  self.  Sherwood  v.  Harral, 
30  Conn.  333 

See,  furtlier,  as  to  covenants  to  in- 


Mut.  Fire  Ins.  Co.  55  N.  H.  457,  458.  sure :  Whitaker  v.  Hawlev,  25  Kan. 

^OThomas  V.  Yonkaptfs,  6Gill  &  J.  674,  37   Am.    Rep.    277:'Kberts    v. 

(Md.)   372;  Masonry  v.  Southworth,  Fisher,  54  Mich.  204;  Rhone  v.  Gale, 

n  Ohio  St.  340.     Where  interest  need  12    Minn.    54.      Examine    Hidden    v. 

not  be  ])ersonal,  see  §  800  herein.  Slater  Mutual  Fire  Ins.  Co.  2  Clifi'. 

A   builder  who   has    entered    into  (U.  S.  C.  C.)  266. 

j)ossession    without    a    sale    under   a  ^  Tannebaum  v.  Greenwald,  73  N. 

decree  upon  his  contract  of  building  Y.  Supp.  873,  67  App.  Div.  473. 
made  with  the  lessee,  and  insures  the 

122 


NATURK  OP  THE  CONTRACT  §  24 

§  24.  Insurance  other  than  that  of  life  and  accident  is  a  con- 
tract of  indemnity. —  It  is  elementary  that  the  contract  of  insur- 
ance, other  than  tliat  of  hfc  and  of  accident  where  the  injury  re- 
sults in  death,  is  one  of  indemnity.^  By  indemnity  is  meant  that 
the  party  insured  is  entitled  to  l)e  compensated  for  such  loss  -as  is 
occasioned  by  the  perils  insured  against,  in  precise  accordance  with 
the  principles  and  terms  of  the  contract  of  insurance.     The  right 

^United     States. — Tnjpeiial      Fire  Atl.   801,   Am.    &    Eng.    Ann.    Cas. 

Ins.  Co.  V.  Coos  Countv,  151  U,  S.  1913E,  648n. 

452,  14  Sup.  Ct.  379,  38  L.  ed.  231  Maryland.— FaUt'me    Ins.    Co.    v. 

(is      contract      of     indemnity    upon  O'Brien,    107    j\ld.    .341,    16    L.K.A. 

lerms    and     conditions    specified     in  (N.S.)    10,').'),  08  Atl.  484:  Heller  v. 

policy)  ;  Plupnix  Mutual  Life  Ins.  Co.  National  Marine  Bk.  89  Md.  (502,  73 

V.  Bailev,  13  Wall.    (80  U.  S.)   616,  Am.  St.  Rep.  212,  4')  L.R.A.  438,  43 

618,  20 'L.  ed.'oOl,  per  Clifford,  J.;  Atl.  800    (policy  against  lo.ss  by  lire 

British   &   Foreign   Marine   Ins.    Co.  i.s  a  personal  contract  of  indemnity)  : 

Ltd.  V.  Maldonado  &  Co.  183  Fed.  744  Bosley  v.  Chesapeake  Ins.  Co.  3  Gill 

(C.  C.  A.)    (policy  insuring-  against  &  J.  (Md.)  468,  per  Dor.sey,  J. 

general  average  contribution  is  con-  Massachusetts. — Eager      v.      Atlas 

tract  of  full  indemnity  against   loss  Ins.  Co.  14  Pick.  (31  Mas.';.)   141.  25 

within   insured   valuation)  ;   Western  Am.  Dec.  363;  Wilson  v.  Hill,  3  Met. 

A.ssurance   Co.   v.   Redding,   68   Fed.  (H  Mass.)  66,  68. 

708,  714;  Hedger  v.  Union  Ins.  Co.  Minnesota.-  Stale   v.    Federal    In- 

17  Fed.  498;  Spare  v.  Home  Ins.  Co.  vestment   Co.  48  ]\Iinn.  110,  111,  .lO 

15  Fed    707   708  ^^-  ^^'-  1^-^  ("the  very  essence  ot  any 

'  Californi,^.— Whitney    Estate    Co.  ^lefinition  of  insurance  is  indemnity 

V.  Northern  Assur.  Co".  155  Cal.  521,  '«!;.  ^«,^f.  ^^    ^^'^^^^'^    *^    ^    specified 

.">24,  18  Am.  &  f^ng.  Annot.  Cas.  .512,  ^""^J^^'V-.      .     ^j  ,  ,        j        ^       „ 

.,.1  T   i>  *   /XT  o  \    ?oo       ini    o        mi  Mississippi. — Natchez    Ins.    Co.    v. 

23  L.H.A.(N.S.)    123n,  101  Pac.  911  ^,     ,           ^Vr         ,  r  at  „^  \  a-i    -o 

.^          .   /-I  1    Vi-      n   J  Buckner,  4  How.  (5  Miss.)  63,  lif. 

{,,uol,n<j  mpavtCal.  Civ.  Code,  sec.  ,i/,,,o„^/._Mc.rrison  v.  Teun.   Ins. 

2.).)1)  ;  Davis  v.  Phoenix  In.s.  Co.  Ill  ^^   jg  ^j^^   262,  59  Am.  Dec.  299. 

Cal.  409.  41.),  43  Pac.  lllo.  i\>?,/-«.s^a;— Bassett   v.   Farmers   & 

(■oiinerticut.—Beym    v.    Connecti-  Merchants   Ins.   Co.   85  Neb.   85,  19 

cut  Mut.  Life  Ins.  Co.  23  Conn.  244,  j^^^    ^  p^,^o._  Ann.   Cas.  252,  122  N. 

251;  (Ik'iidalc  \Vot)leii  Co.  v.  Protec-  ^y^  703;   Stanisics  v.  Hartford  Fire 

linn   Ins.  Co.  21  Conn.  19,  30,  31,  54  ]„s.  Co.  83  Neb.  768,  120  N.  W.  435. 

Am.  Dec.  309.  JSfew   Hampshire. — Hunt     v.     New 

Jllinois. — Illinois  IMutual  Fire  Ins.  Hampshire  Fire  Underwriters  A.'jsgc. 

('...  V.  Andes  Ins.  Co.  67  111.  362,  16  cs  N.  H.  :}05.  308.  73  Am.  St.  Rep. 

-Vm.  Kcp.  (520.                             _  (;()2,   .38   L.R.A.   514,    38    Atl.    145; 

/y(r//Vn/rf.     State  v.  Willett,  1  rl  Ind.  Cumniings  v.   Cheshire  Countv  ]\Iut. 

296,  23  L.K.A.(X.S.)   197,  86  N.  E.  Fire  Ins".  Co.  55  N.  H.  457,  458. 

68.  New     York. — Cross     v.     National 

Kentiuhi/.-^Uome      Ins.      Co.     v.  Fire  Ins.  Co.  132  N.  Y.  133.  135,  30 

Gaihlis,  .3  Ky.  L.  Rep.  160.  N.     E.     390;     Embler    v.    Hartford 

Louisiana. — Marche.'iseau    v.    ?*Ier-  Steam   Boiler  liis|>ection  &  Ins.  Co. 

chants  Ins.  Co.  1  Rob.  (La.)  438.  40  N.  Y.  Supp.  450,  452,  8  App.  Div. 

Maine.-^(\e\c\\e\\    v.    Mercantile    &  186,  case  aff'd  1.58    N.    Y.    431,    4  1 

Manufacturers  Mut.  F.  Ins.  Co.  109  L.K.A.  512,  53  N.  E.  212;  Rawls  v. 

Mc.    274,   42    L.R.A.(N.S.)    135,   83  American  Life  Ins.  Co.  36  Barb.  (N. 

123 


§  24 


JOYCE  ON  INSURANCE 


to  recover  beinc:  comniensuralc  with  the  lo'^s  sustained.^  or  with 
the  amount  spet-ilied,  as  in  cases  of  life  insurance  and  valued  poli- 
cies. It  is  not  intended  by  insurance  that  the  party  insured  shall 
be  put  in  exactly  the  same  situation  as  he  might  have  been,  had 
there  been  no  loss,  although  he  may  be  restored  as  nearly  as  may 
be  to  tlie  condition  he  was  at  the  outset.'*     So  in  marine  insurance 


Y.)  357,  362,  84  Am.  Dec.  280.     See  Fleminc:,   L.   R.    7   Q.   B.   299,   .302; 

Holmes    V.    Gilman,  138  N.  Y.  369,  Dariell  v.  Tibbitt.^^.  L.  R.  5  Q.  B.  D. 

381,  34  Am.  8t.  Rep.  463,  20  L.R.A.  560,   562,  563;   Powles  v.   Innes,  11 

566,  34  N.  E.  205.  Mees.  &  W.  10,  13,  13  Eng.  Rul.  Ca«. 

Ohio. — Farmers'  Tns.  Co.  v.  Butler,  356;  Dalby  v.  India  &  London  Life 

38    Ohio    St.    128,   133;    Commercial  As.sur.  Co.  15  Comm.  B.  365,  387,  13 

Mutual   Ins.    Co.   v.   Detroit   Fire   &  I'^ns-.  Rul.  Cas.  383.    See  Aitcliison  v. 

Marine    Ins.    Co.    38    Ohio    St.    11,  Lohre,  4  L.  R.  App.  C.  755,  761,  49 

15,  43  Am.  Rep.  413 ;  McDonald  v.  L.  J.  Q.  B.  D.  123,  41  L.  T.  323,  14 

Black,  20  Ohio  St.  185,  55  Am.  Dec.  Eng.  Rul.  Cas.  449. 
448.  ^  United     States.  —  Carpenter     v. 

Peunsijlvania. — Seheel  v.   German-  Providence  AYashington   Ins.   Co.  16 

American  Ins.   Co.   228  Pa.    44,    76  Pet.  (41  U.  S.)  503,  10  L.  ed.  1044. 
Atl.  507;  Meigs  v.  Insurance  Co.  of        Connecticut. — Glendale  Woolen  Co. 

North  America,  205  Pa.  378,  385,  54  v.  Protection  Ins.   Co.  21   Conn.  19, 

Atl.  1053 ;  Eureka  Ins.  Co.  v.  Robin-  54  Am.  Dee.  .309. 
son,  50  Pa.  St.  256,  269.  94  Am.  Dec.       Indiana.— ^i-Aie     v.     AYillett,     171 

65;  Commonwealth   Ins.  Co.  v.  Sen-  Ind.  296,  23  L.R.A. (N.S.)  197,  86  N. 

nett,  37  Pa.  St.  205,  208,  78  Am.  Dec.  E.  68. 

418.     See  Kaijtfman  Bro.s.  v.  Stand-        Maryland. — Franklin    F.    Ins.    Co. 

ard  Fire  Ins.  Co.  21  Lancaster  Law.  v.  Hamill,  6  Gill  &  J.  (Md.)  87,  95. 
Rev.  249.  Ohio. — State    (ex    rel.    Physicians 

South     Carolina.  —  Graham       v.  Defense    Co.)    v.    Lavton,    73    Ohio 

American   Fire  Ins.   Co.   48   S.   Car.  St.  90,  97,  76  N.  E.  :)67. 
218,  59  Am.  St.  Rep.  707,  26  S.  E.       Pennsylvania.    —    Commonwealth 

323;  Annelv  v.  De  Saussure,  26  S.  Ins.  Co.  v.  Sennett,  37  Pa.  St.  205, 

Car.  497,  505,  4  Am.   St.  Rep.  725,  78  Am.  Dec.  418. 
2  S.  E.  490.     See  Crosswell  v.  Con-        England. — Kulen  Kemp  v.  Yigne, 

neeticut  Indemnity  Assoc.  51  S.  Car.  1  Term.  Rep.  309. 
103,  112,  28  S.  E.  200.  Insurance  is  a  contract    of   indem- 

Tennessee. — Deming   v.   Merchants  nity,  the  object  being    to    reimburse 

Cotton  Pi-e.ss  &  Storage  Co.  90  Tenn.  insured  for  his  actual  loss  not  exceod- 

306,  13  L.R.A.  518,  17  S.  W.  89.  ing  an  agreed  sum.     Getchell  v.  Mer- 

Vermont. — Plimpton     v.     Farmers  cantile   &   Manufacturers    ilut.    Fire 

Mut.  Fire  Ins.  Co.  43  Yt.  497,  500.  Ins.    Co.    109    Me.    274,    42    L.R.A. 

5  Am.  Rep.  297.  (N.S.)  135,  83  Atl.  801. 

Virginia. — Han-is       v.       Common-        The  general  object  or  purpose  of 

weiilth.  113  Ya.  746,  38  L.R.A. (N.S.)  an    insurance   company   is   to   afford 

458,  73  .S.  E.  561.  indemnity    or    security    against    loss. 

Wisconsin. — Stanhilber   v.    Mutual  Commonwealth    v.    Equitable   Benefi- 

Alill  Tns.  Co.  76  Wis.  285,  291,  45  N.  cial  Assoc.  137  Pa.  412,  419,  18  Atl. 

W.  221 ;  Johannes  v.  Phoenix  Ins.  Co.  1112,    distinguishing    between    insur- 

66  Wis.  50,  53,  57  Am.  Rep.  248,  27  ance   companies   and   benevolent   so- 

N.  W.  414.  cicties  a.s  to  indemnity  etc. 

England. — Castellain     v.     Preston,        *  Commonwealth  Ins.    Co.   v.   Sen- 

L.  R.  11  Q.  B.  D.  380,  386;  Llovd  v.  nett,  37  Pa.  St.  205,  208,  78  Am.  Dec. 

124 


N/VTURE  OF  THE  CONTRACT 


§§  24a,  25 


the  recovery  may  exceed  or  be  less  than  a  complete  indemnity,  and 
therefore  it  is  not  a  perfect  contract  of  indemnity.* 

§  24a.  Standard  fire  policy  is  contract  of  indemnity;  collateral 
contracts;  mortgages. — A  contract  for  lire  insurance  in  tlie  form 
prescribed  hy  tlie  Massachusetts  statute  is  a  contract  of  indenniity, 
and  a.-^sured  is  only  entitled  to  \)e  put  in  the  same  condition  pe- 
cuniarily that  he  would  have  been  in  had  there  been  no  fire.  Nor 
are  his  damages  to  be  diminished  because  he  has  collateral  contracts 
or  relations  with  third  pers(ms  which  relieve  him  wholly  or  partly 
from  the  loss  against  which  the  insurance  company  agreed  to  in- 
denniify  him.  This  principle,  as  applied  to  mortgages  is  now  nn- 
important  in  that  state  by  reason  of  the  standard  policy  provisions 
requiring  the  mortgagee  to  assign  his  mortgage  to  the  insurance 
company  if  so  requested  upon  payment  of  the  mortgage  debt  to  the 
mortgagee.^ 

§  25.  Indemnity — stipulation  as  to  value  in  policy. — It  has  been 
said  that  insurance  is  not  a  ])erlVcl  contract  of  indemnity  in  that 
the  parties  may  agree  beforehand  in  estimating  the  value  of  the 
subject  assured  as  the  measure  of  damages.'''  The  fact,  however, 
that  the  sum  to  be  paid  is  agreed  upon  beforehand  makes  in  itself 
the  contract  no  less  one  of  indenmity,  because  the  value  is  so  fixed 
in  order  that  the  insured  may  have  an  indenmity  and  no  more, 
since  if  there  be  a  gross  and  fraudulent  overvaluation  it  may  be 
inquired  into,  and  it  is  ordinarily  to  the  insured's  advantage  to  see 


418;  Hopkin.s'  ]\Iarine  Ins.  (ed. 
1867)  59;  2  Phillips  on  Ins.  (3d  ed.) 
36,  sec.  1220.  See  Woods'  Mayne  on 
Dama.S'os  (1st.  Am.  ed.)  sec  430;  2 
Sedgwick  on  Dama<res  (Stii  ed.)  sees. 
722  et  seq. ;  Times  Fire  Assur.  Co.  v. 
H:i\vke,  1  Fost.  &  F.  400. 

^17  Earl  ot  Ilalsl)ury's  Ijaws  of 
England,  p.  336,  note;  Id.  ])p.  ;!80, 
402,  et  sc(|.  See  also  15  Id.  |)p.  443. 
444,  title  "Guarantee." 

^  Tabbut  V.  Americiiii  Ins.  Co.  185 
Mass.  41!),  202  Am.  St.  Rep.  353,  70 
N.  E.  430  (case  is  cited  in  Ryan  v. 
Agricultnral  Ins.  Co.  188  INIass.  11. 
13,  73  N.  E.  841),  where  facts  almost 
identical).  See  also  on  last  point 
Jenks  V.  Liverpool.  tJc  Linulon  & 
Globe  Ins.  Co.  206  Mass.  591,  597.  92 
N.  E.  998. 

'  "A  policy  of  assnrance  is  not  a 
perfect  contract  of  indenmity.  It 
mu.st  be  taken  with  this  (|naIilication, 
that   the   parties   ma\^   agree  before 


hand  in  estimating  the  value  of  the 
.subject  assured  Ijy  way  of  li(|uidat- 
cd  damages,  as  indeed  they  may  in 
any  other  contract  to  indcnniify:" 
Jr\ing  V.  Manning,  1  H.  L.  Cas.  .■!03, 
307,  opinion  of  the  judges.  This  ease 
is  cited  in  Aitcluson  v.  Lolire,  L.  R. 
4  App.  Cas.  755,  7(11,  per  Blackburn, 
J.,  and  one  of  the  qualilications  stat- 
ed is  that  of  the  allowance  of  one 
lliird  new  foi-  old  in  marine  risks: 
See  Hamilton  v.  Mendes,  2  Bun-. 
1198,  1210.  iier  Lord  Mansfield:  17 
Earl  of  Halsburv's  Laws  of  England. 
]i.  33(),  note;  Id.'i)p.  380,  462  et  seq.; 
15  Id.  pp.  443,  444,  title  "guarantee." 

See  also  Delaware  Ins.  Co.  v.  Hill 
(1910)  —  Tex.  Civ.  App.  — ,  127  S. 
W.  283,  292,  39  Ins.  L.  J.  908,  927. 

Valued  ])olicits,  see  §§  159-168 
herein.  On  law  governing  a.s  to  ex- 
tent of  recoverv  on  policv,  see  note 
in  03  L.R.A.  808. 


12.= 


25 


JOYCE  ON  INSURANCE 


that  there  is  not  an  undervahuilion,  and  that  the  amount  be  fixed 
suflieiently  large  to  constitute  an  indemnity.®  If,  however,  a  vahicd 
policy  is  bona  fide  meant  'ds  an  indenmity,  the  courts  will  not  in- 
quire very  minutely  whether  the  valuation  be  very  near  the  true 
interest  of  the  avssured.  This  is  the  rule  stated  by  Marshall,  and 
accords  with  that  given  by  the  courts.^  So  it  is  held  in  New  York 
that  an  overvaluation  does  not  per  se  render  a  valued  marine  policy 
void.  In  the  absence  of  fraud,  accident,  or  mistake  the  valuation 
agreed  upon  is  conclusive  and  Ijinding,  however  largely  in  excess 
of  the  true  value.  Overvaluation  is  simply  presumptive  evidence 
of  fraudulent  intent  strong  in  proportion  to  the  excess,  which  pre- 
sumption may  be  repelled  by  proof;  ^°  and  it  must  appear,  in  order 
to  avoid  a  policy  for  oven'aluation,  that  such  overvaluation  was  in- 
tentional, fraudulent,  and  not  an  honest  expression  of  opinion." 
Again,  in  case  of  partial  loss  in  valued  policies  an  inquiry  may 
be  made  as  to  the  amount  of  loss  as  a  basis  upon  which  to  indemni- 
fy the  assured. ^^    Therefore,  the  fact  that  the  amount  is  Hxed  in  a 


^United  Siates.— Marine  Ins.  Co.  3  L.  ed.  201,  7  Cranch  (10  U.  S.) 
v.  Hodo-son,  (3  Craneh  (10  U.  S.)  3;]2,  3  L.  ed.  262;  Hodoson  v.  Marine 
206,  220.  3  L.  ed.  201,  204,  7  Cranch    Ins.  Co.  5  Craneli  (<)  U.  S.)  100,  110, 


(11  U.  S.)  332,  3  L.  ed.  362. 

Colorado. — Duncan  v.  National 
Mutual  Fire  Ins.  Co.  44  Colo.  472, 
20  L.R.A.(N.S.)  340,  98  Pa".  634. 

Louisi(t}ia. — Natcliez  &  New  Or- 
leans   Packet    &    Navis^ation    Co.    v. 


3  L.  ed.  48.     See  §§  159-168  here- 
in. 

10  Helbig-  V.  Svea  Ins.  Co.  54  'Cal. 
156,  35  Am.  Rep.  72  and  note,  74, 
76;  Borden  v.  Hins'ham  Mutual  Fire 
Ins.  Co.  18  Pick.  (35  Mass.)  523,  29 


Louisville  Underwriters,  44  La.  Ann.  Am.  Dec.  614,  and  note,  616,  621. 
714,  11  So.  54,  where  actual  value  Under  following  heads:  " 'Overval- 
exceeded  value  specified,  and  assured  nation  of  insured  property,'  'fraud- 
was  held  Ijound   by  value  stated.  ulent    overvaluation    avoids    policy,' 

^[a■ssac]n(setts. — Clark  v.  Ocean  'rule  applies  both  to  valued  and  to 
Ins.  Co.  16  Pick.  (33  Mass.)  289;  open  policies,'  Svliere  overvaluation 
Wolcott  V.  Eagle  Ins.  Co.  4  Pick.  (21  not  fraudulent,'  'overvaluation  con- 
Mass.)  429.  Irarv    to    warranty    or    condition    in 

New    York. — See    Yoison    v.    Com-  ])olicy,'  'examinations  of  property  by 

mercial  Mutual  Ins.  Co.  62  Hun  (N.  agent;'"   Sturm  v.   Atlantic  Mutual 

Y.)  10,  1],  per  Daniels,  J.,  41  N.  Y.  Ins.  Co.  63  N.  Y.  77;  Watson  v.  In- 

889.  surance    Co.    of    North    America,    3 

Te.ro,';.— Delaware  Ins.  Co.  v.  Hill  Wash.    (U.   S.  C.  C.)   1,  2.     See  In- 

(1910)    —   Tex.    Civ.    A)ip.   — ,   127  surance    (^).    of    Nortli    America    v. 


Coombs,  19  Ind.  App.  331,  49  X.  E. 
471:  Delaware  Ins.  Co.  v.  Hill 
(1910)  —  Tex.  Civ.  App.  — ,  127 
S.   W.   283,  292,  39  Ins.   L.   J.   908, 


S.   W.  283,  39  Ins.   L.  J.  908,  927 

fJnqlmid. — Lewis  v.  Rucker.  2 
Burr.'  1171.  14  Eno-.  Kul.  (^u^.  215; 
Shawe  v.  Felton,  2  East,  109. 

See   Marsliall   \m   Ins.    (ed.    1810)    927. 
288.291.     See  also  §§  159-168  herein.        "  Wlieaton     v.     North     Britisli     &: 

^  Mar.shall     on     Marine    Ins.     (ed.    Mercantile   In.';.    Co.    76    Cal.    41.").    9 
1810)   291 ;  ^Tiner  v.  Tagert,  3  Binn.    Am.  St.  Rep.  216,  18  Pac.  758. 
(Pa.)  204.     See  also  Marine  Ins.  Co.        ^^  Watson     v.     Insurance     Co.     of 
V.  Hodo-son,  6  Cranch  (10  U.  S.)  206,   North    America,   3   Wash.    (U.   S.   C. 

126 


4 


NATURE  OF  THE  CONTRACT  §  26 

valued  policy  whcrc^  llie  pecuniary  value  of  the  subject  of  insurance 
is  capalfle  (if  hcint;  c-timated  makes  the  contract  none  the  less  one 
of  stricl  iudeuinity.  the  only  difference  being  that  the  money  value 
or  indenmity  is,  as  far  as  may  be  possible,  determined  before  in- 
stead of  after  the  loss.  So  Mr.  Phillips  ^^  says:  ''The  valuation  in 
a  valued  policy  is  a  mere  substitute  as  between  the  parties  for  the 
<(iiiiputation  or  estimate  of  the  value  of  the  subject  in  an  open 
|»olicy."'  ^*  Nor  does  the  valuation  preclude  an  inquiry  as  to  the 
amount  of  interest  at  stake,  for  it  may  be  shown  that  only  part  of 
the  property  was  at  risk,^^  the  valuation  being  assumed  to  be  based 
u|)on  the  principles  of  indemnity  in  all  valued  policies. 

§  26.  Life  insurance  not  a  contract  of  indemnity. — Although 
the  question  of  indemnit}^  as  related  to  life  insurances  has  been 
prolific  of  much  discussion  by  both  text-writers  and  the  courts,  yet 
the  weight  of  authority'  is  that  life  insurance  is  not  a  contract  of 
indemnity.  In  Godsall  v.  Boldero,^^  which  was  for  a  long  time  a 
leading  case,  a  creditor  insured  his  debtor's  life.  After  the  debt- 
or's death  and  before  action  brought,  his  executors  paid  the  del)t. 
and  the  court  held  that  such  payment  took  away  the  ground  of 
action."  The  court  relied  upon  the  case  of  Hamilton  v.  INIendes.^^ 
which  was  a  case  of  marine  insurance.  The  ruling  was  followed  in 
other  cases,  although  there  were  conflicting  decisions  until  the  law 
became  settled  upon  the  authority  of  Dalby  v.  India  and  London 
Life  Assurance  Company,"  wdiich  expressly  overruled  Godsall  v. 
Boldero.  The  question  was  well  considered  both  by  the  court  and  in 
the  arguments  of  counsel,  and  it  was  there  determined  that  life  in- 
surance ill  no  way  resembled  a  contract  of  indemnity.^"     While  a 

C.)  ],  •_';  Cljiik  V.  United  Ins.  Co,  7  (the  insured)    were  wliolly  obviated 

-Mass.   30.'),   5   Am.   Dee.   50.     See  1  by  the  payment  of  his  debt  to  tliem, 

Arnouhl    on    Miirinc    Ins.     (Perkins'  flie    foundation     of    anv    action    on 

ed.)    30!),  *304  et  scq.  (heir    (the    plaintilTs')    'part,    on    the 

*^  2  Phillips  on  Ins.    (3d  ed.)   see.  ii^round    of    sueli     insnranee,    fails:" 

1188.  Godsall  v.  Boldero,  !)  East,  72,  81. 

1*  See  also  1  Arnold  on  Marine  Ins.  ^^  o  Burr.  1210,  1  En^-.  Rul.  Cas. 

(Perkins'    ed.    1850)     315,    *309    et  312. 

seq.;  Id.  ( Maclachlan  s  ed.  1887)  200  1M5    Coin.    B.   3n.").    13   En^.    Rul. 

et  seq.;  Eorbes  v.  As{)inall,  13  East,  Ca.s.  383. 

327,  13  Eng'.  Rul.  Cas.  ti73.  ^°  ^t  was  there  declared  that  "the 

^*  Forlies  v.  Aspinall,  13  East,  327,  contract  coninioidy  called  life  assur- 

13    Eng'.     liul.     ('as.     073.       See    §§  aiice,  when  ])roperly  considered,  is  a 

150-108  herein.  mere  contract  to  pay  a  certain  sum 

^^0  East.  72.  of  money  on  the  death  of  a  ]ierson  in 

"Lord     f>llenboi-oiigh,    C.    J.,    de-  consideration  of  the  due  jiayment  of 

clared  "that  if,  before  the  action  was  a   certain   annuity   for   his   life,   tiic 

brought,    the    damage   which    was   at  amount  of  the  annuity  being  calcu- 

first  supposed  likely  to  result  to  the  lated  in  the   first  instance  according 

creditor  from  the  death  of  Mr.  Pitt  to  the  proVjable  durafion  of  the  life; 

127 


26 


JOYCE  ON  INSURANCE 


life  is  not  a  subject  of  valuation  itself/  nor  the  loss  adjustable  on 
any  principle  of  indenmitv,  still  the  amount  of  insurable  interest 
in  a  life  can  sometimes  be  estimated  as  in  case  of  the  insurance  by 
a  creditor  of  the  life  of  his  debtor,  so  much  so  that  it  has  been  held 
that  in  case  of  a  gross  disproportion  between  the  amount  of  the  in- 
surance and  the  debt  secured  thereby  it  may  be  declared  a  wager 
policy.^  80,  perhaps,  in  other  cases  where  the  insurable  interest 
is  a  pecuniary  one  it  may  be  valued  in  the  sense  that  the  interest 
might  be  assumed  to  be  equal  in  amount  to  the  sum  insured.^  and 
therefore  a  life  policy  might  be  said  to  resemble  a  valued  marine 
policy,  and  in  so  far  a.s  the  insurable  interest  in  the  former  is  ca- 
])able  of  being  approximately  estimated  upon  a  pecuniary  basis  that 
that  establishes  a  measure  of  indemnity,  and  therefore  constitutes 
life  insurance  a  contract  of  indemnity,  and  that  the  fact  that  the 
amount  is  fixed  in  a  life  policy  makes  it  differ  in  no  wise  from  a 
valued  marine  policy.  This  conclusion,  however,  cannot  follow 
when  it  is  considered  that  the  nature  of  the  two  contracts  differs  in 
many  respects.  Thus,  in  life  risks  the  premium  depends  upon 
data  based  upon  the  duration  of  human  life,  and  the  event  must 


and   when   once   fixed    it   is   constant  contract  "really  is  what  it  is  on  the 

and      invariable.        The      stipulated  face  of  it,  a  contract  to  pay  a  certain 

amount  of  annuity  is  to  be  uniformly  •''""i  i"  the  event  of  death.     It  is  val- 

paid  on  one  side,'  and  the  .'^nni  to  be  id   at   the  common  law,  and  if  it  is 

liaid  in  the  event  of  death  is  always,  made  by  a  person  having  an  interest 

except  when  bonuses  have  been  oiven  in  the  duration  of  the  life,  it  is  not 

by   prosperous    offices,   the   same    on  prohibited  by  the  statute  14  George 

the  other.     This  species  of  insurance  HI-  c.  48."     Dalby  v.  India  &.  Lon- 

in  no  way  resembles  a  contract  of  in-  don    Life   Assur.   Co.   15   Comm.   B. 

denniity."    The  reasoning  in  this  case  365^13  Eng.  Rul.  Cas.  383,  per  opin- 

seems  to  be  based  upon  the  construe-  ion,  Parke,  B. 

tion  of  the  statute  14  George  III.,  ^  The    court    in    Connecticut    j\[ut. 

chapter  48.  clause  3,  which  provides  Life  Ins.   Co.  v.   Schaefer,  94  V.   S. 

"tliat  in  all  cases  Avhere  the  insured  45 (,  460,  24  L.  ed.  231,  declares  that 

hath  interest  in  such  life  or  lives,  event  "In  life  insurance  the  loss  can   sel- 

or  events,  no  greater  .'^um  sliall  be  re-  dom  be  mea.^ured  by  pecuniary  val- 

covered  or  received  from  tlie  insurer  ues."     Per  Bradley,  J. 

or  insurers  than  the  amount  or  value  Life  insurances  are,  says  Mr.  Bun- 

of  the  interest  of  the  assured  in  such  yon,  independent  of  the  value  of  the 

life  or  lives  or  other  event  or  events."  subject  •  matter:       Bunyon    on    Life 

This  was  held  to  mean  that  "if  there  Ins.   (ed.  1867)  7. 

is  an  interest  at  the  time  of  the  poli-  ^  Cooi^er  v.  Schaeffer  (Pa.)  11  Atl. 

cy,  it  is  not  a  wagering  policy,  and  548,  20  Week.  Notes  Cas.  123,  9  Cent, 

that  the  true  value  of  that  interest  60L    But  see  Grant  v.  Kline,  115  Pa. 

may  be  recovered  in  exact  conformi-  St.  618,  9  Atl.  150.  where  the  insur- 

tv  with  the  words  of  the  contract  it-  once   was   for   $3,000,   and   the   debt 

self;"   that    "the   only   effect    of   tlie  less  than  $800.  and  the  disproportion 

statute  is  to  make  the  assured  value  was  not  considered  too  great, 

his  interest  at  its  true  amount  when  ^  See  2  Phillips  on  Ins.    (3d  cd.) 

he  makes  the  contract,"  and  that  the  35,  sees.  1216,  1217. 

128 


NATURE  OF  THE  CONTRACT 


§  26 


liappcn.  In  other  risks  the  data  for  fixing  rates  of  premium  de- 
pends upon  an  uncertain  event  which  may  or  may  not  hapjjen.'* 
Again,  in  the  one  ca.sc  the  contract  is  based  on  a  pecuniary  interest, 
while  in  a  hfe  risk  the  interest  need  not  necessarily  be  strictly  and 
exchisively  a  j)ecuniary  one,  as  in  case  of  consanguinity  or  affinity.^ 
Another  distinction  is  that  in  marine,  fire,  and  other  insurances  of 
like  nature  the  interest  must  exist  at  the  time  of  the  loss,  or  there 

*  Loss  certain  to  occur  in  life  and  est  in  life  not  necessary.  See  as  to 
not  in  fire  and  marine  insurances,  necessity  of  pecuniary  interest,  Car- 
Nyo  V.  Grand  Lodop  A.  O.  U.  W.  9  j.eiiter  "v.  United  States  Life  Tns. 
Ind.  A))]).  131,  140,  3()  N.  E.  429,  per  Co.  Itil  Pa.  St.  9,  1.5,  16,  28  Atl.  94:], 
Lotz,  J.  per  Dean,  J.;  Nye  v.  Grand  Lodse, 

5  "An  insurance  upon  life  has  in  9  Ind.  App.  131."  142,  36  N.  E.  429. 
fact  but  a  remote  re.sendjlance  to  a  Insurable  interest  is  not  dependent 
marine  or  fire  insurance.  In  the  lat-  on  pecuniarv  loss.  Hess  v.  Segon- 
ter  the  ])articular  o))ject  is  to  indem-  feiter,  t27  Ky.  348,  32  Ky.  L.  Rep. 
nify  against  a  pecuniary  loss;  and  225,  128  Am.  St.  Rep.  343,  14  L.R. A. 
the  event  upon  wliich  the  money  is  (N.S.)  117,  105  S.  W.  476.  Jt  was, 
made  payable  is  the  liappening  of  the  liowever,  held  in  England  under  the 
loss,  the  contract  being  in  terms  to  statute  14  George  III.,  e.  48,  that 
pay  whatever  is  lost,  not  exceeding  a  there  must  be  a  i)ecuniary  interest  in 
specified  sum.  But  a  life  insurance  the  life  or  event  insured.  Halford 
is  a  contract  to  pay  a  specific  sum  v.  Kymer,  10  Barn.  &  C.  724;  1  Pliil- 
on  the  happening  of  a  particular  lips  on  Ins.  (3d  ed.)  201,  sec.  356; 
event  which  may  or  may  not  occa-  (Statute  14  George  III.  c.  48,  was 
sion  a  pecuniary  loss.  Where  that  never  in  force  in  Wisconsin.  Hurd 
event  is  the  death  of  the  insured  him-  v.  Doty,  86  Wis.  1,  21  L.R. A.  746,  56 
.self,  there  is  nothing  like  an  indem-  N.  W.  371).  ''But  the  better  opin- 
nity  against  loss  to  liim,  for  he  can  ion  is  tluit  the  decided  cases  wliich 
never  receive  the  money."  Trenton  i)roeeed  upon  tlie  ground  that  the  in- 
Mutual  Life  Ins.  Co.  v.  Jolmson,  24  sured  must  necessarily  liave  some  pe- 
N.  J.  L.  576,  585,  per  Elmer,  J.  See  cuniary  interest  in  the  life  of  the 
Warnock  v.  Davis,  104  U.  S.  775,  cestui  qui  vie  are  founded  in  an  er- 
779,  26  L.  ed.  924,  ]>er  Field,  J.;  roneous  view  of  tlie  nature  of  the 
Phoeni.x  Mutual  Life  Ins.  Co.  v.  contract."  Phoeni.x  ^Mutual  Life  Ins. 
Bailev,  13  Wall.  (80  U.  S.)  616,  Co.  v.  Bailey,  13  Wall.  (80  U.  S.) 
618,  619,  20  L.  ed.  501,  per  Clif-  616,  018,  619,  20  L.  ed.  501. 
ford,  J.;  Loomis  v.  Eagle  Life  &  A  wife,  ho\v(ver,  might  in  Eng- 
Health  Ins.  Co.  6  Gray  (72  Mass.)  land  insure  th(>  life  of  her  husband 
396)  ;  Mechanics  Nat.  Bk.  v.  Com-  without  other  i)roof  of  interest  than 
ins,  72  N.  H.  12,  101  Am.  St.  Rep.  the  relation  between  them.  Reed  v. 
060;  Corson's  Exr.  Appeal  of,  113  Royal  Exciiange  Assur.  Co.  Peake 
Pa.  St.  438,  443,  444,  6  Atl.  213,  Add.  Cas.  70.  I'cake  N.  C.  3d  ed.  pt. 
per  Clark,  J.;  Halford  v.  Kymer,  10  ii.  See  liunyon  oti  Life  Ins.  (ed. 
Barn.  &  C.  724.  As  to  pecuniary  etc.  18()8)  6.  On  wife's  right  to  insure 
interest,  see  §  899  herein.  See  life  of  husband,  see  note  in  54  L.R.A. 
also  note  128  Am.  St.  Rep.  225.  See  note  in  54  L.R.A.  225,  on 
303.  Held,  in  Mutual  Life  Ins.  Co.  insni-ai)le  interest  in  life  of  relative 
V.  Allen,  138  I\[ass.  27,  5  Am.  i)y  Itlood. 
Rep.  246,  247,  tliat  pecuniary  inter- 
Joyce  Ins.  Vol.  I. — 0.  129 


§  26  JOYCE  ON  INSURANCE 

can  be  no  recovery,*  while  in  life  insurance  the  interest  need  only 
exist  at  the  time  the  insurance  is  effected,'  unlaws  such  be  the  neces- 
sary effects  of  the  provisions  of  the  insurance  itself.*  Again,  in 
life  policies  there  is  no  distinction  between  total  and  partial  losses, 
but  upon  the  loss  occurring  the  insurer  is  bound  to  pay,  according 
to  the  terms  of  his  agreement,  the  full  sum  insured.^ 

Still  again,  in  a  life  policy  the  element  of  damages  is  not 
dependent  upon  the  payment  or  nonpayment  of  the  debt,  nor 
the  payment  of  the  amount  of  pecuniary  interest  by  third  par- 
ties. The  insurable  interest  is  inquired  into  beforehand  by  the 
insurers  to  prevent  speculative  insurances  which  are  against  public 
policy,  and  it  is  sufficient  in  all  life  policies  that  the  contract  is  not 
involved  as  a  ivager  policy,  although,  of  course,  it  may  he  voided 
for  fraud,  hut  as  ive  have  said,  the  question  as  to  interest  is  limited 
in  case  of  loss  to  that  of  whether  the  policy  is  within  that  class  de- 
nominated wagers}^  The  question  of  fraud  should  be  eliminated 
in  determining  whether  life  insurance  is  or  not  a  contract  of  in- 

6  Chrisman  v.  State  Ins.  Co.  16  Or.  Health  Ins.   Co.  6  Gray   (72  Mass.l 

283,   18   Pac.   466;    Saddlers'   Co.   v.  396,   399,   per   Shaw,   C.   J.,   quoting 

Badeoek,  2  Atk.  554,  when  insurable  from  Park  on  Ins.  (7th  ed.)  645;  St. 

interest  must  exist  under  fire  policies,  John  v.  American  Mut.  L.  Ins.  Co.  2 

see   notes   52   L.R.A.    330,   332,   336,  Duer   (N.  Y.)   419,  434.     In  the  last 

iMO,  341.  case  the  court,  notwithstanding-  it  ad- 

'  United  States. — Connecticut  Mut.  mils  that  there  is  no  distinction  be- 

Life  Ins.   Co.  v.   Schaefer,  94  U.  S.  tween  total  and  partial  losses  in  life 

457,  24  L.  ed.  251.  insurance,    nevertheless    asserts    that 

Mi.<^souri. — McKee   v.   Phoenix   Ins.  life  insurance  is  a  contract  of  indem- 

Co.  28  Mo.  383,  75  Am.  Dec.  129.  nity.     This  case,  however,  is  not  the 

Pennsylvania. — Rawls  v.  American  law    of    New    York,    since    the    rule 

Mutual  Life  Ins.  Co.  27  N.  Y.  282,  there  seems  to  be  that  life  insurance 

36  Barb.   (N.  Y.)   357,  84  Am.  Dec.  is  not  a  contract  of  indemnity.     Fer- 

280;   Corson's  Exr.,  Appeal  of,  113  guson  v.  Massachusetts  Mutual  Life 

Pa.  St.  438,  447,  6  Atl.  213.  Ins.   Co.  32  Hun    (N.  Y.)    306,  310, 

Rhode    Island.— Mowry    v.    Home  311,  et  seq.,  affirmed  102  N.  Y.  647; 

Life  Ins.  Co.  9  R.  I.  346.  Rawls  v.  American  Mutual  Life  Ins. 

England.— -Da\hy  v.  India  &  Lon-  Co.  36   Barb.    (N.  Y.)    357,  362.  84 

don  Life  Assur.  Co.  15  Com.  B.  365,  Am.  Dec.  280,  affirmed,  27  N.  Y.  282, 

13  Eng.  Rul.  Cas.  383.  289.     See  §  24a  herein. 

As  to  time  when  insurable  interest        i'' Mr.    Ricliards    says:      "We    are 

must  exist,  see  §  901  herein.  easily  led  to  approve  the  better  doc- 

*  Connecticut  Mut.  Life  Ins.  Co.  v.  trine  tliat  the  valid  life  insurance  con- 

Schaefer,  94  U.  S.  457,  24  L.  ed.  251 ;  tract  is  in  so   far  one  of  indemnity 

Sides  v.  Knickerbocker  Life  Ins.  Co.  that  the  necessity  of  an  insurable  in- 

16  Fed.  650 ;   Scott  v.  Dickson,  lOS  terest,  and  an  interest  actually  or  pre- 

Pa.  St.  6,  56  Am.  Rep.  192.  sumptively   of  a  valuable  character, 

8  Kennedy  v.  New  York  Life  Ins.  lies  at  its  foundation."     Richards  on 

Co.  10  La.  Ann.  809,  811,  citing  An-  Ins.   (3d  ed.)  p.  40,  sec.  34. 
neslev,  207;  Loomis  v.  Eagle  Life  & 

130 


I 


NATURE  OF  THE  CONTRACT  §  26 

deninity,  for  fraud  viliates  all  coulracls.  But  in  the  case  of  a 
valued  marine  policy  the  inquiry  is  not  thus  i-estricted,  as  where 
the  owner's  interest  in  a  valued  policy  is  diminished  to  the  extent 
of  a  loan  on  bottonn-y  to  pay  for  repairs. ^^  So  in  a  valued  marine 
i)olicy  the  insurer  may  show  that  either  by  mistake  or  design  the 
whole  of  the  property  insured  was  not  shipj)ed.  and  thus  entitle 
himself  to  a  proportionate  deduction  from  the  valuation  of  the 
policy. ^2  To  carry  the  argument  still  further,  if  life  insurance  is 
a  contract  of  indemnity  in  any  case  whatsoever,  then  since  by  in- 
demnitv  is  meant  a  full  indemnity,  and  no  more,  it  mii.'^  be  con- 
ceded  that  the  question  may  be  opened  to  the  extent  of  determining 
whether  tho  party  intended  to  be  benetited  has  been  indcmnilied  oi- 
not,  as  in  tlie  case  of  Godsall  v.  Boldero,^^  and  that  ruling  n)ust 
then  be  held  to  govern.  This  conclusion  is  irresistible,  as  was  fully 
realized  by  the  six  judges  who  in  the  exchequer  chamber  expressly 
overruled  that  case  in  Dalby  v.  India  &  London  Life  Aasurance  Com- 
pany,^* and  held  unequivocally  that  life  insurance  w^as  not  a  con- 
tract of  indemnity,  and  how  an  agreement  to  pay  a  fixed  sum,  and 
one  in  which  the  premium  is  based  upon  the  duration  of  human 
life  and  an  event  which  is  bound  to  occur  and  which  diflFers  in  so 
many  essentials,  can  be  held  to  be  a  contract  of  indemnity  is  hardly 
conceivable  without  also  conceding  that  Godsall  v.  Boldero  ^^  de- 
termines the  law,  and  if  so,  the  rule  stare  decisis  should  obtain,  not- 
withstanding the  injustice  of  that  decision  w^as  so  great  that  Mr. 
Bunyon,^^  evidently  speaking  for  the  profes.«ion,  attacked  it  on 
that  ground,  among  others,  and  predicted  that  it  would  be  over- 
ruled," a.s  was  thereafter  done  in  Dalby  v.  India  &  London  Life 

^^  Read  v.  jMutual  Safety  Lis.  Co.  He  slroiiolv   disapproves   the  ruling 

3  Sand.  (N.  Y.)  54.  in    Godsall    v.    Boldero,    9    Ea-st,    72, 

^2  Atlantic    Ins.    Co.    v.    Lunar,    1  and  says  that  there  are  the  greatest 

Sand.  (N.  Y.)   91.  difHculties  in  considorinij  the  contract 

^^9  East,  72.  as  tliat   oi"  an  indemnity  apart  from 

1*  15   Com.   B.   365,  13   Eng.   Rul.  the  statute  14   George  'llL,  chapter 

(as.   383.      See   Ferguson   v.    Massa-  48,  and  that  the  principle  upon  which 

clnisetts  Mut.  Life  his.  Co.  32  Hun  the  decision  is  based  is  the  assumed 

(N.Y.)  312,  per  Hardin,  J.,   (affirm.-  <-ommon-law  doctrine  rather  than  th<' 

ing  Dalby    v.    Lidia    &    London   Life  words  of  the  act,  and  he  adds:     "So 

Assur.   Co.)   affirmed  102  N.  Y.  647.  great   is  the   injustice  involved   in   it 

^5  9  East,  72.  that  in  practice  it  is  universally  re- 

^^  Bunyon  on  Life  Assur.  .sec.  7.  .jected.     .     .     .     The     officers     them- 

"  This   author,  who   wrote    (1853)  selves     .     .     .     have  not  found  it  to 

before  the  decision  in  Dalby  v.  India  be  for  their  benefit  to  act  upon  the 

&  London  Life  Assur.   Co.'  15   Com.  rigid  rule  of  law,  but  generally  pay 

R.  ;!65,  13  Eng.  Rul.  Cas.  383  (1854),  without  inquiry."     He  further  says: 

gives  much  consideration  to  this  ques-  "So  strong  appears  the  feeling  at  the 

tion,  and  determines  that  life  insnr-  present  time  in  the  profession  against 

ance  is  not  a  contract  of  indemnitv.  this  decision,  that  it  is  by  no  means 

131 


§  2G 


JOYCE  OX  insurancp:^ 


Assurance  Company/^  wherein  llie  judges  also  declared  that  the  in- 
justice of  the  decision  was  so  ,2;reat  that  hut  a  few  othces  had  availed 
themselves  of  it.  We  have  >h<)\\ii  in  a  i)ii(ir  section  ^^  that  although 
the  amount  may  Ijc  agreed  upon  beforehand,  as  in  case  of  valued 
marine  policy,  nevertheless  that  does  not  alter  the  fact  that  an  in- 
dennrity  is  intended  in  such  policies,  and  although  a  life  policy 
may  be  a  valued  one,  the  similarity  extends  no  further.  We  con- 
clude, therefore,  as  we  first  asserted,  that  the  weight  of  authority  is 
that  life  insurance  is  not  a  contract  of  indemnity.^"     It  is  also  de- 


impiobaljle  that  it  may  be  shortly 
reviewed  in  a  higlier  court  than  that 
in  which  it  was  decided."  This  au- 
thor also  a.sserts :  "A  whole  life  poli- 
cy is  not  like  a  fire  or  marine  assur- 
ance made  for  a  short  period,  and 
renewable  with  the  consent  of  both 
jiarties,  but  is  a  contract  to  receive 
a  sum  of  money  upon  an  event  which, 
although      deferred,      will      certainly 


Life  ludemnitv  Co.  166  Mo.  App. 
221,  148  S.  W".  626,  G.'^.O. 

Neiv  Jersey. — Campbell  v.  Su- 
preme Conclave  Improved  Order  of 
lleptasoph-s,  66  N.  J.  L.  274,  280, 
54  L.R.A.  576,  49  Atl.  550;  Trenton 
Mut.  Life  &  Fire  Ins.  Co.  v.  Johnson, 
24  N.  J.  L.  585. 

Neiv  York. — Enil)ler  v.  Hartford 
Steam   Boiler  Inspection  &  Ins.   Co. 


happen,  and.  although  renewed  from  40  X.  Y.  Supp.  450,  452,  8  App.  Div. 
year  to  year  by  the  payment  of  an  186,  case  aff'd  158  N.  Y.  431,  44 
annual   premium  the  premium  is  so    L.R.A.  512,  53  X.  E.  212;  Rawls  v. 

American  Mutual  Life  Ins.  Co.  36 
Barb.  (N.  Y.)  357,  27  X.  Y.  282, 
289,  84  Am.  Dec.  284;  Algase  v. 
Horse  Owners  Mut.  Indemnity  As- 
soc. 77  Hun,  472,  29  X.  Y.  Supp.  101, 
302;  Ferguson  v.  ^lutual  Life  Ins. 
Co.  32  Hun,  311,  312,  affM  102  X.  Y^ 
647. 

OJiio. — Kecklev  v.  Co.sliocton  Glass 
Co.  86  Ohio  St.'  213,  99  X.  E.  299, 
Am.  &  Eng.  Ann.  Cas.  1913D.  607. 
Veniifiiilvania. — Scott  v.  Dickson, 
States.— Cenh-i\\  Bank  of  108  Pa.  St.  6,  56  Am.  Rep.  192.  See 
Washington  v.  Hume,  128  U.  S.  195,  also  Little's  Appeal,  162  Pa.  586,  29 
32  L.  ed.  370,  9  Sup.  Ct.  41.  Atl.  660,  42  Am.   St.  Rep.  844. 

Georgia. — Exchange  Bank  v.   Loh.        Hhode    Island. — Mowrv    v.    Home 
104  Ga.  446,  469,  470,  44  L.R.A.  372,    Life  Ins.  Co.  9  R.  I.  .346,  354. 
382,  31  S.  E.  459.  Wisconsin. — Gatzweiler  v.  Milwau- 

Indian-a. — X^ye  v.  Grand  Lodge,  9-  kee  .Elect.  Rv.  &  Lisht  Co.  336  Wis. 
Ind.  App.  131,"  139,  36  X.  E.  429,  per  34,  37, 18  L.R.A.(X.S.)  211,  16  Amer. 
Lotz,  J.  &   Eng.  Annot.  Cas._633,  116  X.  W. 

3Iari/Jand. — Emerick     v.     Coaklev,    633.  ;>7  Ins.  L.  J.  64 <. 
.35  Mdi.  188,  193;  Whiting  use  of  Sun        Encjland.—D&lhy  v.  India  &  Lon- 


calculated  that  the  right  of  renewal 
rests  with  the  assured,  and  is  a 
portion  of  the  consideration  for  which 
all  past  premiums  liave  been  paid." 
Bunyon  on  Life  Assur.  79  Law 
Library.  *22,  *24. 

18  15   Com.   B.   365,   13  Eng.   Rul. 
Cas.  :i83. 

19  §  25. 

2^  71ie    folloicing    authorities    liold 
thai  it  is  not  a  contract  of  indemni- 

United   States. — Central    Bank    of 


Mut.  Ins.  Co.  v.  Independent  !Mutu 
al  Ins.  Co.  15  :\Id.  297,  .327. 

Massachusetts. — Mutual  Life  Ins. 
Co.  V.  Allen,  138  Mass.  24,  27,  52 
Am.  Rep.  246.  247. 

Missouri. — Wavland     v.     Western 


don  Life  Assur.  Co.  15  Com.  B.  365, 
13  Eng.  Rul.  Cas.  383:  Law  v.  Lon- 
don Indis])utal)lc  Lile  Policy  Co.  1 
Kav  &  J.  22.!,  228,  229. 

Bunyon  on  Life  Ins.   (79  Law  Li- 
brary)  *7-24;  17  Earl  of  Halslmry's 


132 


NATUKE  OF  THE  CONTRACT 


§  26 


Laws  of  England  "Insurance,"  p.  not  merely  for  an' indemnity,  as  in 
.')44.  See  Id.  p.  513,  where  it  is  said  :  marine  and  fire  policies."  Phoenix 
"Life  insurance  is  not  a  contract  of  Muiual  Life  Ins.  Co.  v.  Bailey,  13 
indemnity  and  the  principle  of  sub-  Wall.  (80  U.  S.)  GKi,  618  et  seq.  20 
loj^ation  does  not  apply  to  it."  See  L.  ed.  501,  per  Clifford,  C.  J. 
also  Sweet's  Diet.  En"'.  Law  (ed.  United  Stales. — Manhattan  Life 
]882)  "Insurance."  Examine  note  Ins.  Co.  v.  llennessy,  99  Fed.  64,  68, 
]28  Am.  St.  Rep.  303,  304.  39  C.  C.  A.  629;   Sides  v.  Knicker- 

"Policies  of  life  insurance  are  ijov-    hocker  Life  Ins.  Co.   (C.  C.)  16  Fed. 
erned  in  some   respects  by   different    6r)0,  652. 

rules  of  construction  from  those  ap-  Georgia. — Exchange  Bank  v.  Loh, 
plied  by  the  courts  in  case  of  poli-  104  Ga.^  446,  470,  44  L.R.A.  372,  382, 
cies  against  marine  risks  or  policies    31  S.  E.  459. 

against  loss  by  fire.  Marine  and  fire  Illinois. — Guardian  Mutual  Life 
policies  are  contracts  of  indemnity  Ins.  Co.  v.  Hogan,  80  111.  45,  22  Am. 
by  which  the  claim  of  the  insured  is    Rep.  180. 

commensurate  with  the  damages  he  Indiana. — Nye  v.  Grand  Lodge  A. 
sustained  by  the  loss  of  or  injury  to  O.  IT.  W.  9  Ind.  App.  131,  139,  36 
the  property  insured.     .     .     .     Life    N.  E.  429. 

insurances  have  sometimes  been  con-  loiva. — Farmers  &  Traders  Bank  v. 
strued  in  the  same  Avay,  but  the  bet-  .Johnson,  118  Iowa,  282,  284,  91  N. 
ter  opinion  is  that  the  decided  ca.ses  W.  1074  (cited  to  point  of  insurable 
which  proceed  upon  the  ground  that  interest  of  daughter  and  assignment), 
the  insured  must  necessarily  have  Louisiana. — Rorabach  v.  Piedmont 
some  pecuniary  interest  in  the  life  of  &  A.  L.  Ins.  Co.  35  La.  Ann.  233,  234, 
the  cestui  qui  vie  are  founded  in  an  -^8  Am.  Rep.  239  (cited  to  insur- 
crroneous  view  of  the  nature  of  the    able  interest). 

contract,  that  the  contract  of  life  in-  New  York. — Olmstead  v.  Koyes.  85 
surance  is  not  necessarily  merely  one  N.  Y.  593,  598;  Waldheim  v.  .John 
of  indemnity  for  a  pecuniary  loss,  a.s  Hancock  Mut.  Life  Ins.  Co.  8  ■\!isc. 
in  marine  and  fire  policies,  that  it  is  509,  28  N.  Y.  Supp.  766;  Grattan  v. 
sutficient  to  show  that  the  policy  is  Natural  Life  Ins.  Co.  15  Hun,  77 
not  invalid  as  a  wager  policy  if  it  (cited  to  insurable  interest), 
appear  that  the  relation,  whether  of  Peinisi/lvaniu. — Corson's  Appeal, 
consanguinity  or  affinity,  was  such  113  Pa.  447,  57  Am.  Rep.  479,  6  Atl. 
between  the  pei'son  whose  life  was  213  (cited  to  insurable  interest)  ; 
insured  and  the  beneficiary  named  in  Corson  v.  Garnier,  17  Phila.  342.  ■ 
the  policy  as  warrants  the  conclusion  South  Carolina. — Crosswell  v.  Con- 
that  the  beneficiary  had  an  interest,  necticut  Indemnity  Assoc.  51  S.  Car. 
whether  pecuniary  or  arising  from  103,  112,  28  S.  E.  200. 
dependence  or  natural  affection,  in  Virfjinia. — Clemmitt  v.  New  York 
the  life  of  the  person  insured.  In-  Life  Ins.  Co.  76  Va.  360  (cited  to  in- 
surers, in  such  a  policy,  contract  to  surable  interest). 
pay  a  certain  sum  in  tlie  event  there-  A  life  insurance  policy  is  not  by 
in  s])ecified,  in  consideration  of  the  the  great  weight  of  authority  a  con- 
payment  of  the  stipulated  premium  tract  of  indemnity,  but  is  strictly  a 
or  prcmiinns,  and  it  is  enough  to  en-  \alued  policy;  "a  stii)ulation  to  pay 
title  the  assured  to  r(<cover  if  it  a|)-  a  sum  certain  upon  the  happening  of 
pear  that  the  stipulated  event  lias  a  specified  contingency.  Under  such 
happened,  and  that  the  party  effect-  a  ])olicy  the  amount  payable  has  no 
ing  the  policy  had  an  insurable  inter-  neces.sary  relation  to  damages  actu- 
est  such  as  is  described  in  the  life  of  ally  suffered  by  the  beneficiaiy.  The 
the  person  insured  at  the  inception  insured  buys  and  pays  for  the  riglit 
of   the   contract,   as   the   contract   is    to  have  from  another  a  specified  sum 

133 


§  26 


JOYCK  ON  INSURANCE 


cidcd  that  as  to  a  creditor  l)aying  premiums  of  a  i)()licy  upon  his 
dehtor's  life,  the  contract  is  one  of  indemnity,  but  it  is  not  so  where 
the  premiums  are  paid  by  the  insured.^ 


111- 
the 


upon  the  happeniiiii'  of  a  spccitifd  taken  hetwocn  marine  and  other 
event.  Payment  for  the  insurance  is  surances  and  life  insurance,  on 
in  the  iiatare  of  a)i  inrestmeiii.  The  irround  that  while  the  lormer  have 
money  value  of  the  tlung  covered  by  for  their  object  to  indemnify  for  loss, 
tlie  insurance  does  not  enter  into  the  the  latter  is  an  absolute  engagement 
transaction  at  all."  (Italics  are  ours.)  to  pay  a  fixed  sum  on  the  happening 
(ratzweiler  v.  IVJilwaukee  Electric  Ky.  of  a  certain  event,  without  reference 
&  Light  Co.  136  Wis.  34,  37,  18  to  any  damage  in  fact  suffered  by 
L.R.A.(N.S.)  211,  16  Amer.  &  Eng.  the  insured  in  consefiuence.  But  this 
An  not.  Cas.  633,  116  S.  W.  033,  per  distinction  is  superficial,  and  rests 
Marsliall,  J.  rather  upon  the  mode  of  determining 

The  following  ai(thorities  hold  that  the  amount  of  indemnity  than  upon 
it  is  not  Htrictli)  a  contract  of  indem-  any  ditference  in  principle.  There  is 
nity,  or,  in  other  words,  it  is  in  the  the  same  difference,  having  reference 
nature  of  an  ituhnnnity,  as  in  case  to  the  question  of  indemnity,  between 
where  a  creditor  insures  his  debtor's  \alued  and  open  policies,  in  l)oth  lire 
life.  Bacon's  Benefit  Societies  and  and  marine  insurance,  that  there  is 
Life  Ins.  sec.  163;  Miller  v.  Eagle  between  an  open  policy  in  either  and 
Life  &  Health  Ins.  Co.  2  E.  D.  Smi'tli,  a  policy  of  life  insurance.  In  open 
294  295.  Ijolicies  the  question   of  the  amount 

The  following  authorities  hold  that  of  indemnity  is  left  to  1)p  deternnned 
it     is     a      contract      of      indemnitii:    wlien  the  contingency   upon  which   it 

becomes  due  shall  have  happened, 
while  in  valued  policies  and  policies 
on  lives  the  value  of  the  interest 
which  the  insured  seeks  to  nrotect  is 
"The  contract  of  insurance  is  agreed  upon  by  the  parties,  and  in- 
one  of  indemnity,  but  in  life  insur-  serted  in  the  policy,  and  so  the 
ance  the  amount  of  the  indemnity,  amount  of  indemnity  whicii  shall  be- 
we  think,  like  a  valued  policy,  is  come  due  on  the  happening  of  tlu> 
agreed  upon  beforehand;"  St.  John  given  contingency  is  predetermined, 
v?  American  Mutual  Ins.  Co.  2  Duer  The  purpose  in  all  cases  is  alike — in- 
(N.  Y.)  41fl,  434,  not  the  law  of  New  demnity  for  the  lo.^s  of  a  valuable 
York   as   noted    in   the   text;    Codsall    interest."     May  on  Ins.  (3d  ed. 


Bevin  v.  Connecticut  Mutual  Life 
Ins.  Co.  23  Conn.  244,  251;  Kennedy 
V.  New  York  Life  Ins.  Co.  10  La. 
Ann.  809,  810,  where  Merrick,  C.  J., 

says 


as 

V.  Boldero,  9  East,  72,  wliich  was 
overruled  as  noted  in  the  text.  See 
note  2  Smith's  Lead.  Cas.  (44  I^aw 
Lib.  203,  207)  165,  170.  Mr.  IsI-av-' 
sl\all  speaks  of  life  insurance  as  an. 
expedient  by  which  a  pecuniary  in- 
demnity may  be  seeured  to  the  l)ene- 
liciaries.  (Book  3.  e.  1.  p.  7()().  ed. 
1810)  ;  and  he  notes  (Id.  p.  777)  the 
ease  of  Godsall  v.  Boldero,  9  East, 
72,  which  at  tliat   time  had  not  been 


sec. 
7.     Sipe  also  id.  sec.  117. 

Mr.  Philli])s  (1  Phillips  on  Ins. 
sec.  3),  says  that  the  cdn tract  is  now 
considered  "as  extending  n(  t  only  to 
indemnity  against  sea  risks,  fire,  or 
laud,  and  death,  but,"  etc.  This  au- 
thor, however,  wrote  before  Godsall 
y.  Boldero.  H  East,  72,  was  overruled. 

The  code  detinition  of  insurance  in 
California  is  thought  \)\  Mr.  Deering 
to  imply  that  life  insurance  is  a  con- 


overruled,  and  says :     "They  hold  lliat    tract     o!      indemnitv     in     tiiat     .state 


this  insurance,  like  every  other  to 
which  the  law  gives  effect,  is  in  its 
nature  a  contract  of  indemnity  as 
distinguished  from   a   wager. 

"A  distinction  has  sometimes  been 


(DeiM-ing's  Aniiot.  Civ.  (\n\v  Cal.  sec. 
2527,  and  note),  although  he  does  not 
discuss  the  (|uestion. 

^  Central   Bank   of   Washington   v. 
Hume,  128  r.  S.  105.  9  Sup.  Ct.  41, 


134 


Ni\TUUK   OF  THE   CONTRACT  §  27 

§  27.  Accident  insurance  is  not  a  contract  of  indemnity  in  all 
cases. — Accident  iii.siirauce  is  not  a  contract  of  indemnity  in  all 
cases.  It  only  indemnifies  against  the  effect  of  accidents  resuUin.o; 
in  bodily  injuries.  In  case  of  death  occasioned  thereby  it  can  in 
no  sense  be  said  to  indeumify,  because  in  such  case  there  is  a  close 
analogy  between  accident  and  life  insurance.^  A  policy  of  accident 
insurance  ordinarily  has  much  the  same  features  as  one  of  life  in- 
surance, though,  it  more  nearly  than  one  of  life  insurance  has  the 
indenmity  feature.  The  amount  stipulated  to  be  paid  is  a  fixed 
sum  as  to  each  particular  injury  specified,  or  is  computable  without 
any  such  definite  data  as  in  case  of  the  loss  of  property.  And  it  is  de- 
cided that  an  accident  insurance  policy  is  to  be  regarded  as  an 
investment  contract  in  which  the  only  parties  concerned  are  the 
insurer  and  the  insured  or  the  beneficiary.  It  is  not  a  contract  of 
indemnity  giving  right  to  subrogation  in  the  absence  of  a  provision 
expressly  making  it  such  ^  nor  is  an  accident  insurance  contract  a 
contract  of  indemnity,  even  though  the  stipulated  sum  to  be  paid  is 
called  an  "indenmity."  Calling  such  payment  an  indemnity  is  a 
matter  only  of  nomenclature,  which  does  not  affect  the  substance 
of  the  contract,  nor  change  its  legal  effect,  nor  render  the  policy 
an  indemnity  contract.*  It  is  said,  however,  that  accident  insur- 
ance indenmifies  in  a  certain  sense  against  the  pain  and  loss  con- 
nected with  the  immediate  accident,  except  in  case  of  death.^  It 
is  also  decided  that  a  policy  of  accidental  insurance  is  issued  and 
accepted  for  the  purpose  of  furnishing  indenmity  against  accidents 
and  death  caused  by  accidental  means,  and  the  language  of  the 

32  L.  od.  370  (cited  in  West  Norfolk  L.  J.  647,  quoted  from  in   Suttles  v. 

Lumber  Co.,  In  re,  112  Fed.  764;  Ex-  Railway  Mail  Assoc.  141  N.  Y.  Supp. 

cliano-e   Bank   v.   Loli,   104   Ga.   446,  1024,  ir)6  App.  Div.  435. 

449,^44   L.K.A.   374,  31    S.    E.   459;        *  Suttles    v.    Railway    Mail    Assoc. 

Crosswell   v.    Connecticut   Indemnity  141  N.  Y.  Supp.  1024,  156  Ai)p.  Div. 

Assoc.  51  S.  Car.  103,  112,  28  S.  E.  4.35. 

200).  ^  Tlieobald  v.  Kailway  Passenger's 

2  See  Bradhurn   v.   Great   Western  Assur.  Co.  26  Eng.  L.  &  Eq.  432,  437, 

Ry.   Co.  23  Week.   Rep.   48,   8   Eng.  440.     But  in  Ilealey  v.  Mutual  Acci- 

Rul.   Cas.  439.     Examine   Gatzweiler  dent   Assn.   133    111.   556,  560,  25  N. 

V.  Milwaukee  Elect.  Ry.  &  Light  Co.  E.  52,  31  Cent.  L.  J.  419,  23  Am.  St. 

136   Wis.   34,  37,  16   Anier.  &   Eng.  Rep.  637,  9  L.R.A.  371,  where  it  is 

Annot.    Cas.    633,    18    L.R.A. (N.S.)  said  that  the  purpose  of  accident  in- 

211,   116    S.   W.    633,   37   Ins.    L.   J.  surance     is     to      furnish     indemnity 

647:   Accident   insurance   not   a  con-  against    accidents    and    deatli    caused 

tract  of  indemnity,  17  Earl  of  Hals-  by  accidental  means.     This,  however, 

bnry's  Laws  of  England,  \^.  566.  appears  to   l)e  a  mere  general  state- 

^Gatzweiler  v.   Milwaukee   Electric  ment  of  the  court,  made  incidentally 

Ry.  &  Light  Co.  136  Wis.  34,  16  Am.  in    connection    with    the    question   of 

&'  Eng.    Ann.    Cas.    633,    18    L.R.A.  construction. 
(N.S.)   211,  116  N.  W.  633,  37  Ins. 

135 


§§  27a,  27b  JOYCE  ON  INSURANCE 

policy  must  be  construed  with  reference  to  the  subject  to  which 
it  is  applied.^ 

§  27a.  That  employers'  liability  insurance  is  contract  of  indem- 
nity.— A  policy  issued  by  a  casualty  company  against  employers' 
liability  is  a  contract  of  indenmity  to  the  amount  agreed  upon,  but 
it  does  not  necessarily  relieve  the  assured  from  all  responsibility 
whatever  for  damage,^  resulting  from  injuries  to  its  employees.'  A 
casualty  insurance  policy  providing  that  no  action  shall  lie  again.st 
the  company  as  respects  any  loss  under  the  policy,  unless  it  shall 
be  brought  by  the  assured  himself  to  reimburse  him  for  loss  actually 
sustained  and  paid  by  him  in  satisfaction  of  a  judgment,  witliiii 
sixtv  days  from  date  of  such  judgment  and  after  trial  of  the  issues, 
constitutes  a  contract  of  indemnity  and  not  one  of  insurance.' 
And  under  a  like  provision  the  contract  is  held  to  be  one  of  indem- 
nity for  the  benetit  of  assured.^  Again,  all  cases  of  indemnity 
against  future  contingencies,  and  this  applies  to  an  employer's  lia- 
bility policy  against  Hal)ility  for  personal  injuries  to  employees, 
are  included  in  a  statutory  provision  whereby  one  who  indemnilies 
another  against  an  act  to  be  done  by  the  latter  is  lialjle  jointly  with 
the  person  indemnified,  and  separately  to  every  person  injured  by 
such  act.^° 

§  27b.  Same  subject:  whether  contract  one  of  indemnity  or  lia- 
bility or  both. — Whether  an  employers  liability  policy  is  a  con- 
tract of  indenmity  merely,  or  of  liability,  or  both,  depends  neces- 
i^arily  upon  the  terms  and  conditions  of  the  instrument.  A  dis- 
tinction is  made  between  contracts  for  indemnity  against  liability 
and,  those  of  indemnity  against  loss.  In  the  former,  case  the  in- 
surer's obligation  becomes  fixed  when  liability  attaches  to  the  in- 
sured. In  the  latter  case  the  insurer's  liability  does  not  attach  until 
loss  has  been  suffered,  that  is,  Avhen  the  insured  has  paid  the  dam- 
ages. And  where  the  agreement  is  to  indemnify  against  loss  from 
common  law  or  statutory  liability,  and  there  is  also  a  provision  in 
the  contract  that  no  action  shall  lie  against  the  insurer  as  respects 

6  Healey  v.  Mutual  Are.  As.sn.  133  oka  Liinil)cr  Co.  v.  Fidelity  &  Casu- 

111.    5.56,    23    Am.    St.    Rep.    037,   9  alty  Co.  (iii  Minn.  2S(),  30  L.R.A.  (589, 

L.R.A.  371,  23  N.  K.  :)2.  65  N.  W.  353. 

'Rnmfoi-d  Falls  Paper  Co.  v.  Fi-  »  Carter  v.  .F^tna  Life  Ins.  Co.  76 

delitv  &  Casualtv  Co.  192  Me.  .')74,  Kan.  2^.5,  11  L.R.A. (N.S.)   1155,  91 

43  Atl.  503;  17 'Earl  of  Halsbiuy's  Pac.  178. 

Laws  of  Enslaiid.  p.  571.  ^°  ^loore    v.    Los    Angele.s    Iron    & 

8  Kennedy^  V.  Fidelity  &  Casualty  Steel  Co.  (U.  S.  C.  C.)  89  F_ed.  73, 
Co.  100  Minn.  1,  117  Am.  St.  Rep.  under  Cal.  Civ.  Code,  sec.  27^7,  dis- 
cing, 9  L.R.A. (N.S.)  478n,  10  Am.  &  tinguished  in  Northern  v.  Casualty 
Eng.  Ann.  Cas.  673,  110  N.  W.  97,  Co.  of  America  (U.  S.  C.  C.)  177 
36  Ins.  L.  J.  224,  distinguishing  An-  Fed.  981. 

136 


NATURE  OF  THE  CONTRACT  §  llh 

• 
loss  under  llic  policy,  unless  it  is  brought  by  the  assured  himself 
to  reimburse  him  for  loss  actually  sustained  and  paid  by  him  within 
a  certain  time  in  satisfaction  of  a  judgment  after  trial  of  the  issue, 
it  is  determined  that  a  fair  conclusion  is  that  the  i)olicy  is  one  of 
indemnity  against  loss,  and  that  the  insurer's  liability  does  not 
become  fixed  until  the  assured  has  paid  the  judgment  as  provided 
in  the  policy.^^  80  it  is  declared  in  a  Tennessee  case,  that  "there  is 
a  difference  between  the  effect  of  a  policy  Avhich  insures  directly 
against  lialjility,  and  one  that  insures  against  loss  or  damage  by 
reason  of  lial)ility.  Under  contracts  of  the  first  description,  the 
amount  of  the  policy,  up  to  the  extent  of  the  liability  incurred  by  an 
emi)loyer  on  account  of  an  accident  to  an  employee,  becomes,  im- 
niediately  upon  the  happening  of  the  event  on  which  the  liability 
depends,  and  the  giving  of  such  notice  as  the  policy  provides  for, 
an  asset  of  the  assured,  which,  in  the  absence  of  any  provisions  to 
the  contrary  in  the  policy,  may  be  assigned  by  him,  or  taken  for  his 
debt,  subject,  of  course,  to  the  making  of  such  ])roofs  to  perfect 
the  demand  as  the  policy  may  provide  for.  Under  the  policies  of  the 
second  kind,  to  which  the  one  before  us  belongs,  the  amount  of  the 
insurance  does  not  become  available  until  the  assured  has  paid  the 
loss,  and  is  not  even  then  available  unless  proper  notice  has  been 
given  as  provided  in  the  policy."  ^^  In  a  Wisconsin  case  the  insurer 
agreed  to  pay  the  employer  all  sums  for  which  he  "shall  become 
liable  to  his  employees"  on  account  of  personal  injuries,  etc.;  and 
it  was  held  to  be  a  contract  of  indenmity  against  liability,  so  that 

"  Conqueror   Zine   &   Lead   Co.   v.  land  Ca.snalty  Co.  197  Ma.ss.  167,  8:5 

-TStna   Life   Ins.   Co.   152   ]\Io.   App.  N.   E.  407;  Connolly  v.  Bolster,  187 

832,   133   S.   W.   lot),  40   Ins.   L.   J.  Mas.s.  266,  72  N.  E.  HSl. 

721;  Cavard  v.  Rol)ertson  &  Hobbs,  .l//c/f?(7««-— Stephens    v.    Peimsyl- 

123  Tcnii.  882,  :iO  L.K.A.(N.S.)  1224  vania  Ca.snalty  Co.  135  Mich.  180,  07 

and  note,  131  S.  \V.  8(i4,  40  ins.  L.  J.  X.  W.  685,  33  Ins.  L.  J.  180. 

144.      The  above   ca.se     in    152     Mo.  Xew  J<;r.se//.— Travelers  Ins.  Co.  v. 

App.    721,    cites    the    following-    de-  Mose.s,  63  N.  J.  Eq.  260,  92  Am.  St. 

cisions:  Re]).  663,  49  Atl.  720. 

United  States.— Marvldwd    Ca.snal-  New  YorA-.^Mnnroe    v.    Maryland 

ty    Co.    V.    Omaha    EleVtric    Lio-ht    &  Casualtv  Co.  96  X.  Y.  Supp.  705,  48 

Power  Co.  157  Fed.  514,  85  C.  C.  A.  Misc.  183. 

106:  Allen  v.  .l^tna  Life  Ins.  Co.  (U.  Tennessee.— ^V\u\vy        v.        United 

S.  C.  C.)  137  Fed.  136.  Stales   Casualty   Co.   113   Tcnii.   592, 

ioM-«,— Cusliniaii      v.      Carboiidale  Sii  S.  W.  2,  34  Tns.  L.  J.  179. 

Fuel    Co.    122  Iowa,  656,  98  N.  W.  ]Vashin(jton.—P\\i-et    Sound    Imp. 

509.  Co.  v.  Frankfort  i\rarine  Accident   & 

Maine.— Vryv  v.  P.alh  (!as  &  Elec-  Plate   Class   Co.   52   Wa.sh.   124,   100 

trie  Co.  97  Me.  241.  94  Am.  St.  Rep.  Pac  190. 

.500,  59  L.R.A.  444,  54  Atl.  395,  32  12  ],^iniev  y.   Tiiited    States    Casu- 

Ins.  L.  J.  656.  alty    Co.   113    Tenn.    592,   83    S.    W. 

Massachusetts. — Davison  v.   Marv-  2,  34  Ins.  L.  J.  179. 

137 


§  27b  JOYCE  ON  INSURANCE 

payment  by  the  employer,  of  a  claim  for  personal  injury,  was  not 
a  condition  precedent  to  his  right  to  recover  against  the  insurer.^^ 
Under  an  Oliio  decision  it  is  determined  than  an  employer's  liability 
}>olicy  is  not  a  contract  to  pay  a  liability,  but  one  of  indenmity 
against  loss,  under  a  provision  that  no  action  should  lie  against  the 
company  to  recover  for  any  loss  under  the  policy,  unless  brought 
by  assured  for  loss  actually  sustained  and  paid  in  money  by  him, 
in  satisfaction  of  a  judgment,  after  trial  of  the  issue,  "nor,  unless 
such  action  is  brought  within  ninety  days  after  final  judgment 
against  him  has  been  satisfied."  ^*  80  in  equity  an  employers'  lia- 
bility insurance  is  not  an  insurance  against  liability,  but  of  indem- 
nity against  loss  by  reason  of  liability,  the  contracting  parties'  in- 
tention being,  where  the  contract  so  provides,  to  reimburse  or  make 
whole  the  insured  against  loss  sustained  by  it  on  account  of  its  lia- 
bility to  its  emi)loyees  for  negligence;  and.  independently  of  such 
a  condition  as  to  reimbursement  of  the  insured,  in  an  action  brought 
by  him  tlie  contract  would  be  construed  as  one  of  indemnity  only.^* 
If  a  clause  in  a  policy  undertakes  to  indenmify  assured  against  loss 
by  reason  of  liability  on  account  of  injuries  to  employees,  and  the 
insurer  agrees  to  defend  proceedings  against  assured,  or  settle  the 
same,  unless  it  elects  to  pay  the  provided  indemnity  to  assured,  it 
docs  not  make  the  contract  one  guaranteeing  jniyment  of  an  obh- 
gation  of  insured,  rather  than  one  of  indemnitv.  where  another 
clause  provides  that  no  action  shall  be  brought  against  the  insurer 

^^  Hoven     v.     Employer.s   Liability  where  there  has  been  no  loss.     The 

Assur.  Corp.  93  Wis.  '201,  32  L.R.A.  contract  of  insurance  contains  noth- 

388,  67  N.  W.  46,   compare   Fenton  ing  to  show  that  it  was  the  object  or 

V.    Fidelity   &    Casualty    Co.    36    Or.  intention   of  the   contracting   parties 

283,  48  L.R.A.  770,  .'jG' I^ac.  101)6.  that  the  insurer  sliould  guaranty  the 

^*  Gari'ett  v.  Traveler's  Ins.  Co.  20  ga.s    company's    liability    for    negli- 

Ohio    Dec.    181,   55    Oliio    Law   Bull,  gence  to  its  employees.     Tt  was  not 

181.  a  contract  of  in.surance  against  lia- 

^^  Frve  v.  Bath  Gas  &  Electric  Co.  bility,  but  of  indemnitv  asrainst 
07  Me. '241,  94  Am.  St.  Rep.  500,  59  loss 'by  reason  of  liability.  .^  .  . 
L.K'.A.  444,  54  Atl.  395.  The  court.  In  this  case  as  we  have  seen,  tiic  con- 
l>er  Wiswell,  C.  J.,  .said :  "The  con-  tract  was  one  of  indemnity  only.  Tt 
tract  was  with  the  gas  company  to  wa.s  not  obtained  by  the  gas  company 
indenmify  that  company  'against  for  the  benefit  of  its  employees,  but 
•  loss'  from  liability  for  damages  on  for  its  own  benefit  exclusively,  to  re- 
account  of  bodily  injuries  accidental-  indjurso  it  for  any  sum  that  the  com- 
ly  suffered  by  an  employee  and  pany  might  be  obliged  to  pay,  and 
caused  l)y  the  negligence  of  the  as-  had  jiaid  on  account  of  injuries  sus- 
sured.  The  use  of  the  word  'in-  taiued  by  an  employee  through  its 
demnify'  shows  the  object  and  nature  negligence.  Independently  of  the 
of  the  contract.  It  was  to  reimburse,  condition  in  the  contract  of  insur- 
"or  make  whole,  the  a.ssured  against  ance  above  quoted,  we  should  be  com- 
loss  on  account  of  such  liability,  pellod  to  construe  this  contract  as  one 
There     can     be    no     reimbursement  of  indemnity  only." 

138 


NATURE  OF  THE  CONTRACT 


271) 


unless  by  tlie  insuied  himself  to  reimburse  him  for  loss  aetually 
sustained  and  paid,  the  former  clause  being  merely  an  additional 
l)rivilege  for  insured's  protection.^®  Where  the  insurer  exi)re?sly 
binds  himself  to  pay  all  damages  with  which  insured  may  be  legal- 
ly charged  or  required  to  pay,  or  for  which  he  may  become  legally 
liable,  it  is  not  only  a  contract  of  indemnity,  but  also  a  contract  to 
pay  liabilities,  and  a  recovery  may  be  had  thereon  as  soon  as  the 
liability  attaches  to  insured  •  and  before  it  is  discharged.  The 
measure  of  damages  is  the  amount  of  the  accrued  liability. ^^  Again, 
it  is  held  that  an  employee's  liability  policy  is  not  one  of  indeirmity 
merely,  on  which  suit  could  not  be  brought  until  a.ssured  had  paid 
a  judgment  against  it  for  personal  injuries  t  >  an  employee,  but  in 
equity  the  insurer  becomes  the  principal  debtor  to  an  injured  em- 
ployee, and  the  assured  the  surety  so  that  a  bill  would  lie  by  the 


^®  Allen  V.  ^Etna  Life  In.s.  Co.  145  be  $5,000,  except  as  it  miglit  be  in- 
Fed.  881,  76  C.  C.  A.  265,  7  Ij.I^.A.  creased  tjy  failure  on  its  part  to  pay 
(N.S.)  958,  cited  in  Maryland  the  cost  of  making  tlie  defense.  Case 
Casualty  Co.  v.  Omaha  Klectric  followed  in  Vindicator  Con.sol.  Gohl 
LJglit  &  Power  Co.  157  Fed.  514,  85  -Mining  Co.  v.  Frankfort  iMariiic, 
C.  C.  A.  106.  In  this  ease  the  parties?  Accident  &  Plate  Glass  Ins.  Co.; 
agreed  that  the  assured  shall  not  Frankfort  Marine,  Accident  &  Plate 
settle  any  claim  "except  at  its  own  Ghiss  Ins.  Co.  v.  Vindicator  Consol. 
co.st."  An  action  was  brought  Gold  Mining  Co.,  158  Fed.  1023,  86 
against  a-ssured  resulting  in  a  judg-  C.   C.   A.   674. 

nieiit  against  it  for  .$5,000,  which  ^"^  American  Employers'  Liability 
was,  after  being  alfirmed  on  appeal.  Ins.  Co.  v.  Fordvee,  62  Ark.  562,  54 
paid  by  assured.  The  court,  per  Am.  St.  Rep.  305,  36  S.  \V.  1051. 
Adams,  Cir.  J.,  said:  "A.s  modified  In  this  case  it  is  said:  "Tlie  diffcr- 
bv  the  eondilion  just  rei'ened  to,  tlie  ence  between  a  contract  of  indemnity 
contract  is  one  of  indenuiity  against  and  to  pay  legal  liabilities  is  that, 
loss  to  the  extent  of  .$5,000,  together  upon  the  former,  an  action  cannot  be 
with  any  further  sum  which  the  in-  broughl  and  a  recovery  had  until  the 
surer  defending  the  same  in  the  name  liabililv  is  discliaj'ged,  whereas,  upon 
ol'  the  assured  might  I'orce  the  as-  t  lie  latter,  the  cause  of  action  is  com- 
sured  to  pay  as  outlays  or  expendi-  [vlete  when  the  liability  attaches," — 
tures  incident  to  making  the  defense,  (pioted  in  Frye  v.  Bath  Gas  &  Klec- 
It  clearly  indemnilied  against  the  trie  Co.  97  Me.  241,  94  Am.  St.  Hep. 
court  costs  in  (|ur'stion.  '  The  con-  500,  59  L.R.A.  444,  54  Atl.  395,  32 
tract  remains  one  of  iudeuuiily  loss  Ins.  L.  .1.  ()5(i.  See  Anoka  Lumber 
only  and  to  the  liniileil  ext(>nt  Co.  v.  I^'idelity  &  Casualty  Co.  (i.'] 
ju.st  specihed.  The  liiiiilation  is  as  Minn.  286,  3()  L.R.A.  68t>, '65  N.  W. 
much  a  pari  of  the  contract  a.s  the  353.  Held,  that  from  the  \'ery  terms 
covenant  ol'  in(h'iiuiity,  and  the  de-  of  the  instrument  itsell'  the  conlia<-f 
fendant  is  as  much  entitled  to  the  was  not  merely  an  agreement  to  in- 
full  protection  of  the  agreed  limit  as  demnif'y  the  plaintiff  against  any  act 
the  plaintilT  is  to  the  protection  of  of  the  employee,  but  that  in  case  of 
the  agreement  to  indc  iinil'\."  In  an  accident  of  such  a  character  as 
this  case  the  parties  agreed  that  the  to  injure  him,  whereljy  a  cause  of 
defendant's   limit   of  liability   should  action   should    arise   against    assured, 

139 


t 


$§  27c,  27d 


JOYCE  ON  INSURANCE 


lutler  to  establisli  tlie  principal's  lialjility  and  compel  it  to  perform 
the  contract  of  indemnity.^® 

§  27c.  Injury  to  property  or  to  employees  and  others:  to  what 
extent  contract  is  one  of  indemnity. — Insurance  against  loss  or  dam- 
age to  property,  wliether  owned  by  assured  or  others,  caused  by  ex- 
])losion  of  steam  boilers,  and  for  which  assured  may  be  lialjle,  and 
also  against  loss  of  life  or  injury  to  person,  whether  to  assured,  to 
employees,  or  to  any  other  person,  caused  by  such  explosion  or 
rupture,  and  payable  to  assured  for  the  benefit  of  the  injured  person 
or  persons,  or  their  legal  rej)resentatives  in  case  of  death,  and  not 
contingent  upon  tlie  legal  liability  of  assured,  is  a  contract  of  in- 
demnity in  so  far  as  it  covers  injury  to  the  property,  but  in  view 
of  the  provision  as  to  nonlegal  liability  of  the  assured  for  injury 
to  the  person,  it  is  not  a  contract  of  indemnity,  especially  so  where 
the  sum  ])aid  is  to  be  for  the  beuetit  of  the  injured  person,  and  it 
is  to  be  deemed  as  having  been  intended,  at  most,  as  a  pecuniary 
indemnity  to  the  legal  representatives  of  an  employee  for  the  loss 
sustained  by  them  in  consequence  of  death. ^^ 

§  27d.  English  workmen's  compensation  act  grants  complete  in- 
demnity.— A  policy  taken  out  insuring  against  accidents  to  em- 
ployees under  the  English  AVorkmen's  Compensation  Act  of  1006 
grants  a  com])lete  indemnity  mider  that  act.  the  fatal  accidents 
act  of  1846,  and  the  common  law,  and  applies  to  all  employees  in 
the  assured's  immediate  service.^" 

tlie    insurer    or    company   would    as-  ])]osion  and   accident    and    resulting 

sume  the  liability.     Distinguis<hed  in  loss    to   pro2)erty,    and    against    acci- 

Kennedy  v.  Fidelity  &  Casualty  Co.  dental  personal  injury  and    loss    of 

100  Minn.  1,  117  Am.  St.  Kep.  658,  human  life,  for  which  insured  miglit 

9  L.R.A. (N.S.)  478n,  10  Am.  &  Eng.  be  liable  to  his  employees  or  to  any 

Annot.  Cas.  673,  110  N.  W.  07,  30  other  person.     The  court  ^aid:     "On 

Ins.  L.  J.  224.  its  face  it  is  for  indemnity  against 

^8  Beacon   Lamp    Co.    v.    Travelers  explosion   and' accident,   and  los.s   or 

Ins.    Co.    61   N.    J.    Eq.    59,   47   Atl.  damage   resulting  therefrom    to    the 

570.  property,  real  and   personal,   of  the 

"  Embler  v.  Hartford  Steam  Boil-  assured,  and  to  all  property  of  others 
or  1  lisped  ion  &  Ins.  Co.  40  N.  Y.  for  which  the  assured  may  be  liable, 
Snpp.  4r)0.  S  App.  ^iv.  186,  alfd.  and  against  accidental  persona!  in- 
158  N.  Y.  431,  44  L.R.A.  512,  53  N.  jury  and  loss  of  life  for  which  the 
E.  212.  Policy  was  issued  iirior  to  assured  may  be  liable  to  its  em- 
N.  Y".  Ins.  Law  1892,  c.  600.  See  ployees  or  to  any  other  pei-son, 
Chicago  Sugar  Refining  Co.  v.  caused  by  the  boilers,  or  any  ma- 
American  Steam-Boiler  Co.  (U.  S.  chinery  connected  with  and  operated 
C.  C.)  48  Fed.  108,  case  rev'd  by  them."  Id.  p.  200. 
American  Steam-Boiler  Co.  v.  Chi-  20  Bj..,<i](.y  &  Kj^^sex  &  Suffolk  Acci- 
ca"(i  Su"ar  Rcliuing  Co.  57  Fed.  294,  dent  Indemnity  Soe.,  In  re,  81  L.  J. 
6  C.  C.  A.  336,  9  it.  S.  App.  186,  21  K.  B.  523,  526.  [1912]  1  K.  B.  415, 
L.R.A.  572.  Policy  was  upon  steam  105  L.  T.  919,  28  T.  L.  R.  17.5,  [1912J 
boilers    and    proviiled     against     ex-  W.  C.  Rep.  6,  per  Fletcher  Moulton, 

140 


NATUIMO  OF  THE  CONTKACT 


§  ■J7e-271i 


§  27e.  Insurance  of  carriers  against  losses  from  injuries  to  pas- 
sengers is  contract  of  indemnity. — A  contract  to  indeniiiify  a  coin- 
juon  carrier  of  ])a.<^eii tiers  aiiaiiisl  losses  occurring  from  injuries  to 
])assengers  is  not  against  public  policy,  and  is  treated,  without  dis- 
cussion by  the  court,  as  a  contract  of  indenniity.^ 

§  27f.  Insurance  against  burglary  and  loss  or  damage  to  prop- 
erty are  contracts  of  indemnity. — And  ''are  subject  to  the  same 
principles  as  fire  insurance,  which  is  only  a  particular  instance  of 
insurance  against  accident  to  pro])orty."  ^ 

§  27g.  Insurance  against  accidents,  death,  and  theft  of  animals 
is  contract  of  indemnity. — The  fact  that  a  corporation's  piu'pose 
is  to  indemnify  its  members  for  loss  or  damage  by  accidents,  death, 
and  theft  of  animals  belonging"  to  its  members,  and  that  its  mem- 
Ijcrs  pay  a  membership  fee  and  annual  dues,  and  are  assessed  for 
losses,  makes  it  a  contract  of  indemnity  and  a  co-operative  insur- 
ance company.  It  comes  within  the  delinition  of  insurance,  and 
this  is  so  even  though  the  promisor  is  a  corporation  and  its  promise 
is  only  to  those  who  become  members,  and  it  has  no  accumulated 
funds  out  of  which  to  pay  losses,  but  relies  exclusively  upon  as.'^ess- 
ments  therefor.^ 

§  27h.  Fidelity  guaranty  insurance  is  contract  of  indemnity. — 
An  employers'  fidelity  bond  insuring  against  loss  caused  by 
"fraudulent  or  dishonest  acts  .  .  .  amounting  to  embezzle- 
ment or  larceny"  is  essentially  a  contract  of  indenmity  against  loss; 
and  the  general  rules  governing  the  construction  of  life  and  fire  in- 
surance are  applicable  to  it.* 


L.  J.,  a  case  of  constructiou  of  a  pol-   is    eonstruetion] ;    Guarantee   Co.    of 
icy  and  tlie  proposal.     Seo  17  Earl  of    North  America    v.    Mechanics'    Sav- 


Halsburv's  Laws  of  England,  p.  571. 
^  Trenton  P;issenger  Ry.  Co.  v. 
Guarantors  Liability  Indeninitv  Co. 
CO  N.  J.  L.  246,  44  L.R.A.  2i3,  37 
Atl.  009.     See  also  American   Casu- 


ings  Bk 


&  Trust  Co.  80  Fed.  7Gt), 
772,  26  C.  C.  A.  146  [points  of  con- 
struction, and  that  contract  is  one 
of  full  indemnity]  ;  Cluuuiiion  v. 
American  Bonding  &  Trust    Co.  11.") 


alty  Ins.  Co.'s  case  (Boston  &  A.  K.  Ky.  863,  872,  103  Am.  St.  Rep.  356, 
Co.  V.  Mercantile  Trust  &  Deposit  75  S.  W.  107  [point  here  is  con.>^truc- 
Co.)   82  Md.  535,  38  L.R.A.  n7n,  34   tion]  ;  American  Surety  Co.  v.  Pauly, 


Atl.  778. 

2 17  Earl  of  Halsbury's  Laws  ol' 
England,  "Insurance,"  p.  512n. 

3  State  V.  Vigilant  Ins.  Co.  3(1 
Kan.  585,  2  Pac.  840. 

^JFAna  Indemnity  Co.  v.  J.  R. 
Crowe  Coal  &  Mining  Co.  154  Fed. 


170  U.  S.  133,  42  L.  ed.  977,  18 
Sup.  Ct.  552  [not  directly  so  held. 
lUit  the  court  in  determining  the 
construction  of  the  bond  said:  ''The 
object  of  the  bond  in  suit  was  to 
indemnify  or  insure  the  bank  against 
loss     arising     from     any     fraud     or 


545,  83  C.  C.  A.  431  (citincf  .Jackson  dishonesty  on  the  part  of  O'Brien 
V.  Fidelity  &  Casualty  Co.  75  Fed.  in  connection  with  his  duties  as 
359,  365,  '21  C.  C.  A.  394  [point  here   ca.shier,  or  with  the  duties  to  which  in 

141 


§  27i  JOYCE  ON  INSURANCE 

§  27i.  Title  guaranty  insurance  is  contract  of  indemnity. — .V 
contract  of  guaranty  insurance  of  title  is  a  contract  of  indemnity 
similar  to  that  of  insurance  and  is  governed  by  the  .«ame  rule  as  to 
right  of  action  not  accruing  until  time  of  loss.*  So  a  title  policy  is 
a  contract  of  indemnity  where  the  i)lainly  expressed  intent  is  to 
indemnify  against  loss  from  defects  or  unmarketability  of  title,  and 
that  if  any  loss  should  be  sustained  by  assured  by  reason  of  the 
noncompletion  of  certain  buildings,  such  loss  should  come  under 
the  indemnification  covenant^  of  the  policy;  as,  where  the  policy 
indemnified  the  assured  in  a  certain  amount  against  loss  on  a  mort- 
gage given  as  collateral  security  upon  ground  rents,  and  the  policy 
also  '''guaranteed"  the  completion  of  certain  buildings  within  a 
specified  time  with  municipal  improvements,  free  of  municipal 
liens;  and  in  such  case  the  guarantee  does  not  change  the  nature 
of  the  contract  as  one  of  indemnity,  and  make  it  a  guarantee.^  Tn 
another  case  the  bond  guaranteed  the  completion  of  certain  build- 
ings under  a  contract.  Advances  had  been  made  for  building  o])- 
erations,  the  consideration  1)eing  the  conveyance  of  ground  rent.< 
on  land  to  be  improved  and  the  furnishing  of  said  bond.  The 
principle  of  indenmity  was  applied,  limiting  the  damages  to  the 
actual  loss  in  the  value  of  the  ground  rents,  not  exceeding  the 
amount  of  insurance;  the  loss  being  the  difference  in  the  mai-ket 

his  employers  service  he  rai2;ht  be  deranify  the  plaintiff  was  coextensive 
subsequently  appointed.  Tlrat  ob-  with  that  of  the  latter  to  reimburse 
jeet  should  not  be  defeated  by  any  the  employer] ) ;  Remington  v.  Fi- 
narrow  interpretation  of  its  pro-  delity  &  Casualty  Co.  2<  Wash.  429, 
visions,  nor  by  adopting  a  construe-  435,  72  Pac.  432. 
tion  favorable  to  the  company  if  *  Purcell  v.  Land  Title  Guarantee 
there  be  another  construction  equal-  Co.  94  i\Io.  App.  5,  67  S.  W.  726. 
ly  admissible  under  the  terms  of  the  ^  Wheeler  v.  Equitable  Trust  Co. 
instrument  executed  for  the  pro-  221  Pa.  276,  70  Atl.  750,  37  Ins.  L. 
tection  of  the  bank;'  Id.  p.  144,  per  J.  1037,  s.  e.  206  Pa.  428,  55  Atl. 
Mr.  Justice  Harlan];  Fidelitv  &1065.  The  syllabus  m  this  case  (221 
Casualty  Co.  v.  Eickhoff,  63  Minn.  Pa.  276)  reads  as  follows:  AVhere  a 
170,  56  Am.  St.  Rep.  464,  30  L.R.A.  policy  of  title  insurance  of  a  mort- 
586,  65  N.  W.  351  [in  this  case  the  gage  is  by  its  terms  a  general  con- 
aetion  was  brought  to  recover  money  tract  of  indemnity  against  loss  from 
allea:ed  to  have  been  paid  to  defend-  defects  or  unmarketability  "of  the 
ant's  employer  upon  a  bond,  execut-  title  of  the  insured  to  the  estate, 
ed  at  defendant's  request  and  in  the  mortgage  or  interest"  in  the  real 
form  requested  ]jy  him,  by  which  the  estate  included  in  the  mortgage,  and 
I)laintiff.  a  suarantee  insurance  com-  ihe  policy  contains  in  a  note  to  a 
panv,  obligated  itself  to  make  good,  schedule  a  guaranty  to  complete 
andreimbnrse  to  the  employer  such  certain  buildings  according  to  plans 
pecuniarv  loss  as  it  might  sustain  l)y  and  specifications  mentioned,  the 
reason  of  the  infidelity^  of  defendant  court  will  construe  the  whole  con- 
as  employee  and  it  "was  held  that  tract  lo  be  one  of  indemnity;  and 
the  obligation   of    defendant    to    in-    where    it    also   appears   that   the   in- 

142 


NATURE  OF  THE  CONTRACT  .  §§  27J-271 

value  of  the  ground  rents  if  the  buildings  had  been  completed  and 
their  value  with  the  buildings  in  their  incompleted  .state.' 

§  27j.  Rent  or  rent  guaranty  insurance  is  contract  of  indem- 
nity.— A  fire  policy  insuring  against  loss  of  rents  is  within  a  Code 
provision  defining  insurance,  and  providing  that  the  sole  ohject  of 
insurance  is  indemnity,  and  it  is  a  contract  of  indemnity.  Such 
a  policy  may  validly  stipulate  for  a  method  of  ascertaining  and 
computing  the  loss  without  violating  in  anyway  the  principle  tliAt 
insurance  shall  furnish  only  indemnity  against  loss.' 

§  27k.  Insurance  on  "use  and  occupancy"  of  an  elevator:  when 
not  a  contract  of  indemnity. — A  policy  insuring  the  use  and  occu- 
pancy of  an  elevator,  issued  to  a  grain  elevating  company,  under 
which  the  liability  is  fixed  at  a  specified  sum  per  day,  and  wherein 
the  insurer  agrees  to  pay  absolutely  and  unconditionally  the  amount 
or  sum  fixed  in  it.<  contract  for  the  loss  to  the  insured  by  reason  of 
its  suspension  of  business  by  fire,  partakes  of  the  nature  of  a  valued 
policy  and  it  is  not  unqualifiedly  a  contract  of  indemnity.  The 
stipulated  sum  agreed  to  be  paid  is  the  measure  of  liability.^ 

§  271.  Credit  guaranty  insurance  is  contract  of  indemnity. — 
Credit  guaranty  insurance,  or  contract  to  indenmify  against  lo.ss 
of  claims  or  against  loss  by  insolvency  of  debtors,  is  one  of  indem- 
nity against  loss  of  property.     It  is  a  contract  of  insurance.^" 

sured,  who  held  the  mortgage  as  col-  Assurance  Co.  155  Cal.  521,  2;^. 
lateral  for  a  loan,  had  bought  it  in  L.R.A.(N.S.)  123,  18  Am.  &  Eng. 
at  his  own  sale,  permitted  by  the  Ann.  Cas.  512,  101  Pac.  911,  under 
terms  of  the  loan,  at  a  price  equal  Cal.  Civ.  Code,  sees.  2527,  2551, 
to  the  loan,  and  therafter  had  fore-  2558.  See  Young  v.  American  Bond- 
dosed  the  mortgage  and  bought  in  ingCo.  228  Pa.  373,  77  Atl.  fi23, 
the  real  estate,  the  insured  will  not  be  where  the  business  of  surety  com- 
permitted  in  an  action  on  tlie  policy  panies  is  held  to  be  essentially  that 
to  show  a  defect  in  title,  or  that  the  of  insurance, — a  case  of  contract  to 
houses  had  not  been  completed  in  indemnify  vendors  against  loss  of 
accordance  with  the  plans  and  lentals,  etc.  See  notes  in  16  L.R.A. 
specifications.  In  such  case  it  is  im-  (N.S.)  1055,  23  L.R.A.(N.S.)  123, 
material  that  the  insured,  and  not  a  on  construction  of  policy  or  contract 
stranger,  bid  the  mortgage  up  and  insuring  against  loss  of  rents, 
bought  it  in  at  an  amount  equal  to  ^  Butfalo  Elevating  Co.  v.  Prussian 
the  loan,  and  it  is  also  immaterial  National  Ins.  Co.'  71  N.  Y.  Supp. 
that  the  only  other  bidder  was  the  918,  64  App.  Div.  182,  affd  in 
insolvent  borrower.  The  insured,  Michael  v.  Prussian  National  Ins. 
having  bought  the  mortgage  at  a  Co.  171  N.  Y.  25,  63  N.  E.  810. 
price  equalto  ihe  loan,  sullered  no  i°  State  v.  Phelan,  66  Mo.  App. 
loss,  and  is  therefore  entitled  to  no  548;  Shakman  v.  United  States 
indemnitv.  Credit     Svstem,    92     Wis.     366,     32 

'German  American  Title  &  Trust  L.R.A.  383,  53  Am.  St.  Rep.  920,  91 

Co.  v.   Citizens  Trust  &  Surety  Co.  N.  W.  304.     See    Rice    v.    National 

190  Pa.  247,  42  Atl.  682.  Credit  Co.  164  Mass.  285,  41  N.  E. 

8  Whitney  Estate  Co.  v.  Northern  276   (policy  insuring  against  loss  by 

143 


§  27m  JOYCE  ON  INSURANCE 

§  27in.  Whether  contract  to  defend  physician  against  suits  for 
malpractice  is  one  of  insurance  and  indemnity. — A  coiupany  int-or- 
porated  loi'  tlio  ])ur))0,se  of  aiding  and  protecting  the  medical  ]»ro- 
fes.sion  in  the  practice  qf  medicine  and  surgery  bv  the  defense  of 
physicians  and  surgeons  against  civil  prosecution  for  malpractice, 
which  issues  a  contract,  for  an  agreed  and  stipulated  annual  pay- 
ment, and  agrees  to  defend  said  civil  suits,  for  alleged  malpractice, 
during  a  stated  time,  at  its  own  expense,  not  exceeding  a  certain 
amount,  l)ut  limiting  its  liability  by  not  assuming  or  agreeing  to 
piiy  any  judgment  for  damages  rendered  in  any  such  suit  for  mal- 
practice against  the  holder  of  the  contract,  is  held  an  insurance  com- 
])aii\-  within  the  meaning  of  the  Code  of  California  defining  insur- 
ance and  specifying  what  events  ma}'  be  insured  against.^^  as  such 
contract  })rovides  indenmity  against  a  contingent  liability,  and  the 
corporation  is  amenable  to  regulation  under  the  state  insurance 
laws.^^  The  court,  per  A^an  Fleet.  District  Judge,  says:  ^^  "Com- 
plainant relies,  in  support  of  the  contention  advanced  by  it,  ujiou 
Vredenburgh  v.  Physicians  Defen.'se  Co.^*  and  State  (ex  rel.  Physi- 
cians Defense  Co.)  v.  Laylin.^^  both  involving  a  construction  of  the 
same  contract,  and  wherein  conclusions  were  reached  in  harmony 
with  complainants  claim  that  the  contract  is  merely  one  for  per- 
sonal services.  I  am  unable  to  acquiesce  in  the  views  expre.sse<l  in 
these  cases.  The  reasoning  ])roceeds  from  a  consideration  of  the 
formal  terms  of  the  contract  in  suit  as  affected  by  certain  general 
definitions  of  the  essentials  of  a  contract  of  insurance  as  stated  in 
the  text  books:  and  both  ca.<^es  ignore  the  consideration  that  the  lia- 
bility to  I0S.S,  incurred  in  the  contingency  as  to  which  the  contract 
relates,  involves  a  liability  beyond  the  naked  amount  of  the  judg- 
ment that  may  be  rcco\crod.  On  the  other  hand,  the  views  herein 
expressed  will  be  found  fully  sustained  in  the  later  case  of  Physi- 
cians Defense  Co.  v.  O'Brien  Ins.  Commr,^®  where  the  sujjreme 
court  of  Minnesota,  interpreting  the  same  contract  in  the  light  of  a 
statutory  definition  very  similar  to.  and  no  broader  than  our  own. 
held  it  to  be  clearly  a  contract  of  insurance."     In  the  Illinois  case, 

insolvency  of  debtors  considered  as  er  (U.  S.  C.  C.)  188  Fed.  832,  40  In.^. 

contract  "of    indemnity,    bnt    no    dis-  L.  J.  20(12.     Application  for  injnnc- 

cnssion     on     tliis     point),    cited    in  tion  (Iciiiod ;  demurrer  sustained  and 

American    Credit    Indemnity    Co.    v.  Ijill   dismissed.      Case   aif'd   109    Fed. 

Champion     Coated     Paper  '  Co.    103  576,  118  C.  C.  A.  50,  47  L.R.A.(N.S.) 

Fed.   (iOO,  614,  43  C.  C.  A.  340,  no  200  and  note. 

discussion,    but    bonds    of   this    cliar-        ^^  Id.  83(). 

acter  declared  to    be    essentially    in-        1*  126  111.  App.  ."00. 

surance  contracts.  ^^  7.]  Oliio  St.  00.  76  N.  E.  .')67. 

"  Cal.  Civ.  Code,  sees.  2527,  2531.        ^^  loO  Minn.  490,  111  N.  W.  396. 

12  Physicians  Defense  Co.  v.  Coo])- 

144 


NATURE  or  THE  COJ^TRACT  §  27m 

above-mentioned.^''  the  contract  was  decided  not  to  be  one  of 
indemnity,  as  it  did  not  possess  that  element,  and  tliat  tlie  coqoora- 
tion  did  not  conduct  an  insurance  business:  "apj)Hcant  does  not  in- 
sure the  holder  against  suits  for  malpractice.  It  merely  makes  a 
business  of  defending;  n^ainst  them  when  they  are  brougbt.  provides 
legal  services  for  its  j)alr()ns.''  In  the  Ohio  case,  above  noted, ^^  tiie 
court  declared  that  the  contract  was  "neither  in  form  nor  legal 'ef- 
fect, anything  more  than  a  contract  for  services.  And  said  con- 
tract im])o.«es  upon  the  company  no  duty  or  obligation  other  than 
that  of  defending  the  physician  or  surgeon  who  may  hold  such 
contract  against  any  action  that  may  be  brought  against  him  for 
allciicd  ]iial[)ractice  .  .  .  'said  company  does  not  obligate 
itself  to  pay,  or  to  a.«sume,  or  to  secure  the  payment  of  any  judg- 
ment against  the  holder  thereof  in  anv  suit  defended  bv  it.'  The 
undertaking  of  the  company  is  not  that  it  will  compensate  the  phy- 
sician or  surgeon  for  lo.ss  or  injury  he  may  actually  sustain,  but 
only  that  it  will,  after  suit  brought  against  him,  undertake  and 
conduct  for  him  his  defense,  and  thereby,  if  may  be,  protect  him 
against  liability  for  loss,  by  preventing  judgment  being  obtained 
against  liim.  If  the  company  successfully  performed  its  contract 
no  loss  or  injury  resull.s  to  the  defendant.  But  if  not,  and  judg- 
ment be  obtained  against  him,  there  is  no  obligation  or  lialjility  on 
the  part  of  the  company  to  pay  or  satisfy  said  juclgment  or  any 
part  of  it.  Obviously,  we  think,  such  contract  is  not  one  of  indem- 
nity, for  under  it  the  liability  of  the  company  ceases,  at  the  precise 
point  and  time  that  the  right  to  indemnity  attaches  or  begins.  We 
are  of  opinion  therefore,  that  the  plaintitt'  company  is  not  an  insur- 
ance company,  nor  the  contract  it  issues  an  insurance  contract."  ^^ 
This  case  further  turned  upon  the  point  that  the  business  was  a 
professional  one  expressly  prohibited  to  corporations  under  the 
Ohio  statutes,^"  and  such  corporation  was  not  entitled  to  receive  a 
certificate  of  authority  to  transact  business  in  the  state.  In  the  Min- 
nesota case  ^  it  was  held  that  the  contract  was  one  oi'  insurance,  and 
that  the  corporation  making  such  a  contract  was  engaged  in  the  in- 
surance business;  also  that  the  essential  ])uri)ose  of  such  a  contract 
is  not  to  render  personal  sendees,  but  to  indenmify  against  loss  or 
damage  resulting  from  the  defense  of  an  action  for  malpractice,  and 

^"^  Vredonburoh    v.    PlivsiciaiLS   De-        ^^  Id.  9fl.  per  Crc\v,,.I. 
fense  Co.  12(5  111.  App.  50?).  ^^Wex.  Stat.  Oliio,  100.3,  see.  3235. 

^*  State    (ex    rel.    [Mivsir-iniis     Dp-        ^  Plivsiciaiis       Dcfoiiso       Co.       v. 
fonse  Co.)  v.  Laylin,  73  Ohio  St.  90,    O'Biicn,  100  iMiiui    490,  111  N.  W. 
76  N.  E.  567.    The  action  was  to  com-    .'■90. 
pel  the  Secretary  of  State  to  admit 
the   company   to   do   business   in   the 
slate. 

Joyce  Ins.  Vol.  I. — 10.  14-5 


§§  27n-29  JOYCE  OX  INSURANCE 

tliat  the  company  a.cTeed  within  the  statutory  definition  of  insnranoe 
to  "do  some  act  of  vahie  to  tlie  insured  in  case  of  such  loss  or  dam- 
age," and  that  it  was  otlioi'wise  within  tlie  statutory  definition.^ 

§  27n.  Employees'  benefit  and  relief  association:  contract  not 
one  of  indemnity. — It  is  held  in  Pennsylvania  that  the  great  under- 
lying purpose  of  a  beneficial  association  or  organization  is  not  to  in- 
demnify or  secure  against  loss,  but  that  its  design  is  to  accumulate 
a  fund  from  the  contribution  of  its  members  for  beneficial  and  pro- 
tective-purposes to  he  used  in  their  own  aid  or  relief  in  the 
misfortunes  of  sickness,  injury  or  death.  The  benefits  although  se- 
cured by  contract,  and  for  that  reason  to  a  limited  extent  assimilat- 
ed to  the  proceeds  of  insurance  are  not  so  considered.  This  applies 
to  a  beneficial  association  for  the  protection  of  employees  or  firms 
and  corporations  against  sickness  accident  or  death. ^ 

§  28.  Reinsurance  is  a  contract  of  indemnity. — Reinsurance  is 
a  contract  of  indemnity  and  binds  the  reinsurer  to  pay  the  reinsured 
the  whole  loss  sustained  in  respect  of  the  subject  insured  to  the  ex- 
tent for  which  he  is  reinsured.'*  The  object  of  reinsurance  is  said 
to  be  indemnity  to  the  insurer  against  his  own  act.  since  he  may 
have  the  sum  he  has  insured  reassured  to  him  by  some  other  in- 
surer.^ 

§  29.  Other  Incidents  of  the  doctrine  of  indemnity. — Since  tlic 
doctrine  of  indenniity  contemplates  that  the  insured  .shall  be  in- 
demnified, but  shall  never  be  more  than  fully  indemnified,  for  a 

2  Lewis,  J.,  dissented.  Rep.  413.    Examine  Bartlett  v.  Fiie- 

^  Beneficial    Associations,    32    Pa.  man's  Ins.  Co.  77  Iowa,  15.3,  158,  41 

County  Ct.  Rep.  457,  followino-  Com-  N.   W.   601    (wliere  it  was    said    an 

inonwealth     v.     Equitalile    Beneficial  agreement  to   reinsure  is   an    under- 

Assoc.  137  Pa.  St.  412,  18  Atl.  1112.  taking  entered  into  with  the  insurer 

See  §§  344-34(j  lierein.  "to  indemnif.y  the  owner  of    tlie    in- 

*  Allemannia  Fire  Ins,  Co.  v.  Fire-  .>-ui'ed    property    in    case    a    loss    oc- 

raen's  Ins.  Co.  209  U.  S.  326,  52  L.  curs") :    Hunt*   v.    New    Hampshire 

ed.  815,  28  Sup.  Ct.  544,  37  Ins.  L.  Fire  Underwriters  Assoc.   68   N.   H. 

J.  316,  14  Am.  &  Eno-.  Annol.  Cas.  305,  308,  73  Am.  St.    Rep.    602.    38 

048;     Providence-Washinoton      Fire  KR.A.    514,    38    Atl.    145.      See    §§ 

Ins.  Co.  v.  Atlanta-Birmingliam  Fire  !1(,  113,  131  et  seq.  herein. 
Ins.  Co.  (U.  S.  C.  C.)  166  Fed.  548,       Reinsurance    is    an    indemnity    to 

38  Ins.  L.  J.    461.     See    also    Eagle  the  insurer  for  the  loss    up    to    the 

Ins.  Co.  V.  Lafayette  Ins.  Co,  9  Ind.  amount,    whether     for  the   whole  or 

443;  Illinois  M,utual  Fire  Ins.  Co.  v,  ])art  of  the  risk  stipulated,  and  for 

Andes  Ins.   Co.   67  III.  362.  16  Am.  which  the  premium  is  paid.     Chalar- 

Rep.    620:    Mutual    S.    Ins.    Co.    v.  on     v.      Insurance      Co.     of     North 

Hone,  2  N.  Y.  235,    240;    Hone    v.  America,  48  La.  Ann.  1582,  1590,  36 

Mutual  Safety  Ins.  Co.  1  Sand.   (N.  L.R.A.  742,  21  So.  267. 
Y.)    137.      Commercial    Mutual    Ins.        ^  Insurance  Co.  of  North  America 

Co.    V.    Detroit    Fire   &   ^Marine   Ins.  v.  Hibornia  Ins.  Co.  140  IT.   S.  5()5, 

Co.  38  Ohio  St.  11,  15,  16,  43  Am.  573,  35  L.  od.  517,  11  Sup.  Ct.  909. 

146 


NATURE  OF  THE  CONTRACT  §  29 

loss,  there  have,  nece.'^sarily  arisen  many  incidents  or  corollaries 
thereto,  such  as  the  doctrines  of  constructive  total  loss,  of  abandon- 
ment, of  subrogation,  coinsurance,  contribution,  and  apportion- 
ment of  loss,  etc.,  which  will  be  noticed  hereafter  under  their  ap- 
propi'ialc  heads. ^ 

^Brelt,  J.,  in  Castellain  v.  Prpston,  writer  by  tlie  party  insured,  hut  only 
L.  R.  11  Q.  B  D.  380;  Cineinnati  Ins.  to  the  extent  of  tlie  indemnity  eon- 
Co.  V.  Dutlield,  (i  Ohio  St.  200,  67  teniphited  by  the  policy:  See  ehap- 
Aui.  Dec.  .{30,  where  it  is  lieki  that  ters  herein  on  Abandonment  and 
the  lei^al  ett'eet  of  an  abamlonment  in  Total  Loss.  As  to  repairs,  particular 
the  sense  in  w  hicli  it  is  used  in  average  adjustment,  and  one  third 
policies  of  marine  insurance  and  in  new  for  old,  as  qualifying  the  princi- 
the  law  regulating  that  subject,  is  to  pie  of  indemnity,  see  §  3078  herein, 
operate  as  a  transfer  to  the  under- 

147 


CHAPTER  III, 

PAROL  CONTRACTS. 

§  31.  Contract  need  not  be  in  writiutj:  parol  contract  and  rule  in  England. 

§  31a.  Parol  contracts :  life  insurance :  industrial  life  insurance. 

§  31b.  Parol  contracts :  accident  insurance. 

§  31c.  Parol  contracts:  "workman's  collective  policy:"  custom. 

§  31d.  Pai'oJ  contract :  where  policy  partly  written  at  time  of  loss :  contract 

binding. 

§  32.  Parol  contracts :  the  common-law  rule. 

§  33.  Parol  contracts :  statutory  regulations :  English  stamp  acts. 

^  33a.  Parol  contracts:  standard  policy. 

§  33b.  Statutor}^   regulations:    contract   partly   in   writing   and   partly   by 

parol. 

§  34.  Parol  contracts :  mutual  benefit  societies. 

§  35.  Parol  contracts:  corporations:  statutory  or  charter  provisions. 

§  30.  Parol  contracts:  corporations:  statutory  or  charter  provisions:  con- 
tinued. 

§  37.     Parol  contract  for  insurance  subject  to  usual  provisions  of  policy. 

§  38.  Parol  agreement  for  insurance  may  be  specifically  enforced,  or  court 
may  award  damages. 

§  38a.  Same  subject:  standard  policy:  rule  in  New  York. 

§  38b.  Same  subject :  life  insurance :  iiulustrial  life  insurance. 

§  38c.  Evidence:  oral  contract  must  be  clearly  established. 

^  .'>n.     Parol  contracts:  statute  of  frauds. 

§  40.     How  far  parol  contract  merged  in  written  agreement. 

§  41.     Parol  contract :  renewal. 

§  41a.  Same  subject:  standard  policy:  agent's  authoi-ity. 

§  41b.  Parol  contract:  renewal:  contract  luust  be  complete:  recovery:  evi- 
dence to  establish. 

§  41c.  Parol  contract:  renewal:  standard  policy:  equitable  estoppel. 

^'  41d.  Parol  contract :  reinsurance  :  validity. 

§  41e.  Parol  agreement  for  reinsurance  may  be  specifically  enforced. 

§  31.  Contract  need  not  be  in  writing:  parol  contract  and  rule 
in  England. — Tlie  contract  of  insurance  need  not  be  a  specialty  nor 
even  in  writing,  for  it  is  well-settled  law  that  a  parol  contract  of 
insurance  is  valid  in  tlie  absence  of  a  statutory  requirement  or  other 

148 


PAROL  CONTRACTS 


§  31 


positive  regulation  to  the  contrary,  and  this  rule  covers  not  only 
agreements  to  insure,  but  the  completed  contract.'     There  is  a  well- 


'  United  States. — Eames  v.  Home 
Ins.  Co.  94  U.  S.  621,  24  L.  ed  298 
(valid  contract  for  a  policy  created)  ; 
Relief  Fire  Ins.  Co.  v.  Shaw,  94  U. 
S.  574,  24  L.  ed.  291;  Franklin  Fire 
Ins.  Co.  V.  Colt,  20  Wall.  (87  U.  S.) 
560,  22  L.  ed.  423  (preliminary  con- 
tract for  insurance)  ;  Merchants'  Mut- 
ual Ins.  Co.  V.  Lvman,  15  Wall.  (82 
U.  S.)  664,  21  L.  ed.  246;  Commercial 
Mutual  Marine  Ins.  Co.  v.  Union 
Mutual  Ins.  Co.  19  How.  (60  U.  S.) 
.318,  15  L.  ed.  636  (agreement  to  issue 
policy  binding)  ;  Union  Mutual  Ins. 
Co.  V.  Commercial  Mutual  I'iis.  Co. 
2  Curt.  (U.  S.  C.  C.)  524,  Fed.  Cas. 
No.  14,372  (parol  acceptance  of 
written  proposal  is  binding  contract 
in  absence  of  any  statute  contra)  ; 
Humphrey  y.  Hartford  Fire  Ins.  Co. 
15  Blatch'f.  (U.  S.  C.  C.)  35.  37,  511, 
Fed.  Cas.  Nos.  6874,  6875  (contract 
to  insure  and  to  issue  policy  bind- 
ing). 

Alabama. — Insurance  Co.  of  North 
America  y.  Thornton,  130  Ala.  222, 
55  L.R.A.  547,  89  Am.  St.  Re]..  DO. 
30  So.  614,  31  Ins.  L.  J.  305  (liable 
for  loss  before  issue  of  policy)  ;  Com- 
mercial Fire  Ins.  Co.  y.  Morris,  105 
Ala.  498,  18  So.  34  (contract  to  in- 
.sure :  renewal) ;  Home  Ins.  Co.  y. 
Adler,  77  Ala.  242,  71  Ala.  521  (valid 
contract  of  insurance  may  be  made  in 
parol;  verbal  agreement  to  i-ssue 
policv)  ;  Mobile  ^Marine  Dock  & 
Mutual  Ins.  Co.  v.  McMillan,  31  Ala. 
711  (agreement  to  insure  valid;  need 
not  be  reduced  to  writing). 

California. — American  Can  Co.  v. 
Agricultural  Ins.  Co.  12  Cal.  App. 
l.iS,  106  Pac.  720,  39  Ins.  L.  J.  518 
(parol  contract  of  insurance  valid; 
but  facts  did  not  establish  one) ; 
Crawford  v.  Transatlantic  Fire  Ins. 
Co.  125  Cal.  609,  58  Pac.  177;  28  Ins. 
L.  J.  935  (liability;  may  attach  on 
oral  agreement  to  issue  policy;  ques- 
tion of  evidence) ;  Harron  v.  City  of 
London  Fire  Ins.  Co.  88  Cal.  16,  25 
Pac.  982   (i)arol  contract  for* insur- 


ance by  special  agent)  ;  Gold  v.  Sun 
Ins.  Co.  73  Cal.  216,  14  Pac.  786 
(parol  agreement  to  issue  policy^  val- 
id.) 

Illinois. — Insurance  Co.  of  North 
America  v.  Bird,  175  111.  42,  51  N.  E. 
686;  Firemens'  Ins.  Co.  v.  Kucssncr, 
164  111.  275,  45  N.  E.  540;  Hartford 
Fire  Ins.  Co.  v.  Farrish,  73  111.  166 
(parol  contract  of,  valid)  ;  Hartford 
Fire  Ins.  Co.  v.  Wilcox,  57  111.  180 
(parol  contracts  of,  valid)  ;  Fire  Ins. 
Co.  of  Phila.  County  v.  Sinsabaugh, 
101  111.  App.  55 ;  Concordia  Fire  Ins. 
Co.  v.  Heffron,  84  lU.  App.  610  (oral 
contract  of  insurance)  ;  Stoelke  v. 
Hahn,  55  111.  App.  497  (verbal  con- 
tract of,  valid  in  absence  of  statute 
to  contrary). 

Indiana. — Commercial  Union  As- 
surance Co.  v.  State,  113  Ind.  331,  15 
N.  E.  518  (agents  may  make  parol 
as  well  as  written  contracts)  ;  Posey 
County  Fire  Assoc,  v.  Hogan,  37  Ind. 
App.  .573,  77  N.  E.  670  ("it  has  long 
been  settled  that  an  oral  contract  for 
insurance  is  valid")  ;  Western  Assur. 
Co.  V.  McAlpin,  23  Ind.  App.  220.  77 
Am.  St.  Rep.  423,  55  N.  E.  119 
(valid  contract  to  insure). 

loica. — Revere  Fire  Ins.  Co.  v. 
Chamberlain,  56  Iowa,  508,  8  N.  W. 
338  ("tliat  insurance  may  be  effected 
1)V  parol  is  well  settled,''  per  Adams, 
Cih.  J.)  ;  Hubbard  v.  Hartford  Fire 
Ins.  Co.  33  Iowa,  325,  11  Am.  Rep. 
125  (case  of  agreement  to  issue  a 
policy  on  a  certain  date;  issued  but 
not  delivered). 

Kansas. — Wilson  v.  German-Ameri- 
can Ins.  Co.  90  Kan.  355,  133  Pac. 
715  (binding  contract  of  insurance 
may  be  made  witliout  issuance  of 
policy)  ;  Preferred  Accident  Ins.  Co. 
v.  Stone,  01  Kan.  48,  59  Pac.  586 
(execution  and  delivery  of  policy  not 
essential)  ;  Phoenix  Ins.  Co.  v.  Ire- 
land, 9  Kan.  App.  644,  58  Pac.  1024 
(parol    contract   to   insure,   valid    in 


absence 
tra). 


of  statutory  provision,  con- 


149 


/ 


§  31  JOYCE  OX  INSURANCE 

dcfinefl  distinction  between  a  parol  contract  to  insure  or  to  issue  an 

Kentucky. — Hartford  Fire  Ins.  Co.  no  statutory  requireiucMit,  contract 
V.  Trimble,  117  Kv.  583,  25  Ky.  L.  need  not  be  in  wrilinn). 
Rep.  1497,  78  S.  W.  4(i2,  33  Ins.  L.  Michigan.— y[ivhhj:cm  Pipe  Co.  v. 
J.  348  (-well  .settled  law  in  tliis  state  Michigan  Fire  &  Mar.  Ins.  _Co.  92 
that  a  parol  contract  of  insurance  is  Mich.  482,  491,  20  L.R.A.  27/,  .32  N. 
valid  and  enforceable")  ;  Connuercial  W.  10/0  (''it  is  well  settled  that 
Union  Assur.  Co.  v.  Urbansky,  113  where  a  contract  of  insurance  ha-s 
Ky.  624,  24  Ky.  L.  Rep.  462,  68  S.  been  agTeed  upon,  no  policy  need  be 
W.  eoS,  31  Ins.  L.  J.  728  (oral  con-  made  out.  Its  delivery  is  not  es- 
tracts  of  insurance  are  valid)  citing  sential  to  the  validity  of  the  con- 
National  Fire  Ins.  Co.  v.  Rowe,  20  tract")  ;  Roger  Williams  Ins.  Co.  v. 
Ky.  L.  Rep.  1473.  49  S.  W.  422;  Can-ington,  43  Mich.  252,  5  N.  W. 
Fidelity  &  Casualty  Co.  v.  Ballard  &  303^  9  Ins.  L.  J.  577. 
Ballard  Co.  105  Ky.  253,  20  Ky.  L.  Missouri.— King  v.  Phoenix  Ins. 
Rep.  1169,  48  S.  W.  1074,  28  In.s.  L.  q^  193  t^j^.  290,  113  Am.  St.  Rep. 
J.  227;  Howard  Ins.  Co.  v.  Ow-en  s  gyg^  e.Amer.  &  Eng.  Ann.  Ca-s.  618, 
Admr.  94  Ivy.  191,  14  Ky.  L.  Kep.  gg  g  ^j  ggg  (oj-al  contract  of  insur- 
881    21  S.  W.  103/.  ^^^^  ^.^j.^)  .  g^^g  y    g^   J        j^  ^,^ij,g 

Mame.-^alkev    v     Metropolitan  ^^^^..^^  ^^^    ^^    ^3  ^^^             ggg 

Ins.    Co     06    Me.    3/1    (nothing    in  ,^„,idered  at   length  in  above 

nature  of  contract  ot  nre  insurance  ^       x     ^t  j  .             tj^    1     „i  t  •+■„  t„c 

which  requires  it  to  be  in  writing) .  Sf^^^l.^J^^^"^     o-fi    ?h  <^   W     °7 

3far^tod.-Mallette     v.     British-  Co.  142  Mo.  App.  2..6,  126  S   W   22/ 

American  Assur.  Co.  91  Md.  471,  46  (contract  of  insurance   need  not  be 

Atl   1005,  29  Ins.  L.  J.  966  (contract  evidenced     by     a     written     policy); 

to  insure  valid;    pleading    oral    con-  Sheppard    v.    Boone    County    Home 

tract  and  demurrer).  Mutual  Fire  Ins.  Co.  138  Mo.  App. 

Massachusetts.— Goodhue  v.  Hart-  20,  119   S.   W.  984    (but  facts   here 

ford  Fire  Ins.  Co.  175  Mass.  187,  55  showed  no  oral  contract  was  made). 

N.  E.  1039.  29  Ins.  L.  J.  207   (oral  AebmsAo.— Carter  v.  Bankers  Life 

contract    valid;    temporary    here    to  Jns.  Co.  83  Xeb.  810,  120  S.  W.  455 

oover   removal)  ;    Sanford    v.    Orient  (written     application     and     counter 

Ins.  Co.  174  Mass.  416,  75  Am.  St.  proposal;  no  policy  issued;  contract 

Rep.  358,  54  N.  E.  883   (may  make  valid).                           ^      1  11        xr 

',.     .     '              ,       ,       0'       ■  ^f^    +„  New  Hampshire. — Goodall  v.  New 

preliminary    contract,     bee    note    to  i  ^r  f    1  t.-i-      t        n      o-  m 

ii  •             in  n     *.    T     T    \(iT\.  -Rv-.^^r,  England  Mutual  lire  Ins.  Co.  2o  N. 

this  case  49  Lent.  1j.  •).  4b/  )  ;  rJrown  ^^    ir.,^    ,      ,•             j       i.  v         ^     n 

xp       ,,•     ^i  ,     ,  V       T       n^   Mi\  H.  169   (policy  need  not  be  actually 

V.  Franklin  Mutual  lire  Ins.  Co.  loo  •         i\ 

Mass.  565,  52  Am.  St.  Rep.  534.  43  ''"^^/r  J^rse».— Smith  &  Wallace  Co. 

N.  E.  512   (evidence    of    custom    ot  ^.   p^.'^^.^i^j,  ^^t.  Ins.  Co.  68  N.  J.  L. 

agent  to  bind  company  by  oral  con-  g-_^_  33  ^^tl.  458  (complete  temporary 

tract  of  insurance  admissible;   stock  (.Q^tract  existed). 

company  may  undoubtedly  make  oral  Xg^^.     York. — International     Ferry 

contract    of    insurance)  ;    Emery    v.  Co.  v.  American  Fidelity  Co.  207  N. 

Boston   :Marine  Ins.  Co.    138    Mass.  y.  350,  101  N.  E.  160  (a  parol  agree- 

398  (secretary  held  to  have  authority  ment   by   an   insurance   company   to 

to  make  binding  oral    agreement    to  effect  a  stipulated  insurance  by  issue 

indorse  a  risk  upon  an  open  policy)  ;  of  a  valid  policy  is  binding  in  absence 

Dodd  V.  Gloucester  Ins.  Co.  120  Mass.  of    constitutional    or    legislative    re- 
468  (marine;  valid  contract  of  insur-    quirement  contra.     A  case  of  marine 

ance  held  to  have  existed)  ;  Sanborn  vessel  liability  insurance)  ;  Ruggles  v. 

V.  Firemen's  Ins.  Co.    16    Grav     (82  Ameiy-an    Cent.   Ins.   Co.  114  N.  Y. 
Ma.ss.)  448,  77  Am.  Dec.  419  (where   415.  11  Am.  St.  Rep.  674,  21  X.  E. 

150 


PAROL  CONTRACTS  §  31 

insurance  policy,  and  a  parol  contract  of  insurance;  and  in  Oliiu  u 


1000  (fonipletp  and  valid  contract 
from  date  of  conversation  with 
asent) ;  Van  Loan  v.  Farmers  Mutual 
Fire  Ins.  Assoc.  90  N.  Y.  280  (valid 
ao-reement  for  insurance)  ;  Angell  v. 
Hartford  Fire  Ins.  Co.  59  N.  Y.  171, 
17  Am.  Rep.  322  (agent  may  make 
preliminarv  contract  to  issue  policy)  ; 
Flli.s  v.  Aibanv  City  Ins.  Co.  50'  N. 
Y.  402,  10  Am.  Rep.  495  (valid  pre- 
liminarv contract  with  agent  to  issue 
policy)";  Fish  v.  Cottenett,  44  N.  Y. 
538,  4  Am.  Rep.  715  (parol  contract 
for  insurance  valid)  ;  Trustees  of 
First  Baptist  Cluirch  v.  Brooklyn 
Fire  Ins.  Co.  19  X.  Y.  305 ;  Reynolds 
v.  Westchester  F'ire  Ins.  Co.  40  X.  Y. 
Supp.  33(i,  8  App.  Div.  193.  But 
compare  §S   33a,  38a  herein. 

North  Carolina. — Floars  v.  ^■Etna 
Ins.  Co.  144  N.  C.  232,  11  L.R.A. 
(N.S.)  867n,  5(1  S.  E.  916  (oral  con- 
tract of  insurance  or  to  insure  will, 
in  absence  of  some  statutory  pro- 
visions, be  upheld  if  otherwise  bind- 
ing). 

North  Dakota. — Boos  v.  ^Etna  Ins. 
Co.  22  X.  Dak.  11,  132  N.  W.  222,  40 
Ins.  L.  J.  1787  (breach  of  parol  con- 
tract to  insure;  recovery  may  be 
had)  ;  following  MeCabe  Bros.  v. 
.Etna  Ins.  Co.  9  N.  Dak.  19,  47 
L.R.A.  641.  81  N.  W.  426. 

Ohio. — Newark  Machine  Co.  v. 
Kenton  Ins.  Co.  50  Ohio  St.  549,  22 
L.R.A.  768  and  note,  35  X.  E.  1060 
(parol  contract  of  insurance  valid). 

Oregon. — Sprout  v.  Western  As- 
surance Co.  33  Oreg.  98,  54  Pac.  180, 
28  Ins.  L.  J.  118  (oral  prelitninary 
contract  to  insure)  ;  Nortli  British  »fc 
jNIercantile  Ins.  Co.  v.  Lambeit,  26 
Or.  199,  37  Pac.  909  (oral  con- 
tract for  insurance  by  agent  bind- 
ing). 

Pennsylra)ii/i.~  Renner  v.  Fire 
Assoc,  of  Phila.  229  Pa.  75,  140  Am. 
St.  Rep.  706.  78  Atl.  44,  40  Ins.  L.  J. 
84  (law  permits  oral  contracts  of  in- 
surance; oral  executory  contract 
valid);  Patt^M-son  v.  Benjamin 
Franklin  Ins.  Co.  81i    Pa.    St.    454 

1 


(there  may  be  a  parol  contract  be- 
fore issuing  policy,  but  evidence  here 
insufficient)  ;  Smith  v.  Odlin,  4 
Yeates  (Pa.)  468;  Ripka  v.  MutuaJ 
Fire  Ins.  Co.  36  Pa.  Super.  Ct.  51* 
(agent  may  bind  company  by  con- 
tracts by  parol  before  issuing  policy, 
unless  specitic  charter  requirements 
preclude). 

South  Carolina. — Strickley  v.  Mo- 
bile Ins.  Co.  37  S.  Car.  56,  16  S.  E. 
280  (company  bound  where  local 
agent  received  insured's  money  on 
promise  to  issue  policy). 

'Texas. — Cohen  v.  Continental  Fire 
Ins.  Co.  67  Tex.  325,  60  Am.  Rep.  24, 
3  S.  W.  296  (agent  may  contract  by 
jiarol  renewal)  ;  Austin  Fire  Ins.  Co. 
V.  Brown  (Tex.  Civ.  App.)  160  S. 
W.  973  (preliminary  oral  contract 
binding)  ;  State  Mutual  Fire  Ins.  Co. 
v.  Taylor,  —  Tex.  Civ.  App.  — ,  157 
S.  W.  950  (contract  of  insurance  by 
parol  valid  in  absence  of  charter  or 
statutory   provisions). 

Utah. — Idaho  Forwarding  Co.  v. 
Firemen's  Fund  Ins.  Co.  8  Utah  41, 
17  L.R.A.  586,  29  Pac-.  826  (agree- 
ujent  to  execute  policy  in  future; 
question  of  pleading  and  evidence, 
held  that  plaintiff  could  not  recover). 

Virginia. — Interstate  Fire  Ins.  Co. 
v.  McFall,  114  Va.  207,  76  S.  E.  293 
(completed  contract  undelivered 
policy)  ;  Haskin  v.  Agricultural  Fire 
Ins.  Co.  78  Va.  700;  Woody  v.  Old 
Dominion  Ins.  Co.  31  Gratt.  362,  31 
Am.  Rep.  732. 

Wa^hiufjlon. — Thompson  v.  Ger- 
mania  Fire  Ins.  Co.  45  Wash.  482,  88 
Pac.  941,  ;}6  Ins.  L.  J.  400  (complete 
oral  contract  made). 

West  Virginia. —  Croft  v.  Hanover 
Fire  Ins.  Co.  40  W.  Va.  508.  52  Am. 
St.  Rep.  902.  21  S.  K.  854  (oral 
executory  contract  valid). 

^\'is<■nnsin. — Whitman  v.  Mil- 
waukee Fire  Ins.  Co.  128  Wis.  124, 
116  Am.  St.  Rep.  25,  5  L.R.A. (X.  S.) 
680n,  107  X.  W.  2!)1  (oral  contract 
against  lire,  valid);  John  R.  Davis 
Lumber  Co.  v.  Scottish  Union  & 
51 


§  31 


JOYCE  ON  INSUKANCE 


parol  contract  of  insurance,  as  distinguished  from  a  parol  agree- 
ment to  issue  a  policy,  must  not  be  executory,  but  must  take  effect 
in  prscsenti} 


National  Ins.  Co.  94  Wis.  472,  69  N.  on  Ins.  (ed.  1845)  60,  §  5.  See  IMor- 

W.  156  (binding   verbal   contract    of  gan  v.  Mather,  2  Ves.  Jr.  15  and  n. 

insurance  mav  be  made) ;  Stchlick  v.  Contra,   Bell   v.   Western   ]\Iarine  & 

iMihvaukee    Mechanics"    Ins.    Co.    87  Fire  Ins.   Co.  5  Rob.    (La.)   423,  .39 

Wis.  322,  58  N.   \V.  35   (parol  con-  Am.  Dee.  542;  Cockerill  v.  Cincinnati 

tract    to   insure    valid)  ;    Mathers    v.  ]\[utual   Ins.   Co.   16   Ohio,   148.     In 

Union    IMutual    Accident     Assn.     78  this  case  the  court  says:     "It  is  uni- 

AVis.    588,    11  L.K.A.  83,  47  N.  W.  versal  commercial  usage  that  the  poli- 

1130     (oral    agreement    for    present  cy  shall  be  in  writing,  and  there  is 

insurance,  valid)  ;  Northwestern  ]ns.  no  exception  to  it  in  positive  decision 

Co.  V.  ^^tna  Ins.  Co.  23  Wis.  160,  99  or    municipal    regulation.      Such    a 

Am.  Dec.  145.     See  Strohn  v.  Hart-  thing  as  a  verbal  policy  is  unknoAvn 

ford  Ins.  Co.  33  Wis.  648.  to  tlie  law  of  insurance,  and  the  books 

Wi/oming. — Summers  v.  Mutual  upon  the  subject  and  decisions  unite 
Life  Ins.  Co.  12  Wvo.  369,  109  Am.  in  declaring  that  a  policy  must  be  in 
St.  Rep.  952,  66  L.R.A.  812,  75  Pac.  writing."  It  here  appeared  that  the 
937  (parties  bound  though  terms  not  act  incorporating  tlie  company  re- 
reduced  to  writing),  quired  their  contract  to  be  in  writ- 

Evfjland. — See    Coulter  v.    Equity  ing,  but  the  court  also  said  that  ''with- 

Fire  Ins.  Co.  24  Canadian  L.  T.  88.  out  the  act  we  should  hold  that  a  ]ioli- 

As  to  English  decisions,  see  note  22  oy  of  insurance  upon  the  principle  of 

L.R.A.  772.     When  contract  deemed  general  usage  must  be  in  writing,  as 

to  he  eoncliided,  see  marine  ins.  act  supported  and  declared  by  universal 

1906,   6   Edw.    VII.    c.   41,   sec.   21;  authority."    But  see  Dayton  Ins.  Co. 

Butterworth's  20th  Cent.  Stat.  (1900-  v.   Kelly,  24  Ohio   St.  345,  15   Am. 

1909)   p.  404.  Rep.  612. 

See  further  as  to  validity  of  oral       It   should   he   rememhered   that    a 

contracts     of     insurance,    notes    22  policy  is  the  contract  reduced  to  urit- 

L.R.A.  768-773;  6  Am.  &  Eng.  Ann.  ing.     See  Hicks  v.  British  American 

Cas.   624,   69  Am.   St.  Rep.  143,  77  Assur.  Co.  162  N.  Y.  284,  48  L.R.A. 

Am.  Dee.  402.  424,  56  N.  E.  743.  Avhere  the  court 

"Although  tliere  is  a  difference  of  says:     "It  is  usual  for  the  company 

opinion  in  the  various  jurisdictions  to   issue  a   policy  of  insurance   evi- 

and    among    the    text-writers    as    to  dencing    the    contract    between    the 

whether  or  not  an  executory  contract  parties,  but  the  ])olicy  accomplishes 

can  be  made  to  insure  in  the  future,  nothing  more  than  that,"  per  Parker, 

yet  the  clear  preponderance  of  au-  C.  J.    So  the  issuing  of  a  policy  fur- 

thority  seems  to  be  that    such    con-  nishes  a  convenient  mode  of  proving 

tracts    are   valid."      Benner   v.    Fire  contract  but  it  is  not  essential  to  its 

Assoc,  of  Phila.  229  Pa.  75,  140  Am.  validity.      Walker    y.    Metropolitan 

St.  Rep.  700,  78  Atl.  44;  40  Ins.  L.  J.  Ins.  Co.  56  Me.  371,  376. 
84,  per  Moschzisker  J.,  citing  numer-        Prepaipnent  of  pretnium  not  pre- 

ous  cases.  requisite    oral    contract.       See    fifth 

Policy  need  not  he  issued,  and  if  note   under   §   41   herein.      See   §   72 

no  date  is  mentioned  takes  effect  im-  herein. 

mediately.  Potter  y.  PhaMiix  Ins.  *  Hartford  Fire  Ins.  Co.  v.  Whit- 
Co.  63  Fed.  382.  See  note  10  Am.  man,  75  Ohio  St.  312,  9  Amer.  &  Eng. 
Rep.  502.  Ann.  Cas.  218,  79  N.  E.  450;  Hart- 

As  to  mai'ine  insurances,  see  1  Duer  ford   Fire  Ins.   Co.  v.   Trimble,  117 

152 


PAHOL  CONTRACTS 


§  31 


A  parol  contract  by  a  diih^  authorized  agent  of  an  in.-nrance  com- 
pany is  binding  on  the  conipsn}^  before  issuing  the  poHcy.^  In  a 
Massachusetts  case  the  plaintifi'  made  an  appUcation  for  fire  insur- 
ance to  defendant's  local  agent,  who  orally  agreed  to  place  a.  certain 
amount  at  a  certain  rate  upon  the  risk  at  once,  and  to  bind  it,  and 
immediately  made  a  memorandum  to  that  effect  in  the  '^binding 
book."  The  risk  was  specially  hazardous,  and  in  view  thereof  a 
special  agent  was  to  inspect  and  approve  the  risk.  The  agent  had 
written  authority  to  receive  proposals  for  insurance,  and  was  accus- 
tomed to  fill  and  deliver  policies  signed  in  blank  by  the  company's 
oflicers  and  left  with  him  for  that  purpose.  The  same  class  of  risks 
had  been  frequently  taken  by  the  agent,  and  he  had  issued  policies 
thereon  without  consulting  the  company,  and  agents  were  accus- 
tomed to  bind  their  principals  by  preliminary  oral  agreements  until 
policies  could  be  conveniently  issued.  Upon  action  brought  it  was 
decided  that  the  agent  had  made  an  oral  agreement  for  insurance 
within  the  apparent  scope  of  his  authority.^"     So  an  oral  agreement 


Ky.  583,  25  Kv.  L.  Rep.  1497,  78  S. 
W.  4(i2,  33  Ins.  L.  J.  348  (where  the 
court  said:  "We  recognize  the  dis- 
tinction between  jiarol  contracts  of 
insurance  in  prsesenti,  and  in  futuro, 
but  consider  it  unnecessary  to  con- 
sider this  question"). 

A  distinction  exists  between  a  eon- 
tract  of  insurance  which  comprehends 
the  issued  policy,  and  a  contract  to 
insure.  The  one  is  executory  in  its 
nature,  and  the  other  executed. 
Sproul  V.  Western  Assur.  Co.  33 
Orcg.  98,  54  Pac.  180. 

"It  is  contended  by  counsel  for  ap- 
pellee tliaf  the  autliorities  distin- 
guish between  verbal  agveenionts  for 
insurance  in  futuro,  and  verbal  con- 
tracts for  insurance  in  pra^senti,  and 
liave  rejected  the  former,  but  sus- 
tained tiie  latter,  character  of  eon- 
tracts.  We  concede  there  is  a  con- 
flict of  authority  upon  this  question." 
The  court  then  considers  whether  a 
contract  for  renewal  can  validly  rest 
in  parol,  holds  that  it  can,  and  ackls: 
"The  conclusion  we  have  reached  is 
supported  by  King  v.  Cox,  63  Ark. 
204,  37  S.  W.  877,  and  Home  Ins.  Co. 
V.  Adler,  71  Ala.  516  (521,  77  Ala. 
242).  In  those  cases  it  apjieared  that 
the  contract  was  made  v.ithin  a  few 


days  of  the  expiration  of  the  policies 
which  were  to  be  renewed.  Counsel 
for  appellee  argue  that  the  contracts 
in  those  cases  were  made  so  near  the 
(late  of  the  expiration  of  the  old  poli- 
cies the  court  regarded  them  as  con- 
tracts of  insurance  in  pra^scnti.  The 
coui't  in  those  cases  did  not  hold  that 
the  contracts  were  enforcible  because 
the  contracts  for  renewal  were  made 
but  a  short  time  before  the  expiration 
of  the  old  policies,  and,  therefore, 
were  contracts  in  pra^senti.-  They 
simply  adjudged  that  parol  contracts 
for  the  renewal  of  policies,  which 
were  made  before  the  expiration  of 
the  old  policies"  were  binding.  Bald- 
win V.  Phoenix  Ins.  Co.  107  Ky.  356, 
21  Ky.  L.  Rep.  1090,  54  S.  W.'l3,  29 
Ins.  L.  J.  78,  ])er  Paynter,  J.  Seo 
Taylor  v.  Phoenix  Ins.  Co.  47  Wis. 
365,  2  N.  AV.  559,  as  to  contract  to  re- 
new in  prjcsenti  (quoted  from  in 
American  Can  Co.  v.  Agi-icultural 
Ins.  Co.  12  Cal.  App.  133,  106  Pac. 
720,  39  Ins.  L.  J.  518)  ;  Western  As- 
surance Co.  v.  McAlpin,  23  Ind.  App. 
220,  55  N.  E.  119. 

9  Ripka  V.  Mutual  Fire  Ins.  Co.  36 
Pa.  Super.  Ct.  517. 

^°  Putnam   v.   Home   Ins. 
Mass.  :124,  25  Am.  Rep.  93. 


Co.   123 
But  see 


153 


§  31  JOYCE  ON  INSURANCE 

may  be  binding  on  Ibe  company  wlien  by  agTcement  with  the  as- 
ynrod  the  agent  is  to  fix  the  amount  0/  indemnity  as  he  sees  proper 
and  does  fix  it,  as  shown  by  memorandum  made  by  him.^^  And  an 
agent  who  is  intrusted  with  blank  policies,  signed  by  the  president 
and  secretary  of  the  insurance  corporation,  with  autliority  to  fill 
up  and  negotiate  the  same,  may  bind  it  by  an  oral  contract  of  in- 
surance.^^ It  is  held  in  Connecticut  that  an  insurance  company 
cannot  ordinarily  insure  by  parol,  but  that  the  parties  may,  how- 
ever, agree  by  parol  as  to  the  terms  upon  which  a  policy  may  be 
issued.^'  In  another  case  an  application  was  made  to  an  agent  of 
several  insurance  companies  for  insurance,  and  the  amount  was 
specified,  the  rate  fixed,  tlie  premium  paid,  and  a  receipt  given 
lliorefor  by  the  agent,  who  promised  to  draw  the  policy  the  second 
following  day,  and  stated  that  if  it  burned  before  then  'Sve  will  call 
it"  the  property  ''insured,"  and  these  negotiations  were  reduced  to 
writing,  and  a  policy  was  issued  by  the  insurer  and  accepted  by  the 
insured,  and  afterwards  the  property  burned,  in  an  action  brought 
upon  the  oral  contract  to  insure,  it  was  held  that  there  was  no  sucli 
oral  contract  with  the  company;  that  at  the  most  it  was  an  oral 
contract  on  the  part  of  the  agent  to  insure.^*  Guarantee  insurance, 
however,  is  declared  to  be  excepted  from  the  rule  first  above  stated.^* 

In  England,  however,  the  act  35  George  III,,  chapter  63,  section 
2,  expressly  provided  for  an  engrossed,  printed  or  written  contract  in 
case  of  every  agreement  for  any  marine  insurance,  and  that  the 
same  shall  specify  the  premium  or  consideration,  the  character  of 
the  risk,  the  sums  insured,  and  the  names  of  the  insurers.^®  And 
by  act  18G7,  30  Victoria,  chapter  23,  section  7,  every  contract  or 
agreement  for  sea  insurance  ^"^  must  be  expressed  in  a  policy,  other- 
Daniels  V.  Citizens'  Tiis.  Co.  5  Fed.  ^^  Bisliop  v.  ('lav  l^'iro  &  Marine 
425,  430;  Tavlor  v.  Gerinania  Ins.  Co.  Ins.  Co.  49  Conn.  i()7. 
2  Dill.  (U.  S.  C.  C.)  282,  Fe(].  Cas.  "  Kleis  v.  Niai^aia  Fire  Ins.  Co. 
13,793;  Home  Ins.  Co.  v.  Adler,  71  117  Mich.  469,  5  Det.  L.  N.  337,  70 
Ala.  516;  AVarner  v.  Milford  .Mntnal  N.  W.  155,  27  Ins.  L.  J.  912. 
Fire  Ins.  Co.  153  Mass.  335,  11  See  as  to  merger  of  parol  contract 
1..K.A.  598,  26  N.  E.  877;  Friuikliii  in  written  aoreement.  §  40  herein. 
Fire  Ins.  Co.  v.  Tavlor,  52  Miss.  441 ;  i^  Floars  v.  Aetna  Life  Ins.  Co.  144 
Kntiules  V.  American  Cent.  Ins.  Co.  N.  Car.  232,  11  L.R.A.(N.S.)  867n, 
114  \.  Y.  415,  21  N.  E.  1000,  11  Am.    56  S.  E.  916. 

St.  Kep.  074.  and  note,  678,  and  note,  ^^  See  also  25  Geo.  III.  e.  44;  28 
21  Am.  St.  Rep.  88.3.  Geo.  III.  e.  56  (whole  act  repealed  so 

As  to  agent's  power  to  make  oral    far  as  relate.s  to  marine  insnrance  by 
contract,  see  §  525  herein.  marine   ins.   act,-  1906,   6   Edw.   VII. 

^^  Croft  V.  Hanover  Fire  Ins.  Co.    c.    41)    wliich   implv   a    written    con- 
40  W.  Va.  508,  21  S.  E.  854.  tract;   Abbott   on    Slii})ping,   Story's 

12  King  V.  Plioenix  Ins.  Co.  195  Mo.   cd.  2,  n.  1.     As  to  Engli.sli  Statntes, 
290,  113  Am.  St.  Rep.  678,  6  Amer.    see  §  IV.  herein. 
&  Kim-.  Ann.  Cas.  ()18,  92  S.  W.  892.        ^'^  Other  than   that   referred   to   in 

154 


PAROL  CONTRACTS  §  .'Jla 

wise  it  is  null  and  void,  and  in  addition,  under  .scelion  0  of  said  act, 
no  policy  shall  be  pleaded  or  given  in  evidence,  or  adinitted  in  any 
court  to  be  good  and  available  in  law  or  in  equity,  unless  duly 
stamped.^'  Under  the  same  act  policies  effected  abroad  and  charge- 
able with  duty  by  virtue  of  the  28  and  29  A^ictoria,  chapter  9G,  sec- 
tion 15,  may  be  stani})ed  within  the  time  specified  in  that  act. 
Again,  under  an  English  decision,  it  is  held  that  although  there  is 
no  positive  law  in  New  South  Wales  necessitating  that  marine  con- 
tracts of  insurance  be  in  writing,  yet  an  agent  authorized  to  make 
contracts  in  the  ordinary  way  must  make  them  in  writing,^^  and 
although  the  slip  be  initialed,  and  would  otherwise  be  a  contract  of 
marine  insurance,  it  is  nut  an  enforceable  policy  in  England  under 
the  provisions  of  the  act  al)ove  noted. ^° 

§  31a.  Parol  contracts:  life  insurance:  industrial  life  insur- 
ance.— The  rule  as  to  parol  contracts  stated  under  the  preceding 
section  applies  to  life  insurance.^  And  even  though  a  policy  is 
never  issued,  a  contract  for  life  insurance  will  come  into  existence 
immediately  where  a  proposition  is  accepted  and  the  premium 
paid.^  But  a  contract  for  present  insiu-ance  is  not  made  by  an  ap- 
])licant  who  gives  his  note  for  the  lirst  premium  in  consideration 
that  a  policy  shall  be  issued,  where  his  examination  is  to  be  made  in 
the  future,  and  he  expressly  stipulates  that  the  note  shall  not  be 
negotiated  until  the  policy  has  been  delivered  and  accepted.^ 
Again,  in  a  Wisconsin  case  where  an  action  was  brought  on  an  al- 

raercliant  shipping  am'd.  act  18G2,  25  suranee:     English  decisions,  see  note 

&  26  Vict.  c.  G;J,  .sec.  35.    As  to  Eng-  22  L.R.A.  772. 

lish  Statutes,  see  §  IV.  herein.     See  As  to  ship)}ie}i's   clubs  or  associa- 

also  as  to  stamp  acts:     1  Arnoiild  on  tions,  see  30  &  31  Vict.  c.  26,  sec.  J); 

Marine  Ins.  (9th  ed.  Hart  &  Simey)  25  &  26  Vict.  c.  89,  sees.  3,  6,  180, 

sees.  28  et  seq.  pp.  41  et  seq.     (wliere  193,  194,  196,  206.    For  English  Stat- 

it  is  said:   "Tlie  rigour  of  the  law  has  utes,  see  §  IV.  iierein. 

been  considerably  modified,"  etc.  and  ^  Knights    of    Maccabees    of    the 

cases  are  noted  in  whicli  assured  re-  World   v.    Gordon,   83   Ark.   17,   102 

covered  without  a    i)olicy);    17    Earl  S.  W.  711.  36  In.s.  L.  J.  628;  Mcln- 

of  Halsburv's  Laws  of  England,  pp.  tvre  v.  Federal  Life  Ins.  Co.  142  I\Io. 

338  &  notes,  505  et  seq.  515,  517  and  App.  236,  126  S.  W.  227:  Pacific  Mu- 

§  33  herein.  lual  Ins.  Co.  v.  Shaffer,  30  Tex.  Civ. 

"But     see     Teignmouth     General  App.  313,  70  S.  W.  566. 

Mutual  Ship.  Assoc,  In  re  (Martin's  ^  Caiter  v.  Bankers  Life  Ins.  Co. 

Claim)  L.  R.  14  Eq.  148.  83  Neb.  810,  120  N.  W.  455  (a  ten- 

^^  Davies  v.  National   Fire   &   Ma-  ])aymcnt  policy).     See  also  Knights 

riije   Ins.   Co.  of  New  Zealand   App.  of  Maccabees  of  the  World  v.  Gordon, 

Cas.  L.  R.   (H.  L.  P.  C.  Eng.  1891)  83  Ark.  17,  102  S.  W.  711,  36  Ins.  L. 

485.  J.  628. 

2°  Fisher  v.  Liverpool  Marine  Ins.  '  Summers  v.  Mutual  Life  Ins.  Co. 

Co.  L.  R.  8  Q.  B.  469;  L.  R.  9  Q.  B.  12  Wvo.  369,  66  L.R.A.  812,  109  Am. 

418.     Validity  of  oral  contract  of  in-  St,.  Rep.  952,  75  Pac.  937. 

155 


§  31b  JOYCE  OX  IXSURAXCE 

Icgcd  oral  contract  of  prudonlial  life  insurance,  the  validity  of  such 
a  contract  was  evidently  conceded,  at  least  there  appears  no  dis- 
cussion as  to  that  point,  the  only  question  being  whether  there 
was  such  an  oral  contract  upon  the  evidence  and  it  was  determined 
that  there  was  not.* 

§  31b.  Parol  contracts:  accident  insurance. — "Within  the  rule 
above  stated.'*^  an  oral  a.ureement  for  present  or  immediate  in- 
surance covering  an  accident  risk  is  valid  and  binding.*  And 
the  general  rule  applies  that  when  a  contraet  of  insurance  has 
been  agreed  on,  the  execution  of  a  policy  is  not  essential  to  its 
validity,  unless  it  is  part  of  the  contract  that  execution  and  de- 
livery are  prerequisites  to  its  taking  effect.^  So  in  an  action  of 
assumpsit  upon  an  accident  insurance  policy,  it  is  held  that  a  con- 
tract of  insurance  is  to  be  treated  by  the  principles  applicable  to  the 
making  of  contracts  in  general.'''  In  a.  Georgia  case  it  was  claimed 
that  an  oral  contract  was  made  with  defendant's  agent  for  im- 
mediate insurance,  and  that  the  written  policy  had  been  fraudu- 
lently dated  so  as  to  post  date  the  accident.  It  was  held  that  it  was 
unnecessary  to  decide  whether  or  not  a  valid  contract  of  accident 
insurance  could  be  made  in  that  state,  as  it  was  apparent  from 
the  evidence  that  no  parol  contract  was  consummated;  that  the 
plaintiff  had  expressly  agreed,  in  writing,  that  the  basis  of  the  con- 
tract between  him  and  the  company  should  be  the  application  and 
the  premium  paid  by  him ;  that  no  statements  made  by  him  to  the 
agents  should  bind  the  company  unless  WTitten  upon  the  applica- 
tion :  that  the  application  itself  should  not  be  binding  upon  the 
company  until  accepted  by  its  secretary,  and  that  the  policy  itself 
should  not  be  in  force  until  actually  issued  from  the  company's 
ofiice.  It  further  appeared  that  the  insured  had  knowledge  of  the 
limitations  upon  the  agent's  authority  and  that  he  was  not  em- 
powered to  write  any  binding  contract  and  that  no  statements  made 
by  him  to  the  applicant  were  to  bind  the  company.  It  w^as  also 
held  that  a  mere  verbal  assurance  by  the  agent  of  the  insurer  to 
the  applicant  that  he  was  insured  from  the  date  of  the  application 
and  the  giving  by  the  former  to  the  latter  of  a  receipt  purporting 

*  Chamljt'ilain    v.    Prudential    Ins.  United  States  Casualtv  Co.  106  Me. 

Co.  of  America,  109  Wis.  4,  83  Am.  411,  76  Atl.  002. 

St.  Rep.  851,  85  N.  W.  128,  30  Ins.  ^  pj-^^fe^.^.e^i    Accident    Ins.    Co.    v. 

L.  J.  427.  Stone,  61  Kan.  48,  53,  58  Pac.  586. 

***  See  §  31  herein.  "^  Washburn  v.  United  States  Casu- 

5  Mathers   v.   Union   Mutual   Acei-  altv  Co.  106  Me.  411,  76  Atl.  902,  108 

dent  Assoc.  78  Wis.  588,  11  L.R.A.  Me.  429,  81  Atl.  575. 

83,  47  N.  W.  1130.    See  Wasliburn  v. 

156 


PAROL  CONTKACTS  §.^  31e,  31d 

to  be  for  the  first  f|u;irterly  premium  did  not  constitute  a  contract 
of  insurance  on  wliicli  an  action  could  be  maintained.* 

§  31c.  Parol  contracts:  -'v/orkman's  collective  policy;"  custom. — 
Tlie  rule  tliat  a  contract  of  in.-urance  may  be  by  parol,  and  need 
not  be  in  writin,<i.^  has  Ijeen  ai)i)lied  where  a  "workman's  collective 
policy,"  for  which  ai)plication  was  made,  was  one  by  which  the 
insurer  agreed  to  j^ay  one  year's  full  wages  to  the  party  injured  in 
case  of  death,  and  one  half  wages  in  fifty-two  weeks  for  certain  in- 
juries. This  policy  was  to  be  issued  to  an  employer  for  the  bene- 
fit of  its  operatives,  and  the  insurer  agreed  through  its  agent,  in  con- 
sideration of  the  employer's  application  and  promise  to  pay  the 
premium,  that  the  insurance  should  be  in  force  until  the  applica- 
tion was  rejected  and  notice  thereof  given,  that  is,  the  policy  was 
not  to  be  issued  unless  the  application  was  approved,  and  until  it 
was  disapproved  and  the  employer  received  notice  to  that  cft'ect  the 
insurance  was  to  l^e  in  force.  It  did  not  appear  that  the  application 
was  signed.  The  agent  was  authorized  to  and  did  make  such  con- 
tracts, although  it  was  his  custom  to  give  a  writing  to  that  effect. 
An  employee  lost  his  life  between  the  time  the  application  wa.< 
made  and  notification  of  its  rejection.  It  was  also  held  that  inas- 
much as  there  existed  no  right  to  have  a  policy  issued  the  remedy 
was  not  in  equity,  but  by  an  action  at  law  to  recover  on  the  parol 
contract.^" 

§  3 Id,  Parol  contract:  where  policy  partly  written  at  time  of 
loss:  contract  binding. — In  a  late  case  the  owner  of  property  con- 
tracted with  an  agent  re]»resenting  several  insurance  com])anies  to 
insure  jjroperty  for  a  certain  amount,  but  did  not  designate  the 
particular  company  in  which  the  insurance  should  be  taken,  and  at 
the  same  time  he  p'aid  the  premium  and  arranged  with  the  agent 
to  hold  the  policy,  and  thereafter  to  keep  the  property  insured.  A 
|)olicy  was  issued  in  a  comiiany,  which  policy  shortly  afterwards 
was  canceled,  and  the  agent  then  placed  the  insurance  in  another 

8  Fowler  V.  Preferred  Accident  Ins.  897,  28  Ins.  L.  J.  88G,  as  to  writing 

Co.  100  Ga.  330,  28  S.  E.  398,  27  Ins.  being    nece.ssary    to    alter    insurance 

L.  J.  1G8.     See  also  Fireman's  Fund  contiact. 

Ins.  Co.  V.  Rogers,  108  Ga.  191,  '.]'■>  As  to  cif/eiit's  jtoirer  to  make  oral 

S.  E.  954.  28  Ins.  L.  J.  102.').     Eaini-  contract,  see  §  Si'i  liei'cin. 

iue  S  31:  herein.  ^  See  §  31  lierein. 

Contract    of   fire    insurance    to    he  ^°  Fidelity  &  Casualty  Co.  v.  Bal- 

hinding    must    be    in    writinrj    under  lard  &  Ballard  Co.  IC)  Ky.  253,  20 

Georgia  Statute.     Delnware 'ins.  Co.  Ky.  L.  Rep.  11G9,  48  S.  W.  1074,  28 

V.  Pennsylvania  Fire  Ins.  Co.  126  Ga.  Ins.  L.  J.  227. 

380,   7    Amer.    &   Eng.    Annot.    Cas.  Agent's  agreement :  Liahilitij  not  to 

1134,  55   S.  E.   330:   Ga.   Civ.   Code  attach   till  approval,  see   §   59   liere- 

secs.    2022,   2089.      See   Lippman   v.  in. 
iEtna  Ins.  Co.  108  Ga.  391,  33  S.  E. 

157 


^  32  JOYCE  ON  INSURANCE 

company  represented  by  him,  and  that  poUcy,  too,  was  canceled. 
He  then  placed  the  insurance  in  the  defendant  company,  and  be- 
gan to  write  out  a  policy,  but  an  interruption  prevented  its  comple- 
tion at  the  time,  and  before  it  was  finished  the  property  was  de- 
stroyed by  fire.  It  was  held  that  the  steps  taken  by  the  authorized 
agent  of  the  company  constituted  a  binding  contract  of  insurance, 
and  also  that  the  agent's  agreement  with  the  property  owner  to  hold 
the  policy  and  keep  his  property  insured  was  not  repugnant  to  the 
duty  of  the  agent  to  defendant,  nor  did  it  affect  the  validity  of  the 
contract  of  insurance. ^^ 

§  32.  Parol  contracts:  the  common-law  rule. — Formerly,  con- 
tracts of  insurance  were  not  required  to  be  in  writing,  and  this  was 
the  common  law  in  England.^^  The  earliest  English  statute,  43 
Elizabeth,  chapter  12,  enacted  in  1601,  mentions  policies  of  insur- 
ance, as  does  also  the  statute  6  George  1.,  chapter  18,  which  was  the 
act  securing  to  the  two  great  comi)auies  of  assurance  in  1719  the 
monopoly  of  making  these  contracts,  subject  to  certain  exceptions. 
In  this  latter  act  the  preamble  declares  that  this  contract  ''or  course 
of  dealing  is  commonly  called  a  policy  of  assurance."  But  there 
is  nothing  in  the.se  statutory  regulations  which  can  be  construed  as 
making  the  acts  requiring  a  written  policy  in  England  declarators' 
of  the  common  law,  and  in  fact  the  earlier  statutes  in  that  country 
sought  only  to  remedy  or  restrain  certain  abuses  in  insurance 
rather  ,than  to  declare  old  principles.  It  was  no  doubt  a  well-es- 
tablished usage  to  have  policies  of  assurance  in  England  from  the 
day  Of  the  Lombards,  and  Maylnes  ^^  a.sserts  that  it  was  customary 
to  regi.ster  verbatim  policies  of  assurance  in  the  office  of  assurances 
in  order  to  preserve  evidence  of  the  contract  in  case  the  policy 
should  become  lost.  But  the.se  and  other  like  facts  go  no  farther 
than  to  establish  a  usage  to  have  policies  as  an  evidence  of  the  con- 
tract. An  examination  of  Lord  Mansfield's  decisions  and  of  the 
cases  subsequent  thereto  fails  to  di.'^cover  that  a  policy  or  writing 
was  necessary  to  the  validity  of  a  contract  of  insurance  at  the  com- 
mon law,  and  it  is  admitted  that  formerly  the  contract  was  not 
required  to  be  in  writing.^*  Emerigon  declares  that  "^"aHn  and 
Pothier  agree  in  saying  that  in  insurance  the  writing  is  onlv  re- 
quired for  ])roof  of  the  contract;  that  tlie  wi'iting  is  extrinsic  to 

^^  Wilson  V.  Cioriiian-Amfricaii  Ins.  tees     of     First     F>aptist     Clmix-h     v. 

Co.  90  Kan.  355,  133  Pac.  713 ;  War-  Brooklyn  Fire  Ins.  Co.  19  N.  Y.  303 ; 

ren  v.  Franklin   Fire  Ins.  Co.   (Iowa,  1  Smith's  Mercantile  Law   (M.  &  H. 

1913)  143  N.  W.  334.                            '  ISDO),  494. 

^2  Northwestern  Iron  Co.  v.  2&na  ^^  Lex  Mercatoria,  115. 

Ins.    Co.    23    Wis.    160;    Sanborn    v.  i*  See   1   Wood    on    Fire   Ins.    (2(1 

Firenians    Ins.    Co.    Ki    Grav     (82  ed.)    sec.  1;   1  Phillips  on  Ins.    (3d 

Mass.)  448,  77  Am.  Dec  419;'  Trns-  ed.)  sees.  8,  9. 

15S 


PAKOL  CONTRACTS 


32 


the  substance  of  the  agreeinenl*.  They  are  rcducod  to  writing  for 
the  purpose  of  more  easily  preserving  their  proof.  .  .  .  15ut 
this  conmion-law  rule  ceases  its  operation  in  all  cases  where  writing 
is  expressly  required  by  law.  .  .  .  The  ( niidon  ^*  informs  us 
that  formerly  insurances  were  made  without  writing;  they  were 
termed  'in  confidence,'  because  the  person  stipulating  for  insur- 
ance did  not  make  his  bargain  in  writing,  but  trusted  to  the  good 
faith  and  honesty  of  his  insurer.  But  this  practice,  because  of  the 
abuses  and  disputes  it  engendered,  was  subsequently  prohiV>ited  in 
all  commercial  places."  ^^  And  the  court  in  Sandford  v.  Trust 
Fire  Insurance  Comjjany  ^^  declared  in  1845  that  it  had  not  been 
able  to  find  anything  in  the  common  law  of  England  rendering 
il  neces,<ary  that  contracts  of  insurance  should  be  in  writing." 
So  it  was  held  in  a  case  in  the  United  States  Supreme  Court  ^^  that 


"  Chapter  1,  art.  2,  p.  223. 

^6  Emerigoii  on  Jus.  (Mereditli's  etl. 
1805)  c.  ii.  sec  1,  pp.  25,  26.  See  1 
Wood  on  Fire  Ins.  (2d  ed.)  p.  2,  sec. 
1. 

"11  Paige  (N.  Y.)  547. 

13  See  also  Sanborn  v.  Fireman's 
Ins.  Co.  16  Gray  (82  Mas.s.)  448,  77 
Am.  Dec.  419. 

19  Commercial  Mutual  jNIarine  Ins. 
Co.  V.  Union  Mutual  Ins.  Co.  19  How. 
(60  U.  S.)  318,  321,  322,  15  L.  ed. 
636. 

Cited  in  United  Stales. — McElroy 
V.  British  America  Assur.  Co.  36  C. 


land,  9  Kan.  App.  649,  58  Pac.  1024; 
Western  ]\Ias.sachnsetts  Ins.  Co.  v. 
Dufl'ey,  2  Kan.  355. 

Kentucki/. — I'idelitv  &  Casualty 
Co.  V.  Ballard,  lO.l  Jvy.  256,  48  S.  W. 
1074;  Security  F.  Jns.  Co.  v.  Ken- 
tucky Marine  &  Fire  Ins.  Co.  7  Bush, 
86,  3  Am.  Rep.  301. 

Louisiana. — Trager 
Equitable   L.   Ins.   Co. 
239. 

Man/land. — Phoenix 


V. 

31 


Louisiana 
La.   Ann. 


Ins.     Co.    V, 


Rvland,  69  Md.  447,  1  L.R.A.  550,  16 
Atl.  109. 

Massachusetts. — Brown    v.    Fi-ank- 

C    A.   622,   94   Fed.   997;  London  &    lin  Mut.  F.  Ins.  Co.  165  Mass.  568, 

-       ^  ^  '-    52  Am.  St.  Rep.  535,  43  N.  E.  512; 

Emery  v.  Boston  M.  Ins.  Co.  138 
Mass.  412:  Sanborn  y.  FinMuan's  Ins. 
Co.  16  Gray    (82  Mass.)   453. 

Missouri. — Griswold  y.  American 
Cent.  Ins.  Co.  1  Mo.  App.  102. 

New  JIampsliire.  —  Moi-rison  v. 
North  America  Ins.  Co.  64  N.  H. 
140,  7  Atl.  378. 

New  York. — Van  Loan  v.  Farmers' 
Mut.  F.  Ins.  Asso.  90  N.  Y.  285; 
Trust ee.s  of  First  Baptist  Church  v. 
15rooklyn  F.  Ins.  Co.  19  N.  Y.  308; 
Rhodes  y.  Railway  Pass.  Ins.  Co.  5 
Lans.  74;  Ann  Loan  y.  Farmers' 
Mut.  F. 
Hotclikiss 


Lancashire  Fire  Ins.  Co,  y.  Storrs,  17 
C.  C.  A.  650,  36  U.  S.'  App.  327,  71 
Fed.  125;  Fireman's  Fund  Ins.  Co.  y. 
Norwood,  16  C.  C.  A.  140,  32  U.  S. 
App.  490,  69  Fed.  75 ;  Scrantou  Steel 
Co.  V.  Ward's  Detroit  &  L.  S.  Line, 
40  Fed.  870;  Humphrcv  y.  Hartford 
F.  Ins.  Co.  15  Blatchf."  37  Fed.  Cas. 
No.  6,874;  Gary  v.  Nagel,  2  Biss.  246, 
Fed.  Cas.  ^fo.  2,403. 

Illinois. — Continental  Ins.  Co.  y. 
Roller,  101  111.  App.  80;  Fiienien's 
Ins.  Co.  y.  Knossner,  164  ill.  280,  45 
N.  E.  540 ;  Hartford  Fire  Ins.  Co.  v. 
Wileox,  57  111.  182. 

Indiana.— Feoria  Maiine  &  Fire 
Ins.  Co.  V.  Walser,  22  Ind.  83. 

loica. — Viele  v.  Gernuuiia  Ins.  Co. 
26  Iowa,  9,  96  Am.  Dec.  83. 

Kansas. — Phoenix  Ins.  Co.  y.  Ire- 


Ins.  Asso.  24  Hun,  134; 
y.  Germania  F.  Ins.  Co. 
5  Hun,  98;  Post  y.  .Etna  Ins.  Co.  43 
Barb.  362;  see  Hicks  y.  British  Amer- 


159 


§  33  JOYCE  OX  IX6UKAXCE 

under  the  common  law  a  promise  for  a  valuable  consideration  to 
make  a  policy  of  insurance  is  no  more  required  to  be  in  writing 
than  a  promise  to  execute  and  deliver  a  bond  or  a  bill  of  exchange 
or  a  negotial)le  note.^^  In  the  case  of  Cockerill  v.  Cincinnati  ^lu- 
tual  Insurance  Company  ^  the  court,  relying  upon  usage  and  upon 
the  fact  that  the  charter  of  the  company  required  a  writing,  holds 
that  such  a  thing  as  a  verbal  policy  was  unknown  to  the  law  of 
insurance,  and  that  a  policy  must  be  in  writing  "as  supported  and 
declared  by  universal  adjudication."  But  the  policy  is  the  writ- 
ing. ThLs  case  was  substantially  overruled  by  a  later  Ohio  case; 
that  is.  in  so  far  as  relates  to  the  contract  being  in  writing.^  The 
opinions  of  Mr.  Duer  and  Mr.  Millar  ^  are  to  the  same  purport  as 
the  Ohio  ease.  The  court  of  appeals  in  Xew  York  *  has  held  that 
a  contract  of  insurance  is  not  required  to  be  in  writing  by  the  gen- 
eral principles  of  law.  Under  a  Wisconsin  decision  neither  the 
conunon  law  nor  any  statutory  provision  in  force,  in  that  state  re- 
quires that  an  agreement  to  insure  against  loss  by  fire  should  be  re- 
duced to  writing.*  Referring  again  to  the  .statutory  regulations  in 
England.  Mr.  May  ^  doubts  whether  the  stamp  laws  require  a  writ- 
ingand  whether  a  parol  agreement  to  insure  would  be  void.  The 
statements  in  this  section  as  to  the  common-law  rule  relate  also  to 
cases  of  contracts  by  other  than  corporations.  The  rule  as  to  them 
will  be  considered  hereafter.''^ 

§  33.  Parol  contracts:  statutory  regulations:  English  stamp 
acts. — Where  a  statute  requires  the  stipulaiions  to  be  m  writing,  it 
is  held  in  Georgia  that  it  is  indispensable  that  they  should  be."     So 

ica  Assur.  Co.  13  App.  Div.  445.  43  Ins.  Co.  56  Me.  371 ;  Baile  v.  St.  Jo- 

X  Y   Supp.  623,  rev'd  162  X.  Y".  2S4.  sepli  Fire  &  Maiine  Ins.  Co.  73  Mo. 

48  L.R.A.  424.  50  X.  E.  743.  383. 

Xorth    DaAo/a.— McCabe   Bros.   v.  ^  16  Ohio,  148.     See.  also,  Bell  v. 

^tna  In«:   Co.  H  N.  D.  2-5,  47  L.K.A.  Western  Fire  Ins.  Co.  5  Rob.   (La.) 

645,  81  K  TV.  426.  423.  39  Am.  Dee.  542. 

0/,jo.—Elstner  V.  Cincinnati  Eqiii-  2  Dayton   Insurance    Co.   v.   Kelly, 

table  Ins.  Co.  1  Disney   (Ohio)   411,  24  Ohio  St.  345,  15  Am.  Rep.  612. 

420.  See  §  31  herein. 

Tennessee. — American    Cent.    Ins.  ^1   Duer  on   Ins.    (ed.   1845)    60; 

Co.  v.  McCrea,  8  Lea,  524,  41  Am.  Millar  on  Ins.  30. 

Rep.  647.  *  Tru.-tees  of  First  Baptist  Church 

j^rfl.s.— Splawn  v.  Chew.  60  Tex.  v.  Brooklyn  Fire  Ins.  Co.  19  N.  Y', 

522,  537.  305. 

irj.scoH.N^JH.— Campbell  v.  American  ^  Mobile  :Marine  Dock  &  Mut.  Ins. 

F.  Ins.  Co.  73  WLs.  108,  40  X.  TV.  Co.  v.  McMillan  &  Son,  23  Wis.  160, 

661.  99  Am.  Dee.  145. 

TT'vow/«.7.— Summers  v.  Tlutual  L.  ^1  May  on  Ins.  (3d  ed.)  sec.  25. 

Ins.  Co.  12  Wvo.  390.  66  L.R.A.  818.  '  See  §§  36.  37  herein. 

107  Am.  St.  Rep.  952,  75  Pac.  937.  "  ciark  v.  Brand,  62  Ga.  23   (un- 

20  See  also  Walker  v.  :Nretropolitan  dcr  Ga.  Code.  sec.  2794.    See  Ga.  Civ. 

160 


PAROL  CONTRACTS  §  33 

it  ]i;i.-;  been  decided  in  that  state,^  where  the  Code  requires  a  writ- 
in.u;.  thai  an  insurance  company  was  not  estopped  from  insisting 
that  the  contract  was  not  in  writing  in  a  case  where  the  insured, 
while  removing  liis  insured  stock  of  goods  to  another  house,  re- 
.  quested  the  insui'ance  agent  to  transfer  his  policy  if  necessary,  and 
the  ag3nt  consented  to  the  removal  and  promised  to  make  the  neces- 
sary entry  on  the  books,  and  that  equity  would  not  relieve  the 
parly  acting  on  a  parol  contract  unless  his  act  was  in  pursuance  of 
the  contract,  on  the  faith  of  it,  and  induced  by  it.^°  But  a  Massa- 
chusetts statute  which  required  the  conditions  of  insnrance  against 
loss  by  fire  to  be  stated  in  the  body  of  the  policy  was  lield  to  apply 
only  to  written  contracts  of  insnrance,  and  not  to  parol  iusurance.^^ 
Jt  is  said  by  the  court  in  a  Kansas  case  that  subsequent  to  the 
passage  of  the  revenue  laws  requiring  a  stamp  it  might  be  neces- 
sary that  a  contract  of  insurance  should  be  in  writing.^^  And  in 
Fish  V.  Cottenet  ^^  it  is  held  that  a  stamp  does  not  affect  the  validity 
of  a  parol  contract  for  insurance.  In  that  case  the  court  says: 
"Contracts  of  this  character  when  put  in  writing  certainly  require 
a  stamp.  If  the  defendant  had  performed  its  agreement  and  is- 
sued a  policy  the  government  would  have  received  the  aid  to  its 
revenue  which  is  so  much  required.  It  is  not  the  making  of  the 
agreement  that  defrauds  the  revenue,  but  its  breach  by  the  defend- 
ant. Agreements,  when  in  writing,  must  be  stamped.  A  stamp 
upon  an  oral  agreement  is  an  impossibility."  iVnd  iMr.  May  ^*  as- 
serts that  the  stamp  laws  do  not  go  to  the  validity  of  the  contract. 
He  also  says  that  the  doctrine  of  the  Kansas  case  above  referred  to 
'"seems  not  to  l)e  well  founded,"  and  "that  the  state  courts  do  not 
recognize  the  constitutional  right  of  the  general  government  lo 
determine  the  rules  of  evidence  b}'  which  the  former  shall  be  gov- 
erned, and  liold  pretty  uniformly"  that  the  laws  of  Congress  in  re- 
gard to  using  or  admitting  in  evidence  only  stamped  instruments 
applies  (mly  to  United  States  court,s,^^  and  that  author  doubts  the 

Code  sees.  2022,  2089 ;  Delaware  Ins.  ^^  West   j\rassaeliusetts  Ins.   Co.  v. 

Co.  V,  Pennsylvania  Fire  Ins.  Co.  12()  DufTey,  2  Kan.  :>4/. 

Ga.  380,  7  Aniei'.  &  I'^n^-.  Annot.  Cas.  ^^  44  N.  Y.  :)38,  r)43. 

1134,  5.5  S.  E.  230.     See  also  §  31b  "1  May  on  Ins.   (3d  ed.)  sec.  25. 

herein,  and  note  8.  ^^  Citing  llic  lollowing'  cases: 

9  Simonton  v.  Liverpool  &  London  ^''"''''/,'^'':"'::;~  ^''yi!!'''!;^^  ''\^""'" 

&  Globe  Ins.  Co.  51  Ga.  76.  1"?""'^'^\^^'A' .1    ^^ ''*"•   ^'^  ^-  ^"^   ^-^' 


^°  See    Southern    Life    Lis.    Co.   v. 


19  L.  ed.  223. 


T-         ,          -,.    --,        .v.M       o        i-'v  01         Coitnerlirut. — Gi'ifTin  v.  Raiinev,  35 

Kemplon,    ,)()    Ga.    339.      See    J^s  31  p.,,,,,    039 

et  seq.  liei-ein.  ////»r~/«.— United     States     Express 

"Relief  Fire  Ins.  Co.  v.  Shaw,  94  c^.  v.  Haines.  48  III.  21S;  Bunker  v. 

U.  S.  574,  24  L.  ed.  291;  Mass.  Stat.  (;,een,  4S  111.  2^3;  Craig  v.  Dimock, 

1804,  c.  196.  47  111.  308. 

Joyce  Ins.  Vol.  I. — 11.  IGl 


§  33 


JOYCE  OX  INSURANCE 


power  of  Con.aTess  to  declai-e  unstamped  instrumcntp  wholly  void, 
and  cites  cases  from  Illinois  and  Kentucky  holding  that  it  has  not 
such  power.^^  And  he  adds :  "But  it  is  doubtful  if  this  will  become 
the  settled  view  of  the  law  upon  mature  consideration.^'  It  is  also 
very  genei-ally  held  that  under  United  States  Statutes  1864,  chap- 
ter 173,  section  163,  and  1865,  chapter  78,  only  those  unstamped 
instruments  can  be  said  to  be  void  where  the  stamp  has  been  omit- 
ted with  intent  to  defraud  the  revenue,  and  such  is  the  law  under 
the  statute  of  1866,  chapter  184,  section  9."  ^^  In  South  Dakota 
the  want  of  a  revenue  stamp  on  a  policy  cannot  be  questioned  in  a 
state  court.^^     So  in  Iowa  the  validity  of  a  deed  is  not,  in  the  alj- 


3Iaine.— Dudley  v.  Wells,  45  Me.  Kentucky.— B.imter     v.     Cobb,     1 

145.  Bush   (Ky.)   239. 

Massachusetts. — Green  v.  Holway,  Louisiana. — Blake  v.  Hall,  19  T.n. 

301  Mass.  243,  3  Am.  Rep.  339;  Car-  Ann.  49;  McLean  v.  Skelton,  18  La. 

penter  v.  Snelling,  97  Mass.  452.  Ann.  514. 

Pennsylvania. — ]\IcGovern  v.  Hoes-  3Iassachusetts. — Carpenter  v.  Snel- 

back,  53  Pa.  St.  176,  177.  ling,  97  Mass.  452. 


Vermont. — Hitchcock    v.     Sawyer, 
39  Vt.  412. 

Contra;     see     Chartiers     &     Rob 


Nevada. — JMaynard   v.   Johnson,   2 
Nev.  16. 

Wisconsin. — Sayles    v.    Davis,    22 


Turnp.  Co.  v.  McNamara,  72  Pa.  St.  Wis.  225. 

228,  13  Am.  Rep.  673.     See  cases,  in  If  one  fails  to  affix  the  stamp,  the 

7  Alb.  L.  J.  49;  Edeck  v.  Rainer,  2  presumption  arises  that  such  act  is 

Johns.    (N.   Y.)    423;    Plessinger  v.  wilful.    Howe  v.  Carpenter,  53  Barb. 

Depuy,   25    Ind.    419.      ''Where    un-  (N.  Y.)  382.     Contra,  New  Haven  & 

stamped   instruments   were   excluded  Northampton  Co.  v.  Quintard,  6  Abb. 

the  question  of  constitutional  compe-  Pr.   N.    S.    (N.Y.)    128;    Weltner   v. 

tency  was  not  raised."  Riffgs,  3  W.  Va.  445;  act  June  30, 

The    failure    to    affix    a    revenue  1864,  which  only  declared  those  iii- 

stamp  to  the  transcript  of  a  foreign  struments  invalid  where  there  was  an 

judgment  of  a  justice  of  the  peace  intent  to  evade  the  provisions  of  the 

does  not  preclude  its  admissibility  in  act;  Hallock  v.  Jaudin,  34  Cal.  167, 

evidence.      Tomlin    v.    Woods,    125  declares  internal  revenue  stamps  no 

Iowa,  367,  101  N.  W.  135.           _  part  of  a  note. 

16  Citing  Latham  v.  Smith,  45  111.  Instrument      not     stamped     when 

29;  Hunter  v.  Cobb,  1  Bush   (Ky.)  j^^de  may  be  stamped  subseciuently, 

239.                                                        ^  so  as  to  be  admissible  in  evidence,  as 

"  Citing  License  Tax  cases,  5  Wall,  ^^.j^^^^   .^tamped    in    presence    of   the 

(72  U.  S.)   462,  18  L.  ed.  497;  Pe-  ^.^^^^      Patersen    v.    Eames,   54  Me. 

year  v.  Commonwealth,  o  ^^  all.   (/2  203;  Cooke  v.  Ensland,  27  Md.  14; 


U.  S.)  475,  18  L.  ed.  608 

18  Citing  numerous  cases.     Exam- 
ine the  following  cases : 

Alabama. — Blunt  v.  Bates,  40  Ala. 
470. 

Georgia. — Green  v.  Lowrv,  38  Ga. 
548. 

Illinois.— :iacqa\n    v.    Warren.    40    N.  W.  80O. 

111.   459;   Israel  v.   Redding,  40   111. 

362. 

162 


Don-is  V.  Grace,  24  Ark.  326.  See 
further  as  to  stamps,  Hitchcock  v. 
Sawver,  39  Vt.  412;  Corbin  v.  Tracy, 
34  Conn.  325. 

1^  Wheaton  v.  Liverpool  &  London 
&  Globe  Ins.  Co.  20  S.  Dak.  62,  104 


PAROL  CONTRACTS  §  33 

pence  of  fraud  affected  Ijy  the  failure  to  affix  a  revenue  stanip.^" 
And  a  deed  is  valid  and  effectual  in  Illinois  even  though  a  revenue 
stamp  is  not  affixed  and  canceled  as  required  by  the  Federal  stat- 
ute.^ And  where  an  objection  is  made  to  admitting  in  evidence 
an  unstamped  instrument,  the  burden  is  upon  the  person  object- 
ing, to  show  that  the  stamp  was  omitted  with  intent  to  evade  the 
act  of  Congress.^  Justice  Cooley  says:  "It  has  been  repeatedly  de- 
cided that  the  act  of  Congress  which  provided  that  certain  papers 
not  stamped  should  not  be  received  in  evidence  must  be  limited  in 
its  operation  to  the  Federal  courts.'  Several  of  these  cases  have  . 
gone  still  further,  and  declared  that  Congress  cannot  preclude  par- 
ties from  entering  into  contracts  permitted  by  the  state  laws,  and 
that  to  declare  them  void  was  not  the  proper  penalty  for  the  en- 
forcement of  tax  laws."  *  And  in  a  case  which  arose  in  Massa- 
chusetts the  court  said:  ''We  entertain  grave  doubts  whether  it  is 
within  the  constitutional  authority  of  Congress  to  enact  rules  regu- 
lating the  competency  of  evidence  on  the  trial  of  cases  in  the  courtvS 
of  the  several  states  which  shall  be  obligatory  upon  them.  We  are 
not  aware  that  the  existence  of  such  a  power  has  been  judicially 
sanctioned.  There  are  numerous  weighty  reasons  against  its  ex- 
istence." *  In  Missouri  it  is  decided  that  the  Federal  stamp  act 
requiring  all  insurance  contracts  to  have  an  internal  revenue  stamp 
thereon  does  not  make  invalid  parol  contracts  of  insurance.^  But 
where  the  "'war  revenue  act" ''  required  a  stamp  upon  instruments, 
documents,  or  papers  of  any  kind  or  description  whatsoever,  and 
also  provided  that  it  should  not  be  received  in  evidence  without 
such  stamp  in  any  court,  and  it  is  the  duty  of  the  party  issuing 
and  of  the  party  receiving  the  instrument  to  cancel  the  affixed 
stamp,  it  is  held  that  if  a  policy  of  insurance  is  delivered  for  ex- 
amination and  in  case  of  acceptance  revenue  stamps  are  required 

20  Dorr  Cattle   Co.  v.  Des  Moines  Ins.   Co.  20   S.  Dak.  62,  104  N.  W. 

National  Bank,  127  Iowa,  153,  4  Am.  850;  Southoin  Ins.  Co.  v.  Estes,  106 

&  Eng.  Annot.  Cas.  519,  98  N.  AV.  Tenn.  472,  52  L.R.A.  915,  62  S.  W. 

918,  103  N.  W.  836.  149,  and  note,  84  Am.  St.  Rep.  185- 

1  Thompson    v.    Calhoun,    216    111.  189. 

]61,  74  N.  E.  775.  ^  Cooley's     Con.stitutional     Limita- 

2  Ohio  River  Junction   Rd.   Co.  v.    lions  (6th.  ed.)   592,  n.  2,  citing  sev- 
Pennsvlvania    Co.    222    Pa.    573.    72   oral  eases. 

Atl.  271;  act  of  Conj^ress  June  13,  screen  v.  Hohvay,  101  Mass.  243, 

1898,   c.   448,    30    Stat.    448    (IT.    S.  3  Am.  Rep.  339. 

Comp.  Stat.  1901,  p.  2286).  ^  King  v.  Plioenix  Ins.  Co.  195  Mo. 

3  Citing  numerous  cases.  See  al-  290,  113  Am.  St.  Rep.  678,  92  S.  W. 
so  Knox  V.  Rossi,  25  Nev.  96,  48  892,  6  Am.  &  Eng.  Annot.  Cas.  618. 
L.R.A.  305  and  note,  57  Pac.  179;  "'Section  7  of  internal  revenue  act 
Ratliff  V.  Ratlifie,  131  N.  Car.  425,  June  13,  1898,  c.  448,  30  Stat.  452 
(i3  L.R.A.  963,  42  S.  E.  887;  Wheat-  (U.  S.  Comp.  Stat.  1901,  p.  2292). 
on  V.  Liverpool  &  London  &  Globe 

163 


§  33  JOYCE  OX  INSURANCE 

to  be  attaolied  and  canceled  by  the  ai^ent  or  if  returned,  stamps 
enclosed  for  the  purpose  of  being  attached  must  accompany  the 
policy,  such  requirements  luust  be  complied  with,  and  after  death 
of  the  insured  the  internal  revenue  collector  has  no  authority  to 
athx  the  required  stamps  to  the  policy,  cancel  them  and  thereby 
give  it  life.* 

In  England,  however,  the  statute,  35  George  III.,  chapter  63, 
which  repealed  all  former  stamp  duties  on  marine  insurances,  and 
wliich  did  not  extend  to  tire  or  life  insurances,  provided  that  every 
contract  for  marine  insurance  should  be  "printed  or  written,"  and 
that  an  insurance  contract  or  agreement  therefore  should  be  void 
unless  stam|)ed.  and  prescril)ed  a  penalty  for  noncom])liance.^  As 
we  have  stated  under  a  prior  section  ^  the  English  act  of  18(j7,  30 
Victoria,  chapter  23,  page  9,  requires  that  every  policy  of  sea  insur- 
ance be  duly  stamped  to  be  admissible  in  evidence,  and  also  pro- 
vides that  policies  made*  abroad  may  be  stamped.  Other  sections 
of  this  act  make  provisions  in  relation  to  the  stamping  of  policies, 
covering  time  and  voyage  policies,  mixed  policies,  and  insurances 
by  carriers,  and  making  certain  exceptions  in  case  of  nuitual  in- 
surances, and  providing  penalties  for  noncompliance.^  Again :  "a 
contract  for  sea  insurance  other  than  such  insurance  as  is  referred 
to  in  the  merchant  shipping  act  ^  is  not  valid  unless  the  same  is  ex- 
pressed in  a  policy,  which  cannot  be  given  in  evidence  unless  it  is 
stamped,  and  this  must,  except  in  certain  specified  cases,  be  done 
before  it  is  executed;  but  a  policy,  although  not  duly  stamped 
may  for  the  purposes  of  production  in  evidence,  be  stamped  after 
execution  on  payment  of  a  penalty  of  ,£100."  *     Under  a  decision 

8  Amos-Ricliia  v.  Norlliwestern  see  Id.  p.  515.  As  to  statutory  pro- 
Mutual  Life  Ins.  Co.  14;!  JMicli.  G84,  visions  as  to  slampiiig  of  mutual  in- 
107  N.  W.  707,  s.  c.  (U.  S.  C.  C.)  sunmce  policies,  etc.,  see  Id.  p.  505  et 
152  Fed.  982,  36  Ins.  L.  J.  549.  seq.  Stamp  acts  fire  insurance,  see 
^  See  Kensington  v.  Inglis,  8  East,  Id.  p.  517.  When  contract  deemed 
273;  Morgan  v.  ISIatlier,  2  Ves.  Jr.  concluded  see  marine  ins.  act,  1906; 
15,  18;  Rogers  v.  McCartliv,  3  Esp.  6  Edw.  VII.  c.  41,  sec.  21;  Butter- 
106;  3  Phillips  on  Evidence  (5th  ed.)  worth's  20th  Cent.  Stat.  (1900-1909) 
232.  "Insurance,"  p.  404. 

^  See  §  31  herein.  Settlement    of   life    ]iolicies:    when 

2  See  also  33  &  34  Viet.  c.  97,  sec.  indenture  chargeable  with  stamp  du- 

117;  44  &  45  Viet.  c.  12,  see.  44;  47  ties  under  stamp  act  1891,  sec.  104, 

&  48  Vict.  c.  62,  sec.  8.  See  also  list  of  sub-sec.  2  (A)  of  sec.  104.    See  Duke 

acts  in  force  in  England.    See  §  IV.  of  Nortliumberland  v.  Commissioners 

herein,  39  &  40  Vict.  c.  G,  sec.  2,  pro-  of  Inland  Revenue,   [1911]   2  K.  B. 

vides  for  stamping  after  execution.  (Law  Rep.)   343. 

^  1894,  sec.  506.  Practice    as    to    admission    in    evi- 

*  17   Earl   of  Halsburv's  Laws  of  dence  of  unstamped  documents  traced 

England,   p.   338   and   notes.     As   to  ;ind      e.\|ilained.        Coolgai'die     Gold 

stamps  on  other  than  marine  policies,  Fields,  In  re;  Fleming,  Ex  2)arte,  69 

164 


PAROL  CONTRACTS  §  33a 

rendered  in  1801  the  words  "ship  or  vessel,"  in  the  customs  and  in- 
land icvenue  act  of  1870  (which  imposes  a  stauij)  duty  ujjon  poli- 
cies of  sea  insurance  made  on  any  ship  or  vessel),  will  be  construed 
"shi])s  or  vessels."  Under  the  interpretation  of  statutes  act  of 
1880,  providino-  that  in  statutes  enacted  after  1850  words  in  the 
singular  shall  include  the  ]>lural.  so  Ihat  where  one  lumdred  and 
nineteen  vessels  were  insured  under  a  time  i)olicy,  it  was  licld  that 
the  stamp  duty  must  be  calculated  upon  the  agftregate  amount  in- 
sured, even  though  a  specific  sum  was  appropriated  to  each  vessel.^ 
And  it  was  decided  in  1911  that  no  ol)ligation  to  pay  a  loss  relative 
to  sea  insurance  existed,  although  the  verbal  agreement  constituted 
such  a  contract,  where  it  was  not  ex|)ressed  in  a  duly  stamped  poli- 
cy of  sea  insurance  and  was  tlierefore  invalid.^  But  a  ''contract 
note"  which  does  not  contain  the  essentials  of  a  marine  policy,  or 
policy  of  sea  insurance,  as  required  by  statute,  is  not  a  contract  of 
sea  insurance,  even  if  stamped.' 

§  33a.  Parol  contracts:  standard  policy. — Altliough  in  many  of 
the  states  a  standard  form  of  lire  policy  is  provided  for  l>y  statute, 
and  some  of  the  states  have  statutory  provisions  concerning  the 
form  or  substance  of  life-  and  accident  policies,  still  it  is  held .  in 
Massachusetts  that  it  is  settled  that  a  statute  requiring  such  standard 
form  does  not  preclude  a  temporary  oral  contract  for  insurance.* 

L.  J.  Ch.  215,  [IflOO]   1  Cli.  475,  82  patent."    17  Earl  of  Ilalbury's  Loans 

L.  T.  '23,  48  W.  K.  461,  Cozens-Har-  ol'  England,  pp.  ;5;?9,  ;{40  and  notes. 

dy  J.     See  also  as  to  admissibilit.y  of  Registration  of  ijisurance  companies, 

imstanii>ed     in.slrnments,     Mason     v.  see   5   Id.   p.    CI/.      As  to   insnrance 

iMotor  Traftion  Co.  74  L.  .1.  Ch.  273,  clubs    being-    registered     see     §     178 

[1905]   1  Cb.  419,  92  L.  T.  234,  12  herein  notes  19,  20;  §  V.  lierein  note 

Manson,  31,  21  T.  L.  R.  238.  K).  p.  32. 

lllerial  Insurance  Companies— Ne-  ^  Great    Britain    Steamship    Prem- 

cessity  of   being   registered— compa-  inm  Assn.  v.  White  (Scot.  Ch.  Sess. 

nies     acts— England.        Soon      after  1891)  29  Scot.  \j.  R.  104. 

1824  "a  great  number  of  insurance  «  Genfoisd<iiMgs         Aktieselskabet 

companies    were    formed,    eitlicr    bv  (8kandniavia     Ix'einsurance     Co.     of 

charter  from  the  Crown  or  by  Special  V'T'nnifi'N^  k    £'\V""\^    Ti-.v' 

Statutes  or  under  the  provisions  of  a  ^^-     1 1" "  1  ^   •^V^viV'^'"  '^'^'ol  ^^l' 

,        1  •      1     1      o   i^             if  under  stamp  act  1891,  sees.  93,  9/. 

partnership  deetl.     cut  a  part   irom  .,           ^  n         ,   i          l     o  .-,  ■ 

,      ,  .          '           .                   ^  h  or  a  Tuller  statement  of  this  ca.se, 

banking  companies,  no  company,  as-  ^^^,  ^  ^-j^^  herein 

sociation,    or    partnership    consisting  '    7  Mackay  v.  Scottish  Boat  Ins.  Co. 

of  more  than  twenty  ])ersons,  lormed  y  |,|     (<i,(,^)\    f'    ^    'M   Div    1903)    40 

on  or  after  the  '2d  November,  18(i2.  Scottish   Law."  Rep?  675; 'stamp   act 

for   tlie    acquisition    of    gain    l)y    the  5gf)i    sees.  92    93. 
company,  association,  or  iiartiu'rsliip        8  Goodhue    v.    Hartford    Fire   Ins. 

or  its  members,  is  legal,  and  tlierefore  Co.  175  Ma.^s.  187,  55  N.  E.  1029,  29 

no  marine  insurance  company  is  le-  Ins.  L.  J.  207.  under  Stat.  1894,  c, 

gal  unless  registered  undci-  the  com-  522,  sec. 59;   Pub.   Stat.  c.  119,  sec. 

panics  acts  1862-1(108,  or   formed  in  ]38.     Citing  Sanford  v.  Orient   Ins. 

pursuance  of  some  other  act  ov  letters  Co.  174  Mass.  416,  75  Am.  St.  Rep. 

165 


§  33a 


JOYCE  ON  INSURANCE 


In  another  case  in  that  state  il  is  declared  tliat  a  vahd  contract 
of  insurance  niii>,ht  rest  only  in  parol.  In  this  case  there  was  a 
claimed  aoreenient  with  an  agent  to  issue  certain  policies  in  the 
standard  form,  but  upon  the  facts  it  was  held  that  there  was  not  a 
(•(insummated  or  final  agreement  constituting  such  parol  contract, 
as  certain  essential  elements  of  the  contract  of  insurance  were  not 
fixed  in  advance  or  subsequently  agreed  to,  but  that  the  relations 
between  the  parties  rested  in  negotiations.^  And  in  New  York  a 
verbal  contract  of  present  insurance,  since  18SG,  constitutes  a  con- 
tract of  insurance  which  embraces,  however,  the  provisions  of  the 
standard  fire  policy.^"  In  Tennessee  the  terms  of  the  standard 
policy  are  construed  in  connection  with  a  local  agent's  commission 
in  determining  the  extent  of  his  authority  to  make  oral  contracts 
of  insurance  or  renewals  thereof,  and  no  recovery  is  permitted, 
either  on  an  executed  contract  of  insurance  or  an  executory  con- 
tract to  renew  when  not  made  within  the  terms  of  the  agent's 
authority  thus  limited.^^  In  North  Carolina  the  enactment  which 
establishes  a  standard  form  for  a  policy,  the  statute  being  only 
afiirmative  in  its  terms,  will  not  invalidate  an  oral  contract.^^  Un- 
der an  Illinois  decision  the  insurer  was  held  liable  upon  a  "binder." 
even  though  no  policy  w^as  issued ;  and  the  contract  was  held  sub- 
ject to  the  terms  of  a  standard  policy  to  which  it  was  attached  as 
a  part  thereof.^^  And  under  a  CJeorgia  decision  the  ])roperty  de- 
scribed in  the  memoraudum  or  binder  was  held  insured  during  the 
term  specified  therein  upon  the  terms  and  conditions  of  the  regular 
standard  policy  of  the  company.^*  It  is  important  also  to  consider 
liere  as  a  governing  principle  the  efi'ect  of  a  decision  in  Maine, 
where  it  is  determined  that  a  policy  of  fire  insurance,  in  the  standard 


^58,  54  N.  E.  883.  See  Bn.wn  v. 
Franlvlin  Mutual  Eire  3ns.  Co.  105 
Mass.  56,'),  r)2  Am.  St.  Hop.  5:J4,  43 
N.  E.  512. 

^  Cunnine:liain  v.  Councetieut  Fire 
Ins.  Co.  200  Mass.  333.  86  N.  E.  78 <. 
38  In.'^.  L.  J.  315,  the  court,  per  Rug"-, 
J.,  said:  "nor  can  it  l)e  argued  ttiat 
lliere  may  not  be  a  valid  contract  of 
insurance  resting  only  in  i)arol." 
This  was  a  ease  of  action  of  contract, 
upon  appeal  on  agreed  facts,  with 
no  stipulation  tliat  trial  or  ap]>eliiil(> 
coTirt  might  draw  inferences  of  fact. 

^^  Hicks  V.  British-America  Assur. 
Co.  162  N.  Y.  284,  48  L.l^.A.  424,  5() 
N.  E.  743,  30  Tns.  L.  J.  14.  But  see 
as  to  vMritie  vessel  liahilitii  poJicii, 
International  Ferry  Co.  v.  American 


Fidelity  Co.  207  N.  Y.  350,  101  K 
E.  160,  noted  under  S  31  herein. 

"  Caldwell  v.  Virginia  Fire  &  ^Vla- 
rine  Ins.  Co.  124  fenn.  593,  139  S. 
W.  698,  40  Ins.  L.  J.  1899.  See  §§ 
41a,  41c  herein. 

12  Floars  v.  .Etna  Fife  Tns.  Co.  144 
K  Car.  232,  11  L.R.A.(N.S.)  867n, 
56  S.  E.  916,  qnoied  in  Gazzam  v. 
German  Union  Fire  Ins.  Co.  155  N. 
Car.  3:?0,  339,  Ann.  Cas.  1913E,  282, 
286.  71  S.  E.  434. 

13  Jacobs  v.  Atlas  Ins.  Co.  1  tS  111. 
A  pp.  325.  See  also  St.  Paul  Fire  & 
I\rarine  Tns.  Co.  v.  Balfour.  16S  Fed. 
212.  9:!  C.  C.  A.  4ns. 

1^  Queen  ins.  Co.  v.  llarUvel!  Tee 
&  Laundrv  Co.  7  Ga.  App.  <8/,  68  S. 
E.  310,  :!9  Ins.  L.  J.  1125. 


166 


PAROL  CONTRACTS  §§  33b,  34 

form  is  to  be  treated  as  a  voluntary  contract  which,  like  any  other, 
dei'ives  its  force  and  etHcacy  from  the  consent  of  the  parties.^* 

§  33b.  Statutory  regulations:  contract  partly  in  writing  and 
partly  by  parol. — Where  a  statute  positively  requires  that  a  con- 
tract of  fire  insurance  sliall  be  in  writing,  it  precludes  a  contract 
made  partly  in  writing  and  resting  partly  in  parol.^^ 

§  34.  Parol  contracts:  mutual  benefit  societies. — Some  doubt  has 
been  expressed  whether  or  not  the  rule  that  a  contract  of  insurance 
need  not  be  in  writing  except  when  required  by  statute  applies  to 
mutual  benefit  societies. ^''^  The  cases  for  the  most  part  are  those  of 
marine  and  fire  insurances,  with  some  authorities  in  accident  and 
life  insurance  on  other  than  the  mutual  plan."  But  we  see  no 
reason  why  the  rule  should  not  obtain  in  cases  of  an  agreement  for 
insurance  on  the  mutual  plan  as  in  other  contracts,  and  it  has  been 
held  in  New  York  that  a  mutual  fire  insurance  company  could 
bind  itself  by  parol  to  issue  a  valid  policy  of  insurance.  The  court 
said,  referring  to  the  plaintiff,  that  "it  must  be  assumed  that  she 
knew  the  character  of  defendant  and  the  purpose  for  which  it  was 
organized,  and  her  application  for  insurance  was  an  application  to 
become  a  member  of  the  defendant  upon  the  terms  and  conditions 
prescribed  in  its  charter,  and  its  constitution  and  by-laws.  She 
must  have  expected  a  policy  in  the  usual  form  issued  by  the  de- 
fendant, and  nuist  be  deemed  to  have  agreed  to  accept  such  a  policy. 
She  must  also  be  deemed  to  have  agreed  in  advance  to  pay  the 
consideration  in  the  mode  prescribed  by  the  defendant's  charter, 
constitution,  and  by-laws.  The  agreement  for  this  insurance  was 
binding,  therefore,  not  only  on  defendant,  but  also  upon  the  plain- 
tiff. Defendant  could  have  issued  and  tendered  its  policy  to  the 
plaintiff."  ^^     So  an  oral  promise  by  the  president  of  an  insurance 

i^Dunton  v.  Westchester  Fire  Ins.  Ins.  Co.  33  Wl^.  G49,  37  Wis.  62.5,  19 

Co.   104   Me.    172,   20    L.R.A.(N.S.)  Am.  Rep.  777;  21/arme;  Northwestern 

1058,  71  Atl.  1037.  Ins.   Co.  v.  ^l^]tna  Ins.   Co.   23  Wis. 

"Athens  Mutuaf  Ins.  Co.  v.  Evans,  100,  99  Am.  Dee.  145;  Same  to  ship 

132  Ga.  703,  64  S.  E.  903,  Civ.  Code  fJ^od.-^  ««  (^cck  iitslcad  of  hold:  North- 

Ga.  sees.  2022,  2089.  western  Iron   Ins.  Co.  v.  .Etna  Ins. 

A     *       ^^      ,■        1              7            fi  Co.  26  Wis.  78. 

As  to  alteration,   bii   parol,  see   8  ^      .            ,     ,                  ■           /-. 

070  V,     «■                   ^     ^    J.  As    to    mulual    rnmjxtnies:      Com- 

^(^  iierein.  •  i    -vi    .      i    ai     ■        r        /~i 

,_             ,      -r.        .       o     •     -  mcrcial    AJutiuil    .Maiiue    ins.    Co.    v. 

"Bacons     Benefit     Societies     and  Union  Mutual   Ins.  Co.  19  How.   (60 

Bile    Ins.    (ed.    1888)    sec.   172;    Id.  u.  S.)   318,  15  L.  ed.  636;  Belleville 

(ed.  1894)  sec.  l72.  Mutual  Ins.  Co.  v.  Van  Wnikle,  12 

"L?/e;     Sheldon   v.   Conn.  IVlutu-  N.   J.   Eq.   333;    SchafTer   v.   Lehij^h 

al   Life   Ins.   Co.   25   Conn.   219,   65  I\tutual  Fire  Ins.  Co.  89  I^a.  St.  296. 

Am.  Dec.  565;  Trustees  of  First  Bap-  ^^  Van   Loan    v.    Farmers'   Mutual 

tist  Church  v.  Brooklyn  Ins.  Co.  19  Fire  Ins.  Assn.  90  N.  Y'.  280.     Com- 

N.  Y.  305;  Accident:  Rhodes  v.  Rail-  pet  re    §    .3Sa    herein    as    to    standard 

way  Pass.  Ins.  Co.  5  Bans.    (N.  Y.)  policy:     rule  in  New  York.     See  also 

71;    Fire:    Strohn   v.   Hai-tford   Fire  §  3.')a  JKMein. 

167 


§  34 


JOYCE  ON  INSURANCE 


company  to  make  a  policy  of  insurance  is  a  contract  binding  on  the 
company,  and  a  court  of  equity  ^Yill  compel  its  specific  perform- 


ance 


20 


It  is  true  that  mutual  benefit  societies  differ  in  some  resjiects  from 
other  mutual  insurance  corporations,  and  the  powers  of  such  organi- 
zations are  restricted  either  by  statute  or  by  charter,^  and  lliese 
restrictions  relate  not  only  to  membership,  but  to  the  designation 
of  beneficiaries.  The  laws,  however,  of  these  societies  have  been 
construed  liberally  in  many  cases,^  although  some  courts  are  in- 
clined to  limit  such  corporations  strictly  to  their  statutory  or  charter 
powers;^  and  where  a  certiiicate  is  not  delivered  to  the  insured 
nor  signed  by  him  or  certain  otiicers  as  required  under  the  by-laws 
as  conditions  precedent  to  liability  for  loss,  there  is  held  to  be  no 
operative  contract  of  insurance.*  So  in  case  of  a  fraternal  benefit 
society  even  a  certificate  has  been  held  of  no  force  prior  to  initia- 
tion, where  initiation  is  under  the  l)y-laws,  a  condition  precedent  to 
membership.^     But  it  is  also  decided  that  the  absence  of  a  con- 


iiip 

2*>  Commercial  Mutual  Marine  Ins. 
Co.  V.  Union  Mutual  Ins.  Co.  19 
How.  (60  U.  S.)  318,  15  L.  ed.  63G. 
See  also  Union  Mutual  Ins.  Co.  v. 
Commercial  Mutual  Ins.  Co.  2  Curt.    ^ 

(U.  S.  C.  C.)  524;  New  England  Fire    Mass.  410,  75  Am.  St.  Rep.  350,  54 

&  Marine  Ins.   Co.   v.   Robinson,  25    N.  E.  883;  Brown  v.  Franklin  ]\lutu 

Ind.  536;   Trustees  of  First  Baptist   al  Fire  Ins.   Co.  165  Mass.  565,  5: 


Massachusetts. — Daniels  v.  Pratt, 
14.3  Wa-sh.  516,  10  N.  K.  166;  Elsey 
V.  Odd  Fellows'  Mutual  Relief  Assoc. 
142  Mass.  224,  7  N.  E.  844.  Com- 
pare San  ford  v.  Orient  Ins.  Co.  174 


Cluu-ch  V.  Brooklyn  Ins.  Co.  18  Barb. 
(N.  Y.)  69;  Kelly  v.  Commonwealtb 
Ins.  Co.  10  Bo-sw.   (N.  Y.)   82. 

■1  Elsev  V.  Odd  Fellows'  Mutual  Re- 
lief Assn.  142  Ma.ss.  224,  7  N.  E.  844; 
Kentucky  Masonic  ]\Iutual  Life  Ins. 
Co.  y.  IVliller,  13  Bush  (Ky.)  489. 

2  Bloominoton  ]\iutual  Ben.  A.ssn. 
V.  Blue,  120  111.  121,  11  N.  E.  331, 
60  Am.  Rep.  558;  Coyenant  Mutual 
Ben.  Assn.  y.  Sears,  114  111.  108,  29 
N.  E.  430;  Supreme  Lodge  Kniglit~s 
of  Pythias  y.  Schmidt,  98  Tud.  .374, 
381  ;  Mancely  y.  Kniohts  of  Birming- 
ham, 115  Pa.  St.  305,  9  Atl.  41. 

3  United  *S'/rtff.s.^Worley  y.  North- 
west Masonic  Aid  A.ssoc.  10  Fed.  227. 

Illinois. — Fraternal  Tribunes  y. 
Steele,  114  111.  App.  194;   Steele  v 


Am.    St.   Rep.    534,   43   N.    E.    .512; 
Emorv  v.  Boston  Marine  Ins.  Co.  138 

:\lass."  :!n8. 

JlicJiinan.  —  Supreme  Lodge 
Knishts  of  Honor  y.  Nairn,  60  Mich. 
44,  26  N.  W.  826. 

Oliio. — National  Mutual  Aid  Assoc. 
V.  Gonser,  43  Ohio  St.  1,  1  N.  E.  11, 1 
West  Rep.  4;  State  y.  Momv,  38  Oliio 
St.  7. 

*  Sterling  v.  Head  Camp  Pacific 
Jurisdiction  Woodmen  of  the  World, 
28  Utah,  505,  80  Pae.  375,  1110.  See 
Pfeifer  v.  Supreme  Lodge  Bohemian 
Beiieyolent  Slayonian  Soc.  •■)7  Misc. 
71,  74  N.  Y.  Supp.  720,  atl'd  (Mem.) 
77  N.  Y.  Supp.  1125,  74  App.  Div. 
6.30,  revd.  173  N.  Y.  418,  66  N.  E. 
108  s.  c.  atif'd   (mem.)   91  App.  Div. 


Fraternal   Tribune,  215   111.   190,  74   013,  86  N.  Y.  Supp.  1144,  s.  c.  aff'd 


N.  E.  121. 

Kentucky.- — Van  Bibber  y.  \an 
Bibber,  82  Ky.  347;  Kentucky  Ma- 
sonic Mutual  Life  Ins.  Co.  v.  Miller, 
13  Bush   (Kv.)   489. 


(mem.)  179  N.  Y.  588,  72  N.  E.  1149. 
^  Lord  V.  Modern  Woodmen  of 
America,  113  Mo.  App.  19,  87  S.  W. 
530.  See  also  Supreme  Lodge 
Kniiilits  &  Ladies  of  Ilonor  y.  John- 


168 


PAROL  CONTRACTS 


§  34 


tiollinc;  ])r()vi,-^ion  of  its  by-laws,  or  an  agreement  of  the  parties  to 
tlie  coiiti'aiy  a  binding  contract  of  insurance,  may  be  consummated 
with  a  mutual  lire  insurance  company  without  the  issuance  of  a 
policy  (if  insurance.® 

Public  policy  is  the  basis  of  the  prohibition  by  law  of  acts  w'hich 
are  miauthorized  by  the  charter  of  a  com])any,'  and  there  are 
numerous  cases  which  uphold  contracts,  even  when  made  in  viola- 
tion of  a  provision  contained  in  the  charter,  and  which  involve  an 
unauthorized  exercise  of  c^orporate  powers.  Especially  is  this  true 
where  it  appears  that  the  provision  so  contravened  was  not  intended 
by  the  legislature  to  operate  as  an  imperative  prohibition  of  the 
contract  violating  such  charter  provision;  or  where  the  charter  pro- 
vision was  intended  for  the  benctit  of  the  corporation  rather  than 
the  protection  of  the  public;  or  where  the  provision  is  merely  direc- 
tory ;  *  or  where  the  contract  is  made  in  violation  of  the  charter, 
and  third  persons  acting  in  good  faith  and  without  notice  would  be 
injured  thereby.^  And  even  the  provisions  of  the  statute  under 
which  a  mutual  benefit  society  is  incorporated  may  be  waived  so  far 
as  to  preclude  the  defense  of  ultra  vires.^°  Such  cases  also  involve 
questions  as  to  the  nature  and  extent  of  the  powers  of  agents,  and 
also  whether  the  party  dealing  wdth  the  agent' had  notice  of  factsS 
which  if  knoAvn  to  him  would  make  the  contract  not  only  ultra 
vires,  but  void.  The  point  under  consideration  also  comprehends 
the  question  of  estoppel,  as  where  the  party  has  relied  upon  the 
apparent  authority  of  an  agent,  or  the  company  has  received  I  he 


son,  81  Ark.  512,  99  S.  W.  834; 
Shartle  v.  Modern  Brotherhood  of 
Amerif-a,  139  Mo.  App.  433,  122  S. 
W.  1139.  Compare  Bruner  v.  Brotli- 
erhood  of  American  Yeoman, 
Iowa,  612,  111  N.  W.  977. 

^Alliance  Co-operative  Ins.  Co.  v. 
Corbett,  G9  Kan.  5(U,  77  Pae.  108. 

'Morawetz  on  l^rivatc  Corp.  (ed. 
1882)  sec.  100. 

8  Uniied  States. — National  Bank  v. 
Matlhew.s,  98  U.  S.  621,  627,  25  L. 
ed.  188,  189;  Gold  Mining'  Co.  v.  Na- 
tional Bank,  96  U.  S.  640,  24  L.  ed. 
648;  Zabriskie  v.  Cinoinnati  R.  R. 
Co.  23  How.  (64  U.  S.)  381,  16  L. 
ed.  488. 

Alabama. — Bates  &  1  lines  v.  Bank 
of  Alabama,  2  Ala.  l.ll,  4()2. 

Connecticut. — Bnlklev  v.  Derby 
Fish   Co.  2   Conn.  252,  7  Am.  Dec. 


Massachusetts. — Dodd  v.  Glouces- 
ter Ins.  Co.  120  :\Iass.  408.  See 
Brown  v.  Franklin  jMutual  liis.  Co. 
165  Mass.  565,  52  Am.  St.  Rep.  534, 
136  43  N.  E.  512;  Emery  v.  Boston  Ma- 
rine Ins.  Co.  138  Mass.  398. 

3>((5  York. — Palmer  v.  Cvi)ress 
Hill  Cemetery,  122  N.  Y.  429, '25  N. 
E.  983;  Leslie  v.  Lorillard,  110  N.  Y. 
51!),  18  N.  E.  36:!,  1  L.R.A.  456,  row- 
pare  %  38a  herein.     See  ^  33a  herein. 

Enfihiii(L — Ayres  v.  South  Austra- 
lian i3anking-  Co.  L.  R.  3  P.  C.  548. 

See  notes  22  Am.  St.  Rep.  768; 
article  "Ultra  Vires  Conti-acts  of  Coi- 
poration.';,"  32  Am.  Law.  l\eg-.  4:!. 

9  Morawetz  on  Private  Corp.  (ed. 
1882)  sec.  50;  Id.  rule  VI.  sec.  62  et 
seq.      See   next   section   herein. 

lOCoulson  v.  Flvnn,  86  N.  Y. 
Supp.  833,  90   App.  Div.  613,  afC'd 


■1. 


181  N. 
169 


Y.  62,  79  N.  E.  507. 


§  34  JOYCE  ON  INSUKANCE 

benefits  ari.-ing  from  unauthorized  acts.  While  there  are  certain 
leading  principles  which  aid  in  a  solution  of  the  question  of  what  is 
and  is  not  a  valid  contract  within  the  charter  or  articles  of  asso- 
ciation, yet  each  case  must  rest  in  a  large  measure  upon  its  par- 
ticular facts.  j\Iany  of  the  decisions  are  arbitrary  and  seemingly 
.rendered  without  regard  to  principle  or  authority." 

Again,  as  a  general  rule,  the  doctrine  of  waiver  is  applicable 
equally  to  mutual  benefit  societies  as  to  other  insurance  companies 
where  the  charter  or  constitution  of  a  society  does  not  render  it  in- 
applicable,^^ for,  in  general,  by-laws  may  be  waived  which  are  in- 
tended as  a  protection  to  the  company.^^  So  waiver  of  a  by-law 
may  arise  from  a  course  of  dealing.^^  It  is  also  held  that  the 
doctrine  of  estoppel  applies  to  mutual  benefit  associations  in  regard 
to  their  insurance  contracts,  substantially  the  same  as  against  or- 
dinary insurance  companies  and  other  corporations.^*     So  the  fact 

^^  See  notes  .^1  Am.  Dee.  341-45;  Brotherhood  of  America,  113  Minn. 

13  Am.  Dee.  108,  109;  Morawetz  on  411,   131    N.   W.   471;    Schoenau    v. 

Corp.    (ed.  1882)    sees.  28-148,  165,  Grand  Lodge,  A.  0.  U.  W.  85  Minn. 

209;  Angell  &  Ames  on  Corp.    (9th  349,  88  N.  W.  999. 

ed.)    sees.  256-65.     See  next  section  Missouri. — Francis      v.      Supreme 

herein.                            .  Lodge  A.  0.  U.  W.  150  Mo.  App.  347, 

12  ]\Iillard     V.     Supreme     Council  130  S.  W.  500,  39  Ins.  L.  J.  1391. 

American  Legion  of  Honor,  81  Cal.  Massachusetts.  —  Compare      Mass. 

340,  22  Pac.  864.     In  this  ease  the  cases  cited  under  §  36  herein, 

society  had  continued  to  levy  and  re-  Texas. — Supreme     Lodge     United 

ceive  assessments   from  the   memher  Benevolent  Assoc,  v.  Lawson  (1911) 

after  the   date  when   it  claimed   the  —  Tex.  Civ.  App.  — ,  133  S.  W.  907 ; 

member  ceased  to  be  in  good  stand-  Grand  Fraternitv  v.  Mulkev   (1910) 

ing.  62   Tex.   Civ.  App.  147,  130   S.   W. 

See  also  the  following  cases :  242. 

Vniteil  States. — Modern  Woodmen  ^^  Union   Mutual  Fire  Ins.   Co.  v. 

of  America  v.  Tevis,  111  Fed.  113,  49  Kevser,  32  N.  H.  313,  64  Am.  Dee. 

C.  C.  A.  256,  117  Fed.  370.  375.     Here,  by  the  charter  and  by- 

Arlansa.s. — ^losaic     Templars     of  laws,  the  directors  were  required  to 

America  v.  Jones,  99  Ark.  204,  137  S.  divide  the  risks  into  four  dashes,  and 

W.  812.  to  determine  the  rates  of  insurance 

Tlliiiois.  —  .Johnson       v.       Modern  and  the  issuing  of  all  policies;  wifli 

Woodmen  of  America,  160  111.  App.  full  knowledge  of  all  facts  the  direct - 

37,  42  Nat.  Corp.  Rep.  122.  ors    insured    property   which    should 

Indiana. — Brotherhood  of  Painters,  have  been  insured  as  belonging  to  an- 

Decorator.-;,  &:  Pai)erhangers  of  Amer-  other  class.     See  also  Cline  v.  Sover- 

ica  V.  Barton,  46  Ind.  App.  160,  92  eign  Camp  Woodmen  of  the  World, 

N.  E.  64.  Ill  IMo.  App.  601,  86  S.  W.  501. 

Kentuckii. — Modern      Brotherhood  ^^  Downs  v.  Kniahts  of  Columbus, 

of  America  v.  Phelps,  142  Kv.  544,  76  N.  H.  165,  80  Atl.  227. 

134  S.  W.  892,  40  Ins.  L.  J.  710.  i*  Wuerfler     v.      Trustees      Grand 

Michigan. — Lord   v.    Natural    Pro-  Grove  Wis.  Order  of  Druids,  116  Wis. 

tective  Soe.  129  Mich.  335,  88  N.  W.  19,  96  Am.  St.  Rep.  940,  92  N.  W. 

876,  32  Ins.  L.  J.  1038.  433.     See  also,  as  to  same  principle, 

Minnesota. — Johnson     v.     Modern  Kidder    v.     Supreme    Assemblv     of 

170 


PAROL  CONTRACTS  §  34 

that  tlie  relief  department  of  a  railroad  corporation,  organized  for 
the  benefit  and  protection  of  railroad  employees,  is  a  nuitual  insur- 
ance company,  does  not  relieve  it  from  the  operation  of  the  rules  of 
equitable  estoppel. ^^ 

Where  a  mutual  benefit  society  is.sues  a  policy  which  is  in  its 
terms  in  conflict  with  the  by-laws  of  tlie  society,  the  presumption  is 
that  the  society  has  waived  its  by-laws  in  favor  of  assured. ^'^  So 
it  is  held  that  a  regulation  or  by-law  of  a  fire  insurance  company 
cannot  make  void  a  policy  issued  by  the  directors  in  contravention 
thereof  if  the  policy  is  Jiot  voidable  upon  other  grounds,"  and  a 
mutual  company  may  bind  itself  by  a  contract  of  insurance  with- 
out issuing  a  written  policy,  although  the  by-laws  require  that  all 
applications  for  insurance  shall  be  examined  and  approved  by  the 
directors  or  a  committee  before  a  policy  is  issued  and  that  the 
secretary  shall,  after  approval  of  the  applications,  issue  and  deliver 
all  policies  and  keep  a  list  thereof.^^  So  the  omission  to  sign  or 
countersign  a  policy  has  been  held  not  to  render  a  policy  invalid, 
notwithstanding  such  requirement  of  the  corporation.^"  And  a 
by-law  restricting  membership  in  a  certain  class  to  persons  under  a 
certain  age  may  be  waived.^  And  where  an  agent  has  acted  within 
the  apparent  scope  of  his  authority,  the  principal  is  estopped  to 
allege  specific  instructions  not  known  to  the  party ,2  or  to  deny  the 
agent's  power  or  its  own  power  to  contract  where  the  contract  has 

American   Stars  of  Equity,  154  111.  462;JJuion  Ins.  Co.  v.  Smart,  (iO  N. 

A  pp.  489;    Modern   Brotlierliood   of  H.  458. 

Amei'iea  v.  Plielps,  142  Kv.  544,  134  ^  Morrison  v.  Wisconsin  Odd  Fel- 

S.  W.  892,  40  Ins.  L.  J. "710;  Tim-  lows  Mutual  L.  Ins.  Co.  59  Wis.  162, 

berlake     v.     Supreme     Commandery  18    N.    W.    13.      See    also    Supreme 

I'liited  Oivter  of  tlic  Golden  Cross  of  Lodge  Kniglits  of  Honor  v.  Davis,  26 

llie  World,  208  Mass.  411,  94  N.  K.  Colo.  252,  58  Pn<-.  505;  Wood  v.  Su- 

685;    Johnson    v.    Modern    Brother-  preme    Ruling    of    Fraternal    Mystic 

lK)od  of  America,  113  ^linn.  411,  131  Circle,   212   111.   532,   72   N.   E.   783, 

N.  W.  471.  rev'g   Supreme    Ruling  of  Fraternal 

^6  Burlington  Voluntary  Relief  De-  Mystic  Circle  v.  Wood,  114  111.  App. 

l)arlment  v.  White,  41  Neb.  547,  43  431.      See  §   1992  lierein.     Compare 

Am.  St.  Rep.  701,  59  N.  W.  717.  Fraternal  Tribunes  v.  Steele,  114  ill. 

17  Davidson  v.  Old  People's  Mutu-  App. '  194,  aft'd  Steele  v.  Fraternal 
al  Ben.  Soc.  39  Minn.  303,  39  N.  W.  Tribunes,  215  111.  190,  74  N.  E.  121. 
803,  1  L.R.A.  482.  Pirrung  v.  Sui)reme  Council  of  Cath- 

18  Campbell  V.  Merchants' &  Fann-- olie  Mutual  Ben.  A.ssoc.  93  N.  Y. 
ers'  Mutual  Fire  Ins.  Co.  37  N.  H.  Supp.  575,  104  App.  Div.  571;  El- 
35,  72  Am.  Dec.  324;  Merchants'  &  liott  v.  Knights  of  the  iNlodern  Mac- 
Manufacturers  Ins.  Co.  v.  Curran,  45  cabees,  46  Wash.  320,  13  L.R.A. 
Mo.  142,  100  Am.  Dec.  361.  (X.S.)  856,  89  Pac.  929. 

i^Zell  V.  Herman  Farmers'  Mutu-  2  p^^ery  v.  Boston  Marine  Ins.  Co. 
al  Ins.  Co.  75  Wis.  521,  44  N.  W.  828.    138  Mass.  398,  412.    In  this  ease  un- 

20  Myers' V.  Keystone  INlutual  Life  der  the  by-laws  the  president  Avas  re- 
Ins    Co   27  Pa.  St.  268,  67  Am.  Dec.    quired  to  sign  all  policies.     In  case, 

171 


§  34 


JOYCE  ON  INSURANCE 


been  executed  by  the  otlier  party.^  And  an  nnre.ctricted  authority 
to  an  agent  of  a  lire  insurance  company  to  negotiate  a  contract 
of  insurance  by  issuing  a  poHcj-  inckides  authority  to  make  a 
vahd  prehminary  contract  for  such  issue;  and  a  parol  agreement 
to  that  effect  ujDon  his  part  and  the  receipt  of  the  premium  therefor 
binds  the  company.*  It  may  also  be  stated  in  this  connection  that 
an  applicant  for  insurance  in  a  mutual  compan}'  is  a  stranger  to 
the  by-laws,  and  is  not  chargeable  with  knowledge  thereof  vmtil  he 
becomes  a  member.* 

In  view,  therefore,  of  these  principles  why  cannot  a  corporation 
of  this  character  bind  itself  by  a  completed  agreement  of  insurance 
not  in  writing?  Certainly  in  those  cases  where  the  society  is  one 
which  does  not  issue  certificates,^  it  could  not  be  urged  that  the 
contract  must  be  in  writing.  And  a^^sume  the  case  where  an  agent, 
within  the  apparent  scope  of  his  authority,  makes  an  oral  agree- 
ment of  insurance  in  a  coiporation  which  does  issue  certilicates, 
and  such  party  is  received  into  the  corporation,  and  the  right  to 
certain  benefits  matures  before  any  certificate  is  issued,  can  the 
corporation  impeach  its  own  want  of  power  to  make  such  contract 
where  not  contrary  to  public  policy?  To  hold  that  it  could  would 
hcirdlv  seem  to  be  founded  in  the  rea.son  and  justice  of  the  law.' 


Iiowever,  of  his  absence,  inability,  or 
death,  i^ohcies  were  to  be  signed  by 
two  directors.  The  secretary  of  the 
company  contracted  orally  with  the 
jdaintiti'  to  insure  him.  The  company 
claimed  a  want  of  authority,  but  it 
was  held  that  the  evidence  showed  a 
sufTicient  binding  autiiority:  New 
Kniiland  Fire  &  Marine  Ins.  Co.  v. 
Schettler,  38  111.  166;  Union  Mutual 
Ins.  Co.  V.  Wilkinson,  13  Wall.  (80  U. 
S.)  222,  20  L.  ed.  617.  Here  the  court 
said:  "The  powers  of  the  agent  are 
])rima  facie  coextensive  with  tlie  busi- 
ness intrusted  to  his  care,  and  will 
not  be  narrowed  by  limitations  not 
communicated  to  the  person  with 
whom  he  deals." 

^  Bloomington  Mutual  Ben.  As.soc. 
V.  Blue,  120  ill.  127,  11  N.  E.  3.31,  58 
Am.  Kep.  8.')2,  m  Am.  Rep.  358 ;  Ful- 
ler V.  Boston  Ins.  Co.  4  ]\Iet.  (45 
Mass.)  206;  Ijjimont  v.  Grand  Lodge 
Iowa,  Legion  of  Honor,  31  Fed.  177. 

*  Ellis  V.  Albany  Ins.  Co.  50  N.  Y. 
402.  The  agent  was  authorized  to  re- 
ceive proposals  for  insurance,  and  to 

17 


make  and  countersign  policies  and  to 
renew  the  same. 

*  See  §  3!t3  herein.  See  Court 
of  Honor  v.  Hering  (1914)  178 
Mich.  377,  144  N.  W.  843,  noted  un- 
der §  53  herein. 

^  Grand  Lodge  Order  of  Hermann- 
Soehne  v.  Eisner,  26  ^lo.  App.  108. 

'''  See  Bloominston  Mutual  Ben. 
Assoc.  V.  Blue,  120  111.  127,  11  N.  E. 
331,  58  Am.  Rep.  852,  60  Am.  Rep. 
558;  Chicago  Building  Soc.  v.  Crow- 
ell,  65  111.  454.  In  this  case  Crow- 
ell  boi'rowed  money  of  the  society, 
and  the  latter  procured  insurance  up- 
on the  property,  and  shortly  before 
the  expiration  of  the  policy  Crowell 
told  (lie  secretary  tliat  he  wi.shod  to 
insure  his  own  ))roperty;  but  the 
.secretary  re])lied  that  the  society  pre- 
leri'ed  to  procure  tlie  insurance  and 
would  do  so,  but  before  the  insurance 
was  ejected  the  property  was  de- 
stroyed. It  was  held  that  though  the 
procuring  of  insurance  was  Tiot  an 
express   right    conferred    by   charter, 

yet  as  the  societj'^  had  exercised  tliese 
6 


PAKOL  CONTRACTS  §  34 

It  will  be  seen,  therefore,  that  the  decided  caPCs  offer  lierein  no 
certain  and  unvarying  rule  for  the  determination  of  the  propo.sition 
before  us.  It  is  held  that  when  an  accepted  ap])li('ant  for  nioinber- 
ship  pays  his  membership  fee  and  promises  in  his  written  applica- 
tion to  pay  the  further  sum  of  one  dollar  and  ten  cents  whenever 
any  other  member  dies,  or  to  forfeit  his  own  claim  to  a  benefit,  and 
the  by-laws  provide  that  the  association  within  thirty  days  after 
satisfactory  proof  of  his  death,  will  pay  to  his  ''widow"  as  many 
dollars  not  exceedin.2;  one  thousand  as  there  are  surviving  members 
at  the  time  of  the  death,  a  contract  of  life  insurance  is  completed.' 
So  where  the  intestate  has  complied  witli  all  other  provisions  of  the 
society,  the  fact  that  lie  had  not  taken  out  a  certificate  nor  desig- 
nated to  whom  his  benefit  should  be  payable  does  not  preclude  a 
recovery  against  the  society,  but  in  the  absence  of  such  certificate 
the  family  of  the  deceased  will  be  entitled  to  the  benefit,^  and  where 
the  supreme  lodge  of  the  Knights  of  Honor  sends  a  benefit  cer- 
tificate, properly  signed  and  sealed,  to  a  subordinate  lodge  for  a 
pei-son  who  has  applied  for  membership,  been  balloted  for.  elected, 
and  had  a  degree  conferred  upon  him,  and  has  paid  his  fees  an'd 
passed  a  medical  examination  which  has  been  approved,  the  con- 
tract relations  between  him  and  the  supreme  lodge  are  complete, 
although  the  subordinate  lodge  has  not  delivered  to  him  the  cer- 
tificate; ^°  and  in  Zell  v.  Hernian  Farmers'  Mutual  Insurance  Com- 
pany "  it  was  held  that  under  its  by-laws  the  company  could  bind 
itself  by  a  contract  of  insurance  without  issuing  a  written  policy/" 


12 


powers  they  would  be  estoi)p(Ml  from  App.  20,  119  S.  W.  984,  38  In.s.  L. 

claiming  it  as  ultra  vires.  J-  904. 

See  the  following  cases:  New     YoWr.— Connecticut     Mutual 

United  St  at  es.-^houihern  Life  Ins.  Life    Ins.    Co.   v.    Cleveland    Co.    41 

Co.  V.  McCain,  96  U.  S.  84,  24  L.  ed.  Barb.   (N.  Y.)  9. 

653;   Lament   v.    Hotelmen's   Mutual  TF/scoxsm.— Germantown  Farmers' 

Ben.  Assoc.  30  Fed.  817;  Bennett  v.  Mutual    Ins.   Co.   v.    Dliein,   43  \Vi.s. 

Maryla^id  Fire  Ins.   Co.  14  Blatclif.  420,  28  Am.  Rep.  549. 

(U.  S.  C.  C.)  422,  Fed.  Cas.  No.  1321.  En(jla)id.-^Cjovdou   v.   Sea  Fire  & 

Connecticut.— Bu\k]e\      v.   '  Derl)y  LiiV   Assur.   Co.   1   Hurl.  &  N.  599; 

Fish    Co    2   Conn.  252,  254,  7  Am.  Port  of  London  Assur.  Co.  In  re,  5 

Dec.'271.'  I)f^  Gex,   M.  &  G.  465,  481;  County 

F/o~r/rfa.— Southern  Life  Ins.  Co.  v.  Life  Assur.  Co.,  In  re,  L.  R.  5  Ch. 

Lanier,  5  Fla.  110,  58  Am.  Dec.  448.  288. 

777-      •       XT       u      i„    1  T,-';..,,  f.  Af.T  'Bolton  v.  Bolton,  73  Mo.  299. 

Illinois. — New  Lno-land  riic  tv  Ma-  qti-i              n        i   t     i         p  1^ 

T        n           o„i,.^tn«,.    -iQ  Ml    ici;  ^Bishop   v.   (rrand    Lodsje   or    bm- 

rine  Ins.  Co.  v.  hchettler,  .58  111.  U)().  .              1        e  w   >-     \.-a    no  xr    \r 

„              ,.  .,    1  pire  Order  of  iMut.  Aid,  112  N.  Y. 

loua. — Matt    v.    Roman     (  atliolic  ^^7    oq  ]sJ    p^    .-,(J'J 

Mut.  Prot.  Soe.  70  Iowa,  455,  30  N.  "10  T'orschor'    v.'     Supreme     Lodge 

W.  799.  Kni2hts  of  Honor,  72  Mich.  316,  2 

Ma^ifachmetts. — Emery    v.    Boston  ]^.R^A.  206,  40  N.  W.  545. 

Marine  Ins.  Co.  138  Mass.  410.  "11  jr^  Wis.  521,  44  N.  W.  828. 

M/s.so?tri.  —  Shepard       v.       Boone  ^^  ^^or  a  full   consideration  of  the 

County  Mutual  Fire  Ins.  Co.  1:18  ]\Io.  princLi)les   discussed   in    this   section, 

173 


§  35  JOYCE  ON  INSURANCE 

Again,  parol  contracts  of  insurance  by  mutual  benefit  societies  are 
held  to  be  valid,  wherever  the  agreement  has  been  entered  into  and 
completed  except  as  to  the  issuance  of  a  certificate  or  policy,  and 
it  is  also  declared  that  there  is  no  reason  why  such  contracts  should 
not  be  valid."  So  where  the  by-laws  of  a  mutual  insurance  com- 
pany do  not  specifically  require  that  all  of  its  insurance  contracts 
shall  be  in  writing,  and  there  exists  no  statutory  or  charter  pro- 
vision limiting  the  method  in  which  the  company  may  bind  itself 
to  written  contracts,  it  is  held  that  the  great  weight  of  authority 
is  now  to  the  efl'ect  that  the  right  to  make  contracts  of  insurance, 
like  any  other  right  of  contracting,  exists  as  at  common  law,  and 
that  an  oral  or  parol  contract  of  insurance,  or  executory  agreement 
to  insure,  which  leaves  nothing  to  be  done  but  to  issue  and  deliver 
the  policy,  are  valid  aiid  enforceable,  and  that  this  rule  applies  to 
such  mutual  companies.^* 

§  35.  Parol  contracts:  corporations:  statutory  or  charter  pro- 
visions.— Some  distinction  was  formerly  made  between  corporations 
and  individuals  or  partnei-ships,  as  to  the  validity  of  parol  con- 
tracts, since  under  the  common  law  corporations  could  only  contract 
under  their  corporate  seal.     But  this  doctrine  does  not  now  obtain.^* 

see  4  Thompson  on  Corp.  (ed.  1894)  Iowa. — Muscatine    Water    Co.    y. 

sec.  5015  et  seq.  5825  et  seq.;  vol.  5  Muscatine  Lumber  Co.  85  Iowa,  112, 

Id.  sees.  5849,  6042.                 '  39  Am.  St.  Rep.  284,  52  N.  W.  108. 

iSRuights    of    Maccabees    of    tlie  Massachnsetts. — Thayer  v.  Middle- 

Wovkl  V.  Gordon,  83  Ark.  17,  102  S.  sex  Ins.  Co.  10  Pick.  {2i  Mass.)  326, 

W.    711,    36    Ins.    L.    J.    628.      See  329. 

Brown  v.  Franklin  Mutual  Fire  Ins.  Michigan.  —  Sarmiento     v.     Davis 

Co    165  Mass.  565,  52  Am.  St.  Rep.  Boat  &   Oar  Co.  105  Mich.  300,  55 

534,  43  N.  E.  512.  Am.  St.  Rep.  446,  63  N.  W.  205. 

14  State   Mutual   Fire   Ins.    Co.   v.  -^>''^-   ^«:^---Perkins  y.   Washing- 

Tavlor  (1913)  -  Tex.  Civ.  App.  -  ^^on   Ins.   Co.   4   Cow    64.j;   Mott   v. 

157  S   W   950  Hicks,  1  Cow.  ol3,  13  Am.  Dec.  ooO. 

^,    '   .   '  '      '                  -ni    1  PeJ^«s^/^l•a«^«.— Hamilton     v.     Lv- 

''Untied     States.  -  Fleckner    v.  ^             ^^^^^^^^j  j^^   ^^   -  p^   ^^   339 

^T^-^l^^-fi"'  ?-?'  ^  T  rkic^r'  nrgini^.-^ee  Banks  v.  Poitiaux, 
S.)  338,  35^  3.38,  o  L   ed.  631    636,    3  ^J^^   ^^^  ^^  ^^_  j^^^  .^g 

per  Story,  J.;  Bank  of  Columbia  v.  ^^,-,^.^„,,„._st.  Clair  v.  Ratled-e, 
Patterson    7  Cranch  (11  U.  S.)  299,   ^^^  ^.^    ^33^  g-  j^^_  g^    j^^^    gg^^ 

3  L.  ed.  351.  go  N.  W.  234 ;  Ford  v.  Hill,  92  Wis. 

Ue^aHrtjr.— Deringer  v.  Deringer  5  ^gg    53  Am.  St.  Rep.  902,  66  N.  W. 

Houst.  (Del.)  416,  1  Am.  St.  Rep.  150.  n^ 

Illi>ioi.^.—B.  S.  Green  Co.  v.  Blod-  gee  also  Anffell  &  Ames  on  Corp. 

gett,  159  111.  169,  50  Am.   St.  Rep.  (g^jj    ed.)    sec."  228    et   seq;    1    Mav 

146,  42  N.  E.  176 ;  New  England  Fire  on     Ins.     (Parson's     ed.)     sec.     16; 

&^Marine  Ins.  Co.  v.  Schettler,  38  111.  Morawetz     on     Private     Corp.     (ed. 

171.  1882)  sees.  167  et  seq.;  Tliom]ison  on 

7«rZwwo.— Ross  v.  City  of  Madison,  Corp.  (2d.  ed.)  sees  1915,  1920,  1!)23, 

1  Ind.  281,  48  Am.  Dec.  361.  1940,  and  see  Id.  sees.  1921  et  seq.  as 

174 


PAROL  CONTRACTS  §  35 

There  are  case?,  however,  which  go  so  far  as  to  hold  that  where 
the  act  of  incorporation  or  charter  of  the  insurer  requires  the  con- 
tract to  be  in  writing,  such  corporate  provision  should  govern,  and 
necessitates  a  writing.  Such  decisions  would  seem  to  rest  upon  the 
principle  that  a  corporation  can  only  act  in  the  manner  and  mode 
prescribed  by  the  law  creating  it.  Thus,  in  1804,  Mr.  Chief  Jus- 
tice Marshall,  although  not  holding  that  a  parol  contract  of  in- 
surance was  invalid,  determines  that  where  the  act  incorporating 
an  insurance  company  provides  that  its  policies  shall  be  in  writ- 
ing, a  contract  to  cancel  is  as  solemn  an  act  as  the  contract  for 
insurance,  and  must  likewise  be  in  writing  and  not  rest  in  parol. ^^ 
So  in  Spitzer  v.  St.  Mark's  Insurance  Company  ^'  it  is  held  that 
since  under  the  company's  act  of  incorporation  it  was  empowered 
only  to  make  policies  in  writing,  a  contract  to  renew  a  policy  was 
the  same  as  to  make  one,  and  it  could  only  be  done  by  a  w^ritten 
instrument,  and  where  the  company's  charter  provided  that  policies 
issued  by  the  company  should  be  under  seal,  it  was  decided  that  an 
unsealed  policy  could  not  be  given  in  evidence. ^^  And  under  a 
Pennsylvania  decision,  where  the  company's  charter,  after  granting 
the  right  to  make  contracts  of  insurance,  provides  that  ''every 
such  contract,  bargain,  agreement,  and  policy  to  be  made  by  the 
said  corporation  shall  be  in  writing  or  in  print,"  any  attempted 
oral  contract  of  insurance  by  an  agent  is,  in  the  absence  of  an 
cstojjpel,  not  binding  on  the  company.^^  Again,  it  has  been  declared 

1 0  use  of  cori>orate  seal.    As  to  neees-  ^^  Head  v.  Providence  Ins.   Co.   2 

.sitv    for    sealing    see    Briee's    Ultra  Cranch   (6  U.  S.)   127,  150,  2  L.  ed. 

^'ii-es  (ed.  189:3)  pp.  538  et  seq.  229,    237. 

Sealed  and   unsealed  instruments;  ^'^  6  Duer   (N.  Y.)   6   (1856). 

statutes    aholisliins-    distinctions,    see  ^8  Li^j(|.^„pj.  y.  Delaware  Mutual  S. 

notes  71  Am.  St.' Rep.  205,  206,  50  Ins.  Co.  13  Ark.  401.     See  Montreal 

id.  151  et  seq.,  as  to  affixing  .seal  to  Assur.   Co.   v.   McGillivray,   9   L.   C. 

policy,  see  §  180  herein.  488;  National  Banking  &  Ins.  Co.  v. 

See  as  to  parol  contracts  by  cor-  Knaup,  55  Mo.  154;  Cockerill  v.  Cin- 

porationfi.      4    Thompson    on    Corp.  cinnati  Ins.  Co.  16  Ohio,  148.     But 

(ed.  1894)   sees.  5015  et  seq.,  5174-  ggg  the  last  section  herein. 

5177,  5825  et  seq.;  Id.  (2d  ed.)  sees.  19  B(>„„ei.    v.    Fire    Association    of 

1920,  2138.  pj^-jg    229   Pa.   75,   78   Atl.   44,  140 

lo  bind  a  corporation  by  a  con-  ^^_  g^^  ^        ^^g    ^^  j^^^  ^    ^    84. 

ract  made  by  one  who  has  authority  ^^^  Moschzisker,  J.,  said: 

to  act  for  it,  it  IS  not  necessary  that  ,.„    ,           '  V ,          i    i.  ^i         • 

his  authority  should  be  recited  "in  the  But  no  matter  what  the  view  may 

contract,   or  the   corporate   name  be  ^^    elsewhere,    in    Pennsylvania    we 

signed  to  it,  or  his    official    designa-  I^ave  an  authority  which  settles  the 

tion  be  added  to  his  signature.    Jones  question   here.        See   also   Ripka  v. 

V.  Williams,  139   Mo.  1,  37  L.R.A.  Mutual  Fire  Ins.  Co.  36  Pa.  Super. 

682,  61  Am.  St.  Rep.  436,  39  S.  W.  Ct.  517. 
486,  40  S.  W.  353. 

175 


§  35  JOYCE  ON  INSURANCE 

m  Illinois  that  the  rights  of  the  parties  were  governed  by  the  law 
of  thai  state  where  the  apjilication  was  made  to  a  local  agent  in 
the  state,  and  the  policy  issued  in  New  York  did  not  become  opera- 
tive until  countersigned  by  the  local  agent  there.^°  But  corpora- 
tions in  that  state  are  not  precluded  from  making  oral  contracts 
to  effect  insurance,  where  their  charters  authorize  them  to  make 
such  contracts  by  issuing  written  policies.^  There  is  a  distinction, 
however,  between  mere  agreements  to  issue  a  policy  and  com- 
l)leled  parol  contract  of  insurance.  There  are  numerous  case,« 
which  h'old  that  preliminary  parol  contracts  to  issue  a  policy  are 
valid,  even  though  a  loss  occur  before  the  issuance,  and  even  though 
the  charter  or  act  of  incorporation  provide  that  the  contract  be 
executed  only  in  a  certain  manner.^  But  where  the  question  is 
whether  a  parol  exwuted  contract  of  insurance  can  be  enforced  in 
view  of  such  charter  provisions  as  the  above,  many  serious  con- 
siderations are  involved,  such  as  the  right  of  a  corporation  to  incur 
a  liability  which  is  not  necessarily  an  enlargement  of  its  powers. 

So  again,  it  cannot  be  assumed  that  every  per.son  is  familiar 
with  the  charters  of  all  corporations,^  or  with  by-laws  limiting  the 
powers  of  agents  to  make  the  customary  contracts  appertaining 
to  the  business  he  is  authorized  to  transact.*  And  wliile  those 
dealing  with  a  private  corporation  are  charged  with  some  degree 
of  care  to  ascertain  the  corporation's  powers  with  reference  to  a 
transaction,  yet  if  the  transaction  has  some  fair  relation  to  hiatters 
within  the  corporate  authority,  the  defense  of  ultra  vires  will  not 
in  general  be  available  to  afford  injustice  or  inij^osition.^  And 
under  an  Ohio  decision  a  parol  contract  of  insurance  is  valid  when 
not  forbidden  by  statute  or  a  provision  of  the  company's  charter 
which  has  been  brought  to  the  knowledge  of  the  other  contrai-tiug 
party.®  And  where  a  person  without  such  knowledge  has  acted 
in  the  highest  good  faith  in  pursuance  of  a  parol  contract  and 
induced  by  it,  it  is  undoubtedly  true  that  the  corporation  could  not 

20po„jpj.oy  v.  Manhattan  Life  Ins.  ^  ij,,^,]  y    'Woi^t  Branch  Bank,  15 

Co.  40  111.  :m.  Pa.   St.  172. 

*  Firemen's   Ins.    Co.   v.   Kuessncr.  *  Barber  v.  Stroniherg-riirlson  Tel. 

164  111.  -275,  45  N.  E.  540.  .Mty.  Co.  81  Neb.  517,  129  Am.  St. 

Corporation  authorized  l)y  charter  Rep.    /  03,  18  L.R.A.(N.S. )    ()80,  and 

to  make  insurance   and   issue   policy  note,  110  N.  AV.  15/. 

may  enter  into  i>arol  contract  of  in-  ^  McQuaig-    v.    Gulf    Naval    Stores 

suranco.       Continental     Ins.     Co.    v.  Stores  Co.  56  Fla.  505,  l.'il    Am.  St. 

Roller,  101  111.  App.  77.  Rep.  160,  47  So.  2. 

2  See    Constant   v.    Alle£ilianv    Ins.  ^  Xewark    .Machine   Co.   v.   Kenton 

Co.  3  Wall.  Jr.    (U.   S.  C.   C.)   313,  Ins.  Co.  50  Ohio  St.  549,  22  L.R.A. 

Fed.  Cas.  No.  3136;  CoUett  v.  Morris-  708,  35  N.  E.  1060. 
on,  9  Hare,  162;  Perry  v.  Mercantile 
Ins.  Co.  8  U.  C.  363. 

176 


PAROL  CONTRACTS 


§  35 


plead  ultra  vires  to  avoid  the  obligation^  So  where  a  contract  has 
been  fully  performed  b}'  the  party  contracting  Avith  a  corporation, 
and  the  corporation  has  received  the  benefits  from  such  contract, 
it  cannot  afterward  invoke  the  doctrine  of  ultra  vires  to  defeat  an 
action  brought  again.st  it  on  such  contract.  And  where  an  in- 
surance company  issues  a  policy  to  one  upon  his  own  life,  payable 
at  his  death  to  a  third  person,  and  the  insured  pays  the  premiums 
which  are  accepted  by  the  company,  it  is  held  that  it  cannot,  after 
the  death  of  the  assured,  resist  payment  of  the  policy  to  the  bene- 
ficiary, upon  the  ground  that  he  is  neither  a  relative,  heir,  nor 
devisee  of  the  insured,  and  that  its  charter  authorizes  it  to  pay  to 
such  persons  only,^     So  where  a  Ih'e  insurance  company  liius  insured 


'  See  the  following  oases : 

T'nited  States. — National  Bank  v. 
Whitney,  103  U.  S.  99,  2()  L.  ed.  443; 
Union  National  Bank  v.  Mattliews,  98 
U.  S.  621,  23  L.  ed.  188. 

Couneclicut. — Pahncr  v.  Hartford 
Fire  Ins.  Co.  54  Conn.  488,  9  Atl. 
248;  Credit  Co.  v.  llowc  ^ladiine  Co. 
54  Cunn.  387,  8  Atl.  472. 

Indiana. — Louisville  N.  A.  &  C. 
Rv.  Co.  V.  Flanagan,  113  Ind.  488, 
14  N.  E.  370. 

New  Hampshire-. — Norton  v.  Bank, 
61  N.  H.  593. 

New  York. — Pavi.sh  v.  Wheeler,  22 
N.  Y.  494;  Samuels  v.  Fidelity  & 
Casualty  Co.  1  N.  Y.  Supp.  850,  aft'"d 
121  N.  Y.  060. 

Ohio. — ^Newark  Machine  Co.  y. 
Kenton  Ins.  Co.  50  Ohio  St.  549,  22 
L.R.A.  768,  35  N.  E.  1060. 

Pennsi/lvania.  —  Lloyd  v.  West 
Branch  Bank,  15  Pa.   St.  172. 

Tennessee. — Mallory  v.  Ilanauer 
Oil  Works,  86  Tenn.  598,  8  S.  W.  396. 

See  also  2  Morawetz  on  Corp.  (2d 
ed.)  c.  VIII.  sees.  577-725;  5  Thomp- 
son on  Corp.  (ed.  1894)  sec.  6021, 
"The  other  party  estopped  when  he 
has  received  the  benefit;"  sec.  6022, 
"Or  where  the  corporation  has  acted 
to  its  disadvantage;"  sec.  6023,  ''RuIp 
where  the  contract  is  fully  executed 
on  both  sides,"  sec.  6024,  "Rule  where 
the  contract  has  been  fully  executed 
on  eitlior  side;"  sec.  6025,  "Rule 
where,  the  coiitra.ct  has  been  executed 
by  the  party  contracting  with  the 
Jovce  Ins.  Vol.  1. — 12.  17 


corporation;"  sec.  6026,  "Rule  where 
the  contract  has  been  executed  by  the 
corporation ;"  sec.  6028,  "Doctrine 
tliat  violation  of  charter  or  want  of 
power  cannot  be  set  up  collaterally;" 
see.  6029,  "Cases  where  this  doctrine 
has  been  applied;"  sec.  6030,  "Who 
may  not  set  up  such  violations  or 
want  of  power;"  sec.  6031,  "Illus- 
trations of  the  foregoing." 

As  to  charter:  corporate  poiver: 
ultra   vires,  see  §  334  hei"ein. 

*  Bloomington  jMutual  Ben.  Assoc. 
V.  Blue,  120  111.  121,  11  N.  E.  331; 
60  Am.  Rep.  558.  See  last  section 
herein. 

If  a  corporation  has  entered  into  a 
contract  in  violation,  of  a  directory 
provision  of  its  charter,  and  has  en- 
joyed the  full  benefit  of  such  con- 
tract, it  caiinot  plead  ultra  vires  in 
defense,  in  the  absence  of  proof  that 
fraud  was  intended  or  has  been 
lonsummated.  Sherman  Center  Town 
Co.  y.  Morri.s,  43  Kan.  282,  19  Am. 
St.  Rep.  L34,  23  Pac.  569. 

See  also  the  following  cases: 

Illinois. — Kadish  v.  Garden  City 
Equitable  Loan  &  Building  Assoc. 
151  ill.  531,  42  Am.  St.  Rep^.  256,  38 
N.  E.  236. 

loua. — -Twiss  y.  Guaranty  Life 
Assoc.  87  Iowa,  733,  43  Am.  St.  Rep. 
418,  55  N.  W.  8. 

New  J/awps// /re— Manchester  & 
L.  R.  Co.  V.  Concord  R.  Co.  m  N.  H. 
too,  9  L.R.A.  689,  20  Atl.  38.!. 

New    York. — Vought     v.    Eastern 


§  35  JOYCE  ON  INSURANCE 

against  hail,  without  authority  so  to  do,  and  the  insured  performs 
his  part  of  the  contract  and  the  insurer  accepts  the  benefit,  it  is 
estopped  to  set  up  its  want  of  power  to  issue  such  a  policy.^  So  if  a 
company  by  its  charter  is  prohibited  from  insuring  more  than  two- 
thirds  of  the  value  of  any  property,  yet  voluntarily  and  without 
fraud  or  misrepresentation  insures  more,  the  policy  is  not  thereby 
made  void.^°  Again,  when  the  act  of  incorporation  provides  that 
all  powers  relating  to  contracts  of  insurance  are  vested  in  directors, 
and  they  are  to  divide  the  property  insured  into  four  classes  and  to 
direct  the  making  and  issuing  of  all  policies  of  insurance,  if  after 
making  a  by-law  establishing  a  rule  for  the  division  of  risks,  and 
with  a  knowledge  of  the  facts,  they  insure  property  in  one  class 
properly  falling  in  another,  thereby  violating  the  by-law,  still  the 
policy  issued  will  be  valid  and  the  company  bound. ^^  But  it  has 
also  been  held  that  an  insurance  company  is  not  estopped  from 
setting  up  the  fact  that  a  contract  of  insurance  made  through  its 
agent  is  ultra  vires,  though  its  agent  had  led  the  other  contracting 
party  to  believe  that  the  company  had  power  to  make  it,  and  though 
no  pretense  was  set  up  by  the  company  or  its  agent  that  the  con- 
tract was  ultra  vires  until  a  loss  thereunder  was  known  by  all  parties 
to  have  occurred. ^^  Therefore,  charter  provisions  relating  to  execut- 
ing a  policy  ought  not,  in  the  absence  of  words  of  rastriction  or  a 
plain  denial  of  such  power,  to  be  construed  to  limit  the  powers  of 
the  corporation  or  to  prevent  them  from  making  parol  contracts 
within  the  ordinary  scope  of  their  chartered  powers. ^^ 

Bldg  &  Loan  Assoc.  172  N.  Y.  508,   ance  Co.  v.  Colt,  20  Wall.  (87  U.  S.) 
02  Am.  St.  Rep.  761,  65  N.  E.  496.        560,  22  L.  ed.  423. 

Wisconsin. — Wuerfler  v.  Trustees  Illinois. — Hartford  Ins.  Co.  v.  Wil- 
Grand   Grove,   Wis.     Order    Druids,    cox,  57  111.  180. 

316  Wis.  19,  96  Am.  St.  Rep.  940,  92        Maine.— Walker    v.     Metropolitan 
N.  W.  433.  Ins.  Co.  56  Me.  371. 

But  compare  Chewaeia  Lime  Massachusetts. — Putman  v.  Home 
Works  V.  Dismukes,  87  Ala.  344,  5  Ins.  Co.  123  Mass.  324,  328,  25  Am. 
L.R.A.  lOOn,  6   So.    122;    Miller    v.   Rep.  93. 

American   Mutual  Accident  Ins.  Co.       New    York. — Post    v.    JEtna,    Ins. 
02  Tcnu.  167,  20  L.R.A.  765,  21  S.    Co.  43  Barb.  (N.  Y.)  351. 
W.   39.  "  New  England  Fire  &  Marine  Ins. 

^Denver  Fire  Ins.  Co.  v.  Mc-  Co.  v.  Robinson,  25  Ind.  536;  San- 
Clellan,  9  Colo.  11,  59  Am.  Rep.  134,  born  v.  Firemen's  Ins.  Co.  16  Grav 
0  Pae.  771.  (82   IVlass.)    448,  77  Am.   Dec.   410"; 

1®  Williams  v.  New  England  Mut.  Baile  v.  St.  Joseph  Fire  Ins.  Co.  73 
F.  Ins.  Co.  31  Me.  210.  Mo.    371.      See    Posey    County    Fire 

^^  Union  Mutual  Fire  Ins.  Co.  v.  Assoc,  v.  Hogau,  37  Ind.  App.  573, 
Keyser,  32  N.  H.  313,  64  Am.  Dee.  77  N.  E.  670;  Brown  v.  Franklin 
375.  Mutual  Fire  Ins.  Co.  165  Ma.ss.  565, 

12  Webster  v.  Buffalo  Ins.  Co.  7  52  Am.  St.  Rep.  534,  43  N.  E.  512; 
Fed.  399.     See  United  States  Insur-    Sanford  v.  Orient  Ins.  Co.  174Mass. 

178 


PAROL  CONTRACTS  §  36 

§  36.  Parol  contracts:  corporations:  statutory  or  charter  pro- 
visions: continued. — Jt  is  even  declared  in  a  MassachusclLs  case  ^* 
that  the  phraseology  of  statutes  chartering  insurance  companies 
respecting  the  execution  of  policies  should  be  regarded  as  consisting 
simply  of  enabling  words  not  restraining  the  power  which  they 
confer  to  make  contracts  of  which  the  policies  are  the  evidence, 
and  it  was  directly  determined  that  the  company  had  power  to 
make  an  oral  contract,  although  the  charter  gave  authority  to 
make  contracts  of  insurance  "in  their  name  and  by  the  signature  of 
their  president  for  the  time  being,  or  by  tlie  signature  of  such 
other  person  and  in  such  form  and  with  such  ceremonies  of  au- 
thentication as  they  may  by  their  rules  and  by-laws  direct."  In  a 
later  case  in  that  state  it  is  held  that  an  insurance  company  having 
power  generally  to  "make  insurance  against  loss  by  fire"  may  make 
a  preliminary  contract  to  insure  property,  to  be  consummated  by  a 
subsequent  execution  and  delivery  of  a  policy;  and  the  language 
in  its  charter  describing  the  manner  in  which  a  policy  should  be 
executed  does  not  restrain  this  general  power. ^^  It  is  also  decided 
in  the  same  state  that  the  power  of  an  insurance  corporation  to 
make  an  oral  contract  of  insurance  is  not  impaired  by  a  provision 
in  its  by-laws  that  its  "directors  may  authorize  the  president  and 
secretary  to  make  insurance,  and  will  issue  policies  at  such  rates  of 
insurance  and  under  such  limitations  and  restrictions  as  they  shall 
prescribe."  These  are  enabling,,  not  restraining,  words.^^  It  is 
also  determined  that  while  under  a  statute  in  Massachusetts  insur- 

416,  75  Am.  St.  Rep.  358,  54  N.  E.  ]\Iass.   413,   416,   104  Am.    St.   Rep. 

883  (note  more  fully  under  §  36  here-  594,  71  N.  E.  801    (a  ease  of  non- 

in).  waiver     as     to     time    limitation    for 

Validity    of   oral    contract    of    in-  suing.      Cited    in    llatcli    v.    United 

suranee ;  contract  to  insure ;  charter  States  Casualty  (Jo.  197  Mass.  101 ,  14 

or  statutory  provisions,  see  note  22  L.R.A.(N.S.)  "o07,    83    N.    E.    398); 

L.R.A.  770.  Lewis  v.  Metropolitan  Life  Ins.  Co. 

"Sanborn   v.   Firemen's   Ins.    Co.  380  Mass.  317,  318,  62  N.    E.    369 

16  Gray  (82  Mass.  448)  77  Am.  Dec.  (defense   of  estoppel   not   sustained. 

419;  see  also  Franklin  Fire  Ins.  Co.  Cited  in   Thomson   v.    American    Fi- 

V.  Colt,  20  Wall.   (87  U.  S.)  560,  22  delity  Co.  215  Mass.  460,  461,  102  N. 

L.  ed.  423.  E.  699,  agent  held  to  have  no  author- 

^*  Sanford  v.   Orient   Ins.   Co.  174  ity  to  waive  time  limitation  for  suing; 

Mass.  416,  75  Am.  St.  Rep.  358,  54  Cavvvood  v.  Supreme  Lodge  Kniahts 

N.  E.  883.  &  ■  Ladies     of     Honor,     171     Ind. 

16  Brown  v.  Franklin  Mut.  Fire  410,  23  L.R.A.(N.S.)  304,  308,  86 
Ins.  Co.  165  Mass.  565,  52  Am.  St.  N.  E.  482).  Distinguished  in  Carl- 
Rep.  534,  43  N.  E.  512.  Compare  son  v.  Metropolitan  Life  Ins.  Co.  172 
Jennings  v.  Metropolitan  Life  Ins.  Mass.  142,  145,  51  N.  E.  525  (no 
Co.  148  Mass.  61,  18  N.  E.  601.  waiver:  time  limitation  for  suing. 
Waiver  of  proofs  of  death.  Cited  in  Cited  also  in  Thomson  case  above 
Paul  v.  Fidelity  &  Casualty  Co.  186  noted). 

179 


§  36 


JOYCE  ON  INSURANCE 


ance  companies  can  make  valid  policies  only  when  attested  by  the 
signatures  of  the  })re^idcnt  and  secretary,  still  this  provision  has  no 
application  to  oral  agreements  to  make  insurance."  So  it  is  de- 
clared in  a  New  York  case  ^^  that  "whatever  doubts  ina\-  formerly 
have  existed  as  to  the  validity  of  parol  contracts  of  insurance  made 
by  insurance  companies  authorized  by  their  charters  to  make  insur- 
ance by  issuing  policies,  it  is  now  settled  that  they  are  valid.  It  is 
equally  well  settled  that  parol  contracts  of  such  companies  to  effect 
an  insurance  by  issuing  policies  are  valid,"  "  and  it  was  also  held 
in  an  Indiana  case  ^°  that  the  company,  unless  expressly  restrained 
by  charter,  might  make  a  valid  insurance  by  parol. ^  xVnd  the  facts 
that  an  insurance  company  is  bound  by  its  charter  to  print  on  the 
face  of  its  policies  all  conditions,  and  that  certain  othcers  shall 
sign  all  the  policies  or  contracts  made,  etc.,  do  not  prohibit  the  com- 
pany from  making  oral  contracts  of  insurance,^  although  under  a 
similar  state  of  facts  a  case  was  decided  contra  in  the  Missouri  state 
court.^  But  a  different  rule  is  applied  in  a  later  ca.>^e  in  that  state 
and  it  is  held  that  where  the  charter  of  a  corporation  is  that  fur- 
nished by  the  general  laws  of  the  state,  which  require  that  the  con- 
ditions of  all  policies  issued  by  companies  so  organized  shall  l)e 
written  or  printed  on  the  face  thereof,  and  that  all  policies  and 
contracts  of  insurance  and  instruments  of  guaranty  made  by  such 
companies  shall  be  subscribed  by  the  president,  or  president  pro 
tempore,  and  attested  by  the  secretary,  nevertheless  a  verbal  agree- 
ment to  insure  is  binding.*  This  rule  is  again  asserted  there  imder 
a  decision  in  1906,  and  it  is  further  decided  that  a  statute  declaring 
that  parol  contracts  may  be  binding  on  aggregate  corporations  if 
made  bv  an  agent  dulv  authorized  bv  the  coritorate  vote  or  under 


"Commercial   ]\Iu(iuil   ins.   Co.  v.        ^  See  also  State  .Miilual  Fire  Ins. 

Union  Mutual  Ins.  Co.  1!)  How.   (60  Co.  v.  Taylor,  —  Tex.  Civ.  App.  — , 

U.  S.)  .318,  15  L.  eci.  (iSli.  157  S.  W."  9M). 

1^  Ellis   v.    Albany    City    I'^ire   In.s.        ^  Jie,^jii,i„.   y    ruitcd     States     In.s. 

Co.  50  N.  Y.  402,  10  Am.  Rep.  495.  Co.  2  Dill.   (U.  S.  C.  C.)    2(j,    Fed. 

See  also  Commercial  ^Mutual  Ins.  Co.  Cas.  (i.Stid. 

v.  Union  Mut.  Ins.  Co.  19  llow.   (00        ^llenning   y.   United     States    Ins. 

U.  S.)  319,  1.-)  L.  ed.  e.iO;  AValkev  y.  Co.  47  Mo.  425,  4  Am.  Rep.  332. 
Metropolitan    Ins.    Co.   56    Me.    371;        *  Baile  v.  St.  Joseph  Fire  &  Marine 

Trustees     First    Baptist     Church    y.  Ins.    Co.   73   Mo.   3S;>,   disl'ntguisliinij 

Brooklyn  Fire  Ins.  Co.  19  N.  Y.  305.  Henning  v.  United  States  Ins.  Co.  47 

See  ?5S"33a,  38a  herein.  Mo.  425,  4  Am.  Rep.  332.    An  earlier 

^^See    also    Loomis     x.     Jefferson  statute     also     provided    that     parol 

County   Patrons'   Fire   Relief  Assoc,  contracts    could    be    made    by    duly 

87  N.  Y.  Supp.  5,  92  App.  Div.  601.  autiiorized      agents      of      aggregate 

As  to  standard  policy  rule  in  New  corporations  and  that  such  contracts 

Yolk,  see  ^*^  33a,  .38a  herein.  could  be  implied  from  corporate  acts 

2°  New  England  Fire  &  ^farine  Ins.  or   tiiose    of    an    agent    with    general 

Co.  v.  Robinson,  25  ind.  536.  powers. 

180 


PAROL  CONTRACTS  §  36 

the  ,o;cneial  reniilatioiis  of  the  corporation,  and  that  contracts  may 
be  implied  on  the  part  of  such  corporation  from  their  acts  or 
those  of  an  agent  whose  powers  are  of  a  general  character,  must 
be  construed  as  authorizing  insurance  coiporations  to  make  parol 
contracts  of  insurance.^  It  is  held  in  Constant  v.  Allegheny  In- 
surance Company  ®  that  although  by  its  act  of  incorporation  an 
insurance  company  can  make  a  valid  insurance  only  by  a  policy 
attested  by  the  president,  secretary,  and  the  seal  of  the  corporation, 
yet  before  such  instruments  are  attested  in  due  form  the  president 
or  secretary,  or  whoever  else  may  act  as  a  general  agent  of  the 
company,  may  make  agreements  and  even  parol  promises  as  to  the 
terms  on  which  a  policy  shall  be  issued,  so  that  a  court  of  equity 
will  compel  the  company  to  execute  the  contract  specifically."^  And 
under  the  charter  of  an  insurance  company  which  provides  that 
every  contract,  bargain,  agreement,  and  policy  for  insurance  shall 
be  in  writing  or  in  print,  and  be  under  the  seal  of  the  coiporation, 
a  contract  to  issue  a  policy  as  an  executory  agreement  to  insure  is 
binding  without  a  written  memorial  of  it.^  It  is  also  decided  that 
the  rule  that  corporate  contracts  are  unenforceable  when  not  signed 
by  certain  persons  is  so  harsh  and  inconvenient  that  it  has  been 
widely  dejiarted  from  and  practically  abandoned,^  and  it  is  gen- 
erally held  in  like  cases  that  a  parol  agreement  for  insurance  is 
valid.^^  But  a  mere  collateral  promise  or  representation  which  does 
not  involve  the  execution  of  a  policy  of  insurance  is  not  within  the 
scope  of  the  general  authority  of  an  officer  or  agent  of  such  a  cor- 

^Kinij  V.  Phoenix  Ins.  Co.  195  Mo.  Ins.  Co.  174  Mass.  420,  75  Am.   St. 

290,  113  Am.  St.  Rep.  678,  6  Araer.  Rep.  358,  54  N.  E.  883. 

&  En<;-.  Annot.   Ca.s.   618,  92   S.  W.  .U/c/;?V/om.— Westchester    Fire    Ins. 

S92.    ^  Co.  V.  Earle,  33  Mich.  150. 

6  3  Wall.   Jr.    (U.   S.   C.   C.)    313,  North  DflAoia.— McCabe  v.  .^tna 

Fed.  Cas.  3136.  Tns.  Co.  9  N.  D.  25,  47  L.R.A.  645, 

■^  See  also  Seenritv  Eire  Ins.  Co.  v.  81  N.  W.  426. 

Kentucky  Marine  &  Eire  Ins.  Co.  7  ^^'<^^f  T  irgmm.—CYoii  v.  Hanover 

Bus!,  (ky.)  81,  3  Am.  Rep.  301.  F    Ins.  Cc  40  W.  Va^  512,  52  Am. 

8  Insurance     Co.     (Franklin     Ins.  St   Rep   902,  21  S.  E.  8o4. 

Co.)  V.  Colt,  20  Wall.  (87  U.  S.)  .  '  ^f  ^"\,7-  p '^^JTv 'h^n  -  i  oS 
c-nJ  oc)  T       j    AC)o  Telephone  Mfg.  Co.  81  Aeb.  51  <,  129 

;f-r";        '"^   -7   ;  c>  .         J?  Am.  St.  Rep.^703,  18  L.R.A.fN.S.) 

Cited  m:  Lmted  btates. — Earaes  v.  ,.„„        ,       /^  ^^  „  '^  ,,,.  -  __     ■         ' 

,,         ,       /-,      r.^  TT   o    ^.-.T-   o^  T       1  680,  anci  note,  116  JSI.  W.  Jo/. 
Home  Ins.  Co.  94  TL  «•  027  24  L.  ed.       ,„  j,,,  ,,  p,,,,i,  j^^.  Co.  2  Bi..s. 

300;  Laclede  Firc-Brick  Mfg.  Co.  v.  ^u.  S.  C.  C.)   333,  Fed.  Cas.  7001; 

Hartford  Steam-Boiler  Inspection  &  ^^^.^n  ^,    Hartford  Fire  Ins.  Co.  59 

Ins.  Co.  9  C.  C.  A.  8,  19  U.  S.  App.  j^   y.  171,  17  Am.  Rep.  322;  Fish  v. 

510,  60  Fed.  35L  Cottenett,  44  N.    Y.    538:    Post    v. 

ManjJand.—Ph(Bmx     Ins.     Co.    v.  .^tna  Ins.  Co.  43  Barb.  (N.  Y.)  351; 

Ryland,  09  Md.  447,  1  L.R.A.  550,  Cooke  v.  2FAx^a,  Ins.  Co.  7  Daly  (N. 

16  Atl.  109.  Y.)    555;    Jones   v.    Provincial   Ins. 

il/fl.s,sflc//H.se/^s.— Sanford  v.  Orient  Co.  16  U.  C.  Q.  B.  477. 

181 


§  37  JOYCi-l  UX  INSURANCE 

poration.  and  cannot  })e  en  forced. ^^  Tlie  following  ca?e<  further 
illustrate  the  rule  a.s  to  agreements  for  insurance :  Thus,  an  agree- 
ment for  insurance  was  made  with  an  insurance  company  through 
its  agent,  and  on  the  next  day  the  policy,  dated  as  of  the  preceding 
day,  was  executed,  delivered,  and  received  in  perfect  accordance 
with  that  agreement,  and  it  was  held  that  the  company  was  liahle 
for  a  loss  occurring  after  the  agreement  was  entered  into  and  be- 
fore the  policy  was  executed,  although  the  charter  of  the  company 
provided  that  all  policies  of  insurance  should  be  subscribed  by  the 
president  and  signed  and  sealed  by  the  secretary.^^  Again,  where 
the  charter  confers  upon  an  insurance  company  power  "generally  to 
do  and  perform  all  things  relative  to  the  object  of  the  association." 
and  23rovides  in  a  subsequent  section  that  ''all  policies  or  contracts 
of  insurance"  shall  be  subscribed  by  the  president  or  some  other 
ofhcer  designated  by  the  board  of  directors  for  that  purpose,  the 
latter  provision  does  not  disable  the  companj^  from  binding  itself  by 
contracts  for  policies  and  immediate  insurance  executed  in  other 
modes  and  by  other  agents,  but  merely  prescribes  the  manner  in 
which  the  final  contract  or  policy  shall  be  executed. ^^  So  a  pro- 
vision in  a  company's  charter  requiring  that  ''all  policies  and  con- 
tracts of  insurance  .  .  .  shall  be  subscribed  by  the  president" 
relates  only  to  executed  insurances,  and  does  not  abridge  the  com- 
mon-law right  to  make  an  oral  executory  contract  for  insurance.^* 
§  37.  Parol  contract  for  insurance  subject  to  usual  provisions 
of  policy. — A  parol  contract  for  insurance  is  in  effect  the  contract 
of  the  company  as  expressed  in  the  policies  commonly  issued  by 
them,  unless  otherwise  agreed  upon,^^  and  is  to  be  regarded  as 
made  upon  the  terms  and  subject  to  the  conditions  in  the  ordinary 
forms  of  policies  used  by  the  company  at  the  time.^^  In  other 
words,  if  nothing  is  stipulated  in  the  preliminary  agreement  con- 
cerning the  nature  or  kind  of  the  policy  to  be  issued,  the  law 
presumes  that  it  was  contemplated  by  the  parties  that  the  ordinary 

*^  Con.stant  v.  Alleghany  Insurance  35  N.  E.  1000;   Smith  v.  State  Ins. 

Co.  3  Wall.  Jr.   (U.  S.  C.  C.)   313,  Co.  64  Iowa,  716,  21  X.  W.  145. 
Fed.  Cas.  3136.  le  Salisbury  v.  Hekla  Fire  Ins.  Co. 

^^Davenport   v.    Peoria   Marine   &  32  Minn.  458,  21  N.  W.  552;  Vining 

Fire  Ins.  Co.  17  Iowa,  276.  v.  Franklin  Fire  Ins.    Co.    89    Mo. 

^^  Davton    Ins.    Co.    v.    Kelly,    24  App.  311 ;  De  Grove  v.  ^Metropolitan 

Ohio  St.  345,  15  Am.  Rep.  612.  Ins.  Co'.  61  X.  Y.  594,  19  Am.  Rep. 

^*  Security  Fire  Ins.   Co.  v.  Ken-  305 ;  Cleveland  Oil  &  Paint  Mfg.  Co. 

tuckv  Marine  Sc  Fire  Ins.  Co.  7  Bush  v.  Norwich  Union  Fire  Ins.   Co.  34 

(Ky")  81,  3  Am.  Rop.  301.  Oreg.  228.  55  Pac.  435;  Eureka  Ins. 

"  Hubbard  v.  Hartford  Fire  Ins.  Co.  v.  Robinson,  Rhea  &  Co.  56  Pa. 

Co.  3:5  Iowa,  325,  11  Am.  Rep.  125;  St.  256.  94  Am.  Dec.  65;  State  Fire 

Newark  ^fachino  Co.  v.  Kenton  Ins.  Ins.   Co.    v.    Porter,    3    Grant    Cas. 

Co.  50  Ohio  St.  549,  22  L.R.A.  768,  (Pa.)  123. 

182 


PAROL  CONTRACTS  §  37 

and  usual  policy  used  by  the  insurer  to  cover  property  of  like  nature 
and  kind  as  that  designated  in  the  agreement  should  be  issued. 
The  usual  intendment  of  such  agreement  is  that  a  policy  shall 
issue  which  shall  contain  the  specific  limitations  and  conditions  up- 
on which  the  loss  insured  against  shall  be  payable.  The  issuance 
of  the  policy  is  the  ultimate  act  contemplated  by  the  executory, 
and  completes  the  executed  contract.^''  And  where  nothing  is  said 
in  the  negotiations  about  special  rates  of  insurance,  or  the  special 
conditions  of  the  policy,  it  will  be  presumed  that  those  which  were 
usual  and  customary  were  intended.^*  The  preceding  rule  has 
seemingly  been  qualified  to  this  extent,  that  a  presumption  that  the 
parties  to  an  oral  preliminary  contract  of  insurance  contemplated 
such  a  form  of  policy  as  has  been  usual  between  them,  or  is  usual  in 
such  cases  may  be  applied  in  some  instances.^'  So  where  plaintiff 
applied  to  defendant's  agent  for  a  policy  of  marine  insurance  on 
certain  goods  and  paid  the  premium,  but  the  agent  said  it  was  not 
his  custom  to  give  a  policy,  and  that  it  was  unnecessary,  and  gave 
him  a  receipt  specifying  the  risk  insured,  but  containing  no  condi- 
tions, it  was  held  that  the  contract  was  governed  by  the  limitations 
and  conditions  contained  in  the  policies  ordinarily  used  by  the  com- 
pany.^" If  the  insurer,  however,  enters  into  an  oral  contract  of 
insurance,  and  at  the  same  times  agrees  to  issue  a  policy  which  it 
subsequently  refuses  to  do,  it  cannot  claim  that  the  insured's  right 
of  recovery  is  defeated  by  the  violation  of  any  provisions  which  the 
policy,  if  issued,  would  have  contained.^  But  if  a  policy  is  issued 
in  pursuance  of  a  verbal  agreement,  and  assured  receives  it,  but 

"  Sproul    V.    Western    Assurance  United    States. — Eames    v.    Home 

Co.  33  Oreg-.  98,  54  Pac.  180,  28  Ins.  Tns.  Co.  94  U.  S.  621,  24  L.  ed.  298; 

L_  J,  118.  Relief  Fire  Ins.  Co.  v.  Shaw,  94  U. 

18  Newark  Machine  Co.  v.  Kenton  S.  574,  24  L.  ed.  291. 

]ns.  Co.  50  Ohio  St.  549,  22  L.R.A.  Iowa.— Barve     v.     Council     Bluffs 

708  and  note,  35  N.  E.  10G3;  Cleve-  Ins.  Co.  76  Iowa,  609,  41  N.  W.  373; 

land  Oil  &  Paint  Mfg.  Co.  v.  Nor-  ^mitli  v.  Sta^te  Ini;.  Co.  64  Iowa,  716, 

wich  Union   Fire  Ins.   Co.   34   Oreg.  21  N.  T\  .  145. 

ooQ    e:-   p        4Q"  Minnesota.- — Sau.sburv     v.      Hekla 

""Benner  V    Fire    Association    of    t";<-  I--  C»-  ^^  ^'i""-  ^58.  21  N.  W. 

?nli'''-f'.!,''-  .«•  in"/"'-T^S''S'  ■"v^!.™,,;.».-MoCann  v.  iEtna  Ins. 
706,    78    Atl.    44,  40  Ins.  L.  J.  84.    ^^    ^  ^^^    -jpg 

"We  can  conceive  of  instances  where        New^York.—Upman    v.    Niagara 

this  rule  might  well  be  applied,  but    y^^^  j^^  ^^   12i  n.  Y.  454,  8  L.R.A. 

this  is  not  one  of  them."    Per  Mosch-    -2n^  24  N.  E.  690. 

zisker,  J.  I'llardwick   v.    State    Ins.    Co.   23 

^^De   Grove  v.   Metropolitan   Ins.    Qr.  290,  31  Pac.  656,  22  Ins.  L.  J. 

Co.  61  N.  Y.  594,  19  Am.  Rep.  305,    262.      Compare   Sproul    v.    Western 

and  note,  309.     See  also  the  follow-    As.'^uranco  Co.  33  Oreg.  98,  54  Pac. 

180,  28  Ins.  L.  J.  118. 

183 


§  38 


JOYCE  ON  INSUKANCE 


it  is  void  because  of  noncompliance  with  a  statutory  form,  the 
presumption  is  that  the  terms  of  the  oral  contract  conform  with 
those  of  the  written  policy.^ 

§  38.  Parol  agreement  for  insurance  may  be  specifically  enforced, 
or  court  may  award  damages. — An  oral  contract  to  issue  a  policy 
of  insurance  is  binding  and  may  be  specifically  enforced,  or  the 
court  may  award  damages  the  same  as  in  an  action  on  an  executed 
policy.^     In  a  New  Hampshire  case  *  an  agreement  was  made  with 


2  Green  v.  Liverpool  &  London  &  son,  28  Ind.  17:  Peoria  Marine  & 
Globe  Ins.  Co.  91  Io\va,  615,  60  N.  Fire  Ins.  Co.  v.  Walser,  22  Ind.  73; 
W.  189.  See  Howard  Ins.  Co.  v.  Kentucky  Mutual  Ins.  Co.  v.  Jenks,  5 
Owens,  94  Ky.  197,  21  S.  W.  1037,  lud.  96;' Western  Assurance  Co.  v. 
14  Ky.  L.  Rep.  881.  McAlpin,  23  Ind.  App.  220,  55  N.  E. 

3  Vvited    States.— Taxloe    v.    Mer-   119. 

chants  Fire  Ins.  Co.  9  How.  (50  U.  Kansas. — Preferred  Accident  Ins. 
S.)  390,  13  L.  ed.  187;  Fitton  v.  Fire  Co.  v.  Stone,  61  Kan.  48,  58  Pac. 
Ins.  Assoc.  20  Fed.  (U.  S.  C.  C.)  766   986. 

(agreement  to  insure  may  be  con-  Kentucky. — Security  Fire  Ins.  Co. 
sidered  in  equity  as  insurance,  at,  law  v,  Kentucky  Marine  &  Fire  Ins.  Co. 
there  could  only  be  an  action  for  7  Bush  (Ky.)  81,  3  Am.  Rep.  301; 
breach  of  contract  to  effect  tlie  in-  see  Hartford  Fire  Ins.  Co.  v.  Trim- 
.surance) ;  Humphrey  v.  Hartford  ble,  117  Ky.  583,  25  Ky.  L.  Rep. 
Fire  Ins.  Co.  15  Blatchf.  (U.  S.  C.  1497,  78  S.  W.  462. 
C.)  35,  Fed.  Cas.  No.  6874.  Manjland.—Vha^nix    Ins.     Co.     v. 

Alahama.^Coxnxmvnal    Fire    Ins.   Rvland.  69  Md.  437,  1  L.R.A.  548, 
Co.  V.  Morris,  105  Ala.  498,  18  So.   16  Atl.  109. 
34;  Home  Ins.  Co.  v.  Adler,  77  Ala.       Massachusetts. — See     Cunningham 


242,  71  Ala.  524. 

California. — Gold  v.  Sun  Ins.  Co. 
73  Cal.  216,  14  Pac.  786. 


v.  Connecticut  Fire  Ins.  Co.  200 
Ma.ss.  333,  86  N.  E.  787,  38  Ins.  L. 
J.  315  (a  case  of  action  of  contract, 


Connecticut. — See  Bishop   v.    Clay   on  parol  agreement  to  issue  standard 


Fire  &  Marine  Ins.  Co.  49  Conn.  167 
Georgia. — Simonton,        Jone-s       & 
Hatcher   v.   Liverpool   &   London   & 


policies;  no  discussion  as  to  right  of 
action). 

Michigan. — Michigan   Pipe   Co.   v. 


Globe  Ins   Co.  51  Ga.  76  (action  lies;    ^^-^^^^^^^^^^  Y\ve  &  Marine  Ins.  Co.  92 
equity  wdl  gTant  relief  even  though    ^ji,i,;'482,  20  L.R.A.  277,  52  N.  W 


contract  required  to.be  in  writing). 

Illinois.— Fir  evaen's  Ins.  Co.  v. 
Kuessner,  164  111.  275,  45  N.  E.  540 ; 
Dinning  v.  Phcenix  Ins.  Co.  68  III. 
414  (but  held  that  there  were  only 
preliminaries  to  contract,  and  that  no 
contract  was  actually  made,  so  bill 
was  dismissed) ;  Fii-e  Ins.  Co.,  Phila. 
County  V.  Sinsabaugh,  101  111.  App. 
55;  see  Concordia  Fire  Ins.  Co.  v. 
Heffron.  84  111.  App.  610,  as  to 
pleading  on  oral  contract  to  insure. 


1070. 

Minnesota. — Everett  v.  O'Lcary, 
90  Minn.  154,  95  N.  W.  901. 

Mississippi. — Franklin  Fire  Ins. 
Co.  V.  Taylor,  52  Miss.  441. 

Misso7iri. — Baile  v.  St.  Joseph 
Fire  &  Marine  Ins.  Co.  73  Mo.  371. 

Nebraska. — Carter  v.  Bankers  Life 
Ins.  Co.  83  Neb.  810,  120  N.  W.  455. 

Nevada. — Cooper  v.  Pacific  Mutual 
Life  Ins.  Co.  7  Nev.  116,  8  Am.  Rep, 


Indiana. — Standley    v.    Northwest-   705. 
ern  Mutual  Life  Ins.  Co.  95  Tnd.  254;       New  Hampshire. — Gerrish  v.  Ger- 
Amcrican  Horse  Ins.  Co.  v.  Patter-   man  Ins.  Co.  55  N.  H.  355. 

184 


PAROL  CONTRACTS 


§38 


the  agent  of  the  company  for  insurance  aaainst  fire  for  one  year, 
commencing  the  risk  at  noon,  September  30,  1873.  The  premium 
was  paid  to  the  agent  and  he  agreed  to  procure  and  deUver  the 
pohcy.  Before  this  was  done,  and  on  October  1,  1873,  a  loss 
occurred.  The  requisite  proofs  of  loss  were  made  and  a  policy 
demanded  and  payment  of  the  amount  insured,  which  demands 
were  refused.  Upon  a  bill  in  equity  therefor  it  was  decided  that 
(he  court  had  jurisdiction  to  compel  a  delivery  of  the  policy  and 
specific  performance,  and  that  it  would,  to  avoid  circuity  of  action, 
decree  payment  of  the  loss.  So  specific  performance  of  an  execu- 
tory parol  contract  to  insure  a  marine  risk  may  be  compelled  in 
equity  after  the  loss  has  occurred,  when  it  appears  that  the  voyage 
was  undertaken  on  the  understanding  that  the  risk  had  been  ac- 
cepted, and  that  the  writing  to  effect  the  insurance  would  be  duly 
made,  and  that  the  premium  would  be  paid  when  required  accord- 


New     Jersejf. — Hallock     v.     Com-  a.  court  of  equity,    and    having    been 

mercial  Ins.  Co.  26  N.  J.  L.  268.  c-nforced  by  the  procurement  of  the 

New  York. — Ellis  v.  Albany  City  policy,  an  action  can  be  maintained 
Ins.  Co.  50  N,  Y.  402,  10  Am.  Rep.  upon  the  instrument;  or  the  court,  in 
495;  Rhodes  v.  Railway  Passenger  enforcing  the  execution  of  the  con- 
Ins.  Co.  5  Lans.  71;  Kelly  v.  tract,  may  enter  a  decree  for  the 
Commonwealth  Ins.  Co.  10  Bosw.  82.  amount  of  the  insurance.  Franklin 
But  compare  §  38a  herein.  Fire  Ins.  Co.  v.  Colt,  20  AVall.    (87 

North  Dakota.— Boos  v.  .^tna  Ins.  U.  S.)  560,  22  L.  ed.  423.  Cited  in: 
Co.  22  N.  Dak.  11,  132  N.  W.  222,  40  United  States.— Tennant  v.  Travel- 
Ins.  L.  J.  1787.  lers'  Ins.  Co.  31  Fed.  324;  Frankle  v. 

Oregon. — Sproul  v.  Western  Assur.  Pennsylvania  F,  Ins.  Co,  12  Ins.  L.  J. 

Co.  33  Oreg.  98,  54  Pac.  180,  28  Ins.  619,  Fed.   Cas.   No.    5,052a ;     Magic 

L.  J.  118.  Ruffle  Co.  V.  Elm  City  Co.  13  Blatchf. 

Utah.— Jaaho    Forwarding    Co.    v.  151,  2  Bann.  &  Ard.  159,  Fed.  Cas. 

Firemen's  Fund  Ins.  Co.  8  Utah,  41,  No.  8,949;  Weeks  v.  Lycoming  F.  Ins. 

17  L.R.A.  586,  29  Pac.  826.  Co.  7  Ins.  L.  J.  553,  Fed.  Cas.  No. 

Virginia. — Interstate  Fire  Ins.  Co.  17,353. 

V.   IMcFall,   114   Va.    207,   76    S.   E.  Alabama.— Home  Ins.  Co.   v.    Ad- 

293;  Iladen  v.  Farmers  &  Mechanics  ler,  71  Ala.  524. 

Fire  Assoc.  80  Va.  683;    Haskin    v,  California. — Crawford    v,     Trans- 
Agricultural    Fire    Ins.    Co.    78    Va.  atlantie  F.  Ins.  Co.  125  Cal.  611,  58 
700;  Wooddy  v.  Old  Dominion  Ins.  Pac.  177. 
Co.  31  Gratt^  362,  31  Am.  Rep.  732.  Indinna.—FYi\(\entia\    Ins.    Co.    v, 

Wisconsin. — Northwestern  Iron  Co.  Sullivan,  27  Ind.  App.  37,  59  N.  E. 

V.  ^tna  Ins.  Co.  23  Wis.  160,  99  Am.  873. 

Dec.  145.  Kansas. — Preferred  Aeci.  Ins.  Co. 

Wyoming. — Summers     v.     INIutual  v.  Stone,  61  Kan.  53,  58  Pac.  986. 

Life    Ins.    Co.    12     Wvo.     369,    66  Massachusetts. — Emery    v,    Boston 

L.R.A.  812,  109  Am.  St."  Rep.  992,  75  Marine  Ins.  Co.  138  Mass.  412. 

Pac.  937.  Michigan. — Michigan    Pipe    Co.    v. 

Canada. — Jones  v.  Provinciallns.  Michigan  F,  &  M.  Ins.  Co.  92  Mich. 

Co.  16  U.  C.  Q.  B.  477.  491,  20  L.R.A.  289,  52  N.  W.  1070. 

An   executory   contract   for  insur-  New     York. — Hicks      v.      British 

anee,  being  valid,  can  be  enforced  in  American  Assur.  Co.  162  N,  Y,  299, 

185 


§  38  JOYCE  OX  INSUKANCE 

ing  to  usage;  '  and  an  oral  promise  by  the  president  of  an  insurance 
company  to  make  a  policy  of  insurance  is  a  contract  binding  on  the 
company,  and  a  court  of  equity  will  compel  its  specific  perform- 
ance.^ Again,  if  tlie  agents  of  the  A,  B,  C,  D,  and  E  insurance 
companies  agree  with  a  party  to  insure  her  premises  in  the  A,  B,  C, 
and  D  companies,  she  has  against  these  four,  after  destruction  there- 
of by  fire,  a  claim  for  the  loss,  even  though  the  policies  have  not 
been  delivered  to  her,  but  none  against  the  E,  although  the  E  had 
also  written  out  a  policy  for  her.  Equity  will  only  consider  that 
to  be  done  which  was  agreed  to  be  done.'  So  equity  may  compel 
the  issuance  and  delivery  of  an  insurance  policy  after  the  loss,  and 
enforce  the  payment  of  it,  as  if  made  in  advance,  where  there  has 
been  a  valid  agreement  for  one  before  the  loss,  even  where  the 
contract  was  by  parol  and  the  charter  of  the  company  requires  all 
policies  to  be  in  writing.'  And  full  relief  will  be  administered  in  a 
suit  for  specific  performance  of  a  contract  to  insure,  by  compelling 
the  payment  of  the  loss  when  the  evidence  of  its  extent  is  satis- 
factory.^ But  equity  will  not  compel  the  issuance  of  a  policy  in 
accordance  with  the  provisions  of  a  contract  to  insure,  where  the 
property  intended  to  be  covered  has  been  destroyed  and  its  owner 
has  received  from  other  insurers  more  than  its  value.  Nor  will 
specific  performance  of  a  contract  to  issue  a  policy  be  granted  where 
it  was  eft'ccted  by  agents  of  the  property  owner,  and  was  not  bind- 
ing on  him  without  ratification,  and  he  did  not  ratify  it  until  after 
loss,  when  it  was  to  his  interest  to  do  so.^° 

In  a  Kentucky  case,  in  an  action  upon  a  "workman's  collective 
policy"  agreed  to  be  issued  to  an  employer  for  the  benefit  of  his 
operatives,  in  case  of  injury,  or  resulting  death  to  an  employee. 

48  L.R.A.  4:i0,  56  N.  E.  743:  rev'^  13  See  Union  Mutual  Ins.  Co.  v.  Com- 

App.  Div.  445,  43  N.  Y.  Supp.  623;  raercial    Mutual   IMarine    Ins.    Co.    2 

Van  Tassel  v.  Greenwich  Ins.  Co.  72  Curt.    (U.   S.  C.  C.)    524,  Fed.  Cas. 

Hun,   145,   25    N.    Y.     Supp.    301;  14,372;  New  England  Fire  &  Marine 

Clarkson   v.  Western  Assur.   Co.   92  Ins.   Co.  v.  Robinson,  25  Ind.  536; 

Hun,  535,  37  N.  Y.   Supp.  53.  Trustees  of  First  Baptist  Church  v. 

Oregon. — Sproul  v.  Western  A.ssur.  Brooklyn  Ins.  Co.  18  Barb.   (N.  Y.) 

Co.  33  Or.  101,  54  Pac.  155.  69;  Kelly  v.  Commonwealth  Ins.  Co. 

Pennsiflvanki. — Smith      v.      Susar  10  Bosw.  (N.  Y.)  82. 

Vallev  Mut.  F.  Ins.  Co.  5  Pa.  Dist.  R.  '  Fitton  v.  Fire  Ins.  Assoc.  20  Fed. 

.340.  "  766. 

*  Gerrish  v.  German  Ins.  Co.  55  N.  *  Franklin  Fire  Ins.  Co.  v.  Taylor, 

H.  355.  52  Miss.  441.     See    Ellis   v.    Albany 

5  PhoMiix  Ins.  Co.    V.    Rvland,    69  Ins.  Co.  50  N.  Y.  495,  and  note. 
Md.    437,    16    Atl.    109,    1    L.R.A.  ^  Phenix  Ins.  Co.  v.  Rvland,  69  Md. 
.-,48.  437.  1  L.R.A.  548,  16  Atl.  109. 

6  Commercial  Mutual  Marine  Ins.  i°  Insurance  Co.  of  North  America 
Co.  V.  Union  :\rutnal  Ins.  Co.  19  v.  Schall.  96  Md.  225,  61  L.R.A.  300, 
How.  (60  U.  S.)  318,  15  L.  ed.  636,  .53  Atl.  925. 

186 


PAROL  CONTRACTS  §  38a 

and  wliie-li  insurance  was  to  be  in  force  until  an  unsigned  applica- 
tion was  disapproved  and  notice  thereof  given  to  the  employer,  and 
between  the  date  of  said  application  and  notification  of  its  rejection 
an  employee  lost  his  life,  it  was  held  that  cw  tJiere  existed  no  right 
to  have  a  policy  issued  the  remedy  was  not  in  equity  but  by  an' 
action  at  law  to  recover  on  the  parol  contract}^ 

§  38a.  Same  subject:  standard  policy:  rule  in  New  York. — It 
is  held  in  New  York  that,  since  1886,  when  the  legislature  enacted 
the  standard  fire  insurance  policy  law,^^  an  oral  contract  to  insure 
has  been  treated  as  a  contract  of  insurance,  and  not,  as  formerly,  a 
contract  to  issue  a  policy,  and  that  assured's  assignee  had  a  cause 
of  action  on  a  contract  for  present  insurance  since  it  included  with- 
in it  the  standard  form  of  policy,  and  the  contract  was  a  completed 
one,  but  that  the  failure  to  deliver  the  policy  to  the  assignor  gave 
said  assignee  no  cause  of  action  therefor,  as  he  had  sustained  no 
damage  by  reason  thereof.  We  may,  however,  state  the  conclusion 
arrived  at  in  this  decision  in  another  form,  as  follows:  The  value 
of  property  destroyed  by  fire  after  an  oral  contract  to  insure  it,  but 
before  the  issuance  of  a  policy  thereon,  cannot  be  recovered  as 
damages  for  breach  of  agreement  to  issue  the  policy,  where  the 
failure  to  deliver  the  policy  did  not  cause  any  damage  to  the  in- 
sured, since  the  oral  agreement  constituted  a  binding  contract  of 
insurance  which  could  be  enforced  against  the  insurer  except  for 
the  failure  of  the  insured  to  comply  with  the  conditions  contained 
in  the  standard  policy  of  insurance,  which  were  by  law  made  a 
])art  of  the  contract. ^^ 

1^  Fidelity  &  Casualty  Co.  v.  Bal-  to  recover  the  loss  which  he  sus- 
hu-d  &  Ballard  Co.  W'i  Ky.  253,  20  tained  by  the  company's  violation  of 
Ky.  L.  J\ep.  116!),  48  S.  \V.  1074,  28  the  contract  as  evidenced  by  the 
In.s.  L.  J.  227.  The  court,  per  policy,  or  the  court,  in  equity,  could 
Payntor,  J.,  said:  "If  parties  have  render  judgment  for  the  amount  of 
agreed  to  tiie  terms  of  insurance,  the  loss.  In  the  case  at  bar  the  plain- 
hut  tlie  policy  has  not  been  issued,  tiff  does  not  .seek  to  have  the  court 
the  insured  could  proceed  in  a  court  compel  the  company  to  issue  a  policy, 
of  equity,  and  compel  the  company  to  It  is  confessed  that  the  company  had 
issue  the  policy.  When  a  loss  iiiter-  the  right  to  disapprove  the  appli- 
venes  between  the  time  the  terms  of  cation  and  refuse  to  issue  it.  There- 
insurance  are  agreed  upon  and  the  fore  the  plaintiff  had  no  right  to 
delivery  of  the  policy,  which  is  l)ut  an  maintain  an  action  in  equity  to  corn- 
evidence  of  contract',  then  the  insured  pel  the  comi)any  to  issue  it.  This 
can,  by  an  action  at  law,  recover  the  action  is  at  law  to  recover  on  the 
amount  authorized  by  the  terms  of  contract  of  insurance  which  was  made 
the  contract.  In  the  event  of  loss  be-  to  be  in  force  until  the  company  ap- 
fore  delivery  of  the  policy,  if  the  in-  proved  the  application  or  rejected  it, 
sured  desired  by  circuitous  route  to  and  notified  the  appellee  of  such 
bring  an  action,  and  have  adjudged  action." 
to  him  the  policy,  he  might  do  so,  ^^  La^ys  188G,  c  488. 
and  then  maintain  an  action  at  law  "  Hicks    v.    British- American    As- 

187 


§  38b 


JOYCE  ON  INSURANCE 


§  38b.  Same  subject:  life  insurance:  industrial  life  insurance, — 
Parol  agrecniciU.s  for  life  insurance  may  be  speciiically  enforced  by 
requiring  tlie  issuance  of  tlie  policy  as  agreed,  either  before  or  after 
the  loss.i* 

But  an  action  which  is  in  fonn  one  to  establish  and  enforce 
an  oral  contract  of  industrial  life  insm*ance  cannot  be  sustained 
where  it  is,  in  fact,  an  attempt  to  alter  the  terms  of  a  written  con- 
tract which  consisted  of  an  application  and  a  receipt  for  one  week's 
premium  paid  on  account  thereof,  and  subject  to  acceptance  or 
rejection  by  the  company,  but  no  policy  was  issued,  and  the  evi- 
dence did  not  tend  to  show  any  consideration  for  a  separate  oral 
contract,  even  though,  the  agent  represented  that  the  insurance 
began  at  once.^^ 


surance  Co.  162  N.  Y.  284,  48  L.R.A.  enactment  of  the  standard  fire  insur- 

424,  50  N.  E.  743,  30  Ins.  L.  J.  14,  ance  policy  law  and  .says  that  ''there- 

rev'g  32  N.  Y.  Supp.  623,  13  App.  after  the  contract  to  insure  was,  by 

Div.  444.     The  court  cites  Van  Loan  common    consent    of    tlie    profession 

V.  Farmers  Mut.  Fire  Ins.  Assoc.  90  and  the  courts,  scientitically  treated 

N.  Y.  280;  Angell  v.  Hartford  Fire  as  a  contract  of  insurance,  and  not, 

Ins.  Co.  59  N.  Y.  171,  17  Am.  Rep.  as  formerly,  a  contract  to    issue    a 

322;    Ellis  v.  Albany    City   Ins.   Co.  policy,  as  an  examination  of  the  au- 

50  N.  Y.  402,  10  Am.  Rep.  495— and  tliorities  in  this  court  from''  Ruggles 

declares    that    "the    situation    which  v.  American  Central  Ins.  Co.  114  N. 

those  cases  were  designed  to  meet  no  Y.  415,  11  Am.  St.  Rep.  674,  21  N. 

longer  exists.     During  the  period  of  E.    1000,  "will  show."     Per  Parker, 

time  in  which  they  and    others    were  Ch.  J.;  Landon,  J.,  Werner,  J.,  and 

decided,  and  down  to  tlie  year  1886,  Haight,    J.,    dissented.      See    Queen 

each  insurance  company  was  at  liber-  Ins.  Co.  v.  Plartwell  Ice  &  Laundry 

ty  to  insert  such  provisions    in    the  Co.  7  Ga.  App.   787,  68  S.  E.  310, 

policy  of  insurance  issued  by  it  as  it  39  Ins.  L.  J.  1125. 
deemed    best.      The    result   was    that        Marine    vessel   liability   insurance; 

there  was  no  uniformity    in    policies  parol    agreement    to    issue    a    valid 

of  insurance,  and  wJien  loss  by  fire  policy  binding,  and  suit  lies  thereon. 

occurred  prior  to  a  delivery    of    the  International  Ferry  Co.  v.  American 

policy,  it  became  necessaiy  for  the  as-  Fidelity  Co.  207  N.  Y.  350,  101  N. 

sured    to    secure    possession    of    the  E.  160. 

policy,  either  by    its    voluntary    de-       Parol    contract    of    insurance — e.x- 

livery  to  him  by  the  officers  of  the  eciitory    contract    to    renew:  specific 

company,  or  in  pursuance  of  a  decree  performance.     See  §§   33a,  41a,  41c 

in  a  suit  in  equity  for   specific    per-  herein. 

formance.     Thereon  he  could  found        ^*  Summers  v.  Mutual  Life  Ins.  Co. 

a    judgment    for    the    damages    sus-  12  Wyo.  369,  66  L.R.A.  812,  75  Pac. 

tained   by  the  fire,    or    he    was    al-  f)37.      See    also    Carter    v.    Bankers 

lowed   to   recover   the   damages   sus-  Life  Ins.  Co.  83  Neb.  810,  120  N.  W. 

tained  for  a  breach  of  the  contract,  455  (ten-payment  policy), 
which  wa.s  treated  as  a  contract  for       ^^  Chamberlain   v.   Prudential   Ins. 

the  delivery   of  a  policy.     The  last  Co.  of  America,  109  Wis.  4,  83  Am. 

one  of  the  cases  cited  was  decided  in  St.  Rep.  851,  85  N.  W.  128,  30  Ins. 

1882."'     The    court    then    notes    the  L.  J.  427. 

188 


PAROL  CONTRACTS 


38c 


§  38c.  Evidence:  oral  contract  must  be  clearly  established. — 
Such  parol  contracts  must  be  clearly  established,  or  the  court  will 
refuse  relief  either  at  law  or  in  equity. ^^  And  in  order  to  sustain 
an  action  on  a  contract  of  insurance,  where  no  policy  has  been 
issued,  the  elenient>s  nuist  have  been  a.^reed  upon,  and  nothing  been 
left  open  and  undetermined,  and  all  conditions  precedent  complied 
with.^'^  And  where  a  complaint  alleges  the  subject  of  insurance, 
the  limit  of  the  risk,  tlie  peril  insured  against,  the  amount,  and  the 
premium,  it  is  sufHciently  specific  to  support  an  action  ba.sed  on  a 
parol  contract  of  insurance.^* 

Again,  since  a  contract  of  insurance  may  rest  in  parol  if  all  the 
elements  essential  to  a  valid  contract  are  agreed  upon,  a  contract  of 
insurance  is  established  where  an  agent,  with  authority  to  receive 


^^  California. — American  Can  Co. 
V.  Aerir'ultural  Tns.  Co.  12  Cal.  App. 
13;5,'lO(;  Pac.  720,  ;]1)  Jns.  L.  J.  ol8. 
See  Crawford  v.  Traus-Atlantie  Fire 
Ins.  Co.  1-25  Cal.  009.  38  Pac.  177, 
28  Ins.  L.  J.  938  (covering-  also 
points  of  what  declarations  are  and 
are  not  part  of  the  res  oesta?). 

Connecticut. — Sec  Bisliop  v.  Clay 
Fire  &  Marine  Ins.  Co.  49  Conn.  167. 

Illinois. — Dinnins:  v.  Phoenix  Ins. 
Co.  08  111.  414. 

Tndimia. — New  Enjrland  Fire  & 
Marine  Ins.  Co.  v.  Robinson,  25  Ind. 
536. 

Kent  mill.  —  Hartford  Fire  Ins. 
Co.  V.  Tiinil)le,  117  Kv.  .")S:5,  25  Kv. 
L.  K'ep.  1497,  78  S.  W.  402. 

Man/land.— See  Mallette  v.  Brit- 
isli-Anierican  Assur.  Co.  91  Md.  471, 
40  Atl.  1005. 

Michigan. — Kleis  v.  Niatjara  Fire 
Ins.  Co.  117  Mich.  409,  '5  Del.  L. 
News,  337,  70  N.  W.  155,  27  Ins.  L. 
J.  912. 

Minnesota. — See  Ames-Broohs  Co. 
V.  ^Etna  Ins.  Co.  83  Minn.  346,  86  N. 
W.  344,  30  Ins.  L.  J.  802. 

Nebrafika. — McCann  v.  il'^^tna  Ins. 
Co.  3  Neb.  198. 

Ohio. — Hartford  Fire  Ins.  Co.  v. 
Wliitman,  75  Ohio  St.  312.  79  N.  F. 
450;  Snydain  v.  Columbus  In.s.  Co. 
18  Ohio  "St.  459.  • 

Peniisylrania.  —  Benner  v.  Fire 
Assoc,  of  Phila.  229  Pa.  75,  78  Atl. 
44,  40  Tns.  L.  J.  84,  140  Am.  St.  Rep. 

1 


706;  Patterson  v.  Benjamin  Frank- 
lin Ins.  Co.  81*  Pa.  St.  4.54;  Ripka  v. 
Mutual  Fii-e  Ins.  Co.  30  Pa.  Super. 
Ct.  .517. 

Virginia. — Haden  v.  Farmers  & 
Mechanics'  Fire  Assoc.  80  Va.  683; 
Haskin  v.  Agricultural  Fire  Ins.  Co. 
78  Ya.  700. 

W  isconsin . — Strohn  v.  Hartford 
Ins.  Co.  37  Wis.  625. 

.  Oral  contracts  of  insurance  must 
be  clearly  established  in  every  par- 
ticular. The  testimony  must  make 
clear  the  subject-matter,  the  amount, 
jiid  elements  of  the  risk,  including 
its  duration  in  point  of  time  and  ex- 
tent of  hazard  a.'^sumed,  the  rate  of 
]iremium,  and,  generally,  all  the 
circumstances  peculiar  to  the  con- 
tract of  insurance.  Benner  v.  Fire 
Assoc,  of  Phila.  229  Penn.  75,  140 
Am.  St.  Rep.  706,  78  Atl.  44,  40  Ins. 
L.  J.  84.  See  also  Moonev  v. 
Merriam,  77  Kan.  305,  94  Pac. '263; 
Hartford  Fire  Ins.  Co.  v.  Trimble, 
]17  Kv.  ,583.  25  Kv.  L.  Rep.  1497, 
78  S.  W.  402,  33  Ins.  L.  3.  348; 
Keystone  iMattress  &  Spring  Bed 
Co.  V.  Pittsburg*  Underwriters,  21 
Pa.  Super.  Ct.  38.  Examine  §§ 
38-38C,  40-49,  72  herein. 

17  Croft  V.  Hanover  Fire  Ins.  Co. 
40  W.  Va.  508,  52  Am.  St.  Rep.  902, 
21  S.  E.  854.     Comimre  §  45a  herein. 

18  Ohio  Farmers  Tns.  Co.  v.  Bell 
(1912)  51  Ind.  App.  377,  99  N.  E. 
812. 

S9 


§  38e  JOYCE  OX  INSURANCE 

iipi^lieations  for  insurance  and  accept  risks,  agrees  to  insure  certain 
property,  and  the  time  when  the  risk  should  begin,  the  amount  of 
the  risk,  its  duration,  the  premium,  and  the  kind  of  policy  to  be 
issued  were  all  fixed,  and  nothing  remained  to  be  determined  after- 
ward, though  the  premium  was  not  paid,  the  agent  being  indebted 
to  the  insured,  and  having  on  previous  occasions  issued  policies  to 
the  insured,  crediting  the  premium  on  account.^^  But,  as  in  other 
cases  of  parol  contracts,  the  assent  of  the  parties  to  the  terms  of  the 
agreement  may  be  shown  by  their  acts  and  the  attendant  circum- 
stances, as  well  as  by  the  words  they  have  employed,^"  although 
evidence  of  usage  to  make  written  applications  is  immaterial.^ 
Again,  acceptance  of  a  policy  does  not  constitute  conclusive  evidence 
of  a  contract  or  parol  agreement  to  effect  a  stipulated  insurance 
by  the  issue  of  a  valid  policy,  where  there  is  no  negligence  on  in- 
sured's part.^  It  may,  however,  be  a  question  for  the  jury  whether 
or  not  there  exists  a  parol  contract  to  insure.' 

^^  Western  Assur.  Co.  v.  MeAlpin,  contract,  but  to  snpport  the  position 

23  Ind,  App.  220,  77  Am.  St.  Rep.  tliat  no  contract  whatever  had  been 

423,  55  N.  E.  119.     See  also  Posey  made.    If  a  contract  had  in  point  of 

County    Fire    Assoc,   v.   Hogan,   37  fact  been  made  as  alleged,  it  was  of 

Ind.  App.  573,  77    N.    E.    670.     Ex-  no  consequence  whether  it    was    ac- 

amine  §§  72  et  seq.  herein,  cording    to    general    usage    or    not. 

20  Newark  Machine  Co.  v.  Kenton  ...     It  is  no  legitimate  conflrma- 

Ins.  Co.  50  Ohio  St.  549,  22  L.R.A.  tion  of  the  defendant's  position  un- 

768,    35    N,    E.    1060.     See  §  3760  der  such  circumstances  to  show  that 

herein.  otlier    insurance    companies    usually 

^  Emery  v.  Boston  Marine  Ins.  Co.  require  applications  for  marine  in- 
138  Mass.  398.  In  this  case*  the  suiance  to  be  in  writing  as  a  eon- 
court,  per  Allen,  J.,  said :  '*But  it  dition  of  making  the  contract.  .  ,  . 
is  also  well  settled,  and  it  is  now  too  An  oral  contract  was  lawful,  and  the 
late  to  question  the  doctrine,  that  an  evidence  was  properly  confined  to  the 
oral  contract  of  insurance  may  be  question  whether  this  particular  oral 
valid:  Sanborn  v.  Fireman's  Ins.  contract  had  been  made,  as  testified 
Co,  16  Gray  (82  Mass.)  448.  As  was  by  the  plaintiff,  without  going  into 
said  in  that  case:  'It  is  not  easy  to  1he  general  inquiry  whether  other 
see  the  force  of  the  reasoning  which  i)arties  were  accustomed  to  make 
would  infer  that  because  parties  such  contracts.' "  Compare  JEtna 
usually  make  their  contract  in  one  Ins.  Co.  v.  Northwestern  Iron  Co.  21 
way  it  would    be    void    when    they  Wis.  464,  471. 

choose  to  make  it  in  another,  equally  ^  International  FeiTV  Co.  v.  Ameri- 

good    at    common  law  and  not  pro-  can  Fidelity  Co.  207  N.  Y.  .350,  101 

liibited    bv    anv    statute.'      See    also  N.  E.  160,  revg.  129    N.    Y.    Supp. 

Relief  Fire  Ins.  Co.  v.  Shaw,  94  U.  1120,  145  App.  Div.  906. 

S.  574,  24  L.  ed.  291.     A  usage  that  ^  IJVnwis.^lwi^nr-Awe  Co.  of  North 

an  oral  contract  if  made  is  considered  America  v.  Bird,  175  111.  42,  51  N.  E. 

invalid   would   be  plainly  repugnant  f)86,  affg.  74  111.  App.  396. 

to  law  and  void.    In  the  present  case  Kentucl-ji. — Natural  Fire  Ins.  Co. 

the    evidence    of   nsage    was    offered,  v.  Rowe,  20  Ky.  L.  Rep.  1473,  •:I9  S. 

not  in  aid  of  the  construction    of    a  W.  422. 

190 


PAROL  CONTRACTS  §  39 

§  39.  Parol  contracts:  statute  of  frauds. — In  the  United  States 
Supreme  Court  it  is  held  that  the  statute  of  frauds  does  not  require 
that  a  promise  to  make  a  policy  of  insurance  should  be  in  writing,'* 
nor  does  the  statute  make  a  writing  necessary  in  Alabama,*  nor  in 
Kentucky.^  So  an  oral  contract  of  insurance  for  one  year,  includ- 
ing its  date,  is  a  contract  to  be  performed  within  a  year,  and  is 
not  witliin  the  statute  of  frauds,''  and  an  agreement  to  insure  for 
even  three  or  more  years,  where  the  contingency  may  happen  with- 
in a  year,  is  not  within  the  statute.® 

A  verbal  agreement  of  renewal  which  is  not  by  its  terms  to 
endure  for  a  longer  period  than  one  year,  though  it  may  continue 
for  an  indefinite  period,  is  not  within  the  statute.^  But  a  contract 
to  issue  a  policy  and  to  renew  the  same  yearly  thereafter  until  the 
insured  shall  otherwise  direct,  inasmuch  as  it  is  not  to  be  performed 
within  one  year,  is  within  the  statute,  and  is  not  taken  out  of  it  by 
part  ^performance  by  issuing  a  policy  each  of  two  preceding  years." 


10 


Minnesota. — Ames-Brooks    Co.    v.  ^  ^nieriean     Central    Ins.    Co.    v. 

Min&  Ins.  Co.  83  Minn.  346,  86  N.  Leake,  31  Ky.  L.  Rep.  lOKi,  37  Ins. 

\\.  344,  30  Ins.  L.  J.  802.  L.  J.  147,  104  S.  W.    373;    Howarc 

Pennsijlvania.—Gixoiiiih&um     Kera-  Ins.   Co.  v.   Owens,   94  Ky.  197,  14 

raie  Art'  Syndicate    v.    German    Ins.  Ky.  L.  Rep.  881,  21   S.    W.    1037; 

Co.  213  Pa.  500,  62    Atl.    1107.    33  Phopuix  Ins.  Co.  v.  Spiers,    87    Ky. 

Ins.  L.  J.  214.  286,  10  Ky.  L.  Rep.  254,  8  S.  W.  453. 

South      Dakota.     —     Minneapolis  See  also  Wicbeler  \.  Milwaukee,  Me- 

Threshino-^Macliine    Co.    v.    Darnall,  chauies    ]\Iutual    Ins.    Co.    30    Minn. 

13  S.  Dak.  279,  83  N.  W.  266,  29  Ins.  464,  16  N.  W.  363. 

L.  J.  687.  Eeinsurance :     statute     of    frauds, 

*  Commercial   Mutual   Marine  Ins.  see  §  116  herein. 

Co.    V.    Union    Mutual    Ins.    Co.    19  '  San  ford   v.   Orient  Ins.   Co.   1(4 

How.  (60  U.  S.)  318,  15  L.  ed.  636;  Ma^^s.  416,  75  Am.  St.  Rep.  358,  54 

Union  Mutual  Ins.  Co.  v.  Commercial  N.  E.  883;  Sanborn  v.  Fireman's  Ins. 

Mutual  Marine  Ins.  Co.  2  Curt.   (U.  Co.  16  Gray  (82  Mass.)  448,  77  Am. 

S.  C.  C.)  524.  Fed.  Cas.  14,372.  Dec.  419;  Howard  Ins.  Co.  v.  Owen, 

5  Alabama.— Commovcml  Fire  Ins.  94  Ky.  197,  14  Ky.  L.  Rep.  881,  21 

Co.  V.  Morris,  105  Ala.  498,  18  So.  S.    W.    1037.      See    also    Walker    v. 

34;  Gold  Life  Ins.  Co.  v.  Mayes,  61  ^Metropolitan   Ins.   Co.   56   Me.   371; 

Ala    163.     See  also:  Croft  v.   Hanover  Fire   Ins.   Co.  40 

Arkansas.—Kln'j;  v.  Cox,  63  Ark.  W.  Va.  508,  52  Am,  St.  Rep.  902,  21 

204,  37  S.  W.  877.  S.  E.  854. 

Kansas.— Fhwnix  Ins.  Co.   v.   Ire-  ®  Morse  v.  Minnesota  &  St.  Louis 

land,  9  Kan.  App.  (544,  58  Pac.  1024.  Ry.  Co.  30  Minn.  464,  l(i  X.  W.  358. 

MwsoMr/.— Melntvre     v.      Federal  See    Van    Loan  v.  Farmers'  Mutual 

Life  Ins.  Co.  142  ^lo.  App.  256,  126  Fire  Ins.  Assoc.  24  Hun  (N.  Y.)  132. 

S.  W.  227.  ^  Trustees  of  First  Baptist  Church 

New    Tor/c.— International    Fen-y  v.  Brooklyn  Fire  Ins.  Co.  19  N.  Y. 

Co.  V.  American  Fidelity  Co.  207  N.  305;  s.  e.  18  Barb.  (N.  Y.)  69.     See 

Y.  350,  101  N.  E.  100.  §  1468  herein. 

West  Virginia.— Crott  v.  Hanover  i°  Klein  v.  Li\eipool  &  London  & 

Firo  Inr,.  Co.  40  W.  Ya.  508,  52  Am.  Globe  Ins.  Co.  22  Ky.  L.  Rep.  301, 

St.  Rep.  902.  21  S.  E.  854.  57  S.  W.  250. 

191 


§  40  JOYCE  ON  INSUKAXCE 

A  contract  may  however,  be  divisible  and  partly  within  the  statute, 
and  void  as  to  that  part  and  valid  as  to  the  other  part,  as  in  case 
of  a  pai'ol  agreement  to  answer  for  loss  by  fire,  and  for  the  default 
and  miscarriage  of  another.^^ 

§  40.  How  far  parol  contract  merged  in  written  agreement. — A 
I>arol  contract  to  issue  a  policy  is  not  merged  in  a  written  policy 
which  does  not  cover  all  the  branches  and  elements  of  the  parol 
contract,  and  which  the  company  does  not  admit  as  binding  upon 
it. ^2  So  the  issuing  in  consequence  of  a  parol  agreement  of  a  policy 
containing  material  errors  resulting  from  a  mistake  of  the  agent  of 
the  insurers  in  communicating  the  facts  to  them,  and  the  agent's 
error  in  requiring  the  insured  to  pay  a  premium  which  is  less 
than  the  rate  agreed  upon  and  less  than  the  agent  was  authorized  to 
insure  at,  does  not  impair  the  liability  of  the  insurers  upon  the 
original  agreement."  and  where  the  insurers  on  receiving  a  pre- 
mium agreed  to  deliver  a  policy  covering  specific  property,  and 
afterward  sent  a  policy  varying  from  the  terms  of  the  contract  and 
a  loss  occurred,  it  was  decided  that  a  recovery  might  be  had  in 
accordance  with  the  terms  of  the  insurance  contracted  for.  it  ap- 
pearing that  the  policy  was  received  by  a  clerk  and  its  provisions 
not  known  to  the  insured  till  after  the  fire.^*  So  where  the  terms 
of  an  order  to  insure  have  been  materially  departed  from  in  the 
policy  by  fraud  or  mistake,  the  order  will  be  considered  as  con- 
taining the  contract  between  the  pai-ties.  But  the  order  can  be 
resorted  to  only  in  so  far  as  it  varies  from  the  policy ;  in  all  otlier 
respects  the  policy  should  be  considered  as  the  contract.!^  And  if 
an  insurance  company  receives  the  premium  paid  to  its  agent  who 
made  the  contract  and  forwcirded  the  policy,  it  is  bound  by  the  con- 
tract made  by  him,  although  by  mistake  it  is  not  correctly  stated 
in  the  policy.^^ 

It  may  be  stated  that,  as  a  general  rule,  the  written  contract  will 
be  presumed  to  embody  therein  all  previous  verbal  agreements  of 
the  parties  and  will  in  the  absence  of  fraud  or  mistake  be  conclu- 
sive upon  them."    And  in  ^'ew  York  an  insurance  pohcy  presump- 

"]^robile  Marine  Dock  &   Mutual  ^^  ^i,j.aham  v.  Nortli  German  Tns. 

Ins.  Co.  V.  Mc^Iillan,  31  Ala.  711.  Co.  (U.  S.  C.  C.)  40  Fed.  717. 

i2Xebra.<ka   &    Iowa    Ins.    Co.    v.  ^^  .AIeLaug:!ilin    v.    Equitable    Life 

Seiveis,  27  Xeb.  541,  43  X.  W.  351.  Assur.   Co.   38   Xeb.   725,  57  X.  W. 

i^Buulen    v.    Orient    Mutual    Ins.  557.  Examine     §§     185,     3806-3800 

Co.  8  Bosw.  (X.  Y.)  448.  lierein. 

1^  Franklin  Ins.  Co.  v.  Hewitt,  3  B.  See  also  the  following  cases : 

I^Ion.  (Ky.)  231.  United    States. — Northern     Assur- 
es Delaware  Ins.   Co.  V.  Hosran,  2  ance   Co.   v.   Grand    Yiew    Buihlinir 

Wash.    (U.   S.   C.   C.)    4,  Fed.   Cas.  Assoc.  183  U.  S.  308.  46  L.  c.l.  213, 

3765  22  Sup.  Ctj.  133,  31  Ins.  L.  J.  97  (''It 

192 


PAROL  CONTRACTS 


§  40 


tively  merges  all  previous  stipulations  and  expro5A«es  the  final  un- 
derslanding  of  the  parties.    If,  however,  by  inadvertence  or  mutual 


is  a  fundamental  rule,  in  courts  both  concealed    its    terms,    and    prevented 

of   law   and   equity,   that   parol   con-  com])lainant    from    leading-  it.      See 

temporaneous  evidence    is    inadmissi-  McM aster  v.  New  York  Lite  Lis.  Co. 

ble  to  contradict  or  vary  the  terms  [U.  S.  C.  C]  90  Fed.  40,  28  ln.s.  L. 

of  a  valid  written  instrument.     ...  J.  960.     Botli  the  above  cases  are  re- 

This  rule  has   always   been   followed  versed  in  Mc.Master  v.  New  York  Life 

and  applied  by  the  English  courts  in  Ins.  Co.  183  U.  S.  25,  46  L.  ed.  64,  22 

the  case  of  policies  ot  insurance  in  Sup.  Ct.  10,  'M  Tns.  L.  J.  .15.5.     The 


writing'.  .  .  .  Coming  to  the  de- 
cisions in  our  state  courts,  we  find 
that,  while  there  is  some  contrariety 
ot    decisions,    the    decided    weiglit    of 


court  per  Sanborn,  C.  J.,  in  the  C.  C. 
A.  case  quotes  from  Union  Mutual 
Life  Lis.  Co.  v.  ]\Iowrv,  96  U.  S.  544, 
54/,  24  L.  ed.  674,  as  follows:     "All 


authority  is  to  the  effect  that  a  policy  previous  verbal  arrangements  were 
of  insurance  in  writing  cannot  be  merged  in  the  written  agreement.  The 
chang-ed  or  altered  by  parol  evidence    understanding  of  tiie  parties  as  to  the 

amount  of  the  insurance,  the  condi- 


of  what  was  said  prior  or  at  the 
time  the  insurance  was  ett'ccted. 
.  .  .  As  to  the  fundamental  rule 
that  Avritten  contracts  cannot  be 
modified  or  changed  by  parol  evi- 
dence, unless  in  cases  where  the  eon- 


tions  upon  wliich  it  sliould  be  paya- 
l)le,  and  the  premiums  to  be  paid 
were  there  expressed  for  the  very 
purpose  of  avoiding  any  controversy 
or  question  concerning'  them. 


tracts  are  vitiated  by  fraud  or  mutual  For    compliance    with    arrangements 

mistake,  we  deem  it  sufficient  to  say  respecting  future   transactions,    par- 

that     it     has     been    treated    by    this  ties  must  provide  by  stipulations  in 

court    as    invarial)le    and     salutary,  their    agreements    when    reduced    to 

.     .     .     Policies  of  fire  insurance  in  writing.     The  doctrine,  carried  to  the 

writing    have    always    been    held    by  extent  for  which  tiie  assured  contends 

this  court  to  be  within  the  protection  in  this  case,  would  subvert  the  salu- 

of   this   rule."     Id.    ])er   Mr.    Justice  tary    rule    tliat    the   wi'itten    contract 

Shiras)  ;   Kentucky  Vermillion    Min-  must  prevail  over  previous  verbal  ar- 

ing  &  Concentrating  Co.  v.  Norwich  rangements  and  open  tlie  door  to  all 

Union  Fire  Ins.  Soc.  14GFed.  695,  77  the  evils  wliich  that  rule  was  intend- 

C.    C.   A.   121;   Leder   v.   New   York  ed  to  prevent"). 

Life  In.s.  Co.  143  Fed.  814,  74  C.  C.  Georgia.—  Vn\\\ev  v.  Preferred  Ac- 

A.  488    (parol  evidence  of  prior  ne-  cident  Ins.  Co.  100  Ga.  .■i30,  28  S.  E. 

398,  27  Tns.  L.  J.  368   Call  tlie  oral 


gotiations  inadmissible  to  contradict 
certain  and  unambiguous  terms  of 
written  contract,  even  to  raise  an  es- 
toppel in  pais)  ;  New  York  Life  Ins. 
Co.  V.  McM aster.  87  Fed.  63,  57  U. 
8.  App.  6.38,  30  C.  C.  A.  532,  28  Ins, 
L.  J.  698  (holding  that  no  represen- 
tation,  promise,,  or  agreement  made, 


conversations  and  negotiations  be- 
tween the  i)laintitf  and  the  defend- 
ant's agent  in  r(>firence  to  accident 
insurance  which  tlie  plaintiff  desired 
to  procure  in  the  defendant  company 
resulted  in  the  ]daintitf  tilling  out 
and  signing  an  application  for  a  pol- 
or  opinion  expressed,  i'.i  the  previous  icy  for  such  insurance  in  the  defend- 
parol  negotiations  as  to  the  terms  or  ant  company,  and  the  agents  of  the 
legal  effect  of  the  resulting  written  defeinhint  gi\-iiig  the  plaint ilT  a  re- 
agreement,  can  be  permitted  to  pre-  ceipt  for  a  certain  sum  on  the  first 
vail  eitlier  at  law  or  in  equity,  over  quarterly  i)remiiim  of  the  policy  to 
the  plain  provision*;  and  just  inter-  be  issued  by  the  defendant  and  weiv 
pretation  of  the  contract,  in  the  al)-  therefore  merged  in  the  said  written 
sence  of  some  artifice  or  fraud  which  instruments  bv  virtue  of  the  plain 
Joyce  Ins.  Vol.  L — 13.  193 


§  40  JOYCE  ON  INSURANCE 

inistake,  or  fraud  of  one  party  and  mistake  of  the  other  an  accepted 
policy  fails  to  conform  to  a  prior  oral  agreement  to  insure  a  court 
will  correct  it.^^  Again,  it  is  decided  in  an  Oklahoma  case,  where 
the  court  reviews  at  length  numerous  authorities,  that:  (1)  It  is 
a  fundamental  rule  of  law  that  parol  contemporaneous  evidence  is 
inadmissible  to  contradict  or  vary  the  terms  of  a  valid  written  in- 
strument. (2)  When  parties  have  deliberately  entered  into  a  writ- 
ten contract  in  such  terms  as  import  a  legal  obligation,  without  any 
uncertainty  as  to  the  object  or  intent  of  such  transaction,  it  is  con- 
clusively presumed  that  the  whole  transaction  of  the  parties  and  the 
extent  and  manner  of  their  undertaking  was  reduced  to  writing; 
and  all  oral  testimony  of  previous  negotiations  or  statements  be- 
tween the  parties,  or  contemporaneous  therewith,  are  merged  in 
the  written  instrument,  in  the  absence  of  fraud  or  mutual  mistake 
of  the  parties.  (3)  A  contract  in  writing,  if  its  terms  are  free  from 
doubt  or  ambiguity,  must  be  i^ermitted  to  speak  for  itself,  and 

and  familiar  rule  that  all  oral  nego-  If  the  action  is  brought  on  the  oral 

tiations,    conversations,    and    agree-  contract    underlying    it,    a    complete 

raents  between  parties  to  a  written  answer  is  that  the  negotiations  were 

contract  which  either  precedes  or  ac-  reduced  to  writing,  and  executed  and 

companies  the  execution  of  the  instru-  accepted    by   the   parties."      Id.    per 

ment  are  to  be  regarded  as  merged  Hooker,  J.). 

in    or    extinguished    by    it,    and    the  Washington. — Ferguson     v.     Lum- 

writing  is  to  be  treated   as   the  ex-  bermen's  Ins.  Co.  45  Wash.  209,  88 

elusive  agi'eement  by  which  the  eon-  Pac.  128,  36  Ins.  L.  J.  318  (oral  evi- 

tracting  parties  are  bound."     Id.  per  dence    inadmissible   which    tends    di- 

Fish,  J.).  7-ectly  to  contradict  terms  of  policy 

Kentucky.  —  Provident  Savings  and  application  by  showing  that  more 
Life  Assurance  Soc.  of  N.  Y.  v.  With-  property  was  covered  than  the  writ- 
ers, 132  Ky.  541,  21  L.R.A.(N.S.)  ten  contract  specified). 
30  note,  116  S.  W.  350  (renewable  West  Virginia. — Providence-Wash- 
term  policy;  special  preliminary  con-  ington  Ins.  Co.  v.  Board  of  Educa- 
tract  became  merged  in  policy  when  tion,  49  W.  Va.  360,  38  S.  E.  679,  30 
issued,  and  .said  policy  constituted  Ins.  L.  J.  577  (where  parties  have 
the  sole  measure  of  the  company's  made  a  written  agreement,  the  writ- 
liability),  ing  is  regarded  as  the  exclusive  evi- 

Massachusetts. — Bowditch   v.   Nor-  dence   of  the   contract,   and   all   oral 

wieh  Union  Fire  Ins.  Soc.  193  Mass.  negotiations  preceding  or  accompanv- 

565,  79  N.  E.  788,  36  Ins.  L.  .J.  276.  ing    the    execution    of    the    written 

Michigan. — Kleis  v.   Niagara  Fire  agreement  are  merged  in  it  and  are 

Ins.  Co.  117  Mich.  469,  5  IDet.  L.  N.  not  admissible  in  evidence). 

.337,  76  N.   W.   155    ("this   was   the  Wisconsin. — Rief     v.     Continental 

completion  of  a  contract  evidence  of  Casualty  Co.  131  Wis.  368,  111  N.  W. 

Avhich  was  contained  in  the  two  writ-  502  (where  no  fraud  or  mistake  evi- 

ings,  viz.,  the  application  and  policy,  dence  to  contradict  or  vary  policy  in- 

which    merged    all    negotiations    and  admissible). 

agreements  in  the  writing;  and  under  ^^  International  Ferry  Co.  v.  Amer- 

innumerable  authorities  it  is  not  sub-  ican  Fidelity  Co.  207  N.  Y.  350,  101 

ject  to  contradiction  or  variation  bj'  N.  E.  160  (marine  vessel  liability  in- 

parol  in  an  action  brought  upon  it.  surance),  see  §  3Sa  herein. 

194 


PAROL  CONTRACTS  §  41 

cannot  by  the  courts,  at  the  instance  of  one  of  the  parties  be 
ahered  or  contradicted  by  parol  evidence,  unless  in  case  of  fraud 
or  mutual  mistake  of  facts,  and  this  principle  is  applicable  to  con- 
tracts of  insurance. ^^  The  rule,  however,  that  parol  agreements  are 
merged  in  a  written  contract  has  no  application  where,  in  an  action 
to  recover  premiums  with  interest,  paid  on  a  life  insurance  policy, 
it  is  alleged  that  the  written  contract  was  by  fraud  or  mistake 
executed  differently  from  the  terms  of  the  agreement.^" 

§  41.  Parol  contract:  renewal. — The  term  "renewal"  means  that 
the  old  policy  shall  be  repeated  in  substance.  It  is  the  same  in 
this  connection  as  ''extended."  ^  And  where  there  is  an  agreement 
for  the  renewal  of  a  policy,  the  insured  is  justified  in  assuming 
that  the  premium,  and  all  the  terms  and  conditions  of  the  renewal 
will  be  the  same  as  those  of  the  original  unless  he  has  notice  of  some 
proposed  change.  In  other  words  unless  otherwise  expressed,  a 
renewal  of  an  existing  insurance  policy  is  on  the  same  terms  and 
conditions  as  were  originally  contained  in  tlie  pre-existing  policy. 
This  is  especially  so  where  the  terms  of  the  original  policy  expressly 
so  provide  and  the  verbal  agreement  to  insure  is  made  shortly  before 
the  expiration  of  said  policy  and  a  part  of  the  renewal  premium  is 
paid  with  a  promise  to  pay  the  remainder  in  a  few  days,  said  pay- 
ment and  promise  being  accepted  by  the  agent  of  insurer.^  A 
parol  contract  to  renew  an  existing  policy  or  contract  of  insurance 
is  valid.  It  may  be  based  upon  the  payment  of  the  consideration 
or  |)remium  at  the  time  the  contract  is  made,  or  upon  an  express 
agreement  postponing  said  payment,  or  upon  a  course  of  dealing 
l)etwcen  the  parties  sliowing  that  they  contemplated  that  credit 
should  be  given  for  the  premium,  and  that  it  need  not  be  paid 

^^  Liverpool    &"^  London    &    Globe  and  altliouuli  the  insurer  declined  to 

Ins.  Co.  V.  T.  ^I.  Richardson  Lumber  renew  hut  tailed  to  notify  insured  or 

Co.  11  Okla.  585,  69  Par-.  938,  31  Ins.  return  the  premium  paid.     The  loss 

L.  J.  997.     See  also  Gish  v.  Ins.  Co.  occurred  after  the  expiration  of  the 

of   Xortli   America,  16   Okla.   59,  13  time  specified  in  the  receipt. 

L.R.A.(N.S.)    826,   87   Pac.   869,   36  As  to  renewal  poUc!/ bei)i(j  on  same 

In.s.  L.  J.  227.  terms  and  conditions  as  original,  see 

2*' Gwahnoy    v.    Provident    Savinu'  Si?    1460,    1463    herein.      Examine    § 

Life  Assurance  Soe.  132  N.  Car.  925,  37  liereiu. 

44  S.  E.  659,  33  Ins;  L.  J.  72.     See  Reinsurance  sometimes  means  "re- 
Mutual  Life  Ins.   Co.  v.  Ilarsus,  —  newal."     See  §  112  lieivin. 
Tex.  Civ.  App.  — ,  99  S.  W.  580.  ^  ]\iallctte  v.  Briti.^h  American  As- 

1  Phoenix  Ins.  Co.  v.  Hale,  67  Ark.  surance  Co.  91  Md.  471,  46  Atl.  1005, 

433,  55  S.  W.  486,  29  Ins.  L.  J.  550,  29  Ins.  L.  J.  966.     Compare  O'KeiUy 

554,    per   Iluuhes,    J.:    "P>indin<i-   re-  v.  Corporation  of  London  Assurance 

ceipt"   construed  in   this   connection,  Co.  101  N.  Y.  575,  5  N.  E,  568,  dis- 

and    contract    to    renew    lield    \alid  tinguislied  in   McCabe  v.  Aetna  Ins. 

even   though   said  receipt  was  to  be  Co.  9  N.  Dak.  19,  47  L.R.A.  641,  81 

invalid  on  the  issue  of  the  renewal,  N.  W.  426,  29  Ins.  L.  J.  138. 

195 


41 


JOYCE  OX  I^sSURANCE 


wlien  the  renewal  policy  is  issued  but  upon  demand  by  the  agent.^ 
And  where  insurance  agents  authorized  to  countersign,  issue  and 
renew  policies  of  insurance  agree  orally  to  continue  an  existing 
contract  of  insurance  and  issue  a  renewal  or  policy  therefor,  the 
insurer  is  obligated,  although  credit  is  given  for  the  premium.* 
And  where  an  insurance  agent  had  charge  of  all  the  insured's 
insurance  business  for  several  years,  under  directions  not  to  let 
a  policy  expire  unless  told  to  do  so,  and  under  an  arrangement 
whereby  the  insured  jiaid  the  premiums  only  on  presentation 
of  bills  therefor,  and  the  agent  had  a  pigeonhole  in  his  safe 
devoted  to  the  exclusive  custody  of  insured's  papers,  it  was  decided 
that  there  was  a  valid  renewal  of  an  accident  policy  by  the  agent 
attaching  a  renewal  receipt  to  the  original  policy,  charging  the 
renewal  premium  to  insured  and  crediting  the  insurance  company 
with  the  amf)unt.*     And  a  company  through  its  authorized  agent, 


under  § 


'  Baldwin  v.  Phoenix  Ins.  "Co.  107 
Kv.  3o(i,  21  Kv.  L.  Rep.  1090,  54  S. 
W.  13,  29  Ins.'L.  J.  78.  In  this  case 
insurer's  agent  liad  been  issuing  poli- 
cies for  years  to  insured  without  pre- 
niiunis  being  paid  when  policies  were 
issued  or  renewals  made,  but  said 
premiums  had  been  charged  to  in- 
sured, and  when  the  account  Avas 
presented  it  was  paid.  See  quotation 
from  this  case  in  note  tp  S  31 
herein.  Compare  Klein  v.  Liverpool 
&  London  &  Globe  Ins.  Co.  22  Kv. 
L.  Rep.  301,  57  S.  W.  250,  noted 
39  herein. 

That  parol  contract  to  renew  valid, 
see: 

Arkansas. — Kine  v.  Cox,  Go  Ark. 
204,  37  S.  W.  877. 
•  California. — American  Can  Co.  v. 
Aaricultnral  Ins.  Co.  12  Cal.  App. 
133,  106  Pac.  720,  39  Ins.  L.  J.  518 
(but  the  evidence  here  did  not  estab- 
lisli  a  parol  contract). 

Illinois. — Insurance  Co.  of  North 
America  v.  Bird,  175  Til.  42,  51  X.  E. 
686. 

Indiana, — Western  Assurance  Co. 
V.  IMcAlpin,  23  Ind.  App.  220,  55  X. 
E.  119. 

Kenfncky. — Hartford  Fire  Ins.  Co. 
V.  Trimble',  117  Kv.  583,  25  Kv.  L. 
Rep.  1497,  78  S.  W.  462,  33  Ins.  L. 
J.  348  (but  evidence  showed  no  en- 
forcible  contract) 


Missouri.  —  Shepard  v.  Boone 
Countv  Mutual  Fire  Ins,  Co.  138 
Mo.  App.  20,  119  S.  W.  984,  38  Ins. 
L.  J.  904  (oral  contract  for  renewal 
valid,  but  facts  here  showed  no  oral 
contract  was  made). 

North  Dakota. — Boos  v.  Aetna  Ins. 
Co.  22  N.  Dak.  11,  332  N.  W.  222, 
40  Ins.  L.  J.  1787  (foUoicinfj  Mc- 
Cabe  V.  Aetna  Ins.  Co.  9  N.  Dak.  19, 
47  L.R.A.  641,  81  X.  W.  426,  29  Ins. 
L.  J.  138). 

*  Squier  v.  Hanover  Fire  Ins.  Co. 
162  N.  Y.  552,  76  Am.  St.  Rep.  349, 
3{  N.  E.  93.  Compare  Brown  v. 
Dutchess  Countv  Mutual  Ins.  Co.  71 
N.  Y.  Supp.  670,  64  App.  Div.  9. 

As  to  agent's  power  to  renew,  see 
§  538  herein. 

^  Washburn  v.  United  States  Cas- 
ualtv  Co.  106  :\Ie.  411,  76  Atl.  902, 
108  "Me.  429,  81  Atl.  575. 

As  to  prepai/ment  of  premium  as 
prerequisite:  credit  iov  premium, 
and  custom  as  to  same,  see  §§  72, 
78,  84,  1122,  1141  herein.     See  also: 

United  States. — Ins.  Co.  (Franklin 
Fire  Ins.  Co.)  v.  Colt.  20  Wall.  (87 
V.  S.)  560,  22  L.  0.1.  423:  P.rooklvn 
Life  Ins.  Co.  v.  :\IilkT  (Miller  v.  Life 
Ins.  Co.)  12  Wall.  (79  U.  S.)  285, 
20  L.  ed.  398. 

Arkansas. — King  v.  Cox,  63  Ark. 
204,  37  S.  W.  877'. 

Indiana. — Western    Assurance   Co. 


196 


PAROL  CONTRACTS 


§  41 


may  contract  by  parol  for  the  renewal  of  a  policy,  although  it  be 
stipulated  on  the  face  of  the  existing  policy  that  it  shall  not  be 
renewed  in  that  manner.^  Again,  although  the  written  appoint- 
ment of  an  agent  of  a  fire  insurance  company  does  not  authorize 
him  to  make  oral  contracts,  still  he  may  Ijind  the  insurer  by  a 
parol  contract  to  insure  where  such  contract  is  a  renewal  of  an 
existing  policy  about  to  expire,  if  he  has  authority  to  negotiate, 
lill  up  and  issue  blank  jjolicies  with  which  he  is  entrusted  and 
which  are  signed  by  the  president  and  secretary  of  the  company. 
So  where  a  contract  of  insurance  is  about  to  expire  and  insured 
apjjUes  for  ten  days  further  insurance  and  agrees  therefor  with 
the  agent,  this  may  constitute  a  mere  renewal  of  the  pre-existing 
insurance  contract,  and  as  written  the  agent's  authority,  when 
his  power  to  renew  a  policy  by  oral  agreement  is  not  limited.'^ 
And  a  parol  agreement  by  an  agent  of  a  foreign  insurance  company 
for  renewal  of  a  policy  which  had  l^een  originally  issued  by  him  will 
be  deemed  to  have  been  made  by  him  in  his  representative  capacity, 


V.  MeAlpin,  23  Ind.  App.  220,  55  N. 
E.  119. 

Mon/Jand. — Union  Fire  Ins.  Co.  v. 
Baltimore  Asbestos  Co.  (Md.)  89 
Atl.  408;  Mallette  v.  British  Ameri- 
ean  Assurance  Co.  91  Md.  471,  46 
Atl.  lOn.3,  29  Ins.  L.  J.  96(). 

Michigan. — Dailey  v.  Preferred 
Masonif  IMntual  Accident  Assoc.  102 
:\lich.  289,  26  L.R.A.  171,  57  N.  W. 
184. 

North  Dalota. — McCabe  v.  Aetna 
Ins.  Co.  9  N.  Dak.  19,  47  L.R.A.  641, 
81  N.  W.  426,  29  Ins.  L.  J.  138  ("it 
is  also  lU'ged  tbat  pre])aynient  of  the 
premium  for  tiic  renewal  term  was 
neee.ssary  to  effect  a  valid  renewal 
but  we  are  of  opinion  tliat  lliis  was 
not  e.s.sential.  liy  the  terms  of  the 
policy  prejniyment  of  the  ])remium 
is  not  required.  By  the  lanijiiae'e  of 
the  policy,  it  may  be  renewed  'in 
consideration  of  premium  for  I  lie' re- 
newal term.'  This  lan<z.ua<ie  cannot 
be  con.strued  .so  as  to  retjuii'c  prepay- 
ment of  such  ])remium.  Moreover, 
this  laniiuape  in  the  ])olicv  has  ref- 
erence only  to  Ihe  completed  contract 
of  renewal,  and  not  to  a  preliminary 


contract 
J.). 

Ohio. — Newark 


to    renew."      Td.    per    Fisk, 
Machine     Co.     v. 


Kenton  Ins.  Co.  50  Ohio  St.  549,  22 
L.R.A.  768,  35  N.  E.  1060. 

Fennsiilrania. — Benner  v.  Fire  As- 
sociation of  Pliila.  229  Pa.  75,  140 
Am.  St.  Rep.  706,  40  Ins.  L.  J.  84, 
78  Atl.  44.     • 

Te.ras. — Supreme  Lodge  Fnite<l 
Benevolent  Assoc,  v.  Lawson,  —  Tex. 
Civ.  App.  — ,  133  S.  W.  907. 

Wijoming. — Summers  v.  Mutual 
Life  "ins.  Co.  12  Wvo.  369,  109  Am. 
St.  Rep.  952,  66  L.R.A.  812,  75  Pac 
937. 

Prior  parol  agi-eement  a.s  to  pay- 
ment of  premiums — waiver  and  es- 
tojipel,  .see  §  1354  liereiu. 

^  Cohen  v.  Continental  Fire  Ins. 
Co.  67  Tex.  325,  3  S.  W.  296,  60  Am. 
Rep.  24.  See  Gidding-s  v.  Pluenix 
Ins.  Co.  90  Mo.  272,  277,  2  S.  W. 
139;  Roval  Ins.  Co.  v.  Beattv,  119 
Pa.  St.  (),  12  Atl.  607. 

Examine  as  to  specialties,  Fire- 
men's Ins.  Co.  v.  Floss,  67  Md.  403, 
10  All.  139. 

■^  King  v.  Phoenix  Ins.  Co.  195  Mo. 
290.  113  Am.  St.  Rei>.  678,  6  Amer. 
&  Kng.  Annot.  Cas.  618,  92  S.  W. 
892.  Compare  Brown  v.  Dutchess 
("•ounty  IMulnal  Ins.  Co.  71  N.  Y. 
Supp.  670,  64  App.  Div.  9. 


197 


§  41  JOYCE  ON  INSURANCE 

when  he  is  aulhorized  to  i;;sue  renewals.'  But  it  is  hehl  in  Penn- 
sylvania, that  an  ai^ent  appointed  to  the  territory  in  question 
with  full  power  to  receive  proposals  for  insurance;  with  authority 

to  issue  and  countersign  policies  and  renewal  receipts  "furnished 

by  said  associations;"  to  assent  to  assignments  and  transfers,  to 
collect  premiums,  and  to  transact  "such  other  business  as  may  be 
entrusted  to  his  care''  is  not  thereby  empowered  to  obligate  and 

SMfCabe  v.  Aetna  Ins.   Co.  9  N.  Dill.  (C.  C.)  282,  Fed.  Cas.  No.  1.1,- 

Dak.   19,  47  L.R.A.  641,   81   N.  W.  793;  Baubile  v.  .ICtua  Ins.  Co.  'l  Dill. 

426,  29  Ins.  L.  J.  138   (iu  tliis  ease  (C.   C.)    356,   Fed.   Cas.   No.   1,111; 

there  was  nothing  in  the  commission  Scrauton  Steol  Co.  v.  Ward's  Detroit 

or  in  the  policy  authorizing  tlie  agent  &    Lake    Superior    Line    (C.    C.)    4t) 

to  make  a  preliminary  oral  agreement  Fed.  866. 

to    issue    or    renew    policies,    neither  Arkansas. — King  v.   Cox,  63  Ark. 

Avas    there    anything    restricting    the  204,  37  S.  W.  877. 

agent's  authority  in  this  regard,  "and  California. — Stewart     v.     Helvetia 

if  such  authority  was  conferred  upon  Swiss  I^ire  Ins.  Co.  102  Cal.  218,  36 

him,  it  must  have  been  .so  conferred  Pac.  410. 

1)V  opei'at  ion  of  law,  from  the  express  loica. — City      of      Davenport      v. 

authority    given    him."      The    agent  Peoria  ^larine  &  Fire  Ins.    Co.    17 

liad  express  authority  to  receive  pro-  Iowa,  276. 

posals  for  insurance;   to  act  as  sur-  Kentucki/. — Security  Fire  Ins.  Co. 

veyor,  and  to  appoint  surveyors,  for  v.  Kentucky  iVfarine  &  Vive  Ins.  Co. 

buildings  to  be  insured,  to  make  in-  7  Bush,  81,  3  Am.  Rep.  30L 

surance  thereon  by  policies  signed  by  Mari/land. — Phoenix  Insurance  Co. 

the  president  and  attested  by  the  sec-  v.  Rylaiid,  69  Md.  437,  1  L.R.A.  .')48, 

retary,   countersigned  by  said   agent  16  Atl.  109. 

as  agent,  and  by  the  terms  of  the  ])ol-  Massachusetts. — Emery    v.    Boston 

icy  said  agent  might  renew  the  same  Marine  Ins.  Co.  138  Mass.  398,  412; 

in  the  manner  therein  ])rovided.     It  Sanborn    v.    Firemen's    Ins.    Co.    16 

was  declared  that  such  an  agent  was  Gray    (82  ]\rass.)    448,  77  Am.   Dec. 

a  general  agent.    The  court,  per  Fisk,  419. 

J.,  cites  and  considers:    Oti  the  point  Missmiri. — Baile  v.  St.  Joseph  Fire 

of  general  af/enci/.  King  v.  Cox,  63  &.  Marine  Ins.  Co.  73  Mo.  371. 

Ark.  204,  :57  S.  W.  877;  Post  v.  Aet-  Xew  YorA:.— Manchester  v.  Guard- 

na  Ins.   Co.  43   Btiri).    (N.  Y.)    361;  iau  Assurance  Co.  ir)l  N.  Y.  88,  56 

Lisihtliodv    v.    North    American    Ins.  Am.    St.    Rep.    600,    47)    N.    E.    381; 

Co.  23  Wend.   {N.  Y.)   22;   IMcEwen  IMore  v.  Xew  York  IJoweiw  Firejlns. 

v.  Montgomery  County  ]\lutual   Ins.  Co.    130   X.    Y.   .")37,   29    N.    K.    7.'')7; 

Co.  5  Hill   (N.'  Y^.)  10.').     And  on  the  O'Reilly    v.    Corporation    of    London 

point  thai  a  fjeneral  a</enl  with  sim-  Assiu'ance  Co.  101  N.  Y.  375,  5  N.  E. 

ilnr  autlioriti)  mail  enter  into  a  l>ind-  568;    Van   Loan   v.   Farmers    i\Iutual 

1)1(1    eiecutori/    contract    Itii    /xirol    to  Fire    Ins.  Assoc.   90  N.  Y.  280;   An- 

issne  or  renew  a  poJicii  in  llic  future  gell  v.  Hartford  Fire  Ins.  Co.  59  N. 

the  followino-  cases:  Y.   171,  17   Am.   Rep.   322;    Ellis  v. 

United      ,S7rt«e.s\  — Insuraiu-e      Co.  Albanv  Citv  Ins.  Co.  .50  N.  Y.  402, 

(Franklin  Fire  Ins.  Co.)   v.  Colt,  20  10  Am.  Rep.  495;  Truslees  of  First 

AYall.  (87  U.  S.)  560,  22  L.  ed.  423;  Baptist  Church  v.  Brooklyn  Fire  Ins. 

Connnercial   Mutual  IMarine  Ins.  Go.  Co.  19  N.  Y.  305;  Post  v.  Aetna  Ins. 

v.   Union    :\rutual    Ins.   Co.   19   IIow.  Co.   4.3   Barl).    351;    Shank   v.   Glens 

(60  U.  S.)   318,  321,  15  L.  ed.  636;  Falls   Ins.  Co.  40  N.  Y.  Supp.  14,  4 

Tavlor  v,  Germania  Insurance  Co.  2  Ai)p.  Div.  516. 

198 


PAROL   CONTRACTS  §  41a 

bind  the  company  by  an  oral  agreement  to  renew  in  the  future 
an  existing  contract.  There  was,  however,  a  law  under  which 
the  insurance  company  was  organized  which  required  every  con- 
tract or  policy  made  by  it  to  be  in  writing  or  print,  and  under 
such  charter  provision  it  was  determined  that  in  the  absence  of 
elements  of  estoppel  the  company  was  precluded  from  making  a 
binding  parol  contract  to  renew  a  policy  in  the  future.^  In  Ben- 
jamin V.  Saratoga  Mutual  Fire  Insurance  Company  ^°  a  policy 
of  insurance  was  issued  to  plaintiff  as  agent  of  the  owners.  Plain- 
tiff had  an  interest  in  the  property  as  mortgagee,  of  which  he 
informed  the  insurers.  .Vfterward  he  obtained  title  by  foreclosure, 
lie  notified  tlie  insurers  of  this  and  of  the  fact  that  he  had  agreed 
to  convey  to  a  third  person.  They  consented  that  the  policy  should 
remain  valid  till  the  vendee's  title  was  perfected  and  it  was  held 
that  this  agreement  was  equivalent  to  issuing  a  new  policy  to  the 
j)laintift'.  A  preliminary  contract  to  insui-e  or  renew  insurance 
is  not  within  the  provisions  of  the  policies  of  the  insurer  respecting 
renewals,  waiver,  etc.^^ 

§  41a.  Same  subject:  standard  policy:  agent's  authority. — 
Where  a  local  agent's  commission  empowered  him  to  issue  and 
countersign  policies  on  risks  accepted  by  him ;  to  renew  or  cancel 
such  policies;  and  to  assent  to  assignments  thereof  ])efore  loss; 
but  such  authority  was  subject  to  the  terms  and  conditions  of  the 
company's  printed  policy,  and  the  agent's  acts  were  not  to  be  in 
contravention  thereof,  or  to  operate  as  a  waiver  of  them,  the  agent's 
authority  depended  upon  two  writings,  the  agent's  commission 
and  the  printed  policy,  which  was  the  standard  policy,  and  it 
provided  for  renewal  under  the  original  stipulations  in  considera- 
tion of  a  premium  for  the  renewed  term;  it  also  stipulated  that 
whatever  was  done  by  the  agent  must  be  done  by  writing  indorsed 
upon  the  policy;  it  was  also  held,  in  the  absence  of  proof  that  the 
agent's  powers  had  been  broadened,  or  that  the  insurer  had  ratified 

Ohio.— Bayton   Ins.    Co.    v.   Keilv,  Fire  Ins.  Co.  73  Wis.  100,  40  N.  W. 

24  Ohio  St.  ;J45,  .3fi5.  GOl ;  Kino-  y.  Hekla  Fire  Ins.  Co.  58 

Oregon.— I'luvfhvk-k   v.    State   Ins.  Wis.  508,  17  N.  W.  297;  Tavlor  v. 

Co.  20  Oreg.  547,  2()  Pac.  840.  Phoenix  Ins.  Co.  47  Wis.  365. 

South   Carol itia. — Stickley   v.   Mo-  As  to  agent's  power  to  reneiv  poli- 

bile  Ins.  Co.  37  S.  Car.  56^  IG  S.  E.  cy,  see  §  538  herein. 

280.  ^  Benner    v.    Fire    Association    of 

Te.m.s.— Cohen  v.  Continental   Kiro  Phihu  220  Pa.  75,  140  Am.  St.  Rep. 

Ins.  Co.  67  Tex.  325,  GO   Am.  Rep.  70(1.  78  Atl.  44,  40  Tns.  L.  .1.  84. 

24,  3  S.  W.  29G.  lo  17  N.  Y.  415. 

r//a^.— Idaho    Forwardinj?    Co.    v.  ^^  McCahe  v.  .Etna  Ins.  Co.  9  N. 

Firemens  Fnnd  Ins.  Co.  8  Utah,  41,  Dak.   19,  47  L.R.A.   G41,   81   N.   W. 

17  L.R.A.  58G,  29  Pae.  826.  426,  29  Ins.  L.  J.  138. 

Wisconsin. — Campbell  v.  American 

199 


§  41b  .     JOYCE  UN  IXSrifAN'CE 

liis  acts,  or  lliat  lie  hud  ever  been  beUl  out  a.<  having  power  to 
l)iiid  the  company  by  an  oral  contract,  to  in?;ure  or  to  renew 
exi.sting  insurance,  tliat  said  agent  had  no  authority  to  make  an 
oral  contract  of  insurance  or  to  renew  an  existing  policy  except  in 
accordance  with  the  authority  vested  in  him  by  his  commission 
and  the  '"printed  ])olicy."  ^^ 

§  41b.  Parol  contract:  renewal:  contract  must  be  complete:  re- 
covery: evidence  to  establish. — The  contract  to  renew  nuist  be  com- 
plete as  in  cases  of  original  insurance. ^^  And  n\\  agreement  to 
continue  an  insurance  being  valid,  a  recovery  may  be  had  before 
the  issuance  of  the  policy  or  the  payment  of  the  premium.^*  But 
mere  loose  general  conversation  relating  to  the  renewal  of  a  policy, 
had  between  the  assured  and  an  agent  authorized  to  renew  policies, 
cannot  be  deemed  equivalent  to  a  renewal. ^^  So  evidence  of  a  con- 
versation between  the  owner  of  property  and  the  agent  of  defendant 
company  about  renewing  another  insurance,  during  which  tlie 
former  said  to  the  latter:  "Don't  forget  the  barn;  Renew  the  barn 
as  quick  as  that  comes  due,"  and  received  the  re})ly,  "I  will  attend 
to  it;  you  don't  need  to  worry," — is  too  vague  and  uncertain  to 
show  clearly  an  oral  contract  to  insure  in  the  future.  The  conver- 
sation consisted  of  a  few  words  on  the  street,  no  money  passed, 
no  memorandum  wa.'^  made,  and  there  was  no  definite  promise, 
and  thereafter  the  owner  instructed  the  agent  to  watch  the  insur- 
ance.^^ And  where  the  insured  testified  that  he  called  the  local 
agent  up  to  his  ottice  and  told  him  that  certain  policies  were  about 
to  expire  and  asked  him  to  renew  them  in  the  same  companies 
for  the  same  amounts  for  another  year,  and  there  was  some 
conversation  about  higher  rates  and  the  agent  agreed  to  renew 
the  policies  and  said  he  would  not  lose  any  time  on  the  same,  and 

12  Caldwell     V.     Virsinia     Fire    &  v.  Aetna  Ins.  Co.  22  N.  Dak.  11,  132 

.Mariuf   Ins.  Co.  124  Teiui.  593,  139  N.  W.  222,    40  Ins.  L.  J.  1787  (a  re- 

S.  W.  698,  40  Ins.  L.  J.  1899.  eovery  can  be  liad  for  breaeli  of  parol 

1^  American    Can    Co.    v.    Ao'ricnl-  contract  to  insnre  made  Avith  defend- 

lural  Ills.  Co.  12  Cal.  Ai>p.  133,  10(5  ant's    authorized   asient    prior   to   ex- 

Pac.  720,  39  Ins.  L.  J.  518;  Johnson  piration   of  the  policy). 

V.  Connecticut  Fire  Ins.  Co.  84  Ky.  ^^  O'Heilly  v.  Corporation  of  Lon- 

470,  2  S.  W.  151,  8  Kv.  L.  Kep.  460;  don  Assur.  Co.  101  N.  Y.  575,  5  N.  E. 

King  V.  Hekla  Fire  Ins.  Co.  58  Wis.  568.     See  also  Croghan  v.  New  Y^ork 

508,  17  N.  W.  297;  Dinnino- V.  Plice-  Underwriters'    Agency,    53    Ga.    109, 

nix   Ins.   Co.   68    111.   414,   418.      See  111:   American   Can   Co.  v.  Ao-ricul- 

iJ§  43-49,  181  hcicin.  tural  Ins.  Co.  12  Cal.  App.  133,  106 

14  Sprinti-er    v.    Aiislo-Nevada    As-  Pac.  720,  29  Ins.  L.  J.  518. 

snr.   Corp.  33  N.  Y^  543,  11  N.  Y.  ^^  B(,„„pi.    v.    Fire    A.«.sociation    of 

Supp.  533.     See  Wainer  v.  :Milford  Phila.  229  Pa.  75,  140  Am.  St.  Rep. 

Mutual  Fire  Ins.  Co.  153  Mass.  335,  706,  78  All.  44,  40  Ins.  L.  J.  84. 
11  L.R.A.  598,  26  N.  E.  877;   Boos 

200 


PAROL  CONTRACTS  §  41b 

they  were  to  be  renewed  at  their  expiration,  and  the  insured  never 
had  any  eonnnunicalion  with  the  company  rehitive  to  said  oral 
contract,  and  on  cross-examination  testified  that  he  did  not  depend 
upon  the  agent  to  renew  hut  upon  the  company,  but  on  redirect 
examination  stated  that  lie  depended  upon  the  agent  for  said 
renewals,  such  evidence  does  not  establish  an  executed  contract 
of  insiy-ance.  It  amounts  to  nothing  more  in  law  than  an  execu- 
tory agreement  to  renew  an  existing  ])olicy  of  insurance  upon 
its  expiration  at  a  future  date.^'^  Again,  Avhere  it  is  sought  to 
establish  renewal  of  an  insurance  policy  in  an  action  thereon,  and 
the  plaintiff  merely  proves  an  application  to  the  defendant's  agent 
to"bind"'  or  renew  the  policy,  and,  receiving  no  answer,  supposed 
that  the  policy  was  continued,  no  contractual  obligation  on  the  part 
of  the  defendant  is  thereby  established.  In  such  case  it  is  incum- 
bent upon  the  party  to  repeat  his  question  and  take  further  action  if 
lie  wishes  to  obtain  assent  of  the  company.^*  And  no  present 
contract  of  insurance  which  will  sujiport  an  action  to  recover  for  a 
loss  is  shown  by  evidence  that,  shortly  before  the  expiration  of  the 
former  policy,  plaintiff  instructed  his  cashier,  who  was  also  the  in- 
surer's agent,  to  renew  the  policy  when  it  expired,  which  the  agent 
promised  but  neglected  to  do.^^  But  it  is  not  necessary  that 
insured  establish  a  parol  contract  to  renew  ''by  clear  and  satisfactory 
evidence,"  and  an  instruction  to  the  jury  that  plaintiff  must 
establish  his  case  "by  a  fair  pre]5onderance  of  evidence"  is  not 
error,2°  AltlK)Ugh  the  pleading,  in  an  action  on  a  verbal  agree- 
ment to  renew  an  existing  policy,  is  defective  in  that  it  fails  to  set 
forth  with  sufficient  fullness  and  clearness  the  terms,  agreements, 
covenants,  and  stipulations  contained  in  the  original  policy  and 
which  were  to  be  inserted  in  the  renewal  policy,  still,  the  insured 
will  be  entitled  to  recover  upon  evidence  showing  a  previous  insur- 
ance, and  a  verbal  agreement  to  renew. ^  So  evidence  of  one  suing 
on  a  |)reliminary  contract  to  renew  a  policy  that  he  relied  upon  it 
and  would  have  procui'ed  other  insurance  had  he  not  believed  that 
the  ])olicy  was  renewed,  is  admissible.^  But  an  offer  to  prove  that 
insurance  agents  arc  accustomed  to  agree  to  renewals  in  advance 

"Caldwell  v.  Viriiinia  Fire  &  Ma-  20  j^ipC^bp  y^  Aetna  Tiis.  Co.  9  N. 

rine  Ins.  Co.  124  Tenn.  f)!).!,  ]3fl  S.  Dak.  19,  47  L.R.A.  (i41.  81  N.  W.  42G, 

W.   G08,  40    Ins.  L.  J.  18i)i).     See  §  29  Jns.  L.  J.  138.     See  §  3/60  lieiv- 

41a  herein.  m. 

"Royal  Tn.s.  Co.  v.  Beat! v,  119  Pa.  ^  ]\lallette  v.   British   America    As- 

St.   6,  4  Am.   St.  Rep.   (J22,  12   All.  snrance  Co.  91  Md.  471,  40  Atl.  1005, 

G07.  5  Pa.  (L.  ed.)  306.  29  Ins.  L.  J.  9G(l     See  §  38<-  hei'ein. 

i^Idalio  Forwardim;-   Co.   v.  Fire-  2  j^iv-Cabe  v.  Aetna   Tns.   Co.  9  N. 

mens  Fnnd  Tns.  Co.  8  TTtah,  41,  17  Dak.   19.  47   L.R.A.   041,  81   N.  W. 

L.R.A.  586,  29  Pac  82(i.  42(i,  29  Ins.  L.  J.  138. 

201 


§§  41e,  41d  JOYCE  ON  INSURANCE 

of  the  e.\j)iratiuii  of  current  policies  and  f;;ive  credit  for  premiums 
is  properly  refused  when  offered  to  establish  the  authority  of  the 
agent  to  niake  an  oral  contract  for  future  insurance  or  the  renewal 
of  insurance.^ 

§  41c.  Parol  contract:  renewal:  standard  policy:  equitable  es- 
toppel.—  In  Teuuessee,  as  above  stated,  the  standard  policy  terms 
and  conditions  are  construed  and  held  to  govern  the  extent  of  a 
local  agent's  authority  under  his  commission  to  make  oral  contracts 
of  insurance  or  renewals  of  existing  policies,  and,  thus  construed 
and  upon  the  evidence,  the  agent's  want  of  authority  to  make  such 
oral  contract  has  been  held  to  preclude  a  recovery  and  where  at 
the  date  of  the  claimed  oral  contract  sued  on  the  insured  held  an 
unexpired  policy,  issued  by  the  defendant  company,  containing 
a  stipulation  precluding  the  insured  from  claiming  any  privilege 
or  permission  affecting  the  insurance  under  said  policy,  unless  the 
same  should  be  written  on  the  policy  or  attached  in  writing  thereto, 
an  equitable  estoppel  arises  against  assured  to  set  up  an  oral 
contract  to  renew  said  policy  as  the  oral  contract  would  be  in  fraud 
of  the  insurer's  rights  and  said  estoppel  set  up  as  a  matter  of 
defense  in  the  answer  is  good  against  the  complainant.  And 
even  though  it  might  be  claimed  that  the  oral  contract  contemplated 
the  execution  of  a  new  printed  or  written  evidence  of  the  contract 
of  insurance  beginning  at  the  instant  of  the  expiration  of  the  old 
policy,  and  that  each  of  these  evidences  constitute  in  and  of  them- 
selves different  contracts,  nevertheless  the  estoppel  exists  whei'e 
the  parties,  the  subject  matter  or  property,  the  amount  of  indemnity, 
and  the  cause  of  loss  contemplated  by  the  oral  contract  are  the 
same  as  in  the  printed  policy.  And  a  party  cannot  in  a  court  of 
equity  expect  a  decree  for  damages  for  the  breach  of  a  contract  of 
which  that  court  would  refuse  to  decree  specific  performance.  And 
where  complainant  avers  his  legal  right  to  an  executed  oral  contract 
but  fails  to  prove  it,  and  avers  in  the  alternative  an  executory  oral 
contract,  and  invokes  the  equitable  doctrine  of  specific  performance 
he  must  abide  by  the  equitable  rules  governing  that  branch  of  llie 
jurisdiction  of  the  court.  And  the  variance  is  fatal  where  tlie 
existence  of  an  oral  executed  contract  is  averred  and  the  proof 
shows  merely  an  executory  contract  to  renew  a  policy.* 

§  41d.  Parol  contract:  reinsurance:  validity. — The  contract  of 
reinsurance  involves  no  legal  princii)les  essentially  different  from 
those  applicable  to  contracts  generally,  and  although  the  contract 

'P>enner  v.  Five  Association  of  *  Caldwell  v.  Yirainia  Fire  &  Afn - 
Phila.  22!)  Pa.  75,  140  Am.  St.  Pvep.  rine  Ins.  Co.  124  Tenn.  593,  139  S. 
706,  78  Atl.  44,  40  Ins.  L.  J.  84.  AV.  G98,  40  Ins.  L.  J.  1899. 

202 


PAROL  CONTRACTS  §  41e 

differs  in  many  respects  from  a  contract  of  insurance,^  still  it 
is  held  to  be  a  contract  of  insurance  and  not  required  to  be  in 
writing,  a  parol  agreement  therefor  being  valid.  It  may,  however, 
be  a  question  for  the  jury  whether  such  a  contract  of  reinsurance 
exists.^  But  under  an  English  decision,  in  1911,  there  was  a  verbal 
agreement  for  reinsurance,  or  to  sign  a  policy  on  certain  conditions 
whicli  were  complied  with,  but  the  defendant,  an  underwriter  at 
Lloyds,  refused  to  sign,  and  an  action  was  brought  to  recover  dam- 
ages for  breach  of  the  verbal  agreement.  It  was  determined  that 
the  action  could  not  be  maintained,  because  the  verbal  agreement 
was  a  contract  of  sea  insurance,  and  was  invalid  under  the  stamp 
act,  1891,'  as  not  being  exnressed  in  a  policy  of  sea  insurance, 
and  the  defendant  would,  if  he  paid  the  loss,  be  paying  money  upon 
a  loss  relative  to  sea  insurance,  which  insurance  was  not  expressed 
in  a  policy  of  sea  insurance  duly  stamped,  and  he  would,  therefore, 
be  liable  to  a  jienally  under  the  slamj)  act  1891.8 

§  41e.  Parol  agreement  for  reinsurance  may  be  specifically  en- 
forced.— A  suit  in  equity  may  be  su^tained  to  compel  specitic  per- 
formance of  an  oral  contract  to  reinsure.^ 

^  See  §§  113,  126,  128,  130  herein,  means  of  an  "open  cover,"  tlie  risks 
Esamine  Ivigle  Ins.  Co.  v.  Lat'a.x-  they  had  insured  as  to  cargo  to  he 
ette  Ins.  Co.  9  Ind.  44G;  Consoli(Uit-  carried  in  certain  steamers  for  a  jie- 
ed  Real  Estate  Co.  v.  Cashow,  41  Md.  riod  of  twelve  months.  The  plain- 
59;  Manufacturers  Fire  &  Marine  tiffs  became  liable  for  a  loss,  but  de- 
Ins.  Co.  v.  Western  Assur.  Co.  145  I'endant  refused  to  sign  the  policy 
Mass.  419,  14  N.  \\.  ()32:  Jackson  v.  put  forward  by  plaintiffs  in  respect 
St.  Paul  Fire  &  ^larine  Iwii.  Co.  99  thereto,  under  the  claim  tliat  the  f'or- 
N.  Y.  124,  1  X.  E.  .")39.  mer   had   not    made   all   the   declara- 

^Mclntyre  v.  Federal  T^ife  Ins.  Co.  tions  they  should  have  made  under 
142  Mo.  App.  256,  12()  S.  W.  227.  the  ''open  cover."  By  verbal  agree- 
See  Commercial  Mutual  >hirine  In^.  ment  an  independent  person  was  ap- 
Co.  V.  Union  Mutual  Ins.  Co.  19  How.  pointed  who  examined  plaintiff's 
(60  U.  S.)  318,  15  L.  ed.  636,  ^vlli(•]l  hooks  and  certified  that  all  the  dec- 
was  an  agreement  to  reinsure.  larations    had     been    made,    but    al- 

'  Sec.  93.  though  defendant  had  agreed  to  sign 

'Sec.    97.      Genfursikriiigs    Aktie-  the  l)olicy  upon  such  certilication,  it 

selskabet    (Skandinavia    lieinsurance  refused  to  sign  or  to  pay  the  loss. 
Co.    of    Copenhagen)    v.    Da    Costa       ^Commercial    AFutual   Marine   Ins. 

(Eng.  C.  A.)  :  [1911]  1  K.  B.  (Law.  Co.    v.    Union    Mutual    Ins.    Co.    19 

Rep.)    137.     Plaintiffs   reinsured    bv  Ifow.  (60  U.  S.)  318,  15  L.  ed.  636. 

203 


CHAPTER  IV. 

REQUISITES    OF    VALID    CONTRACT— COMPLETION    OF    CON- 
TRACT. 

SuBDiv.      I.  Requisites  op  Valid  Coktractt. 

II.  Completion  of  Coxthact — Proposal  and   Acceptance. 

III.  Completion  op   Contract — Prepayment  of   Premium. 

IV.  Completion    of    Contract — Delivery    of    Policy— Knowl- 

edge OF  Loss. 

SuBDiv.  I.     Requisites  of  Valid  Contract. 

§  43.     Requisites  of  a  valid  contract  of  insurance. 

§  44.     Requisites  of  a  valid  parol  contract  of  insurance. 

i^  44a.  Same  subject :  identity  of  parties :  designation  of  insurer. 

§  44b.  Same  subject :  designation  of  insured. 

§  44c.  Oral  contract  for  reinsurance  or  for  renewal  must  be  complete. 

§  45.     Minds  of  the  parties  must  meet  on  all  essentials  of  contract. 

>;  45a.  Same  subject :  where  impossil)le  to  obtain  dctinite  particulars  or  im- 
portant facts. 

^  46.  Essentials  need  not  be  expressly  agreed  upon:  prior  course  of  deal- 
ing, custom,  etc. 

§  47.     The  usual  rate  of  premium  will  be  presumed  to  have  been  intended. 

^  48.  Both  the  rate  of  premium  and  the  duration  of  the  risk  may  be  under- 
stood. 

§  49.     The  rate  of  premium  and  amount  may  be  understood. 

§  50.  Whether  contract  exists  may  be  governed  by  custom  or  usage  of  the 
parties  or  of  the  insurance  business  at  a  place. 

§  43.  Requisites  of  a  valid  contract  of  insurance. — To  coll^^tit^te 
a  valid  contract  of  in>«urance  it  is  necessary  that  there  .should  be 
(1)  parties  thereto,  (2)  a  ])revniinn.  (3)  a  subject-matter,  (4)  an 
insurable  interest.  ( o)  certain  risks  or  perils,  (6)  duration  of  the 
risk,  (7)  the  amoiiut  insured.^"     It  is  also  essential  to  a  valid  con- 

10  J.  C.  Smith  tS:  Wallace  Co.  v.  App.  789,  59  S.  E.  94;  Shawnee 
Pru-ssian  National  Ins.  Co.  68  N.  J.  Mutual  Fire  Ins.  Co.  v.  McClure,  39 
L.  674,  54  Atl.  458,  .32  Ins.  L.  .1.  559,  Okla.  535.  49  L.R.A.(N.S.)  1054,  135 
per  Garretson,  J.  See  also  Todd  v.  Pac.  1150:  Cleveland  Oil  &  Paint 
German-American     Ins.     Co.    2    Ga.    Manufacturing  Co.  v.  Norwich  Union 

204 


KEgUISITES  OF   VALID  CONTRACT  §  4;j 

tract  of  insurance  that  the  time  of  the  comniencenient  of  the  risk 
be  agreed  upon.^^  And  there  can  be  no  conii)l('(e  contract  of  in- 
surance, unless  all  these  essentials  exist,  either  exjjressiy  or  by 
imi)lication.  But  "neither  the  times  and  amoiqits  of  ])ayments  by 
the  assured,  nor  the  modes  of  estimating  or  securing  the  payment 
of  the  sum  to  be  paid  by  the  insurers,  alfect  the  question  whetlier 
the  agreement  between  them  is  a  contract  of  insurance.  All  that 
is  requisite  to  constitute  such  a  contract  is  the  payment  of  the  con- 
sideration by  the  one  and  the  promise  of  the  other  to,  ])ay  the 
amount  of  the  insurance  upon  the  happening  of  injury  to  the  sub- 
ject by  a  contingency  contemplated  in  the  contract."  ^^  And  the 
omission  of  a  statement  in  the  ])olicy  of  the  amount  of  the  prem- 
iums which  is  i>aid  does  not  invalidate  insurance. ^^  It  is  also  neces- 
sary that  the  parties  be  those  capable  of  contracting,^*  and  that  the 

Fire  Ins.  Soc.  34  Oreg.  228,  55  Pac.  called    the    subject-matter"     (marine 

435.  insurance).      17    Earl   of   Halsbury's 

The  essentials  of  a  contract  of  in-  Laws  of  England,  p.  33(3.     See  also 

suranee  are  a  subject-matter,  the  risk  as  to  essentials  17  Id.  pp.  339  et  seq. 

insured  against,  tlu;  amount,  duration  &  notes.     Contract  or  "policy  of  sea 

of  the  risk,  and  the  premium :     Tyler  insurance"    which    does    not    specify 

V.  New  Amsterdam  Ins.   Co.  4  Kob.  the  sum  or  sums  insured  is  invalid 

(N.  Y.)  151;  Trustees  of  First  Bap-  and  cannot  be  stamped  or  sued  on  as 

tist  Church  v.  Brooklyn  Ins.  Co.  28  such  policy.     Home  Marine  Ins.  Co. 

N.  Y.  153.     Essentials' are,  the  prem-  Ltd.  v.  Smith   [1898]   2  Q.  B.  D.  L. 

ises,  the   risk,   the   amount,   the  time  K.  351.  L1898]  1  Q.  B.  829,  67  L.  J. 

the  risk  should  continue,  and  the  pre-  Q.  B.  N.  S.  777,  554,  78  L.  T.  Kep. 

mium:     Strohn  v.  Hartford  Fire  Ins.  734,  465.     Completed  contract:  what 

Co.  37  Wis.  625;  19  Am.  Kep.  277.  constitutes:     intent     of    parties,    see 

Kate   of  premium   should   be   agreed  note  138  Am.  St.  Kep.  38,  43.    Keciui- 

upon.    Roberta  ]\Ianufacturing  Co.  v.  sites  of  valid  policy,  see  §  LSI  herein. 

Koval    Exciiange   Assur.    Co.    161   N.  ^^  Whitman  v.  Milwaukee  Fire  Ins. 

Car.  88,  76  S.  E.  865.     See  Hartford  Co.  128  Wis.  124,  116  Am.  St.  Rep. 

Fire  Ins.   Co.  v.    Whitnum,   75  Ohio  25,  5  L.R.A.(N.S.)   4U7n,  107  N.  W. 

St.  312,  79  N.  E.  450,  36  Ins.  L.  J.  291.     See  S^  46,  .-)0  herein. 

19.      But   compare   S§   46-49    herein.  ^^  Commonwealth     v.     Weatherbee, 

The   substantial    elements    of   a    con-  105   Mass.    149,    160,    per    (h-ay,   J.; 

tract   of  insurance   are   the   payiuent  State  v.  Farmers'  &  [Mechanics'  ^VIu- 

of  a  consideration  by  one  party  and  tual  Benevolent  Assoc.  18  Neb.  276, 

the  promise  of  the  other  to  pay  an  25  N.  W.  81. 

agreed   amount   upon   the  happening  donsideraHon    is   any   benefit    con- 

of  the  specified  contingency,  it  being  f erred   upon   the   promisor  to   which 

understood  that  the  former  party  had  he  is  not   lawfully  entitled.      Schadt 

an   insurable   interest    in   the   sul)jcct  \.  Mutual  Life  Ins.  Co.  2  Cal.  App. 

matter:      Bolton   v.    Bolton,   73   Me.  715,    84    Pac.    249,    Cal.    Civ.    Code, 

299,    303.      To    render    the    contract  sec.  1605. 

complete,   there   should   be   a   matter  "  Whcaton  v.  Liverpool  &  London 

to  form  its  subject,  and  this  matter  &  Globe  Ins.  Co.  20  S.  Dak.  62,  104 

should  be  exposed  to  the  hazards  of  N.  W.  850.  Eramive  §§  45-50  herein. 

the  sea:      Emerigon  on   Ins.    (Mere-  ^*  See  §§  34,  305  et  se(|.  hen'in. 

dith's  ed.)  c.  i.,  sees.  1,  2,  pp.  5,  11,  As  to  consent  of  person  wliose  life 

"The    thing   or   property   insured    is  is  insured,  see  note  56  L.K.A.  585. 

205 


J?  44 


JOYCE  OX  1X.SIKAXCK 


risk  be  a  legal  one,  not  repugnant  to  public  policy  nor  po.sitive  pro- 
hibition, nor  occa:5ione(l  by  the  insurer's  own  fraud  or  miscon- 
duct, nor  an  infringement  of  the  rights  of  persons  not  parties  to 
the  contract. ^^ 

§  44,  Requisites  of  a  valid  parol  contract  of  insurance. — A  parol 
contract  for  insurance  must  contain  all  the  essentials  of  a  valid 
agreement  so  that  nothing  remains  to  be  done  but  to  lill  up  and 
deliver  the  policy  on  the  one  hand,  and  to  pay  the  premium  on  the 
other.^^  The  contract  must  also  be  fairlv  entered  into  for  a  aood 
consideration  between  parties  competent  to  contract,^'''  and  the 
minds  of  the  insured  and  insurer  must  come  together  in  mutual 
agreement  on  every  material  point  constituting  a  contract  in  order 


^*  Bell  V.  Western  Marine  &  Fire  uncertain    in    its    terms.      Evidence 

Ins.   Co.  5  Rob.    (La.)   423,  39  Am.  tended  to  establish   a  valid  contract 

Dec.  542;  1  Phillips  on  Ins.  (3d  ed.),  to  insure). 

492,  sec.  906.     See  §  34  herein.  Mississippi. — Franklin     Fire     Ins. 

On   validity  of  contract   of   insur-  Co.  v.  Taylor,  52  iMi.<s.  441. 

ance  in  violation  of  statute,  see  note  ^ew     Jerseif. — Consumei's'     Match 

in  12  L.R.A.^N.S.)   612;  on  validity  Co.  v.  Germaii  Ins.  Co.  70  N.  J.  L. 

of  insurance  on  intoxicating  liquors  226,  57  Atl.  440,  33  Ins.  L.  J.  525, 

as  affected  bv  liquor  laws,  see  note  in  32  Ins.  L.  J.  180. 

31  L.R.A.(N.S.)   874.  ^eiv     YorA-.— Sandford    v.     Trust 

16  People's  Ins.   Co.  v.   Paddon,   8  Fire  Ins.  Co.  11  Paige  (N.  Y.)  547; 

Bradw.    (111.)    447.  Tyler  v.   New  Amsterdam   Fire   Ins. 

See  also,  the  following  cases:  Co.  4  Rob.  (N.  Y.)  15l. 

Uniled  States.~Kqm{ab\e  Life  Ins.  O///0.— Hartford   Fire  Ins.   Co.   v. 

Co.  V.  McElroy,  83  Fed.  631,  49  U.  Whitman,  75  Ohio  St.  312,  79  N.  E. 

S.  App.  648,  28  C.  C.  A.  365,  27  Ins.  450,    36    Ins.    L.    J.    19    (when    oral 

L.  J.  361.  contract  incomplete.) 

Alabama.— Stephenson   v.    Allison,  P en >i s i/Iv a ni a. —Bennev      v.      Fire 

165  Ala.  238,  51  So.  622;  Home  Ins.  -'^^soc.    of   Phila.    229   Penn.    75,    75 


Am.  St.  Rep.  706,  78  Atl.  44,  40  Ins. 
-.  ..  ^,  .^  .         „^„.  ^ 

Illinois. — Insurance    Co.    of   North         ',;.  .        ^,       ,      ,  •  ,-. 

\\isco)ism. — Chamberlain  v.  Pru- 
dential Ins.  Co.  of  America,  109  Wis. 
4,  83  Am.  St.  Rep.  850,  85  N.  W. 
128 ;  .John  R.  Davis  Lumber  Co.  v. 
Scottish  Union  &  National  Ins.  Co. 
94  Wis.  472,  69  N.  W.  156;  Stehlick 
v.  Milwaukee  Mechanics  Ins.  Co.  87 


Co.  V.  Adler,  71  Ala.  516. 


America  v.  Bird,  175  111.  42,  51  N 
E.  686,  affg.  74  111.  App.  306;  Bar- 
low v.  Farmers'  Mutual  Fire  Ins.  Co. 
1'28  111.  App.  580;  Hartford  Ins.  Co. 
v.  Wilcox,  57  111.  180. 

Indiana. — Kentuckv     Mutual     Ins. 


Co.  V.  Jenks,  5  Ind.  96;  Posey  Coun-    ^^.^^^   ^^   ^g  ^^  ^   35^^ 
^7    ^^^.t,^^!«^:    I    Hogan,    3.    Ind.        On  requisites  of  a  pree 


App.  573,  77  N.  E.  670. 

Mussach  usetts. — Cunningham  v. 
Connecticut  Fire  Ins.  Co.  200  Mass. 
333,  86  N.  E.  787,  38  Ins.  L.  J.  315 
(held,    no    binding    parol     contract 


here)  ;  Real  Estate  Mutual  Fire  Ins.    rish.  73  111.  166. 


present  oral  eon- 
tract  of  insurance,  see  note  in  5 
L.R.A.(N.S.)  407;  on  validity  of  oral 
contract  of  insurance  generallv,  note 
in  22  L.R.A.  768. 

1' Hartford  Fire  Ins.   Co.  v.  Far- 


Co.  v.  Roessle,  1  Gray  (67  Mass.)  336. 
Minnesota. — Ames-Brooks     Co.     v. 


Rate    of    premium    not    fixed,    see 
Hartford  Fire  Ins.  Co.  v.  Whitman, 


.Etna  Ins.  Co.  83  Minn.  346,  30  Ins.  75   Ohio   St.   312,  79  N.  E.  450,  36 
L.  J.  802   (contract  not  void  because   Ins.  L.  .T.  19. 

206 


REQUISITES  OF  VALID  CONTRACT  §  44a 

to  constitute  a  complete  oral  contract  for  insurance. ^^  A  parol  con- 
tract must  otherwise  conform  to  the  rules  given  in  the  last  section 
in  regard  to  legality  of  the  contract.  It  is  declared  in  the  case  of 
1-ife  insurance  companies  whose  custom  is  to  contract  by  written 
policies,  that  until  such  policy  is  delivered  and  the  premium  paid 
the  presumption  is  that  there  were  negotiations,  but  no  contract, 
and  no  intention  to  contract,  before  delivery  of  the  policy.^®  But 
a  valid  contract  of  life  insurance  may  exist  even  though  no  policy 
is  issued.^"  But  an  oral  contract  is  incomplete  and  unenforceal)lc 
for  want  of  certainty  as  to  the  pai'ties.  the  risk  insured  against,  and 
the  duration  of  the  insurance.-'  And  instructions  by  a  general  to 
a  local  agent,  who  signifies  his  desire  to  write  a  policy  on  his  own 
property,  to  write  it  in  the  usual  way,  do  not  constitute  a  binding 
contract  of  insurance,  even  though  it  is  a  custom  for  agents  to  in- 
sure their  own  property,  and  such  instructions  are  supplemented  by 
the  writing  of  the  policy-,  where  at  the  time  of  the  conversation 
between  said  agents  the  subject  matter  of  insurance  was  not  in 
existence,  no  statement  made  of  the  value  of  the  property  to  be 
insured,  no  amount  stated,  no  rate  of  premium  fixed,  and  the  in- 
surance company  never  accepted  or  delivered  the  policy,  and  no 
premium  was  ever  paid.^ 

§  44a.  Same  subject:  identity  of  parties:  designation  of  in- 
surer.— Where  an  insurance  agent  represents  several  companies, 
and  there  is  no  designation  of  the  company  to  take  the  risk,  there 
is  no  contract,  because  of  failure  of  parties.^     Sq  an  oral  agree- 

18  Bell  v.  Peabodv  Ins.  Co.  49  W.  ^  Ogle    Lake    Shingle    Co.    v.    Na- 

Va.  437,  .38  S.  E.  541,  .30  Ins.  L.  J.  tional  Lumber  Ins.  Co.  68  Wash.  1«5, 

627;   Ogle  Lake  Shingle  Co.  v.  Na-  122  Pae.  990. 

tional  Lunil)er  Ins.  Co.  68  Wash.  185,  ^  Zimmerman    v.    Dwelling    House 

122  Pae.  900.     See  Ames-Brooks  Co.  Ins.    Co.   110   Mich.   399,   33   L.K.A. 

V.  .^:tna  Ins.  Co.  83  Minn.  346,  86  698,  68  N.  W.  215,  26  Ins.  L.  J.  77. 

N.  W.  344,  30  Ins.  L.  J.  802.     See  ^  Qgle    Lake    Shingle    Co.    v.    Na- 

§  45  herein.  tional    Lumber    Ins.    Co.    68    Wash. 

"  EquitJibh-  Life  Assurance  Soc.  v.  185,   122   Pac.   990,   citing   New   Or- 

McElrov,  83  Fed.  631,  49  U.  S.  App.  leans  Ins.   Assoc,  v.  Boniel,  20  Fla. 

648,  28  C.  C.  A.  365,  27  Ins.  L.  J.  815;  Hartford  Fire  Ins.  Co.  v.  Trim- 

361.     Caldwell,  C.  J.,  dissented.  ble,   117   Ky.   583,   25   Ky.   L.   Rep. 

Meaning  of  "negotiation,"  see  note  1497,   78   S.   W.   462,   33  Ins.   L.   J. 

to  §  55  herein.  348;   Kleis  v.  Niagara  Fire  Ins.  Co. 

As  to  delivery  of  policy,  see  Inter-  117  Mich.  469,  76  N.  W.  155;  Michi- 

national  Forrv   Co.  v.  American  Fi-  gan    Pipe    Co.    v.    Michigan    Fire    & 

delity  Co.   207   N.  Y.   350,   353,  101  Marine    Ins.    Co.    92    Mich.    482,   20 

N.  E.  160.     See  also  §§   90  et  seq.  L.R.A.  277,  52  N.  W.  1070;  John  R. 

herein.  Davis  Lumber  Co.  v.  Scottish  Union 

20  Carter  v.  Bankers  Life  Ins.  Co.  &  National  Ins.  Co.  94  Wis.  472,  69 

83  Neb.  810,   120  N.   W.  455.     See  N.  W.  156;   Sheldon   v.   Hekla  Fire 

also  §§  31  et  seq.  herein.  Ins.  Co.  65  Wis.  436,  27  N.  W.  315. 

207 


§  44a  JOYCE  UX  IXSL'li'ANCE 

nient  will  fail  where  under  the  rules  of  conslniction  Ihere  is  a  want 
of  identity  of  the  |)artie.s  to  the  contract.  This  ajiplies  where  an 
asicnt  of  several  companies  is  applied  to  for  insurance,  and  there  is 
no  proof  or  claim  that  at  the  date  of  application  for  insurance  there 
wa<  any  ati'reement  on  the  part  of  insurer's  agent  that  it  was  to  be 
placed  with  the  defendant  company.'*  In  such  cases  it  is  held  that 
there  should  he  a  designation  of  the  company  or  companies  to  carry 
the  risk  as  well  as  the  amount  to  be  assumed  by  each  and  this  agree- 
ment should  be  mutual.^  But  even  though  if  an  agent  for  several 
insurance  companies  is  directed  to  place  a  given  amount  of  insur- 
ance, without  any  expectation  on  the  ))art  of  the  ap|)licaiit  that  it 
will  all  he  written  in  any  one  of  the  companies,  which  are  not  men- 
tioned by  name,  no  contract  exists  as  to  any  one  or  all  of  them,  and 
no  liability  attaches  until  further  action  is  taken  to  determine  and 
deline  the  risk,  in  doing  which  the  agent  acts  as  agent  of  insured, 
still  the  agents  agreement  t(»  ])lace  a  certain  amount  of  insurance, 
to  select  t]ie  companies,  distribute  the  risk  and  give  the  insurance 
constitutes  a  valid  contract  of  insurance  with  each  company  as  soon 
as  its  policy  is  signed,  although  the  policies  are  not  deli\ered  until 
after  the  property  is  destroyed  by  fire.^  And  where  persons  contract 
for  insurance  with  the  agents  of  several  companies  without  specify- 
ing in  which  the  insurance  is  desired,  and  subsequently  the  agents 
designate  a  particular  corporation  a.s  the  insurer,  they  pos.«essing 
tiie  power  to  make  such  designation,  this  completes  the  contract, 
and  makes  the  insurer  so  designated  liable  for  a  subsequent  loss.' 
So  where  the  agent  represents  several  companies  and  wilji  full  ])()w- 
er  in  tlie  premises  designates  a  company  in  which  to  place  the  i-isk 
and  carry  the  insurance,  and  the  time  the  policv  is  to  run,  the  in- 
sured's  name,  the  rate,  the  amount,  and  the  gt)ods  to  he  insured  are 
all  agreed  upon,  approved  and  placed  on  (lie  by  such  agent,  there 
is  a  com])lete  oral  conti'act  of  insurance.*     Again,  it  is  held  to  be 

*  Hartford  Fire  Ins.  Co.  v.  Triyi-  tollo  v.  Grntit  Couiitv  Mutual  Fire  & 

ble,    117   Kv.   583,   25    Kv.    L.    Kep.  Lif-Iitinu"-  Ins.  Co.  133  Wis.  3(il,  11:5 

497.  78  S.  W.  4ti2,  33  Ins.  L.  J.  348;  N.    W.   (i3!).      Compare   Axues-Hrooks 

Insurance   Co.   of  Nortli   America  v.  Co.  v.  ^F]tna  Ins.  Co.  83  Minn.  34(5, 

lUrd,  175  111.  42,  51  N.  E.  686,  affg.  86  N.  W.  344,  30  Ins.  L.  J.  802. 

74    111.    App.    306;    John    R.    Davis  As   to    description    of   parties,   see 

Lunil)er  Co.  v.  Scottish  Union  &  Na-  §§  310,  1689  herein, 

tional  Ins.  Co.  94  Wis.  472,  69  N.  W.  ^  j\ii^.i,i„.,„    pj^g    q^^    ^    IVfichigan 

156.  Fire  &  Marine  Ins.  Co.  92  Midi.  482, 

^  John    R.    Davis    Lumber    Co.    v.  20   L.R.A.   277    (annotated   on   when 

Scottish  Union   &  National   Ins.   Co.  insurance  af^ent  is  agent  ot  insured) 

94  Wis.  472,  09  N.  W.  156.     See  In-  52  N.  W.  1070. 

surance    Co.    of    North    America    v.  '  Croft   v.   Hanover  Fire   Ins.   Co. 

Bird,  175  111.  42,  51  N.  E.  086.  affg  40  W.  Va.  508,  52  Am.  St.  Rep.  902, 

74   111.    App.   306;   Mooney   v.   Mer-  21  S.  E.  854. 

riara.  77  Kan.  305,  94  Pac.  263;  Cos-  *  Thompson  v.  Germania  Fire  Ins. 

208 


REQUISITES  OF  VALID  CONTRACT  §§  44b-45 

error  to  non-suit  the  plaintiff  in  an  action  upon  a  fire  insurance  pol- 
icy, on  the  ground  that  no  completed  contract  of  insurance  is  shown, 
where  it  appears  that  the  plaintiff  directed  an  insurance  agency, 
in  which  the  defendant  company,  as  well  as  other  companies,  was 
represented,  to  carry  for  him,  on  the  property  subsequently  burned, 
a  certain  amount  of  insurance,  that  policies  to  the  amount  specified 
were  written  in  different  companies,  chosen  by  the  agency,  and 
that,  upon  one  of  these  companies  becoming  bankrupt,  the  agency 
replaced  the  portion  of  insurance  which  was  carried  by  that  com- 
pany by  writing  a  policy  of  similar  amount  in  the  defendant  com- 
})any,  notwithstanding  it  further  appears  that  the  plaintiff  did  not 
know  of  the  substitution  of  policies  until  after  the  fire  occurred, 
and  although  the  new  policy  was  never  actually  delivered  to  him.* 

§  44b.  Same  subject:  designation  of  insured. — The  fact  that  the 
agent's  memorandum  of  insurance  designated  one  person,  when  the 
insurance  was  applied  for  and  intended  to  be  paid  to  another,  does 
not  invalidate  an  oral  contract  of  insurance.^" 

§  44c.  Oral  contract  for  reinsurance  or  for  renewal  must  be 
complete.^^ — And  no  i>resent  contract  of  insurance  which  will  sup- 
port an  action  to  recoxer  for  a  loss  is  shown  by  evidence  that,  short- 
ly before  the  expiration  of  a  former  policy,  plaintiff  instructed  his 
cashier,  who  was  also  the  insurer's  agent,  to  renew  the  policy  when 
it  expired,  which  the  agent  promised  but  neglected  to  do.^^ 

§  45.  Minds  of  the  parties  must  meet  on  all  essentials  of  con- 
tract.— There  must  be  a  meeting  of  minds  upon  all  the  essentials 
of  a  valid  contract  of  insurance.  If  any  of  the  material  details  re- 
main to  be  determined,  the  contract  is  not  complete."     Concur- 

Co.  45  Wash.  482,  88  Pae.  941,  3U  man's  Fund  Ins.  Co.  8  Utah,  41,  17 

Ins.  L.  J.  400.  L.R.A.  586,  29  Pac.  820. 

*  Todd  V.  German-Anicrif-an  Ins.  On  validily  of  oral  agi'eeniont  to  re- 
Co.  2  Ga.  App.  789,  59  S.  E.  94.  new  or  extend  policy,  .see  note  in  22 

^•^  Croft  V.  Hanover  Fire  Ins.  Co.  L.R.A.  772:  on  teiius  and  conditions 

40  W.  Va.  508,  52  Am.  St.  Rep.  902,  of  nsual  written  i)o!icy  as  affecting  a 

21   S.  E.   854.     Examine  Phillips   v.  claim  nnder  or  damages  lor  breacli  of 

Union  Central  Life  Ins.  Co.    (U.   S.  an  oral  contract  to  renew  policy,  see 

C.  C.)  101  Fed.  33,  rev'd  Union  Cen-  notes  in  48  L.R.A. (N.S.)  321,  324. 

tral   Life   Ins.    Co.    v.    Phillips,   102  "  fj^Ycr/  ,s7a/.e.s\—Mntnal  Life  Ins. 

Fed.  19,  41  C.  C.  A.  263.  Co.  v.   Young,  23  Wall.   (90   U.   S.) 

^^  Manchester  Fire  Ins.  Co.  v.  In-  SiS,  23  L.  ed.  152;  Kennedy  v.  Mu- 
surance  Co.  of  Illinois,  91  111.  App.  tual  Benelil  Life  Ins.  Co.  (U.  S.  I). 
609  (held  that  essentials  not  agreed  C.)  205  Fed.  677;  Travis  v.  Neder- 
on  here)  :  Doherty  \.  Millers  c^'  Man-  land  Life  Ins.  Co.  Ltd.  104  Fed.  486, 
ufacturers  Ins.  Co.  4  Ont.  Law  Rep.  43  C.  C.  A.  ()b'.\\  Kimball  v.  Lion 
303  (case  of  renewal  policy  held  not  Ins.  Co.  17  Fed.  625,  626. 
complete;  renewal  not  accepted;  AUihanui. — Home  Ins.  Co.  v.  Ad- 
higher  rate  charged).  lei-,   71  Ala.  516. 

^^  Idaho   Forwarding  Co.   v.   Fii'c-  Georgia. — Todd  v.  German-Ameri- 
Joycp  Ins.  Vol.   I. — 14.              209 


§  45  JOYCE  ON  INSUKANCE 

rence  of  minds  is  esvsenlial.  The  impressions  of  one  alone  of  the 
parties  is  insufficient.^*  In  brief  nothing  should  be  left  open  for 
future  determination.  The  assent  must  be  nmtual,  since  this  meet- 
ing of  minds  is  vital  to  the  life  of  the  contract.  This  obligation  is 
correlative,  and  depends  upon  the  acts  of  the  parties  themselves, 
and  if  one  party  is  not  bound  it  necessarily  follows  that  there  is  no 
obUgation  on  the  other  party. ^^  But  the  terms  being  specified,  the 
minds  of  the  parties  meet  when  the  insurer  signifies  his  acceptance 
of  the  application  to  the  applicant.^®  AVhere,  however,  one  made 
application  for  life  insurance,  gave  his  note  for  the  premium,  and 
took  a  receipt  from  the  company's  agent,  giving  the  company  the 
right  to  accept  or  reject  the  application,  and  the  company  did  not 
agree  to  the  terms,  but  issued  a  policy  Mith  different  terms,  and  sent 
the  same  to  the  agent,  but  before  delivery  the  applicant  died,  his 
note  being  unpaid,  it  was  held  that  there  was  no  mutual  assent  of 
parties,  and  no  contract  of  insurance." 

can  Ins.  Co.  2  Ga.  App.  789,  59  S.  639;    Wliitman    v.    Milwaukee    Fire 

E.  94.  Ins.  Co.  128  Wis.  124,  116  Am.  St. 

Illinois.— Covenant  Mutual  Benefit  Rep.   25,   5  L.R.A.(N.S.)    680n,   107 

Assn.  V.   Conway,  10   Brad.    (10  111.  N.  W.  291;  John  R.  Davis  Lumber 

App.)  348.          "  Co.    V.    Scottish    Union    &    National 

Massachusetts.— QuiW     v.     Boston  Ins.  Co.  94  Wis.  472,  69  N.  W.  156. 

Ins.    Co.    197    Mass.    216,   83   N.    E.  i*  Roberta    Manufacturing    Co.    v. 

401;     Cunningham     v.     Connecticut  Roval    Exchange   Assur.    Co.   161  N, 

Fire  Ins.   Co.  200  Mass.  333,  86  N.  Car.  88,  76  S.  E.  865. 

]■:.  787,  38  Ins.  L.  J.  315;  Goddard  "Mutual  Life  Ins.  Co.  v.  Young, 

V.  Monitor  Mutual  Fire  Ins.  Co.  108  23   Wall.    (90  U.   S.)    85,  23  L.  ed. 

Mass.  56,  11  Am.  Rep.  307.  152;   Elia.son  v.  Henshaw,  4  Wheat. 

Micliinfin. — Serane  v.   Portland,   9  (17  U.  S.)  225,  228,  4  L.  ed.  556,  557; 

Mich.  493.  Hallock  v.  Commercial  Ins.  Co.  27  N. 

New   YorA-.— Bradley  v.   Standard  J.  L.  645,  72  Am.  Dec.  379;  Strohn 

Life  &  Accident  Ins.   Co.   98  N.   Y.  v.  Hartford  Ins.  Co.  37  Wis.  625,  19 

Supp.  797,  112  App.  Div.  536  (con-  Am.  Rep.  777. 

sidered  under  §   62a  herein) ;   Trus-  ^^  Schwartz  v.   Germania   Ins.   Co. 

tees     of    First     Baptist     Church     v.  18  Minn.  448,  455. 

Brooklyn  Fire  Ins.  Co.  28  N.  Y.  153.  "  JMutual  Life  Ins.  Co.  v.  Y^oung, 

North      Carolwa.—Boss     v.     New  23  Wall.  (90  U.  S.)  85,  23  L.  ed.  152. 

York  Life  Ins.  Co.  124  N.  Car.  395,  Cited  in : 

32  S.  E.  733.  United  States.— Giddings  v.  North- 

Oldahoma. — Shawnee  ^Mutual  Fire  western  Mut.  L.  Ins.  Co.  102  U.  S. 

Ins.   Co.   V.   McClure,  39   Okla.   535,  112,  26  L.  ed.  93;  La  Compania  Bil- 

49  L.R.A.(N.S.)   1054,  35  Pac.  1150.  baind  v.  Spanish  American  Light  & 

South  Dakota.— l^oYdue^s  v.  Mutu-  Power  Co.  146  U.  S.  483,  497,  36  L. 

al  Cash  Guaranty   Fire    Ins.   Co.   22  ed.  1054,  13  Sup.  Ct.  Rep.  142;  Pen- 

S.  Dak.  1,  114  N."  W.  1092.  dleton  v.  Knickerbocker  L.  Ins.  Co.  7 

West    Virginia.— MeCullfs   Adm'r  Fed.  178;  Hamblet  v.  Citv  ]ns.  Co.  36 

V.  Phoenix  Mutual  Life  Ins.  Co.  18  Fed.  122;   Paine  v.   Pacific   Mut.  L. 

AY.  Va.  782.  Ins.   Co.   2   C.   C.  A.  461,  10   U.   S. 

Wisconsin.— Cof^teWo       v.       Grant  App.  256,  51  Fed.  691;  Starr  &  Co. 

County    Mutual     Fire    &    Liglitning  v.  Galgate  Ship  Co.  15  C.  C.  A.  373, 

Ins.   Co.   133   Wis.   361,   113   N.   W.  29    U.    S.    App.  599,    ()8    Fed.    241; 

210 


REQUISITES  OF  VALID  CONTRACT 


§  45 


In  case  the  correspondence  between  the  parties  shows  that  their 
minds  never  met  with  respect  to  the  terms,  there  is  no  contract,  nor 
is  the  company  bound  in  sucli  case  by  mailing  to  the  apphcant  a 
policy  which  he  is  not  bound  to  accept.^^  So,  where  an  application 
for  insurance  was  made  in  the  regular  form,  and  everything  was 
satisfactory  except  the  rate  of  premium,  and  correspondence  was 
had  on  this  subject,  whereby  the  owner  of  the  property,  being  un- 
able to  make  better  terms  elsewhere,  finally  notified  the  company 
that  he  agreed  to  the  rate  required,  it  was  lield  that  a  valid  contract 
of  insurance  had  been  made,  upon  which  the  company  ^^as  liable, 
where  the  property  was  burned  before  the  premium  was  paid  or  the 
policy  written.^'    Again,  Avhere  there  was  an  agreement  to  accept 


Bowen  v.  Hart,  41  C.  C.  A.  396,  101  i^  Eames  v.  Home  Ins.  Co.  94  U. 

Fed.    381;    Travis    v.    Ncderland    L.  S.  621,  24  L.  ed.  298.    Cited  in: 

Ins.  Co.  43  C.  C.  A.  656,  104  Fed.  United  States.— Ladede  Fire-Brick 

488;  Miller  v.  Northwestern  Mut.  L.  Mfg.   Co.   v.   Hartford   Steam-Boiler 

Ins.  Co.  49  C.  C.  A.  334,  111  Fed.  Inspection  &  Ins.  Co.  9  C.  C.  A.  8, 

469 ;  Mohrstadt  v.  Mutual  L.  Ins.  Co.  19    U.    S.    App.    510,    60    Fed.   359; 

52  C.  C.  A.  678, 115Fed.  84;  Rickard  Schultz  v.   Phenix  Ins.   Co.  77  Fed. 

v.  Taylor,  122  Fed.  937 ;  Shattuck  v.  389. 

Mutual  L.  Ins.  Co.  4  Cliff.  611,  Fed.  Alabama.— Harttord  F.  Ins.  Co.  v. 

Cas.  No.  12,715.  King,  106  Ala.  522,  17  So.  707. 

Alabama.— Al-Ahama   Gold   L.   Ins.  ////»o/s.— Continental    Ins.    Co.    v. 

Co.  v.  Maves,  61  Ala.  167.  Roller,  101  111.  App.  77,  79. 

Califonna..-Yove    v.    Bankers'    &  .r^A?' •'""'■^^Y'^'^a"    ^ooJ'  ^-""-a  ''' 

Merchants'    Mut.    L.    Asso.    88    Cal.  J^«4,'P^"'  ^^  Ind.  App.  225,   <  i  Am. 

612,  26  Pac.  514.  ^\^''^'-  f-^'^''  \  E.  119. 

n      -.   I    T  Massachusetts. — Emerv    v.    Boston 

Zo«ja.—Stephe^nsv     Capital    Ins.  ^    j^g.  Co.  138  Mass.  412;  Davis  v. 

Co.  87  Iowa,  28  ^  54  N.  W.  139.  jp^^^^  ^j^,^  p   j^^g   Co.  67  N.  H.  219, 

Maine. — Clark  v.  Insurance  Co.  of  34  Atl.  464. 

N.  A.  89  Me.  36,  35  L.R.A.  279,  35  Ohio.— 'Newark  Maeh.  Co.  v.  Ken- 

AtL  1008.  ton    Ins.    Co.    50    Ohio    St.    556,    22 

Oklahoma. — Home   Forum   Benefit  L.R.A.-  773,  35  N.  E.  1060. 

Order  v.  Jones,  5  Okla.  614,  50  Pac.  Oregon. — Sproul  v.  Western  Assui. 

165.  Co.  33  Or.  105,  54  Pac.  180. 

Wyoming. — Summers  v.  Mutual  L.  Pennsi/lvaiiiii. — Smith      v.      Sugar 

Ins.  Co.  12  Wyo.  394,  66  L.R.A.  820,  Vallev  Mut.  F.  Ins.  Co.  5  Pa.  Dist. 

107  Am.  St.  Rep.  952,  75  Pac.  937.  R.  339. 

See  Costello  \-.  Grant  County  Mu-  Wisconsin. — Van    Slyke    v.    Trem- 

tual  Fire  &  Lightning  Ins.  Co.  133  pealeau  Countv  Farmers  Mutual  Fire 

Wis.     361,     113    N.     W.     63!)     (the  Ins.  Co.  48  Wis.  683,  687,  5  N.  W. 

policy  issued  here  was  hased  upon  a  236. 

(•hanged  application  of  which  appli-  See  Doherty  v.  Millers  &  Manufac- 

cant  had  no  knowicdge)  ;  Doherty  v.  turers  Ins.  Co.  4  Ont.  Law  Rep.  303, 

Millers  &  Manufacturers   Ins.   Co.  4  Avhere  higher  rate  of  premium  cliarged 

Ont.  L.  Rep.  303,  where  renewal  con-  and     contract     held     not     complete, 

tract  had  not  complete.      See   §   104  Loomis  v.  Jefferson  County  Patrons 

herein.  Fire  Relief  Assoc.  87  N.  Y.  Supp.  5, 

18  Hamhlet  v.  City  Ins.  Co.  36  Fed.  92  App.  Div.  601.     See  §  104  Iierein. 

118.     Sec  Sheldon  v.  Hckla  Fire  Ins.  Completion    of    contract:    negotia- 

Co.  6.")  Wis.  436.     See  Si^  ',7,  62,  63  lions    through    mail,   see    §§    57,    62 

herein.  herein. 

211 


§  45  JOYCE  ON  INSURANCE 

the  risk  as  soon  as  the  rate  of  premium  should  be  fixcfl,  whicli  was 
not  done,  and  a  loss  occurred,  it  was  held  that  no  insurance  was  ef- 
fected, although  the  company  entered  the  insurance  in  its  order- 
book,  and  the  number  and  date  of  the  proposed  policy  in  its  ledger, 
and  the  secretary  told  the  applicant  to  consider  himself  insured.^" 
So  where  it  appeared  that  a  "risk  Wcjs  taken  for  t'.vo  thousand  five 
hundred  dollai"s  at  two  per  cent,"  and  that  the  applicant's  insur- 
ance broker  threw  a  policy  down  on  the  secretary's  desk  and  said, 
according  to  one  witness,  'There  is  a  policy,  if  you  take  it,"'  or  ac- 
cording to  another  witness,  "You  are  to  make  out  a  like  policy." 
but  tendered  no  premium  till  the  premises  to  be  insured  were  burned, 
it  was  held  that  the  contract  was  too  vague  and  indefinite  to  be 
binding.^  But  the  agreement  will  be  complete,  although  a  bond  to 
pay  assessments  be  not  executed,  it  being  customary  to  do  that  up- 
on delivery  of  the  policy.^ 

The  minds  of  the  parties  must  also  meet  as  to  the  subject  mat- 
ter,^ and,  if  the  insurer  acted  on  his  application  describing  one 
house,  and  issued  a  policy  thereon,  the  insured  cannot  recover  un- 
der such  policy  for  the  loss  of  another  house,  wliich  was  one  he  in- 
tended to  have  taken  insurance  upon,  on  the  ground  that  he  ap- 
plied for  an  insurance  on  the  latter,  but  the  agent  of  the  company, 
by  mistake,  described  the  former  in  the  application.*  In  another 
case  the  broker,  without  the  owner's  knowledge  or  authority,  stated 
in  the  application  that  the  risk  was  a  machine  shop,  when  in  fact  it 
was  an  organ  factory,  which  was  a  more  hazardous  risk,  and  the 
owner  accepted  the  policy  expressed  to  be  on  a  machine  shoi),  and 
paid  the  premium.  It  was  held  in  an  action  after  loss  that  the  ])ol- 
icy  v»-as  void,  as  the  minds  of  the  parties  never  met  on  the  subject 
matter  of  the  contract:  ^  and  in  a  case  where  the  api)lication  was  for 
insurance  on  one  house  and  the  policy  covered  another  whicli  the 
agent  thought  was  the  one  meant,  there  was  no  insurance,  as  the 

As   to   necessity   of  fixing   rate  of  ^  Van   Loan    v.    Fanners'   ]\I.   Fire 

preniium,  see  Hartford  Fire  Ins.  Co.  Ins.  Co.  24  Hnn  (N.  Y.)   132. 

V.  Wliitnian,  75  Ohio  St.  3l2,  79  N.  ^  j^j^ie  Fire   Ins.   Co.   v.   Wallace, 

E.  450,  9  Ani.  &  Eng.  Ann.  Cas.  218,  153  Ky.  677,  156  S.  W.  140;  Sanders 

36  Ins.  L.  J.  19.     See  lloberta  ^Nfanu-  (Landers)  v.  Cooper,  115  N.  Y.  2<!), 

faeturing    Co.    v.    Koval    Exchange  12  Am.   St.  Rep.  801,  5  L.R.A.  638 

Assur.  Co.  161  N.  Car.  88,  76  S.  E.  and  note,  22  N.  E.  212. 

865;  Wheal  on  V.  Liverpool  &  London  ^Sanders     (Landers)     v.     Cooper, 

&  Globe  Ins.  Co.  20  S.  Dak.  62,  104  115  N.  Y.  279,  12  Am.  St.  Rep.  801, 

S.  ^V.  850.     Compare  next  following  5  L.R.A.  638n,  22  N.  E.  212. 

sections  herein.  ^  Goddard  v.  Monitor  ]\Iutual  Fire 

20  Christy  v.  North  Brit.  Ins.   Co.  Ins.  Co.  108  Mass.  56,  11  Am.  Rep. 

3  Ct.  Sess.  (1st  series,  1825)  p.  360.  307. 

^  Tjder    v.    New    Amsterdam    Fire 
Ins,  Co.  4  Rob.  (N.  Y.)  151,  156. 

212 


REQUISITES  OF  VALID  CONTIUCT  §  45 

minds  of  the  parties  never  met.^  So  again  where  two  vessels  with 
the  same  name  were  lying  in  port,  and  the  in^^urance  was  on  goods 
laden  or  to  be  laden  on  board  a  vessel  of  a  certain  name,  and  there 
was  a  doubt  as  to  which  vessel  was  intended,  it  was  held,  in  the  ab- 
sence of  proof  that  the  goods  Avere  laden  on  board  the  vessel  con- 
templated by  the  pai-ties,  that  the  policy  did  not  attach.'  The  rule 
is  otherwise,  liowever,  if  both  parties  intend  the  same  subject,  but 
make  a  mistake  in  the  name.^  Again,  an  oral  agreement  by  an  in- 
surance agent  to  take  $5,000  upon  mill  property  is  not  a  completed 
contract  of  insurance  if  there  was  to  be  an  apportionment  between 
real  and  personal  estate,  and  none  had  been  made  when  the  prop- 
erty was  destroyed  by  lire.^  80  where  an  undated  note  with  a  blank 
application  was  given  to  an  agent  of  an  insurance  company,  with 
an  agreement  b}^  the  latter  that  such  acts  constituted  an  agreement 
of  insurance,  and  that  when  the  owner  gave  the  company  a  descrip- 
tion of  tlie  property  the  policy  should  issue,  and  the  note  and  ap- 
plication be  filled  out,  this  does  not  constitute  a  contract  of  insur- 
ance.^" 

Again,  where  the  agent  upon  application  gave  a  receipt  for  the 
premium,  which  contained  only  a  brief  statement  of  the  risk  in- 
sured, specifying  the  rate  of  the  premium,  amount  of  insurance, 
the  property,  the  time  insured,  but  did  not  specify  the  peril  or  risk 
insured  against,  it  was  held  not  a  contract,  but  merely  evidence  that 
the  insured  was  entitled  to  a  contract  in  the  usual  form,  and  that 
the  usual  policy  must  be  looked  to  to  ascertain  the  limitations  and 
conditions  of  the  contract  and  the  company's  liability.^^  In  an- 
other case  the  defendant's  agent  agreed  to  insure  one  C,  by  an  ''open 
policy"  upon  tobacco  belonging  to  C.  and  others,  stored  in  C.'s  ware- 
house at  a  certain  rate  per  annum,  the  amount  insured  being  varia- 
ble from  time  to  time  as  the  amount  of  tobacco  in  the  store  should 
vary.  The  time  for  which  the  insurance  should  continue  was  not 
fixed,  and  no  premium  was  received  by  the  agent,  on  the  ground 
that  he  could  not  determine  what  amount  of  premium  would  be- 
come due  under  the  policy.  After  this  agTcement  plaintiff's  tobacco 
stored  in  the  warehouse  was  destroyed  by  fire,  and  it  was  lield  that 
in  the  absence  of  any  definite  agreement  as  to  the  duration  of  the 

« Mead    v.    Westchester    Fire    Ins.  Y.  279,  5  L.R.A.  638,  22  N.  E.  212. 

Co.  3  Hun  (N.  Y.)  608.  See  §  44b  herein. 

'  Sea  Ins.  Co.  v.  Fowler,  21  Wend.  ^  Kimball  v.  Lion  Ins.  Co.  17  Fed. 

(N.   Y.)    600.      See   Hughes  v.   Mer-  625. 

cantile  Mutual  Ins.  Co.  55  N.  Y.  265,  ^°  Mattoon    Manufacturing    Co.    v. 

14  Am.  Rep.  254.  Oshkosh    Mutual    Fire    Ins.    Co.    69 

*  Hughes  V.  Mercantile  Mutual  Ins.  Wis.  564,  35  N.  W.  12. 

Co.  55  N.  Y.  265,  14  Am.  Rep.  254;  ^^  De   Grove   v.   Metropolitan   Ins. 

Sanders  (Landers)  v.  Cooper,  115  N.  Co.  61  N.  Y.  594,  19  Am.  Rep.  305. 

213 


§§  45a,  46  JOYCE  ON  INSURANCE 

risk  there  was  no  coinplolc  contract  of  insurance. ^^  So  a  dcdnite 
statement  of  the  period  of  in.'^urance  is  indispensable  where  the  Code 
requires  a  writing."  But  an  insurer  who  has  left  the  value  of  the 
property  blank,  to  be  determined  after  loss,  is  estopped  to  insist 
that  an  oral  statement  as  to  its  value  was  material  to  the  validity 
of  the  contract.^* 

But  a  contract  of  fire  insurance  is  complete  when  it  appears  that 
the  terms  of  the  contract  have  been  settled  by  the  concurrent  assent 
of  the  parties,  and  nothing  remains  to  be  done  but  to  deliver  the 
policy.^^  And,  if  oral  contracts  of  life  insurance  be  completed  by 
a  meeting  of  the  minds  of  the  parties,  the  insurer  will  be  liable  for 
a  loss  occurring  before  the  issuance  and  delivery  of  the  policy. ^^ 

§  45a.  Same  subject:  where  impossible  to  obtain  definite  partic- 
ulars or  important  facts. — Although  all  the  essential  elements  of 
the  contract  must  ordinarily  be  agreed  upon  in  order  to  bind  the 
parties,  still  if  it  is  at  the  time  impossible  to  obtain  important  facts 
affecting  the  subject  of  their  dealing,  they  can  make  a  general  agree- 
ment to  accomplish  their  purpose  as  Avell  as  they  can,  and  where  a 
contract  is  made  in  the  absence  of  definite  particulars,  it  is  the  duty 
of  a.ssured  to  furnish  them  within  a  reasonable  time,  and  a  breach 
of  this  duty  annuls  the  contract." 

§  46.  Essentials  need  not  be  expressly  agreed  upon:  prior  course 
of  dealing,  custom,  etc.— All  the  essentials  need  not,  liowever,  be 
expressly  negotiated  upon,  since  they  may  be  understood,  as  where 
the  terms  of  the  usual  policy  are  presumed  to  have  been  intended." 
or  where  the  usual  rate  of  premium  is  presumed  to  have  been 
meant ;  ^^  or  in  case  the  duration  of  the  risk  is  understood  to  be  the 

"  Strohn  V.  Hartford  Fire  Ins.  Co.  674,  54  Atl.  458,  32  Ins.  L.  J.  559, 

37  Wis.  625,  19  Am.  Kep.  777.     See  per  Garretson,  J.;  Ruggles  v.  Amen- 

§§  46   50  herein.  <'an  Central  Ins.  Co.  114  N.  Y.  415, 

""Clark  V.  Brand,  62  Ga.  23,  25;  21  N.   E.   1000;   DeGrove  v.  Metro- 

Ga.    Code,    sec.    2794.      See    §    1440  politau   Ins.    Co.   61   N.   Y.   602,   19 

jierein  Am.  Rep.  305;  Boice  v.  Thames  Ins. 

i^Bardwell  v.  Conway  Mutual  Fire  Co.  38  Hun    (N.  Y.)   246.     See  also 

Ins.  Co.  122  Mass.  90.  House  v.  Security  Fire  Ins.  Co.  145 

15  Stephenson  v.  Aliison,  165  Ala.  Iowa  462,  121  N.  W.  509,  38  Ins.  L. 
238,  138  Am.  St.  Rep.  26,  51  So.  J.  875;  Queen  Ins.  Co.  v.  Hartwell 
622;  Todd  v.  German-American  Ins.  Ice  &  Laundry  Co.  7  Ga.  App.  787, 
Co.  2  Ga.  App.  789,  59  S.  E.  94.  68    S.   E.   310,   39   Ins.   L.   J.   1125; 

16  Summers  v.  Mutual  Life  Ins.  Todd  v.  German-American  Ins.  Co. 
Co.  12  Wvo.  369,  66  L.R.A.  812,  109  2  Ga.  App.  789,  59  S.  E.  94;  State 
Am.  St.  Rep.  992,  75  Pac.  937.  Mutual    Fire     Ins.     Co.     v.     Taylor 

"Scammell  v.   China  Mutual  Ins.    (1913)    —   Tex.    Civ.   App.   — ,   157 
Co.  164  Mass.  341,  49  Am.  St.  Rep.    S.  W.  950. 
462,  41  N.  E.  649.  "  Audubon    v.    Excelsior   Ins.    Co. 

18,7  C."  Smith  «&  Wallace  Co.  v.  27  N.  Y.  216;  Perkins  v.  Washington 
Prussian  Nat.  Ins.   Co.  68  N.  J.  L.    Ins.  Co.  4  Cow.  (N.  Y.)  645;  Wmne 

214 


REQUISITES  OF  VALID  CONTRACT  §  47 

samq  as  in  a  former  policy ;  ^°  or  where  by  custom  or  usage  a  cer- 
tain course  of  dealing  has  been  established.^  It  is  said  in  an  Illinois 
case  that:  ''It  has  been  held  that  such  an  oral  contract  will  sustain 
an  action  although  no  express  agreement  was  made  as  to  the  amount 
of  premium  to  be  paid  or  the  duration  of  the  policy,  if  the  inten- 
tion of  the  parties  to  the  contract  in  these  particulars  can  be  gath- 
ered from  the  circumstances  of  the  case."  ^  So  where,  during  nego- 
tiations, nothing  is  said  about  special  conditions  of  the  policy,  it 
will  be  presumed  that  those  which  are  usual  and  customary  were 
intended.^  And  although  the  rale  is  an  element  of  the  contract 
which  nuist  be  agreed  upon,  yet  if  the  proximate  amount  of  pre- 
mium is  known  and  the  exact  amount  is  a  mere  matter  of  calcula- 
tion, and  the  applicant  agrees  to  pay  whatever  amount  the  calcu- 
lation shows  it  to  be  the  contract  can  be  enforced.'* 

§  47.  The  usual  rate  of  premium  will  be  presumed  to  have  been 
intended,  and  the  minds  of  the  parties  will  be  as::umed  to  have  met 
and  iixed  the  rate  where  a  prior  course  of  dealing  would  reasonably 
warrant  such  intendment.^  So,  where  nothing  is  said,  during  the 
negotiations  about  special  rates,  it  will  be  presumed  that  those  which 
are  usual  and  customary  w^ere  intended.^    The  fact  that  the  amount 

V.  Niagara  Fire  Ins.   Co.   91  N.   Y.    herein.)     Michigan  Pipe  Co.  v.  Mich- 

385;  Home  Ins.  Co.  v.  Adier,  71  Ala.    igan  Fire  &  Marine  Ins.  Co.  92  Mic-h. 

r,16.      See    next    following    sections   482,  20  L.R.A.  277,  52  N.  W.  1070; 

lun-ein.      See  also   Queen   Ins.   Co.  v.    J.  C.  Smith  &  Wallace  Co.  v.  Prus- 

Hartwell  Ice  &  Laundry  Co.  7  Ga.    sian  National  Ins.   Co.  68  N.   J.  L. 

A  pp.  787,  68  S.  E.  310,  39  Ins.  L.    674,  54  Atl.  458,  32  Ins.  L.  J.  559, 

J.    1125,    1131;    Todd    v.    German-    per  Garretson,  J. 

American  Ins.   Co.  2  Ga.  App.  789,        ^  Concordia  Fire  Ins.   Co.  v.  Hef- 

59  S.  E.  94;  Jacobs  v.  Atlas  Ins.  Co.    fron,   84   111.   App.    610,   per   Sears, 

148    111.    App.    325;    Michigan    Pipe   P.J. 

Co.  V.  Michigan  Fire  &  Marine  Ins.        ^  Newark   Machine   Co.   v.   Kenton 

Co.  92  Mich.  482,  20  L.R.A.  277,  52    Ins.  Co.  50  Ohio  St.  549,  22  L.R.A. 

N.    W.    1070;    Ames-Brooks    Co.    v.    768,  35  N.  E.  1060. 

.Etna  Ins.  Co.  83  Minn.  346,  86  N.        *  Stale    ]\lutuai    Fire    Ins.    Co.    v. 

W.   344,   30    Ins.    L.   J.   802;   J.    C.    Taylor    (1913)    —    Tex.    Civ.    App. 

Smith  &  Wallace  Co.  v.  Prussian  Na-    — ,  157  S.  W.  950. 

tional  Ins.   Co.  68  N.  J.  L.   674,  32        ^  See  Jacol)s  v.  Atlas  Ins.  Co.  148 

Ins.  L.  J.  561,  54  Atl.  458.  111.   App.   325;    Concordia  Fire   In.s. 

2»  Winne  v.  Niagara  Fire  Ins.  Co.  Co.  v.  Heftron,  84  111.  App.  610 ; 
91  N.  Y.  185.  See  also  Concordia  Michigan  Pipe  Co.  v.  ]\licliigan  Fire 
Fire  Ins.  Co.  v.  Hetlron,  84  111.  App.  &  Marine  Ins.  Co.  92  Mich.  482,  20 
610.  L.R.A.  277,  52  N.  W.  1070;   Araes- 

^  Hartshorne  v.  Union  ]\rutual  Ins.  Brooks  Co.  v.  .T^tna  Ins.  Co.  83 
Co.  36  N.  Y.  172.  See  also  Todd  v.  Minn.  346,  86  N.  W.  344,  30  Ins. 
German-American  Ins.  Co.  2  Ga.  L.  J  802.  See  §  46  herein. 
App.  789,  59  S.  E.  94;  Western  As-  ^  Newark  Machine  Co.  v.  Kenton 
surance  Co.  v.  McAlpin,*23  Ind.  App.  Ins.  Co.  50  Ohio  St.  549,  22  L.R.A. 
220,  77  Am.  St.  Rep.  423,  55  N.  E.  768,  35  N.  E.  1060. 
119.       (See    this    case    under    §    44 

215 


§  48 


JOYCE  ON  INSURANCE 


of  premium  is  not  fixed  does  not  necessarily  prove  that  the  contract 
of  insurance  had  not  become  operative.  Therefore,  a  memorandum 
stating  in  general  terms  tlie  amount  of  insurance  desired  on  chart- 
ered freiglit  of  a  designated  vessel,  ''Premium,  open  for  particu- 
lars," marked  "binding"  before  the  signature  of  the  parties,  and 
"Send  policy  to  Walker  &  Hughes,  63  Wall  street,  New  York,"  is 
an  obligatory  policy  of  insurance.  It  is  equivalent  to  an  agreement 
that  the  insurance  shall  be  upon  a  reasonable  rate  of  premium  until 
the  assured  shall  liave  an  opportunity  to  furnish  furtlier  particu- 
lars, and  that  he  Avill  furnish  them  within  a  reasonable  time.  His 
failure  to  do  so  avoids  the  contract.'  In  Audubon-  v.  Excelsior  In- 
surance Company'*  an  application  was  made  for  insurance 
against  fire  of  certain  engravings  similar  in  all  respects  to 
others  on  which  the  assurer  had  recently  issued  a  policy  to  the  same 
applicant.  The  parties  agreed  verbally  upon  all  the  terms  of  such 
insurance,  except  the  rate  of  premium.  The  previous  insurance  was 
mentioned  in  the  conversation, 'and  the  assurer  promised  to  make 
out  a  policy  and  send  it  to  the  assured  at  a  near  date,  and  it  was 
held  that  there  was  a  contract  to  insure  at  the  former  rate  of  pre- 
mium, and  that  recovery  might  be  had  for  loss  thereon  though  the 
policy  was  not  made  out  when  the  loss  happened.  But  if  anything 
remains  so  that  it  appears  that  tlie  rate  of  premJum  is  not  fixed,  or 
that  the  usual  rates  do  not  apply,  then  the  contract  is  incomplete.* 
and  where  there  is  a  verbal  agreement  for  a  continuous  insurance, 
and  the  rate  of  premium  is  changed,  this  terminates  such  agree- 
ment, and  it  requires  a  new  bargain  to  effect  a  continuing  contract.^ 
So  where  an  agent  had  authority  to  receive  applications  and  for- 
ward the  same  with  the  premium  for  approval,  and  the  policy  is- 
sued was  to  be  of  effect  as  of  the  time  of  the  agreement,  and  the 
usual  rate  was  paid,  but  a  loss  occurred  before  the  agent  forwarded 
the  risk  and  premium,  the  contract  was  held  binding,  although  it 
was  claimed  by  the  company  that  it  had  not  assented  to  the  rate  of 
premium.^" 

§  48.  Both  the  rate  of  premium  and  the  duration  of  the  risk  may 
be  understood,  and  a  valid  contract  exist,  as  where  an  agent  had 
insured  certain  property  for  several  years,  and  upon  expiration  of 
the  insurance  an  application  was  made  to  him  for  another  policy 


'Scammel    v.    China    Mutual    In.s.  23  How.    (64  U.  S.)   401,  16  L.  ed. 

Co.  164  Mass.  341,  49  Am.  St.  Rep.  524. 

462,  41  N.  E.  649.     See  Queen  Ins.       ^  Trustees  of  First  Baptist  Church 

Co.  V.  Hartwell  Ice  &  Laundry  Co.  v.  Brooklyn  Fire  Ins.  Co.  28  N.  Y. 

7  Ga.  App.  787,  68   S.  E.  310,  39  153. 
Ins.  L.  J.  1125.  ^°  Perkins  v.  Washington  Ins.  Co. 

'a  27  N.  Y.  216.  4  Cow.  (N.  Y.)  645. 

^  Orient  Mutual  Ins.  Co.  v.  Wright, 

216 


REQUISITES  OF  VALID  CONTRACT  §§  49,  50 

thereon,  which  was  written  hy  him,  and  thereupon  he  directed  it 
to  be  reported  to  the  defendant,  and  entered  upon  the  register  of 
completed  contracts.  The  rate  of  premium  and  duratiou  of  the  risk 
were  not  specified  when  the  agreement  was  made,  but  the  agent  had 
been  accustomed  to  give  credit  for  premiums  and  to  keep  the  pol- 
.  icies  until  called  for.  Before  delivery  the  property  was  burned,  and 
it  was  held  that  the  same  term  and  rate  of  premium  as  the  expired 
policy  must  have  been  intended,  notwithstanding  the  amount  of 
in.surance  was  reduced  in  the  last  policy." 

§  49.  The  rate  of  premium  and  amount  may  be  understood. — An 
agreement  to  insure  a  cargo  to  be  laden,  provided  the  vessel  sail 
within  a  given  time,  which  agreement,  though  contingent  as  to  the 
amount  to  be  covered  and  the  rate  of  premium,  provides  means  for 
a.scertaining  them  with  certainty  as  soon  as  the  lading  is  completed 
and  the  day  of  sailing  fixed,  is  valid,  and  the  insurers  are  bound  to 
give  a  policy  on  the  vessel's  sailing  within  the  given  time,  and  the 
insured  is  bound  to  pay  the  premium  accordingly. ^^ 

§  50.  Whether  contract  exists  may  be  governed  by  custom  or 
usage  of  the  parties  or  of  the  insurance  business  at  a  place. — It 
is  well  settled  that  insurers  are  bound  to  know  the  customs  of  a 
place  where  they  transact  business,  and  are  assumed  to  have  made 
their  contracts  in  reference  to  such  customs.  So  in  a  New  York 
case,  a  custom  had  existed  for  many  years,  and  had  become  an  es- 
tablished usage  and  course  of  business  by  which  the  insurance  busi- 
ness was  transacted  at  a  certain  place  in  the  following  manner:  Per- 
sons engaged  in  receiving  consignments  of  cotton  at  that  place  ob- 
tained from  the  insurer  a  certificate  of  insurance  expressed  to  cover 
shipments  of  cotton  from  various  points  on  the  river  to  the  holder 
of  such  certificate  to  said  place.  The  holder  kept  a  book  in  wliich 
he  entered  as  received  all  shipments  of  the  description  specified  in 
the  certificate,  with  the  values  and  requisite  particulars,  and  after 
the  end  of  each  month  he  exhibited  such  pass-!)Ook  to  the  insurer, 
and  had  the  premium  fixed.  The  fact  of  shipment  was  rarely 
known  to  the  consignee  or  insurer  before  the  termination  of  the 
risk.  The  defendants,  a  New  York  company,  delivered  to  their 
agents  an  open  policy  of  marine  insurance  for  two  hundred  and 
fifty  thousand  dollars;  a  certificate  of  renewal  of  this  policy,  and  an 
additional  policy  was  thereaflor  issued  for  two  hundred  and  fiftv 
thousand  dollars,  and  delivered  to  said  agents  at  the  same  time  a 

^^  Winne  v.  Niagara  Fire  Ins.  Co.        ^^  Biinten    v.    Orient    Mutual    Ins. 
91   N.   Y.    185.     See   also    Concordia    Co.  8  Bosw.  448.    See  Concordia  Fire 
Fire  Ins.  Co.  v.  Heifion,  84  111.  App.    Ins.  Co.  v.  Heft'ron,  84  111.  App.  610. 
610 ;  Walker  v.  Metropolitan  Ins.  Co.    See  §§  46,  47  herein. 
56  Me.  371. 

217 


§  50  JOYCE  OX  INSURAXX'E 

large  number  of  certificates  to  be  used  in  their  insurance  agency, 
one  of  which  was  issued  to  the  plaintiff  and  pasted  into  his  pass 
book.  The  agents  at  the  time  made  an  entry  in  their  pass  book, 
"I'o  cover  all  cotton  shipped  by  or  for  ac't  of  the  following  parties, 
valuation  per  bale  annexed  to  each  name."  Then  followed  the 
names  and  value  per  bale.  Thereafter  the  agents  wrote  on  the  , 
original  certificate  to  the  plaintiff  a  renewal  of  the  policy,  and 
signed  the  same,  and  at  the  same  time  gave  a  renewal  of  the  certi- 
ficate for  the  same  term.  By  instructions  to  the  agents  the  certi- 
ficates were  covered  by  the  policies,  and  considered  as  representing 
the  policies,  subject  to  the  same  terms  and  payable  in  like  manner. 
Thereafter  and  before  the  termination  of  the  renewal  period  a  boat 
having  cotton  on  board,  consigned  to  the  plaintiff  on  account  of 
the  persons  named  in  the  certificate,  was  destroyed  with  the  cargo 
by  fire.  An  action  was  brought  demanding  the  issue  of  a  formal 
Ijolicy  and  the  amount  due,  and  it  was  held  that  the  defendants 
were  liable,  the  certificate  being  declared  to  be  in  effect  an  open, 
continuous  policy. ^^  In  another  case,  in  the  same  state,  a  contract 
binding  upon  the  company  was  permitted  to  be  established  by  evi- 
dence that  a  custom  existed  between  the  plaintiffs  and  several  in- 
surance companies,  including  the  defendant,  by  which  applications 
were  made  for  "not  to  exceed"  a  certain  sum  where  the  value  of 
property  upon  which  insurance  was  desired  was  not  known  at  the 
time  of  the  application,  and  that  the  company,  not  knowing  tlie 
actual  value  of  the  property,  had  made  insurances  in  like  manner 
with  certain  of  the  other  companies  upon  the  property  in  various 
sums;  ^*  and  a  custom  to  consider  that  an  open  policy  covered  all 
cotton  consigned  to  a  party  unless  the  bill  of  lading  showed  the 
contrary,  binds  the  insurer  in  the  absence  of  such  reservation  in 
the  bill  of  lading.^^ 


Si:bdiv.  II,  Completion-  of  Contract — Proposal  and  Accept- 
ance. 

§  53.     Completion  of  contract :  mutual  benefit  societies  or  associations. 
§  53a.  Same  subject:  acceptance:  approval. 

^3  Hartsliorne  v.  Union  Mut.   Ins.  ^^  Bramstein    v.    Crescent    Mutual 

Co.  36  N.  Y.  172.     See  Todd  v.  Ger-  Ins.  Co.  24  La.  Ann.  589.     See  Dela- 

man-American  Ins.   Co.  2   Ga.  App.  ware  Ins.  Co.  v.  S.  S.  White  Dental 

789,  59  S.  E.  94,  37  Ins.  L.  J.  191;  Manufacturing  Co.  109  Fed.  334.  48 

Concordia  Fire  Ins.  Co.  v.  Heffron,  C.  C.  A.  382,  65  L.R.A.  387,  writ  of 

84  III.  App.  610.  certiorari   denied    (mem.)    18.1    I'.   S. 

iM<'abbri  V.  Mercantile  Ins.  Co.  0  700,  46  L.  ed.  396,  22  Snp.  Ct.  93 *. 
Lans.   (N.  Y.)  446,  Id.  64  Barb.  (N. 
Y.)  85. 

218 


COMPLPrnON  OF  CONTRACT 

>;  531).  Same  subject:  sig-ning'. 

>;  53c.  Same  subject:  initiation:  medical  examination:  signing. 

§  54.     Completion  of  contract :  proposal  or  application. 

§  54a.  Effect  of  absence  of  signed  proposal :  Insurer  may  be  estopped  to  set 
up  want  of  proposal. 

§  54b.  When  contract  of  fidelity  insurance  complete,  and  not  a  mere  pro- 
posal. 

^  55.     Completion  of  contract :  acceptance  generally. 

§  55a.  Mere  intention  to  accept,  insufficient. 

§  55b.  To  what  extent  acceptance  must  accord  with  terms  of  application. 

§  55c.  Proposal  and  acceptance :  counter  propositions. 

§  55d.  Whether  acceptance  of  offer  should  be  communicated  to  proposer. 

i'^  55e.  Protection  by  insurer  pending  approval:  date  when  policy  in  force 

^  56.     Qualified  acceptance:  condition  precedent. 

S  57.     Acceptance :  delay  in  acting  on  application. 

§  58.     (Transferred  to  §§  66b-66j  herein.) 

§  59.     Agent's  agreement :  liability  not  to  attach  till  approval. 

§  59a.  Usage  or  custom  that  agents  can  bind  insurer  until  notice  of  refusal. 

§  60.     Approval  may  be  implied  from  the  circumstances. 

§  61.     Oral  agreement  of  agent  may  be  controlled  by  application. 

§  61a.  Agent's  statement  that  application  accepted:  when  insurer  estopped. 

§  61b.  Agent's  statement  that  certificate  or  application  binding :  mutual  ben- 
efit insurance. 

§  62.     Completion  of  contract:  negotiations  through  mail. 

j^  62a.  Employers'  Hability  insurance :   when  contract  incomplete :  negotia- 
tions with  insurance  agent  through  mail. 

i>  62h.  Contracts  of  insurance :  telegraphic  agency. 

§  63.     No  contract  where  acceptance  mailed  differs  in  terms  from  proposal. 

^  64.     Agent's  receipt  pending  approval  or  issuance  of  policy:   "binding 
slip  :  "'  ''binding  receipt.'' 

§  65.     Same   subject :   effect   of  memorandum :    binding   slip,   indorsement, 
etc. 

§  66.     Completion  of  contract,  marine  and  fire:  binding  slip. 

§  66a.  Binding  slips,  etc.,  continued:  new  terms:  rate  of  premium:  parol 
evidence. 

§  66b.  Delivery  to  and  acceptance  by  applicant:  generally. 

§  66c.  Right  of  applicant  to  reject  policy:  generally. 

§  66d.  Stipulation  or  agreement  for  return  of  policy  by  applicant:  option 
to  accept  or  reject. 

§  66e.  Where  applicant  receives  policy  for  examination:  acceptance. 

§  66f.  Applicant  not  bound  to  accept  policy  when  it  does  not  conform  to 
proposal  or  agreement. 

§  66g.  Where  policy  does  not  conform  to  proposal :  neglect  of  applicant  or 
assured  to  read  policy :  duty  to  notify  company  or  rescind. 

219 


§  53  JOYCI-:  ox  INSURANCE 

§  06h.  When  applicant  may  reject  policy  not  conforming  to  agent's  repre- 
sentations. 
§  66i.  Klt'ect  of  retention  of  policy  by  applicant :  unreasonable  delay. 

§  66 j.  Acceptance  bj-  insured  father  for  infant  beneficiaries. 

§  53.  Completion  of  contract:  mutual  benefit  societies  or  asso- 
ciations.—  hi  mutual  benefit  societies  the  bj-laws  and  charter  of 
the  company  are  of  great  weight  in  determining  what  constitutes 
the  completion  of  tlie  contract,  as  where  the  by-laws  provide  that  the 
l)cneliciarv  nhall  be  named  in  the  certificate,  involving  therebv  the 
question  whether  the  company  has  power  to  complete  a  con- 
tract otherwise  than  in  the  precise  manner  provided,  and  whether 
or  not  a  compliance  with  the  bj'-laws  is  not  a  condition  precedent. 
In  New  York  it  has  been  held  that  it  is  not.^®  Issuing  a  policy 
of  insurance,  however,  within  the  power  of  a  mutual  benefit  society 
under  its  charter,  but  conflicting  with  its  by-laws,  will  be  deemed 
a  waiver  of  such  by-laws  in  favor  of  the  assured,  and  will  be  con- 
trolling.^' And  it  has  been  determined  that  a  valid  contract  of  in- 
surance existed  between  the  owner  of  a  schooner  and  an  insurance 
company  at  the  time  of  her  loss,  although  on  the  application  book 
of  the  company  certain  blanks  left  for  the  value  of  the  ve.'^scl  and 
the  amount  insured  were  not  filled  as  provided  in  the  by-laws.^* 
We  have,  however,  already  ^^  given  some  attention  to  the  question 
of  the  power  of  such  corporations  to  make  a  parol  contract  of  in- 
surance, and  have  seen  tliat  while  in  some  states  the  courts  have 
been  inclined  to  limit  such  corporations  strictly  to  their  statutory 
or  charter  powers,  j^et  in  other  states  a  more  liberal  construction 
has  been  given.^°  But,  as  we  have  stated,  the  by-laws,  however,  are 
made  to  govern  the  officers  and  members  of  the  company,  rather 
than  persons  who  are  about  to  become  members ;  ^  and  such  persons 

^^  Bishop  v.  Grand  Lodge  of  jmu-  Home    Forum    Beneficial    Order    v. 

pire   Order  of   iMulual   Aid,   112   N.  Jones,  5  Okla.  598,  50  Pac.  165,  27 

Y.  627,  20  N.  E.  562,  revg.  43  Hun  ins.  L.  J.  8,  18,  where  the  court,  per 

(N.  Y.)  472.  Dale,  C.  J.,  says:     "If  Ave  apply  to 

^'Davidson    v.    Old    People's    Mu-  this  case  the  rules  which  seem  gen- 

tual    Ben.    Assoc.    39    Minn.    303,    1  erally  to  prevail  we  must  hold  that 

L.K.A.  482,  39  N.  W.  803.  the  parties  to  the  contract  were  gov- 

^8  Dodd  v.  Gloucester  Mutual  Fire  erned   by   the  constitution   and  laws 

Ins.  Co.  120  Mass.  468.  of  the  order.     .     .     .     We  must  fur- 

^^  §  34  ante.  Ihor  hold  that  Jones  was  presumed 

2°  See  also  Bacon's  Benefit  Soc.  &  to  have  known,  and  joined  the  order 

Life  Ins.  sec.  147.  under   a   knowledge   of    such    laws" 

^  The  court  in   Somers  v.   Kansas  a   case,  however,  relating  to  agency 

Protective  Union,  42  Kan.  619,  622,  of    subordinate   lodges.     See    §    407 

22  Pac.  702;  Titsworth  v.  Titsworth,  herein. 

40  Kan.  571,  20  Pac.  213.     Compare  Application  may  provide  that  it  is 

220 


COMPLETiON   OF  CONTRACT 


53 


are  not  member?;,  but  rather  stranoers  to  the  company  in  prior 
negotiations  witli  it  relative  to  granting  insurance,  for  member.ship 
does  not  date  before  consummation  of  the  contract.^ 

The  follou'inr/  general  rules,  however,  govern  in  such  companies 
in  relation  to  the  consummation  of  the  contract.  The  contract  is 
complete  upon  proposal  and  accej^tance  of  the  terms,'  provided  that 
the  terms  are  so  definitely  agreed  upon  as  to  all  the  essentials  that 
all  that  remains  is  to  comply  therewith ;  *  and  the  company  may 
waive  provisions  in  its  by-laws  where  they  are  for  its  benefit,^  and 
acts  done  by  an  agent  within  the  scope  of  his  authority,  although 
in  disregard  of  the  express  provisions  of  the  by-laws,  may  be  bind- 
ing on  the  company.^  And  in  a  mutual  befiefit  order  case  it  was 
contended  that  the  agent  who  obtained  the  application  and  for- 
warded it  to  the  company  had  no  power  to  waive  any  of  the  provi- 
sions of  the  application  or  policy,  but  it  was  held  that  the  agent  was 
a  soliciting  agent,  and  that  his  knowledge  of  facts  before  the  ap- 
plication was  sent  to  the  order  was  the  knowledge  of  the  order;  and 
the  doctrine  of  estoppel  was  applied  to  prevent  a  forfeiture  of  the 
policy.  It  was  also  decided  that  a  person  ajjpointed  as  agent  by  the 
company  to  solicit  insurance,  forward  apj)lications,  and  deliver  pol- 
icies, is  in  effect  the  general  agent  of  the  company,  and  his  knowl- 
edge of  any  fact  that  might  increase  the  risk  is  the  knowledge  of 
the  company.'''  In  a  case  which  arose  in  Nebraska  in  an  action 
brought  against  a  railroad  relief  association,  it  appeared  that  the  by- 
laws of  the  association  provided  that  those  who  desired  to  become 


subject  to  by-laws  and  cliaiter  of 
company  as  in  Winchell  v.  Iowa 
State  Ins.  Co.  103  Iowa,  189,  72  N. 
W.  503. 

2  Eilcnberger  v.  Protective  Mutual 
Fire  Ins.  Co.  89  Pa.  St.  464;  Strat- 
ton  V.  Allen,  Id  N.  J.  Eq.  229; 
Franklin  Fire  Ins.  Co.  v.  Martin,  40 
X.  J.  L.  579,  29  Am.  Rep.  271;  Co- 
lumbia Ins.  Co.  V.  Cooper,  50  Pa.  St. 
331;  Cumberland  Valley  Mutual  Pro- 
tective Co.  V.  Schell,  29  Pa.  St.  .31. 
Compare  quotation  in  last  ])receding 
note.     See  §§  317,  393  herein. 

Tlio  application  may  be  such  that 
tlie  applicant  will  be  presumed  to  be 
acquainted  with  the  rules  of  the  as- 
sociation. Court  of  Honor  v.  Hering, 
178  iMich.  377,  144  N.  W.  843. 

'  Oliver  V.  American  Legion  of 
Honor  (Cal  1882)  17  Am.  L.  Rev. 
301. 


*  Connecticut  Mutual  Life  Ins.  Co. 
V.  Rudolph,  45  Tex.  454;  Todd  v. 
Piedmont  &  Arlington  Life  Ins.  Co. 
34  La.  Ann.  G3. 

*  Manning  v.  Ancient  Order  Unit- 
ed \Vc)rk.  8G  Ky.  13(5;  5  S.  AV.  385; 
Cumbei'land  \'alk'\-  Mutual  Protect. 
Co.  V.  Schell,  29  Pa.  St.  31;  Splawn 
V.  Chew,  ()0  Tex.  532. 

•^  fJnion  Mutual  Life  Ins.  Co.  v. 
Wilkinson,  13  Wall.  (80  U.  S.)  222. 
20  L.  ed.  617;  Somers  v.  Kansas 
Pruloctive  Union,  42  Kan.  619,  22 
Pac.  702;  Emeiv  v.  Boston  Marine 
Ins.  Co.  138  Mas.s.  398.  See  i^§ 
3i)3,  395  herein. 

'''  Thomas  v.  Modern  Brotherhood 
of  America,  25  S.  Dak.  632,  127  N. 
W.  572,  39  Ins.  L.  J.  1539,  and  note. 
See  §§  393,  395,  424  et  seq.  herein. 


221 


§  53a  JOYCE  OX  IXSUKAXCE 

members  should  make  application  in  a  certain  manner,  and  also 
submit  to  a  physical  examination.  "\V.,  on  July  21st,  stated  his  de- 
sire to  become  a  member  to  a  soliciting  agent  of  the  department,  who 
gave  written  notice  of  W.'s  application  to  the  officers  of  the  associa- 
tion, specifying  July  21st  as  the  day  for  the  application  to  take 
effect.  On  July  22d,  however,  W.  w^as  taken  sick.  The  prescribed 
manner  of  making  the  ap])lication  w^as  not  complied  with,  nor  was 
any  physical  examination  made,  and  no  request  was  made  of  W.  for 
compliance  with  either  requirement.  His  name  was  placed  on  the 
roll  of  members  and  an  assessment  deducted  from  his  wages.  On 
August  7th,  the  association,  through  its  officers,  was  notified  of  W.'s 
disability,  and  subsequently  tendered  back  his  assessment  in  tlie 
form  of  a  ''time  check,"  which  he  refused  a  few  hours  before  his 
death.  It  was  held  that  the  company  was  estopped  from  denying 
the  completion  of  the  contract.* 

§  53a.  Same  subject:  acceptance:  approval. — Membership  in  a 
nmtual  company  may  be  obtained  by  acceptance  of  a  policv 
issued  by  the  company;  and  liability  as  a 'member  upon  dissolu- 
tion proceedings  will  thereby  be  created.^  No  proposal  for  absolute 
indemnity  is  contained  in  an  application  for  insurance  which  does 
not  allude  to  the  method  of  raising  the  fund,  so  as  to  render  neces- 
sary' an  acceptance  of  the  policy,  where  it  provides  for  the  levying 
of  an  assessment  to  meet  the  obligation.^"  And  a  deduction  by  a 
raih'oad  company  of  dues  to  an  employees'  relief  association,  from 
the  wages  of  an  employee,  does  not  amount  to  an  acceptance  of  the 
employee's  application  to  become  a  member  of  the  association,  where 
the  constitution  and  by-laws  of  the  association  authorized  the  com- 
])any  to  deduct  dues  from  members,  but  it  does  not  appear  that  the 
company  had  l)een  officially  notified  by  the  association  that  the  em- 
ployee had  been  admitted  to  membership. ^^  If  an  agent  has  no 
authority  to  accept  a  person  to  membership  but  the  application 
must  be  forwarded  to  the  association  for  acceptance,  the  certificate 
does  not  relate  back  to  the  date  of  the  application,  wliere  there  is 
nothing  in  the  latter  to  that  effect,  and  the  association  is  not  liable 
in  such  case,  where  an  accident  occurs  to  the  applicant  before  ac- 

'  Bin-linji^ton  Voluntary  Relief  De-  ^°  Tuttle  v.   Iowa    State   Traveliug 

partment  \.  White,  41  Neb.  547,  59  Men's  Assoc.  132  Iowa  652,  7  L.R.A. 

X.  W.  747,  751.    See  ^§  34,  510  here-  (X.S.)  223,  104  X.  W.  1131. 

in.  "Receipt   and   acceptance"   of  ap- 

^  Swing   V.   Kaufman,   115   K   Y.  plication   and  fee,  see  §   1437   here- 

Supp.  143.     See    (mem.)    117  N.  Y.  in. 

Supp.  1148,  132  A  pp.  Div.  932.  "  Baltimore    &    Ohio    Employee's 

090 


COMPLETION  OF  CONTRACT  §  53b 

ce])(nn('e.^^  But  where  a  benefit  certificate  contained  conditions 
which  were  not  in  a  prior  one,  in  lieu  of  wliich  it  was  isj^ucd.  and 
therefore  an  acceptance  of  the  later  certificate  was  necessary,  al- 
though it  did  not  appear  that  a  written  acceptance  was  required,  a 
finding  in  an  action  thereon  tliat  the  member  had  accepted  said 
later  certificate  is  warranted  where  it  is  shown  that  it  was  found 
among  his  private  papers.^^  Again,  the  enumeration  in  the  appli- 
cation for  insurance  in  a  mutual  benefit  association  of  certain  ex- 
ceptions from  liability  does  not,  by  exclusion,  prevent  the  opera- 
tion of  an  exception  of  suicide  contained  in  the  insurer's  by-law^s, 
so  as  to  render  acceptance  necessary  to  make  binding  a  policy  con- 
taining such  exception,  where  the  application  makes  the  by-laws  a 
basis  of  membership  in  the  association.^*  The  issuance  of  a  policy 
to  a  member  of  a  mutual  fire  insurance  company  may  be  found 
from  admissions  in  the  pleading  or  answer.^*  If  a  policy  is  issued 
by  the  secretary  of  a  mutual  fire  insurance  company  Avith  the  knowl- 
edge of  the  directors,  their  nonaction  constitutes  an  approval  or 
ratification  which  is  binding  where  approval  of  applications  by  the 
board  is  provided  for  by  the  constitution,  even  though  tliey  sup- 
posed the  policy  was  issued  upon  an  application  which  liad  1)cmi  ap- 
proved by  the  promoters  of  the  company,  who  in  fact,  had  never 
passed  upon  the  amended  application.^* 

§  53b.  Same  subject:  signing. — The  acceptance  by  a  member  of 
a  mutual  benefit  association,  of  a  certificate  issued  for  him  and  in 
accordance  with  his  directions,  will  be  presumed,  although  he  never 
signed  the  blank  form  of  acceptance  printed  upon  its  face,  where 
it  does  not  appear  that  such  signature  was  made  in  the  slightest 
degree  a  requisite  for  showing  acceptance."  In  a  INIichigan  case 
the  constitution  and  regulations  of  the  lodge  provided  that  tlie  con- 
tract shovdd  be  complete  on  examination  of  the  applicant  and  ap- 
proval of  the  application  by  the  supreme  lodge,  and  upon  the  sign- 
ing the  certificate  and  forwarding  it  to  the  subordinate  lodge,  which 
was  done,  but  the  subordinate  lodge  retained  it  on  the  gTound  of 

Relief   Assoc,   v.   Post,   122   Pa.    St.  Men's  Assoc.  132  Iowa  652.  7  L.R.A. 

579,  9  Am.   St.   Rep.  147,  2  L.R.A.  (N.S.)  223,  104  N.  W.  1131. 

44,  15  All.  885.  ^^  Spencer  v.  Fanners  Mutual  Ins. 

12  Rogers  v.  Equitable  Mutual  Life  Co.  79_Mo.  App.  213,  2  Mo.  App. 
&  EndoAvnieut  Assoc.  103  Iowa  337,  Rep.   3*7. 

72  N.  W.  538.  Compare  New  York  ^^  Fanners  Co-operative  Ins.  Assoc. 
Life  Ins.  Co.  v.  Moats,  207  Fed.  481,  v.  Taliaferro,  107  Ga.  326,  33  S.  E. 
125  C.  C.  A.  143.  26. 

13  Wood  V.  Brotherhood  of  Ameri-  i'^  Luhrs  v.  Luhrs,  123  N.  Y.  367, 
can  Yeomen,  140  Iowa,  98,  117  N.  W.   9  L.R.A.  534,  25  N.  E.  388. 

1123.  Countersigning    policy — death    be- 

1*  Tuttle  V.   Iowa   State   Traveling   fore,  see  §  1438  herein. 

223 


§  53c  JOYCE  ON  INSURANCE 

fraud  in  the  application,  and  the  court  determined  that  the  benefi- 
ciary might  recover  without  producing  the  certificate,  no  fraud  in 
the  apphcation  being  shown."  And  if  a  policy  against  loss  by  fire 
is  issued  by  a  nuitual  protective  association  to  one  who  has  not 
signed  its  constitution,  he  may  be  estopped  when  sued  for  an  assess- 
ment, and  the  association  when  sued  upon  a  liability  arising  under 
the  policy,  from  asserting  that  he  is  not  a  member  of  the  association 
because  of  such  failure  to  sign.^^  But  where  the  constitution  of  a 
fraternal  association  provides,  as  a  condition  precedent  to  a  benefi- 
ciary certificate  becoming  in  force,  that  it  shall  be  executed  bv  the 
supreme  president  and  supreme  secretary  and  countersigTied  by  cer- 
tain officers  of  the  local  council,  and  the  conditions  accepted  in . 
writing  on  the  certificate  by  the  member  to  whom  it  is  issued,  such 
conditions  must  be  complied  with  before  the  assessment,  paid  when 
the  application  was  made,  can  be  applied.^"  It  has  also  been  held 
that  a  person  enrolled  as  a  member  of  a  mutual  benefit  association, 
without  having  signed  the  application  required,  cannot  claim  any 
insurance,  even  though  he  did  not  know  that  his  application  had 
never  been  received.^  Where  under  the  laws  of  a  society  no  cer- 
tificate was  to  be  issued  until  full  meml:»ership  should  be  conferred, 
and  a  person  made  and  signed  an  api)lication  for  membership,  at- 
tended one  meeting,  and  was  notified  to  attend  the  next,  wdien  full 
membership  would  be  conferred,  and  at  the  time  of  the  next  meet- 
ing he  was  too  ill  to  attend  and  died  shortly  after,  it  was  held  that 
the  contract  was  not  completed.^ 

§  53c.  Same  subject:  initiation:  medical  examination :  signing. — 
A  benefit  certificate  cannot  become  effective  until  an  applicant  has 
been  initiated  into  the  order,  where  such  initiation  is,  by  the  laws 
of  the  order,  made  a  condition  precedent  to  the  execution  of  a  con- 
tract of  insurance.^  And  where  one  of  the  rules  of  a  fraternal  ben- 
efit society  provides  that  no  certificate  of  benefit  membership  shall 

^^  Ijorscher     v.      Supreme     Lotlt^e  ^  Tavlor  v.   Grand  Lodfje  Ancient 

Knifrhts  of  Honor,  Tl  Mich.  316,  40  Order 'U.  W.   75  Iliin   (N.  Y.)    612, 

N.  W.  545.  29  N.  Y.   Supp.   773,  61  N.  Y.   St. 

19  Ricluirds  V.   Louis  Lipp   Co.   69  Rop.  510. 

Ohio  St.  359,  100  Am.  St.  Rop.  679,  Countersi;::niiig:    policy:    death    be- 

69  X.  E.  616.  fore.  S  1438  herein. 

^''Triple     Tie     Benefit     Assoc,     v.  ^  Sovereign  Camp  Woodmen  of  (he 

Wood,  73  Kan.  124,  84  Pac.  5()5.  World    v.    Hall,    104    Ark.    538,   41 

1  Supreme     Lodge     of     Protection  L.R.A.(N.S.)    517,   148    S.    W.    526; 

Knights  &  Ladies  of  Honor  v.  Grace,  Kolosinski  v.  ]\Iodern  Brotherhood  of 

(iO    Tex.    569.      But    see    Somers    v.  America,  175  Mich.  582,  141  N.  W. 

Kansas    Protective    Union,    42    Kan.  589;    Lord  v.    Modern   Woodmen   of 

619.  22  Pac.  702.  America,  113  Mo.  App.  19,  87  S.  W. 

On  failure  to  sign   application   as  530.      See    McWilliaras    v.    Modern 

avoiding  accident,  life,  or  mutual  ben-  Woodmen    of    America     (1912)     — 

efit  poliW,  see  note  in  4  B.  R.  C.  468.  Tex.  Civ.  App.  — ,  142  S.  W.  641. 

224 


COMPLETION  OF  CONTRACT  §  53e 

be  in  force  until  the  applicant  shall  have  been  initiated  or  obligated 
at  a  meeting  of  the  district  court  or  under  a  dispensation  granted, 
and  until  he  shall  have  signed  and  accepted  the  certificate  and  made 
full  payment  of  the  assessment  and  dues  as  provided  in  the  consti- 
tution, and  before  the  recorder  shall  deliver  a  benefit  certificate,  the 
initiate  must,  in  person,  while  in  good  health,  sign  the  certificate 
in  his  presence,  it  cannot  be  held  that  the  risk  was  assumed  until 
the  law  was  complied  with  or  the  compliance  waived;  and  where 
tlie  applicant  reached  the  point  where  he  paid  an  assessment  and 
certain  dues  and  was  initiated,  but  broke  down  with  paresis  before 
the  certificate  was  received  and  it  was  not  delivered  to  him  or  to 
any  person  for  him  nor  demanded  by  him.  and  he  died  from  said 
ailment  it  was  held  that  there  was  no  binding  contract.'*  If  the 
l)rocedure  is  that  applications  for  membership  in  a  fraternal  ben- 
efit society  are  forwarded  by  the  secretary  of  the  local  colony 
to  the  home  ofiice,  and  if  in  proper  form,  and  the  ap- 
plicant duly  found  initiated  and  the  fee  for  the  benefit  certificate 
paid,  a  benefit  certificate,  reciting  that  it  is  issued  upon  condition 
that  the  insured  complies  with  the  laws,  rules,  and  regulations  of 
the  society  and  indorses  thereon  his  acceptance  in  writing  of  the 
certificate  upon  the  conditions  named,  is  then  forwarded  by  the 
home  office  to  the  secretary  of  the  local  colony  for  the  acceptance 
of  the  member,  the  contract  of  the  benefit  certificate  becomes  effec- 
tive when  formally  accepted  by  insured.  Such  accef)lance  is  the 
final  act  consummating  the  contract,  although  delivery  may  be 
conditioned  upon  any  act  such  as  payment  of  premium  to  a  local 
agent.^  AVhere  the  application  of  respondent's  (the  beneficiary) 
wife  was  approved  by  the  home  office  and  returned  to  the  local  dep- 
uty, who  delivered  it  to  the  applicant  with  the  declaration  that  it 
was  in  force,  and  the  lodge  was  organized  a  week  later,  and  she  was 
voted  in  as  a  member,  but  was  prevented  by  sickness  from  attend- 
ing, and  so  was  not  initiated  and  did  not  receive  the  obligation,  and 
after  the  lodge  was  organized,  the  certificate  was  attested  by  re- 
spondent as  secretary  and  by  the  president,  and  redelivered  to  her, 
it  was  held  that  she  did  not  become  a  member  of  the  society,  the 
contract  was  not  completed,  and  the  certificate  was  void.^    And  even 

*  Court   of   Honor   v.   Hering,   178        The     <iiiestioii     of     sickness,     etc., 

Mich.  377,  144  N.  W.  843.       '  pending  acceptance  may  dei)end,  so 

^  Supreme    Colony    United    Order,  far  as  the  (•onii)h'lion  or  validity  of 

Pilgrim  Fathers  v.  Towne,  87  Conn,  the    contract    is   concerned    upon    the 

644,  89  Atl.  264.  question    of    concealment    or    fraud. 

,     ^Loudon    V.    Modern    Brotherhood  Equitable  Life  As.sur.    See.    v.    Mc- 

of   America,    107   Minn.    12,   119    N.  EIroy,  83   Fed.   G31.  49   U.   S.  App. 

W.  425.  548,  28  C.  C.  A.  365,  27  Ins.  L.  J. 
Joyce  Ins.  Vol.  I. — 15.            225 


§  53c  JOYCE  ON  INSURANCE 

though  an  apphcant  has  taken  all  requisite  steps  and  has  been  in- 
itiated, and  the  supreme  medical  examiner  has  approved  the  ap- 
plication and  medical  examination  as  required  by  the  by-lawy,  still 
where  such  requirement  is  a  condition  precedent  to  benelicial  mem- 
l^ership,  the  beneliciary  has  no  claim  for  benefits  where  the  member 
was  accidentally  killed  before  said  approval,  although  on  the  same 
day.'''  Where,  under  the  constitution  and  laws  of  a  beneficiary 
order,  it  is  provided  that  the  local  lodge  may  receive  applications 
for  benefit  certificates,  and  that  such  application  shall,  if  acceptable 
to  the  local  lodge,  and  the  medical  examiner  thereof,  be  at  once 
forwarded  to  the  grand  secretary  of  the  order,  who  shall  submit  the 
same  to  the  grand  medical  examiner,  who  has,  under  the  constitu- 
tion and  laws  of  such  order,  authority  to  reduce  the  sum  named 
in  the  application  for  a  beneficiary  certificate,  or  to  reject  the  same 
altogether;  and  where  it  is  further  provided  that  no  beneficiary 
certificate  shall  be  binding  upon  the  order  until  the  same  has  been 
approved  by  the  grand  medical  examiner,  and  signed  by  the  presi- 
dent and  secretary  of  the  order;  the  approval  and  action  of  such 
ofiicers  are  essential  to  create  an  obligation  upon  the  beneficiary 
certificate,  and  in  such  case  delay  on  the  part  of  the  local  lodge  in 
forwarding  the  application  to  the  grand  lodge  will  not  create  a  con- 
tract in  the  face  of  the  provisions  of  the  constitution  and  laws  of  the 
order,  even  though  the  applicant  had  been  initiated  into  the  order 
and  paid  the  required  dues  and  assessments.^  If  a  medical  exami- 
nation is  made  a  condition  precedent  to  one's  admission  to  the  mutual 
Ijenefit  class  of  a  fraternal  order  his  heirs  cannot  recover,  even 
though  he  pays  the  first  assessment,  where  it  is  to  be  applied  part- 
ly in  payment  of  his  fee  in  the  nonbeneficial  or  social  class,  and 
part  is  to  be  refunded  in  case  of  his  rejection  in  the  other  class.^ 
The  initiation  as  a  member  of  a  local  camp  of  an  applicant  for  mem- 
bership in  a  fraternal  or  beneficial  order  before  the  receipt  by  such 
camp  of  a  certificate  from  the  sovereign  camp,  if  unauthorized  by 
the  constitution  and  by-laws,  is  not  a  waiver  of  conditions  precedent 
to  his  becoming  a  beneficial  member  of  the  order,  but  can,  at  the 

561,  as  to  concealment  in  other  than  *  Home  Forum  Beneficial  Order  v. 
mai-ine  risks,  see  §§  1844  et  seq.  Jones,  5  Okla.  598,  50  Pac.  165,  27 
herein.  Ins.   L.   J.   165.      See  §   407   herein. 

'Patterson  v.  Supreme  Command-  See  also  Patterson  v.  Supreme  Com- 
ery  United  Order  of  Golden  Cross  of  mandery  United  Order  of  Golden 
the  AVorld,  104  Me.  355,  71  Atl.  1016.  Cross  of  the  World,  104  Me.  355, 
See  also  Rogei-s  v.  Equitable  Mutual    71  Atl.  1016. 

Life  &  Endowment  Assoc.  103  Iowa  ^  Asselto  v.  Supreme  Tent  Knights 
337,  72  N.  W.  538.  of  Maccabees,  192  Pa.  5,  43  Atl.  400. 

226 


COMPLETION   OF  CONTRACT  §  53a 

most,  make  liim  only  a  fraternal  member.^"  An  application  for  life 
insurance  and  medical  examination  are  preliminaries  solely  for  the 
benefit  and  protci-lioii  of  the  insurer  in  issuing  the  policy.  He  may 
entirely  dispense  with  or  waive  them,  and  is^slle  a  policy  which  is 
A^alid  and  binding.^^  So  the  issuance  of  a  relief  certificate  is  evi- 
dence that  conditions  precedent  to  receiving  benefits  thereunder, 
such  as  a  medical  examination,  payment  of  the  assessment  and  fee 
and  initiation,  have  been  complied  with  or  waived. ^^  In  a  suit  up- 
on a  mutual  benefit  certificate,  in  order  to  sustain  a  defense  that  the 
medical  examination  of  the  insured  was  reconsidered  and  rejected 
within  six  months  by  the  secretary  of  the  medical  board  of  the  de- 
fendant, in  accordance  w4th  a  provision  therefor  in  the  certificate, 
the  defendant  must  show  that  the  reconsideration  and  rejection 
w^ere  for  a  sufficient  cause  wdiich  existed  at  the  time  of  the  original 
examination.  And  the  fact  that  one  parent  of  an  insured  died  of 
phthisis  before  the  medical  examination  is  not  of  itself  enough  to 
prove  that  sufficient  cause  existed  for  rejection  of  the  insured. ^^ 
Again,  the  initiation,  as  a  member  of  a  local  camp,  of  an  applicant 
for  membership  in  a  fraternal  and  beneficial  order  before  the  re- 
ceipt by  such  camp  of  a  certificate  from  the  sovereign  camp,  if  un- 
authorized by  the  constitution  and  by-laws,  is  not  a  waiver  of  con- 
ditions precedent  to  his  becoming  a  beneficial  member  of  the  order, 
but  can,  at  the  most,  make  him  only  a  fraternal  member.^*  Where 
respondent,  the  beneficiary,  reported  as  secretary  of  the  local  lodge 
to  the  head  office  that  the  applicant  had  become  a  member,  and 
])aid  several  assessments,  which  were  received  and  applied  in  pay- 
iiiciit  thereof  by  the  head  office,  in  ignorance  of  the  facts  as  to  non- 
(•oiii|)lianee  by  the  applicant  with  the  by-laws  as  to  the  necessary 
stc[)s  to  be  taken  to  become  a  member,  it  was  held  that  the  accept- 
ance of  the  money  did  not  constitute  a  waiver  by  the  association 
of  the  right  to  repudiate  the  transaction  and  the  certificate  upon 
discovery  of  the  facts.  On  the  undisputed  evidence  the  company 
was  entitled  to  judgment,  notwithstanding  the  verdict.^*  .  A  med- 
io McLendon  V.  Sov(Mvi<-u  Camp  J.  L.  584,  14  L.R.A.(N.S.)  632,  07 
Woodmen  of  tlie  World,  10(5  Tenn.  All.  1037. 
095,  52  L.R.A.  444,  C4  S.  W.  30.  ^^  McLeudon  v.  Sovereign  Camp  of 

11  Malheit  v.  Metropolitan  Life  Woodmen  of  the  World,  100  Tenn. 
Ins.  Co.  87  Me.  374,  47  Am.  St.  Rep.  095,  52  L.R.A.  444,  64  S.  W.  36. 
330,  32  Atl.  989.  See  Hoefner  v.   Canadian  Order  of 

12  Wagner  v.  Supreme  Lodge  Chosen  Friends  (Ont.  H.  C.  J.)  18 
Knights    &    Ladies    of    Honor,    128   Canadian  L.  T.  86. 

Mich.  660,  8  Det.  Leg.  N.  815,  87  N.        i^  Loudon  v.   Modern  Brotherhood 
W.  903.  of  America,  107  Minn.  12, 119  N.  W. 

1^  Gilroy  v.   Supreme  Court  Inde-   425. 
pendent   Order   of  Foresters,   75   N. 

227 


§  5i  JOYCE  OX  INSUl^ANCE 

ical  examination  by  an  authorized  physician  may  become  a  pre- 
requisite to  the  issuance  of  a  certificate  under  a  statute  making  a 
contract  of  an  as.^ocialion  with  its  members  one  of  life  insurance.^® 

§  54.  Completion  of  contract:  proposal  or  application. — The  pro- 
posal for  insurance  may  be  uiade  by  written  application  or  orally, 
and  it  is  generally  upon  reliance  of  the  facts  stated  therein  that  the 
insurer  accepts  the  risk.  A  written  application  is  now  generally 
dispensed  with  by  fire  insurance  companies.  The  application  is  not 
the  contract,  but  a  mere  proposal  for  insurance,^'' 

If,  however,  an  application  for  accident  insurance  provides  tliat 
the  contract  shall  be  complete  when  received  at  the  insurer's  ofiice 
and  accepted  by  its  secretary,  the  application  accompanied  by  the 
premium  and  their  acceptance  by  the  insurer  forms  the  contract  of 
insurance  until  the  policy  is  issued  and  received." 

No  obligation  rests  upon  the  company  to  accept, ^^  and  a  life 
insurance  company  has  an  absolute  right  to  insist  that  it  shall  ac- 
cept an  application  and  issue  a  'policy  before  it  shall  be  bound  as 
an  insurer,^"  and  it  may  reject  the  proposal  even  though  there  may 
have  been  a  payment  of  part  or  even  all  of  the  premium.^  So, 
where  there  is  the  payment  by  an  applicant  of  the  admission  fee 
and  an  acceptance  by  him  of  a  receipt  stating  that  the  policy  is  not 
to  go  into  effect  until  the  application  has  been  approved  and  ac- 
cepted, and  there  is  a  statement  in  the  application  that  the  annual 
dues  must  be  paid  and  the  policy  actually  delivered  to  the  appli- 
cant^ and  the  application  is  not  accepted  nor  are  the  dues  paid, 

Instate  V.   Willett,  171   lud.   29G,  plication  was  held  to  constitute  the 

23  L.R.A.(N.S.)    197,  86  N.  E.  68;  contract.     In  Home  Life  Ins.  Co.  v. 

Burns'  Ann.  Stat.  Ind.  sec.  4713.  Myers,    112    Fed.    816,   50    C.    C.    A. 

On  whether  u  beneht  association  is  514,  it  was  held  that  the  application 

an  insurance  company,  see  note  in  38  and    certain    questions    and   answers 

L.R.A.  33.     On  what  constitutes  in-  therein  amounted   at  best  to  only  a 

iiurance,    note    in    48    L.ii.A.{X.S.)  contract  for  insurance,  provided  the 

1051.  application  should  be  approved. 

^'  Travis  v.  Nederland  Life  Ins.  When  insurance  contract  is  corn- 
Co.  Ltd.  104  Fed.  486,  43  C.  C.  A.  plete,  see  note  69  Am.  St.  Hep.  143- 
653;  Covenant  Mutual  Benefit  Assoc.  153. 

V.  Conway,  10  Brad.   (10  111.  App.)        "Robinson   v.   United   States   Be- 

348;  Schwurtz  v.  Gerniania  Ins.  Co.  iievolent    Soc.    132    Mich.    695,    102 

18    Minn.    448 ;    Heiman    v.    Phoenix  Am.  St.  Rep.  436,  94  N.  W.  211. 
Mutual  Life  Ins.  Co.  17  Minn.  157,        "^Mutual  Life  Ins.  Co.  v.  Youn?, 

10  Am,  Rep.  154;  McCully  v.  Phce-  23  Wall.  (90  U.  S.)  85,  23  L.  ed.  152; 

nix  Mutual  Life  Ins.  Co.  18  AV.  Va.  Harp  v.  Grangers'  Mutual  Fire  Ins. 

782.      See    Hogben    v.    :\rctropolitaii  Co.  49  :\rd.  309. 

Life  Ins.  Co.  69  Conn.  503,  38  Atl.       20  Summers  v.  :\lLitual  Life  Ins.  Co. 

214,  26  Ins.  L.  J.  998.    But  compare  12  Wvo.  369,  109  Am.  St.  Rep.  992, 

Commercial    Mutual    Accdt.    Co.    v.  66  L.R.A.  812,  75  Pac.  937. 
Bates,  176  111.  194,  52  N.  E.  49,  74        1  Otterbein  v.  Iowa  State  Ins.  Co. 

111.  App.  335,  where  the  written  ap-  57  Iowa,  274,  10  N.  W.  667;  Arm- 

228 


COMPLETION  OF  CONTRACT  §  54a 

tliere  i?  no  valid  contract  created.  The  payment  of  the  admission 
fee  under  such  circumstances  creates  no  contract  of  insurance  of 
itself. 2 

There  may  be  an  acceptance  far  a  limited  period  of  time  with 
tlie  right  reserved  to  reject:  as  in  a  case  where  a  fire  insurance 
company,  havino;  received  an  application  for  a  policy,  contracted 
to  accept  the  risk  for  the  term  of  thirty  days  from  date,  "unless  the 
applicant  is  sooner  notified  of  its  rejection.  If  he  receives  no  no- 
tice that  the  risk  is  rejected,  the  insurance  will  cease  at  the  end  of 
the  thirty  days,  unless  a  regular  policy  has  been  issued. '^  After 
expiration  of  the  thirty  days  a  loss  occurred,  no  policy  having  been 
issued  nor  notice  of  rejection  given;  it  was  held  that  the  company 
was  not  liable.^ 

So  the  acceptance  may  be  conditional.* 

If  the  application  is  not  made  in  writing  and  there  are  no  state- 
ments contained  in  any  written  application  as  to  the  risk  or  subject- 
matter,  then  oral  proof  of  such  facts  is  admissible.^  Though  oral 
statements  are  not  admissible,  as  a  rule,  to  alter  the  application,  if 
in  writing,^  for  such  application  is  itself  the  best  evidence  of  its 
contents.' 

Where  the  custom  of  the  compmiy  has  been  to  issue  a  new  pol- 
icy covering  a  former  risk  without  a  new  written  application  there- 
for, the  secretary  of  the  company  has  authority  to  issue  a  new  policy 
without  a  new  written  application,  notwithstanding  a  by-law  pro- 
vides that  all  applications  shall  be  examined  and  approved  before 
a  policy  is  issued.^ 

§  54a.  Effect  of  absence  of  signed  proposal:  insurer  may  be 
estopped  to  set  up  want  of  proposal. — in  an  English  case  a  jiolicy 
was  effected  by  a  wife  ujK.n  her  husband's  life,  who  was  the  as- 
sured under  said  policy  which  Avas  issued  under  the  seal  of  insurer 
and  stated  that  it  was  granted  in  consideration  that  the  proposer  had 
signed  and  delivered  a  proposal  to  the  company  which  constituted 
the  agreed  basis  of  the  contract.  It  was  also  stipulated  that  any 
untrue  statement  therein  as  to  assured's  health  should  render  the 
policy  void  and  all  moneys  paid  thereunder  on  account  of  the 

strong  v.  State  Ins.  Co.  61  Iowa,  212,  ^  Ashworth     v.     Builders'     Mutual 

le  N.  W.  94.  Fire  Ins.  Co.  112  Mass.  422;  17  Am. 

2  Weinftld  v.  Mutual  Reserve  Fund  Rep.  117;  Jenkins  v.  Quincy  Mutual 
Life  Assoc.  53  Fed.  208.  Fire  Ins.  Co.  7  Gray  (73  Mass.)  370; 

3  Barr  v.  North  American  Ins.  Co.  Tibbets  v.  Hamilton  Mutual  Ins.  Co. 
61  Ind.  488.  •>  Allen    (85  ^Mass.)    569.     See  Com- 

'  Hamilton  v.  Lvcoming  Ins.  Co.  5  mercial  Mutual  Accident  Co.  v.  Bates, 
Pa.  St.  339.     See  §  56  herein.  176  111.  194,  52  N.  E.  49. 

^The   court    in    Iloose   v.   Prescott        '  Lewis  v.  Hudmon,  56  Ala.  186. 
Ins.  Co.  84  Mich.  309,  11  L.R.A.  340,        ^  ^ell  v.  Herman  Farmers  :\lutual 
47  N.  W.  587,  32  Cent.  L.  J.  226         Ins.  Co.  75  Wis.  521,  44  N.  W.  828. 

229 


§§  :Ah,  55  JOYCE  ON  INSURANCE 

insurance  should  be  forfeited.  Said  wife,  who  had  duly  paid  the 
])remiums,  claimed  tlie  policy  amount  upon  assured's  death.  The 
insurer  resisted  the  claim  on  the  ground  that  the  proposal 
on  which  the  policy  had  been  issued  contained  misrepresen- 
tations as  to  the  assured's  health.  At  the  hearing  before  justices 
of  a  complaint  for  nonpayment  of  the  sum  insured,  the  wife  satis- 
lied  the  justices  that  a  proposal  produced  by  the  comj^any  and  pur- 
])orting  to  be  signed  by  her  was  not  signed  by  her  or  with  her  au- 
thority, and  she  further  stated  that  no  proposal  at  all  had  l)een 
.signed  by  her  or  with  her  authority.  It  was  held  that  the  company, 
having  issued  the  policy  and  received  the  premiums,  was  estopped 
from  contending  that  in  consequence  of  the  want  of  a  proposal  there 
was  no  contract;  that  the  mere  fact  that  the  wife,  instead  of  con- 
fining her  evidence  to  the  disproof  of  the  proposal  put  forward  by 
tlie  company,  made  the  admission,  irrelevant  to  her  own  case,  that 
there  had  been  no  proposal  at  all,  did  not  prevent  her  from  taking 
the  benetit  of  that  estoppel;  and  that  the  company  was  liable  on 
the  policy.^ 

§  54b.  When  contract  of  fidelity  insurance  complete,  and  not 
a  mere  proposal. — A  temporary  contract  executed  and  delivered  to 
an  employer,  upon  his  application,  which  expressly  states  that  the 
company  "hereby  guaranties  the  fidelity"  of  an  employee  and  that 
all  liability  shall  cease  upon  issuance  of  the  regular  bond  or  in  a 
certain  number  of  days  if  no  bond  is  issued,  is  binding  and  is  not 
converted  into  a  mere  proposal  for  a  contract  by  Avriting  across  the 
face  of  the  contract  the  Avords:  ''subject  to  result  of  investigation." 
Such  words  should  be  so  construed  as  merely  to  give  to  defendant 
the  right  to  cancel  the  contract  on  further  investigation,  so  as  to 
prevent  future  liability.^" 

§  55.  Completion  of  contract:  acceptance  generally.— A  propo- 
sition only  becomes  a  binding  contract  when  the  party  to  whom  it 
is  made  signifies  his  acceptance  to  the  proposal. ^^  so  that  in  the  ab- 
sence of  some  provision  to  the  contrary  there  nuist  be  an  actual  ac- 
ceptance of  the  proposal  for  insurance,  some  act  to  bind  the  com- 

3  Pearl  Life  Assur.  Co.  v.  .Johnson,  construction.     Allis  CIialmer.«?  Co.  v. 

Same  v.  Greenhalgh,  [1909]  2  K.  B.  Fidelity  &  Depo.'^it  Co.  29  T.  L.  R. 

L.  R.  288   (above  text  is  partly  the  .'SOfi.  Pbillimore,  J. 
syllabus  in  this  ease).  ^^  Bentley  v.  Columbia  Ins.  Co.  17 

"  On    when    contract    is    dceraed    to  N.  Y.  421,  423 ;  Hartford  Fire  Ins. 

have    been    made,    see    noles    in    63  Co.  v.  Davenport.  37  IMich.  600.     See 

L.R.A.  833.  and  23  L.R.A.(N.S.)  968.  §^   fi6b-66j  herein. 

10  Hall  v.  United  Slates  Fidelity  &  Acceptance  and  issuing  policy  corn- 
Guarantee  Co.  177  :Minn.  24,  79  N.  plete  contract.  Deviue  v.  Federal 
W.  590,  28  Ins.  L.  J.  661.  Life   Ins.  Co.  250  111.  20.3,  95  N.  E. 

Fidelily    insurance :    emploj/ee    in-  174,  40  Ins.  L.  J.  1513. 
sured    from    "issuance"    of    policii : 

230 


COMPLETION  OF  CONTKACT 


§  55 


pany,  or  some  act  must  be  done  which  is  equivalent  thereto,  and 
from  which  the  company  cannot  recede  without  liability. ^'^ 

If  the  act  done  by  the  insurer  be  such  that  a  liability  would  exist 
against  him  were  he  to  withdraw,  or,  in  other  words,  if  he  has  so 
acted  that  he  cainiot  recede  without  liability,  there  is  an  acceptance, 
and  the  contract  is  complete.^^  So  a  contract  of  life  insurance  is 
consummated  upon  the  unconditional  written  acceptance  of  the  ap- 
plication for  insurance  by  the  company  to  which  such  application 
is  made."  And  where  a  written  proposal  for  fire  insurance  is  ac- 
cepted by  the  company  there  is  a  meeting  of  the  minds  of  the  par- 
ties, and  a  valid  contract  of  insurance  which  will  be  enforced.^* 
And  acceptance  of  a  proposal  to  insure  for  a  premium  offered  com- 
pletes the  negotiations;  and  where  upon  the  same  day  that  an  ap- 
plication for  insurance  was  filed  the  company  made  out  and  signed 
the  policy,  it  thereby  ratified  the  application,  and  its  consent  was 
complete. ^^ 

So  a  fire  insurance  company  admits  its  liability  and  is  estopped 
to  claim  that  a  policy  was  not  accepted  or  in  force,  where  it  issued 
and  delivered  the  policy  antedating  its  liability  and  accepted  proofs 
of  a  loss  occurring  between  the  two  dates,  and  participated  in  an 


12  United  .S'/«fe.s.— Shattuck  v.  Mu- 
tual Life  Ins.  Co.  4  Cliff  (C.  C.) 
598,  Fed.  Cas.  No.  12,715. 

Alabama. — Al;  bama  Gold  Life  Ins. 
Co.  V.  Mayes,  61  Ala.  103. 

Georgia. — W.  P.  Harper  &  Co.  v. 
Ginners  Mutual  Ins.  Co.  6  Ga.  App. 
139,  04  S.  E.  567. 

Indiana. — New  England  Ins.  Co. 
V.  Robinson,  25  Ind.  530. 

Maine. — Carlelon  v.  Patrons  An- 
droseosr^in  IMutual  Fire  Ins.  Co.  109 
I\re.  79;  39  L.R.A.(N.S.)  951,  954, 
82  Atl.  649. 

Masmchusetts. — IMarkey  v.  Mutual 
Benefit  Ins.  Co.  103  Mass.  92. 

Minnesota. — Schwartz  v.  Germaniu 
Ins.  Co.  18  Minn.  448;  Heiman  v. 
Plio?nix  Mutual  Life  Ins.  Co.  17 
Minn.  153,  10  Am.  Kep.  154. 

ilf?s.soi«r/.— Keim  v.  Home  Mutual 
Fire  Ins.  Co.  42  Mo.  38,  97  Am.  Deo. 
291. 

New  Jemeri. — Halloek  v.  Commer- 
cial Insurance  Co.  20  N.  J.  L.  278. 

Oklahoma. — Shawnee  ^lutual  Fire 
Ins.  Co.  V.  IMcClure.  39  Okla.  535,  49 
L.R.A.(N.S.)  10r)4,  35  Pac.  1150. 

231 


Texas. — Connecticut  IMutual  Life 
Ins.  Co.  V.  Rudolph,  45  Tex.  454. 

Virginia. — Haden  v.  Farmers'  & 
Mechanics'  Fire  Assoc.  80  Va.  683; 
Ilaskin  v.  A2:rieultural  Fire  Ins.  Co. 
78  Va.  707.  ^ 

"Negotiation"  means  the  entire 
transaction  of  applying  for  and  final- 
ly issuing-  the  completed  contract  of 
insurance.  Everson  v.  General  Fire 
&  Life  Assur.  Corp.  Ltd.  202  INIass. 
169,  88  N,  E.  658,  38  Ins.  L.  J.  923 
and  note  931. 

13  Mead  v.  Davison,  3  Ad.  &  E. 
.303;  Dunlop  v.  Higgins,  1  H.  L.  Cas. 
;]81;  Kentucky  'Mutual  Ins.  Co.  v. 
.Tenks,  5  Ind.  96;  Viii^sar  v.  Camp,  14 
Barb.  (N.  Y.)  341. 

14  New  York  Life  Ins.  Co.  v.  Bab- 
cock,  104  Ga.  07,  69  Am.  St  Rep. 
134,  42  L.R.A.  88,  30  S.  E.  273,  27 
Ins.  L.  J.  049. 

1^  Herring  v.  American  Ins.  Co. 
123  Iowa  533,  99  N.  W.  130,  33  Ins. 
L.  J.  558. 

16  Keim  v.  Home  ^Ntutnal  Fire  Ins. 
Co.  42  :\ro.  38,  97  Am.  Dec.  291. 


§  55a  JOYCE  ON  INSURANCE 

adjustment  based  on  tlie  validity  of  four  policies  that  relieved  it 
of  one  fourth  of  it<  liability,  and  issued  its  check  therefor,"  And 
when  an  open  policy  is  issued  ''on  property  on  board  vessel,"  etc., 
"with  such  other  risks  as  may  be  agreed  on,  as  per  indorsement 
hereon,  accepted  by  the  company,"  and  the  risk  is  agreed  upon, 
the  premium  paid,  and  the  indorsement  made  by  the  agent,  the  in- 
surance is  effected;  but  a  different  rule  obtains  where  the  risk  is 
''to  be  accepted.*'^*  But  a  present  contract  of  insurance  is  not  effect- 
ed by  signing  an  application,  followed  by  the  statement  of  the  agent 
that  he  would  "see  to  it,  take  care  of  it  so  it  would  be  all  right," 
would  "get  a  policy."  ^^  If  an  application  for  accident  insurance 
provides  that  the  contract  shall  be  complete  when  received  at  the 
insurer's  office  and  accepted*  by  its  secretary,  the  application  accom- 
panied by  the  premium  and  their  acceptartce  by  the  insurer  forms 
the  contract  of  insurtmce  until  the  policy  is  issued  and  received.^" 

In  an  action  on  a  policy  of  insurance  which  had  been  filled  up 
and  signed,  but  not  delivered,  and  on  which  no  premiums  had  been 
paid,  it  is  for  the  jury  to  determine  what  constitutes  a  reasonable 
time  within  which  the  insured  should  pay  the  premium  and  accept 
the  policy.^  It  is  also  a  question  for  the  jury  whetlier  an  applica- 
tion to  an  insurance  com]:>any  b}^  a  party  desiring  to  be  insured  has 
been  declined  or  not.^  and  the  question  whether  a  policy  was  issued 
•  on  a  written  application  may  be  one  for  the  jury,*  but  the  effect  of 
an  acceptance  is  a  question  for  the  court.* 

If  the  policy  ever  attached,  the  insurer  has  a  claim  for  premium ; 
if  otherwise,  he  has  not.^ 

§  55a.  Mere  intention  to  accept,  insufficient. — A  mere  intention 
by  the  insurer  to  accept  the  proposal  is  of  itself  alone  insufficient, 

"  Finlev  v.  "Western  Empire  Ins.  199    N.    Y.    590.      See    Robinson    v. 

Co.  69  Wa.sh.  673,  125  Pae.  1012.  '  Union  Central  Life  Ins.  Co.    (U.   S. 

iMVass   v.    Maine   .Mutual    .Marine  C.  C.)  144  Fed.  1005,  rev'd  148  Fed. 

Ins.  Co.  CI  IMe.  5.37.  358,  78  C.  C.  A.  208. 

^^  Whitman  v.  ^lilwaukee  Fire  Ins.        ^  Cronin  v.   Fire   Assoc,   of  Pliila. 

Co.    128   Wis.  'l24,   5   L.R.A.(N.S.)  123  Mich.  277,  6  Det.  L.  N.  1048,  82 

407,  116  Am.  St.  Rep.  !?5,  107  N.  W.  N.  W.  45,  29  Ins.  L.  J.  564. 
291.  *  ^lanson    v.    Metropolitan    Surelv 

20  Robinson   v.   United    States   Be-  Co.  112  N.  Y.  Supp.  886,  128  App. 

nevolent  Soc.  132  :\Iicli.  695,  102  Am.  T)W.  577  affd  (mem.)  199  N.  Y.  590. 
St.  Rep.  4.36,  94  N.  W,  211.     The  ap-        ^  Cleveland  v.    Fittyplar-e,  3  ]\rass. 

plication  here  was  marked  •■approved  392,    395;    ^Merchants'     Ins.     Co.    v. 

and  accepted"  by  tlie  .secretary.  Clapp,  11  Pick.    (28  Mass.)    56,  61; 

^  P>axter  v.  Mas.-asoit  Ins.   Co.  13  Homer  v.  Dorr,  10  ]\Iass.  26;  Tavlor 

Allen  (95  Mass.)  320.  v.  Lowell.  3  Ma.ss.  331,  3  Am.  Dec. 

2  Mutual   Benefit   Life   Ins.    Co.   v.  141:    Elliers   v.    United    Ins.    Co.   16 

Wi=:e,  34  :\Id.  582;  Manson  v.  Metro-  -Tohns.    (N.    Y.)    128;    Hendricks    v. 

politan  Snretv  Co.  112  N.  Y.  Supp.  Commercial  Ins.  Co.  8  Johns.  (N.  Y.) 

886,  128  App.  Div.  577  (mem.)  affd  1. 

232 


I 


COMPLETION  OF  CONTRACT  §  55b 

as  such  intention  may  be  changed  even  thougli  certain  preliminary 
acts  liave  been  done  by  the  insurer  in  view  of  a  sub.-^equent  consum- 
mation of  the  contract.^  And  in  ca.se  of  a  mere  offer  or  bare  pro- 
posal, a  mental  determination  to  accept,  or  even  acts  done  in 
pursuance  thereof  are  not  sufhcient,  when  not  completed  by  a 
reciprocal  promise.' 

§  55b.  To  what  extent  acceptance  must  accord  with  terms  of 
application. — It  may  be  stated  as  a  general  rule  that  the  apphcant 
has  a  right  to  assume  -that  his  policy  will  be  in  accordance  with  his 
ap])lication,  and  it  is  the  duty  of  the  insurer  to  so  write  it.  If  other 
and  different  clauses  not  in  accord  therewith  are  inserted  by  the 
insurer  he  should  call  insured's  attention  to  them.^  It  is  also  neces- 
sary, in  order  to  establish  an  insurance  contract,  where  the  parties 
are  at  the  same  place,  that  there  "should  be,  according  to  the  prin- 
ciples of  the  common  law  an  offer  and  an  acceptance  thereof  in  ac- 
cordance with  its  terms.^  In  a  Maryland  case  it  is  held  that  where 
the  binding  slip  given  by  a  fire  insurance  company  for  temporary 
insurance  is  in  the  form  of  an  executed  contract,  and  not  in  the 
form  of  a  contract  executory  only,  the  conditions  of  a  policy  issued 
and  tendered,  after  the  applicant  has  sustained  a  loss,  cannot  be 
read  into  the  contract;  and  where  such  binding  slip  is  silent  as  to 
the  question  of  other  insurance  it  is  not  competent  to  inject  into 
the  contract  any  restrictions  of  that  character.  It  is  also  too  late,  in 
such  a  case,  to  reject  the  application  after  a  loss  has  occurred.^"  If 
a  signed  application  expressly  provides  the  basis  on  which  the  in- 
surance is  to  be  effected  the  insurer  cannot,  whether  by  inadvert- 

^  Allen    V.    Massaelmsetts,    ]\Iutual  J.  761  (a  distinction  is  made  in  llii-^ 

Accident  Assoc.  167  ^lass.  18,  44  N.  case  between  bilateral  and  unilateial 

E.  ]0:)3,  26  Ins.  L.  J,  316.  contracts).    See  ^  63  herein. 

'  New  V.   Gerniania   Fire  Ins.   Co.  "Acceptance    innst    correspond    to 

171    1 11(1.  35,  131  Am.  St.  Rep.  24'),  offer  in  every  re.spect  leaving' nothino; 

8.")  X.  E.  703.  cpeii  to  fntnre  negotiations."    1  Paji'e 

8  (iernian-.\merican  Ins.  Co.  v.  on  Contracts  (ed.  100.'))  see.  45. 
Darrin,  80  Kan.  578,  103  Pac.  87.  38  "It  becomes  a  contract  only  when 
Ins.  L.  J.  1008,  citing'  and  quoting  (he  iiropositioii  is  met  by  an  accept- 
from  Gristock  v.  !\oyal  Ins.  Co.  87  ance  wliicli  coi-re.>^iH)nds  with  it  en- 
Micli.  428,  49  N.  W.  634;  ]\fcEJroy  v.  tii'ely  and  adequately,  an  assent,  how- 
British  American  Assur.  Co.  94  Fed.  ever,  may  bind  the  party,  altliougli 
990,  36  C.  C.  A.  61.').  See  also  Mohr-  not  ex-jn-ess  or  in  writing,  if  it  can  l)e 
staclt  V.  ^Intual  Life  Ins.  Co.  11')  fairlv  inferred  from  bis  profiting  bv 
Fed.  81,  32  C.  C.  A.  675.  See  §  6:5  llie  .•Stipulations  of  the  contract."  1 
herein.  Parsons  on  Contracts  (ed.  1904)  bot- 

As  to  neglect  of  applicant  to  read  tom  p.  513  (Book  II.  ^p.  476). 

application    or    policy,    see    §§    C)()<i,  i°  ^lutnal     Fire     Ins.     Co.     ^font. 

1974.  3514  note,  liere'in.  County  v.  Goldstein,  119  Md.  83,  86 

9  Busher  v.  New  York  Life  Ins.  Co.  Atl.  35. 
72  N.  H.  551,  58  Atl.  41,  33  Ins.  L. 

233 


§  55b  JOYCE  ON  INSURANCE 

ence,  mistake  or  design,  change  such  basis  of  contract  and  substitute 
another  in  its  stead  and  thereby  bind  the  applicant  without  his 
knowledge  or  consent  and  the  latter  ha.s  the  right  to  assume  that 
the  policy  if  issued  will  be  upon  the  stated  Ijasis  as  offered,  and  it 
is  the  duty  of  the  assurer  to  so  write  it  or  reject  it.  If  such  an  ap- 
plication is  received  and  retained  by  the  company,  and  a  policy  be 
written  and  delivered,  and  the  premium  paid  by  the  applicant  and 
retained  by  the  company,  a  binding  contract  of  insurance  is  effected 
on  the  basis  of  the  application."  If  an  agent  has  authority  to 
negotiate,  write,  and  transmit  applications,  he  has  for  such  pur- 
poses all  the  power  the  company  itself  possesses,  and  agreements 
made  with  him  as  to  what  the  terms  of  the  application  should  be, 
are  made  with  the  company.  It  is  the  agent's  duty  to  frame  the 
application  in  accordance  with  his  agreement  with  the  applicant 
and  his  neglect  to  do  so  is  the  company's  neglect.  His  knowledge 
is  his  principal's  knowledge  and  where  the  company  in  such  case 
accepts  and  approves  the  application,  receives  and  retains  the  first 
year's  premium  and  issues  the  policy  a  binding  contract  of  insur- 
ance is  effected  according  to  the  agreement. ^^ 

It  may  be  stated,  however,  that  conditions  not  mentioned  in  the 
application  may  be  inserted  in  the  policy  by  the  insurer,  but  with 
this  qualification  that  if  the  policy  issued  contains  any  clause,  to 
which  assured  does  not  agree,  he  is  at  lil)erty  to  reject  it,  and  either 
demand  a  rescission  and  return  of  the  premium  paid,  or  insist  up- 
on a  policy  without  the  condition  to  which  he  does  not  assent,  and 
if  such  a  policy  is  received  and  accepted  without  objection  and  re- 
newed, the  objectionable  clause  cannot  be  eliminated  on  the  ground 
that  it  is  not  expressly  referred  to  in  the  application.^^  In  a  Massa- 
chusetts case  the  court  says:  "The  application  not  only  did  not  con- 
tain the  terms  and  conditions  which  the  defendant  says  they  did 
not,  but,  so  far  as  appears,  they  did  not  contain  many  other  terms 
and  conditions  which  are  in  the  policies.  Ordinarily  it  is  not  ex- 
pected that  an  application  for  insurance  will  contain  all  the  terms 
and  conditions  which  are  included  in  the  policy  when  it  is  issued. 
Certain  particulars  are  named ;  othei-s  are  not.  The  application  is 
for  such  insurance  on  such  terms  and  conditions  as,  in  view  of  the 
particulars  submitted,  the  companj'  sells.    It  is  to  be  presumed  that, 

^1  German    American    Ins.    Co.    v.  Lee  v.  Union   Central  Life  Ins.   Co. 

Darvin,  80  Kan.  578,  103  Pae.  871,  38  22  Kv.  L.  Rop.  1712,  56  S.  ^V.  724, 

In.s.  L.  J.  1008.  29  Ins.  L.  J.  510. 

i2pfiester  v.   jMissouri   State  Life       "  Bi„„t  v.  Fidelitv  &  Casualty  Co. 

Ins.  Co.  85  Kan.  97,  116  Pae.  245,  40  145  Cal.  268.  67  L.R.A.  793,  104  Am. 

Ins.  L.  J.  1651.  St.  Rep.  34,  78  Pae.  729,  34  Ins.  L. 

'    Presumption  that  terms  of  policy  J.  166. 
in   conformity  Avith  application,   see 

234 


i 


COMPLETION  OF  CONTRACT  §§  55e,  53d 

as  in, other  cases,  the  purchaser  has  made  himself  acquainted  with 
what  he  is  purcliasing.  On  the  delivery  of  the  policy,  therefore, 
the  contract  becomes  complete  without  any  further  assent  on  the 
part  of  the  insured.  Possibly,  if  the  policy  contains  any  extraord- 
inary provisions  such  as  are  generally  or  often  found  in  policies, 
the  insured  on  receiving  it  might  have  a  right  to  rescind.  But  that 
was  not  the  case  here.  Morever,  the  plaintiff  is  a  mutual  company. 
.  .  .  The  provision  contained  in  one  of  the  policies  in  regard 
to  coinsurance  or  average  is  not  shown  to  liave  been  an  unusual  oi- 
extraordinary  provision,  and  it  appears  that  the  brokers  who  were 
acting  for  the  defendant  knew  that  it  was  frequently  inserted  in 
policies,  and  knew  when  the  applications  were  sent  what  the  uni- 
form provisions  of  the  policies  issued  by  the  plaintiff  were."  ^* 

§  55c.  Proposal  and  acceptance:  counter  propositions. — If  the 
applicant  rejects  the  contract  offered  and  makes  a  counter  proposi- 
tion and  refuses  to  pay  the  premium  until  it  is  accepted,  there  is 
no  contract  unless  such  proposition  is  accepted  and  notice  of  ac-' 
ceptance  given  to  the  proposer.^^  If  the  company  rejects  the  appli- 
cation and  makes  a  counter  proposition  which  is  accepted  and  the 
required  premium  is  paid  it  is  a  valid  insurance  contract  even 
though  no  policy  of  insurance  is  issued. ^^  But  if  the  insurer  replies 
to  tlie  application  by  proposing  different  terms,  or  by  sending  a 
l)olicy  differing  in  essential  matters  no  contract  is  made  until  the 
counter  proposition  or  policy  has  been  accepted  by  the  applicant.^' 

§  55d.  Whether  acceptance  of  offer  should  be  communicated  to 
proposer. — A  contract  may  be  completed  by  notice  of  acceptance, 
as  where  tliere  was  some  correspondence  as  to  the  rate  of  .premiuin 
and  the  applicant  finally  notified  the  company  that  he  agreed  to 
the  rale  required,  it  was  held  that  a  valid  contract  of  insurance  had 
been  made.^* 

^*  Commonwcnltli  ^rntuol  Firp  Tns.  ropolitnn  Surety  Co.  112  N.  Y.  Supi). 

Co.  V.  Will.  Knal)e  &  Co.  171  Mas?.  880,  128  App.  Div.  577,  ati'M  (mem.) 

205,  50  N.  E.  516,  29  Ins.  L.  J.  34,  199  N.  Y.  590.    But  see  §  55d  liereiii. 

l)er  Morton,  J.,  cited  in  Paquette  v.  ^^  Carter  v.  Bankers  Life  Ins.  Co. 

Pi'udenlial   Ins.   Co.   193   ^Mass.   215,  83   Neb.   810,  120   N.   W.  455.     See 

220,  79  N.   E.  250,  to  point  tliat   a  $^  OOc  lierein. 

liolicy  of  life  insurance  may  coiitain  ^"^  See  Micliisjaii  Pipe  Co.  v.  IMiclii- 

conditions  not  found  in  tlie  applica-  L;an   Kire  &  Marine  Ins.  VjO.  92  Mieli. 

tion,  but  outside  oE  any  independput  482,  491,  20  L.R.xV.  277,  289,  52  N. 

agreement  the  application    an<i     i)ol-  W.    1070,    1073.       See    §§     OOe  (iOli 

icy   together    usually    form    the    con-  liei-ein. 

tract.  18  p]a,nes  v.  Home  Ins.   Co.  91   I^. 

i^Eriuitable    Life    Assurance    Soc.  S.  G21,  24  L.  ed.  298.     Seetliisea.se 

v.   iMcKlroy,  8:5  Fed.   631,   49  U.    S.  under  §  45  herein. 

App.  548,  28  C.   C.  A.  365,  27  Ins.  As    to    ne^'otiations    tlirouuli    mail 

L.  J.  561.     Eianiiiie  INlanson  v.  Met-  or  teleurams,  see  {^>?  02,  ()2a,  63  herein. 

235 


§  ood  JOYCE  OX  INSURANCE 

So  Avhere  the  company's  officers  merely  place  an  initial  letter 
on  the  application,  upon  notice  to  the  applicant  that  the  policy 
is  prepared  and  ready  for  him  there  is  an  acceptance  by  the 
company.^^  But  the  question  has  been  raised  as  to  the  necessity 
of  such  a  communication  and  in  a  Federal  case  it  is  directly  held 
that  the  acceptance  of  an  offer  not  communicated  to  the  proposer 
does  not  make  a  contract,  but  this  was  a  case  of  a  counter  proposi- 
tion.'^" In  a  New  Hampshire  case  it  is  also  decided  that  the  accept- 
ance to  be  complete  must  be  actually  communicated  to  the  offerer, 
except  that  in  cases  of  offers  by  mail  or  telegraph  constructive 
notice  of  acceptance  may  be  sufiicient.^  In  a  West  A'^irginia  case 
it  is  held  that  a  contract  cannot  bind  the  party  proposing  it,  luitil 
the  acceptance  of  the  other  party  is  in  some  way  actually  or  con- 
structively communicated  to  him.'^     In  an  Indiana  case  it  is  deter- 

Delivery:  notice  to  assured  of  exe-  notice    of    acceptance    is    necessar3\ 

cution    of  policy,   see   §    100    herein.  "A  mere  mental  intention  to  accept. 

Binding-  slip,  etc.,  see  §§  65  et  seq.  not  followed  by  sucli  act  or  notice  as 

herein.  is  sufficient  in  law  to  charg-e  the  par- 

^^  Armstrong  v.  Provident   Saving  ty   making  the   offer   with   notice   of 

Life  Assur.  Soc.  (D.  C.  Ont.)  2  Ont.  the  acceptance,  dots  not  have  any  Ic- 

L.  Rep.  771.  gal  effect  '\i\  converting  the  offer  into 

20  Equitable  Life  Ins.  Co.  v.  Mc-  a  contract."  Id. 
Elrov,  83  Fed.  631,  49  U.  S.  App.  ^  Rusher  v.  New  York  Life  Ins.  Co. 
548,  28  C.  C.  A.  365,  27  Ins.  L.  J.  561.  72  N.  H.  551,  58  Atl.  41,  33  Ins.  L. 
The  court,  per  Sanborn,  C.  J.,  cites  J.  761.  See  Kilcullen  v.  Metropoli- 
Kendall's  Admr.  v.  Pacitie  Mutual  tan  Life  Ins.  Co.  108  Mo.  Ap]j.  61, 
Life  Ins.  Co.  gl  Fed.  689,  2  C.  C.  A.  82  S.  W.  966,  holding  that  there  was 
459,  10  U.  S.  App.  256;  Jenness  v.  no  completed  contract,  and  no  corn- 
Iron  Co.  53  Me.  20.  23;  Thayer  v.  municated  acceptance  of  the  applica- 
Middlesex   ^Mutual  Fire  Ins.   Co.   10  tion. 

Pick.  (27  Mass.)  325,  331;  MeCul-  2  ]^jeCnlly's  Admr.  v.  Plia-nix  Mu- 
lough  V.  Eagle  Ins.  Co.  1  Pick.  (18  tual  Life  Ins.  Co.  18  W.  Va.  782, 
Mass.)  278;  Beckwith  v.  Cheever,  21  (following  the  lans'uage  of  1  Par- 
NT.  H._41,  44;  White  v.  Corlies,  46  N.  sons'  Con.  483).  In  this  case  tlie 
Y.  467;  Borland  v.  Guffey,  1  Grant's  ajiplication  provided  that  the  "con- 
Cas.  (Pa.)  394;  Duncan  v.  Heller.  13  tract  shall  be  completed  onlv  bv  the 
S.  C.  94,  96.  delivering    of    the    policy,"  'but    the 

"An  acceptance  which  does  not  go  above  was  also  decided  as  a  general 

beyond    an    uncommunicated    mental  principle.     The  court  said:     ''In  the 

determination,  cannot  create  a  bind-  case    of    Barr    v.    Insurance    Co.    of 

ing  agreement  .simply  because  the  in-  North  America,   6^  Ind.  488,  it  was 

tention    to   accept    did   in   fact   exist,  held  that  a  company  may  be  bound, 

.     .     .     But  in  the  rule  that  accept-  tliongh    no    policy    was    issued;    but 

anee  of  an  offer  must  be  communi-  there  must  be  a  valid  contract  .'^ub- 

cated,  the  word  'communicated'  does  sisting  between  the  ^larties.     A  mere 

not  mean  actual  notice."     Lawson  on  acceptance  of  tlie  proposition  by  the 

Contracts  (ed.  1905)  ?<ec.  26.     See  1  company   would   not   create   a   valid 

Page   on    Contracts    (ed.    1905)    sec.  contract  witlunit  a  notification  to  tlie 

43,  where  (he  cases  considered  are  to  insured.      ...      In    Hobb's    Case, 

the   effect   that    a    connnunication    or  Law  Rep.  4  Eq.  9,  it  was  held,  that  a 

236 


COMPLETION  OF  CONTRACT  §  Twd 

mined  that  in  case  of  a  mere  offer  or  bare  proposal,  mental  deter- 
mination to  accept  or  even  acts  done  in  inirsuance  thereof  are  not 
sufHcient  to  bind  .the  party  who  makes  the  offer,  a  reciprocal  prom- 
ise is  required,  and  therefore  in  addition  to  consent  the  party  to 
whom  the  offer  is  made  must  connnunicate  his  acceptance  directly 
or  constructively  to  the  other  party,  that  is  he  must,  in  the  latter 
case,  use  such  agency  as  amounts  to  constructive  notice.'  In  jNlassa- 
chusetts  it  is  held  that  wliere  the  application  provides  that  it  must 
be  received  and  accepted  by  the  company  before  it  is  liable  and 
that  it  is  not  responsible  for  money  paid  to  any  other  than  its 
treasurer,  or  those  authorized  by  him  in  writing,  the  signing  of  an 
application  and  the  payment  of  money  to  an  agent  by  the  applicant 
constitutes  no  acceptance  even  though  the  company  had  received 
the  application  and  had  been  intending  to  accept  it.  and  had 
made  some  minutes  on  it  at  the  home  office  but  had  changed  its 
intention  when  it  heard  of  an  accident  to  the  applicant,  no  accept- 
ance having  been  communicated  to  him  prior  thereto.* 

But  under  a  jNIichigan  decision  actual  acceptance  at  the  home 
office  may  be  sufficient  Avithout  notice  of  acceptance  especially  so 
wdiere  the  application  provides  that  the  conti-act  shall  be  complete 
upon  such  approval.^  And  where  upon  the  same  day  that  an 
application  was  filed  and  the  premium  offered,  the  company  made 
out  and  signed  the  policy,  it  thereby  ratified  the  application  and 
its  consent  was  comidete.^  In  Oklahoma  proof  of  approval  of  an 
application,  independently  of  the  issuance  and  delivery  of  a  policy, 
may  be  made  by  direct  evidence  of  the  act  of  approval  itself,  or 
in  an  implied  way  by  the  acceptance  and  application  of  the  pre- 
mium, and  it  is  declared  that  the  correct  rule  seems  to  be  that  the 
obligation-  of  the  insurer  or  insurance  company  depends  on  the 
fact  of  the  acceptance  or  approval  of  the  application  for  insurance 
and  not  on  notice  of  such  acceptance  to  the  insured.'^  And  the 
sole  question  should  be,  as  we  have  stated  elsewhere.*  whether  the 
insurer  has  signified  his  acceptance  by  some  binding  act  from 

proposed  contract  is  not  bindins-  on  *  Allen    v.    Massachusetts    Mutual 

the  party  who  proposes  it  until  its  Accident  Assoc.  167  Maas.  18,  41  N. 

acceptance   by   the    other    party   has  E.  105'),  26  Ins.  L.  J.  316. 

been    communicated    to    him    or    his  ^  Robinson  v.  United  States  Benev- 

ao-ent.     Vide  also  Dimh)p  v.  Hiu<jins,  olont  Soc.  132  Mich.  695.  102  Am.  St. 

I'^H.  L.  Cases,  381;   Tayloe  v.   Mer-  Rep.  436,  94  N.  W.  211. 

chants  Fire  Ins.  Co.  9  How.   (50  V.  ^  Koim  v.  Home  ]Vhitnal  Fire  Ins. 

S.)   390,  402,  13  L.  ed.  187;  Trevor  Co.  42  Mo.  38,  97  Am.  Dec.  291. 

V.  Wood,  36  N.  Y.  :507."  '  Van    Arschile-Osbornc   Brokerage 

3  New  v.   Germania  Fire   Ins.   Co.  Co.  v.  Cooper,  28  Okla.  598,  115  Pac. 

171  Ind.  33,  131  Am.  St.  Rep.  245,  779,  40  In.s.  L.  J.  1625. 

85  N.   E.  703.     Question   of  accept-  *  See  §  55  herein, 
ance  by  mail,  although  general  prin- 
ciple held  to  be  as  above  stated. 

237 


§§  53e-57  JOYCE  OX  INSIJJAXCE 

which  he  cannot  recede.  The  test  is  not  intention  alone  but 
whether  tiiat  intention  has  been  effected. 

§  55e.  Protection  by  insurer  pending  approval;  date  when  policy 
in  force. — A  notilicution  from  an  insurance  company  that  it  would 
protect  until  the  application  is  acted  upon  does  not  place  the  insur- 
ance in  force  from  that  date  for  the  purpose  of  determining  the 
truthfulness  of  statements  in  the  application  at  the  mception  of  the 
contract.^ 

§  56.  Qualified  acceptance:  conditions  precedent. — An  acceptance 
may  be  quaUlied  or  made  depeiident  upon  the  performance  of 
some  condition  precedent,  in  Avhich  case  notice  of  compliance 
therewith  will  bind  the  insurer.  This  is  illustrated  by  a  case 
where  a  person  haAdng  an  interest  in  an  academy  building  applied 
to  the  agent  of  a  mutual  ofKce  for  insurance,  paid  what  cash  was 
required,  and  gave  the  necessary  premium  note.  The  insurance 
company  agreed  to  issue  a  policy  on  the  application  on  certain 
alterations  being  made  in  the  building,  and  on  authority  from 
the  trustees  of  the  academy  to  effect  the  insurance.  These  condi- 
tions were  complied  with,  and  the  agent  Avas  notified  to  examine  the 
building,  which  he  did  not  do.  It  was  held  that  the  risk  com- 
menced from  the  time  of  the  notice  that  the  conditions  were 
performed.^"  In  case  of  a  conditional  acceptance  of  the  risk,  if 
the  conditions  specified  are  not  complied  Avith  no  valid  contract  is 
effected,"  and  if  the  time  or  place  of  acceptance  is  specified,  the 
acceptance  must  conform  thereto.^^  In  case  the  policy  does  not 
conform  to  that  contemplated  by  the  application,  there  must  be  an 
acceptance  of  such  policy,  or  there  is  no  binding  contract,  and 
where  there  is  such  a  change  of  terms  acceptance  by  the  company 
is  a  qualified  acceptance  which  the  api^licant  is  not  bound  to  accept 
and  if  he  does  not  accept  the  company  is  not  bound.^^  Again, 
the  acceptance  may  be  qualified  by  the  terms  of  the  binding  receipt 
as  where  the  insurance  is  to  be  effective  from  the  date  of  the 
i-eceipt  subject  however  to  the  company's  approval  or  rejection  of 
the  risk.^* 

§  57.  Acceptance:  delay  in  acting  on  application. — There  is,  as 
we  have  seen,  no  obligation  resting  upon  the  insurer  to  accept 

'  Carleton  v.  Patrons  Androscoggin  Quill  v.  Boston  Ins.   Co.  197  Mass. 

Mutual  Fire  Ins.  Co.  109  Me.  79,  39  -16;  83  N.  E.  401. 

L.li.A.(X.S.)  951,  82  Atl.  649.     See  ,  ''J^I^J^^",.,^':   Pr'^'^^^  ^^^'^*- 

^§  o9,  P4-66  herein.  13  :\rutual  Life  Ins.  Co.  v.  Young, 

"  Hamilton  v.  Lycoming  Ins.  Co.  5  23  Wall.  (90  U.  S.)  85,  23  L.  ed.  152. 

Pa.  St.  3;!9.  14  :\ro}irstadt   v.   Mutual   Life   Ins. 

"  Gauntlett   v.    Sea   Ins.    Co.    127  Co.   115  Fed.  81,  52  C.   C.  A.  675. 

Mich.  504,  86  N.  W.  1047.     See  also  See  S§  64,  96  herein. 

238 


COMPLETION   OF  COKTKACT  §57 

a  proposal  or  application  for  insurance/^  and  therefore  delay  in  act- 
ing thereon  will  not  in  itself  warrant  a  presumption  of  acceptance. ^^ 
Thus,  in  an  Alabama  case,  a  receipt  was  given  by  an  agent  recitinp; 
that  the  applicant  was  to  be  considered  insured  from  date,  "if  said 
application  shall  be  approved  and  accepted  by  said  company."  Af- 
ter several  weeks  the  application  was  rejected,  and  it  was  held  that 
no  acceptance  could  be  implied  from  such  delay,  even  though  the 
note  for  the  premium  was  not  surrendered,  it  not  appearing  that 
the  agent  claimed  the  power  to  contract,"  So  the  company  will 
not  be  bound  by  a  mere  delay  of  five  months  without  reply  to  the 
proposal ;  ^®  nor  by  a  delay  of  two  months  and  the  retention  of  a 
note  for  the  first  premium ;  ^^  nor  will  unreasonaljle  delay  bind 
the  company,^"  and  it  was  held  a  question  for  the  jury  whether  a 
delay  of  twenty  seven  daj's  was  unreasonable ;  ^  and  where  the 
application  provided  ''the  policy  to  bear  date  and  take  effect  at 
noon  of  the  day  this  application  is  approved,"  this  was  held  to 
mean  approval  by  the  home  or  principal  office,  and  that  a  delay 
of  eighteen  days  before  rejecting  the  application  would  not  warrant 
a  presumption  of  acceptance.^  In  another  case  an  application  for 
fire  insurance  was  made  to  a  mutual  company  August  7th,  the 
application  being  subject  to  the  ai^proval  of  the  directors,  and  was 
delivered  to  one  of  the  directors  August  9th.  On  the  19th  of 
Aug-ust  the  directors  had  a  meeting  for  the  transaction  of  special 
business,  and  no  action  was  at  that  time  taken  on  the  application. 
August  30th  the  house  was  burned.  September  25th,  at  the  first 
regular  meeting  of  the  executive  committee,  the  application  was 
rejected,  and  the  connnittee's  action  was  approved  by  the  directors. 
It  was  held  that  there  was  no  such  negligence  on  the  part  of  the 
company  as  would  entitle  the  plaintiff*  to  recover.' 

Again,  an  insurance  company  does  not,  by  delay  in  passing 

^^  §  53  herein.  "  Alabama  Gokl  Life  Ins.   Co.  v. 

"  Equitable  A.ssuraiiee  Soe.  v.  Mc-  Mayes,  61  Ala.  163. 

Elroy,  83  Fed.  631,  49  U.  S.  App.  "New   York    Mutual    Ins.    Co.    v. 

548, "28  C.  C.  A.  365,  27  Ins.  L.  J.  Jolinson,  23  Pa.  St.  72. 

561;  Herman  v.  Phamix  Mutual  Life  ^^  Ross  v.  New  York  Life  Ins.  Co. 

Ins.   Co.   17   Minn.   153;   Hallock   v.  124  N.  Car.  395,  32  S.  E.  733. 

Commercial  Ins.  Co.  26  N.  J.  L.  268,  ^o  Misselhorn    v.    Mutual    Reserve 

27  Id.  645,  72  Am.  Dec.  379;  Has-  Fund   Life  Assn.   30   Fed.  545,   per 

kin  V.  Agricultural  Fire  Ins.  Co.  78  Brewer,  J. 

Va.  707.  ^  Duffy  v.  Bankers  Life  Assoc.  160 

That   mere   delay   in   acting   upon  Iowa,  19,  46  L.R.A.(N.S.)  25,  139  N. 

an   application   cannot   be  construed  W.  1087. 

into  an   acceptance  is  supported  by  ^  Winnesheik  Ins.  Co.  v.  Holzgrafe, 

an  overwhelming  weight  of  aulhori-  53  111.  516,  5  Am.  Rep.  64. 

ty.     See  notes  36  L.R.A.(N.S.)  1211,  3  pxarp   v.   Grangers'   Mutual   Fire 

and  51  L.R.A.(N.S.)  873.  Ins.  Co.  49  Md.  307. 

239 


§  58  JOYCE  OX  INSURANCE 

upon  an  application  presented  by  an  uninsurable  risk,  assume 
the  obligation  of  an  insurer  upon  the  theory  that  its  conduct  pre- 
vents the  securing  of  insurance  elsewhere  and  creates  a  legal  pre- 
sumption of  acceptance.*  And  mere  delay  in  rejecting  a  receipt 
for  renewal  of  an  accident  policy  does  not  amount  to  an  acceptance 
which  will  continue  the  policy  in  force.^  So  where  the  agent,  who 
knew  of  the  rejection  of  the  application,  failed  for  eighteen  days 
thereafter  to  notify  the  insured,  and  a  fire  occuri-ed,  the  company  is 
not  liable.^ 

But  retention  of  tlie  premium  and  failure  to  reject  within  a  rea- 
sonable time,  may  imply  an  acceptance ;  '  and  if  through  negli- 
gence of  the  agent  the  application  is  not  received  or  acted  upon, 
until  a  loss  occurs,  the  company  is  liable.* 

In  case  of  a  proposal  by  mail  an  offer  to  insure  should  be  accepted 
within  a  reasonable  time,  or  the  party  might  assume  that  it  was 
rejected.^  But  if  the  company  agrees  to  notify  the  applicant  of 
rejection  of  his  proposal,  and  receives  the  application  and  premiuiri 
note,  but  fails  to  send  such  notification  for  seven  months,  and  tlie 
property  is  burned  in  the  meantime,  this  is  such  a  delay  as  to 
render  the  company  liable.^" 

The  applicant  has  also  the  right  to  assume  that  his  application 
was  rejected  after  a  delay  of  forty  days  where  the  receipt  for  the 
premium  so  provided  and  no  explanation  of  the  delay  was  offered. ^^ 

§  58.  Transferred  to  §§  66b-66j  herein. 

*  Northwestern  Mut.  Life  Ins.  Co.  time  to  adjust  a  matter  o£  concern 
V.  Neafus,  145  K3'.  563,  36  L.K.A.  onfy  to  itseff  were  tantamount  to  an 
(N.S.)  1211,  140  S.  W.  1026.  acceptance  of  the  application  of  an 

*  Richmond  v.  Travelers'  Ins.  Co.  ag-reemeut  to  issue  the  policy.''  In 
123  Tenn.  307,  30  L.K.A. (N.S.)  954,  this  case  insured  met  with  an  accident 
130  S.  W.  790.  heforc  the  policy  ^vas  delivered.     The 

^  More  V.  New  York  Bowery  Fire  court  in  the  principal  case  also  con- 
Ins.  Co.  130  N.  Y.  537,  29  N.  E.  757,  siderti  Campbell  v.  American  Fire 
rev'g  10  N.  Y.  Supp.  44,  55  Hun  Ins.  Co.  73  Wis.  100,  40  N.  W.  661 ; 
540.  New  York  Life  Ins.  Co.  v.  Babcock. 

'  Robinson  v.  United  States  Benev-  104  Ga.  67,  69  Am.  St.  Rep.  134,  42 

olent   Soc.   132  Mich.   695,  102   Am.  L.R.A.  88,   30   S.   K.   273,,  and   cites 

St.  Rep.  436,  94  N.  W.  211   (in  this  Continental  Ins.   Co.   v.   Haynes,  10 

case  application  was  made  June  29,  Ky.  L.  Rep.  276;  Uartford  Fire  Ins. 

accepted    June    30;    policy    was    re-  Co.  v.  Iving,  106  Ala.  519,  17  So.  507. 

ceived  by  agent  July  2,  and  insured  *  Fish  v.  Cottenet,  44  N.  Y.  538. 

was  killed  July  2).     The  court,  per  ^  Thayer  v.  ^liddlesex  ^Mutual  Fire 

Grant,  J.,  considers  Preferred  Acci-  Ins.  Co."^  10  Pick.  (27  Mass.)  326. 

dent  Ins.  Co.  v.  Stone,  61  Kan.  48,  ^^  Somerset    County    ^futnal    Fire 

58,  986,  and  quotes  therefrom  as  fol-  Jns.  Co.  v.  May,  2  We^'k.  Not.  Cas. 

lows:     "The  retention  of  the  premi-  (Pa.)  43. 

nm  and  its  failure  to  reject  the  appli-  ^^  Stillwell     v.     Covenant     Mutual 

cation,  its  holdins'  of  it  while  it  took  Life  Ins.  Co.  83  ^lo.  App.  215. 

240 


COMPLETJOX   OF   CONTRACT  §  59 

§  59.  Agent's  agreement:  liability  not  to  attach  till  approval. — 
If  the  application  provides  llial  no  liability  sliall  attach  until 
approval  by  the  principal,  such  ai)proval  is  necessary  to  coini)lctc 
the  contract,  and  if  a  loss  occurs  before  such  approval,  the  insur- 
ance company  is  not  lialjle,  though  the  premium  has  been  delivered 
to  the  local  agent. ^^  If  a  ])erson  applies  for  life  i/isurance  and  pays 
an  amount  equal  to  the  first  premium,  but  the  application  and  tlie 
receipt  for  the  money  paid  stipulate  that  the  insurance  is  to  become 
effective  only  when  the  application  is  approved  and  the  policy 
issued,  the  transaction  does  not  amount  to  an  agreement  for  pre- 
liminary or  temporary  insurauce.^^  And  where  if  an  agent  has  au- 
thority merely  to  receive  ai)plications  and  forward  the  same  for  ap- 
proval and  to  deliver  policies  and  receive  premiums,  and  the  appli- 
cant knows  the  extent  of  the  agent's  authority,  but  that  the  policy 
vvas  to  l)e  issued  by  the  general  agent  on  his  approval  of  the  risk,  and 
the  risk  is  rejected  after  the  property  is  burned,  but  without  knowl- 
edge of  the  fact,  there  is  no  valid  contract  of  insurance.^*  In  another 
ca.«e  an  insurance  solicitor  received  a  written  ai)))lication  for  insur- 
ance, witli  the  understanding  that  no  liability  should  attach  until 
approval  by  the  company.  The  solicitor  also  accej^ted  the  premium 
and  gave  a  receipt  therefor  providing  that  it  should  be  returned  in 
case  of  nona])proval  of  the  ri.sk.  I'he  solicitor  mailed  the  apjilica- 
tion  and  ])remium  to  the  company,  but  the  comijany  never  received 
or  heard  of  them,  no  policy  was  i.ssued.  and  the  j)remium  was  not 
returned  to  the  applicant.  It  was  decided  that  the  company  was 
not  liable. ^^  In  a  New  York  case  a  general  agent  appointed  a 
subagent,  with  authority  to  make  contracts^  for  insurance  which 
.should  be  binding  u[)on  the  company  from  the  date  of  application 
until,  upon  reference  to  the  general  agent,  they  t^hould  be  rejected. 
The  plaintiff  claimed  to  have  been  appointed  a  subagent,  and  sent 
a  Ic'Hm-  proposing  insurance.  The  letter  was  delivered  to  the 
general  agent.  There  was  conflicting  evidence  as  to  whether  the 
latter  read  plaintiff's  letter  until  after  he  had  knowledge  of  the 
fire;  but  after  he  knew  of  the  fire  he  executed  and  deli\crcd  a  policy 
to  the  plaintiff,  and  it  was  held  that  the  policy  was  invalid,  and 
that  the  agent  had  no  authority  to  issue  a  jtolicy  to  himself. ^^ 

An  application  to  an   insurauic   (•()iii])aiiy   for  a   pdlicy   of  fire 

^^  Pickett  v.  German  Fire  Tn.s.  Co.  ^^  Fleiiiiii<i'  v.   Il.u-t  fdfd'    Fii'e    Ins. 

.".9  Kan.  ()97,  18  Pae.  <)();];  .Jacoh.^  v.  Co.  42  Wis.  (il(i. 

New  York  Lit'e  Ins.  Co.  71  Miss.  ()5S,  ^^  Atkinson  v.  ilawkeve  In.s.  Co.  71 

129  Atl.  ()()().     See  §§  ()4-(;(i.  !)(i  Iicre-  Iowa,  340,  32  X.  W.  371.     This  was 

in.  ,'1  lire  risk:  tlie  aueiU  was  a  soliciting; 

^' Cookscv  v.  Mutnal  Life  Ins.  Co.  a<ienl  onlv. 

73  Ark.   llY.   108   Am.   St.    IJep.  2fi,  iMV-nliev  v.  Cohimhia  Ins.  Co.  17 

83  S.  W.  317.  X.  Y.  121. 
,r()y(o    Ins.  Vol.   J.— Hi.              241 


§§  o9a,  60  JOYCE  ON  INSURANCE 

insurance,  and  a  pi'oinisc  by  it?  agent  to  attend  in  due  time  to  the 
matter  of  taking  sucli  further  ."-teps  as  were  nece&sary  to  efJ'ect  the 
insurance,  subject  to  the  action  of  the  insurer,  do  not  constitute  a 
valid  contract  for  insurance  in  pra^senti."  If  the  application  taken 
by  a  local  agent  is  conditioned  that  it  shall  attach  only  upon  the 
general  agent's  approval,  and  he  approves  it,  but  with  a  modifica- 
tion which  the  applicant  accepts,  a  subsequent  approval  by  the 
general  agent  is  unnecessary.^^ 

§  59a.  Usage  or  custom  that  agents  can  bind  insurer  until  notice 
of  refusal. — A  general  usage  or  custom  to  the  etfect  that  persons 
authorized  to  solicit  insurance  can  bind  their  principal  until 
notice  of  the  refusal  of  the  risk  is  received  by  the  agent  and  com- 
municated to  the  person  desiring  insurance  is  valid,  and  is  binding 
both  upon  stock  and  mutual  insurance  corporations  insuring  against 
loss  by  fire.^' 

§  60.  Approval  may  be  implied  from  the  circumstances. — Receipt 
of  a  premium  from  a  local  agent,  by  the  general  agent,  followed  by 
an  instruction  from  the  latter  to  the  former  to  cancel  the  policy, 
will  be  such  a  recognition  of  the  existence  of  the  policy  as  to 
constitute  the  requisite  "approvar"  of  the  general  agent  for  its 
validity ;  ^°  and  if  after  the  execution  and  delivery  of  a  policy 
by  an  agent  of  the  insurers  duly  authorized  to  make  insurance  upon 
vessels  and  who  had  in  fact  previously  insured  the  same  vessel  for 
the  same  applicant,  a  memorandum  is  signed  by  the  insured  that 
the  insurance  is  to  take  effect  ''when  api3roved  by  the  general 
agent  at  Buft'alo,"  and  a  loss  occurs,  the  insurers  ai'e  liable  although 
the  insurance  was  disapproved  by  the  general  agent,  who  directed 
the  agent  to  return  the  premium  note  and  cancel  the  policy;  no 
notice  of  the  disapproval  having  been  given  to  the  insured  till 
after  the  loss.^  Again,  the  insurance  wa^  to  inure  from  the 
time  of  the  payment  of  the  premium  to  the  agent,  provided  the 
company  approved  the  risk,  and  the  agent  having  had  negotiations 
with  a  pai'ty  accepted  a  premium  for  insurance  for  a  certain  sum 
to  conuuence  then,  and  gave  a  receipt  therefor  as  agent.     Before 

^"^  Whitman  v.  Milwaukee  Fire  Tns.  Cited  in  Cnneordia  Fire  Ins.  Co.  v. 

Co.  128  Wis.  124,  llti  Am.  St.  Rep.  Hefifroii,  84  III.  App.  612 ;  Underivood 

25,   o   L.R.A.(N.S.)    407    (annotated  \,  Greenwich  Ins.  Co.  161  N.  Y.  413, 

on  the  requisite.s  of  an  oral  contract  55  N.  E.  936,  29  Ins.  L.  J.  149  (as  to 

of  in.surance)    107  X.  W.  291.  this  last  case  see  note  12  under  §  66a 

^^  Born  V.  Home  Ins.  Co.  120  Iowa,  herein).     Examine  §§  46,  50,  65  here- 

299,  94  X.  W.  849.  in. 

"  Brown  v.  Franklin  Alut.  Fire  Ins.  20  ^tna  Ins.  Co.  v.  ^ilaguire,  51  111. 

Co.  165  Mass.  565,  52  Am.  St.  Rep.  342.     See  §  73  herein. 

.534,  43  N.  E.  512.    See  also  Insaranc(>  ^  TFAna    Ins.    Co.    v.    Webster,    6 

Co.  of  Vallev  of  Ya.  v.  Mordecai,  22  Wall.  (73  U.  S.)  129,  18  L.  ed.  888. 
How.  (63  U.  S.)  Ill,  16  L.  ed.  329. 


COMPLETION  OF  CONTRACT  §§  61,  Gla 

llie  preniiuin  was  received  by  tlie  company  or  the  policy  made 
out  the  i>reiiiises  wore  burned.  Had  the  premium  boon  jmmc- 
chalely  remitted  by  llie  af2,ent  to  the  home  ofiicc,  it  would  have  been 
received  there  befoi-e  tlie  los;^.  In  the  lower  court  it  waR  held  that 
there  could  be  no  binding  contract  until  the  receipt  of  the  premium 
and  approval  of  the  lisk  at  the  home  ofhce.  The  court  of  errors, 
however,  decided  ibat  a  recovery  could  be  had.^ 

§  61.  Oral  agreement  of  agent  may  be  controlled  by  applica- 
tion.— If  the  ai)])Ucation  particularly  si)ecilie.s  when  the  contract 
Avill  take  effect,  this,  it  is  held,  will  control  a  contemporaneous  oral 
agreement  differing  in  terms  therefrom,  and  made  with  the  agent 
of  the  insurer,  in  a  case  where  the  j^laintifF,  at  the  solicitation  of 
an  agent  signed  an  a[)plication  for  a  policy,  wherein  it  was  provided 
that  the  ]3olicy  should  lake  effect  from  the  day  the  application  was 
approved  and  gave  his  note  for  the  premium.  The  agent  gave  a 
receipt  for  the  note,  at  the  same  time  promising  plaintiff  that 
the  policy  would  take  effect  from  the  date  of  the  application.  The 
application  was  sent  to  the  pnncipal  office  and  was  rejected ;  but, 
before  the  agent  had  informed  plaintiff  of  the  failure  of  the  nego- 
tiations the  property  proposed  to  be  insured  Ava.s  destroyed  by  lire. 
It  was  held  that  there  was  no  valid  contract  of  insurance.^  And 
even  though  if  the  agent  who  solicited  the  insurance  assured  the  ap- 
])licant  that  it  would  go  into  effect  at  once,  and  he  signs  the  aj^plica- 
tion  which  stipulates  that  the  insurer  incurs  no  liability  until  the 
policy  is  issued  and  delivered,  and  the  receipt  for  the  llrst  premium 
contains  a  like  stipulation,  the  insurer  incurs  no  liability  until  the 
policy  is  issued  and  delivered,  nor  can  there  be  any  recovery  in  the 
absence  of  such  issuance  and  delivery,  as  such  written  contract 
governs  and  cannot  be  varied  by  jxu'ol  evidence,  and  the  applicant 
is  negligent  in  not  reading  the  agreement.'*  And  where  from  the 
terms  of  the  application  the  only  reasonable  and  natural  inference 
to  be  drawn  is,  that  the  insurance,  if  granted,  Avould  take  effect 
from  the  date  and  delivery  of  the  policy,  a  mere  oral  statement  from 
an  agent  that  the  insurance  if  granted  would  be  operative  from  the 
date  of  the  apjdication.  is  not  l)inding,  said  agent's  authority, 
known  to  the  apjdicant,  being  limited  to  forwarding  the  application 
to  the  company  for  approval  or  rejection.* 

§  61a.  Agent's  statement  that  application  accepted:  when  insurer 
estopped. — An   insurance  company  may  be  estopped  to  repudiate 

2  Perkins  v.  Wasliin^lon  Ins.  Co.  4    Co.  109  Wis.  4,  83  Am.  St.  Rep.  S-J, 
Cow.  (N.  Y.)  04.-),  0  .Tolins.  Cli.  (N.  '85  N.  W.  128. 
Y.)  48").  *  Firomon's  Fund  Ins.  Co.  v.  Ros;- 

MViiino.'^luMk  Ins.  Co.  v.  Holz-  ers,  108  Cti.  101,  33  S.  E.  954,  28 
grafo,  53  111.  510,  5  ;\in.  Rep.  64.  Ins.  L.  J.  1025. 

*  Chamberlain    v.    Prndcntinl     Ins. 

243 


§§  Gib,  62  JOYCE  ON  INSURANCE 

the  announcement  of  il.^  agent  that  an  application  ha?  been  ac- 
cepted if  the  applicant  wliile  relying  thereon  dies,  or,  by  reason  of 
intervening  sickness,  has  become  incapal^le  of  securing  other  insur- 
ance.® 

§  61b.  Agent's  statement  that  certificate  or  application  binding: 
mutual  benefit  insurance. — A  benelit  certificate  to  which  by  its 
terms  only  a  member  of  a  particular  association  is  entitled,  is  not 
void,  because  at  the  time  the  apphcation  is  made  the  a])plicant 
is  not  a  member  of  the  association,  if  the  agent  soliciting  the  appli- 
cation agreed  that  the  certificate  should  become  binding  when 
applicant  was  admitted  into  the  association,  tmd  he  wa.s  in  fact 
admitted  before  a  liability  arose  under  the  certiticate.''  So  a  mutual 
life  insurance  company  whose  by-laws  reserve  to  its  board  of  direct- 
ors the  power  to  accept  the  applications  for  insurance,  but  authorize 
the  secretary-  to  receive  the  applications  and  the  advance  premium 
thereon  and  conduct  all  correspondence  with  applicants  in  makino; 
insurance  contracts,  will  be  bound  by  the  written,  though  erroneous, 
statement  of  that  otiicer  to  an  applicant  that  his  application 
had  been  accepted,  and  that  a  policy  would  be  issued,  if,  before 
making  it,  the  secretary  had  received  and  was  retaining  the  advance 
premium,  and  if  the  applicant  died  before  either  he  or  his  benefi- 
ciary became  aware  of  the  real  facts.® 

§  62.  Completion  of  contract:  negotiations  through  mail, — Xego- 
tiations  are  frequently  carried  on  by  mail,  and  some  question  has 
arisen  as  to  what  constitutes  an  acceplance  in  such  cases.  If  the 
application  and  premium  be  mailed,  and  they  are  never  received 
nor  heard  of  by  the  company,  no  coulract  exists  even  i1iou,l!.1i  a  re- 
ceipt is  given  by  the  coiiipnn\".^  hi  llie  well-known  case  of  Mc- 
Culloch  V.  The  I'^agle  Insurance  Comiiany^"  a  letter  was  written 
inquiring  on  what  terms  the  company  w(nild  lake  a  risk  for  a  stated 
amount  on  a  certain  brig  and  cargo  between  s[)ecilied  termini.  The 
company  replied  slating  the  terms,  and  on  the  .«ame  day  the  answer 
was  received  the  party  wrote  requesting  a  policy  on  the  terms  speci- 
fied. The  day  liefore  this  letter  of  acce])taiu'e  was  mailed  the  com- 
])aiiy  had  written  refusing  the  risk,   which,  however,   was  not  re- 

^Kiiiibro  V.  New  Yoi'lv  Life  Ins.,  ^  ^i,,,,]!,,,,  v^f.,^^),,!,.  ;\[,itual  Beiie- 
Co.  i:!4  Iowa,  84,  12  I..I^A.(  X.S. )  tit  Sof.  04  Ivmi.  •")(),  07  Pac.  r>33. 
421,  108  N.  ^Y.  102.").  See  Christy  v.  Exainiiie  Gillespie  Heme  Tp.  iMutual 
North  Brit.  Ins.  Co.  3  Ct.  Sess.  (1st  1-^ire  Jns.  Co.  v.  Prather,  lO-j  111.  App. 
.series,  1823)  i).  .300,  noted  under  >5  123,  agent's  authority  an  important 
4o  herein.  Examine  §^  ()4  el  se(i.  t actor. 
herein.  '       ®  Atkinson  v.  Ilawkeye  Ins.  Co.  71 

7  Delanevv.  Modern  Accident  Club.    Iowa.   340,    32   N.    W.'  371.      See    § 
121  Iowa, "528,  63  L.R.A.  6t)3,  97  N.    3300  herein. 
W   ni  ^°1  Pick.   (18  Mass.)  277. 

244 


COMI'LETION   OF  CONTKACT 


§  62 


ceivcd  at  tlie  time  of  mailing  the  letter  of  acce[)tance.  All  the  let- 
ters were  duly  received  in  regular  course  of  mail  by  both  parties. 
Upon  a  loss  and  action  brought  for  recovery  tliereof  the  court  held 
that  there  was  no  completed  contract.  In  a  later  case,  however,  in 
the  same  state."  il  was  declared  bv  the  court  in  argument  tlial  a 
"notice  actually  put  into  the  mail,  especially  if  forwarded  and  be- 
yond the  control  or  revocation  of  the  party  sending  it,  may  be  a 
good  notice."  ^^  Jn  view  of  the  McCuUoch  v.  Eagle  Insurance 
Company  case,  we  will  state  that  a  locus  poenitcnliae  exi.^ts  so  long 
as  either  party  may  withdraw.  But  the  rule  clearly  is  that  the 
mailing  a  letter  of  acceptance  in  like  ca.<es  coiupletes  the  contract, 
as  the  locus  poenitentiae  is  ended  when  the  acceptance  has  passed 
beyond  the  control  of  the  party,  notw^itlistanding  before  that  the 
company  may  have  mailed  another  letter  rejecting  the  risk,  unless 
such  notice  has  reached  the  insured  before  his  acceptance  had  been 
mailed.^^     And  if  the  acceptance  is  made  by  the  deposit  of  a  policy 


^^  Thaver  v.  Middlesex  Mutual  Fire 
Ins.  Co.  10  Pick.  (27  Mass.)  326,  331. 

^^  See  also  1  Duer  on  Ins.  (ed. 
1845)  121.  Mr.  Phillips  (1  Phillips 
on  Ins.  (3(1  ed.)  ]>.  18,  sec.  It)  says: 
"The  doctrine  decidedly  predominat- 
ing in  the  cases,  accordingly,  is  that  a 
written  offer  by  insurers  of  tenns  on 
vvhich  thev  will  insure  where  the  sub- 


Indian<t. — Swing  v.  National  Pulp 
Co.  47  Ind.  App.  li)9,  «J3  N.  E.  10U4, 
40  Ins.  L:  J.  807. 

Minnesota. — Kilborn  v.  Prudential 
Ins.  Co.  99  Minn.  176,  108  N.  W. 
8t)l,  35  Ins.  L.  J.  840. 

Missouri. — Welsh  v.  Chicago  Guar- 
anty Fund  Lite  Soc.  81  ]\lo.  App.  30. 

New    Hampshire. — B usher  v.   New 


ject  risks  and  terms. are  adequately   York  Life  Ins.  Co.  72  N.  H.  551,  58 
specitied,    becomes    binding    on    dis-    Atl.  41,  33  Ins.  L.  J.  761,  considered 
patch  of  an  acceptance,  provided  the   under  §  62a  herein, 
acceptance  reaches  them  before  being 
countermanded,     and     in     reasonable 
time,  or  within  the  time  prescribed." 

^3  United  States. — Taylor  v.  Mer- 
chants Fire  Ins.  Co.  9  How.  (50  U. 
S.)  390,  13  L.  ed.  187  (see  citations 
of  this  case  beloAV,  in  this  note). 

Alabama. — Triple  Link  IMutual  In- 
demnity Assoc.  V.  Williams,  121  Ala. 
138,  77  Am.  St.  Rep.  34,  26  So.  19. 

J  r/,Yn?.srt.s.— Travelers  Fire  Ins.  Co. 
V.  Globe  Soap  Co.  85  Ark.  I(i9,  122 


New  York. — Hammond  v.  Interna- 
tional Rv.  Co.  116  N.  Y.  Supp.  854, 
(i.-J  .Misc.' 437,  aff'd  (mem.)  119  N.  Y. 
Supp.  1127. 

North  Carolina.  —  Kendrick  v. 
Mutual  Benelit  Life  Ins.  ('o.  124  N. 
Car.  315,  70  Am.  St.  Rep.  592,  32 
So.  728. 

Texas.— Fidelity  Mutual  Life  As- 
soc. V.  Harris,  94  Tex.  25,  86  Am. 
St.  Rep.  813,  57  S.  W.  ()35. 

Vermont. — Hartford  Steam   Boiler 


Am.    St.    Rep.   22,   107    S.   AV.   38(5;    Inspection     &    Ins.     Co.     v.    I^nsher 

Stocking  Co.  60  Vt.  439,  44  Am.  St.- 
Rep.  859,  29  Atl.  629. 

West  Virginia. — Galloway  v.  Stand- 
ard Fire  Ins.  Co.  45  W.  Va.  237,  31 
S.  E.  969,  28  Ins.  L.  J.  125. 

England. — Adams  y.  Lindsell,  1 
Barn.  &  Aid.  681,  6  Eng.  Rul.  Cas. 
80. 


Mutual  Reserve  Fund  Life  Assoc,  v. 
Farmer,  05  Ark.  581,  47  S.  W.  850. 

Colorado. — Mutual  Life  Ins.  Co.  v. 
Reid,  21  Colo.  App.  143,  121  Pac. 
132. 

Illinois. — National  Mutual  Church 
Ins.  Co.  v.  Trustees  Meth.-Epis. 
Church,  105  111.  App.  143. 


245 


§  02 


JOYCE  UX  IXSUKAXCE 


in  the  mail,  (lie  contract  is  consunnnated,  for  the  company  thereby 
does  an  overt  act  which  signifies  that  tlie  policy  shonld  have  present 


See  also  1  Wood's  I'lrc  Iiisunince, 
2d  ed.  40,  sec.  If)  et  seq.  and  notes. 

The  case  of  Tayloe  v.  Merchants' 
Fire  Ins.  Co.  cited  above  in  this 
note,  is  cited  on  the  above  point  in: 

United  Stale.^.  —  ^[cDonald  v. 
Chemical  National  Bk.  174  U.  S.  610, 
620,  43  L.  ed.  1110,  19  Sup.  Ct.  787 ; 
Patrick  v.  Bowman,  149  U.  S.  411, 
424,  37  L.  ed.  795,  13  Sup.  Ct.  811; 
Utley  V.  Donaldson,  94  U.  S.  29,  45, 
24  L.  ed.  55;  Peinisylvania  Lumber- 
man's ]\Iutual  Fire  Ins.  Co.  v.  Meyer, 
126  Fed.  352,  354,  61  C.  C.  A.  254, 
256;  Sea  Ins.  Co.  v.  Johnston,  105 
Fed.  286,  291,  44  C.  C.  A.  477,  482; 
Andrews  v.  Schreiber,  93  Fed.  369; 
Phenix  Ins.  Co.  v.  Sdiultz,  80  Fed. 
337,  343,  42  U.  S.  App.  483,  25  C.  C. 
A.  453,  459;  Schultz  v.  Phenix  Ins. 
Co.  77  Fed.  375,  394;  Gairettson  v. 
North  Atchison  Bank,  47  Fed.  869; 
Northwestern  Mutual  Life  Ins.  Co.  v. 
Elliott,  7  Sawy.  21,  r,  Fed.  225,  229: 
Winterport  Granite  &  Brick  Co.  v. 
The  Jasper,  Holmes,  102,  Fed.  Cas. 
No.  17,898;  Humphrev  v.  Hartford 
Fire  Ins.  Co.  15  Blatehf.  511,  Fed. 
Cas.  No.  6,875;  Dodoe,  In  re,  9  Ben. 
482,  17  Nat.  Bankr.^  Keg.  506,  Fed. 
Cas  No.  3,948;  Gartielde  v.  United 
States,  11  Ct.  CI.  601. 

Alabama. — ^lol^ile  ^Farino  Dock  & 
Mutual  Jns.  Co.  v.  McMillan,  31  Ala. 
711,  720. 

Arkansas. — State  ^Futual  Fire  As- 
soc. V.  Brinklev  Stave  &  Heading  Co. 
61  Ark.  1,  5,  25  L.R.A.  713,  54  Am. 
St.  Rep.  191.  31  S.  W.  869. 

Georgia. — Holliugsworth  v.  Ger- 
mania,  Niagara,  Hanover  &  Republic 
Fire  Ins.  Cos.  45  Ga.  294,  297,  12 
Am.  Rep.  579. 

Illinois. — Firemen's  Ins.  Co.  v. 
Kuessner,  164  111.  275,  280,  45  N.  E. 
540;  Haas  v.  Mvcrs,  111  111.  421, 
426,  53  Am.  Rep.  634;  Hartford  Fire 
Ins.  Co.  v.  Farrish,  73  III.  1(36,  168; 
Continental  Ins.  Co.  v.  Roller,  101  111. 
App.  80. 

Indiana. — Barr     v.     Ins.     Co.     of 


Xorlh  America,  61  Ind.  488,  495; 
New  England  Fire  &  Marine  Ins. 
Co.  v.  Robinson,  25  Ind.  536,  539; 
Kentucky  Mutual  Ins.  Co.  v.  Jenks, 
5  Ind.  96,  100 ;  Western  Assur.  Co.  v. 
McAlpin,  23  Ind.  App.  220,  223,  77 
Am.  St.  Rep.  423,  55  N.  E.  119; 
Union  Central  Life  Ins.  Co.  v.  Pau- 
ley, 8  Ind.  App.  85,  94,  35  N.  E.  190. 

Iowa. — Ferrier  v.  Storer,  63  Iowa, 
484,  487,  50  Am.  Rep.  752,  19  N.  W. 
288. 

Kansas. — ^Preferred  Accident  Ins. 
Co.  V.  Stone,  61  Kan.  48,  53,  58  Pac. 
986. 

Kentucky. — Security  Fire  Ins.  Co. 
V.  Kentucky  Marine  &  Fire  Ins.  Co. 
7  Bu.sh  (Kv.)  81.  86,  3  Am.  Rep. 
301. 

Man/ land. — Latrobe  v.  AVinans,  89 
Md.  636.  647,  43  Atl.  829;  Hand  v. 
Evans  Marble  Co.  88  Md.  226,  231, 
40  Atl.  899;  Phoenix  Ins.  Co.  v.  Rv- 
land.  69  Md.  437,  447,  1  L.R.A.  548, 
550,  16  Atl.  109 ;  Wheat  v.  Cross,  31 
Md.  99,  103,  1  Am.  Rep.  28. 

Massachusetts. — Brauer  v.  Shaw, 
168  Mass.  198,  201,  60  Am.  St.  Rep. 
387,  46  N.  E.  617;  Sanborn  v.  Fire- 
men's Ins.  Co.  16  Gray  (82  Mass.) 
448,  454,  77  Am.  Dee.  419. 

Michi(jan. — -Michigan  Pipe  Co.  v. 
Alichigan  Fire  &  Marine  Ins.  Co.  92 
Mich.  482,  491,  20  L.R.A.  277,  289, 
52  N.  W.  1070. 

Minnesota. — Horn  v.  Western  Land 
Assoc.  22  ^linn.  236;  Heiman  v. 
Phoenix  Mutual  Life  Ins.  Co.  17 
Minn.  153,  157,  Gil.  127,  10  Am.  Rep. 
154;  Lanz  v.  McLaughlin,  14  Minn. 
72,  75,  Gil.  55. 

Mississippi. — Alabama  Gold  Life 
Ins.  Co.  v.  Herron,  56  Miss.  643,  646 ; 
Robertson  y.  Cloud,  47  Miss.  210. 

Missouri. — Day  y.  iMechanics  &  T. 
Ins.  Co.  88  Mo.  325,  337,  57  Am.  Rep. 
416;  Lunostra.'^s  y.  German  Ins.  Co. 
48  Alo.  201,  204,  8  Am.  Rep.  100; 
Keim  v.  Home  Alutual  Fire  &  Marine 
Ins.  Co.  42  Mo.  38,  41,  97  Am.  Dec. 


246 


COMPLETION  OF  CONTRACT                            §  62 

vilalily.^*  And  wlicre  a  properly  addres;«ed  contract  is  deposited 
in  the  post  ofiice  it  constitutes  a  delivery  tliere.^*  And  the  deposit 
of  a  jiolicy  in  the  mail  properly  addressed  to  the  insured,  with  post- 
age prepaid  is  a  delivery  to  him  even  though  death,  sickness  or  loss 

occurs  thereafter  but  before  the  policy  is  received,  and  a  recovery 
may  be  had  for  such  loss  or  death. ^^    If,  however,  the  postage  is  not 

291;  Wallingford  v.  Home  Mutual  Wisconsin. — Fuller  v.  Madison 
Fire  &  Marine  Ins.  Co.  30  Mo.  46,  Mutual  Ins.  Co.  36  Wis.  599,  603. 
55;  Misselhorn  v.  ^tutual  Reserve  As  to  the  fj^eneral  rule  in  other  con- 
Fund  Life  Assoc.  30  Mo.  App.  589,  tracts  that  the  acceptance  takes  effect 
600;  Estey  v.  Truxel,  25  Mo.  App.  from  the  mailing  of  the  letter  of  ac- 
238,  245.  eeptance   and   a    retraction   from   the 

Xew   Hampshire. — Davis  v.   Home  receipt  of  the  letter.     See  the  follow- 

Manufacturers  Ins.  Co.  67  N.  H.  218,  ing  cases: 

219,  34  Atl.  464.  Georgia.— Bryan  v.  Booze,  55  Ga. 

New   Jersey. — McClave   v.    Mutiyil  438. 

Reserve  Fund  Life  Assoc.  55  N.  J.  L.  Iowa. — Ferrier  v.  Storer,  63  Iowa. 

187.   191,  26   Atl.   78;    Northampton  484,  50  Am.  Rep.  752,  19  N.  W.  288. 

Mutual  Live  Stock  Ins.  Co.  v.  Tuttle,  Kentucky.— lintcheaon     v.     Blake- 

40  N.  J.  L.  479;  Hallock  v.  Conuuer-  man,  3  Met.  (Kv.)  80. 

cial  Ins.  Co.  26  N.  J.  L.  268,  283,  27  Marifland.—i^tockham     v.      Stock- 

N.  J.  L.  645.  ham,  32  Md.  196 ;  Wheat  v.  Cross,  31 

New  Tor/.-.— Bentlev   v.    Columbia  Md.  99,  1  Am.  Rep.  28. 

Ins.  Co.  17  N.  Y.  421,  423;  IMcCluskey  New  II ami^shi re. —Ahhott  v.  Shep- 

v.  National  Life  Assoc.  77  Hun,  55li,  herd,  48  N.  H.  14,  17, 

558,  28   N.   Y.    Supp.    931;   Post  v.  New  Jersey.— Fotts  v.  Whitehead. 

Aetna  Ins.  Co.  43  Barb.  (N.  Y.)  351,  20  N.  J.  55. 

7.T     ,7     ^,       ,•           \\r  ^■            r>  •  Pennsylvania. — Greer   v.    Chartiers 

North    Carolina. — V\  ylie    v.    Brice,  ^    .^     ^'^  „      c<,    „„,     ..,    .        „    _  ,„ 

rrn  XT   n        lo'  R-  Co.  96  Pa.  St.  391,  42  Am.  R.  n48. 

70  N.  Car.  42o.  ,,..                  T,r    ,  ,              i^i  ^  u 

Wisconsin. —  \\  ashburn  v.  Fletcher, 

Ohio. — Palm     v.     Medina     County  42  Wis.  152. 

:\Iut.  Fire  Ins.  Co.  20  Ohio,  529,  539.  EnrjlanLl. —Bnncan    v.    Topham,    8 

Oregon.— llac-heny    v.    Learv,    12  Comm.  B.  (O.  S.)  225. 

Oreg.  40,  43,  7  Pac".  329.            "  See    also    2    Rents    Comm.     (13tli 

Pennsylvania.— Uamihon     v.     Ly-  ""^-^   4''  '"?'^  ''.''^^1  .^^  ^'^^  paragraph 

coming  ins.  Co.  5  Pa.  St.  339;  McKee  l^st^ preceding  in  this  note 

V.  Harris,  16  Phila.  150.     See  Stand-  ^,,  '' ^e^^"^   ;'.n^  "'.'f '.Ian  ^'^T    "^■ 

ard  Wheel  Co.  v.  Phoenix  Ins.  Co.  29  ,«.:  ^?!'^^'-  ^^'^  ^T  •  ^v'  ■^^^\  ^^.^-  «*l: 

It      n      fi.   t>        oi,--  18/ ;    Oliver   v.    American    Legion   of 

I'a.  Co.  Ct.  Rep.  Sbi.  l,            ,,,  ,    u,uo\    i-    \        ?     n 

,„                     Vw^-                Ti               or.  rlonor    (Cal.    1882)    1/    Am.   L.   Rev. 

lennessee. — Otis      v.      Pavne,      8b  .,^-,     ,,               ■   ,  t        ^,           n    n     i 

m          pf->    rro    o  o    ^T-    oio'  '^^^  -  Commercial  Ins.  to.  v.  llallock, 

renn.  66.>,  666   8  S.  ^^  .  848.  .^^  ^   j  j^   ^^^g.  jj^^^^j^,  ^,   ^ommer- 

y.,.,.s.-Matkin  v^  Supreme  Lodge  ^.^^,  ^^^    p^,    .,^.  ^.   ^j    ^     ._,,.^_  -._,  ^^^ 

Knights  of  Honor,  82  Tex.  301,  303,  ^,^^    3-,.   ^a.ssar  v.  Camp,  11  N.  Y. 

2,   Am.  St.  Kep.  88,,  18  S.  ^^  .  306;  ^^^.  j^j^^^i^^  v.  Frith,  6  Wend.   (N. 

«lake  V.  Hamlnirg  Hremen  Fire  Ins.  y.)    103,  21    Am.   I^cc  262,  2  Kent's 

Co.  67  Tex.  160,  163,  60  Am.  Rep.  Commenlaiies,     13tli  "ed.""477.     See 

15,  2  S.  W.  368.  Fames  v.  Home  Ins.  Co.  94  U.  S.  621, 

West   Virginia. — McCully  v.   Plio'-  '24  L.  ed.  298. 

iiix  :\rutual  Life  Ins.  Co.  18  W.   Va.  15  (Jallowav  v.   Standard    Fire  Ins. 

782,   785;    Woody   v.    Old   Dominion  Co.  45  W.  Va.  237,  31  S.  F.  969,  28 

Ins.   Co.   31   Gratt.    (Va.)    362,   364.  Ins.  L.  J.  125.     See  §  231  lierein. 

31  Am.  Rep.  732.  i«  Triple    Link    Afulual    Indenmitv 

247 


§  62  JOYCE  ON  INSURANCE 

prepaid  there  is  no  presumption  that  it  was  received  by  addressee, 
and  depositing  a  letter  witliont  postage  is  not  prima  facie  evidence 
of  its  receipt."  as  a  proj^osal  by  mail  requesting  an  answer  may  be 
withdrawn  before  it  is  accepted  but  not  thereafter. ^^  The  underly- 
ing principle  is  this,  that  a  person  makes  the  mail,  or  similar  agency 
his  agent  to  receive  the  acceptance,  by  making  his  offer  through 
that  medium  and  the  acceptance  when  mailed  or  properly  delivered, 
as  in  case  of  a  telcgriun.  is  then  constructively  communicated  to  the 
proi)oser,  except  of  course,  where  the  proposal  has  been  withdrawn 
prior  to  said  mailing  or  delivery. ^^  So  where  the  status  of  the 
parties  becomes  fixed  by  a  completed  contract  of  insurance  it  can- 
not be  affected  and  the  contract  ignored  or  repudiated  by  subse- 
quent letters. 2°  A  policy  is  also  delivered  when  mailed  from  the 
home  oHice  to  the  agent  for  delivery  to  assured.^  If  an  application 
is  accepted  and  the  contract  is  put  in  force  by  issuing  and  mailing 
a  policy,  the  fact  that  it  is  then  sent  to  an  insurance  agent  for  un- 
conditional delivery  does  not  alter  the  effect  of  the  transaction.^  If 
an  applicant  for  insurance  delivers  his  application  to  the  special 
agent  of  a  foreign  insurance  company,  who  transmits  it  to  tho 
office  of  the  comj)any,  and  the  policy  is  issued  and  mailed  to  the 
applicant,  the  contract  takes  effect  when  the  policy  is  mailed.  It 
being  a  foreign  contract  the  question  as  to  whether  the  insurance 
company,  or  its  agent,  had  a  license  to  transact  business  in  the 
state  where  the  application  was  made  is  immaterial  in  an  action 
by  the  company  to  recover  a  premium.' 

Assoc.  V.  Williams,  121  Ala.  138,  77  Co.  72  N.  H.  551,  58  Atl.  41,  33  Ins. 

Am.  St.  Rep.  34,  26  So.  19,  28  Ins.  L.   J.   7fil,   considered  under   §   62b. 

L.  J.  621;  Travelers  Fire  Ins.  Co.  v.  20  ^^elsh     v.      Chicago     Guaranty 

Globe    Soap    Co.    85    Ark.    169,   122  Fund  Life  Soc.  81  Mo.  App.  30. 

Am.    St.   Rep.   22,   107    S.   W.   386;  ^  Mutual  Life  Ins.  Co.  v.  Reid,  21 

Mutual  Reserve  Fund  Life  Assoc,  v.  Colo.  App.  143,  121  Pac.  132. 

Farmer,  65  Ark.  581,  47  S,  W.  850;  On    where    insurance    contract    is 

Kimbro  v.  New  York  Life  Ins.   Co.  deemed  to  hav&  been  made  when  pol- 

134  Iowa,  84,  12  L.R.A.(N.S.)   421,  icy   is   mailed   to   local   asent   of  in- 

108  N.   W.   1025,  35   Ins.   L.   J.  57.  surer  see  notes  m  6.-.  L.R.A.  840;  23 

See  §§  103-108  herein.  L.R.A.{N.S.)    969;   52  L.R.A.(N.S.) 

On    presumption   as   to   receipt   of  276;  or  to  insured  or  his  agent,  see 

communication  sent  through  mail,  see  note  in  52  L.R.A. (N.S.)   275. 

note   in    49    L.R.A. (N.S.j    458.      On  2  j^idelity    :\rutual    Life    Assoc,    v. 

effect    of    death    of    party    after    the  Harris,  94  Tex.  25,  36  Am.  St.  Rep. 

mailing  but  before  the  receipt  of  his  813,  57  S.  W.  635. 

letter  accepting  an  offer,  see  note  in  '  Hartford  Steam  Boiler  Inspection 

12  L.R.A.(N.S^)  439.  &  Ins.  Co.  v.  Lasher  Stocking  Co.  66 

"  Welsh     V.      Chicago      Guaranty  Vt.  439.  44  Am.  St.  Rep.  859,  29  Atl. 

Fund  Life  Soc.  81  Mo.  App.  30.  629.      See    Harrigan    v.    Home   Life 

18  Jones  V.  New  York  Life  Ins.  Co.  Ins.  Co.  128  Cal.  531,  58  Pac.  ISO, 

15  Utah,  522,  50  Pac.  620.  61  Pac.  99. 

1^  Busher  v.   New   York  Life   Ins. 

248 


1 


COMPLETION    OF   CONTIfACT  §  62a 

In  a  case  in  the  United  States  circuit  court  a  life  insurance,  Upon 
due  application,  was  issued  under  a  contract  with  the  local  agent, 
whereby  it  was  sul:>s(antially  agreed  tliat  the  agent  should  pay  the 
lirst  quarter's  premium  and  take  the  applicant's  note  for  the  same, 
and  the  policy  was  mailed  from  the  home  ofiice  July  28,  1885, 
and  received  by  tlie  local  agent  August  5,  1885,  but  was  never  act- 
ually delivered  into  the  possession  of  the  applicant,  who  was  taken 
ill  August  6th,  and  died  September  9,  1885,  and  it  was  held  that 
as  between  the  applicant  and  the  company  the  policy  became  eflfec- 
tive  and  binding  when  placed  in  the  mail  July  28,  1885,  and  if  not 
then,  certainly  when  it  reached  the  hands  of  the  agent,  August  5, 
1885.'*     So,  also,  where  an  accident  policy  was  sent  by  mail  but 
did  not  reach  its  destination  until  after  the  death  of  assured,  it  was 
held  that  the  coutract  was  complete  when  the  policy  was  deposited 
in  the  mail  and  credit  given  for  the  premium.^     And  where  a  poli- 
cy insuring  against  loss  by  boiler  explosion  was  deposited  in  the 
mail,  together  with  the  report  of  the  company's  boiler  inspector  and 
suggestions  as  to  changes  in  the  setting  of  the  boiler,  it  was  held 
that  the  contract  was  complete  and  that  compliance  with  the  sug- 
gestions was  not  a  condition  precedent  to  the  completion  of.  the  con- 
tract.^    Again,  if  at  the  direction  of  the  insurer's  agent  a  check  for 
the  premium  is  sent  by  mail  to  the  company,  the  time  of  payment 
is  that  of  tlie  mailing,  where  the  check  is  honored.'     And  where  a 
new  poHcy,  substituted  for  the  old  one,  in  accordance  with  an  agree- 
ment, is  delivered  by  mail,  the  old  one  being  surrendered,  the  con- 
tract is  completed  even  though  the  premium  is  not  prepaid  as  re- 
quired and  a  delivery  in  person  is  also  required.*     A  proposal  by 
an  insiu'ance  company  by  letter  to  renew  a  policy  must  be  accepted 
or  there  is  no  binding  contract.^ 

§  62a.  Employers'  liability  insurance:  when  contract  incom- 
plete: negotiations  with  insurance  agent  through  mail. — The  rule 
that  the  minds  of  the  parties  must  meet  on  all  the  essential  elements 
of  the  contract^"  applies  to  employers'  liability  insurance;  and 
when  a  contractor  holds  such  an  insurance  covering  or  connected 

^Yoinit?  V.  Equitable  Life  Ins.  Co.  Ins.  Co.  124  N.  Car.  315,  70  Am.  St. 

30  Fed.  'iW2.  Kep.   592,  32   S.   E.  728;   Tayloe  v. 

5  Dailev  v.  Preferred  Masonic  Mut-  Alereliants  Fire  Ins.  Co.  9  How.  (50 
ual    Aec-ident   Assn.    102   Mich.    289,  U.  S.)  390,  L3  L.  ed.  187. 

26  L.R.A.  171,  57  N.  W.  184.     Re-  « Lamb    v.    Mutual    Resen-e    Fund 

versed  upon  other  points  on  rehear-  Life  Assoc.    (U.   S.  C.   C.)   106  Fed. 

ir-^,  102  Mich.  299,  60  N.  W.  694.  637,  aff'd  108  Fed.  961,  48  C.  C.  A. 

6  Hartford  Steam-Boiler  Inspection  164,  s.  c.  109  Fed.  81. 

&  Ins.  Co.  V.  Lasher  Stockinp;  Co.  ^  W.  P.  Harper  &  Co.  v.  Ginnens 
66  Vt.  439,  44  Am.  St.  Rep.  859,  29  Mutual  Ins.  Co.  6  Ga.  App.  139,  64 
Atl.  629.  S.  E.  567. 

'  Kendricks  v.  Mutual  Benefit  Life        ^°  See  §§  45  et  seq.  herein. 

249 


§  GJb  JOYCE  ON  INSURANCE 

\vilh  certain  work,  on  beginning  another  piece  of  work  writes  to  the 
insurer  s  general  agent  that  he  understands  that  the  policy  covers 
the  new  work  but  is  advised  by  the  agent,  by  letter,  that  it  is  not 
covered  but  that  he  will  bind  the  risk  until  the  contractor  decides 
just  what  he  wants  to  do,  and  requests  the  latter  to  call  him  up  on 
the  telephone  the  following  day,  or  that  he  will  come  to  see  the  con- 
tractor on  that  day  if  the  latter  so  desires,  and  no  reply  is  made 
to  the  agents  communication,  the  two  letters  do  not  constitute  u 
contract  of  insurance  on  which  the  insurer  is  liable  for  an  injury  to 
an  employee  occurring  ten  days  after  the  negotiations.^^ 

§  62b.  Contracts  of  insurance :  telegraphic  agency. — Contracts 
may  be  made  through  the  medium  of  a  telegraph,  as  well  as  through 
the  mail  and  such  contracts  are  as  binding  and  obligatory  as  if 
made  in  the  ordinary  way.  The  entire  transaction  may  be  by  tele- 
graphic comnumication  entirely  or  partly  by  letters  and  partly  by 
telegram,  or  the  telegraphic  communication  may  be  one  of  several 
factors  necessary  to  constitute  a  complete  contract.  .Vn  acceptance 
by  telegram  must  be  one  that  binds  both  the  proposer  and  acceptor. 
^\llere  the  telegraph  is  adopted  as  the  medium  of  communication 
l)etween  parties  contemplating  a  contract,  an  acceptance  of  a  pro- 
posal completes  the  contract,  if  sent  within  the  time  agreed  upon, 
or  if  no  time  is  .specified  or  indicated,  then  if  .'^ent  witliin  a  reason- 
ably prompt  time,  having  in  view  all  the  circumstances.  The  time 
of  telegraphing  is  the  time  from  which  the  contract  becomes  closed 
and  binding;  or  to  be  more  exact,  the  time  Avhen  the  proper  tele- 
gram is  deposited  in  the  telegraph  office,  or  delivered  to  the  tele- 
graph company  or  its  authorized  agent  for  transmission,  is  the  time 
from  Avhich  the  completion  of  the  contract  dates.  This  is  by 
analogy  to  the  accejitance  of  a  prcjposal  through  the  mail.  This  nile 
assumes,  of  course,  that  the  offer  has  not  been  withdrawn  [it  the 
time  of  such  acceptance.  Where  the  proper  telegram  accepting  a 
proposal  is  sent  as  above,  a  subsequent  revocation  of  the  proi>osition 
will  not  be  effectual  as  against  the  contract  or  the  accepting  ])arty. 
even  though  such  revocation  be  telegraphed  by  the  proposer  before 
the  message  of  acceptance  is  received  by  him.  And  this  rule  as  to 
acceptance  applies,  it  is  held,  even  though  the  telegram  so  accept- 
ing does  not  reach  the  proposer.^^  The  above  rules  may  be  quali- 
fied l)y  the  rule  stated  in  the  preceding  section  as  to  negotiations  by 
mail,  and  locus  poenitentiae."  In  case  a  proposal  for  insurance  is 
made  by  telegram  the  contract  is  completed  by  delv<ery  at  the  tele- 

iiBradlev  v.  Standard  Life  &  Ac-        12  jo^^.p  ^n  Electric  Law   (2d  ed.) 
cident  Ins.  Co.  !)8  N.  Y.  Supp.  797,    sees.   878-910a. 
112  App.  Div.  ^3().  ^^  See  §  62  herein. 

250 


COMPLETION   OF  CONTKACT  .  §  63 

graph  office  and  placing  beyond  the  acceptor's  control  a  properly 
addressed  telegTani  accepting  the  proposal.^* 

If  negotiations  are  carried  on  by  telegrams  and  tliere  is  a 
conditional  acceptance  of  the  risk,  and  the  imposed  conditions  are 
not  complied  with,  no  contract  is  effected. ^^  A  contract  of  insur 
arice  is  not  made  by  telegram  and  a  letter  where  the  rate  of  prem- 
ium is  not  settled  and  the  letter  also  encloses  a  form  but  not  of  the 
character  indicated  by  previous  letters  and  negotiations.^^ 

In  case  the  negotiations  are  partly  by  telegram  and  partly  by 
mail  the  acceptance  and  j)olicy  become  effective  on  the  date  when 
it  is  mailed  from  tlie  j)lace  where  the  insurance  company  is  lo- 
cated." 

§  63.  No  contract  where  acceptance  mailed  differs  in  terms  from 
proposal. — \^  tlie  }>olicy  sent  by  mail  is  not  an  acceptance  of  the 
terms  proposed,  but  is  in  different  terms,  there  is  no  contract,  as 
the  minds  of  the  parties  never  met,  although  the  insTU-ers  answer 
that  they  accept  the  terms  proposed.^*  iSo  if  the  correspondence 
shows  that  the  minds  of  the  parties  never  met  upon  the  terms,  mail- 
ing a  policy  which  the  applicant  is  not  l)oiiiid  to  accept  does  not 
bind  the  company. ^^     The  acceptance  must  be  an  absolute  and 

^*  Buslier  v.   New   York   Life   Ins.  surli  cases,  still  the  law  requires  that 

Co.  72  N.  H.  551,  58  Atl.  41,  33  Ins.  the  message  of  acceptance  .shall  pass 

L.  J.  761.     In  this  case  the  court,  per  beyond  the  control  of  the  acceptor." 

Bingham,    J.,    said    that    where    the  ^*  Gauiitlott    v.    Sea    Ins.    Co.    127 

offer  is  sent  bv  mail  oi'  by  telegraph  Mich.  504,  86  N.  W.  1047. 

"it  is  eommoniy  held,  andsuch  is  the  ^^Pht'nix   Ins.   Co.   v.    Schultz,   80 

law  in  this  State— that  the  reply  ac-  \^^-  ^3'.  2o  C.  _C.  A.  453,  42  U.  S. 

cepting  the  offer  may  l)e  sent  through  ^^PP-  "^^•'-  ''^^'S"  "  J""'^-  ^'■\- 

the   same   medium,   and   the   contract  ^      a'^'T       .o-    ^^^"^^^^''1  ^^'• 

will  be  complete  when  the  acceptance  l^-_^  ^^   ^''"'■-  ^^'^   ^^^  ^-  ^-   ^"PP" 

is    mailed,    or   delivered    to    the    tele-  /-i     j.  i                         i-     ■             -       • 

,  «.  -  ,  ,  ,  ,  ,  ^1  On  telegram  as  prelimniarv  step  in 
graph  office  properly  a.hlresse.  to  the  ,,,„,,, i^,tio„  ^f  contract,  see"  note  in 
party  making  the  offer,  and  beynnd  4  L.R.A.(N.S.)  177.  On  time  an<l 
the  acceptors  control:  Abbott  v.  pi.,ee  of  consummati(m  of  contract 
Shepard,  48  N.  H.  14;  Davis  v.  Home  \vi,ere  offer  bv  letter  is  accepted  bv 
Manufacturers'  Ins.  Co.  67  N.  H.  telegram  or  vice  versa,  see  note  in  6 
218.  The  theory  advanced  in  support  L.H.A.  (N.S.)  1016. 
of  such  a  holding  is  that  when  one  ^^  Op^^a^  j,-,g  Q^^^  ^  Carrington,  3 
makes  an  offer  through  the  mail,  or  (\iini.  :i37;  Duncan  v.  Topham,  8 
hke  agency,  he  authorizes  the  accept-  Com.  B.  (0.  S.)  225;  Costello  v. 
ance  to  be  made  through  the  same  Grant  County  :\rutual  Fire  &  Light- 
medium,  and  constitutes  that  medium  ning  Ins.  Co.  l.i.'J  Wis.  361,  113  N. "w. 
his  agent  to  receive  the  acceptance,  639.  See  §§  45  et  seq.  55b,  66f  here- 
and  that  the  acceptance  when  mailed  in;  Nordness  v.  Mutual  Cash  Guai- 
or  delivered  at  the  telegraph  office,  is  anty  Fire  Ins.  Co.  22  S.  Dak.  1,  114 
then   constructively  communicated  to  X.  \v.  10!)2. 

Ihe  offerer;   2  Lang.   Cont.   095,  sec.  ^^  Piedinont   c*c  Arlington  Life  Ins. 

15,  par.  2.     While  constructive  notice  Co.  v.  Fwing,  92  U.  S.  377,  23  L.  ed. 

of  acceptance  is  permitted  to  take  the  610;    Hamblet    v.    City    Ins.    Co.    36 

place    of    actual    communication    in  Fed.  118. 

251 


§  (i3  JOYCE  ON  INSURANCE 

unconditional  one.'^"  And  this  applies  to  the  renewal  of  a  policy 
where  there  is  an  increase  in  the  rate  of  premium,  and  the  corres- 
pondence shows  that  there  was  no  aoreement  fixin,2;  the  rate,  and, 
therefore,  there  is  no  acceptance.^  But  where,  in  the  correspond- 
ence respoctinp;  an  agreement  to  insure,  the  letter  of  the  applicant 
•states  that  the  rate  per  cent  "is  pretty  heavy,  but  I  gu&«s  we  will 
have  to  stand  it."'  There  is  an  acceptance  of  the  proposal  to  in- 
sure.2  And  where  an  agent  sent  a  policy  by  mail  to  an  applicant, 
with  a  statement  that  the  ju'emium  charged  wa.*;  higher  than  usual, 
and  requesting  a  return  of  the  policy  by  mail  should  he  decline  it, 
or  if  retained,  to  send  the  premium,  it  was  held  that  retaining  the 
policy  was  an  acceptance,  or,  at  all  events,  the  que.-^tion  was  one  for 
the  jury.^  In  a  Connecticut  case,  one  C.  signed  an  application  for 
life  insurance,  and  submitted  to  a  medical  examination  under  an 
agTeement  that  the  policy,  when  issued,  should  be  forwarded  by 
mail  to  C.'s  address  in  New  A'ork,  who,  if  it  was  found  to  be  as 
agreed,  was  to  send  the  premium,  or  if  not,  to  return  the  policy; 
the  policy  to  take  effect  when  the  premium  was  paid.  Afterward, 
the  agent  mailed  it  to  C.  at  New  York,  the  envelop  being  marked 
''return  in  ten  days  if  not  called  for."  It  was  returned  uncalled  for. 
The  agent  then  sent  the  ])olicy  to  another  place  where  he  sujiposed 
C.  mieht  be.  but  C.  had  died  two  davs  Ijefore  it  was  sent.  It  was  held 
to  be  an  inchoate  and  not  a  complete  contract  of  insurance,  and 
that  no  liability  attached  under  it.* 

Again,  a  subsequent  acceptance  of  a  proposition  which  has  been 
signed  and  mailed  is  not  binding  as  a  contract  where  before  acce|>t- 
ance  a  new  condition  or  term  has  been  added  by  the  proposer  and 
rejected,  since  in  such  ca.«e  there  has  been  ilo  such  meeting  of 
minds  as  is  essential  to  complete  the  contract,  even  though  the  ap- 
plicant sent  with  the  original  application  his  personal  notes  for 
the  first  year's  premium.^  If  upon  receipt  of  the  application,  fur- 
ther information  is  requested  and  it  is  sent  by  the  applicant  with  a 
stalement  that  if  it  is  not  satisfactory  it  should  consider  the  appli- 
cation withdrawn  and  return  his  check,  which  had  been  given  for 
the  first  premium,  and  the  application  is  rejected  b}'-  letter  sent 
to  the  local  agent  with  a  return  of  the  premium  on  the  .same  day 
that  the  applicant  died  no  contract  of  insurance  is  made.^     In  ca.se 

2°  Hartford   Steam   Boiler  Inspee-  '  Sheldon  v.  Atlantic  Fire  &  Ma- 

tion  &  Ins.   Co.  v.  Lasher  Stocking  rine  Ins.  Co,  2G  N.  Y.  460,  84  Am. 

Co.  66  Vt.  439,  44  Am.  St.  Rep.  859,  Dec.  '21.3. 

29  Atl.  629.  *  Rogei-s  v.  Charter  Oak  Life  Ins. 

^Dolicitv   v.    Millers   &   Manufac-  Co.  41  Conn.  97. 

lurers  Ins."  Co.  4  Ont.  Law  Rep.  303.  *  Travis  v.  Nederland  Life  Ins.  Co. 

2  Eames  v.  Home  Ins.  Co.  94  U.  S.  Ltd.  104  Fed.  486,  43  C.  C.  A.  653. 

6'21,  24  L.  ed.  298.  6  .Miller    v.    Northwestern    Mutual 

252 


COMI'LKTION   OF  CONTRACT  §  64 

of  such  negotiations  by  mail  if  conditions  precedent  to  writino  the 
policy  are  imposed  by  the  insurer,  and  are  not  complied  with  by 
the  applicant,  there  is  no  c<)iii])leted  contract  of  insurance.'  An 
insurance  company  may.  lio\ve\er,  be  esto[)i)C(l  to  deny  the  issuance 
of  a  policy  where  the  applicant  receives  and  relies  upon  a  letter 
from  the  insurer's  agent  stating  that  the  company  had  reconsidered 
the  application  and  would  issue  a  policy  covering  the  full  amount 
from  the  start  on  the  plan  ajjplicd  for  and  that  the  agent  would 
send  the  policy  as  soon  as'  it  arrived.^  A  proposal  by  letter,  the 
forwarding  of  policies  for  examination  and  the  acceptance  thereof 
ett'ect  a  contract,  and  if  the  one  who  makes  the  proposal,  has  no 
original  authority  as  the  C(>m})any's  agent,  but  is  made  its  agent 
by  the  company's  act,  evidenced  by  correspondence,  his  deli\ery 
of  the  i)olicy  Ijetore  loss  eft'ects  the  contract.^ 

§  64.  Agent's  receipt  pending  approval  or  issuance  of  policy: 
"binding  slip:"  "binding  receipt." — To  what  extent  a  company  is 
bound  by  a  receipt  given  by  an  agent  pending  an  approval  by  the 
c()m|)any  or  until  the  policy  is  issued  depends  greatly  upon  the 
agent's  authority  and  the  particular  circumstances  of  each  case,  and 
for  these  reasons  the  decisions  are  not  perfectly  in  accord.  The 
following  general  rules  will,  however,  be  found  to  be  in  conformity 
with  the  law  as  laid  down  by  the  adjudicated  cases:  1.  If  the  act 
of  acceptance  of  the  risk  by  the  agent  and  the  giving  by  him  of  a 
receipt  is  within  the  scope  of  the  agent's  authorit}",  and  nothing 
remains  but  to  issue  a  policy,  then  the  receipt  will  bind  the  com- 
pany.^" 2.  Where  an  agreement  is  made  between  the  appHeant 
and  the  agent  whether  l)y  signing  an  application  containing  such 
condition,  or  otherwise,  that  no  liability  shall  attach  until  the 
principal  aj^proves  the  risk  and  a  receipt  is  given  l)y  the  agent,  such 
accei)tance  is  nierels'  condilional.  and  i.~  sul»(»i-(lin;Ue(l  to  the  act  of 
the  company  in  approving  or  rejecting;  ^^  so  in  life  insurance  a 

LilV  Ins.  Co.  Ill  Fed.  4(j5.  4!)  C.  C.  §    57    herein,    and    cases.      See    also 

A.  .'i.'JO.  Lee  V.  I'nioii  Ceiili'al  Lil'e  Ins.  Co.  19 

'  (^lill  v.  Boston  Ins.  Co.  197  Ma.-<s.  Kv.  L.  Hep.  U()8,  41  S.  W.  :!19:  .Mu- 

210,  83  N.  F.  401.  lual  Lite  Ins.  Co.  v.  Herron,  7!)  Miss. 

8  New  York   Life  Ins.   Co.   v.   Mc-  :;81,.  30    So.    091    (here    receipt    was 

Intosh,  —  Miss.  — ,  41   So.  381,   35  signed  by  a  solicitor  a ppciinted  by  tlie 

Ins.  L.  J.  857,  s.  o.  80  Miss.  230,  38  ficneral  manager). 
So.  775,  34  Ins.  L.  J.  1054.     See  also        ^^  See     S     57     herein,     and     cases. 

Kiinbro  v.  New  York  Life  Ins.   Co.  See   also   IMohrsladt    v.    ^lutnal    Life 

134   Iowa   84,   12   L.K.A.(N.S.)    421,  Ins.    Co   115   Fed.   81,   52    C.    C.    A. 

108  N.  W.  1025,  35  Ins.  L.  J.  57.  (;75;  Pace  v.  Provident  Savings  Life 

8  National  Mutual  Church  Ins.  Co.  Assur.  Soc.  113  Fed.  13,  51  C.  C.  A. 

V.      Trustees      IMethodisl      Episcopal  32;    Union    Central   Life  Lis.   Co.  v. 

Church,  105  111.  Apj).  143.  I'iiillips,   102   Fed.   19.   41   C.   C.   A. 

i°Fish  V.  Cottenet,  44  N.  Y.  538;  203,   rev'g   101    Fc.l.    33;    Steinle    v. 

253 


§  (34  JOYCE  ON  INSURANCE 

"binding  slip"  or  "binding  receipt,"  does  not  insure  of  itself.  When 
l^roperly  executed  it  protects  the  a'i»pli('ant  for  insurance  against 
the  contingency  of  sickness  intervening  its  date  and  the  delivery  of 
the  policy,  if  the  application  for  insurance  is  accepted.  If  the 
latter  is  not  accepted,  or  refused,  in  the  valid  exercise  by  the  com- 
]>;niy  of  its  rights,  the  "binding"  slip  ceases  eo  instanti  to  liave  any 
eH'ect.^^  3.  Where  the  acceptance  by  the  agent  is  witliin  the  scope 
of  his  authority,  a  receipt  containing  a  contract  for  insurance  for 
a  specified  time  which  is  not  absolute  but  conditional,  upon  accept- 
ance or  rejection  by  the  principal,  covers  the  specified  period,  unless 
the  risk  is  declined  within  that  time,"  and  it  has  been  held  in  these 
cases  that  the  company  may  not  arbitrarily  reject  after  a  loss.^* 
In  connection  with  the  above  rulers  the  following  decisions  are 
important:  Where  an  agent  gave  a  binding  receipt  pending  the 
comi)any"s  approval  and  told  the  applicant  that  the  risk  had  been 
accepted,  and  the  evidence  of  the  agent  showed  that  it  had  in  fact 
been  accepted,  the  contract  was  held  good  after  loss,  and  the  com- 
pany estopped  to  deny  acceptance,^*  and  it  is  also  held  where  the 
agent  gave  a  receipt  for  certain  money  intended  as  part  payment 
of  premium  and  duty,  under  an  agreement  of  insurance  for  one 
month,  or  unless  rejected  by  the  company  before  the  expiration  of 
the  month,  and  the  property  was  burned  before  a  policy  was  issued, 
that  giving  the  receipt  completed  the  contract,  unless  rejected  by 
the  principal, ^^  and  the  company  will  be  bound  Avhere  a  local  in- 
surance agent  authorized  to  deliver  "binding  receipts,"  signed  by 
the  general  agent,  agrees  in  good  faith  and  for  value  to  assume  the 
payment  to  the  company  of  the  first  cash  instalment,  and  delivers 
to  the  insured  a  "binding  receipt"  properly  signed.^'''     But  it  is 

Now  York  Life  Ins.  Co.  81  Fed.  480,  Life  Ins.  Co.  41  Wash.  228,  83  Pae. 

2b  C.  C.  A.  401,  52  U.  S.  App.  2.35,  IKJ,  35  Ins.  L.  J.  137. 
27  Ins.  L.   .1.   174    {Distinguished  in        ^^  Fish  v.  Cottenet,  44  N.  Y.  538; 

Starr    v.    Mutual    Life    Ins.    Co.    41  I^alm  v.  Medina  Ins.  Co.  20  Ohio  52!). 

Wasli  228,  83  Pac.  IKi,  35  Ins.  L.  J.  See  also  Union  Central  Life  Ins.  Co. 

]:{?).  v.  Phillips,  102  Fed.  19,  41  C.  C.  A. 

12  Gardner  v.  North    State  ^Mutual  263,  revV  101  Fed.  33.     Bnt  comjmre 

Life    Ins.    Co.    163    N.    Car.    3(i7,   48  Shawnee  Mutual  Fire  Ins.  Co.  v.  Me- 

L.R.A.(N.S.)  714,  7J)  S.  E.  806.     See  Clure  (1913)  39  Okla.  535,  49  L.R.A. 

also  Grier  v.  IMutual  Life  Ins.  Co.  132  (N.S.)   1054,  135  Pac.  1150. 
N.  Car.  542,  44  S.  E.  28.     Examine        "  Penlev    v.    Beacon    Ins.    Co.    7 

New  York  Life  Ins.   Co.  v.  Moates,  Grant  U.  C.  130. 
207  Fed.  481,  —  C.  C.  A.  — .  ^^  Mackie  v.  European  Ins.  Co.  21 

"Goodlellow   v.   Times  &  Beacon  L.  T.  N.  S.  102.     See  BaiT  v.  North 

Assur.  Co.  17  U.  C.  Q.  B.  411.     See  American  Ins.  Co.  61  Ind.  488. 
also  Robinson  v.  Union  Central  Life        "  Mississippi  Vallev  Life  Ins.  Co. 

Ins.  Co.  (IT.  S.  C.  C.)  144  Fed.  1005,  v.  Neyland.  9  Bush   (Ky.)  430.     But 

rev'd   8  L.R.A. (N.S.)    883,  148   Fed.  see    Todd    v.    Piedmont  &   Arlington 

358,  78  C.  C.  A.  268;  Starr  v.  Mutual  Life  Ins.   Co.  34  La.   Ann.   63. 

254 


COMPLETION   OF   CONTKACT  §  64 

held  that  it  is  competent  for  the  agent  to  explain  AAhat  was  under- 
stood between  the  parties  by  the  words,  "this  receipt  being  bind- 
ing/' etc.,  whci'c  the  I'eceipt  was  signed  by  the  agent  and  read  as 
follows:  "Received  of  S.  three  hundred  and  seventy-live  dollars  in 
payment  of  insurance  in  the  C.  S.  Insurance  Company,  this  re- 
ceipt being  binding,  on  said  company  until  policy  is  received.*'  ^^ 
In  another  case  A.  applied  to  an  agent  for  insurance  on  certain 
propert}',  and  the  terms  were  agreed  upon  and  the  premium  paid, 
but  the  agent  having  no  blanks  for  i)olicies  agreed  to  send  a  policy 
to  A.,  and  gave  him  a  receipt  sijecifying  the  property  to  be  insured 
and  providing  that  a  policy  should  be  sent  as  soon  as  the  blanks 
were  received,  and  it  was  held  that  the  effect  of  the  i-eceipt  was  to 
bind  the  company  the  same  as  if  a  policy  with  the  ordinary  condi- 
tions had  been  issued.  The  policy,  however,  was  declared  void  for 
breach  of  certain  conditions  relating  to  "other  insurance"  con- 
tained therein. ^^  But  where  a  receipt  was  given  by  the  general 
agent  of  an  insurance  company,  Avho  agreed  if  the  application 
should  be  approved  by  the  company  to  furnish  a  policy  within 
thirty  days,  "or,  if  the  application  is  declined,  to  return  the  above 
amount  to  him,  or  his  order,  on  demand  and  return  of  this  re- 
ceipt," and  the  application  was  approved  by  the  company  and  a 
policy  was  sent  to  the  agent  within  thirty  days;  but  before  delivery 
the  applicant  died  and  the  agent  returned  the  policy  to  the  com- 
pany, the  court  decided  that  the  receipt  did  not  operate  as  a  present 
insurance  for  thirty  days  or  until  a  policy  should  be  furnished.^" 
In  another  case  the  applicant  signed  an  application  ])roviding  that 
only  the  home  office  had  authority  "to  determine  whether  or  not 
a  policy  shall  issue  on  application."  The  agent  gave  a  receipt, 
specifying  the  amoimt  received  and  expressed  to  be  in  jjayment  of 
insurance  in  the  company.  It  was  also  set  forth  that  the  receipt 
should  be  binding  upon  the  company,  until  the  policy  was  received. 
An  action  being  brought,  the  court  decided  that  the  receipt  wa.s  not 
binding  after  the  application  was  rejected,  and  also  that  the  com- 
pany was  not  bound  to  issue  a  ])olicy.  No  decision  was  given,  how- 
ever, as  to  the  ])oint  whether  the  receipt  was  binding  on  the  com- 
pany until  action  had  by  it  on  the  application,  as  the  question  was 
not  considered  as  raised  by  the  facts  in  the  case.^ 

Where  a  receipt  by  an  insurance  agent  to  an  applicant  for  pay- 

"  Scurry  v.  Cotton  States  Life  Ins.        ^Cotton    States    Life    Ins.    Co.    v. 
Co.  51  Ga.  024.  Scurry,    50    Ga.    48.      Ejcamine   New 

1^  Hubbard  v.   Hartford  Fire  Ins.    York  Mutual  Ins.  Co.  v.  Johnson,  2.3 
Co.  33  Iowa,  325,  11  Am.  Kep.  125.    Pa.  St.  72. 

2°  Marks  v.  Hope  Mutual  Life  Ins. 
Co.  117  Mass.  528. 

255 


§  05  JOYCE  ON  INSURANCE 

ment  of  premiimi,  states  tliat  if  the  ap|)li('ation  is  approved  the 
insurance  will  he  in  force  from  the  date  of  the  medical  examina- 
tion, it  refers  to  the  examination  the  result  of  which  is  forwarded 
to  the  company  and  not  to  one  which  is  withheld  by  the  examiner 
because  not  satisfactory.  Such  a  receipt  does  not  put  the  insur- 
ance in  force  pending  a  decision  upon  the  application.^  Again, 
where  the  agent  acknowledged  receipt  of  the  application  in  a  speci- 
lied  company  ''subject  to  approval  by"  a  named  manager  "all  for 
the  term  of  one  year  and  one  note  payable  on"  a  certain  date  also 
a  stated  amount  "in  cash,  all  to  be  restored  if  policy  is  not  issued" 
and  "if  policy  is  not  received  within  thirty  days  from  date  of  this 
receipt.  rei)ort  that  fact  to"  said  manager  at  a  designated  place,  and 
the  application  and  premium  were  returned  to  the  agent  and  the 
risk  rejected,  it  was  held  that  there  was  no  contract  of  insurance 
even  though  the  applicant  never  received  back  said  application  or 
premium,  where  he  gave  no  notice  of  the  nonreceipt  of  the  policy 
as  requested.' 

§  65.  Same  subject:  effect  of  memorandum:  binding  slip:  in- 
dorsement, etc. — The  memorandum  of  insurance  and  the  receipt 
for  the  premium,  both  signed  by  the  agent  of  the  underwriter,  form 
a  contract  of  insurance  between  the  parties,*  and  where  no  policy 
is  made  out  or  delivered,  an  action  can  be  maintained  on  the  mem- 
orandum, .since  the  contract  will  be  presumed  to  be  that  evidenced 
by  the  usual  policies  issued  in  like  cases  by -the  company,^  and  an 
ordinary  binding  slip  is  an  agreement  to  issue  a  policy  in  the  form 
the  insurer  is  accustomed  to  issue,  and  furnishes  indemnity  to  the 
assured  pending  action  upon  his  application  by  the  insurer,  sub- 
ject to  the  terms  and  conditions  contained  in  such  policy.^  Again, 
a  binding  slip  containing  a  memorandum  to  identify  the  parties 
to  a  contract  of  insurance,  the  subject-matter,  and  the  principal 
terms,  "to  be  binding  until  policy  is  delivered,"  is  a  contract  for 
temporary  insurance  subject  to  the  conditions  contained  in  the 
ordinary  policy  in  use  by  the  company,'^  and  if  the  terms  of  a 

2  Northwestern  Mutual  Life  Ins.  Pa.  St.  256,  94  Am.  Dec.  G5;  State 
Co.  V.  Neafus,  145  Kv.  50:?.  36  L.R.A.  Fire  &  Marine  Ins.  Co.  v.  Porter,  3 
(N.S.)   1211,  140  S.'W.  102(i.  Cxrant  Cas.   (Pa.)   123. 

3  Easlev  v.  New  Zealand  Ins.  Co.  ^  ^Mutual  Fire  Ins.  Co.  jMoutooniery 
5  Idaho  593,  51  Pac  41 S,  27  Ins.  L.  County  v.  Goldstein,  119  Md.  83,  86 
J.  289.  Compare  Stihvell  v.  {'ove-  Atl.  34.  Binding- slip  defined.  See  also 
pant  Mutual  Life  Ins.  Co.  83  Mo.  Gardner  v.  North  State  Mutual  Life 
A  pp.  215.  Ins.  Co.  163  N.  Car.  367,  48  L.R.A. 

estate  Fire  &  Marine  Ins.   Co.  v.    (N.S.)  714,  79  S.  E.  807. 
Porter,   3   Grant    Cas.    (Pa.)    123    (a       '  Lipman  v.  Niagara  Fire  Ins.  Co. 
marine  risk).     See  Pattison  v.  Mills,    121  N.  Y.  454,  8  L.R.A.  719,  24  N.  E. 
2  Bli,-,di,  N.  S.  519  (marine  risk).  699. 

^  Eureka  Ins.  Co.  v.  Robinson,  56 

256 


COMPLETION  OF  CONTRACT  §  65 

Standard  policy  are  attached  to  the  binder  as  a  part  thereof  the  in- 
surance company  may  be  liable  in  accordance  therewith.'     So  a 
memorandum,  made  by  a  company's  aftent,  that  a  vessel's  frei.<2,ht 
is  insured  in  a  specified  sum,  eft'ects  such  insurance  by  a  policy 
in  blank,  issued  according-  to  the  custom  of  the  company,  at  that 
place. ^     fSo  when  goods  are  insured  on  ''memorandum"  or  open 
policy,  entries  of  shipments  made  on  the  blank-book  to  which  the 
policy  is  attached  are  as  valid  as  if  made  on  the  sheet  on  which 
the  policy  was  written ;  ^°  and  the  company  may  be  bound  by  a 
memorandum  that  the  subject  ''stand  insured''  until  a  certain  date, 
and  although  loss  occurs  before  that  time."     And  a  recognized 
custom  among  insurance  companies  that  upon  the  agent's  taking 
the  memorandum  of  an  application  the  insurer  became  immediate- 
ly bound,  may  constitute  an  important  factor  as  to  the  existence 
of  a  contract. ^2     But  where  the  plaintiff,  wishing  to  obtain  insur- 
ance on  his  interest  in  the  barque  P.,  his  agents,  L.  C.  &  Co.,  em- 
ployed F.,  an  insurance  broker,  who  obtained  from  W..  agent  of  the 
company,  this  j)aper.  dated  .June  20,  1878:    "No.  1002.     $1,200, 
D.  S.  F.  &  M.  Ins.  Co.,  Wilmington,  Del.     This  certifies  that  we 
have  this  day  entered  in  the  name  of  Iv.  C.  &  Co.,  for  whom  it  may 
concern,  on  our  open  policy  No.  1002,  with   (said  Co.)   a  risk  of 
$1,200  on  barque  P.  at  and  from  June  20,  1878,  to  June  20,  1879, 
loss,  if  any,  payable  in  current  funds  to  Messrs.  L.  C.  &  Co.,  or 
order,    according    to    the    terms    and    conditions    of    the    policy." 
(Signed)    "J.   S.   W.,   agent."     The  paper  was  delivered  by  the 
broker  to  L.  C.  &  Co.,  and  by  them  assigned  in  writing  to  plaintiff. 
No  policy  was  ever  prepared  or  issued  by  the  company.     In  a  suit 
on  said  paper  for  a  loss  on  said  vessel,  it  was  held  that  the  same 
did  not  constitute  a  valid  and  binding  contract  of  insurance,  nor 
could  an  action  be  maintained  on  it  as  such."     An  agent  may  bind 
the  company  by  an  entry  or  memorandum  of  the  contract  in  what 
is  known  as  a  "binding  book."     So  where  an  entry  of  insurance 
was  made  by  a  local  agent,  with  authority  "to  receive  proposal  of 
insurance,"  in  the  "binding  book,"  to  continue  in  force  until  the 
premises,  the  risk  being  specially  hazardous,  should  be  inspected  by 
a  special  agent,  a-nd  the  property  was  burned  before  the  policy  is- 

8  Abel   V.   Atlas   Ins.    Co.   148   111.  facfurcrs'  :\rntual   Ins.   Co.  17  Oliio, 

App.  325.                           •  192. 

^  Insnranoe  Co.  of  Vallev  of  Va.  v.  ^^  Soutliern    Ins.    Co.    v.    Hannah 

Morderai,  22  How.  (63  U.  S.)  Ill,  16  (l!)04)  —  Miss.  — ,  37  So.  506. 

L.  ed.  329.     Cited  in    Concordia  Fire  "  Delaware    State   Fire   &   ^Marine 

Ins.  Co.  V.  Heffron,  84  111.  App.  612.  Ins.  Co.  v.  Shaw,  54  Md.  546.     But 

^"Edwards    v.    M issi.'jsi ppi    Yallev  see  Mobile  ^lariiie  Dock    &    Mutual 

Ins.  Co.  1  Mo.  App.  192.                    '  Ins.  Co.  v.  MacMillan,  31  Ala.  711. 

^^  Neville  v.  Merchants'  &  Manu- 

Joyce  Ins.  Vol.  I. — 17.  257 


§  G6  JOYCE  ON  INSURANCE 

sued,  the  company  was  bound  thereby/*  and  where  the  agent 
entered  the  amount  upon  his  register  the  terms  being  agreed  upon 
and  the  premium  received  by  the  agent,  the  contract  was  held 
valid. ^^  So  an  indorsement  on  an  application  for  reinsurance  that 
the  risk  is  taken  will  be  binding.^®  So  the  company  may  be  bound 
by  a  certificate  given  by  the  secretary  of  an  insurance  company  to 
an  applicant  consenting  that  a  policy  already  issued  to  him  might 
cover  property  not  included  therein, ^"^  In  Thompson  v.  Adams  ^* 
tlie  plaintifi:'s  in  New  Zealand  instructed  their  representatives  to 
obtain  insurance  for  them  upon  certain  goods  in  New  Zealand. 
Their  representatives  communicated  with  a  firm  of  brokers  who  un- 
dertook to  efl'ect  insurance  for  twenty  thousand  pounds.  Insur- 
ance had  been  effected  in  the  same  way  before.  The  insurance 
brokers  communicated  with  another  broker,  B.,  entitled  to  effect 
insurances  at  Lloyds.  B.,  as  was  customary,  prepared  a  slip  show- 
ing the  particulars  as  in  case  of  a  marine  risk;  this  risk  was  shown 
to  the  defendant,  who  initialed  the  slip.  Ordinarily,  this  slip  was 
followed  with  a  policy.  This  slip  was  initialed  October,  1886,  but 
no  policy  was  tendered  for  signature  until  February  following,  and 
on  the  28th  of  that  month  news  came  that  the  premises  and  goods 
were  destroyed  by  fire,  but  no  policy  had  been  issued  nor  premium 
tendered.  Premiums  were  afterward  tendered  but  defendant  re- 
fused to  accept  them  or  to  sign  the  policy.  It  was  held  that  the 
slip  was  a  binding  contract  to  insure  and  enforceable.  A  ''binder" 
is  not  invalid  for  failure  to  state  the  premium,  and  it  is  so  executed 
as  to  become  an  obligation  of  the  company  where  the  chief  clerk 
of  insurer's  agent  signed  it  and  the  agent  ratified  the  act.^^ 

§  66.  Completion  of  contract:  marine  and  fire:  binding  slip. — 
In  marine  insurance  in  England  the  usual  course  of  business  is  for 
the  broker  to  prepare  a  slip  or  brief  memorandum,  containing  the 
particulars  of  the  proposed  insurance,  and  showing  the  risk.  This 
slip  is  presented,  if  at  Lloyds,  to  the  miderwriters,  and,  if  the  risk 
is  accepted,  is  initialed  successively  by  them  for  the  sum  agreed  to 
be  taken  by  each  underwriter.  Within  about  the  last  twenty-seven 
years  fire  risks  have  been  underwritten  at  Lloyds,  the  same  course 
being  pursued  as  in  marine  risks,  and  when  the  slip  has  been  com- 
pletely initialed  the  policy  is  prepai-ed  by  the  broker  and  submitted 

1*  Putnam  v.  Home  Ins.    Co.    123  "L.  R.  23  Q.  B.  D.  361.    See  next 

Mass.  324,  25  Am.  Rep.  93.  section. 

15  Ellis  V.  Albany  Fire  Ins.  Co.  50  ^^  Jacobs  v.  Atlas  Ins.  Co.  148  111. 

N.  Y.  402,  10  Am.  Rep.  495.  App.  325,  38  Nat.  Corp.  Rep.  483. 

1^  Woodruff  v.  Columbus  Ins.  Co.  5  In  this  case  the  amount  of  the  insur- 

La.  Ann.  697.  ance  or  risk  was  held  to  be  five  hnn- 

1'  Goodall    V.    New    England    Fire  dred  dollars  where  expressed  as  500, 

Ins.  Co.  25  N.  H.  169.  hut  with  a  line  after  the  figure  5. 

258 


COMPLETION   OF  CONTKACT  §  66 

to  the  successive  undeiwiiters,  and  when  they  have  signed  the 
pohcy  the  contract  is  complete  in  all  formal  particulars,  and  an 
interval  must  elapse  between  initialing  the  slip  and  the  date  of  the 
policy,  which  frequently  runs  into  weeks  and  months.  There  is, 
however,  in  the  English  cases  one  essential  and  marked  difference 
between  the  legal  effect  of  the  initialed  slip  in  marine  and  fire  poli- 
cies, and  this  distinction  is  brought  about  clearly  by  force  of  the 
act  of  1867,  30  Victoria,  chapter  23,  sections  7,  9.  In  marine  risks 
the  slip  is,  in  practice  and  in  accordance  with  a  long-existing  course 
of  business,  and  the  understanding  of  those  engaged  in  marine  in- 
surance, the  complete  and  final  contract  between  the  parties  fixing 
the  terms  of  the  insurance  and  the  premium,  and  is  obligatory  upon 
both  parties.  At  least  this  is  its  effect  as  an  honorary  engagement, 
but  under  the  legislative  enactment  above  referred  to  requiring 
contracts  and  agreements  for  sea  insurance  to  be  expressed  in  a  poli- 
cy, and  precluding  the  pleading  or  the  admission  in  evidence. of  a 
policy  not  duly  stamped,  such  slip  is  not  a  valid  obligation,  binding 
either  in  law  or  equity  upon  the  insurers,  in  case  they  should  seek 
to  evade  the  honorary  contract  evidenced  by  the  initialed  slip,  for 
the  policy  is  the  only  legal  evidence  of  the  contract.  On  the  con- 
trary, in  case  a  slip  is  initialed  for  a  fire  risk,  there  is  no  statutory 
difficulty  in  the  way.  A  slip  filled  out  and  presented  for  fire  insur- 
ance at  Lloyds  and  initialed,  is  a  binding  legal  contract  to  effect 
a  subsequent  insurance,  and  not  merely  an  honorary  undertaking. 
If  the  policy  is  put  forward  within  a  reasonable  time  the  under- 
writer is  obligated  to  subscribe,  and  during  the  interval  between 
llic  slip  and  the  policy  he  is  legally  bound,  and  the  insured  is  liable 
for  the  premium.  We  deduce  the  distinction  here  made  between 
the  effect  of  the  slip  in  marine  and  fire  risks  from  the  words  of  tht; 
statute  and  the  cases  cited  below,  and  such  is  evidently  the  law  of 
the  present  day  in  England.^"  But  it  is  said  that  in  case  of  an  un- 
staniped  agreement  to  insure,  the.  premium  having  been  paid,  a 
court  of  equity  would  compel  the  issuance  of  a  policy,^  although 

2°  Fisher  v.  Liverpool  Marine  Ins.  Hart  &  Simey,  1909)    §§  34  et  sccj. 

Co.  (1873)  L.  R.  8  Q.  B.  469,  L.  R.  pp.   48   et  seq.     See  also   Id.    {?   .58, 

9    Q.    B.  418,  43  L.  J.  Q.  B.  114;  p.  ofj,  upon  tLe  point,  "Does  the  sli]) 

London     Mutual     Ins.     Co.     In     re  contain    the    requisites     of     a     valid 

(Smith's  case),  4  L.    R.    Ch.    611;  policy?"      Also    Id.    §    39,    p.    56, 

Tlionipson  v.  Adams,  L.  R.  23  Q.  B.  '^agreements  to  issue  policies"  eover- 

D.  361 ;  noted  as  last  case  nnder  pro-  iii^-  notes. 

ceding  section;  lonidcs  v.  Pacific  F.  ^  Mead  v.  Davison,  3  Ad.  &  E.  303, 

&  M.  Tns.  Co.  L.  R.  6  Q.  B.  674,  13  308.     As  to  English  stamp  acts,  see 

Eng.  Rul.  Cas.  471;  17  Earl  of  Hals-  §  33  herein.     As  to  stamp  act  1891 

bury's  Laws  of  England,  pp.  348  et  see  17  Earl  of  Halsbury's  Laws  of 

seq.;  Arnold  on  ]\Iarine-Ins.  (Perkins'  England,  p.  349. 
ed.  1850)    13,  *13,  14,  Id.    (8th  ed. 

259 


§  66a  JOYCE  ON  INSURANCE 

the  statute  above  referred  to  would  seem  to  exclude  even  this  propo- 
sition.^ It  is  stated,  however,  that  for  the  purpose  of  showing 
when  the  proposal  was  accepted  reference  may  be  made  to  the  slip 
or  covering  note  or  other  customary  memorandum  of  the  contract, 
although  it  be  unstamped.^  In  this  country,  however,  when  a  slip, 
application,  or  order  for  insurance  is  actually  accepted,  the  terms 
being  agreed  upon  and  the  contract  otherwise  complete  except  the 
issuance  of  the  policy,  whether  the  entry  be  made  in  the  books  of 
the  company  j)roperly  subscribed  by  an  authorized  agent,  or  the 
acceptance  be  otherwise  evidenced,  there  would  seem  to  be  no  valid 
reason  why  in  the  absence  of  a  statutory  or  })erhaps  some  charter 
prohibition  there  is  not  a  valid  enforceable  contract  of  insurance, 
even  though  the  policy  is  not  issued,  and  such  is  evidently  the  law.* 
We  may  state  here  that  in  this  country  the  general  j)rinciples  un- 
derlying and  governing  the  completion  and  validity  of  contracts 
of  insurance  are  equally  applicable  to  cases  of  marine  and  fire  con- 
tracts as  in  other  cases,  and  those  principles  are  set  forth  fully 
under  this  chapter.  But  upon  the  question  whether  the  slip  on 
application  for  a  policy  of  insurance  is  admissible  in  evidence  to 
show  the  intention  of  tlie  parties  to  the  policy  a  different  question 
is  presented;  and  although  it  is  held  not  admissible  in  a  court  of 
law  upon  the  general  grounds  that  all  prior  negotiations  are  merged 
in  the  written  contract,  yet  if  the  policy  does  not  conform  to  the 
agreement  contained  in  the  slip,  it  might  be  admissible  to  show  a 
mistake  in  a  court  of  equity  or  in  a  court  exercising  equitable  juris- 
diction over  the  case,  or  even  in  a  law  court  under  certain  circum- 
stances.* An  application  for  a  policy  may  be  validly  drawn  up  in 
lead  pencil.® 

§  66a.  Binding  slips,  etc.,  continued:  new  terms:  rate  of  pre- 
mium: parol  evidence. — A  present  contract  of  insurance  upon  new 
terms  may  arise  and  become  of  force  from  date  by  a  binding  slip 
containing  a  memorandum  of  the  "accepted"  terms.'^ 

2  Fisher  v.  Liverpool    Marine    Ins.  Ins.   Co.  50  N.  Y.    402;    Neville    v. 

Co.  L.  R.  8  Q.  B.  469,  L.  R.  9  Q.  B.  Merchants  &  Manufacturers  Mutual 

418,  43  L.  J.  Q.  B.  114.  Ins.    Co.    17    Ohio     192.     See    also 

^  17   Earl   of   Halsbury's   Laws    of  cases  cited  S§  64,  6.")  herein. 

England,   p.   348,   citing   marine   ins.  *  Plinenix  Fire  Ins.  Co.  v.  Gurnee, 

act,  1906  (8  Edw.  7,  c.  41)  §  21.  1  Paige    (N.  Y.)     278;    Motteux    v. 

*Marx  V.  National  Marine  &  Fire  London  Assurance  Co.  1  Atk.  545,  13 

Ins.  Co.  25  La.  Ann.  39;  Woodruff  v.  Eng.  Rul.  Cas.  407;  Dow  v.  Whetten, 

Columbus  Ins.  Co.  5  La.  Ann.  697;  8  Wend.  (N.  Y.)  160,  168;  Delaware 

Wass  V.   Maine  Mutual  ^Marine  ]ns.  Ins.  Co.  v.  Hogan,  2  Wash.  (U.  S.  C. 

Co.  61  Me.  537;  Loring  v.  Proctor,  C.)  4  Fed.  Cas.  No.  3765. 

26  Me.  18;  Blancbard  v.  Waite,  28  ^  cj^y  Ins.  Co.  v.  Bricker,  91  Pa. 

Me.  51;  Warren  v.  Ocean  Ins.  Co.  16  St.  488. 

Me.    4.39 ;    Ellis  v.  Albany  Citv  Fire  '  Belt  v.  American  Central  Ins.  Co. 

260 


COMPLETION  OF  CONTRACT  §  6,6a 

"Wliere  a  memorandum  states  in  general  terms  the  amount  of  in- 
sm  aiice  desired  on  cliartered  freight  on  a  designated  vessel  "pre- 
mium, open  for  particulars,"  marked  ''binding"  before  the  ])arties' 
signatures,  "send  policy"  to  a  specified  place,  there  is  an  obligatory 
tem])orary  contract.* 

In  a  Georgia  case  A.  made  a  verbal  application  to  a  local  agent 
of  an  insurance  company  for  a  policy  of  insurance  on  certain  de- 
scribed property,  then  offering  to  pay  the  premium  to  the  agent. 
The  agent  stated  that  he  could  not  at  that  time  issue  the  regular 
standard  policy  of  the  company,  nor  accept  the  tender  of  the  pre- 
mium because  he  did  not  know  the  rate  on  tliat  class  of  property. 
The  agent  agreed,  however,  to  enter  upon  the  books  of  the  com- 
pany a  Avritten  memorandum  in  the  nature  of  a  "binder,"  which 
he  stated  would  be  effective  as  a  contract  of  insurance  until  the 
regular  policy  was  issued  by  the  company,  and  that,  on  receipt  of 
this  regular  policy,  A.  could  pay  the  premium.  This  was  satis- 
factory to  A.,  and  the  agent,  in  compliance  with  his  agreement,  did 
write,  sign,  and  place  in  the  book  of  policies  issued  by  the  company 
at  his  agency  a  statement  or  "binder,"  containing  all  the  essential 
elements  of  a  contract  of  insurance  between  A.  and  the  company, 
and  made  a  written  report  to  the  company  of  this  memorandum  or 
"binder,"  and  of  his  action  relating  to  the  same,  all  of  which  was 
aflirmed  and  ratified  by  the  company.  It  was  held:  (a)  A  com- 
plete temporary  contract  of  insurance  existed  between  A.  and  the 
company  during  the  period  set  out  in  the  memorandum  or  binder, 
(b)  For  a  loss  which  occurred  during  the  existence  of  the  tempo- 
rary contract,  and  before  the  rate  of  premium  had  been  fixed  on  the 
property  covered  thereby,  A.  could  recover  the  amount  stipulated- 
as  indemnity  in  the  binder,  less  the  rate  of  premium  fixed  by  the 
company  subsequently  to  the  loss.  It  was  also  held  that  the  prop- 
erty described  in  the  memorandum  or  binder  was  insured  during 
the  term  specified  therein  upon  the  terms  and  conditions  of  the 
regular  standard  policy  of  the  company.^ 

In  another  case  an  insurance  company,  by  its  agent,  issued  and 
delivered  to  tiic  insured  a  binder,  or  binding  slip,  Avhereby  it  as- 
sumed and  bound  $2,000  of  insuraiice  u})on  certain  property  of  the 
insured ;  the  binding  .slip  to  be  void  on  delivery  of  the  policy.  Wlien 
the  binder  was  delixcred  it  was  assumed  by  the  insured  that  the 
insurer  proposed  to  charge  a  rate  higher  than  it  had  charged  for 

163  N.  Y.  5:).'),  57  N.  E.  11U4,  airi;'  r)3        ^  Queen  Insurance  Co.  v.  Hartwell 
N.  -Y.  Supp.  316,  20  App.  Div.  546.    Ice  &  Laundry  Co.  7  Ga.  App.  7«7, 

8  Scamniel    v.    Cliina   INlulual    Ins.    68  S.  E.  310,  39  Ins.  L.  J.  1125. 
Co.  161  Mas.s.  341,  4L)  Am.  St.  Rep. 
462,  41  N.  E.  649. 

261 


§  GOa.  JOYCE  ON  INSURANCE 

the  same  insurance  for  the  previous  year,  although  no  rate  was' 
mentioned  in  the  binder,  whereupon  he  requested  the  agent  of  the 
insurer  to  ascertain  if  he  could  not  obtain  from  liis  ]jrincipal  some 
concession  in  the  rate.  This  the  agent  consented  to  attempt,  but 
l)efore  any  attempt  was  made  by  the  agent  the  building  burned. 
It  was  held  (1)  That  a  complete  temporary  contract  of  insurance 
existed  between  the  insurer  and  the  insured  from  the  time  of  the 
delivery  of  the  binder.  (2)  That  the  insured  having  accepted  the 
binder,  the  promise  to  pay  the  premium  to  be  mentioned  in  the 
policy  was  a  sufhcient  consideration  for  the  contract.  (3)  That 
the  agent  of  the  insurer  having  failed  to  tix  the  rate  before  the 
policy  was  delivered  and  before  the  loss  occurred,  the  insured  was 
bound  to  pay  a  reasonable  rate  for  the  protection  which  he  had 
received  by  the  temporary  contract.^" 

There  may  be  such  a  latent  ambiguity  in  a  memorandum,  with 
a  "rider"  attached,  with  reference  to  a  policy  designated  by  number 
as  to  permit  parol  evidence  to  explain  the  same.^^  And  where  a 
further  claimed  renewal  of  a  policy  was  in  the  form  of  a  binder  or 
Ijinding  slip  which  stated  no  consideration,  but  provided:  ''memo, 
to  be  void  on  delivery  of  the  policy,"  it  was  held  that  the  slip, 
standing  alone  was  not  a  complete  and  perfect  contract,  but  was 
open  to  explanation  by  parol  proof  as  to  intention  of  the  parties 
and  the  established  custom  of  the  business  as  to  the  issuance  of  such 
slips  to  brokers  for  temporary  insurance  pending  approval  of  the 
risk,  and  also  as  to  the  brokers  knowledge  of  such  custom  and  that 
the  contract  was  made  in  accordance  therewith,  and  a  recovery  was 
precluded  for  a  loss  after  notice  of  rejection  of  the  risk.^^ 

A  receipt  delivered  by  an  agent  to  the  assured  for  the  first  pre- 
mium may  be  explained  and  avoided  by  ])arol  evidence  showing 
that  no  actual  payment  took  place,  and  that  the  agent,  without  the 
authority  of  his  principal,  took  the  promissory  note  of  the  assured, 
which  was  never  paid,  the  receipt  containing  a  condition  that  the 
failure  to  pay  the  note  at  maturity  ended  the  policy. ^^  But  if  a 
receipt  for  a  premium  is  given  by  a  person  who  is  the  agent  both 

'*  J.    C.    Smith    &    Wallace  Co.  v.  senting.     Same  ease,  151  N.  Y.  130, 

Prussian   Nat.  Jns.   Co.   G8  N.  J.   L.  45  N.  E.  365,  rev'g  83  Hun,  611i)  .')4 

(j^i,  54  Atl.  458,  32  Jns.  L.  J.  559.  App.  Div.  38G,  06  App.  Div.  531,  103 

^*St".  Paul  Fire  &  Marine  Ins.  Co.  App.   Div.   610    (memo.)    184  N.   Y. 

V.  BallOTir,  1G8  Fed.  212,  93  C.  C.  A.  GOT  (memo.) 
498.  13  p,jj|i:^t,n  y    Fidelity  Mutual  Life 

12  Underwood    v.    Greenwich    Ins.  Ins.  Co.  155  Ala.  265,  130  Am.  St. 

Co.  161  N.  Y.  413,  55  N.  E.  936,  29  Rep.  21,  46   So.  578.     But  compare 

Ins.  L.  J.  149   (rev'g  Van  Tassel  v.  Chamberlain   v.   Prudential  Ins.   Co. 

Greemvieh  Ins.  Co.  ol  N.  Y.  Supp.  109  Wis.  4,  83  Am.  St.  Rep.  850,  85 

79,  28  App.  Div.  163,  3  Justices  dis-  N.  W.  128. 

262 


COMPLETION   OF  CONTRACT  §  60b 

of  the  insurer  and  the  assure'd,  who  in  giving  tlie  receipt  was  not 
acting  as  the  agent  of  tlie  insurer,  but  gave  it  for  premiums  paid  or 
advanced  for  a  building  and  loan  association  on  policies  in  which 
it  was  interested,  such  receipt  is  not  admissible  against  the  insurer.^* 

§  66b.  Delivery  to  and  acceptance  by  applicant:  generally. — xVn 
applicant  for  insurance  has  a  right  to  require  delivery  to  and  ac- 
ceptance by  him  of  the  policy  before  he  will  be  bound.^^  And 
where  delivery  and  acceptance  of  the  policy  is  necessary  to  put  the 
insurance  into  effect,  there  can  be  no  risk  until  the  things  precedent 
agreed  upon  shall  happen.^®  But  an  acceptance  of  the  policy  by 
the  insured  will  conclude  the  contract  with  the  insurer."  Where 
the  applicant,  however,  signs  a  paper  reciting  that  he  had  '"re- 
ceived and  accepted  from"  the  insurer's  agent  a  policy  there  is  no 
acceptance  which  is  binding  where  the  policy  was  not  delivered  to 
him  until  three  days  thereafter.^^ 

Ordinarily  and  without  special  circumstances  where  the  appli- 
cant accepts  a  policy  based  on  his  application  he  accepts  all  its 
stipulations  as  they  are  contained  therein  including  conditions 
made  a  part  thereof.^^  And  an  insured  who  accepts  a  policy  in- 
corporating the  provisions  of  another  policy  as  part  of  the  contract 
is  bound  by  such  provisions,  although  the  policy  referred  to  is  in 
possession  of  the  insurer,  and  is  never  seen  by  the  insured,  who 
knows  nothing  of  its  terms. ^^ 

If  different  kinds  of  policies  of  life  and  endowment  insurance 
are  issued  by  an  insurance  company  and  the  form  of  application 
for  a  policy  calls  upon  the  applicant  to  indicate  which  kind  he  de- 
sires, he  becomes  charged  with  knowledge  of  the  provisions  of  the 
policy  and  it  must  be  conclusively  presumed  that  he  received  the 
kind  of  poHcy  he  desired  and  that  he  understood  and  assented  to 
its  terms  and  conditions.^ 

1*  Foreman    v.    German     Alliance  Summers  v.  ]Vratual  Life  Ins.  Co.  12 

Ins.  Assoc.  104  Va.  694,  113  Am.  St.  Wyo.  369;  109  Am.  St.  Rep.  992,  66 

Rep.  1071,  52  S.  E.  337,  3  L.R.A.  LK-A.  812,  75  Pac.  9:37. 

( N  S  ~)  444n  alhnglord    v.    Home    Mutual 

15  Summers  v.  Mutual  Life  Ins.  Co.  JL^^e  &  Marme  Ins    Co.  30  Mo.  46; 

12  Wyo.  369,  109  Am.  St.  Rep.  369.  ^/^^j^^j;^  ^^  ^"'-  ^*'-  ""•  ^^''^''P^^' 

66  L.R  A.  812,  75  Pac.  937.  ,,  ^^^^^^^  ;;  p^^^,^,     ^^q  ^  ^.  ^ 

Contract  ot  insurance  is  not  com-  ^g^^    jg  ^j-_,^,    y^- 

plete  until  policy  is  delivered  and  'm-  19  Brown  v.  United  Slates  Casualty 

cepted.       Millard    v.    Brayton,    1/7  Co.  (U.  S.  C.  C.)  88  Fed.  38,  27  Ins. 

Mass.  533,  52  L.R.A.  117,  59  N.  F  j^   j   951,     Dismissed  88  Fed.  829. 

43(5.  20  Conner  v.  ]\I  audi  ester  A«sur.  Co. 

i«  Banco    De    Sonora    v.    Bankers'  130  Fed.  743,  65   C.   C.  A.  127,  70 

Mutual  Life  Co.  124  Iowa  576,  104  L.R.A.  106.     See  8  66^-  herein. 

Am.  St.  Rci).  367,  100  N.  ^Y.  532;  1  Banner  v.  Equitable  Life  Assur. 

263 


§  66c  JOYCE  OX  INSURANCE 

§  66c.  Right  of  applicant  to  reject  policy:  generally. — The 
applicant  may  refuse  to  accept  a  policy,  even  if  he  stipuhites  in  his 
application  to  accej^t  it  if  issued.  Such  an  agreement  is  merely  one 
not  to  withdraw  his  offer,  is  without  consideration  and  not  binding.^ 
If  the  delivery  of  a  policy  of  life  insurance  and  the  payment  of  the 
premium  are  conditioned  upon  this  acceptance  of  the  application  at 
the  home  office  and  the  issue  of  the  policy  and  also  upon  accept- 
ance by  the  applicant  of  the  policy,  there  is  no  binding  contract 
upon  either  party  until  the  actual  delivery  of  the  policy  and  pay- 
ment of  the  first  premium  as  prior  thereto  the  appHcation  may  V)e 
rejected  or  the  applicant  may  reject  the  policy.'  In  a  Connecticut 
case  it  is  held  that  the  signing  of  an  application  for  life  insurance 
with  the  execution  and  tender  of  a  policy  does  not  effect  a  contract, 
where  the  applicant  changes  her  mind  and  refuses  to  accept  the  pol- 
icy when  tendered,  never  receives  it  and  does  not  pay  the  first  pre- 
mium, although  the  premiums  are  paid  by  another  party  without 
authority  or  interest.*  And  the  refusal  to  accept  a  policy  except  up- 
on a  lower  rate  of  premium  precludes  a  delivery  which  would  make 
a  binding  contract.*  So  where  one  is  induced  by  the  company's 
agent  to  surrender  a  policy  and  take  out  a  new  one  upon  the  con- 
sideration that  he  will  be  allowed  the  surrender  value  of  the  first 
policy  upon  the  first  premium  and  insured  did  not  accept  the  policy 
as  delivered  and  never  indicated  that  lie  was  satisfied  with  it  or  up(ni 
the  subject  of  the  surrender  value  and  the  fir.-^t  premium,  but  mere- 
ly took  the  policy  for  examination  and  never  signified  his  approval, 
there  is  no  unqualified  delivery.^  If  after  dissolution  of  a  firm 
and  the  death  of  one  partner,  a  new  policy  u])on  real  estate,  which 
had  become  the  property  of  the  estate  of  the  deceased  partner,  is  by 
the  direction  of  the  surviving  partner  issued  in  the  deceased  part-' 
ner's  name  and  it  is  antedated  and  is  sent  to  the  attorney  for  the 
heirs  who  refuses  to  accept  the  policy  in  the  form  issued  but  prom- 
ises to  see  the  agent  about  it  but  does  not,  no  contract  is  completed.' 

See.  141  N.  Y.  Supp.  442,  156  App.  of  forfeiture  and  estoppel,  depend- 

Div.  562,  565.  ing  upon  the  date  of  the  policy  as 

On  effect  of  general  notification  by  affectinjr  the  time  of  payment  of  the 

agent    of    arrival    of    policy,    where  iiremiuni. 

the  company  has  substituted  another       *  Hoeben  v.  Metropolitan  Life  Ins. 

form  of  poiicv  for  tliat  applied  for,  Co.  69  Conn.  503,  38  Atl.  214,  26  Tn.'s. 

see  note  in  12  L.R.A.(N.S.)  421.  L.  J.  998. 

2  Citizens  National  Life  Ins.  Co.  V.        *  Roberta     Manufacturins^    Co.    v. 
Murphv,  154  Ky.  88,  156  S.  W.  1069.  Roval  Exclianse  Assur.  Co.  161  N.  C. 

3  McNlaster  v.  New  York  Life  Ins.  88,  76  S.  E.  865. 

Co.  99  Fed.  856,  40  C.  C.  A.  119,  «  Westerfield  v.  New  York  Life  Ins. 
case  wa.s  rev'd  in  183  U.  S.  25,  46  L.  Co.  129  Cal.  68,  61  Pac.  667,  29  Ins. 
ed.  64,  22  Sup.  Ct.  10.  but  on  point.s    L.  J.  813,  aft'g  58  Pac.  92. 

264 


COMPLETION  OF  CONTRACT  §§  66d,  666 

§  66d.  Stipulation  or  agreement  for  return  of  policy  by  applicant: 
option  to  accept  or  reject. — The  parties  may,  without  making  the 
contract  invalid,  stipulate  that  a  life  policy  may  be  returned  if 
not  satisfactory  to  the  applicant  and  that  the  note  for  the  premium 
will  be  surrendered  to  him.*  And  evidence  is  admissible  in  an  ac- 
tion on  the  policy  of  an  agreement  between  insurer's  agent  and 
the  applicant  giving  the  latter  an  option  to  acce|)t  or  reject  tlie 
policy,  to  explain  his  acts  in  rejecting  a  policy  and  demanding  its 
cancelation,  and  the  act  of  the  agent  in  collecting  a  payment  on  tlie 
note  for  the  premium  and  returning  the  amount  upon  the  repudia- 
tion of  the  transaction  by  the  applicant.^  In  a  New  York  ca.se  ^° 
it  appeared  that  the  agent  of  a  company  gave  to  A.  a  life  insurance 
policy  and  received  his  note  and  a  check  therefor.  A  written  agree- 
ment was  entered  into,  providing  that  the  policy  should  be  re- 
turned unless  the  agent  should  obtain  the  surrender  value  or  paid- 
up  policies  for  certain  policies  delivered  by  A.  to  the  agent.  The 
agent  failed  to  accomplish  this  result.  The  court  held  that  no 
valid  contract  Avas  created  until  the  condition  was  complied  with 
and  that  it  was  immaterial  whether  the  agent  of  the  company  had 
power  to  make  such  conditional  delivery  or  not,  since  if  he  had  not, 
the  result  would  still  be  that  no  contract  was  made. 

§  66e.  Where  applicant  receives  policy  for  examination:  accept- 
ance.— If  a  ])()licy  is  merely  submitted  to  the  applicant  for  ex- 
auiination,  to  be  linally  delivered  if  he  approves  of  it  and  pays  the 
tirst  ])remium,  and  he  never  signifies  his  approval,  and  does  not 
pay  the  premium,  there  is  no  acceptance  or  delivery,^^  since  the 
jnerc  receiving  of  a  policy  by  a  person  proposed  to  be  insured,  for 
the  purpose  of  determining  whether  he  will  accept  it,  is  not  suf- 
ficient to  conclude  the  contract.^^  And  an  acceptance  of  a  policy 
b}'  an  applicant  for  insurance  in  order  to  ''read  it  and  look  it  over"' 
does  not  constitute  an  acceptance  binding  as  a  contract.^^  .Vgain, 
an  applicant  may  reserve  the  right  to  inspect  his  policy  before  ac- 
ceptance but 'he  maj^  waive  such  right.^- 

'  Baldwin  v.  Ponnsvlvaiiia  Fire  Ins.  ^^  Westoifield  v.  New    York    Life 

Co.  20  Pa.  Super.  Ci.  1^88.               ,  Ins.  Co.  129  Cal.  68,  61  Pae.  667,  29 

8  Parker  v.  Bond,  121  Ala.  529,  25  Ins.  L.  J.  813,  -MTi^  58  Pae.  92. 

So.  898.  ^^New  v.  Gennania  Fire  Ins.  Co. 

A.S  to  retention  of  policy  see  §  66i  171  Ind.  33,  131  Am.  St.  Rep,  245, 

lierein.  85  \.  E.  703. 

»  Atkins  V.  New  York  Life  Ins.  Co.  "  p,.iddv  v.  l^aum,  140  N.  Y.  Snpp. 

(1901)  —  Tex.  Civ.  App.  — ,  62  S.  481,  79  Misc.  607. 

W.  503.  1*  Going   v.   jMulual     Benefit    Life 

1°  Harnickell    v.    New    York    Life  Ins.  Co.  58  S.  Car.  201,  36  S.  E.  556, 

Ins.  Co.  Ill  N.  Y.  390,  18  N.  E.  632,  29  Ins.  L.  J.  801. 
affV  40  Hun  (N.  Y.)  558. 

265 


§  mi  JOYCE  ON  INSURANCE 

§  66f.  Applicant  not  bound  to  accept  policy  when  it  does  not  con- 
form to  proposal  or  agreement. — Where  the  policy  does  not  conform 
in  terms  to  the  proposal,  there  is  no  obligation  resting  upon  the 
applicant  to  accept  it.^^  Thus,  in  a  New  York  case  an  agent,  who 
had  authority  to  solicit  and  make  contracts  for  insurances,  agreed 
to  insure  the  plaintiff  by  a  policy  containing  special  provisions  for 
refunding  the  money  paid  for  premiums  and  received  the  plain- 
tiff's note  in  part  payment.  The  company  tendered  a  policy  with- 
out the  provision,  which  policy  the  plaintiff  refused.  It  was  de- 
cided that  the  transaction  did  not  constitute  a  binding  contract.^® 
Under  a  Kentucky  -decision  the  agent  executed  a  writing  showing 
that  the  applicant  "was  entitled  to  an  ordinary  life  policy  in  ac- 
cordance with  the  application,  provided  it  was  accepted  by  the 
company,"  and,  if  not  accepted  a  note  given  the  agent  for  the  first 
premium  "was  to  be  returned."  Nothing  appeared  in  the  applica- 
tion as  to  a  limited  risk,  but  the  policy  contained  an  exemption  of 
liability  in  case  of  death  from  certain  causes.  It  w^as  held  that  as 
the  policy  was  different  from  that  for  which  the  applicant  had  con- 
tracted he  was  not  bound  to  accept  it,  and  that  the  company  was 
liable  for  the  amount  of  the  note."  And  where  an  application  for 
accident  insurance  is  received  and  accepted  by  the  insurer,  the  ap- 
plicant is  not  bound  by  a  policy  containing  conditions  inconsistent 
with  such  application,  which  is  issued  and  sent  to  a  local  insurance 
agent  for  delivery,  until  such  applicant  has  had  an  opportunity  to 
ratify  or  waive  such  inconsistent  provisions. ^^  So  the  issue  of  a 
policy  of  life  insurance  for  one-half  the  amount  proposed  in  the 
application  is  a  rejection  of  the  proposition  of  the  applicant  and 
is  not  binding  upon  the  insurer  until  assented  to  by  the  apj^licant." 
If  the  insurer  proposes  a  form  of  insurance  not  in  conformity  with 
the  application  it  will  be  liable  pending  the  applicant's  action  on 
such  change,  where  it  is  stipulated  in  the  receipt  for  the  iiremium 
that  the  insurance  should  be  in  force  from  the  dale  thereof,  and 
it  was  agreed  with  the  agent  that  the  insurance  should  ))cgin  at 
once,  and  the  receipt  also  stipulated  that  the  amount  paid  should 
be  refunded  if  no'  policy  should  be  issued.^"  The  acceptance  of  a 
policy,  without  negligence  on  the  part  of  the  insured  does  not 

"  Mutual  Life  lus.  Co.  v.  Youn^-,  Soc.  132  Mich.  695,  102  Am.  St.  Rep. 

23  Wall.  (90  U.  S.)  85,  23  L.  ed.  152,  430,  94  N.  W.  211. 

S«>e  S>?  -ISl),  *63  lieroin.  ^^  New  York  Life  Ins.  Co.  v.  Lew, 

16  Tiftt  V.  Plux?uLx  Mutual  Life  Ins.  122  Ky.  457,  29  Kv.  L.  Rep.  21,  5 

Co.  6  Lans.  (N.  Y.)  198.  L.R.A.  739  and  note,  92  S.  W.  325,  35 

I'^futual  Life  Ins.  Co.  v.  Gorman,  In.s.  L.  J.  455. 

19  Ky.  L.  Rep.  295,  40  S.  W.  571,  2(3  ^o  Halle  v.  New  York  Life  In.<^.  Co. 

Ins.  L.  J.  1014.  22  Ky.  L.  Rep.  740,  58  S.  W.  722. 

1^  Robinson  v.  United  States  Ben. 

2G6 


COMPLETION  OF  CONTRACT  §§  G6s,  GUh 


OJ 


make  it  tlie  true  and  conclusive  evidence  of  a  prior  parol  agree- 
ment to  insure,  and  a  court  will  correct  such  policy  when,  x.>y  in- 
advertence or  mutual  mistake,  or  the  fraud  of  one  party  and  the 
mistake  of  tlie  other  it  does  not  conform  to  the  actual  agre^^ment.^ 

§  66g.  Where  policy  does  not  conform  to  proposal:  neglect  of 
applicant  or  assured  to  read  policy:  duty  to  notify  company  or 
rescind. — If  the  policy  does  not  accord  with  the  application  the 
failure  of  insured  to  read  it  does  not  relieve  the  insurer  from  the 
duty  of  so  writing  it,  and  where  the  application  is  expressly  made 
the  basis  on  which  insurance  is  to  be  effected  it  is  of  no  consequence 
that  the  insured  does  not  read  the  policy  when  delivered  or  prompt- 
ly object  to  its  terms.^  But  it  is  also  held  that  if  a  person  receives 
a  policy  of  insurance  ostensibly  in  response  to  an  application  there- 
for, which  he  signed  and  parted  with  in  the  belief,  induced  by  the 
fraud  of  the  agent  taking  the  same,  that  it  called  for  a  policy  dif- 
ferent from  that  which  it  called  for  in  fact,  he  is  bound,  as  a  matter 
of  law,  to  examine  the  policj'  within  a  reasonable  time  after  it  comes 
to  his  hand,  and  to  discover  obvious  departures  therein  from  the  one 
which  he  supposed  he  was  to  get,  and  promptly,  upon  discovering 
the  same,  to  rescind  the  transaction,  give  the  company  due  notice 
thereof,  and  do  all  on  his  part  which  justice  requires  to  restore  the 
former  situation,  or  he  will  be  held  to  have  accepted  the  policy  as 
satisfying  his  application,  so  as  to  be  precluded  from  rescinding  the 
same.^  And  the  assured  is  charged  with  notice  of  the  contents  of 
a  written  application  executed  l)y  him,  and  which,  by  the  terms  of 
the  policy,  is  made  a  part  thereof.* 

§  66h.  When  applicant  may  reject  policy  not  conforming  to 
agent's  representations. — If  an  application  for  insurance  does  not 
set  forth  all  the  provisions  which  the  policy  is  to  contain,  and  the 
insurer's  agent  represents  that  the  ))olicv  will  contain  certain  lawful, 
stipulations,  the  policy  luust  contain  them,  or  the  insured  will  not 
be  bound  to  accept  it.  In  such  case,  however,  it  is  incum- 
bent upon  the  applicant  immediately  after  receipt  of  the  policy 

^International  Ferrv  Co.  v.  Amcri-  ^  Rostwick  v.  Mutual  Fire  Tns.  Co. 

can  Fidelitv  Co.  207  N.  Y.  350,  101  110  Wis.  392,  67  L.K.A.  705,  89  N. 

"N.  E.  100  (marine  vessel  lialnlity  in-  W.  538,  92  N.  W.  240,  31  In.<.  L.  J. 

suranee).  412.     Sec  also  Cluunhcrlain   v.   I'ru- 

On  reformation  of  in.surance  itolicy  <ieiitial  Ins.  Co.  109  Wis.  4,  83  Am. 

for   mistake   of  solicitin.a'  a^ent,  see  St.  Kep.  850,  85  N.  W.  128. 

note  in  11  L.K.A.  (N.S.)  357.  Tliat  neglect  to  read  or  have  appli- 

2  German-American     Tns.     Co.     v.  cation    read    no    excuse,    warranties. 

Darrin,  80   Kan.  578,  ;i8  Ins.  L.   J.  See  §§  1974,  3514  and  note  herein. 

1008,    103    Pac.     87.    quoting-  from  On  effect  of  delay  in  seeking  relief 

McElroy  v.  Bi'itisli   American  Assur.  from  mistake  in  insurance  contract, 

Co.    94"  Fed.  990,  3(3  C.  C.  A.  615.  see  note  in  28  L.K.A. (N.S.)  8!)0. 

See  §§  55b,  63,  6Ub  herein.  •*  Russell    v.    Prudential   Life  Tns. 

267 


§  C6i  JOYCE  OX  INSURANCE 

to  notif}'  the  company  of  his  refusal  to  accept  the  policy.*  So 
one  who  signs  an  apph  cation  for  life  insurance  without  read- 
ing it,  upon  the  assurance  of  the  soliciting  agent  that  it  con- 
forms to  representations  orally  made,  and  that  such  signing 
is  customary  but  not  necessary,  may  refuse  to  accept  a  poli- 
cy tendered  him,  on  the  ground  that  it  does  not  meet  such 
representations,  notwithstanding  the  application  contains  a  provi- 
sion that  no  statement  made  by  the  solicitor  would  affect  the  right.s 
of  the  company  unless  embodied  in  a  written  application.^  And 
where  the  defendant's  agent  induced  the  applicant  to  take  out  a 
policy  by  a  promise  that  the  principal  would  make  her  a  loan  on 
her  property  taking  the  policy  as  part  security  therefor  and  the 
agreement  was  also  that  the  applicant  was  to  accept  the  policy  only 
on  condition  that  the  loan  be  made  she  may  refuse  to  accept  the 
policy  where  the  company  declines  to  make  the  loan,  and  she  may 
surrender  the  policy  and  recover  back  the  premium  paid.'  But  a 
false  statement  by  an  insurance  agent,  that  the  policies  of  a  rival 
company  did  not  contain  a  certain  clause,  will  not  justify  the  in- 
sured in  refusing  to  receive  his  policy,  where  he  has  sub.?equently 
niade  an  application  therefor,  after  having  been  furnished  with  a 
blank  policy  which  he  retained  about  ten  days^  and  having  been 
requested  by  the  agent  to  compare  it  with  that  used  by  the  other 
company.* 

§  661.  Effect  of  retention  of  policy  by  applicant:  unreasonable 
delay. — If  fire  policies  are  sent  by  mail  to  the  applicant  condition- 
ally, that  is  with  the  privilege  of  returning  them  to  the  company 
within  a  specified  time  in  case  the  terms  on  which  they  were  sent 

Co.  176  N.  Y.  178,  98  Am.  St.  Rep.  tions,     VI.  Misrepresentations  made 

ti56, 68  N.  E.  2.52.  wlien     policy     is     exchanged.     VII. 

5\vmerican  Ins.  Co.  v.  Weiberger,  :\Iisrepresentations    made    by    agent 

74  :Mo.   167;   Ribble  v.   Roberts,"—  at       time      of      delivering      policy. 

Tex.  Civ.  App.  — ,  180  S.  W.  630,  47  VIII.  Eiifect    of    agent's    agreement 

Ins.  L.  J.  156,  159.  that   applicant    might   reject   policy. 

«>  Evans  V.  Central  Life  Ins.  Co.  87  IX.    INIisrepresenta tions      made      to 

Kan.   641,  41    L.R.A.(N.S.)     1130n,  illiterate  persons.     X.  Where  appli- 

12.J    Pac.    86.      See    §§    489    et    seci.  cation   is   not    intelligible   to   one   in- 

herein.  duced   to    insure.     XI.  Where   agent 

Right   to   reject   or   re^icind  policy  makes    good    his    misrepresentation. 

not  conforming  to  representations  of  XII.  Admissibility  of  parol  evidence 

insurer's  agent  is  headline  to  note  41  conflicting  with  written  application. 

L.R.A.(N.S.)     1130,    as    follows:    I.  XIII.  Questions  for  the  jury.     XIV. 

Scope.     II.  Riglits    to    reject    or    re-  .Miscellaneous. 

scind,  in  general.    III.  Necessity  that  '  Key  v.  National  Life  Ins.  Co.  107 

applicant  rely  upon  agent's  mi.^repre-  Iowa  446,  78  N.  W.  68,  28  Ins.  L.  J. 

seutations.     IV.  Policy  varying  from  2-39. 

agent's  agreement  treated  as  counter-  *  American   Steam  Boiler  Ins.  Co. 

proposal.     V.  Cases  treating  agent's  v.    Wilder,   39    ]Minn.    350,   1   L.R.A. 

statements  as  promissory  repre.scnta-  671,  4U  X.  W.  252. 

268 


COMPLETION  OF  CONTRACT  §  6Gi 

were  not  satisfactory  and  the  aiij'tlieant  receives  the  policies  and- 
retains  them  .beyond  the  time  allowed  for  their  return,  the  failure 
to  take  advantage  of  such  option  is  in  effect  an  act  of  acceptance, 
and  the  last  act  necessary  to  complete  the  contract  and  whetlier  the 
time  was  allowed  to  pass  either  intentionally  or  unintentionally 
will  make  no  difference.^  And  the  insured  is  not  justified  in  re- 
fusing to  receive  a  policy  notwithstanding  the  agent  falsely  states 
that  the  policies  of  a  rival  company  did  not  contain  a  certain  clause 
where  the  insured  subsequently  makes  an  application  therefor, 
after  having  been  furnished  with  a  blank  policy  which  he  retained 
about  ten  days  and  having  been  requested  by  the  agent  to  compare 
it  with  that  used  by  the  other  company.^"  In  Adams  v.  Eidan  " 
it  was  held  that  a  finding  that  an  applicant  receives  and  retains 
without  objection  policies  made  out  and  sent  to  him  is  equivalent 
to  a  finding  that  he  had  accepted  them.  And  in  such  cases  it 
would  seem  to  be  incumbent  upon  the  applicant,  immediately  on 
receipt  of  the  policy,  to  notify  the  company  of  his  refusal  to  ac- 
cept the  policy.  Under  a  Federal  Supreme  Court  decision  the  re- 
tention of  a  policy  containing  a  copy  of  the  application,  by  as- 
sured, is  an  approval  of  such  application.^'^  Under  a  Wisconsin 
decision  the  reasonable  time  for  discovering  that  a  policy  of  insur- 
ance received  ostensibly  in  response  to  an  application  therefor, 
signed  in  the  belief,  induced  by  the  fraud  of  the  agent  that  it  called 
for  a  policy  different  from  that  actually  called  for,  differs  from 
the  one  supposed  to  have  been  applied  for,  commences  to 
run  immediately  upon  the  receipt  of  the  paper,  nothing  oc- 
curring then  reasonably  to  excuse  the  applicant  from  omitting  to 
examine  his  contract.  And  retaining  the  policy,  in  ignorance  of 
the  fraud  because  of  failure  to  examine  it,  four  and  one' half  months 

'  Swing  V.   Marion   Pulp    Co.    47  Arkansas. — King  v.  Cox,  63  Ark. 

Ind.  App.  199,  93  N.  E.  1004,  40  Ins.  211,  37  S.  W.  877;  Providence  Life 

L.  J.  807.  Assurance    Soc.    v.    Rentlinger,     58 

i»  American  Steam  Boiler  Ins.  Co.  Ark.  544;  25  S.  W.  835. 

V.   Wilder,   39   Minn.    350,   1   L.R.A.  Illinois. — National   Union    v.    Arn- 

671,  40n,  252.  liorst,  74  111.  App.  482,  489. 

"47  Minn.  53,  43  N.  W.  690.  Man/land.— CAohe  Reserve  Mntnal 

12  New    York     Life     In.s.     Co.     v.  Life  Ins.  Co.  v.  Duffv,  76  Md.  301, 

Fletcher,  117  U.  S.  519,  29  L.  ed.  934,  25  Atl.  227. 

6  Sup.  Ct.  827.  New    York.— Hook     v.     Michigan 

Cited  in:  :\rutual  Life  In.<;.  Co.  90  N.  Y.  Supp. 

United       States. — John      Hancocic  5().  44  Misc.  478,  483. 

Mutual  Life  Ins.  Co.   v.   Houpt,   113  Xorth  Dakota. — Johnson  v.  Dakota 

Fed.     576;     Caruthers     v.     Kansas  Fire  &   Marine  Ins.   Co.  1   N.   Dak. 

Mutual  Life  Ins.  Co.  108  Fed.  494;  181,  45  N.  W.  799. 

United  States  Life  Ins.  Co.  v.  Smith,  Distinguished  in   State  Ins.  Co.  v. 

92  Fed.  507,  34  C.  C.  A.  510.  Crav,  44  Kan.  735,  25  Pac.  197. 

269 


§  66i  JOYCE  ON  INSURANCE 

in  such  a  case  is,  as  a  matter  of  law,  unreasonable,  and  defeats  the 
right  of  the  insured  to  rescind  the  contract,  where  t^ere  was  noth- 
ing to  prevent  his  examining  his  policy  as  soon  as  it  was  delivered 
to  liim,  and  the  substitution  is  plainly  apparent  on  its  face.^^  Again, 
silence  on  the  part  of  a  buyer  of  goods  which  the  seller  has  offered 
to  insure  at  their  joint  expense  before  delivery,  coupled  with  the  ac- 
ceptance and  retention  of  the  policies  by  the  former  operates  as 
an  acceptance  of  the  offer  even  though  he  has  a  secret  intention 
not  to  accept  and  he  becomes  liable  for  premiums. ^^ 

But  mere  failure  to  reply  to  a  letter  containing  a  slip  to  be  pasted 
to  a  policy  of  insurance,  and  which  deals  wdth  a  matter  already 
embraced  in  the  contract,  Avill  not  make  the  slip  binding  on  the 
insured,  in  the  absence  of  anything  to  show  that  the  insurer  was 
injured  by  the  silence.^^  But  in  a  Massachusetts  case  ^^  an  insur- 
ance company  issued  a  policy  in  the  name  of  B.,  and  sent  it  to 
B.'s  agent,  by  whom  it  was  returned  with  a  requast  to  make  it  pay- 
able to  K.,  B.'s  mortgagee.  The  first  policy  was  canceled  and  a 
new  policy  was  made  out  to  K.,  but  without  B.'s  knowledge  of  such 
return  and  substitution.  The  court  determined  that  although  the 
new  policy  was  kept  seven  months  by  K.,  this  did  not  constitute  an 
acceptance  thereof  on  the  part  of  B.,  notwithstanding  B.  admitted 
that  K.'s  possession  was  not  fraudulent.  In  Meyers  v.  Keystone 
Mutual  Life  Insurance  Company,^'''  it  was  determined  that  there 
was  no  sufficient  acceptance  of  the  policy  to  make  it  binding.  There 
the  agent  of  the  company  agreed  gn  certain  terms  for  a  policy  which 
were  not  ratilicd  l)y  the  company,  but  a  new  policy  was  sent  with  a 
request  to  return  it  if  the  terms  were  not  satisfactory,  and  both 
policies  were  kept  without  complying  Avith  the  terms  of  the  letter. 
The  receipt  and  retention  by  assured  of  a  renewal  policy  creates  a 
binding  contract  even  though  the  assured's  name  in  the  policy  is 
that  of  the  original  corporation  from  which  it  had  been  changed.^® 
An  acceptance  by  assured  of  a  policy  of  fire  insurance,  issued  to 
take  the  place  of  another,  is  shown,  notwithstanding  assured  re- 
tained the  other  policy,  where  assured  at  the  time  of  the  fire  had  no 
knowledge  of  the  attempted  substitution  which  was  arranged  by  an 
agent  acting  as  factor  for  both  parties :  and  on  being  consulted  after 

13  Bostwiek  V.  Mutual  Life  Ins.  Co.  System  Co.  92  Wis.  366,  53  Am.  St. 

116  Wis.  392,  67  L.R.A.  705  (anno-  Rep.  920,  32  L.R.A.  383,  66  N.  W. 

tated  on  retention  of  policy  of  insur-  .328. 

ance  as  waiver  of  mistake  or  fraud  ^^  Bennett    v.    City    Ins.    Co.    115 

of  the  insurer  or  its  agent),  89  N.  W.  ]Mass.  241. 

538.  92  N.  W.  246,  31  Ins.  L.  J.  412.  i'  27  Pa.  St.  268,  67  Am.  Dec.  462. 

i^Bolin     Manufacturing      Co.     v.  ^^  ppgypi.   Mercantile   Co.  v.   State 

Sawver,  169  Mass.  477,    48    N.    E.  Mut.  Fire  Assoc.  23  S.  Dak.  1,  119 

620."  N.  W.  1008. 

15  Sliakman  v.  United  States  Credit 

270 


COMPLETION   OF   CONTRACT  §  66j,  70 

the  fire,  informed  the  compan}^  that  he  proposed  to  hang  on  to  all 
the  policies." 

§  66j,  Acceptance  by  insured  father  for  infant  beneficiaries. — 
Where  a  father  insures  his  life  for  the  benefit  of  his  infant  children, 
it  is  not  essential  to  the  interests  of  the  beneficiaries  that  they  have 
the  nominal  possession  of  the  policy,  the  taking  delivery  of  the 
policy  by  the  insured  constitutes  an  act  of  acceptance  for  such  bene- 
ficiaries, and  in  subsequently  holding  the  same  he  made  himself  a 
naked  depositary  without  any  int^rst  for  those  entitled  thereto.^" 

SuBDiv.  III.     Completion  of  Coxtkact — Pkepayment  of 

Premium. 

§  70.     Prepayment  of  premium  condition  precedent. 

§  71.     Actual  prepayment  of  premium  not  in  all  cases  essential  to  validity 

of  contract. 
§  72.     Prepayment  of  premium:  oral  agreement. 
§  73.     Preijayment  of  premium  to  agent  or  broker. 
§  74.     Effect  of  part  payment. 
§  74a.  Same  subject :  rebate :  agent's  commission  released  or  property  taken 

on  credit  therefor. 
§  74b.  Part  payment:  good  health. 
§  75.     Payment  by  third  person. 
§  76.     Prepayment  of  premium  may  be  waived. 
§  77.     Waiver  of  prepayment  by  agent. 
§  78.     Renewal :  waiver  of  prepayment  of  premium. 
§  79.     Prepayment  of  premium:  effect  of  delivery  of  policy, 
§  80.     Prepayment:  credit  may  be  given. 
§  80a.  Same  subject:  promissory  notes,  checks,  and  drafts. 
§  81.     Prepayment:  mutual  credits:  application  on  agent's  debt. 
§  82.     Where   there  are  mutual  credits. 

§  83.     Crediting  premium  on  agent's  indebtedness  to  applicant. 
§  84.     Prepayment :  course  of  dealings :  allowing  credit. 
§  85.     Prepayment  of  premium:  evidence  of  waiver. 
§  86.     Effect  of  receipt  in  policy  for  premium. 

§  70.  Prepayment  of  premium  condition  precedent. — Where  it  is 
expressly  provided  that  the  policy  shall  not  take  effect  until  the 
premium  is  paid,  there  is  no  binding  contract  until  such  payment 
is  made,  unless  such  provision  is  waived,^  and  if  the  application 

"  Finley  v.  Western  Empire  Ins.  of  policy  of  ordinarv  life  insurance 
Co.  69  Wash.  673,  125  Pac.  1012.  without   consent  of   beneficiary),   79 

20  Ferguson     v.     Phcenix     Mutual    Atl.  997,  40  Ins.  L.  J.  1521. 
Life  Ins.  Co.  84  Vt.  350,  35  L.R.A.        ^United      Stales.  —  GidtVmgs      v. 
(N.S.)   844   (annotated  on  suiTender   Northwestern   Mutual   Life   Ins.   Co. 

271 


§  70 


JOYCE  OX  INSURANCE 


provides  that  the  policy  shall  not  be  in  force  until  the  first  premium 
is  paid,  the  legal  result  is  that  the  insured  covenants  with  the  cor- 
poration directly,  and  not  through  its  agents,  that  the  policy  shall 


102  U.  S.  108,  26  L.  ed.  92;  Miller  v. 
Northwestern  ^Mutual  Life  Ins.  Co. 
Ill  Fed.  405,  469,  49  C.  C.  A.  330, 
334;  ]\lutual  Reserve  Fund  Life 
Assoc.  V.  Simmons,  107  Fed.  418,  46 
C.  C.  A.  393;  Lamb  v.  Mutual  Re- 
serve Fund  Life  Assoc.  106  Fed.  637, 
aff'd  108  Fed.  961,  48  C.  C.  A.  164, 
S.  C.  109  Fed.  81;  Travis  v.  Neder- 
land  Life  Ins.  Co.  104  Fed.  486,  488, 
43  C.  C.  A.  653,  656;  Weinfeld  v. 
Mutual  Reserve  Fund  Life  Assoc.  53 
Fed.  209.  See  Mc:\Iaster  v.  New 
York  Life  Ins.  Co.  99  Fed.  850,  40 
C.  C.  A.  119  (alf'd  90  Fed.  40)  rev'd 
183  U.  S.  25,  46  L.  .ed.  64,  22  Sup. 
Ct.  10. 

Arkansas. — Home  Fire  Ins.  Co.  v. 
Stancell,  94  Ark.  578,  127  S.  W.  966. 

California. — Westertield  v.  New 
York  Life  Ins.  Co.  129  Cal.  68,  77, 
01  Pac.  667;  Bergesen  v.  Builder's 
Ins.  Co.  38  Ca.  541. 

Colorado. — Newcomb  v.  Provident 
Fund  Soc.  5  Colo.  App.  140,  143,  38 
Pac.  61. 

Illinois.  —  Milwaukee  Mechanics 
Ins.  Co.  V.  Graham,  181  Hi.  158.  54 
N.  E.  914,  29  Ins.  L.  J.  175;  Home 
Ins.  Co.  V.  Field,  42  Til.  App.  392. 

Indiana. — New  v.  Germania  Fire 
Ins.  Co.  171  Ind.  33,  131  Am.  St. 
Rep.  245,  85  N.  E.  703. 

Kentuchi/. — Blue  Grass  Ins.  Co.  v. 
Cobb,  24  ivv.  L.  Rep.  2132,  72  S. 
W.  1099. 

Massachusetts. — Wainer  v.  ]\Iilford 
^Mutual  Fire  Ins.  Co.  153  Mass.  335, 
11  L.R.A.  598,  26  N.  E.  877;  Baxter 
V.  Massasoit  Ins.  Co.  13  Allen  (95 
Mass.)  320;  Mulrev  v.  Shawmut  Uut. 
Firo  Ins.  Co.  4  Allen  (86  Mass.)  116, 
81  Am.  Dec.  089. 

Michigan. — Bowen  v.  Prudential 
Ins.  Co.  of  America,  178  Mich.  03, 
51  L.R.A. (N.S.)  587,  144  N.  W.  .543. 

Minnesota.  —  Schwartz      v.      Ger- 
mania Ins.  Co.  18  Minn.  448. 
,  Missouri. — Wilcox      v.      Sovereign 
Camp   Woodmen   of   the   World,   76 
Mo.  App.  573,  1  ]\ro.  App.  Reps.  525. 


Baker,  56 

Div.  .558; 

11   Paige 

Xorih 


Xebraska. — Modern  Woodmen  Ac- 
cident Assoc.  V.  Kline,  50  Neb.  345, 
09  N.  W.  943,  26  Ins.  L.  J.  724. 

New  York. — Russell  v.  Prudential 
Ins.  Co.  176  N.  Y.  178,  98  Am.  St. 
Rep.  656,  68  N.  E.  252;  Babeock  v. 
N.  Y.  Supp.  239,  37  App. 
Sandford  v.  Trust  Ins.  Co. 
(N.  Y.)   547. 

Carolina. — Perrj'  v.  Se- 
curity Life  &  Annuity  Co.  150  N. 
Car."l43,  03  S.  E.  079,  38  Ins.  L.  J. 
432;  Ray  v.  Security  Trust  &  Life 
Ins.  Co."  126  N.  Car.  166,  35  S.  E. 
246,  29  Lis.  L.  J.  369. 

Ohio. — State  Life  Ins.  Co.  v.  Har- 
vey, 72  Ohio  St.  174,  73  N.  E.  1056 ; 
Flint  V.  Ohio  Ins.  Co.  8  Ohio  502; 
Union  Central  Life  Ins.  Co.  v.  Mor- 
row, 7  Ohio  Dec.  118. 

Pennsylvania. — Brady  y.  North- 
western ^lasoiiic  Aid  Assoc.  190  Pa. 
595,  42  Atl.  962. 

-Oliver  v. 
Va.  134,  1 
S.  E.  536, 


Virginia.- 
Ins.  Co.  97 
Rep.  29,  33 


Mutual  Life 
Va.  Sup.  Ct. 
28  Ins.  L.  J. 
/lO.  See  :\Iutual  Life  Ins.  Co.  v. 
Oliver,  95  Va.  445,  28  S.  E.  594,  27 
Ins.  L.  J.  444. 

If  insured  does  not  comply  with  a 
condition  precedent  in  a  policy  no 
contract  is  effected.  Banco  de 
Sonora  v.  Bankers  Mutual  Casualty 
Co.  124  Iowa  576,  104  Am.  St.  Rep. 
367,  100  N.  W.  532;  Summers  v. 
:\rutual  Life  Ins.  Co.  12  Wyo.  369, 
109  Am.  St.  Rep.  992,  75  Pac.  937, 
06  L.R.A.  812. 

A  condition  is  valid  in  a  fire  policy 
issued  in  Iowa,  providing  "that  no 
insurance,  whether  original  or  con- 
tinued, shall  be  considered  as  binding 
until  the  actual  payment  of  the 
premiums,  nor  shall  this  company  be 
liable  for  any  loss  under  this  policy 
occurring  when  any  note,  or  any 
part  thereof,  given  for  a  part  or 
whole  of  the  premium,  shall  be  due 
and  nnpaid."  Harle  v.  Council 
Bluffs  Ins.  Co.  71  Iowa,  401,  32  N. 


COMPLETION   OF  CONTRACT  §  70 

not  be  binding  until  such  payment  is  made.^  So  where  there  is  a 
special  understanding  between  an  insurance  ofRce  and  the  agent  of 
the  insured  that  no  insurance  shall  be  considered  as  effected  in  be- 
half of  himself  or  others  until  the  premium  is  paid,  and  a  rule  of 
the  company  is  kept  i)osted  up  in  the  office  not  to  consider  an  in- 
surance effected  until  the  premium  is  paid,  the  policy  delivered,  or 
a  written  acceptance  entered  on  the  books,  no  agreement  for  insur- 
ance can  be  perfected  in  equity  when  these  conditions  are  not  com- 
plied with.^  So,  also,  where  a  policy  is  issued  subject  to  the  con- 
ditions on  the  back  thereof,  and  one  of  the  conditions  is  that  the 
contract  is  not  valid  unless  the  premium  is  actually  ''paid  in  cash,'' 
and  there  is  no  waiver  of  this  provision  by  the  company,  and  the 
agent  issuing  the  policy  has  no  authority  to  alter  these  provisions, 
it  is  held  that  the  acceptance  of  a  promissory  note  of  the  insured 
by  the  agent  as  payment  of  the  premium  does  not  render  the  con- 
tract complete,  and  that  there  is  no  consideration  for  the  note.'* 
And  where  the  application  for  a  life  policy  provides  that  there  shall 
be  no  contract  until  the  policy  is  issued  and  delivered  and  the  first 
premium  paid  during  the  life  of  the  applicant  while  in  the  same 
condition  of  health  as  described  in  the  application,  and  the  appli- 
cant dies  before  the  policy  is  issued,  the  contract  is  not  complete.' 
So  a  policy  of  insurance  issued  on  the  express  condition  that  the 
assured  shall  execute  his  negotiable  promissory  note  to  the  com- 
pany with  a  solvent  indorser  is  of  no  binding  force  until  the  con- 
dition has  been  performed.^  Where  by  the  charter  of  the  com- 
pany the  deposit  of  a  iDremium  note  for  a  sum  to  be  determined 
by  the  directors  is  made  a  condition  precedent  to  receiving  the 
policy,  this  condition  must  be  complied  with.'''  In  New  Jersey  a  by- 
law of  the  company  required  the  execution  of  a  premium  note  by 
the  assignee  before  delivery  to  him  of  the  approved  policy,  and  the 
purchaser  of  insured  property  took  an  assignment  of  the  policy  and 
sent  it  to  the  secretary  of  the  company  for  approval.  This  was 
given  by  indorsement  on  the  policy,  and  entry  on  the  company's 

W.    396.     See    also    Mutual    Reserve  quirement  that  initial  payment  must 

Fund  Life  Assoc,   v.    Simmons,   107  have  been  actuallv  paid,  see  note  in  5 

Fed.  418,  46  C.  C.  A.  393.    Perry  v.  B.  R.  C.  372. 

Security    Life    &    Annuitv    Ins.    Co.  ■*  Dunham  v.  Morse,  158  Mass.  132, 

150    N.    Car.  143,  63  S.'E.  679,  38  35  Am.  St.  Rep.  47.3,  32  N.  E.  1116. 

Ins.  L.  J.  432.  See  §§  80,  80a,  1202  herein. 

2  Russell  V.  Prudential  Tns.  Co.  170  ^  Paine  v.  Pacific  Mutual  Life  Ins. 
N.  Y.  178,  98  Am.  St.  Rep.  656,  68  Co.  51  Fed.  689.  691.     See  §  104. 

N.  E.  252.  6Bid\vell    v.     Si.    Louis    Floating 

3  Flint  V.  Ohio  Ins.  Co.  8  Ohio,  502.    Dock  &  In.'^.  Co.  40  Mo.  42. 

On  promissory  note  as  iiayment  of        ''Belleville  .Mutual  Ins.  Co.  v.  Van 
insurance     ])reraium     .'^alisfving     re-   Winkle,  12  N.  J.  Kq.  333,  §  34. 
Joyce  Ins.  Vol.  I.— fs.  273 


§  70  JOYCE  UN  INSURANCE 


S 


books.  The  policy,  however,  was  retained  until  the  required  prem- 
ium note  should  be  executed,  which  was  agi*eed  to  be  done.  This 
was  neglected,  a  loss  occurred,  and  defendant  was  a.ssessed  as  a 
policy  holder.  He  refused  to  pay.  A  bill  was  filed  against  him 
by  the  company.  The  court  dismissed  the  l)ill  on  the  ground  tliar 
the  property  was  not  insured.^  In  Giddings  v.  Northwestern  Mu- 
tual Life  Insurance  Company  ^  an  application  was  made  bj'  B.  to 
the  agent  of  a  mutual  life  insurance  company  for  a  policy  ui)on  his 
life  for  six  thousand  dollars;  the  application  was  upon  a  form  fur- 
nished by  the  agent.  The  charter  of  the  company  provided  that 
before  a  person  could  become  a  member,  he  should  ''the  first  time 
he  effects  insurance,  and  before  he  receives  his  policy,  pay  the  rates 
that  shall  be  fixed  upon  and  determined  by  the  trustees.'"'  A  pol- 
icy was  issued  and  forwarded  to  the  agent,  which  provided  that  it 
should  not  be  binding  on  the  company  until  "the  premium  be 
actually  paid,  during  the  lifetime  of  the  person  whose'  life  is  as- 
sured, to  the  company,  or  some  person  authorized  to  receive  it.  who 
shall  countersign  the  policy  on  receipt  of  the  premium."  The  pol- 
icy was  not  called  for,  but  was  returned  and  canceled.  B.  died 
l)rior  to  the  return  of  the  policy,  and  the  administrator  tendered  the 
Jirst  premium  to  the  agent,  who  refused  to  act  in  the  matter.  There- 
upon, the  administrator  forwarded  proofs  of  loss  to  the  company, 
action  was  subsequently  brought,  and  the  court  decided  that  the 
payment  of  the  premium  in  the  lifetime  of  B.  was  a  condition  pre- 
cedent to  A.'s  liability,  and  the  suit  could  not  be  maintained.  In 
another  case  the  policy  expressly  provided  that  the  company  should 
not  be  liable  until  the  premium  in  full  was  actually  paid,  and  that 
if  the  premium  was  not  paid  within  fifteen  days  from  the  date  of 
the  policy,  it  should  be  null  and  void.  Before  the  premium  was 
paid,  and  before  the  expiration  of  the  "fifteen  days,"  the  property 
was  burned.  Thereupon  the  insured  within  the  '"fifteen  days" 
tendered  the  premium  and  claimed  indemnity  for  the  loss.  The 
court,  however,  determined  that  actual  payment  of  the  premium, 
not  only  within  the  "fifteen  days"  but  before  loss,  was  necessary 
to  render  the  company  liable  under  the  policy,  and  that  the  holder 
could  not  recover.^"  And  where  a  party  seeking  insurance  on  his 
life  has  made  some  effort  to  pay  the  premium  necessary  to  perfect 
Ihe  contract,  but  has  not  done  all  that  he  could,  the  company  is  not 
liable;  ^^  and  such  stipulation  as  to  prepayment  of  premium  is  not 
complied  with  or  waived  by  a  payment  of  the  premium  to  an  in- 

^  CranbeiTv  ^Mutual  Fire  Ins.  Co.  ^°  Bradlev  v.  Potomac  Fire  Ins. 
V.  Hawk  (N.  J.  Ch.  1888)  14  Atl.  Co.  32  Md.  108,  3  Am.  Kep.  121.  See 
74.5.  Home  Ins.  Co.  v.  Field,  42  111.  App. 

» 102  U.  S.  108,  26  L.  ed.  92.  :!02. 

274 


COMPLETION  OF  CONTRACT  §  70 

surance  a^ent,  through  whom  the  application  was  made  and  the 
policy  delivered,  if  the  policy  contains  an  express  stipulation  that 
every  insurance  agent,  broker,  or  other  person  forwarding  applica- 
tions or  receiving  premiums  is  the  agent  of  the  applicant  and  not 
of  the  company,  although  the  c()mi)any  were  in  the  habit  of  settling 
a  monthly  account  with  him,  and  he,  after  the  loss,  tendered  the 
])remium  to  them.^^  It  is  also  held  in  a  North  Carolina  case  that 
if  the  prepayment  of  dues  is  stipulated  for  in  the  application,,  it 
constitutes  an  essential  part  of  the  contract  of  insurance,  with  which 
tlie  agent  has  no  power  to  dispense  even  if  an  intent  to  do  so  can 
l)e  inferred  from  his  forwarding  the  policy  with  a  receipt  for  the 
dues  signed  by  the  president,  but  not  countersigned  by  him.^^  So 
the  parties  to  a  contract  of  insurance  may  stipulate  that  it  shall  not 
become  operative  as  an  indemnity  until  payment  in  full  by  the 
insured  of  all  charges  and  assessments  required  by  the  constitution, 
rules,  and  regulations  of  the  insurer.^*  An  '"advance  premium"' 
is  in  the  nature  of  a  membership  fee,  where  the  payment  thereof 
is'  made  a  condition  precedent  to  liability  of  the  company  under  the 
express  terms  of  the  policy.^^  In  Hubbell  v.  Pacific  jNlutual  Insur- 
ance Company  ^®  the  defendant  agTced  to  insure  plaintiff's  cargo. 
The  custom  in  such  cases  was  to  issue  a  policy  in  from  ten  to  twenty 
days  on  payment  of  the  premium  or  delivery  of  the  note  of  the  in- 
sured therefor.  AVithin  twenty  days  plaintiff  became  insolvent, 
and  made  an  assignment.  Defendant  gave  notice  that  the  jn-e- 
mium  must  be  paid  in  cash  or  secured.  Nothing  more  was  done. 
Several  years  afterward,  in  a  suit  brought  on  the  agreement,  it  was 
held  that  the  agreement  came  to  an  end  by  the  failure  of  plaintiff 
to  comply  with  defendant's  notice  or  to  take  some  action  at  the 
time.  In  Buflum  v.  Fayette  Mutual  Fire  Insurance  Company,^"^  it 
was  determined  that  if  tlie  by-laws  of  a  mutual  insurance  company 
provide  that  "each  person,  before  the  policy  sliall  be  binding  on 
the  company,  shall  pay  to  the  treasurer  or  agent  such  premium 
and  make  such  deposit  as  the  directors  sliall  determine,'"  the  com- 
pany is  not  rendered  liable  on  a  policy  which  is  executed,  but  not 
delivered,  and  for  which  no  i)rciiiiiun  has  been  paid,  by  an  oral 
promise  of  iheir  trea,surer  to  the  ai)plicant  for  insurance  that  if  any- 

"Cronkliite   v.    Aofidont   Ins.    Co.  l*  Modern       Woodman       Acc-ident 

of  North  America.  'A'y  Fed.  26.  As.soc.  v.  Kfine,  00  Neb.  345,  69  N. 

I2:yiulrev      v.      Shawmut      jMuliial  \V.  943,  26  Ins.  L.  J.  724. 

Fire  Ins.  Co.    4    Allen     (86    INfass.)  is  c^j^ifi,  y.  Covenant  Mutual  Bene- 

316.  81  Am.  bee.  689.     See  Walling-  tit  Assoc.  16  Tex.  Civ.  App.  593,  43 

lord  V.  Home  Mutual  Fire  &  Marine  S.  W.  819. 

Ins.  Co.  30  Mo.  46.  ''  100  N.  Y.  41.  2  N.  F.  470. 

i^Onnond   v.   Fidelity   Lite   Assn.  i' 3  Allen   (85  Mass.)   360. 
96  N.  C.  158,  1  S.  E.  796. 


§  71  JOYCE  ON  INSURANCE 

thing  should  happen,  he  would  see  the  premium  paid,  or  that  he 
would  take  it  upon  himself  to  keep  the  policies  good.  In  another 
case  an  application  for  life  insurance  was  made  to  an  insurance 
company'  which  it  found  satisfactory ;  and  it  wrote  a  policy  based  on 
the  application  and  sent  tlje  policy  to  its  agent,  who  offered  the  pol- 
icy to  the  person  making  'the  application  for  inspection.  The 
premium  called  for  by  the  terms  of  the  policy  was  not  paid,  and  the 
policy  was  not  delivered,  and  it  was  decided  that  an  action  could 
not  be  maintained  against  the  company  under  any  form  of  dec- 
laration." And  if  a  policy  of  insurance  is  sent  to  the  assured,  and 
he  refuses  to  accept  it  and  pay  the  premium  according  to  its  terms 
and  his  agreement,  but  holds  it  to  look  into  the  standing  of  the 
company  while  it  is  under  advisement,  without  delivery,  accept- 
ance, and  payment  of  the  premium,  tlie  property  is  at  risk  of  the 
assured,  and  he  cannot  recover  in  case  of  loss  by  fire.  It  is  too 
late  to  accept  the  policy  and  tender  the  premium  after  the  prop- 
erty is  destroyed,  where  the  policy  requires  prepayment  and  there 
has  been  no  waiver. ^^  Where  a  policy  on  mortgaged  premises 
which  the  mortgagor  has  refused  to  accept  is  delivered  to  the  mort- 
gagee, who  does  not  pay  or  agree  to  pay  the  premium,  tiie  policy 
does  not  become  effective  by  reason  of  a  clause  therein  that  the 
mortgagee  should  pay  the  premium  on  demand  if  the  mortgagor 
fails  to  do  so.^"  And  a  worthless  check  does  not  constitute  the 
payment  of  the  first  premium  required  as  a  condition  precedent  to 
the  completion  of  the  contract.^  A  premium  is  not  overdue  be- 
cause not  paid  on  the  day  of  the  date  of  the  policy,  even  though 
the  insurance  is  not  to  take  effect  unless  the  first  premium  is  paid.^ 
§  71.  Actual  prepayment  of  premium  not  in  all  cases  essential  to 
validity  of  contract. — This  head-line  statement  is  a  general  qualifi- 
cation of  or  exception  to  the  rule  first  stated  under  the  last  preced- 
ing section  and  will,  therefore,  be  only  briefly  instanced  in  this 
place  as  it  emln-aces  to  a  great  extent  what  appears  under  other  sec- 
tions next  following  herein.  The  payment  of  the  premium  is  not 
made  a  condition  precedent  to  the  taking  effect  of  a  contract  of  in- 
surance by  a  writing  following  the  proposals,  but  not  made  a  part  of 
the  policy,  either  by  recital  or  reference,  stating  tliat  the  applicant 
agrees  "that  the  assurance  hereby  proposed  shall  not  be  binding  on 
said  company  imtil  the  amount  of  premium  as  stated  therein  shall 

iSMarkev  v.  Mutual    Beneflt    Ins.  171  Ind.  33,  131  Am.  St.  Rep.  245, 

Co.  126  JMass.  158.     See  also  Home  85  N.  E.  703. 

Ins.  Co.  V.  Field,  42  111.  App.  392.  ^  Bradv   v.    Xorthwestern    Masonic 

19  Milh  ille  :Mutual  Marine  &  Five  Aid  A.ssop.  100  Pa.  595,  42  Atl.  962. 

J*vs.  Co.  v.  Collerd,  .38  N.  J.  L.  480.  »  Kcinedy     v.     .Metroiiolitan     Life 

.      '°  New  V.  Germania  Fire  Ins.  Co.  Ins.  Co.  116  La.  G6,  40  So.  533. 

276 


COMPLETION   OF  CONTIJACT  §  72 

be  rocoixed  V)y  said  company  or  an  accredited  agent."'  And  in 
Stanley  v.  Northwestern  Life  Association*  a  member  agreed  in 
liis  application  to  pay  ''one  assessment  within  thirty  days  after  the 
date  of  such  assessment"  whenever  made  in  accordance  with  the 
constitution  and  by-laws,  which  provided  that  every  member  fail- 
ing to  pay  his  assessment  within  thirty  days  from  the  date  thereof 
should  stand  suspended,  and  the  court  decided  that  under  the  stip- 
ulations of  the  contract  if  one  assessment  was  not  paid  within  the 
time  provided,  the  certificate  would  become  null  and  void,  but  the 
payment  of  at  least  one  assessment  was  not  a  condition  precedent  to 
recovery.* 

§  72.  Prepayment  of  premium:  oral  agreement. — In  the  case  of 
an  oral  contract  of  insurance  or  to  insure,  the  prepayment  of  the 
premium  is  not  necessary  ^  until  the  policy  issues,  unless  there  is  a 
special  agreement  to  the  contrary,  but  when  the  policy  is  tendered, 
the  insured  must  pay  the  premium,  unless  credit  is  given  or 
there  is  an  express  or  implied  waiver  or  some  agreement  obviating 
the  necessity  of  prepayment.'  If  an  oral  agreement  for  insunmce 
is  made,  and  prepayment  is  not  made  a  condition  precedent,  there 
is  no  obligation  to  pay  the  premium  until  the  policy  is  ready  for 
delivery.^    And  a  promise  to  pay  may  be  sufficient.^    So  also  is  a 

3Slieldon    V.    Comieotiout   Mutual  Me.  51,  48  Am.  Dec.  474;  Loriug  v. 

Life  Ins.  Co.  25  Conn.  207,  65  Am.  Proctor,  26  Me.  18. 

Dec    565  ^eru  Torfc.— Ruggles  v.  American 

*  36  Fed.  75.  Central  Ins.  Co.  114  N.  Y.  415,  11 

5  See  note  to  21  Am.  St.  Rep.  883.  Am.  St.  Rep.  674,  21  N.  E.  1000; 
See  sections  next  following.  Audubon  v.  Excelsior  Ins.  Co.  27  N. 

6  Western  Assurance  Co.  v.  Mc-  Y.  21G,  223,  Denio,  J.;  Kelly  v. 
Alpin,  23  Ind.  App.  220,  77  Am.  St.  Commonwealth  Ins.  Co.  10  Bo.sw. 
Rep.  423,  55  N.  E.  119.  (N.  Y.)  82.     See  §  38a  herein. 

Oral     agreement — case    where    tho  Aorf/i  Carolina. — Perry  v.  Security 

agent     received     .and     remitted     the  Life  &  Annuity  Ins.  Co.  150  N.  Cai*. 

premium:  Ellis  v.  Albany  City  Ins.  143^  63  S.  E.  679,  38  Ins.  L.  J.  432. 

Co.  4  Lans.    (N.  Y.)   433,  50  N.  Y.  Wisconsin.— 3o\\n  R.   Davis  Lum- 

402,  10  Am.  Rep.  495.  1^^^.  q^  y    Scottish  Union  &  National 

On  requisites  of  a  present  oral  con-  j^^   q^   94  ^yis.  472,  69  N.  W.  156; 

tract    of    insurance,    see    note    in    5  j^^f^jjiipk     v      Milwaukee    Mechanics' 

L.R.A.(N.S.)  407.  j^^    Co.  87  Wis.  379,  58  N.  Y.  350. 

"^  United  States. — Kohne   v.   Insur-  ,         +„„*..  ^„„^„,„i .  r^^o 

ance  Co.  of  North  America,  1  Wash.  As  to  oral  contract:  renewal,  pre- 

(U.    S.    C.    C.)    93,   Fed.    Cas.    No.  P^.^'^^  ^^  premium,  see  fifth  note, 

7920.  §  41  herein. 

7/;>,;o,-,5._Continontal    In.s.    Co.    v.  8  pij-enien's   Ins.   Co.  v.  Kuessner, 

Roller,  101  111.  App.  77.  164  111.  275,  45  N.  E.  540;  Perry  v. 

Indiana.— ^Gw    England    Fire    &  Security    Life    &   Annuity    Ins.    Co. 

M.  Ins.  Co.  V.  Robinson,  25  Tnd.  53().  150  N.   Car.  143,   63  S.   E.  6/9,  38 

Zoua.— Davenport   v.   Peoria    Ma-  Ins.  L.  J.  432;    Croft    v.    Hanover 

rine  &  Fire  Ins.  Co.  17  Iowa,  276.  Fire  Ins.  Co.  40  W.  Va.  0O8,  o2  Am. 

3/ame.— Blanchard    v.    Waite,    28  St.  Rep.  902,  21  S.  E.  854. 

277 


^  7;j 


JOYCE  OX  INSURANCE 


promise  to  give  a  premium  note.^°  But  it  is  not  essential  to  the  ex- 
istence of  a  ))inding  contract  to  make  insurance  that  the  premium 
note  should  have  been  actually  signed  and  delivered. ^^ 

§  73.  Prepayment  of  premium  to  agent  or  broker. — The  payment 
of  the  premium  to  a  company's  authorized  agent  binds  the  company 
thougli  tlie  agent  "convert  the  money  and  a  policy  is  never  actually 
issued. ^^  And  where  the  insurer's  agent  retains  the  premium  paid, 
beyond  the  time  limited  for  payment  or  remittance  to  the  company 
there  is  a  sufficient  payment. ^^  So  an  insurance  company  will  not 
be  permitted  to  refuse  a  risk  on  the  ground  of  a  loss  prior  to  the 
receipt  of  the  premium  if  the  premium  was  paid  to  an  agent  of  the 
company  prior  to  the  loss  and  would  have  been  received  but  for  the 
delay  of  the  agent.^*  And  it  is  no  defense,  that  the  company  never 
received  the  money  from  the  agent  who  delivered  the  policy,  he  hav- 
ing authority  to  deliver  it.^^  In  a  Pennsylvania  case  the  policy 
provided  for  actual  cash  payment  into  the  ofhce  before  the  policy 
should  attach  and  payment  was  made  to  an  insurance  broker  to 
whom  the  application  was  made,  but  the  money  was  not  paid  into 
the  office  of  the  company.  The  court  held  that  he  was  agent  of  the 
applicant,  and  that  the  company  was  not  liable.^®  Again,  if  the 
premium  is  paid  to  the  company's  general  agent,  who  transmits  the 
application  but  not  the  premium  paid,  and  the  company  delays 
formal  acceptance  until  the  agent  remits  the  premium  there  is  a 
completed  contract."     Payment  to  an  agent  of  a  duly  authorized 


^  Milwaukee  Meclianic's  Ins.  Co.  v. 
Graham,  181  111.  158,  5-1  N.  E.  914, 
aTg  SO  111.  App.  r)4i). 

1°  Commercial  Mutual  Ins.  Co.  v. 
Union  INIutual  Ins.  Co.  19  How.  (GO 
U.  S.)   318,  15  L.  ed.  G3li. 

^^  Commercial  Mutual  Jns.  Co.  v. 
Union  iAlutual  Ins.  Co.  19  How.  (60 
U.  S.)  318,  15  L.  ed.  63(J,  cited  in 
Miller  v.  Brooklyn  Life  Ins.  Co.  12 
Wall.  (79  U.  S.j  285,  304,  20  L.  ed. 
398,  402;  Belleville  Mutual  Ins.  Co. 
V.  Van  Winkle,  12  N.  J.  Eq.  333,  340. 

i2lde  V.  Phoenix  Ins.  Co.  2  Biss. 


^*  Perkins  v.  Washington  Ins.  Co. 
4  Cow.   (N.  Y.)   045. 

^*  Lebanon  Mutual  Ins.  Co.  v.  Erb, 
112  Pa.  St,  149,  4  Atl.  8.  See  Shoe- 
maker V.  Commei'cial  Union  Assur. 
Co.  80    Neb.  G37,  114  N.  W.  1105. 

16  Pottsville  Mutual  Ins.  Co.  v. 
Minnequa  Springs  Improvemeiit  Co. 
100  Pa.  St.  137."  See  also  Arthur- 
holt  v.  Susquehanna  Mutual  Fire 
Ins.  Co.  159  Pa.  St.  1,  39  Am.  St. 
l^ep.  659,  28  Atl.  197. 

On  insurance  broker  as  agent  for 
insured  as  to  payment,  see  note  in  38 


(U.  S.  C.  C.)    333,    Fed.    Cas.    No.    L.R.A.(N.S.)  616,  on  insurance  agent 
7001 .    See  Ferebee  v.  North  Carolina    as  agent  of  assured  as  to  payment, 


I\[utual  Home  Ins.  Co.  68  N.  C.  11 
See    New    Y'ork    Life    Ins.    Co.    v. 
Greenlee,  42  Ind.  App.  82,  84  N.  E. 

noi. 

1^  Gaysville  Manufacturing  Co.  v. 
Phoenix  Mutual  Fire  Ins.  Co.  67  N. 
H.  457,  36  Atl.  367.  See  also  Pulasld 
Mutual  Fire  ins.  Co.  v.  Dawson,  Hi 
111.  App.  514. 

278 


see  note  in  20  L.R.A.  286. 

As  to  agent's  powei's,  restrictions 
on  authority,  etc.,  compare  S§  424 
el  seq.,  472  et  seq.,  512  et  seq.,  550 
et  sec|.  herein. 

i""  Preferred  Accident  Ins.  Co.  v. 
Stone,  61  Kan.  48,  58  Pac.  986. 


COMPLETION  OF  CONTRACT  §  73 

aoent  or  t(j  one  without  authority  where  it  is  received  by  the  coni- 
ixmy  or  its  authorized  agent  is  sufficient.^*  It  is  held  in  Illinois 
that  payiiient  of  the  premium  to  the  local  agent  and  a  return  there- 
of to  the  genci-al  agent,  by  whom  the  amount  is  credited  to  the  local 
agent  on  the  books  of  the  company,  and  an  instruction  afterward 
to  the  local  agent  to  cancel  the  policy,  is  an  admission  that  there 
wa.s  a  policy  capable  of  being  canceled,  and  it  is  not  for  the  com- 
pany afterward  to  deny  it.^^  But  an  agent  authorized  to  deliver  the 
policy  and  receive  and  transmit  premiums,  but  not  to  issue  policies, 
may  not  extend  the  time  for  payment.^"  If  the  assured  pays  the 
premium  to  an  insurance  broker  and  receives  the  policy,  he  does 
not  lose  the  benefit  thereof  by  reason  of  a  course  of  dealing  between 
the  broker  and  the  general  agent  of  the  company.^  A  policy  was 
executed  and  attested  as  required  by  the  act  incorporating  the  com- 
pany. It  contained  no  stipulation  making  an  actual  payment  of 
the  premium  a  condition  precedent,  or  that  default  in  its  payment 
should  constitute  a  forfeiture.  The  policy  was  delivered  without 
jn-epayment  to  an  agent  for  the  purpose  of  being  delivered  to  the 
plaintiff.  The  plaintiff  paid  the  premium  to  the  agent  and  the 
stock  insured  was  destroyed  by  fire.  It  was  held  that  the  company 
was  liable.^  When  the  policy  provides  that  the  insurance  broker 
should  be  deemed  the  agent  of  the  insured,  the  payment  of  the  pre- 
mium to  him  does  not  constitute  a  payment  to  the  company.^  So 
where  a  policy  is  delivered  to  an  agent  with  authority  to  deliver  it 
to  tlie  insured  and  receive  the  premium,  and  the  agent  delivers  the 
j)()licy  and  accepts  a  note  for  the  premium,  and  discounts  it  on  his 
own  account,  but  does  not  pay  the  amount  to  the  princi])cil,  the 
company  is  liable,  although  the  policy  provides  that  sucli  agent 
shall  be  deemed  the  agent  of  the  insured,  and  that  the  insurer  shall 
not  be  liable  until  he  actually  receives  the  premium.*  The  deci- 
sions, however,  are  not  unanimous  upon  the  (question  whether  the 

"  Weisman    v.     Commercial    Fire  Ins.  Co.  122  N.  Y.  439,  25  N.  E.  92(5, 

Ins.  Co.  3  Pennewill   (Del.)   22-1,  50  15  N.  Y.  802;  K()lirl)ach  v.  Germania 

Atl.  93.  Tns.  Co.  G2  N.  Y.  47.  20  Am.  Kep. 

^^  ^l^^tiia   In.s.   Co.   V.   Maguirc,   31  451.     (See  N.  Y.  statute    as    to    so- 

]11.  342.  lioitor  bcinji'  insurer's  agent)  ;  Potls- 

^^  Critf'hett  v.  American  Tns.  Co.  53  \ille  iMutiial  Ins.    Co.    v.    ^linnequa 

Iowa,  405.     See  statutes  of  this  stale  Sprinsis    improvement    Co.    100    Pa. 

as  to  .solicitor  being  insurer's  agent.  St.  137. 
See  §  512  herein.  ■*  Carson   v.  Jersey   Citv  Five  Tns. 

1  Pittsburgh    Boat    Yard     Co.     v.  Co.  43  N.  J.  L.  300,39  Am.  Rep.  584. 

Western   Assnr.   Co.   5   Pa.   119.   47  See  Alexander  v.  Germania  Fire  Tns. 

Am.  Dec.  401.     '  Co.    06    N.  Y.  464,  23  Am.  Rep.  76. 

^  Pennsylvania  Ins.  Co.  v.   Carter,  See  statutes  of  New  Jersey  and  New 

—  Pa.  — ,  11  Atl.  102.  York  as  to  solicitor  being  agent  of 

'  Wilber  v.  Williamsburg  City  Fire  insurer. 

279 


§  74  JOYCE  ON  INSURANCE 

agent  or  broker  is  agent  of  the  insurer  or  insured  in  certain  cases, 
although  the  statutes  of  a  majority  of  the  states  make  the  solicit- 
ing  agent  the  insurer's  agent.  This  point,  however,  will  be  con- 
sidered hereafter.* 

§  74,  Effect  of  part  payment. — AVhere  prepayment  is  a  co  idition 
precedent  to  the  validity  of  the  policy,  a  part  payment  of  the  pre- 
mium, unless  the  balance  is  credited,  is  not  sufficient  to  bind  the 
company,®  unless  the  company  assents  thereto  and  receives  the  part 
payment.'  If  payment  is  not  required  until  the  policy  is  delivered 
a  partial  payment  to  the  agent,  to  whom  the  policy  is  sent  for  de- 
livery to  assured,  is  a  waiver  of  complete  payment.^  So  there  may 
be  a  prepayment  partly  in  cash  and  the  balance  by  note.^  Again, 
a  presumption  exists,  if  a  policy  is  delivered  upon  a  part  payment 
of  the  premium  that  a  credit  was  extended  for  the  balance.^"  If 
an  agent  has  full  authority,  to  deliver  policies,  collect  premiums  and 
make  rates  and  the  policy  is  delivered,  receipts  the  payment,  and 
shows  on  its  face  that  the  premium  was  considered  fully  paid  the 
insurer  cannot  call  in  question  the  acts  of  the  agent  in  extending 
credit  to  insured  for  part  of  the  premium,  especially  where  the  pol- 
icy contains  no  condition  that  it  shall  not  be  effective  unless  the 
premium  be  paid  in  money.^^  ' 

An  agent  may  have  the  right  to  bind  the  insurer  by  ac- 
cepting less  than  the  amount  of  the  initial  fee,  and  if  he 
does  so  and  the  policy  is  issued  it  is  unimportant  that  assured 
knew  that  the  sum  paid  was  less  than  the  regular  fee.^^     And 

5  It  is  held  in  a  ca-se  in  Indiana  ®  Barnes  v.  Piedmont  &  Arlington 
that  the  broker  is  the  agent  of  the  Life  Ins.  Co.  74  N.  C.  22. 
one  from  whom  he  receives  com-  ,  '  Brown  v.  Massachusetts  Mutual 
pensation,  irrespective  of  who  em-  Life  Ins.  Co.  59  N.  H.  298,  307,  47 
ploys  him :  Indiana  Ins.  Co.  v.  Hart-  Am.  Rep.  205.  See  also  Nebraska  & 
well,  123  Ind.  177,  24  N.  E.  100;  see  Iowa  Insurance  Co.  v.  Christiensen. 
MuUin  V.  Vermont  Mutual  Fire  Ins.  29  Neb.  572,  26  Am.  St.  Rep.  407. 
Co.  58  Vt.  113,  4  Atl.  417.  «  n^^,  York  Life  Ins.  Co.  v.  Green- 
In  another  case  it  is  held  that  he  is  lee,  42  Ind.  App.  82,  84  N.  E.  1101. 
agent  for  both  parties:  Crousillat  v.  ^  Life  Ins.  Co.  of  Virginia  v. 
Ball,  3  Yeates  (Pa.)  375;  4  Dall.  Hairston,  108  Va.  832,  128  Am.  St. 
(4  U.  S.)  294,  2  Am.  Dec.  375.  Rep.  989,  62  S.  E.  1057.     See  §§  80, 

In  another  case  it  is  decided  that  81,  1202  herein. 

he  is  agent  of  the  person  employing  ^°  Northwestern  Life  Assur.  Co.  v. 

him:   Hamblett  v.   City  Ins.   Co.  36  Schulz,  94  111.  App.  156. 

Fed.  118.  ^^  Home-stead  Fire  Ins.  Co.  v.  Ison, 

In  another  ease  it  is  decided  that  110  Va.  18,  3  Va.  App.  485,  65  S.  E. 

he  may  be  shown  to  be  the  company's  463.  38  Ins.  L.  J.  1143. 

agent:    Newark    Fire     Ins.     Co.     v.  ^^ipj-jpie   Link   Mutual   Indemnity 

Samons,  110  111.  166.     See  chapters  Assoc,  v.  Williams,  121  Ala.  138,  77 

on  agents  §§  424  et  seq.,  472  et  seq..  Am.  St.  Rep.  34,  26  So.  19,  28  Ins. 

512  et  seq.,  550  et  seq.  herein.  L.  J,  621. 

280 


COMPLETION  OF  CONTRACT  §  74a 

where  there  is  an  application,  or  payment  of  a  portion  of  the 
premium,  and  acceptance  of  the  risk  by  tlie  company,  and  nothing- 
is  required  but  the  delivery  of  the  policy  and  the  payment  of  the 
balance  of  the  premium,  which  latter  is  not  required  under  the 
rules  of  the  company  until  the  contract  is  completed,  a  valid  con- 
tract for  a  policy  exists.^^  Again,  an  agreement  between  the  gen- 
eral agent  of  a  foreign  insurance  company  and  a  person  who  takes 
a  policy,  by  which  the  latter  is  given  credit  for  a  part  of  the  first 
premium  in  ignorance  of  any  stipulation  contained  in  the  policy 
thereafter  issued,  which  denies  the  right  of  the  agent  to  make  such 
contract,  estops  the  insurance  company  to  deny  the  acts  of  the  agent 
or  to  assert  the  invalidity  of  the  agreement.  And  a  provision  of  an 
insurance  policy  to  the  efi'ect  that  ''none  of  its  terms  can  be  modi- 
fied nor  any  forfeiture  under  it  waived  save  by  an  agTeement  in 
writing  signed  by  the  president  or  secretary  of  the  company"  never 
became  binding  or  efiective  on  the  assured,  who  made  his  contract 
v»ith  the  general  agent  and  manager  of  the  insurance  company 
within  the  state  before  the  policy  was  written,  when  he  did  not  as- 
sent to  this  provision,  had  no  knowledge  of  it,  and  was  not  informed 
that  the  policy  to  be  issued  would  contain  any  such  provision,^*  It 
is  held,  however,  that  part  payment  of  the  premium  cannot  be 
waived  by  a  mutual  insurance  company's  agent  with  authority  to 
issue  policies.-'* 

§  74a.  Same  subject:  rebate:  agent's  commission  released  or 
property  taken  on  credit  therefor. — An  insurance  company,  is  not 
charged  with  notice  that  payment  of  the  first  premium  on  a  policv 
was  effected  in  part  by  a  release  of  the  agent's  commission  to  the  ap- 
plicant.^^ So  the  payment  of  the  first  premium  required  by  an 
application  for  insurance,  to  be  made  before  the  policy  will  become 
binding,  is  not  effected  by  the  release  to  the  applicant  of  the  agent's 
commission  and  payment  by  the  applicant  of  the  balance,  where  the 
commission  is  not  due  until  the  premium  has  been  paid  in  cash 
and  the  policy  issued,  and  all  moneys  received  by  the  agent  are  to 
be  held  in  trust  for  the  company,  while  the  binding  slip  requires  a 
return  of  the  money  acknowledged  to  have  been  received,  upon  re- 
jection of  the  policy.^'    But  it  is  also  held  that  a  person  who,  under 

"Cooper   V.    Paciac   Mutual   Life  268,  8   L.R.A.(N.S.)    883,  rev'^  144 

Ins.  Co.  7  Nev.  116,  8  Am.  Rep.  705.  Fed.  1005.     As  to  rebate  see  §§  447, 

1*  Cole  V.  Union  Central  Life  Ins.  715,  1091,  1092,  1408  herein. 

Co.  22  Wash.  26,  47  L.R.A.  201,  60  "  Union   Central  Life  Ins.  Co.  v. 

Pae.  68.  Robinson,  148  Fed.  358,  78  CCA. 

15  Graham  v.  Mercantile  Town  268,  8  L.R.A.(N.S.)  883  (annotated 
Mutual  Ins.  Co.  110  Mo.  App.  95,  84  on  allowance  to  applicant  of  agent's 
S.  W.  93.  Commission    as   payment   of   premi- 

16  Union   Central  Life  In.s.   Co.  v.  urn),  144  Fed.  1005. 
Robinson,  148  Fed.  358,  78  C  C.  A. 

281 


§§  74b,  73  JOYCE  OX  INSURANCE 

a  state  statute  is  agent  of  the  insurer,  may  accept  part  payment  of 
the  first  premium  in  cash,  and  for  that  portion  which  amounts  to 
liis  commission  may  lake  his  pay  in  mercliandise.  or  trust  assure<l 
for  such  baUmce,  even  tliough  the  premium  is  required  to  be  paid 
in  cash.^^  But  it  is  decided  that  an  agent  of  a  life  insurance  com- 
pany has  no  implied  authority  to  waive  payment  of  premiums  on 
an  insurance  policy  in  money  and  agi-ee  to  take  something  in  lieu 
thereof  which  is  neitlier  money  nor  an  agreement  to  pay  money, 
nor  equivalent  to  money  to  the  corporation  when  taken. ^^  It  is, 
liowever,  also  held  that  if  an  insurer  gives  its  agent  full  power  to 
collect  a  premium,  and  treats  the  premium  as  paid,  such  an  agent 
may  agree  to  take  part  payment  in  trade  with  insured.^"     , 

§  74b.  Part  payment:  good  health. — If.  owing  to  a  mistake  a.s  to 
the  amount,  only  part  of  the  premium  is  paid  to  and  received  by 
the  agent,  and  the  actual  delivery  of  the  policy,  which  is  also  re- 
quired as  a  condition  precedent  to  complete  the  contract,  is  delayed, 
and  the  delivery  by  the  agent  is  recalled  before  sickness  of  the  ap- 
plicant, no  insurance  is  effected.^  If  part  payment  in  cash  is  de- 
ferred until  the  applicant  is  sufiering  from  his  last  sickness  and 
shortly  before  his  death  no  contract  exists  even  though  the  solicitor 
orally  agrees  to  a  partial  payment  in  cash.^ 

§  75.  Payment  by  third  person. — Where  a  policy  of  life  insur- 
ance provitles  that  it  shall  not  take  effect  until  the  payment  of  the 
advance  premium  has  been  made  during  the  lifetime  of  the  insured, 
a  payment  with  the  applicant's  money  made  by  a  third  party  but 
without  his  knowledge,  although  during  his  lifetime,  cannot  be 
ratified  by  his  administrator  after  his  death,  and  is  inoperative.^ 

is.lolin  ITaiu-oek  Mutual  Life  Ins.  ^o  jjome^fpad  Fire  Ins.  Co.  v.  Ison, 

Co.  v.   Sfhliiik.  175  111.   284,  -31  N.  110  Va.  18,  3  Va.  App.  483,  G5  S.  K. 

E.  795,  28  Ins.  L.  J.  132,  aTg  74  111.  4G3.  38  Ins.   L.   J.  1143.     See  §  83. 

Ap|).    181.      See    AYinchell    v.    Iowa  ^  Rav   v.    Securitv    Trnst    &    Life 

State  Ins.  Co.  103  Iowa.  189,  72  N.  Ins.  Co.  126  N.  Car.  16fi,  33  S.  E. 

W.  303.                                                  -  246,  29  Ins.  L.  J.  369. 

Brokers  actins,'  a.s  insnred'.s  aaents,  ^  Han-iman  v.  New  York  Life  Ins. 

not;  within  statute  N.  Y.  1892,  e.  641,  Co.  43  Wasji.  398,  86  Pa^^.   636,  35 

sec.  1,  which  forbids  agents,  etc.  of  Ins.  L.  J.  852. 

lire  insurance  company  including  as  ^  ^yijij-jj^'p.  y^  Massachusetts  Mutual 

consideration  for  insurance  any  lee,  Life  Ins.  Co.  129  Mass.  240,  37  Am. 

compensation,    etc.      Tanenbaum    v.  Rep.  317.     See   State  Life  Ins.   Co. 

Rosenthal.   (iO   N.  Y.   Supp.  494,  44  v.  Harvey,  72  Oliio  St.  174,  73  N.  E. 

App.  Div.  4.)t.  1036.      Compare    Mississi]>pi    Valley 

19  Tomsecek  v.  Travelers'  Ins.  Co.  Life  Ins.  Co.    v.    Neyland,    9    Kush 

113  Wis.  114.  90  Am.  St.  Rep.  846,  (72  Ky.)  430. 

57  L.R.A.  455,  88  N.  W.  1013.  See  as  to  payment  of  premiums  in 

On  payment  of  insurance  premium  marine   insurance:    Hurlliurl    v.    Pa- 

by    cancelation    of    aiieut's   indebted-  cific  Ins.   Co.  2  Sum.    (U.  S.  C.  C.) 

ness,  see  note  in  L.R;A.1915A,  686.  471,  Fed.   Cas.   No.   6919;   Patapsco 

282 


COMPLETJOX  OF   CONTHACT  §  76 

Where  an  applicant  lor  life  insnranee  had  an  interview  with  an 
agent  of  the  company,  who  ottered  a  policy  to  him  and  a.<ked  him 
to  pay  the  premium,  and  he  told  the  agent  that  if.  he  would  go  to 
a  third  party  that  the  latter  would  pay  him,  as  an  arrangement  had 
been  made  with  him  to  that  eft'ect,  and  the  agent  agreed  to  go,  but 
never  went,  and  retained  the  ])olicy  in  his  own  hands:  it  was  held 
that  instructions  were  erroneous  which  permitted  the  jury  to  find 
that  these  facts  were  equivalent  to  a  delivery  of  the  policy  and  pay- 
ment of  the  premium.^  But  a  third  person  may  by  agreement  be- 
tween the  assured  and  him  made  in  the  agent's  presence  agree  to 
pay  the  premium  and  bind  the  company  by  a  part  payment.^  And 
a  person  may  obtain  money  from  another  to  j)ay  the  premium  on 
a  policy  which  is  taken  out  for  the  benefit  of  insured's  estate,  and 
the  insurer  issuing  the  policy  cannot  inquire  into  the  terms  of  tlie 
contract  under  which  the  money  was  obtained,  as  it  is  immaterial 
to  him.^  But  if  an  applicant  for  life  insurance,  after  making  his 
application,  changes  his  mind  and  refuses  to  accept  the  policy  when 
tendered,  and  neither  he  nor  the  beneficiary  named  therein  pays 
any  of  the  premiums  nor  authorizes  their  payment,  there  is  no 
complete  contract  of  insurance,  though  another  person  into  whose 
possession  the  policy  comes  pays  such  premiums.'  And  a  friend 
of  the  applicant  cannot  pay  the  premium,  about  the  payment  of 
which  there  was  an  unsettled  dispute,  an  hour  or  two  before  the 
death  of  the  applicant,  to  an  agent  ignorant  of  his  hopeless  iUness. 
and  thus  secure  a  valid  policy,  not  delivered  until  after  his  death.* 
§  76.  Prepayment  of  premium  may  be  waived. —  It  is  well-settled 
law  that  the  clause  in  a  policy  exempting  the  company  from  liabil- 
ity until  actual  payment  of  the  prenuum  may  be  waived  by  the 

Ins.  Co.  v.  Smith,  6  Har.  &  J.  (Mel.)  19,  29,  49  C.  C.  A.  216,  225;  Equit- 

166,  14  Am.  Dee.  268;  Insurance  Co.  able  Life  A.«isur.  Sec.  v.  MeElroy,  8.3 

of  Pourisvlvania   v.  Smith,  i!   Whaii.  Fed.  631,  637,  28  C.  C.  A.  365,"^  371 

(Pa.)    520.  49  U.  S.  App.  548;  Paine  v.  Pacili.- 

*  Hoyt  V,  Mutual  Beiiolit  Life  Ins.  Mutual  Life   Ins.   Co.   51   Fed    689 
Co.  98  Mass.  539.  693,  2  C.   C.  A.  459,  463.  10  U.   S. 

*  New  York  Life  In.s.  Co.  v.  Gm-n-  App.  256  (Kendalls  Adm'r  v. 
lee,  42  Ind.  App.  82,  84  N.  E.  1101.  Same)  ;     Whiting    v.     Massachusetts 

«I\lerchants  Life  Assoc,  of  U.  S.  v.  Mutual  Lif'e  Ins.  Co.  129  Mass.  240, 

Oakum,  98  Fed.  251,  39  C.  C.  A.  56.  241,  37  Am.   Kep.  317:   Societe  Des 

'  Hogljen  v.  Metropolitan  Life  Ins.  Mines     D'Argent     et    Fonderie.s    De 

Co.  69   Conn.  503,  61  Am.   St.  Rep.  Bingliam  v.  Mackintosh.  5  Ctah  568. 

53,  38  Atl.   214.  577,  ]8   Pac.   363.     Distinguished  in 

*  Piedmont  &  Arlington  Life  Ins.  Dove  v.  Koval  Ins.  Co.  98  Mich.  122, 
Co.  v.  Ewing,  92  U.  S.  377,  23  L.  ed.  125.  57  N."W.  30.  See  also  Harri- 
610,  cited  in  Oiddings  v.  Northwest  -  man  v.  New  York  Life  Ins.  Co.  43 
ern  Mutual  Life  Ins.  Co.  102  U.  S.  Wash.  398,  86  Pae.  656,  35  Ins.  L.  J. 
108,  112,  26  L.  ed.  92,  93;  Cable 'v.  852. 

United  States  Life  Ins.  Co.  Ill  Fed. 

283 


§  70  JOYCE  ON  INSURANCE 

company  or  its  authorized  agent,  and  the  contract  become  binding 
without  prepayment  of  the  premium,  such  provisions  being  for  the 
benelit  of  the  company,^  and  prepayment  of  the  premium  may  be 
waived  though  the  poUcy  provides  that  the  premium  must  be  prepaid 
either  at  the  company's  ofiice  or  to  an  agent  duly  authorized  in  writ- 
ing to  receive  it.^°  So  a  clause  in  a  policy  providing  that  it  shall  be 
void  unless  the  premium  is  paid  to  the  secretary,  or  an  agent  of  the 
insurer  duly  appointed  in  writing,  is  waived  by  the  insurer  Avhen- 
ever,  by  his  voluntary  act,  the  policy  leaves  his  office  to  be  delivered 
to  insured  on  payment  of  the  premium,  without  regard  to  the  fact 
that  someone,  having  nominal  connection  with  the  insurer  as  agent, 
hands  over  the  policy,  receives  the  premium,  and  fails  to  pay  it  to 
the  insurer.^^  And  where  the  by-laws  and  conditions  of  a  mutual 
insurance  company  provide  that  all  general  and  local  agents  shall 
be  appointed  by  the,  secretary  and  furnished  with  a  certificate  of 
appointment  under  seal  setting  forth  their  powers,  and  no  insur- 
ance, whether  original  or  continued,  shall  be  considered  binding 
unless  the  premium  shall  have  been  actually  paid  to  some  duly  au- 
thorized and  commissioned  agent,  such  by-laws  and  conditions  are 
solely  for  the  benefit  of  the  insurer  and  may  be  waived,  and  are 
waived,  when  an  agent  is  authorized  to  deliver  a  policy  and  receive 
the  premium  though  such  agent  has  not  been  duly  authorized  and 
commissioned  as  provided  in  the  by-laws.  Such  a  course  of  dealing 
adopted  between  the  insurer  and  his  agent,  though  wholly  incon- 
sistent with  the  provisions  of  the  policy  cannot  be  set  up  to  defeat 
a  recovery.^2 

^  Train   v.   Holland   Purchase  Ins.  tual  Fire  Ins.  Co.  v.  Elkins,  124  Pa. 

Co.  62  N.  Y.  598,  602;  Bodine  v.  Ex-  St.  484,  10  Am.  St.  Rep.  608,  17  Atl. 

change  Fire  Ins.  Co.  51  N.  Y.  117;  24. 

10  Am.  Rep.  566;   Wood  v.  Pough-  Utah. — Thum  v.  Wolstenholme,  21 

keepsie  Ins.  Co.  32  N.  Y.  619 ;  Trus-  Utah  446,  61  Pac.  537,  29  Ins.  L.  J. 

tees  First  Baptist  Church  v.  Brook-  699. 

lyn  Fire  Ins.  Co.  19  N.  Y.  305.  As     to     premiums     etc.,     excuses, 

See  also  the  following  eases :  waiver  and  estoppel,  see  also  §§  1345 

California. — Griffith  v.   New  York  et  seq.  herein. 

Life  Ins.   Co.  101   Cal.   627,  40  Am.  ^°  Susquehanna    Mutual    Fire    Ins. 

St.  Rep.  96,  36  Pac.  113.  Co.  v.   Elkins,   124  Pa.   St.   484,   10 

7Hrf/a«a.— New  York  Life  Ins.  Co.  Am.   St.  Rep.  609,  17  Atl.  24;  Uni- 

V.  Greenlee,  42  Ind.  App.  82,  84  N.  versa!  Fire  Ins.  Co.  v.  Block,  109  Pa. 

E.  1101.  St.  535. 

Nebraska. — Nebraska  &  Iowa  Ins.  ^^  Arthurholt  v:  Susquehanna  Mu- 

Co.  v.  Christiensen,  29  Neb.  572,  26  tual  Fire  Ins.  Co.  159  Pa.  St.  1,  39 

Am.  St.  Rep.  407.  Am.  St.  Rep.  059.  28  Atl.  197. 

North   Carolina. — Pender  v.  North  ^^  Susquehanna  Mut.  Fire  Ins.  Co. 

State   Mutual  Life  Ins.   Co.   163   N.  v.  Elkins,  124  Pa.  St.  484,     10  Am. 

Car.  98,  79  S.  E.  293.  St.  Rep.  608,  17  Atl.  24. 

Pennsi/lvania. — Susquehanna     ^lu- 

284 


COMPLETION  OF  CONTRACT  §  76 

Again,  a  condition  in  a  policy  that  it  shall  not  be  in  force  until 
the  premium  is  paid  is  waived  by  neglect  of  the  company  to  insist 
on  such  condition  after  the  agent  reports  that  a  policy  has  been  is- 
sued and  that  the  premium  thereon  is  unpaid.^^  It  is  held  in  Louis- 
iana, that  where  an  application  for  insurance  is  accepted,  the  policy 
made  out  in  duplicate,  and  the  name  of  the  assured  as  such  is  en- 
tered on  the  company's  books,  the  contract  is  complete,  and  unless 
the  company  has  required  payment  of  the  premium  at  that  time, 
or  notified  the  applicant  of  a  stipulation  in  the  policy  requiring  pay- 
ment of  the  premium  as  a  condition  precedent,  the  company  will 
be  deemed  to  have  waived  such  condition.^*  Although  a  policy  in 
a  mutual  insurance  company  stipulates  that  it  shall  be  void  if  any 
assessment  on  the  premium  note  shall  not  be  paid  within  thirty 
days,  yet  it  may  lawfully  impose  a  second  assessment  where  the  first 
one  is  not  paid  within  the  time  limited.^*  But  the  acceptance  of  a 
note  for  the  premium  constitiTtes  a  waiver  of  a  condition  requiring 
prepayment,  although  the  policy  may  be  canceled  after  the  matur- 
ity and  nonpayment  of  the  note  if  reasonable  notice  is  given,  and 
this  may  be  done  without  either  tendering  or  crediting  that  part 
of  the  premium  which  is  unearned,  as  the  credit  may  be  adjusted, 
no  matter  into  whose  hands  the  note  may  fall.^® 

Such  waiver  may  be  established  by  evidence  of  a  parol  agTeement 
to  that  effect,^''  or  it  may  be  inferred  from  circumstances  showing 
that  prepayment  was  not  intended  to  be  insisted  upon,^^  and  proof 
of  such  a  waiver  is  no  violation  of  the  rule  prohibiting  parol  evidence 
to  vary  or  contradict  a  written  contract. ^^  So  a  statement  that  the 
payment  of  the  money  makes  ''no  difference"  is  a  waiver.^"  The 
mere  fact,  however,  that  the  applicant  goes  to  an  insurance  office  to 
make  payment  of  the  first  premium  by  note  but  is  told  that  it  can- 

"  German  Ins.   Co.  v.   Shader,  08  Cloit   v.  National  Protection  Ins.  Co. 

Neb.   I.   m  L.K.A.   918.  8:i   Am.   St.  '^r,  I'.arb.  (N.  Y.)  189. 

Kep.  503,  93  N.  W.  972.  ^^  Thompson   v.    St.   Louis  Mutual 

i^Pino'v.  Merchants'  Mutual  Ins.  Life  Ins.  Co.  52  Mo.  469;  Bodine  v. 

Co.   19   La.   Ann.   214,  92   Am.  Dee.  Kxeli.inge  Fire  Ins.  Co.  51  N.  Y.  117, 

529.  10   Am.  Rep.  566;   Goit  v.  National 

~15  Columbia    Itis.    Co.   v.    Bueklev,  Proteetion  Ins.  Co.  25  Barb.  (N.  Y.) 

83  Pa.  St.  293,  24  Am.  Rep.  172.  189;   Whitwell  v.   Putnam   Fire   Ins. 

16  Little  V.  Charter  Oak  Life  In.s.  Co.  6  Lans.  (N.  Y.)  166,  168;  Heaton 

Co.  38  Ohio  St.  110.     See  Thum  v.  v.  Manhattan   Fire  Ins.  Co.  7  R.  I. 

Wolstenholme,  21  Utah,  446,  61  Pac.  502;   Equitable  Ins.   Co.  v.  McCrea, 

537,  29  Ins.  L.  J.  699.  76  Tenn.  541. 

As    to    notes    for    premiums,    and  ^^  Pino  v.  Merchants'  IMutual  Ins. 

premium   etc.   notes,   see   §§   1202   et  Co.   19  La.  Ann.  214,  92   Am.   Dee. 


"  B()(hne    v.    Exchange    Fire    Ins.       ^o  Bragdon     v.     Applelon    Mutual 
Co.  51  N.  Y.  117,  10  Am.  Rep.  566;    Ins.  Co.  42  Me.  259. 


529. 


77 


JOYCE  OX  INSURANCE 


not  be  paid  until  tlie  agent  with  whom  negotiations  were  pending 
consented  and  that  he  was  not  in,  does  not  constitute  a  waiver.^ 

Where  the  premium  was  not  paid  at  the  time  of  application,  but 
after  the  loss  and  on  delivery  of  the  polic}^,  the  insured  not  mention- 
ing the  loss,  it  was  held  that  the  question  of,  waiver  of  immediate 
payment  was  one  of  fact  for  the  jury.^  > 

§  77.  Waiver  of  prepayment  by  agent. — A  general  agent  of  an 
insurance  conjpany  who  has  authority  to  deliver  policies  and  receive 
payment  of  the  premium  has  power  to  waive  prepayment  of  the 
premium  although  the  policy  contains  a  condition  to  the  contrary.^ 
80  a  general  insurance  agent,  with  authority  to  make  terms  for  in- 
surance countersign  and  deliver  policies,  and  collect  ])remiums,  has 
power  to  waive  a  condition  in  the  policy  requiring  payment,  of  the 
premium  in  money.*  Where  the  agent  of  the  insurers  was  told 
that  the  money  was  ready  for  him  in  the  bank,  and  the  agent  told 
assured  to  let  it  lie,  and  when  he  wanted  it  he  would  draw  for  it, 


^  Deunis  v.  Fidelity  Mutual  Life 
Ins.  Co.  159  Mich.  594,  l(i  Det.  L.  N. 
1065,  124  N.  W.  575. 

2  Baldwin  v.  Chouteau  Ins.  Co.  56 
Mo.  151,  17  Am.  Rep.  671. 

^  United  States. — Miller  v.  Brook- 
lyn Life  Ins.  Co.  12  Wall.  (79  U.  S.) 
285,  20  L.  ed.  308;  O'Brien  v.  Union 
Mutual  Life  Ins.  Co.  22  Fed.  586. 
E.imniue  Robinson  v.  Union  Central 
Life  Ins.  Co.  144  Fed.  1005,  rev'd 
148  Fed.  358,  78  C.  C.  A.  268,  8 
L.R.A.(N.S.)  883.  See  Ball  &  Sage 
Wagon  Co.  v.  Aurora  Fire  &  Marine 
Ins.  Co.  20  Fed.  232. 

California. — Berliner   v, 
Ins.  Co.  121  Cal.  451,  53 

Illinois. — Mulligan    v. 
tan  Life  Ins.  (^o.l49  111 

Indiana. — Home   Ins. 
man,  112  Ind.  7,  13  N, 

^         V, 


Travelers 
Pac.  922. 

Metropoli- 
App.  516. 

,  Co.  V.  Gil- 
E.  118;  New 
York  Life  Ins.  Co.  v.  Greenlee,  42 
Ind.  App.  82,  84  N.  E.  1101;  West- 
ern Assur.  Co.  V.  McAlpin,  23  Ind. 
App.  220,  77  Am.  St.  Rep.  423,  55 
N.  E.  119. 

Iowa. — Critehett  v.  American  Ins. 
Co.  53  Iowa  404,  407,  5  N.  W.  543; 
Young  V.  Hartford  Fire  Ins.  Co.  45 
Iowa  377,  24  Am.  Rep.  784. 

Louisiana. — Pino  v.  Merchants' 
Mutual  Ins.  Co.  19  La.  Ann.  214,  92 
Am.  Dec.  529. 

Michigan. — Improved  Match  Co. 


286 


Michigan  Mutual  Fire  Ins.  Co.  122 
Mich.  256.  6  Det.  L.  N.  748,  80  N. 
AY.  1088,  35  Ins.  L.  J.  53. 

Minnesota. — Kilborn  v.  Prudential 
Ins.  Co.  99  .Minn.  176,  108  N.  W.  861, 
35  Ins.  L.  J.  840,  Rev.  Laws  1905,  sec. 
1716,  Genl.  L.  1895,  c.  175,  sec.  88, 
p.  437. 

New  York. — Bowman  v.  Agiicul- 
tural  Ins.  Co.  59  N.  Y.  521;  Boehen 
V.  Williamsburg  City  Ins.  Co.  35  N. 
Y.  131,  90  Am.  Dec.  787;  Sheldon  v. 
Atlantic  Fire  &  Marine  Ins.  Co.  26 
N.  Y.  460,  84  Am.  Dec.  213;  Hotch- 
kiss  V.  Germania  Fire  Ins.  Co.  5  Hun 
(N.  Y.)  91.  But  compare  Russell  v. 
Piudential  Ins.  Co.  176  N.  Y.  178, 
98  Am.  St.  Rep.  656,  68  N.  E.  252. 

Ohio. — Newark  Machine  Co.  v. 
Kenton  Ins.  Co.  50  Ohio  St.  549,  35 
N.  E.  1060,  31  Week.  L.  Bull.  51,  22 
L.R.A.    768n. 

Tennessee. — Southern  Life  Ins. 
Co.  V.  Booker,  9  Heisk.  (Tenn.)  606, 
24  Am.  Rep.  344. 

Virrfinia.- — See  Wytheville  Ins.  & 
Banking  Co.  v.  Teiger,  90  Va.  277, 
18  S.  E.  195. 

On  effect  of  nonwaiver  agreement 
on  conditions  existing  at  inception  of 
insurance  policv,  .see  note  in  13 
L.R.A.(N.S.)   826. 

*  American  Employers'  Liability 
Ins.  Co.  V.  Fordvce,  62  Ark.  562,  54 
Am.  St.  Rep.  305,  36  S.  W.  1051. 


COMPLETION   OF  CONTKACT  §  77 

and  he  dre\v  for  it  after  the  fire,  this  was  held  to  constitute  a  sufl"i- 
cient  waiver.^  and  a  general  agent  may  waive  prepayment  of  the 
premium  although  the  policy  provides  not  only  that  the  insurer 
shall  ''not  he  liahle  until  actual  payment  of  the  premium,"  hut  also 
that  no'ofiicor  or  agent  shall  "he  held  to  have  waived  any  of  the 
terms  and  conditions  of  the  policy  unless  such  waiver  be  indorsed 
thereon  in  writing."  ^  And  an  agent  may  waive  prepayment  al- 
though a  receipt  delivered  to  assured  with  the  policy  provides  that 
"agents  may  not  deliver  policies  until  the  premiums  are  received, 
as  no  policy  is  in  force  until  paid  for,"  and  the  policy  also  provides 
that  the  agent  cannot  change  or  waive  its  conditions.'  It  is  held, 
however,  in  a  Pennsylvania  case,  that  an  agent  may  not  Avaive  pre- 
payment of  premium  if  the  application  states  that  he  has  no  power 
to  do  so.^  And  under  a  Missouri  decision  there  can  be  no  waiver 
by  an  agent  of  a  mutual  company.^  It  is  also  declared  in  a  Con- 
necticut case  that  the  agent  has  no  power  to  waive  such  prepayment 
if  the  policy  states  that  it  shall  not  be  valid  till  the  premium  is 
paid.^°  And  if  an  agent  exceeds  his  actual  authority,  and  the  ap- 
plicant has  notice  of  the  fact,  the  company  is  not  bound  as  in  a  case 
where  a  local  agent  assumed  to  waive  a  provision  that  ''no  insurance 
would  be  binding  until  actual  payment  of  the  premium,"  and  the 
policy  contained  a  provision  that  none  of  its  terms  could  be  Avaived 
by  any  one  except  the  secretary  of  the  company.^^  Nor  can  a  mere 
local  agent  waive  a  condition  in  the  policy  that  the  premium  shall 
be  paid  in  money. ^^  If,  however,  a  local  agent  has  power  to  receive 
proposals,  countersign  and  deliver  policies  within. his  territory  he 
is  presumed  to  have  power  within  such  territory  to  waive  immediate 
payment  of  })remiums.^^  But  it  is  not  a  waiver  of  prepayment 
where  the  agent  tells  the  applicant  that  he  may  pay  the  dues  on 
application  or  when  the  policy  should  be  delivered.^*  It  is  said  by 
the  court  in  an  Iowa  case  that  "the  authorities  all  agree  that  a  mere 

5  New    York    Centra!    Ins.    Co.   v.        iMVilkins    v.    State    Ins.    Co.    43 
Xatioual  Protection  Ins.  Co.  20  Barb.    Minn.  177,  45  N.  W.  1. 

(N.  Y.)  468.  ^^^YiUputs  v.  Northwestern  Mutual 

6  Younf,'  V.  TTartford  Fire  Ins.  Co.    Life  Ins.  Co.  81  Ind.  300,  309.     But 
45  Iowa  377,  24  Am.  Kep.  784.  see    Provident    Savings    Life    x\ssur. 

"^  Miller  v.  Brooklyn  Life  Ins.  Co.    Soc.  v.  Oliver,  22  Tex,  Civ.  App.  8, 
12  Wall.    (79  U.  S.')    285,  20  L.  ed.    53  S.  W.  594. 
398.  ^^  Farnuni   v.   Plioonix  Ins.   Co.  83 

"  Greene  v.  L.ycoming  Fire  Ins.  Co.    Cal.   246,  17   Am.   St.   Rep.   233,  23 
91  Pa.  St.  387.  Pac.  869. 

^  Graham  v.  Mercaulile  Town  Mu-       ^*  Ormond   v.    Fidelity   Life   Assn. 
tual  Ins.  Co.  110  Mo.  App.  95,  84   96  N.  C.  158;  1  S.  E.  796. 
S.  \V.  93. 

^°  Bouton  V.  American  Mutual  Life 
Ins.  Co.  25  Conn.  542. 

287 


§  78  JOYCE  ON  INSURANCE 

agreement  to  waive  prepayment  will  not  put  a  policy  in  force  where 
it  is  not  delivered.  It  is,  therefore,  the  delivery  which  constitutes 
the  ground  of  waiver."  ^^ 

§  78.  Renewal:  waiver  of  prepayment  of  premium. — It  is  equal- 
ly well  settled  that  it  is  competent  for  the  company  to  disregard  the 
condition  relative  to  prepayment  of  the  premium,  and  upon  any 
renewal  to  waive  by  parol  tbe  payment  in  cash  of  any  premium, 
and  this  waiver  can  be  shown  by  proof  that  credit  was  given  or  can 
be  inferred  from  circumstances,  and  the  waiver  can  be  made  by 
the  company  or  any  of  its  duly  authorized  agents.^®  So  where  the 
company  accepted  an  application,  issued  the  renewal,  and  forward- 
ed it  to  the  agent,  stating  to  him  that  they  would  hold  him  respon- 
sible for  the  premium,  it  was  decided  that  this  amounted  to  a  con- 
tract between  the  company  and  the  applicant  to  insure  his  property 
according  to  the  terms  and  stipulations  of  the  renewal.^'  A  provi- 
sion in  a  policy  already  executed  that  no  insurance,  whether  orig- 
inal or  continued,  should  be  binding  until  the  actual  payment  of 
the  premium,  and  the  written  acknowledgment  thereof  does  not  in- 
validate a  subsequent  contract  by  parol  to  renew  such  insurance 
for  a  premium  not  paid  at  the  time  the  risk  attaches  but  postponed 
to  a  future  day.^^  and  where  an  insurance  company  agreed  that  a 
policy  for  one  year  should  be  a  permanent  risk,  and  that  its  officers 
should  call  for  the  premiums  as  they  became  due,  and  leave  the 
certiticates  of  payment  and  renewal,  and  the  assured  relied  upon 
this  arrangement,  but  before  any  of  the  officers  called  for  the  re- 
newal premiunij  the  property  was  destroyed  by  fire,  it  was  decided 
that  the  company  was  liable  for  the  loss.^^  But  an  agent  who  has 
no  power  to  make  a  contract  of  insurance  cannot  bind  the  company 
by  a  contract  to  indefinitely  postpone  the  payment  of  a  renewal 
premium  and  keep  the  policy  in  force  in  contravention  of  its  pro- 
visions.^" If  an  insurance  company  mails  to  an  insured  a  renewal 
fire  policy,  which  he  returns,  refusing  to  accept  it,  and  the  company 
then  leaves  the  policy  with  a  mortgage  clause  attached  with  the 
mortgagee's  agents,  who  place  it  with  the  mortgage  papers,  where 
it  remains,  and  subsequently  the  company  presents  a  bill  for  the 

^5  Critchelt   v.   American    Ins.    Co.  "  Planters'    Ins.    Co.    v.    Rav,    52 

53  Iowa,  404,  407,  5  N.  W.  543.  IVIiss.  325. 

^^  Bodine    v.    Exchange    Fire    Ins.  ^*  Trustees  First  Baptist  Clmrcli  v. 

Co.  51  N.  Y.  117,  10  Am.  Rep.  5C6;  Biooklyn  Fire  Ins.  Co.  19  N.  Y.  305. 

Fireman's   Fund  Ins.   Co.   v.   Pekor,  ^^  Trustees  First  Baptist  Church  v. 

10(j  Ga.  1,  31  S.  E.  779;  Continental  Brooklyn  Fire  Ins.  18  Barb.  (N.  Y.) 

Casualtv  Co.  v.  Bridges,  —  Tex.  Civ.  69. 

App.  — ,  114   S.  W.  170.     See  Do-  ^o  Critchett  v.  American  Ins.  Co.  53 

hertv  v.  Millers  &  I\Ianufacturers  Ins.  Iowa,  404,  5  N.  W.  543. 
Co.  4  Ont.  L.  Rep.  303. 

288 


COMPLETION  OF  CONTKACT  §  79 

premiiiiDs  to  these  agents,  who,  requesting  time  to  comnuinicate 
with  the  owner,  then  write  to  him  stating  that  if  he  does  not  pay  the 
preniiuni  they  will,  and  charge  the  amount  to  him,  and  the  owner 
does  not  answer  the  letter,  but  writes  Ir's  agent  directing  him  to  pay 
the  })remium  at  once,  but  tender  of  payment  is  delayed  until  after 
the  destruction  of  the  property  by  fire,  when  it  is  refused,  the  policy 
does  not  become  effective  so  as  to  bind  the  company.^ 

Again,  prepayment  of  the  premium  for  the  renewal  term  is  not 
necessary  to  make  a  \alid  iDreliminary  contract  with  an  insurance 
agent  for  renewal.^ 

Where  insured  had  an  agreement  by  which  his  insurance  was  to 
be  kept  up  to  a  specified  amount  by  new  policies  or  renewals,  and 
it  was  the  agent's  custom  to  charge  premiums  as  policies  were  re- 
newed or  issued,  and  to  have  settlements  periodically  with  insured, 
when  premiums  would  be  paid,  it  may  be  implied  that  credit  for 
the  premium  so  charged  was  gi-anted  to  the  next  period  of  settle- 
ment.^ 

§  79.  Prepayment  of  premium:  effect  of  delivery  of  policy. — 
Where  the  contract  is  otherwise  complete,  an  unconditional  delivery 
of  the  policy  operates  as  a  waiver  of  the  prepayment  of  the  pre- 
mium, notwithstanding  an  express  provision  therein  that  the  com- 
pany shall  not  be  liable  until  the  premium  is  actually  paid,*  and 

^  New  V.   Germania   Fire   Ins.   Co.  Massachusetts. — Jones       v.       New 

171  Ind.  33,  131  Am.  St.  Rep.  245,  85  York    Life   Ins.    Co.   168   Mass.   245, 

N.  E.  703.  248,  47  N.  E.  92,  26  Ins.  L.  J.  1009. 

^McCabe  v.   .l^tna   Ins.   Co.   9  N.  Minnesota. — Kollitz     v.     Equitable 

Dak.   19,  47  L.R.A.   641,  81   N.   W.  Mutual  Fire  Ins.  Co.  92  Minn.  234, 

426,  29  Ins.  L.  .T.  138.  99  N.  W.  892. 

'Newark   Machine    Co.    v.   Kenton  Nebraska. — German     Ins.     Co.     v. 

Ins.  Co.  50  Ohio  St.  549,  22  L.R.A.  Shatter,   68   Neb.   1,   60   L.R.A.   918, 

768  and  note,  :].')  N.  E.  10(i3.  93  N.  W.  972. 

*  United  Slates. — Miller  v.  Life  New  York. — Boehen  v.  Williams- 
Ins.  Co.  12  Wall.  (79  U.  S.)  285.  20  burg  Ins.  Co.  35  N.  Y.  131,  90  Am. 
L.  ed.  398.  Dec.  787;  Washoe  Tool  Mfg.  Co.  v. 

Arkansas. — American      Employers  Hibernia    Fire   Ins.    Co.   7   Hun    (N. 

Liability    Ins.    Co.    v.    Fordvce,"   62  Y.)  74,  66  N.  Y.  613. 

i\rk.  562,  5/0,  54  Am.  St.  Rep.  305,  North  Caroliyia.—  Uaxhuni  v.  Penn- 

36  S.  W.  1051.  svlvania    Ca.sualtv    Co."   138    N.    Car. 

California.— Grimth  v.   New   York  379,  50  S.  E.  262. 

Life  Ins.   Co.  101   Cal.   627,  40  Am.  South  Caroliufi.—Canihen  v.  Hart- 

St.  Rep.  96,  3(i  Pac.  113;  Farnum  v.  ford  Life  Ins.  Co.  80  S.  Car.  264,  61 

Piiopnix  Jns.  Co.  83  Cal.  246,  17  Am.  S.  E.  428. 

St.  Hep.  23i5,  23  Pac.  869.  Tennessee.— ^oulhcrn  Life  Ins.  Co. 

Illinois. — People      v.      Commercial  v.  Hooker,  9  Heisk.    (Tenn.)    ()06,  24 

Life  Ins.  Co.   247  111.  92,  93  N.   E.  Am.  Rep.  344;  Equitable  Ins.  Cc  v. 

yO-  McCrea,   8   Lea    (Term.)    541. 

Louisiana. — Latoix  v.  Germania  Yirrfinia. — Wytheville  Insurance  & 
Ins.  Co.  27  La.  Ann.  113. 

Joyce  Ins.  Vol.  L — 19.  289 


§  79  JOYCE  OX  INSURANCE 

the  company  cannot,  under  such  circumstances,  cancel  the  policy 
for  nonpayment  without  first  putting  the  insured  in  default  by 
some  act,  such  as  a  new  demand.^  But  the  mere  nonpayment  of 
the  premium  on  demand,  does  not  of  itself  destroy  the  policy  where 
the  company  fails  to  give  notice  of  its  election  to  rescind  the  con- 
tract.^ Again  a  local  insurance  agent  who  has  power  to  extend  cred- 
it upon  the  premium,  and  who  represents  the  full  power  of  the 
company  to  make  binding  contracts  of  insurance  by  countersign- 
ing and  delivering  policies,  and  who  countersigns  and  delivers  a 
policy  unconditionally  as  a  completed  contract  under  a  specific 
agreement  for  the  payment  of  the  premium  at  a  future  date  there- 
by waives,  to  the  full  extent  to  which  the  company  could  then  have 
waived,  the  actual  payment  of  the  premium  as  a  condition  prece- 
dent to  its  liability  on  the  policy.'''  A  certificate  of  life  insurance  is 
also  presumed  to  have  been  delivered  on  the  day  of  its  date,  althpugh 
this  presumption  may  be  overcome,  and  even  though  the  applica- 
tion provides  for  prepayment  of  the  first  premium  such  provision 
can  be  waived  and  this  is  so  even  if  the  certificate  so  provides  and 
the  delivery  of  the  certificate  without  prepayment  may  constitute 
a  waiver,  or  raise  the  presumption  of  a  waiver  or  that  credit  was 
given.*  Again,  a  provision  in  a  policy  of  insurance  stipulating  that 
the  policy  shall  be  void  unless  payment  of  the  premium  shall  be 
made  to  the  secretary,  or  an  agent  of  the  insurer  duly  appointed  as 
such  in  writing,  is  intended  to  protect  the  insurer  against  default 
on  the  part  of  mere  solicitors  for  insurance  from  the  insured,  but 
not  to  make  the  latter  answerable  for  the  default  of  the  insurer's 
agents;  and  if  the  insurer,  either  expressly  or  by  acts  warranting 
the  injiplication,  in  fact  appoints  an  agent  to  deliver  a  policy  and 
collect  the  premium,  the  receipt  of  the  money  by  such  agent  is  the 
receipt  by  the  insurer,  and,  operates  as  a  waiver  of  such  condition 
in  the  policy,  although  the  insurer  does  not  in  fact  receive  the  pre- 
mium.^ It  is  held  that  the  delivery  of  a  policy  does  not  operate  as 
a  waiver  of  prepayment  where  the  policy  provides  that  it  shall  not 

Banking  Co.  v.  Teiger,  90  Va.  277,  ^  Washoe  Tool  Manufacturing  Co. 

18  S.  E.  195.  V.  Hibernia  Fire  Ins.  Co.  7  Hun  (N. 

West    Virginia. — Eagan    v.    ^tna  Y.)  74. 

Fire  &  Marine  Ins.  Co.  10  W.  Va.  '  Famum  v.   Phoenix  Ins.   Co.   83 

583.  Cal.   246,  17  Am.   St.   Rep.  233,  23 

As  to  effect  of  delivery  of  policy  Pac.  869.     See  Slobodisky  v.  Phenix 

before  payment  of  first  premium  con-  Ins.  Co.  53  Neb.  816,  74  N.  W.  270. 

trary  to  conditions,  see  note  20  L.  ed  *  Hoover   v.    Bankei's   Life   Assoc. 

398.    See  also  note  107  Am.  St.  Rep.  155  Iowa,  322,  136  N.  W.  117. 

136,    137.  ^  Arthurholt  v.    Susquehanna  Mu- 

5  Latoix  V.   Germania  Ins.   Co.  27  tual  Fire  Ins.  Co.  159  Pa.  St.  1,  39 

La.  Ann.  113.  Am.  St.  Rep.  659,  28  Atl.  197. 

290 


COMPLETION   OF  CONTRACT  §  80 

be  binding  until  the  premium  is  paid,  and  that  waiver  must  be  in 
writing.  In  such  case  the  agent  cannot  waive  such  condition  preced- 
ent,^" and  although  a  condition  as  to  prepayment  of  premium  may 
be  waived  by  the  general  agent,  by  delivering  the  policy  without 
exacting  payment,  there  is  no  such  waiver  when  the  agent  merely 
leaves  the  policy  for  examination  and  requires  the  party,  if  he  con- 
cludes to  accept  it,  to  prepay  the  premium,  in  accordance  with  the 
condition. ^^  It  is  also  held  that  when  an  application  for  life  insur- 
ance, signed  by  the  applicant,  provides  that  the  policy  shall  not  take 
effect  until  the  first  premium  is  paid  in  full,  and  the  policy,  as  is- 
sued, declares  that  no  agent  has  power  to  extend  the  time  for  paying 
the  premium  or  to  waive  any  forfeitures,  and  that  these  powers  can 
be  exercised  only  by  the  pre^^ident  or  secretary  or  one  of  the  vice- 
presidents  and  will  not  be  delegated,  and  that  no  provision  in  the 
policy  can  be  waived  or  modified  except  by  such  officers  by  indorse- 
ment on  the  policy,  a  general  agent  whose  appointment  specifies 
that  he  has  no  authority  to  make,  alter,  or  destroy  any  contract,  to 
waive  any  forfeiture  or  to  receive  any  moneys  except  on  policies  or 
renewals  signed  by  the  president,  secretary,  or  manager  of  the  or- 
dinary branch,  has  no  power  to  waive  the  payment  of  the  first  pre- 
mium, and  the  delivery  of  a  policy  by  him  without  such  payment 
is  ineffective. ^2 

§  80.  Prepayment:  credit  may  be  given. — An  insurance  may  be 
binding  without  actual  prepayment  of  the  premium  by  an  agree- 
ment by  the  company  to  give  credit  therefor ;  ^^  and  it  is  held  that 
if  the  charter  of  an  insurance  company  be  wholly  silent  as  to  the 
power  of  the  corporation  to  give  credit  for  premiums  and  to  take 
notes  in  payment,  such  a  power  necessarily  results  from  its  power 
to  make  insurances  and  to  enable  it  to  advantageously  conduct  its 
bilsiness.^*  If  a  poUcy  is  delivered  on  an  agreement  for  future  pay- 
ment of  the  premium  it  becomes  effective  immediately,  although 
the  premium  is  not  paid.^*  And  credit  will  be  presumed  to  have 
been  given  if  the  policy  is  delivered  without  prepayment,!^  since 
an  unconditional  delivery  in  such  case  raises  a  presumption  that 

loPottsville  Mutual  Fire  Ins.  Co.  423;   Mississippi  Valley  Ins.  Co.  v. 

V.    Minnequa    Springs    Improvement  Dunklee,  16  Kan.  158. 

Co.  100  Pa.  St.  137.  ^^  Mclntyre    v.    Preston,    5    Gilm. 

"Wood  V.    Poughkeepsie   Mutual  (111.)  48. 

Ins.  Co.  32  N.  Y.  619.  ^^  Dailey  v.  Preferred  ^Masonie  Mu- 

12  Russell  V.  Prudential  Ins.  Co.  lual  Accident  Assoc.  102  Mich.  289, 
176  N.  Y.  178,  98  Am.  St.  Rep.  656,  26  L.R.A.  171,  57  N.  W.  184,  60  N. 
68  N.  E.  252.  W.  694. 

13  Franklin  Fire  Ins.  Co.  v.  Colt,  ^^  Kollitz  v.  Equitable  Mutual  Fire 
20  Wall.   (87  U.  S.)   560,  22  L.  ed.  Ins.  Co.  92  Minn.  234,  99  N.  W.  892. 

291 


§  80 


JOYCE  ON  INSURANCE 


credit  was  given. ^'^  So  tliei-e  may  be  a  presumption  that  credit  was 
given  for  the  difference  between  the  ca^li  payment  and  the  full 
amount  of  the  pieniium.^^ 

An  agent  authorized  to  insure  may  give  credit, ^^  where  it  is  not 
a,  condition  precedent  that  tlie  iirst  premium  should  be  paid  at  the 
time  tlie  policy  is  delivered.^o  although  a  general  agent,  even  though 
in  violation  of  the  rules  and  regulations  of  his  principal,  may  give 
credit  for  premiums.^  And  an  agent  autliorized  to  make  fire  insur- 
ance contracts  and  issue  policies,  has  authority  to  waive  cash  pay- 
ment of  premiums  and  give  credit,  or  time,  for  their  payment,  un- 
less the  insured  has  notice  of  restrictions  upon  his  authority,  and 
such  waiver  may  be  express  or  implied.^  So  an  agent  may  give 
credit  where  the  policy  provides  that  the  insurance  shall  not  be 
binding  until  the  actual  payment  of  the  premium.^  And  insured 
is  not  bound  to  take  notice  of  conditions  in  the  policy,  that  the 
premium  must  be  actually  paid,  nor  that  the  waiver  of  condition 
must  be  indorsed  in  writing  on  the  policy,  when  it  is  executed  and 
delivered  to  him  as  a  valid  and  completed  contract  by  an  agent  hav- 
ing authority  to  countersign  it,  and  who,  before  or  at  the  time  of 
delivery  of  it,  has  given  the  insured  a  credit  upon  the  premium  up- 
on parol.     If  a  loss  occurs,  in  such  case,  before  the  credit  expires, 


^'  Washburn  v.  United  States  Casu-        North  Carolina. — Pender  v.  North 
aity  Co.  108  Me.  429,  81  Atl.  575.        State  Mutual   Life   Ins.   Co.   163   N. 
•   "Northwestern  Life  Assur.  Co.  v.    Car.  98,  79  S.  E.  293. 
Scluilz,  94  111.  App.  156.  South  Carolina. — Cauthen  v.  Hart- 

^^  United     States. — Franklin     Fire   ford  Life   Ins.    Co.   80    S.    Car.   264, 
Ins.  Co.  V.  Colt,  20  Wall.  (87  U.  S.)    61  S.  E.  428. 

560,  22  L.  ed.  423.  (Agent  with  au-  Tennessee. — Gordon  v.  United 
thority  to  take  and  approve  risks  and  States  Casualty  Co.  —  Tenn.  Ch. 
to  insure)  :  Ball  &  Sage  Wagon  Co.  App.  — ,  34  S. 'W.  98. 
V.  Aurora  Fire  &  Marine  Ins.  Co.  20  ^°  Marysville  Mercantile  Co.  Ltd.  v. 
Fed.  232.  (Agent  had  "full  power  to  Home  Fire  Ins.  Co.  21  Idaho,  377, 
receive  proposals  for  insurance,  to  121  Pac.  376.  See  §§  70,  71,  76 
receive  moneys,   and   to   countersign,    et  seq.  herein. 

issue,  and  renew  policies  of  insur-  ^  State  Mutual  Fire  Ins.  Co.  v. 
anee  of  the  company,  subject  to  such  Taylor  (1913)  —  Tex.  Civ.  App.  — , 
rules,  and  regulations  as  are  or  may    157  S.  W.  !)50. 

be  adopted  by  the  company,  and  such        ^  Newark   Machine    Co.   v.   Kentou 
instructions  as  may  from  time  to  time    Ins.  Co.  50  Ohio  St.  549,  22  L.R.A. 
bo  given  by  the  manager  of  the  com-   768n,  35  N.  E.  1060. 
pany  at  Cincinnati.")  ^O'Brien  v.  Union  Mutual  Ins.  Co. 

Idaho. — Marvsville  Mercantile  Co.  22  Fed.  566  (general  agent)  ;  Day- 
Ltd.  V.  Home  Fire  Ins.  Co.  21  Idaho,  ton  Ins.  Co.  v.  Kellv,  24  Ohio  St.  345, 
377,  121  Pac.  376.  15    Am.    Kep.    612.      See   Hewitt   v. 

Minnesota. — Kilborn  v.  Prudential  American  Union  Life  Ins.  Co.  34 
Ins.  Co.  99  Minn.  176,  108  N.  W.  Misc.  738,  70  N.  Y.  Supp.  1012,  rev'd 
861.  73  N.  Y.  Supp.  105,  66  App.  Div.  80. 

Nebraska. — Union  Life  Ins.  Co.  v. 
Raman,  54  Neb.  599,  74  N.  W.  1090. 

292 


COMPLETION  OF  CON  TK ACT  §  80a 

the  comjiany  i.*  bound,  nolwilhslaiifling  tlie  asTeciiient  for  credit 
was  iiol  iiulor.-ed  upon  the  pohcy.  The  limitation  upon  the  power 
of  tlie  auent  to  waive  such  condition  apphes  only  after  the  ])olicy 
has  been  delivered  as  an  executed  contract.*  Again,  provisions  in 
a  policy  of  insurance  that  the  risk  shall  not  attach  unless  the  pre- 
nhuni  has  been  actually  paid  are  waived  where  the  policy  is  deliv- 
ered on  an  agreement  to  extend  credit,  and  the  insurer  does  not 
take  advantage  of  such  provisions,  but  treats  the  ])olicy  as  in  force.^ 
The  agent  may  agree  to  be  himself  responsible  for  the  premium.^ 
In  a.  Louisiana  case  the  agent  was  requested  to  send  the  bill  for  the 
premium  to  the  treasurer  of  the  insured  society  for  payment  and  he 
replied,  "That's  all  right,". and  called  several  times,  but  did  not  lind 
the  party,  and  the  contract  was  held  to  be  complete.''  If  an  agent 
with  no  authority  to  give  credit  delivers  a  policy  before  the  pre- 
mium is  paid,  but  accounts  therefor  to  the  company,  it  is  bound.' 
And  an  agreement  to  pay  the  premium  is  suflicient  although  the 
property  is  destroyed  before  the  delivery  of  the  policy.^ 

Credit  may  be  given  for  a  portion  of  the  premium,^"  and  the  giv- 
ing of  any  credit  on  the  payment  of  premium  by  an  authorized 
agent  of  tJie  company  is  a  waiver  of  actual  payment  as  a  condition 
precedent  to  its  liability ;  and  the  only  remedy  of  the  company  after 
the  term  of  credit  has  expired,  is  to  rescind  or  cancel  the  policy  for 
nonpayment  within  the  term,  upon  personal  notice  to  the  in- 
sured.^^  Again,  insurer's  agent  may  accept  payment  of  the  pre- 
mium in  instalments.^^ 

§  80a.  Same  subject:  promissory  notes,  checks,  and  drafts. — 
Insurer's  agent  may  accept  the  promissory  notes  of  the  applicant. ^^ 
And,  although  one  of  the  conditions  of  an  insurance  policy  is  that 
it  "shall  not  be  valid  or  l>inding  until  the  first  premium  is  paid," 

*rarnum   v.   Phoenix    Ins.    Co.   83  "  Farnum  v.   Plurnix  Ins.   Co,  83 

Cab  246,  17  Am.  St.  Rep.  2:53.  Cal.  246,  17  Am.  St.  Rep.  233. 

*  German  Ins.  Co.  v.  Sluuler,  68  ^^  Mulligan  v.  Metropolitan  life 
Neb.  1,  60  L.R.A.  918,  93  N.  W.  972.  Ins.  Co.  149  111.  App.  516. 

^  Mississippi  Valley  Life  Ins.  Co.  ^^  Mississipjii  Vallev  Life  Ins.  Co. 
V.  Neyland,  9  Bush  (Ky.)  430.  See  v.  Neyland,  9  Bush  (Ky.)  430.  Gen- 
Sheldon  v.  Connecticut Mntual  Life  oral  agent  with  power  to  solicit  ap- 
Ins.  Co.  25  Conn.  207,  65  Am.  Dee.  plications  and  receive  Hrst  premiums: 
565  (noted  under  §  80a  herein).  Kelly  v.   St.  Louis  Mutual  Life  Ins. 

■^La  Societe  v.  Morris,  24  La.  Ann.  Co.   3  Mo.   App.  554.      See   §§    1202 

347.  et  seq.  herein. 

*  Agricultural    Ins.    Co.    v.    Mon-  See  also  the  following  cases: 
tague,   38    Mich.    548,    31    Am.    Rep.  United     States. — Commercial     ]\Iu- 
326  tual   Marine  Ins.  Co.  v.  Union   Mut. 

^Fitton  V.  Fire  Ins.  Assn.  20  Fed.  Ins.  Co.  19  How.  (60  U.  S.)  318.  15 
76().  L.  ed.  636;    Hodgson  v.  Marine  Ins. 

10  Trustees  First  Baptist  Church  v.  Co.  5  Cranch  (9  U.  S.)  100,  3  L.  ed. 
Rrooklvn  Ins.  Co.  28  N.  Y.  153.  See  48;  Robinson  .v.  Cnion  Cent.  Life  Ins. 
§  74  herein.  Co.   144   Fed.    KMK'),   rev'd    8    L.H.A. 

293 


§  80a  JOYCE  ON  INSURANCE 

if  it  is  silent  as  to  the  mode  of  payment,  promissory  notes  received 
by  the  company,  even  in  the  absence  of  any  express  agreement, 
must  be  deemed  to  have  been  accepted  as  payment  of  the  premium. 
The  poh'cy  is  binding  and  is  a  vahd  consideration  for  the  notes. ^* 
So  the  agent  may  agree  to  liold  liimself  accountable  to  the  company 
for  the  cash  payment,  and  that  a  note  should  be  given  by  the  ap- 
plicant for  the  balance  of  the  premium  at  some  future  time,  and 
that  the  insurance  should  take  effect  when  the  proposals  were  ac- 
cepted.^* And  payment  may  be  made  partly  in  cash  and  partly  in 
notes,  as  where  a  life  insurance  policy  was  issued  to  plaintiff's  de- 
cedent expressed  to  be  made  in  consideration  of  a  premium  already 

( 

(N.S.)  883,  148  Fed.  358,  78  C.  C.  A.  Neio  Torfc.— Buckley  v.  Citizens 
268.  Compare  Pennsylvania  Casual-  Ins.  Co.  188  N.  Y.  399,  13  L.l^A. 
ty  Co.  y.  Bacon,  133  Fed.  907,  67  (N.S.)  889,  81  N.  E.  165;  Stewart. 
C.  C.  A.  497;  Miller  v.  Northwestern  v.  Union  Mutual  Life  Ins.  Co.  155 
Mutrual  Life  Ins.  Co.  Ill  Fed.  465,  N.  Y.  257,  42  L.R.A.  147,  49  N.  E. 
49  C.  C.  A.  330;  Mutual  Life  Ins.  876;  McGee  y.  Felter,  135  N.  Y. 
Co.  y.  Loe:an,  87  Fed.  637,  57  U.  S.  Supp.  267,  75  Misc.  349;  looker  v. 
App.  18,  31  C.  (-.  A.  172.  Security  Trust  Co.  49  N.  Y.   Supp. 

Alabama. — Lehman    v.    Gunn,    124   814,  26  App.  Di\ .  372. 
Ala.   213,   82   Am.    St.    Rep.   59,   51       Oklahoma. — Arkansas   Ins.    Co.   v. 
L.R.A.   112,   27    So.   475.      Compare   Cox,  21  Okla.  873,  20  L.R.A.  (N.S.) 
Batson  v.  Fidelity  Mutual  Life  Ins.   421,  129  Am.  St.  Rep.  808,  98  Pac. 
Co.  155  Ala.  265,  130  Am.  St.  Rep.   552. 
21,  46  So.  578.  South    Dakota.— ^ohle   v.    Kansas 

Caiifornia.—GrUnth  v.  New  York   City  Life  Ins.   Co.  33  S.   Dak.  458, 
Life  Ins.  Co.  101  Cal.  627;  40  Am.   146  S.  W.  606. 
St.  Rep.  96,  36  Pac.  113.  Texas. — Provident      Savings     Life 

Colorado. — Rosenberg  v.  Johnson,  Assur.  Soc.  y.  Oliver,  22  Tex.  Civ. 
45  Colo.  53,  99  Pac.  315.  App.  8,  53  S.  W.  594.     See  Hudson 

Georrji a. —Bi\)\)    v.    Fidelitv    Mu-   v.   Compere,  94  Tex.  449,  61  S.  W. 
ti;al  Life   Ins.   Co.   128  Ga.   491,  12   389. 
L.R.A. (N.S.)  319,  57  S.  E.  892.  Utah.— Thnm  v.  Wolsteuholme,  21 

7//mo/.s.— Devine  v.  Federal  Life  Utah,  446,  61  Pac.  537,  29  Ins.  L.  J. 
Ins.  Co.  250  111.  203,  95  N.  E.  174,   669. 

40  Ins.  L.  J.  1513:  INIutual  Life  Ins.        Vermont. — Porter  y.   Mutual   Life 
Co.  v.  Allen,  113  111.  App.  80,  atf'd    Ins.  Co.  70  Vt.  504,  41  Atl.  970. 
212  111.  134.  72  N.  E.  200.  On  promissory  note  as  payment  of 

loua. — Kinibro  y.  New  York  Life  insurance  premium,  see  note  in  5  B. 
Ins.  Co.  134  Iowa,  84,  12  L.R.A.  R.  C.  365.  On  commercial  paper  as 
(N.S.)  421.  108  N.  ^Y.  1025.  such  payment,  .see  note  in  35  L.R.A. 

A'e«i?/rfev.— National  Life  Ins.  Co.    (N.S.)  84. 
V.  Tweddeil,  22  Ky.  L.  R.  881,  58  S.       i*  Union   Central  Life  Ins.   Co.  y. 
W.   699.      .  Taggart,    55    Minn.    95,   43    Am.    St. 

Minnesota. — Kilborn  v.  Prudential  Rep.  474,  56  N.  \V.  579.  But  com- 
Ins.  Co.  99  Minn.  176,  108  N.  W.  861.    pare   Dunham    v.    Morse.    158    Mass. 

Missouri.— J acohii  v.  Omaha  Life  132,  35  Am.  St.  Rep.  473,  32  N.  E. 
As.soc.  146  Mo.  523,  48   S.   W.  462,  1116. 

142  Mo.  49,  43  S.  W.  375.  See  ^^  <mipij,^,^  ^  Connecticut  Mutual 
Moonev  v.  Home  Ins.  Co.  80  Mo.  Life  Ins.  Co.  25  Conn.  207,  65  Am. 
App.  i92,  2  Mo.  App.  Rep.  524.  Dec.  565. 

294 


1 


COMPLETION   OF  CONTRACT  §  80a 

paid,  and  of  a  like  sum  to  be  aniuially  paid  during  the  continuance 
of  the.  policy,  and  providing  that  the  policy  should  not  take  effect 
until  the  premium  was  paid,  and  that  the  policy  should  be  forfeited 
''in  case  any  premium  due  upon  this  policy  shall  not  be  paid  at  the 
day  when  payable."  The  first  premium  Avas  paid  partly  in  cash 
and  partly  in  promissory  notes,  but  the  notes  were  not  paid  and  the 
insured  died.  It  was  held  that  the  policy  had  taken  effect  and  that 
the  nonpayment  of  notes  did  not  bar  plaintiff's  recovery,  because 
the  "forfeiture"  clause  referred  to  premiums  after  the  first.^^  So 
payment  in  cash  may  be  waived  and  a  promissory  note  or  other  evi- 
dence of  indebtedness  may  be  accepted  in  lieu  thereof  and  a  prom- 
issory note,  payable  to  his  own  order,  given  by  an  applicant  to- 
gether with  cash  for  the  first  premium  to  an  agent  of  the  company 
is  sufficient,  even  though  non-negotiable  under  the  statute,  such 
instruments  being  enforceable  in  the  hands  of  a  purchaser  or  as- 
signee." Again,  where  the  agents  of  an  insurance  company,  act- 
ing for  themselves,  advance  the  money  for  the  premium  to  the  com- 
pany, and  take  the  note  of  the  insured  for  the  amount  as  their  own 
and  negotiate  it,  the  company  cannot  dispute  its  liability  on  the 
ground  that  the  premium  has  not  been  actually  paid.^^  And  credit 
for  the  first  premium  may  be  given  by  the  soliciting  agent  by  tak- 
ing a  note  therefor,  according  to  the  usual  method  of  transacting 
business,  and  indorsing  it  over  to  the  general  state  agent  instructing 
him  to  charge  the  net  sum  due  the  company  from  such  premiums 
to  such  soliciting  agent's  account,  the  latter  being  thereby  still  liable 
to  the  company  for  the  net  premium. ^^ 

A  check  may  also  be  given  and  accepted  as  payment,  as  where  in- 
surer's agent  instructs  the  applicant  to  send  him  "his  .check  for  the 
premium  and  the  business  is  concluded"  and  it  is  sent.^°    If  credit 

i«  McAllister  v.  New  England  Mu-  689,  691,  2  C.  C.  A.  459,  4(31 ;  Ken- 

tual  Ins.  Co.  101  Mass.  558,  3  Am.  dalls  Admr.   v.   Pacific   Mutual   Life 

Rep.  404.  Ins.  Co.  51  Fed.  689,  691,  2  C.  C.  A. 

"  Unterhamscheidt      v.      Missouri  459,  461,  10  U.  S.  App.  256. 

State  Life  Ins.  Co.  160  Iowa,  223,  45  Alaha ma. —Home      Protection      v. 

L.R.A.(N.S.)   743,  138  N.  W.  459.  Avery,  85  Ala.  348,  351,  7  Am.  St. 

18  Home    Ins.    Co.    v.    Curtis,    32  Rep.  54,  5  So.  143. 

Mich.  402.  Indiana. — Home    Ins.    Co.    v.    Gil- 

On  giving  of  note  as  a  transaction  man,  112  Ind.  7,  13,  13  N.  E.  118. 

witli  tlie  agent  personally,  see  note  in  Louisiana. — Trager     v.     Louisiana 

5  B.  R.  C.  436.  Equital)le  L.  Ins.  Co.  31  La.  Ann.  239. 

19  Mutual  Life  Ins.  Co.  v.  Reid,  21  il/ar/y/a/id.— Mallctte  v.  British 
Colo.  A]))).  143,  121  Pac.  132.  American    Assur.    Co.    91    Md.    471, 

20  Tavloe  v.   Merchants'   Fire   Ins.  483,  46  Atl.  1005. 

Co.   9   ilow.    (50   U.   S.)    390,   13  L.       ]l/«s.sac/iM«e//.s.— White  v.    Connee- 
ed.  187.  ticut  Fire  Ins.  ('o.  120  Mass.  333. 

Cited  in  United  States.— V-Aine  v.  H^orth  CaroUnu. — HoUowell  v.  Life 
Pacific  Mutual  Life  Ins.  Co.  51  Fed.    Ins.  Co.  126  N.  Car.  398,  404,  35  S. 

295 


§§  81,  82  JOYCE  OX  INSURANCE 

is  given  and  a  draft  is  drawn  by  the  insurer  and  accepted  by  in- 
sured, but.  at  tlie  time  tlie  property  was  destroyed  by  fire,  it  was  un- 
paid, such  non-payment  constitutes  no  defense  even  though  the  ap- 
pHcation  stipuL^ited  that  "if  the  premium  is  not  i)aid  as  herein 
agreed  the  insurance  shall  be  void  until  such  settlement  is  made."  ^ 

It  may  be  a  question  for  the  jury  whether  the  general  agent  has 
waived  the  cash  payment  of  the  j^'einium ;  ^  al.«o  whether  or  not 
credit  has  been  given  and  accepted,^  or  whether  an  agent  had  au- 
thority to  give  credit  and  waive  a  cash  payment.*  And  whether 
credit  ha.s  been  given  may  be  shown  by  direct  proof  or  inferred  from 
surrounding  circumstances,  as  by  the  production  of  the  policy  at 
the  trial :  ^  and  the  agent's  authority  may  be  evidenced  by  issuing 
a  policy  upon  an  application  which  recites  that  the  agent  has  been 
paid  the  premium.® 

§  81.  Prepayment:  mutual  credits:  application  on  agent's 
debt. — Where  there  are  mutual  credits  between  the  parties,  and  an 
authorized  agent  of  the  company  is  indebted  to  the  applicant,  the 
parties  may  agree  that  the  amount  of  the  premium  may  be  charged 
or  credited,  as  the  case  may  be,  subject  to  settlement  of  accounts, 
and  this  will  constitute  a  valid  prepayment  of  the  premium  and  be 
binding  upon  the  company.''' 

§  82.  Where  there  are  mutual  credits. — AVhere  the  insurer  and 
insured  had  mutual  credits  and  struck  a  balance  monthly,  this  is 
in  efl'ect  a  payment,*  and  where  an  application  had  been  sent  by 
plaintiff's  agent  to  defendant's  agent,  who  agreed  to  take  two  thirds 
the  ri.-^k,  and  the  amount,  duration,  and  premium  were  agreed  up- 
on, and  the  two  agents  had  running  accounts  with  each  other  and 

E.  616.     See  Miller  v.  Northwestern  v.   Surety  Trust  &  Life  Ins.   Co.   60 

Mutual  Life  Ins.  Co.  Ill  Fed.  465,  N.  Y.  Siipp.  189,  .58  App.  Div.  602. 

49   C.   C.   A.   .330,   where   cheek  was  *  S]ol)odisky  v.  Phenix  Ins.  Co.  53 

given  but  held  that  no  contract  was  Neb.  816,  74  N.  W.  "270. 

made  under  the  cirouuistances.  *  Pender    v.    North    State    Mutual 

On  check  or  draft  as  pa,>-ment  of  Life  Ins.  Co.  163  N.  Car.  98,  79  S.  E, 

insurance     premium,     see     note     in  293. 

L.R.A.1916A,  674.  ^  poj.ter   v.   Mutual   Life   Ins.   Co. 

1  Bell  V.  Hudson  Bay  Ins.  Co.  44  70  Vt.  504,  41  Atl.  970. 

Can.   Sup.   Ct.  419,   21   Am.   &  Eng.  "^  Marsh   v.    Northwestern  National 

Ann.  Cas.  788.     Compare  London  &  Ins.  Co.  3  Biss.    (U.  S.  C.   C.)    351, 

Lancashire  Life  Assur.  Co.  v.  Flem-  Fed.    Cas.    No.   9118.      See   cases   in 

ing,  App.  Cas.  [1897]  Law  Rep.  499.  following  sections. 

2  Cauthen  v.  Hartford  Life  Ins.  Charging  premium  to  agent  person- 
Co.  80  S.  Car.  264,  (il  S.  E.  428.  ally  by  company,  and  agent  credits 

^  Untcrharnscheidt  v.  Missouri  insured  as  payment :  Wvtheville  In- 
State  Life  Ins.  Co.  160  Iowa,  223,  .surance  &  Banking  Co.  v.  Teiger,  90 
45  L.R.A.(N.S.)  743,  138  N.  W.  459;  Va.  277,  18  S.  E.  1!)5. 
Slol)odiskv  V.  Phenix  Ins.  Co.  53  *  ^Mai'sh  v.  Northwestern  National 
Neb.  816,"  74  N.  W.  270;  Manson  v.  Ins.  Co.  3  Biss.  (U.  S.  C.  C.j  351, 
Metropolitan  Surety  Co.  112  N.  Y.  Fed.  Cas.  No.  9118. 
Supp.  886,  128  App.  Div.  577;  Cross 

296 


COMPLETION   OF  CONTRACT  §  83 

r^ettled  nioiitlily.  the  court  lield  that  there  was  evidence  for  ihe  jury 
of  a  contract  of  insurance,  which  hegan  immediately:^  and  where 
the  parties  had  mutual  accounts  and  their  course  of  dealing  was  to 
give  credit  for  premiums  due  to  each,  and  to  give  receipts  as  for 
cash  and  to  balance  accounts  from  time  to  time,  and  the  plaintiff 
was  given  a  receipt  for  his  premium,  such  ]M-emiuni  is  paid  when 
the  recei})ts  are  given. ^° 

§  83.  Crediting  premium  on  agent's  indebtedness  to  applicant. — 
When  an  insurance  agent,  who  has  authority  to  issue  policies  of 
insurance,  i.ssues  and  delivers  a  policy  upon  a  building  therein  de- 
scribed, and  agrees  with  the  assured  to  deduct  the  premium  out  of 
money  then  in  his  possession  belonging  to  the  assured,  and  apply 
it  on  the  payment  of  the  premium,  such  an  agreement  is  a  receipt 
of  the  premium,  and  the  company  issuing  the  policy  will  be  bound 
thereby;  "  but  if  the  agent  has  money  of  the  assured  in  his  posses- 
sion and  has  agreed  to  pay  the  premium  out  of  the  same,  and  the 
company  has  no  knowledge  thereof,  it  may  upon  nonpayment  of 
the  ])remium.  and  upon  due  notice,  cancel  the  policy. ^^  Whore  an 
insurance  agent  enters  into  a  contract  to  insure  property,  crediting 
the  premium  on  an  account  whicii  the  agent  owed  the  insured,  the 
contract  is  binding  on  the  company  ;^^  and  where  money  is  ad- 
vanced by  a  subagent  to  the  general  agent  to  be  debited  against  pre- 
miums collected  by  the  former,  and  he  applies  for  insurance,  the 
advancement  to  the  general  agent  will  be  considered  a  payment  of 
the  premium.^*  And  if  the  agent  pays  the  insurer  eacii  luonth  set- 
tling with  it  for  the  amount  due  on  premiums  collected,  it  is  im- 
material that  insured  settled  with  the  agent  by  crediting  him  \\i11i 
the  amomit  of  tlie  premium  on  an  accounr  due  assured  from  such 
agent."     ]n  Wooddy  v.  Old  Dominion  Insurance  Conipany  ^^  an 

8  Sanborn  v.  Firemen's  Ins.  Co.  1(5  Co.  155  N.  Car.  330,  Ann.  Cas.  1912C 

Gray  (82  Mass.)  448,  77  Am.  Dec.  362,  71  S.  E.  434,  40  Ins.  L.  J.  158(i. 
419.  On  whether  existence  of  indebted- 

1°  Prince  of  Wales  Life  Assur.  Co.  ness  froin  insurer  to   insured  in  an 

V.  Harding,  El.  B.  &  E.  183,  4  Jur.  amount  suflHcient  to  pay  ]jremuim  or 

(NS  )   851    '?7  L   J    O    B.  297.  a.ssessmenl  will  prevent  forteiture  of 

.1  '  ~  ^    '  a     ■  policy  for  nonijavment  of  premium. 

On    payment    or    insurance    pre-  ^       ■  oo  {   l>   *   ,  v  y  \  Sn  i 

,^    •'  ,    ,.  p  ,.  ^-  .see  note  in  23  lj.n.A.(  N.r>.)   .5U4. 

niuim  by   cancelation    of   agents   m-        u  Thompson  v.   American   Tontine 

debtedness,  sec  note  m  L.R.A.1915A,  ^.^^  ^  ^^^,    ^^^^  ^^    ^g  j^,    Y.  647, 

686.  ^.^^ 

"  PhoPnix  Ins^  Co.  Meier,  28  Neb.        15  Herring    v.    American    Ins.    Co. 

124,  44  N.  W.  9/.  123  Iowa  533.  99  N.  W.  139.  33  Ins. 

12  Merchants  &  Manufactnrers  Mil-  L.  J.  558.  The  court  said:  "While 
tual  Ins.  Co.  v.  Baker,  4  Neb.  384,  it  is  true  as  a  general  proposition, 
94  N.  W.  627.  Ihat  an  agent  may  not  accept  prop- 

13  Western  Assur.  Co.  v.  ]\rcAlpin,  erty  in  beu  of  cash  for  the  premium, 
23  Ind.  App.  220,  77  Am.  St.  Hep.  without  express  authority  to  do  so,  it 
423,  55  K.  E.  119.  But  compare  is  equally  as  true  that,  when  he  ac- 
Gazzam   v.   German  Union   Fire  Ins.  tuallv  pays  the  premium  in  cash  to 

297 


§  84  ■       JOYCE  UX  l.XSUKAX'CE 

agent  aulliorized  to  fill  up  and  deliver  policies  entered  into  mi  agree- 
ment for  insurance  with  an  applicant  who  tendered  the  premium 
to  the  agent;  but  the  latter,  who  resided  in  the  house  insured,  and 
who  owed  the  former  for  rent,  said  he  would  apply  tlie  i)remium 
toward  the  rent,  and  this  was  held  a  valid  payment  of  the  premium. 
But  in  the  absence  of  an  actual  or  apparent  right  of  an  agent  to 
contract  for  livery  service  in  lieu  of  cash  for  the  premium  the  in- 
surer is  not  estopped  to  claim  its  nonapproval  of  the  application, 
by  reason  of  the  nonpayment  by  the  agent  for  such  livery  hire." 
Again,  a  policy  delivered  by  an  agent  without  exacting  payment 
of  the  premium  under  an  agTcement  between  him  and  the  assured 
that  the  agent  would  accept  as  payment  his  own  indebtedness  for 
meat,  and  take  meat  for  the  balance,  is  void,  where  the  policy  con- 
tains a  condition  requiring  all  premiums  to  be  paid  at  the  home 
office,  but  provides  that  payments  will  be  accepted  if  paid  to  the 
agent  in  exchange  for  a  receipt  signed  by  the  president  or  secretary 
and  countersigned  by  the  agent  and  that  the  policy  shall  not  take 
effect  unless  the  first  premium  is  paid  while  the  assured  is  in  good 
health.  18 

§  84.  Prepayment:  course  of  dealings:  allowing  credit. — Stipu- 
lations making  a  prepayment  of  the  premium  a  condition  prece- 
dent to  the  attachment  of  the  risk  are  in  some  cases  governed  by 
the  usual  course  of  dealing  between  the  parties  to  the  contract,  or 
between  the  principal  and  agent  or  insurance  broker.  So  an  agent 
authorized  to  take  risks  and  insure  may  be  also  authorized  by  gen- 
eral usage  to  give  credit.^^  And  evidence  that  an  insurance  com- 
pany sued  has  often  extended  time  to  others  and  to  the  insured  for 

the  insurer,  it  ends  the  matter  so  far  ter  Fire  Jns.   Co.  v.  Plato,  22  Ohio 

as  the  insurer  is  concerned."  Cir.  Ct.  Rep.  35. 

16  31  Gratt.  (Va.)  362,  31Am.Rep.  Te.ras.— Provident     Savings     Life 

'32.  Assur.   Soe.   v.   Oliver,  22   Tex.   Civ. 

I'^Winehell  v.  Iowa  State  Ins.  Co.  ^pi)    8   53  S   W   594 

103  Iowa  189,  72  N.  W   503.  VermonL-^orXer  i   Mutual   Life 

^,  '  \r'rf^  a^  ^A        ci'f  p^"'-c5r-   Ins.  Co.  70  Vt.  504,  41  Atl.  570. 
113  Wis.  114,  90  Am.  St.  Rep.  84b,        ^.     .   .       ^.n    -J       ^        r,  ^r 

57  L.R.A.  455,  88  N.  W.  1013.  „"'^'"'"';ToH^.^  ^^al\^^-:.a  V' ^- J ' 

"  United     States.— ¥vvin\^\\n     Fire   gairston    J08  Va.  832,_128  Am.  St. 

Ins.  Co.  v.  Colt,  20  Wall.  (87  U.  S.)  ^^^P-  -^^'-^^  ^'-  &•  ^-  ^^^'■ 

560,  22  L.  ed.  423.  Franklin    Fire    Ins.    Co.    v.    Colt 

New   York. — Boiee    v.    Thames,   &  {above  cited)  is  cited  in: 

jMersey  Marine  Ins.  Co.  38  Hun  (N.  United        States.— 1^ or d-Beutscher 

Y  )  246  Llovd  v.  Ins.  Co.  of  North  America, 

'North  Dakota.— MaCahe  v.  ^tna  llO^Fed.  420,  429,  49  C.  C.  A.  1,  10; 

Ins.  Co.  9  N.  Dak.  19,  47  L.R.A.  641,  Jones  v.  JEtna  Ins.  Co.  7  Rep._645. 

bl  N.  W.  426.  29  Ins.  L.  J.  138.  8  Ins.  L.  J.  416.  Fed.  Cas.  No.  /453, 

Ofoio.— Newark     Machine     Co.     v.  19  Alb.  L.  J.  522. 

Kenton  Ins.  Co.  50  Ohio  St.  549,  22  Arkansas.— American     Employers' 

L.R.A.  768,  35  N.  E.  1060 ;  Manches-  Liability  Ins.  Co.  v.  Fordyce,  62  Ark. 

298 


I 


COMPLETION  OF  CONTRACT  §  84 

the  payiiiciit  of  premiums  on  other  policies,  that  the  policy  in  suit 
was  delivered  without  payment  of  premium  or  subsequent  demand 
therefor,  and  that  the  company  accepted  part  of  the  premium  due 
when  tendered,  is  sufficient  to  prove  a  waiver  of  a  condition  in  the 
policy  exempting  the  company  from  liability  miless  the  premium 
is  actually  paid;  and  it  cannot,  after  loss,  urge  as  a  defense  that  the 
premium  was  not  all  paid.^"  So  the  fact  that  the  rate  of  premium 
has  not  been  paid  or  fixed  will  not  prevent  the  commencement  of 
a  valid  contract  of  insurance  where  there  is  a  generally  understood 
rate  on  that  class  of  risks  and  the  usual  course  of  business  between 
the  parties  has  been  for  the  agent  to  collect  the  premiums  at  his 
convenience  after  the  issuance  of  the  policies.^  In  a  Pennsylvania 
case  2  the  company  issued  and  forwarded  a  policy  to  its  agents  after 
notification  given  the  plaintiff  that  a  policy  which  was  about  to 
terminate  would  be  renewed  unless  he  gave  notice  to  the  contrary. 
It  was  a  custom  between  the  agent  and  the  insured  to  give  the  latter 
a  credit  for  thirty  days,  and  the  premium  in  this  instance  was 
charged  to  him  by  such  agents,  and  a  credit  of  thirty  days  given. 
Before  the  expiration  of  that  period,  but  after  a  fire,  the  insured 
gave  his  check  for  the  premium,  which  was  retained  for  two  weeks 
without  objection.  In  an  action  on  the  policy  it  was  held  to  be  a 
question  for  the  jury  whether  a  contract  existed.  In  Lungstrass  v. 
(lerman  Insurance  Company)^  the  agent  was  accustomed  to  forward 
his  remittances  to  the  company  at  the  end  of  each  month.  He  ap- 
plied for  insurance  on  his  goods,  and  upon  receipt  of  the  policy  he 
made  an  entry  of  the  amount  chargeable  against  him  for  the  pre- 
mium in  a  book  in  which  his  accounts  with  the  company  were  reg- 
uUu-ly  kept,  and  it  was  decided  that  he  was  not  obliged  to  forward 
the  premium  before  the  accustomed  time,  and  that  the  company 

56'^  570  54  Am.  St.  Ren.  305,  36  Co.  v.  Richardson,  40  Neb,  1,  8,  58 
S.W.  1051.  N.  W.597. 

,    ,.            TT      ^    T., .     Pr.     1-     nil  New  l.ork. — Merserau     v.     Plui'iiix 

Induma. —  ILonie    Jus.    to.    ^ .    Uil-  i   t --p     t         n       «r   xr    v    o--i 

,,.,   I     1    -    11     iQ  XT    TT    lie.  Mutual  Lite  Ins.  Co.  bo  N.   Y.  2/4, 

man,   112   Jud.    (,   14,   i.6   JN.    h,.   llo,  m        •      ^r   *.      i    t -^ 

Prudc-ntial   Ins.    Co.   v.   Sullivan,  27  2'8;    Shear  v.   Phannx  Mutual  Life 

Tnd.    App.    30,    36,   59    N.    E.    873;  I^^-  ^o- 4Hun  (N.  1.)  801. 

Western   Assur.   Co.  v.  Mc-Alpin,  23  "  ^f  ^  r  "'''Tw    vf ^^^    ^^V^'rJ 

Ind.  App.  220,  227,  77  Am.  St.  Rep.  ^^^e  Ins.  Co.  40  W\  a.  508   51/,  52 

423,  55  N.  E.  110.  '^''^,  ^,\  ^^^P-  ^\''  -^l  S.  E.  8o4^ 

'                          •     T       /-<          ^i  2°  Nebraska    &    Iowa    Ins.    Co.    v. 

Kansas.— Vhvomx  Ins.  Co.  y.  Mun-  ei,i.igti,,„sen,  2!)  Neb.  572,  26  Am.  St. 

ger,  49   Kan.   1/8,   196,   33   Am.   St.  j^        ^^-^  ^5  j^    y^^   g.,^^ 

Rep.  360,  30  Pac.  120;  German  Ins.  1  T^|i,.,,|gan    Pipe   Co.   v.    Miehi-an 

Co.  v.  Amsbauo^h,  8  Kan.  App.  19/,  pj^.^  ^  Marine  Ins.  Co.  92  :\ri(-h.  482, 

201,  55  Pac.  481.  20  L.R.A.  277,  52  N.  W.  1070, 

Mariiland. — Mailette      v.      British  2  f^^j^g  y   North  British  &  Mercan- 

Ameiican  Ins,  Co.  91  ]\Id,  471,  483,  ^Wo  Ins,  Co.  137  Pa.  St.  335,  21  Am, 

46  Atl.  1005,  St.  Rep.  879,  20  Atl.  1014. 

iVebrasfca.— Western     Home     Ins.  3  43  Mo.  201,  8  Am.  Hep.  100. 

299 


§  84  JOYCE  ON  INSURANCE 

was  liable.  So  in  another  case  it  was  cieterinined  tliat  the  com})any 
might  waive  a  condition  providing  that  the  premium  should  be 
actually  paid  before  the  policy  should  attach,  and  if  the  course  of 
business  between  the  company  and  one  of  its  agents  tended  to  show 
tliat  the  company  was  accustomed  to  substitute  the  personal  liabil- 
ity of  the  agent  fdr  premiums  received  in  the  place  of  the  security 
whicli  tlie  suspension  clause  in  the  policy  afforded,  a  nonsuit  should 
not  be  ordered,  but  the  case  should  be  submitted  to  the  jury,'*  and 
the  contract  may  be  complete  without  pre])ayment  where  it  is  the 
custom  of  the  company  to  give  the  broker  credit  until  the  end  of  the 
month.*  So  the  first  premium  on  a  policy  of  insurance  will,  as  be- 
tween insurer  and  insured,  be  deemed  to  have  been  paid  at  the  time 
the  general  agents  of  the  insurer  extended  credit  therefor  to  the  in- 
sured, where  such  premium  was  charged  to  the  agents  in  their  ac- 
count with  the  insurer  pursuant  to  the  general  course  of  dealings 
between  them,  which  disregarded  any  arrangements  the  agents 
might  make  with  insured  as  to  credit,  notwithstanding  that  a  note 
covering  the  premium  in  question,  given  by  the  insured  to  the 
agents  did  not  mature  until  after  an  attempt  had  been  made  to  can- 
cel the  policy,  nor  until  after  the  destruction  of  the  property,  and 
that,  upon  maturity,  it  was  taken  up  by  the  agents  from  the  bank 
by  which  it  had  been  discounted,  and  was  still  held  by  them  at  l!ic 
time  of  the  action  on  the  policy,  they  having  been  credited  in  the 
meantime  in  their  account  with  the  conjpany  with  the  amount  of 
premium  unearned  at  the  time  of  the  attempted  cancelation.^  Tn 
J.ebanon  JMutual  Insurance  Company  v.  Hoover'  it  appeared  thai 
by  the  usual  and  established  course  of  business  between  an  agent 
and  tlie  company  the  former  was  charged  for  the  premiums  received 
by  liim  on  all  policies  and  renewal  certificates  obtained  throu.gh 
him.  whether  the  insured  paid  the  agent  or  not,  and  tliat  he  was 
expected  to  render  regular  monthly  statements  and  settle  with  the 
company,  and  the  assured  was  not  expected  to  pay  the  agent  in  ad- 
vance, but  only  on  demand  about  a  month  after  etfecting  insurance. 
It  was  held  that  a  failure  to  pay  the  premium  would  not  prevent  a 
recovery  on  the  policy  for  a  loss.  And  wlicre  insur;nice  brokers,  on 
delivery  to  them  of  a  policy,  are  wilh  their  knowledge  charged  in 
a  general  account  with  the  ]jremium  due  on  the  policy,  and  they 
make  no  objection,  the  comi)any  i,<  lia])le  for  the  insurance  money, 

*  Elkins  V.  Sus(|U(li;imia  AJiitual  ^  Biu-klov  v.  Citizens  Ins.  Co.  188 
Fire  Ins.  Co.  113  Ph.  St.  :i86,  (J  Atl.  N.  Y.  .39!),  13  L.R.A.(N.S.)  88!),  81 
222.  N.  E.  165. 

5  Rugfrles  V.  American  Central  Ins.       '^  113  Pa.  St.  591;  8  Atl.  163. 
Co.  Ill  N.  Y.  418,  11  Am.  St.  Rep. 
674. 

300 


COMPLETION   OF  CONTRACT  §  84 

notwithslandiiig  the  policy  provides  in  terms  that  the  insurance 
company  shall  not  \>p  liable  until  the  premium  sliall  be  actually 
paid,  and  that  no  .<!uch  provision  shall  be  construed  as  waived  ex- 
cejjt  by  some  distinct  act,  such  as  a  clear  express  asreeuient  in- 
dor.^^ed  on  the  policy.*  And  although  agents  are  forbidden  by  a 
life  insurance  comi)any  to  take  notes  for  first  premiums,  the  taking 
of  a  note  will  constitute  a  payment  of  the  premium,  where  the  cus- 
tom is  for  the  agent  to  take  the  note  in  his  own  name  and  charge 
it  to  himself  in  his  account  with  the  company,  being  responsible 
for  its  collection.^  But  it  is  lield  in  New  UamiJshire  that  the  cus- 
tom of  the  company  to  charge  the  advance  premium  to  tlie  agent 
on  is.«uing  a  policy  is  not  a  payment  unless  so  understood  between 
the  agent  ancl  the  insured.^"  So  it  may  be  show^n  that  by  usage  in 
case  of  a  parol  agreement  to  insure,  the  premium  is  not  due  till  de- 
livery of  the  policy. ^^  But  it  is  held,  however,  in  a  New  ^'ork  case 
that  evidence  that  the  agent  of  an  insurance  company  frequently 
waived  the  condition  of  prepayment  is  not  admissible  to  raise  an 
inference  of  waiver  in  the  absence  of  other  proof  tendiug  to  estab- 
lish it.^^  This  decision  does  not,  perhaps,  conflict  with  the  general 
rule  that,  notwithstanding  there  may  be  a  condition  that  the  policy 
shall  not  attach  tillthe  premium  is  actually  paid,  nevertheless  the 
insurer  cannot  successfully  set  up  nonpayment,  where  the  author- 
ized agent  of  the  company,  by  his  accustomed  and  usual  course  of 
.dealing  with  the  a.ssured.  induce.<  him  to  rely  upon  the  belief  that 
the  condition  of  prepayment  is  waived."  In  Dinning  v.  Phoenix 
Insurance  Company  "  an  alleged  general  custom  among  agents 
and  brokers  to  give  credit  for  premiums  was  set  up,  but  the  court 

8  Bang  v.  Farmville  Ins.  &  Bank-  shall  on  Ins.  (ed.  1810)  *292  et 
ing  Co.  1  Hughes  (U.  S.  C.  C.)  290,  seq.,  where  it  is  said  that  the  rule  that 
Fed.  Cas.  No.  838.  the    underwriters   give    credit    to   the 

9  Kimbro   v.   New    York   Life   Ins.    broker  depends  upon  usage. 

Co.   13-1   Iowa,   84,  12   L.R.A.(N.S.)  "Baxter  v.  Massasoit  Ins.  Co,  13 

421,  108  N.  W.  102.!).  Allen  (f)5  Mass.)  320. 

10  Brown  v.  Massachusetts  Mutual  ^^  ^y^od  v.  Poughkeepsie  Mutual 
Life  Ins.  Co.  59  N.  H.  298,  47  Aju.  Ins.  Co.  32  N.  Y.  619. 

Ken.  205.  "  S^'e  Tenant  v.  Travelers'  Ins.  Co. 

In    England,   the   negotiations    are  31    Fed.    322;    Yonge    v.     lM|uitablo 

generally  carried  on  through  a  broker,  Life  Ins.  Co.  30  Fed.  902;   Fraukle 

and  the  "premium  is  due  from  assured  v.  Pennsylvania  Fire  Ins.  Co.  9  Fed. 

to  the  broker  and   from  him  to   the  70(i.   12   Ins.   L.   J.  _614;   Home  Life 

company:  1  Phillips  on  Ins.  (3d  ed.)  Ins.  Co.  v.  Pierce,   /5  111.  42(5;  New- 

274,  .sec.   507,   clfitnf   Fouke  v.   Pen-  ark  Machine  Co.  v.  Kenton  Ins.  Co. 

sack,   2   Lev.   153,   and   other   cases;  50  Ohio  St.  549,  22  L.R.A.   /(i8ii,  35 

Grove  v.  Dubois,  1  Term  Rep.  112;  N.  E.   1063    (considered  under  ?i   78 

Edgar   v.    Fowler,    3   East,   222;    De  herein);    Helme  v.  Philadelphia  Life 

Gaminde    v.    Pigou,    4    Taunt.    240;  Ins.    Co.    01    Pa.    St.    10/,    100    Am. 

Parker  v.   Smith,  16  East,  :i82,  and  Dec.  621. 

several  other  cases.     See  also  1  Mar-        ^^  68  111.  414,  3  Ins.  L.  J.  677. 

301 


§  85 


JOYCE  OX  INSURANCE 


iound  that  there  was  nothing  in  the  coin-.<c  of  dealings  hctween  the 
parties  to  sustain  such  a  claim  or  warrant  any  implied  waiver  of 
prepayment,  and  this  is  on  a  line  with  the  decision  in  the  New  York 
case  above  noted. ^*  And  in  connection  with  these  cases  we  do  not 
believe  that  a  mere  custom  to  give  credit  to  others  will  be  sufficient 
to  hold  the  company  in  the  absence  of  other  proof,  such  as  a  cus- 
tom to  give  the  applicant  credit.^® 

§  85.  Prepayment  of  premium:  evidence  of  waiver. — Delivery  of 
the  policy  without  prepayment  of  the  premium  is  prima  facie  evi- 
dence of  waiver,"  and  such  waiver  may  be  shown  by  parol.^^  So 
parol  evidence  is  admissible  to  show  that  the  agent  verbally  agreed 
that  a  policy  of  insurance  should  take  effect  immediately  upon  the 
approval  of  the  application,  and  that  the  premium  note  might  be 
made  and  the  cash  premium  paid  at  some  future  time,  at  the  con- 
venience of  the  parties;  provided  that  such  agreement  was  made 
known  to  and  acquiesced  in  by  the  defendants. ^^  Although  evidence 
is  admissible  to  prove  whether  the  delivery  was  conditional  or  ab- 
.solute,  yet  when  a  husband,  acting  as  agent  for  his  wife,  procures 
a  policy  of  insurance  on  his  own  life  in  the  name  and  for  the  ben- 
efit of  the  wife,  his  subsequent  declarations  that  the  policy  was  de- 
livered conditionally  are  not  admissible  as  against  the  wife.^** 


^^  Wood  V.  Poughkeepsie  Mutual 
Ins.  Co.  32  N.  Y.  619. 

^^  See  1  Wood  on  Fire  Ins.  (2d 
ed.)  68,  who  says:  "But  so  far  as 
evidence  of  the  practice  of  the  agent 
to  give  credit  to  others  is  concerned, 
it  is  hardly  believed  that  evidence 
thereof  can  establish  a  waiver,  and 
that  it  is  inadmissible  to  establish  a 
waiver  unless  connected  with  other 
^■rnof  to  establish  it."  Citing  the 
following  cases: 

United  States. — Marsh  v.  North- 
western National  Ins.  Co.  3  Biss.  (U. 
S.  C.  C.)  S51,  Fed.  Cas.  No.  9118. 

Illinois. — Teutonia  Ins.  Co.  v.  An- 
derson, 77  111.  382;  Teutonia  Ins.  Co. 
V.  Mueller,  77  111.  22 ;  Provident  Life 
In5;.  Co.  V.  Fennell,  49  111.  180;  Illi- 
nois Cent.  Ins.  Co.  v.  Wolf,  37  111. 
354,  87  Am.  Dec.  251. 

Louisiana. — Michael  v.  Mutual  Ins. 
Co.  10  La.  Ann.  737. 

MassacJi  nsetts. — Hemmingway  v. 
Bradford,  14  Mass.  121. 

New  York. — Baker  v.  Union  Mu- 
tual Life  Ins.  Co.  43  N.  Y.  283: 
Sheldon  v.  Atlantic  Fu-e  Ins.  Co.  26 
N.  Y.  460,   84  Am.  Dec.   231;   New 

30 


Y^ork  Cent.  Ins.  Co.  v.  National 
Prot.  Ins.  Co.  20  Barb.  (N.  Y.)  468; 
Bamum  v.  Childs,  1  Sand.  (N.  Y.) 
52;  Goit  v.  National  Protection  Ins. 
Co.  25  Barb.  (N.  Y.)  189. 

'Ohio. — Madison  Ins.  Co.  v.  Fcl- 
lowes,  1  Disn.  (Ohio)  217. 

Wisconsin. — Troy  Fire  Ins.  Co.  v. 
Carpenter,  4  Wis.  20. 

^"^  Wood  v.  Poughkeepsie  Ins.  Co. 
52  N.  Y.  619.  See  Washoe  Tool 
Manufacturing  Co.  v.  Hibernia  Fire 
Ins.  Co.  66  N.  Y.  613;  Church  v. 
Lafayette  Fire  Ins.  Co.  66  N.  Y. 
222.     Examine  §  75  herein, 

^^  Pino  v.  Merchants'  Ins.  Co.  19 
La.  Ann.  214,  92  Am.  Dec.  529. 

On  the  parol  evidence  rule  as  to 
varying  or  contradicting  written  con- 
tracts as  affected  by  the  doctrine  of 
waiver  or  estoppel  as  applied  to  pol- 
icies of  insurance,  see  note  in  16 
L.R.A.(N.S.)   1165. 

^^  Sheldon  v.  Connecticut  Mutual 
Life  Ins.  Co.  25  Conn.  207,  65  Am. 
Dec.  565. 

2"  Southern      Life      Ins.      Co.      v. 

Booker,    9    Heisk.    (Tenn.)    606,    24 

Am.  Kep.  344,  Emerigon  (Emerigon 
o 


COMPLETION   OF  CONTRACT  §  86 

§  86.  Effect  of  receipt  in  policy  for  premium. — In  this  country 
the  effect  of  an  acknowledgment  of  the  receipt  of  the  premiinn  in 
a  policy  of  insurance  which  has  been  delivered  to  the  assured  has 
been  the  subject  of  much  discussion.  It  is  held  in  an  Indiana  case 
that  if  an  agent  delivers  a  policy  which  acknowledges  that  the  pre- 
mium has  been  paid,  this  concludes  the  company,  in  the  absence 
of  fraud  or  mistake,  from  subsequently  assailing  the  policy  on  ac- 
count of  failure  to  pay  the  premium.^  In  a  New  York  case  the  fact 
that  the  assured  had  possession  of  the  policy  which  provided  for 
payment  of  a  specified  sum  in  advance  as  a  part  of  the  consid'era- 
tion,  was  held  no  evidence  of  payment  of  the  first  premium.^  Un- 
der another  decision  in  that  state,  if  a  policy  acknowledges  receipt 
of  the  fh'st  premium  which  had  not  been  paid,  said  first  payment  be- 
ing the  consideration,  and  the  circumstances  disclose  no  promise  to 
pay,  no  obligation  or  liability  on  the  part  of  the  insurer  or  insured 
exists.^  Under  an  Iowa  decision  when  a  fire  insurance  policy  ac- 
knowledges the  receipt  of  the  payment  of  a  premium  which  in  fact 
has  not  been  paid,  the  fact  that  the  policy  is  made  out  and  sent  to 
the  insured  on  his  express  promise  to  remit  the  premium  does  not 
estop  the  insurer  from  denying  its  validity  for  nonpayment  of  the 
premium,  as  against  a  mortgagee  of  the  assured  to  whom  the  loss 
is  made  payable,  although  he  received  the  policy  from  the  assured 
without  notice  of  the  nonpayment  of  such  premium.*  But  under  a 
later  decision  in  that  slate,  where  there  was  a  recital  of  the  payment 

on    Ins.     [Meredith's    ed.]     1850,    c.  the  premium,  and  the  premium  be- 

jii.,  see.  6,  p.  69),  says:    "If  the  pol-  comes  due  from  the  latter  to  the  for- 

icy    imports    that    the    premium    has  mer.      The    broker    generally    credits 

been     received,     there     is     novation,  the  assured  with  the  premium;  there- 

1  hough  the  payment  has  not  been  ef-  fore,  the  acknowledgment  of  its  re- 

feetive,  and  the  sum  was  passed  into  ceipt  in  the  policy  in  England  stands 

account   current.      It    becomes,   then,  on  a  different  basis  than  in  the  Unit- 

an  ordinary  and  purely  chirographic  ed   States,  where  the  liability,  as  a 

debt."      "Novation"    defined   in   note  iiile,  is  from  tlie  assured  to  the  un- 

f,  id.  p.   68.     He  then  notes  an  old  derwriter.     In  England,  the  assured 

custom  whereby  the  ciause,  "received  is  estopped  by  the  receipt :  See  chap- 

the  premium,"  was  witlulrawn  from  ter  on  Agencj'. 

the   pohcy;    the   brokers    held   them-  ^  Home    Ins.    Co.    v.    Gilman,    112 

selves  as  debtors  to  the  insurer  and  Ind.  7,  13  N.  E.  118. 

creditors    of    the    assured    for    the  ^  Quinby   v.   New   York   Life   Ins. 

amount  of  the  premium.     This  spe-  Co.  71  Hun  (N.  Y.)  104,  24  N.  Y.  S. 

cies  of  transfer  worked  a  novation.  593,  54  N.  Y.  St.  Rep.  82. 

The   premium    ceased   to   be   due   as  ^  Priddy  v.  Baum,  140  N.  Y.  Supp. 

premium.     It  was  due  as  money  ad-  481,  79  Misc.  607. 

vanced  or  to  be  advanced  by  the  bio-  *  Union    Building   Assn.    v.    Rock- 

ker.     In  England,  in  case  of  marine  ford  Ins.  Co.  83  Iowa  647,  32  Am. 

policies  negotiated  through  a  broker,  St.  Rep.  323,  14  L.R.A.  248,  49  N. 

the  cases  evidence  a  custom  for  the  W.  1032. 
undeiTvriter  to  credit  the  broker  with 

303 


§  86  JOYCE  ON  INSURANCE 

of  an  afliiii.«.«ion  fee  in  the  certificate  or  policy,  evidence  of  the  so- 
liciting agent  tending  to  show  that  said  fee  had  never  been  paid 
was  offered  as  was  also  evidence  by  others  of  statenionls  contra  by 
the  agent  after  insured's  death,  but  the  evidence  of  such  statements 
was  rejected  and  it  was  held  that  the  rights  of  the  designated  ben- 
eficiaries became  fixed  by  insured's  death.*  In  California,  it  is  hekl 
that  if  an  insurance  policy  contains  a  formal  receipt  of  the  pre- 
mium, its  nnconditional  delivery  is  conclusive  evidence  of  payment 
so  as  to  estop  the  company  from  denying  the  validity  of  the  policy, 
notwithstanding  the  declaration  in  it  that  it  .<halL  not  be  binding 
until  the  premium  is  actually  paid:  that  the  same  result  follows 
where  the  policy  is  delivered  as  a  valid  and  completed  contract  up- 
on a  consideration  expressed  therein,  the  receipt  of  which  is  im- 
pliedly acknowledged.^  And  under  the  civil  code  of  that  state  an 
acknowledgment  in  a  policy  of  the  receipt  of  the  premium  is  con- 
clusive evidence  of  its  payment,  so  far  as  to  make  the  policy  bind- 
ing, notwithstanding  any  stipulation  therein  tliat  it  shall  not  be 
binding  until  the  premium  is  actually  paid,  and  this  applies  to  a 
recital  in  the  policy  of  the  consideration  paid  where  there  is  also 
a  provision  against  liability  while  any  note  for  the  premium  is  due 
and  unpaid  and  the  note  for- said  consideration  remains  due  and 
unpaid.'^  In  an  Illinois  case*  the  court  declares  that  an  insurance 
coiupany  will  be  estopped  on  the  grounds  of  public  policy  to  dis- 
pute its  receipt  for  the  purpose  of  avoiding  the  policy.^  The  same 
ruling  obtains  in  Tennessee.^"  but  it  is  held  in  the  same  case  that 
the  company  may  show  nonpayment  in  an  action  to  collect  the  pre- 
mium, or  in  deducting  it  from  the  amount  sought  to  l)e  recovered. 
So  in  Maryland  ^^  it  is  declared  that  an  insurance  coiupany  will  not 
be  permitted  to  allege  a  want  of  consideration  for  its  promise  by 
disputing  its  acknowledgment  of  the  receipt  of  the  premium  when 
sued  on  the  policy  after  a  loss  has  happened.  In  South  Dakota, 
where  the  statute  provides  that  an  acknowledgment  in  a  policy  of 
the  receipt  of  premium  is  conclusive  evidence  of  its  payment,  so  far 
as  to  make  the  policy  binding,  notwithstanding  any  stipulation 
therein  that  it  shall  not  be  binding  until  the  premium  is  actually 

*  Sclioep  V.  Bankers  Alliaiu-e  Ins.    son,  77  III.  384;   Teutonia  Life  Ins. 
Co.  104  loAva  354,  73  N.  W.  825.  Co.  v.  Mueller,  77  111.  22. 

^  Farnum    v.    Pha'nix   Ins.    Co.    83  ^  Same  in   Union   Life  Ins.   Co.  v. 

Cal.  246,  17  Am.  St.  Rep.  233.  Winn.  87  111.  App.  257. 

"^  Palmer    v.    Continental    Ins.    Co.  ^°  Southern  Life  Ins.  Co.  v.  Book- 

1.32  Cal.  68,  64  Pac.  97,  61  Pac.  784;  er,    H    Heisk.    (Tenn.)    606,    24    Am. 

Civ.  .Code,  sec.  2598.     Compare  'Moo-  Rep.  344. 

nev  v.  Home  Ins.  Co.  80  ^lo,  App.  ^^  Consolidated  Real  Estate  &  Fire 

192,  2  Mo.  App.  Rep.  524.  Ins.  Co.  v.  Cashow,  41  Md.  59. 

*  Teutonia  Life  Ins.  Co.  v.  Ander- 

304 


COMPLETION  OF  CONTRACT  §  86 

paid,  and  the  policy  does  not  contain  in  express  terms  the  words 
'"receipt  of  which  is  hereby  acknowledged"'  prescribed  for  the  stand- 
ard forms,  but  recites  ''in  further  consideration  of  the  annual  pre- 
mium" and  that  ''this  policy  will  be  continued  upon  the  further 
payment  of  a  like  amount  .  .  .  each  year,"  the  word  ''contin- 
ued" implies  the  existence  of  a  policy,  and  the  words  "further  pay- 
ment" clearly  imply  if  they  do  not  expressly  acknowledge  a  pre- 
ceding payment,  so  a  receipt  for  the  first  premium  is  clearly 
acknowledged  so  far  as  the  binding  effect  of  the  policy  is  con- 
cerned.^^ 

In  a  New  Jersey  ease"  the  policy  w^as  executed  by  the  president  and 
secretary  of  the  company,  and  contained  a  formal  acknowledgment 
of  the  payment  of  the  premium,  and  it  was  decided  that  this  pre- 
vented the  company  from  averring  or  showing  nonpayment  for  the 
purpose  of  proving  that  tlie  contract  had  no  legal  existence,  and 
that  it  conclusively  achnitted  payment  of  the  premium  so  far  as 
was  necessary  to  give  validity  to  the  contract,  and  it  was  said  by 
Beasley.  J.,  that  the  usual  legal  rule  that  a  receipt  was  only  prima 
facie  evidence  of  payment,  and  might  be  exjjlained,  did  not  apply 
"where  the  question  involved  is  not  only  as  to  the  fact  of  payment, 
but  as  to  the  existence  of  rights  springing  out  of  the  contract,"  and 
that  "with  a  view  of  defeating  such  rights  the  party  giving  the  re- 
ceipt cannot  contradict  it,"  and  he  adds  "an  acknowledgment  of  an 
act  done  contained  in  a  written  contract,  and  which  act  is  requisite 
to  put  it  in  force,  is  as  conclusive  against  the  party  making  it  as  any 
oilier  part  of  the  contract,  and  cannot  be  contradicted  or  varied  b}' 
parol."  Mr.  Wood  ^^  cites  this  case  somewhat  at  length  as  an  au- 
thority ;  another  writer,  however,^^  dissents  therefrom.  Mr.  May  ^* 
states  that  such  recital  in  the  policy  is  only  prima  facie  evidence 
of  payment.  Mr.  Marshall  ^''  asserts  that  the  payment  or  nonpay- 
ment of  the  premium  can  have  no  effect  on  the  validity  of  the  con- 
tract, as  an  action  will  lie  to  recover  the  premium  "notwithstand- 
ing the  formal  acknowledgment  of  it  in  the  policy,  which  is  not 
inserted  there  as  conclusive  evidence  of  the  actual  payment  of  the 
premium,  but  to  preclude  the  necessity  of  proving  it  in  case  of 

^^  Noble  V.  Kansas  Cilv  Life  Ins.        ^^  Ostrander  on   Fire  Ins.  see.  95, 

Co.  33  S.  Dak.  458,  14G  N.  W.  60(j;  p-  220. 

S.  Dak.  Civ.  Code,  sec.  1849;  Laws        ^^  1  May  on  Ins.  (3d  ed.)  sec.  359, 

1909,   c.   58.      See   also    Power    Mer-  citing  United   States,  Indiana,  Loui- 

cantile    Co.    v.    State    Mutual    Fn-e  siana,    Massachusetts,    New    Ilamp- 

Assoe.  23  S.  Dak.  1,  119  N.  W.  1008.  shire,    New    York    and    Texas   cases. 

"  P>as{'h  v.  Humboldt  iMutual  I'lre  See  also  Troy  Fire  Ins.  Co.  v.  Car- 

&  Marine  Ins.  Co.  35  N.  J.  L.  429,  pouter,  4  Wis.  .■!2,  and  cases  cited. 
5  Bennett's  Fire  Ins.  Cases,  421.  ^^  1  Marshall  on  Ins.  335. 

"1  Wood  on  Fire  Ins.  (2d  ed.)  09.  i 

Joyce  Ins.  Vol.  I. — 20.  305 


§  86  JOYCE  ON  INSURANCE 

loss,"  and  Mr.  Pliillips  ^*  states  that  the  acknowledgment  is,  accord- 
ing to  general  practice,  "substantially  true,"  but  is  nevertheless  only 
prima  facie  evidence  which  may  be  rebutted.  It  is  also  held  in 
North  Carolina  that  parol  evidence  is  admissible  to  explain  a  receipt 
given  by  the  agent  of  a  fire  insurance  company  for  the  premium 
on  the  policy,^^  and  in  Ormond  v.  Fidelity  Mutual  Life  Associa- 
tion ^°  the  insured  agreed  to  pay  the  dues  to  the  agent  upon  de- 
livery of  the  policy.  Attached  to  the  policy  w^as  a  receipt  for  the 
dues,  providing  that  when  payment  was  made  to  an  agent  such 
agent  must  countersign  it  at  the  date  of  payment.  The  policy  was 
sent  to  the  insured  without  the  receipt  being  countersigned  by  the 
agent.  It  was  decided  that  this  amounted  to  a  declaration  that  the 
required  payment  had  not  been  made,  and  must  be  made  before  the 
policy  could  become  binding.  Under  a  later  decision  in  that  state 
the  acknowledgment  in  a  policy  of  insurance  of  the  receipt  of  a 
ju'cmium  estops  the  insurer  to  test  the  validity  of  the  policy  on  the 
ground  of  nonpayment  of  the  premium.^  But  in  so  far  as  a  recital 
in  an  insurance  policy  of  the  payment  of  premium  is  a  part  of  the 
contract  of  insurance,  it  cannot  be  contradicted  by  parol  to  invali- 
date the  contract,  in  the  absence  of  fraud  in  procuring  the  delivery 
of  the  policy.  In  so  far,  however,  as  a  recital  in  an  insurance  pol- 
icy of  the  j)ayment  of  premium  is  a  mere  receipt  for  money,  it  is 
only  prima  facie  like  other  receipts,  and  will  not  prevent  an  action 
to  recover  the  money  if  not  in  truth  paid.^  In  Nebraska  the  deliv- 
ery of  a  life  policy  to  insured  and  its  possession  by  the  ])eneliciary 
after  its  death  are  prima  facie  evidence  of  the  payment  of  the  cash 
consideration  recited  therein.^  So  in  fSouth  Carolina,  such  a  receipt 
in  the  policy  is  only  prima  facie  evidence,  although  it  is  also  held 
that  the  deliver}^  of  such  a  policy  without  exacting  payment  creates 
a  presumption  that  credit  was  given.*  Under  a  Massachusetts  deci- 
sion if  the  insurer  delivers  to  a  broker  for  the  assured  a  policy  con- 
taining an  acknowledgment  of  the  receipt  of  the  premium,  they 
cannot  insist,  as  a  condition  precedent,  on  their  actual  receipt  of 

1^1  Pliillips  oil  Ins.   (3d  ed.)  sees.       ^  Union   Life   Ins.    Co.   v.    Parker, 

275-78,  512-15.  '  OC  Neb.  395,  103  Am.  St.  Rep.  714, 

i^Ferebee  v.  North   Carolina  Mu-  62  L.R.A.  3i)U,  92  N.  W.  604.     See 

lual  Home  Ins.  Co.  68  N.  C.  11.  also   Cauthen  v.   Hartford  Life   Ins. 

20  96  N.  C.  158,  1  S.  E.  796.  Co.   80   S.    Car.   264,   61   S.   E.  428. 

^  Grier  v.  Mutual  Life  Ins.  Co.  132  Examine  Hewitt  v.  American  Union 

N.  Car.  542,  44  S.  E.  25 ;  Kendriek  Life  Ins.  Co.  34  Misc.  738,  70  N.  Y. 

v.  Mutual  Benefit  Life  Ins.  Co.  124  Supp.   1012,   revd.   73   N.   Y.   Supp. 

N.   Car.   315,  70  Am.   St.  Rep.  592,  105,  66  App.  Div.  80. 
32  S.  E.  728.  *  Cauthen    v.    Hartford    Life    Ins. 

2Keudrick  v.  Mutual  Benefit  Life  Co.  80  S.  Car.  264,  61  S.  E.  428. 
Ins.  Co.  124  N.  C.  315,  70  Am.  St. 
Eep.  592,  32  S.  E.  728. 

306 


COMPLETION  OF  CONTRACT 


86 


the  premium  note  which  was  delivered  by  the  assured  to  tlie  brok- 
er at  llie  time  of  receiving  the  poUcy,  and  afterward  dehvered  to 
the  underwriters,*  and  a  suit  hes  at  the  instance  of  a  pohcy  holder 
to  recover  a  portion  of  the  unearned  premium  notwithstanding  that 
a  promissory  note  which  has  been  given  for  the  premium  has  not 
been  i)a)d.^  Other  cases  hold  that  the  delivery  of  the  receipt  for 
])ayiiient  of  premium  is  not  conclusive,  and  tliat  where  the  policy 
])rovides  for  payment  in  the  lifetime  of  assured  of  an  advance  pre- 
)i]imii  it  nnist  be  done.'  And  the  bvu'den  is  upon  the  insurance 
company  to  prove  nonpayment  of  the  premium  note,  in  order  to 
avoid  a  policy  of  insurance  made  and  accepted  on  condition  that 
it  sliould  cease  and  determine  upon  failure  by  the  as,sured  to  pay 
a  premium  note  when  due  given  by  him  to  the  insurers.* 

The  cases  are  numerous,  however,  which  hold  that  wdiere  a  policy 
duly  executed  and  delivered  acknowledges  the  payment  of  the  pre- 
mium, such  receipt,  in  the  absence  of  fraud,  duress,  or  mistake 
estops  the  company  from  denying  the  same,  and  is  conclusive  evi- 
dence of  payment ;  ^  while  other  courts  qualify,  this  rule  by  holding 
tliat  it  is  evidence  of  payment  to  the  extent,  at  least,  that  such  pay- 
ment is  necessary  to  give  validity  to  the  contract.^" 


5  Mayo  V.  Pew,  101  Mass.  555. 

^  Hemingway  v.  Bradford,  14 
Mass.  121. 

"^  Davis  v.  Massachusetts  Life  Ins. 
Co.  13  Blatelif.  (U.  S.  C.  C.)  162, 
Fed.  Cas.  No.  3642 ;  Brown  v.  Massa- 
chusetts ]\futual  Life  Ins.  Co.  59  N. 
H.  298,  47  Am.  Rep.  205;  Orniond 
V.  Fidelity  Life  Assoc.  96  N.  C.  158, 
1  S.  E.  796.  See  Troy  Fire  Ins.  Co. 
V.  Carpenter,  4  Wis.  20.  See  also  1 
May  oil  Ins.  (Parsons)  sec.  359,  and 
cases  cited. 

*  Hodsdon    v.    Guardian    Life 
Co.  97  Mass.  144,  93  Am.  Dec. 
Cauthen   v.   Hartford   Life   Ins. 
80  S.  Car.  264,  61  S.  E.  428. 

^Illinois. — Teutonia   Life  Ins. 
V.  Anderson,  77  111.    .')84;    Provident 
Life  Ins.  Co.  v.  Fennel!,  49  111.  180; 
tllinois    Cent.    Ins.    Co.    v.    \yolf,    37 
111.  354,  87  Am.  Dec.  25L 

Indiana. — Home    Ins.    Co.    v.    Gi 
man.    ]12    Ind.  7,  13  N.  E.  118,  17 
Jus.  L.  .].  12;  Kline  v.  National  Ben. 
Assn.  Ill  Ind.  462,  11  N.  E.  620,  60 
Am.  Ren.  703. 


Ins. 
73; 
Co. 

Co. 


Louisiana. — Michael  v.  Mutual  Ins. 
Co.  to  La.  Ann.  7.37. 

Manjland.  —  Consolidated  Real 
Estate  &  Fire  Ins.  Co.  v.  Cashow,  41 
Md.  59. 

Montana. — Savage  v.  Phoenix  Ins. 
Co.  12  Mont.  258.  33  Am.  St.  Rep. 
591,  31  Pae.  66,  21  Ins.  L.  J.  967. 

yew  York. — Goit  v.  National  Pro- 
tection Ins.  Co.  25  Barb.  (N.  Y.) 
1 89. 

C>/iio.— Madison  Ins.  Co.  v.  Fel- 
lows, 1  Disn.  (Ohio)  217,  Id.  2  Disn. 
(Oliio)  128. 

Knijland-  ]{o\k'v{s  v.  Secui'itv  Co. 
(C.  A.)  [1897]  1  Q.  B.  Ill,  m  L.  J. 
Q.  B.  (N.  S.)  119,  75  Law  T.  IJep.  53 
(even  while  the  policy  remains  in  tho 
company's  possession) ;  Dalzell  v. 
Mair,  1  Camp.  532;  Cumining  v. 
Forrester,  1  Maule  &  S.  498,  499; 
1)(>  Gaminde  v.  Pigou,  4  Taunt.  246; 
1-   Anderson  v.  Thornton,  8  Exch.  425. 

^^  Insurance  Co.  of  Pennsylvania, 
Jn  re,  22  Fed.  109.  See  oilier  cases 
and  citations  throughout  this  section. 


307 


§  86  JOYCE  ON  INSURANCE 

It  is  certainly  true  that  the  insurer  can  waive  prepayment  of  the 
premium,  and  if  the  policy  be  delivered  without  exacting  such  pre- 
payment its  validity  is  established,  provided  alway.s  that  the  con- 
tract of  assurance  is  otherwise  binding.  It  is  also  true  that  if  the 
contract  be  comj)leted  and  is  valid  and  the  risk  has  attached,  that 
the  insurer  has  an  action  for  the  premium  earned,  and  the  insured 
either  a  suit  for  specific  performance,  or  an  action  for  indemnity  ^^ 
may  be  compelled  in  equity.  Certain  rights  have  attached  and  the 
insured  may,  with  the  knowledge  and  acquiescence  of  the  insurer, 
have  rested  to  his  prejudice  upon  tliose  rights.  The  contract  has 
been  completed  and  the  policy  has  become  valid  and  binding.^^  j^^^ 
exactly  what  point,  then,  does  the  flaw  exist  w^hicli  will  enable  the 
insurer  to  aver  or  prove  that  the  premium  has  not  been  paid  for  the 
purpose  of  escaping  liability  on  a  contract  which  the  assured,  rest- 
ing his  belief  upon  the  precedent  established  by  the  adjudicated 
cases,  has  the  right  to  consider  completed  and  binding?  In  view, 
therefore,  of  the  weight  of  authority,  such  receipt  is  conclusive  evi- 
dence of  payment,  so  tar  as  the  validity  of  the  policy  rests  thereon, 
and  the  assured  is  estopped  to  deny  such  acknowledgment  for  the 
purpose  of  escaping  liability  on  the  contract,  unless  fraud,  duress, 
or  mistake  be  shown.  But  where  payment  of  the  premium  is 
sought  to  be  enforced,  the  receipt  should  be  only  prima  facie  evi- 
dence of  payment.  ^^ 

^^  Dinning-  v.  Phoenix  Ins.   Co.  68  ]iany    may    exist  and  be  enforced  at 

III.  414;  Phtrnix  Ins.  Co.  v.  Ryland,  law    to    pay    biniunthlv     a     specified 

69   Ind.   437,   1  L.R.A.   548,   16  Atl.  sum:     Smith  v.  Bown,  58  N.  Y.  St. 

109;    New   England   Fire   &    Marine  Rep.  60.'),  27  N.  Y.  Supp.  11,  75  Hun, 

Ins.   Co.  v.   Robinson,  25   Ind.  536;  231. 

Gerrish  v.  German  Ins.  Co.  55  N.  H.  ^^  Even  thouiih  the  premium  be 
355.  never  paid,  decides  the  conrt  in  Mil- 
It  is  held  in  Carpenter  v.  Mutual  ler  v.  Life  Ins.  Co.  12  Wall.  (79  U. 
Safety  Ins.  Co.  4  Sand.  Ch.  (N.  Y.)  S.)  285,  20  L.  ed.  398;  Farnum  v. 
408,  that  an  agreement  to  insure,  Pha?nix  Ins.  Co.  83  Cal.  246,  Iv  Am. 
evidenced    by    the    receipt     for    the  St.  Rep.  233. 

premium,  may  be  specihcally  en-  ^^  Norton  v.  Phoenix  Life  Ins.  Co. 
forced,  and  if  a  lo.ss  has  happened,  36  Conn.  503,  4  Am.  Rep.  98.  See 
payment  may  be  compelled  in  equity.  Pitt  v.  Berksliire  Life  Ins.  ('o.  100 
As  to  life  policies,  where  the  Mass.  500;  Ryan  v.  Rand,  26  N.  H. 
premium  is  paid  in  advance,  the  con-  12;  Southern  Life  Ins.  Co.  v.  Book- 
tract  is  held  not  to  bind  the  insured  er,  9  Heisk.  (Tcnn.)  606,  24  Am. 
to  pay,  the  forfeiture  of  the  policy  Rep.  344;  Life  Ins.  Co.  v.  Davidge, 
being  the  result  of  nonpayment  when  51  Tex.  244.  See  Mooney  v.  Ilomfe 
due,  although  it  is  held  a  contract  Ins.  Co.  80  INIo.  App.  192,  2  Mo. 
obligation  on  the  part  of  a  member  App.  Rep.  521. 
of    a    co-operative    assessment    com- 

308 


COMPLETION   OF   CONTRACT 

subdiv.  iv.  completiox  of  contract delivery  of  policy 

Knowledge  of  Loss. 

§  90.     Delivery  of  policy  not  necessary  to  comjjlete  contract. 

§  90a.  Same  subject :  date. 

§  91.     Actual  or  manual  delivery  of  policy  not  necessary  to  complete 
contract. 

§  92.     Agreement  to  deliver  policy :  demand  is  unnecessary. 

§  93.     There  may  be  a  constructive  delivery. 

§  94.     Delivery:  possession  of  policy  by  assured. 

i;  95.     Neglect  of  assurer  to  deliver  policy. 

§  96.     Conditional   delivery. 

§  97.     Parol  evidence  admissible   to  show   conditional   delivery. 

§  97a.  Condition   precedent:    delivery   or  prepayment   of  premium  during 
lifetime  or  good  health,  etc.,  of  assured. 

§  97b.  Same  subject. 

§  97c.  Change  in  health  of  assured :  date  of  contract. 

§  98.     When  actual  delivery  of  the  policy  necessary. 

§  99.     Delivery :  misrepresentation  or  fraud. 

§  100.     Delivery:  notice  to  assured  of  execution  of  policy. 

§  101.     Delivery  to  agent  of  insured  or  to  third  person. 

§  102.     Deliver}'  by  and  to  agent :  policy  held  by  agent. 

§  103.     Delivery:    agreement    completed    before    loss:    mortal    illness    oi 
accident. 

§  104.     Delivery:  agreement  incomplete  at  time  of  loss,  mortal  illness,  or 
accident. 

§  104a.  Same  subject. 

§  105.     Loss  before  date  of  contract:  policy  retroactive, 

§  106.     Where  both  parties  know  of  loss  when  contract  is  made  or  exe- 
cuted. 

§  107.     Knowledge   of  loss   by   assured   before   and   after  risk   attaches. 

§  108.     Assured    not    obligated    to    notify    company    of    loss    before    de- 
livery of  policy  when  risk  has  attached. 

§  108a.  Mutual  benefit  societies  or  associations:  issuance  of  certificate. 

§  108b.  Mutual   benefit   societies   or   associations:   actual   delivery   of   cer- 
tificate unnecessary,  unless.  * 

§  108c.  JNIutual  benefit  societies  or  associations:  initiation  as  prerequisite 
to    delivery. 

§  108d.  Delivery  of  certificate  to  subordinate  lodge,  local  camp,  etc. 

§  108e.  Mutual   benefit    societies   or   associations:    delay   in   executing  and 
delivering-  certificate:  retention  of  certificate. 

§  108f.  Where  officer  of  society  acts  as  custodian  of  certificate. 

§  108g.  Mutual    benefit    societies    or    associations:    delivery    of    certificate 
or  prepayment  of  dues  during  life  or  good  health. 

309 


§  90 


JOYCE  OX  INSURANCE 


§  90.  Delivery  of  policy  not  necessary  to  complete  contract. — 
A  promise  to  insure  is  generally  performed  by  issuing  a  policy  or 
procuring  one  to  be  issued.^*  and  if  the  insurer  delivei-s  the  policy 
and  receives  the  premium,  he  is  estopped  from  denying  the  fact 
that  a  contract  of  insurance  was  made,"  and  dehvery  of  a  policy 
is  conclusive  proof  of  the  completion  of  the  contract,  in  the  absence 
of  fraud. ^^  But  a  contract  to  issue  an  insurance  policy,  the  agree- 
ment being  otherwise  complete,  is  equivalent  to  the  actual  issuance 
of  the  policy  so  far  as  the  binding  force  of  the  contract  is  con- 
cerned ;  ^"^  since  if  a  sufficient  contract  has  been  made  neither  a 
policy  nor  a  certificate  is  necessary  to  make  the  company  liable.  ^^ 

So  in  mutual  benefit  societies,  if  the  insured  has  complied  with 
all  the  other  requirements  of  the  society,  the  fact  that  he  has  not 
taken  out  a  certificate  or  that  one  ha.s  not  been  delivered  to  him 
does  not  prevent  a  recoveiy,^^  and  such  recovery  may  be  had 
without  producing  such  certificate.^" 


^*  Scranton    Steel    Co.    v.    Ward's  per  Deemer,  J.,  said:     "The  rule  of 

Detroit    &    Lake    Superior    Line,    40  this  court  is  that,  if  no  policy  is  in 

Fed.  866;  Fire  Association  of  Piiila.  fact  issued,  the  case  will  be  treated 

V.  Bynum,  —  Tex.  Civ.  App.  — ,  44  and  considered  as  if  a  policy  in  the 

S.  W.  579.  usual  form  issued   by   the   company 

When  Folicji  is  "issued:"  meaning  liad  in  fact  been  issued")  ;  Herring- 
of  term,  see  Stringham  v.  Mutual  v.  American  Ins.  Co.  123  Iowa,  533, 
Life  Ins.  Co.  44  Oreg-.  447,  75  Pac.  99  N.  W.  130,  33  Ins.  L.  J.  588. 
822,  33  In.s.  L.  J.  463;  Homestead  See  Newark  Machine  Co.  v.  Ken- 
Fire  Ins.  Co.  v.  Ison,  110  Va.  18,  3  ton  Ins.  Co.  50  Ohio  St.  549,  22 
Va.  App.  485,  65  S.  E.  483,  40  Ins.  L.R.A.  768,  35  N.  E.  1060,  31  Week. 
L.  J.  1143.  L.  Bull.  51. 

^^  State  of  Pennsylvania  Ins.   Co.        It   is  a   general   rule  that   when  a 

In  re,  22  Fed.  109;   Traveler's  Ins.  parol  contract  of  insurance  lias  been 

Co.  v.  Jones,  32  Tex.  Civ.  App.  140.  entered  into  the  delivery  of  the  i)oli- 

73  S.  W.  978.     See  Keen  v.  Alutual  cy  is  not  essential  to  its  validity  or 

Life  Ins.  Co.  131  Fed.  551>,  33  Ins.  L.  enforceability  unless  a  stipulation  of 

J.   916,    rev'd    135    Fed.    677,    68    C.  the  contract  be  that  it  shall  not  there- 

C.  A.  315    (case  of  provisional  and  tofore  take  effect.    International  Fer- 

permanent   policv).  .  rv  Co.  v.  American  Fidelitv  Co.  207 

ifiRavburn    v.'  Pennsvlvania    Cas-  N.  y.  350,  353,  101  N.  E.'  160,  per 

ualty  Co.  138  N.  Car.  379,  50  S.  E.  Collin,  J.   (marine  vessel  liability  in- 

762.  '  surance)  ;  Michigan  Pipe  Co.  v.  Mi- 

^"^  Springer   v.    Anslo-Nevada   Ins.  chigan    Fire    &    Marine    Ins.    Co.   92 

Corp.  33  N.  Y.  St.  Rep.  543,  11  N.  Y.  :\lich.  482,  491,  20  L.R.A.  277,  52  N. 

Supp.  533.  W.  1070;  King  v.  Phoenix  Ins.  Co. 

"Blake  v.  Hamburg-Bremen  Fire  195  Mo.  290,  113  Am.  St.  Rep.  678,  6 

Ins.   Co.  67   Tex.  160.   60  Am.  Rep.  Amer.  &  Eng.  Ann.  Cas.  618.  92  S. 

15;  Western  Assur.  Co.  v.  McAlpin,  W.  892. 

23  Ind.  App.  228,  77  Am.  St.  Rep.        ^^  Bi.shop  v.  Grand  Lodge  of  Em- 

423,  55  N.  E.  119;  House  v.  Securitv  pire  Order  of  Mut.  Aid,  112  N.  Y. 

Fire  Ins.  Co.  145  Iowa,  462,  121  N.  627,  20  N.  E.  562:  Lorseher  v.  Su- 

W.  509,  38  Ins.  L.  .7.  875  (the  court,  ])reme  Tjodge  Knights  of  Honor,  72 

310 


COMPLETION  OF  CONTRACT  §§  90a,  91 

§  90a.  Same  subject:  date. — Where  an  application  was  made  to 
an  a.tieiit  and  tlie  agent  agreed  to  issue  and  send  the  apphcant  a 
pohcy  on  a  certain  day,  and  the  policy  was  in  fact  issued  on  and 
bore  (late  of  that  day,  but  was  not  deUvered  nor  the  premium  paid 
for  several  days  thereafter,  it  was  held  that  the  policy  became 
operative  and  binding  from  the  day  it  was  issued  though  not 
delivered.^  But  the  date  of  delivery  will  be  the  date  of  the  issuance 
of  the  policy,  which  does  not  mean  the  date  of  the  policy,  when 
the  time  of  its  delivery  and  acceptance  is  the  first  time  the  minds 
of  the  parties  meet  upon  all  the  essentials  of  the  contract.^  A 
policy  does  not  take  effect  from  the  date  of  its  delivery  where  it 
expressly  declares  that  it  is  to  be  effectual  upon  payment  of  the 
initial  ])remium  for  one  year  from  its  date  which  is  much  earlier 
than  the  date  of  delivery.^     If  the  application  asks  for  insurance 

from  ''the  — day  of  "  for  one  year  "to  the  • — 

({ry^yr  ^f "  \]^Q  infereucc  is  that  the  insurance  if  granted  will 

take  effect  from  the  date  and  delivery  of  the  policy,  especially  so 
if  the  agent  had  no  authority  to  make  a  contract  until  the  applica- 
tion was  approvecl.  and  such  want  of  authority  was  known  to  the 
applicant.'*  The  exact  date  of  delivery  is  immaterial  if  the  jury 
finds  tliat  it  was  actually  delivered  the  question  being  whether  there 
was  an  actual  delivery.* 

§  91.  Actual  or  manual  delivery  of  policy  not  necessary  to  com- 
plete contract. — If  the  contract  of  insurance  is  otherwise  complete, 
and  the  parties  intend  that  it  shall  be  effectual  without  the  policv 
being  actually  delivered,  an  actual  or  manual  delivery  is  unneces- 
sary.^    This  i-ule  not  only  applies  to  a  fire  policy,  since  the  insurer 

Midi.  316,  2  L.R.A.  20G,  40  N.  W.        ^  ir^ited     Stales.— FrankMa     Fire 

545.     See  ^S  lOSa-lOSg  herein.  Ins.  Co.  v.  Colt,  20  Wall.  (87  U.  S.) 

2°  Lorsc'her     v.      Supreme      Lorlo-e  5G0,  22  L.  ed.  423   (cited  in  Phoenix 

Knights  of  Honor,  72  Mif-h.  316,  2  ins.   Co.   v.   Meier,   28   Neb.   132,  44 

L.R.^A.  206,  40  N.  W.  54.j.  N.  w.  07)  ;  Fisher  v.  London  &  I^an- 

1  Hubbard  v.  Hartford  Fire  Ins.  ,.ashire  Fire  Ins.  Co.  83  Fed.  807, 
Co.  33  Iowa,  325,  11  Am.  Rep.  12ry.  07  ins.  L.  J.  417.  aff'd  92  Fed.  .500, 
See  S  1441  herein.  34  (^    q    a.  .")03    (neitliei'  actual  de- 

2  Homestead  Fire  Ins.  Co.  v.  Ison,  jj  ^^^,j,  manual  possession  of  poli- 
110  Va.  18,  3  Va.  App.  485,  65  S.  E.  ^^^  „;,essavy). 

463   38  Ins.  L.  J.  114,!.  \4/«^fl.'»m.."— Stephenson    v.   Allison, 

'^^r^'^'-  ;'-^,^"'^    '    ;^'=j;'tie    Life       ..   ^^j^  ^3g.^^^    g^    ^        26 

Ins^Co    111  Va.  (.99,  69  S.  E.  961,    ^^^^^^  ^^^^^^   .^'^^    ^22;  Phoenix  Ins. 

^^'^e!;;«n^     Fund     Ins.      Co.     v.  ("o.   v^^  McArthnr,   116   Ala.    659,  22 

Rogers,  108  Ga.  191,  33  S.  E.  954,  28  ^o.  90...  ,       ^      ,      x 

Ins  L  J  10'^5  Georfjia. — v  ireman's      r'  und      1  ns. 

s'Pen'der    v.    North    Slate    Mutual  Co.  v.  Pekor.  106  Ga.  1,  31  S.  E.  779: 

Life  Ins.  Co.  163  N.  Car.  98,  79  S.  New  York  Life  Ins.  Co.  v.  Babcock. 

E  '^QS  104  Ga.  67,  69  Am.  St.  Rep.  134,  42 

311 


§  91  JOYCE  ON  INSURANCE 

may  be  considered  as  holding  it  for  insurer's  benefit^  but  also  to  life 
insurance  contracts  unless  actual  deliver}^  is  made  essential  to  their 
validity,^  and  although  delivery  may  be  essential  in  order  to  com- 
plete a  contract  of  life  insurance,  such  delivery  may  be  waived ;  ® 
and  although  it  is  intended  to  issue  the  policy,  yet  if  the  terms 
liave  been  agreed  upon  and  acts  have  been  done  which  would 
entitle  the  applicant  to  a  policy,  or  if  by  custom  or  by  rules  of 
the  company,  or  by  agreement  or  otherwise,  the  policy  is  not 
required  to  be  immediately  delivered,  the  contract  may  be  complete 
for  the  reception  of  the  policy  is  not  a  prerequisite  to  a  contract  of 
insurance.^"  So  the  assured  need  not  formally  accept  nor  take 
away  a  policy  to  complete  the  deliveiy,^^  and  where  a  policy  of 
life  insurance  was  delivered  to  the  broker  to  whom  the  application 
was  made  but  the  applicant  died  without  having  received  the 
policy,  it  was  held  that  the  contract  was  complete.^^ 

L.R,A.  88,  30  S.  E.  273,  27  Ins.  L.  Unless   made  so   by   the  terms   of 

J.  649.  the  application,  actual  delivery  of  a 

Idaho. — Maiysville  Mercantile  Co.  life  policy  to  the  insured  is  not  es- 

Ltd.  V.  Home  Fire  Ins.  Co.  21  Idaho,  sential  to  the  validity  of  the  contract. 

377,  121  Pac.  1026.  Deviue  v.  Federal  Life  Ins.  Co.  250 

Illinois.— Hose  v.  Mutual  Life  Ins.  111.  203,  95  N.  E.  174,  40  Ins.  L.  J. 

Co.  240  111.  45,  88  N.  E.  204.  1513. 

Maine. — ^Loring  v.  Proctor,  26  Me.  ^  Rhodus  v.  Kansas  City  Life  Ins. 

18.  Co.  156  Mo.  App.  281,  137  S.  W.  907. 

North    Carolina. — Roberta    Manu-  Where   a   policy   provides   that   it 

faetnring    Co.    v.    Royal    Excliange  shall   not   be  effective   until  delivery 

Assur.  Co.  161  N.  Car.  88,  76  S.  E.  such     provision     may     be     waived. 

865;   Hardv  v.  Aetna  Life  Ins.   Co.  Pierce  v.  New  York  Life  Ins.  Co.  174 

154  N.  C.  430,  70  S.  E.  828,  40  Ins.  Mo.  App.  383,  160  S.  W.  40. 

L.   J.   1148;   Powell  v.   North   State  ^°  Yonae  v.  Equitable  Life  Assur. 

Mutual   Life   Ins.    Co.   153   N.    Car.  Soe.  30  Fed.  902.  1  Corp.  L.  J.  531; 

124,  69  S.  E.  12;  Waters  v.  Security  Sheldon  v.  Connecticut  Mutual  Life 

Life  &  Annuitv  Co.  144  N.  Car.  663,  Ins.  Co.  25  Conn.  207,  65  Am.  Dec. 

54  S.  E.  437,  36  Ins.  L.  J.  673,  13  565 ;  Blanchardv.  Waite,  28  Me.  51, 

L.R.A.(N.S.)  805  (annotated  on  can-  48  Am.  Dee.  474;  Warren  v.  Ocean 

celation  of  insurance  contract  by  re-  Ins..  Co.   16   Me.   439,   451,   33    Am. 

turn  of  policy).  Dee.   674;   Alabama    Gold   Life   Ins. 

Ohio. — Hartford  Fire  Ins.   Co.  v.  Co.  v.  Hen-on,  56  Miss.  643. 

Whitman.  75  Ohio  St.  312,  79  N.  E.  ^^  Xenos  v.  Wickham,  2  L.  R.  Eng. 

450,    36   Ins.   L.    J.   19;    Manchei-ter  &  Irish   App.   296.   16   L.   T.   N.   S. 

Fire  Ins.  Co.  v.  Plato,  23  Ohio  Cir.  800,  16  Week.  Rep.  38,  36  L.  J.  Com. 

Ct.  Rep.  35.  P.    31.3,    13    Eng.    Rul.    Cas.    422; 

'  Stephenson  v.   Allison,  165   Ala.  Stringham   v.   ^Mutual  Life  Ins.   Co. 

238,  138  Am.  St.  Rep.  26  and  note,  44  Oreo-.  447,  75  Pac.  822,  33  Ins. 

51  So.  622.  L.  J.  463. 

8  New  York  Life  Ins.  Co.  v.  Bab-  12  Mutual  Life  Ins.   Co.  v.   Thom- 

cock,  104   Ga.   67,  69  Am.   St.  Rep.  son,  94  Ky.  253,  22  S.  W.  87,  22  Ins. 

134,  42  L.R.A.  88,  30  S.  E.  273,  27  L.  J.  481. 
Ins.  L.  J.  649. 

312 


COMPLETION   OF  CONTRACT  §§  92-94 

§  92.  Agreement  to  deliver  policy:  demand  is  unnecessary 
where  an  insurance  policy  is  agreed  to  be  delivered  within  a  cer- 
tain time." 

§  93.  There  may  be  a  constructive  delivery. — That  there  may  be 
a  constructive  delivery  of  the  policy  is  undoubted.^*  In  the  follow- 
ing cases,  however,  the  circumstances  were  held  not  sufficient  to 
justify  finding  such  constructive  delivery.  Thus,  in  Herman  v. 
Phoenix  Mutual  Life  Insurance  Company  ^^  the  company  executed 
and  forwarded  a  policy  to  its  agent  to  be  delivered  to  the  applicant 
H,  on  receipt  of  the  premium.  The  agent  took  the  policy  to  H.'s 
place  of  business,  but  he  was  temporarily  absent  from  the  state 
and  the  policy  was  exhibited  to  the  son,  wdio  was  informed  by  the 
agent  that  the  first  premium  was  payable  in  cash  and  a  note.  The 
son  did  not  pay  the  cash,  but  gave  his  father's  note  as  required,  and 
the  agent  accepted  the  same  and  took  it  away  Avith  the  policy, 
stating  that  he  would  keep  the  policy  good  till  the  father's  return. 
The  father  died  while  so  absent,  and  the  court  decided  that  there 
was  no  actual  or  constructive  delivery  of  the  policy. ^^  So  where 
there  was  no  payment  of  the  premium  due  upon  a  life  policy,  and 
payment  of  only  one-half  of  the  premium  due  had  been  waived, 
it  was  held  that  a  letter  by  the  agent  to  the  applicant  stating  that 
"your  policy"  has  arrived  did  not  amount  to  a  constructive  de- 
livery." 

§  94.  Delivery:  possession  of  policy  by  assured. — Possession  of 
the  policy  by  the  assured  is  only  prima  facie  evidence  of  its  delivery, 
as  where  it  appears  that  it  was  delivered  subject  to  examination  by 
the  assured."     So  mere  possession  by  the  assignee  of  the  assured 

13  Western  Mass.  Ins.  Co.  v.  Duffey,  fit  Life  Ins.   Co.  103  Mass.  78,  118 

2  Kan.  347.     See  Waters  v.  Security  Mas.s.  178,  320  IMass.  158. 

Life  &  Annuity  Co.  144  N.  Car.  663,  ^''  Union   Central  Life  Ins.   Co.  v. 

13  L.R.A.(N.S.)   805  note,  54  S.  E.  Pauley,   8   Ind.    App.   85,   35   N.    E. 

437,  36  Ins.  L.  J.  673.  190. 

i^McLaehlan  v.  yEtna  Ins.   Co.  4  ^^  United  Slates.— Davis  v.  Mas.sa- 

Allen  (N.  B.)  173;  Home  Ins.  Co.  V.  clmsetts    Mutual    Life    Ins.    Co.    13 

Curtis,  32  Mich.  402,  5  Ins.  L.  J.  120.  Blatehf.  (U.  S.  C.  C.)  462,  Fed.  Ca-s. 

See  New  York  Life  Ins.  Co.  v.  Bab-  No.  3,642. 

cock,  104  Ga.   67,  69  Am.   St.  Rep.  7Kmo/s.— Richardson      v.      North- 

134,  42  L.R.A.  88,  30  S.  E.  273,  27  western  Mutual  Life  Ins.  Co.  143  111. 

Ins.  L.   J.   649;   Waters  v.   Security  App.  279. 

Life  &  Annuity  Co.  144  N.  Car.  663,  3Ia-ssachnsetts.—M{irkey   v.    Mutu- 

54  S.  E.  437,  36  Ins.  L.  J.  673,  13  al  Benefit  Life  Ins.  Co.  103  Mass.  78, 

L.R.A.(N.S.)     805    note;     American  118  Mass.  178,  126  Mass.  158. 

Home   Life   Ins.    Co.   v.   Melton,   —  New  York. — Prall  v.  Mutual  Pro- 

Tex.  Civ.  App.  — ,  144  S.  W.  362.  tection  Life  Assur.  Soe.  5  Daly   (N. 

See  §  102  herein.  Y.)  298  aff'd  63  N.  Y.  608. 

15  17  Minn.  153,  10  Am.  Rep.  154.  North  C«roZ?Vw.— Waters   v.    Seeu- 

16  See  also  Markev  v.  Mutual  Bene-  rity  Life  &  Annuity  Co.  144  N.  Car. 

313 


§§  <J.3,  96  JOYCE  ON  INSURANCE 

of  a  life  policy  which  recites  on  its  face  that  it  is  to  take  effect  only 
when  countersigned  by  the  agent,  and  which  is  not  so  countersigned, 
is  no  evidence  that  the  policy  was  ever  delivered  to  the  assured.^' 
])Ut  delivery  of  a  life  policy  to  insured  and  its  possession  after  his 
death  l)y  the  beneficiary  are  prima  facie  evidence  that  its  recital 
of  a  cash  payment  is  correct.^" 

§  95.  Neglect  of  assurer  to  deliver  policy. — Nondelivery  by  rea- 
son of  negligence  of  the  company  or  its  agents  does  not  relieve  the 
insurer  of  liability  where  the  contract  between  the  parties  is  com- 
plete, as  where  the  application  has  been  accepted  and  the  terms 
concluded,  and  the  premium  has  been  tendered,  or  the  applicant 
has  agreed  to  pay  the  first  premium  on  delivery  of  the  policy.^ 
since  a  coi^poration  which  is  bound  in  good  faith  to  execute  and 
deliver  a  policy  in  the  usual  form,  and  thereby  consunnnate  the 
contract,  cannot  escape  liability  by  negiec-ting  so  to  do.^ 

§  96.  Conditional  delivery. — A  policy  may  be  conditionally  de- 
livered, and  in  such  case  the  contract  is  not  complete  until  the 
condition  be  complied  with,'  as  where  the  delivery  was  conditioned 
upon  the  agent  obtaining  the  surrender  value  or  paid-up  policies* 
in  place  of  certain  other  policies  of  the  a[)plicant  left  with  hiui 
for  that  purpose,  and  the  agent  did  not  succeed  in  so  doing.*  So. 
a  policy  may  be  sent  to  assured  for  his  acceptance  or  rejection  and 
upon  payment  of  the  premium  the  contract  to  be  completed,  in 
which  case  the  prerequisite  conditions  must  be  complied  with.* 
And  a  life  insurance  company  may  show  that  the  manual  delivery 
of  the  policy  was  ccniditional,  for  this  goes  to  the  execution  of  the 
contract.^     ^\^gain,  where  a  policy  of  insurance  is  written  at  the 

603,  54  S.  E.  4.37,  36  Ins.  L.  J.  673,  2  Bradlov  v.  Nashville  Ins.   Co.   3 

13  L.ri.A.(N.S.)   805  note.     Examine  La.  Ann.  708,  48  A  in.  Dec.  465. 

'  Pennsburg     Manufaotnring     Co.     v.  ^  Le   Hoy  v.   Park   Ins.    Co.  30  N. 

Pennsylvania   Fire   In.s.    Co.   16   Pa.  Y.  5();    IJogeis  v.   Chai'tcv  Oak  Lite 

Snper.  Ct.  91.  Ins.  Co.  41  Conn.  97;  Brnton  v.  ]\[ar- 

19  Prall  v.  Mutnal  Protection  Life  tin,  52  N.  Y.  570.     See  also  Moore  v. 

Assur.  Soe.  5  Daly  (N.  Y.)  298  aiif'd  Fanner's  Alnlnal  Ins.  Assoc.  107  Ga. 

63  N.  Y.   608.  199,  52  N.  E.  49;  Commercial  Mutual 

2"  Union  Life  Ins.   Co.  v.  Parker,  Accident  Co.  v.  Bates,  176  III.  1!)4, 

66  Neb.  395,  103  Am.  St.  Rep.  714,  52  N.  E.  49;  Blue  Gra.ss  Ins.  Co.  v. 

62  L.R.A.  390,  92  N.  W.  604;  Thum  Cobb,  24  Kv.  L.  Kcp.  2132,  72  S.  W. 

V.    Wolstenholme,    21    Utah,   446,    61  1099. 

Pac.  537,  29    Ins.    L.    J.    699.     See  *  Harneckell     v.    New    York    Life 

§§  76,  86  herein.  Ins.  Co.  40  Hnn   (N.  Y.)   558,  att"'d 

lYoiiiie   v.    Equitable    Life   Assnr.  Ill  N.  Y.  .390,  2  L.R.A.  150,  18  N. 

Soc.  30  Fed.  902,  1  Corp.  L.  J.  531 ;  E.  632. 

New  York  Life  Ins.  Co.  v.  Babcock,  ^  Blue  Grass  Tn.5.  Co.  v.  Cobb,  24 

304  Ga.  67,  69  Am.  St.  Rep.  134,  42  Kv.  L.  Rep.  2132,  72  S.  W.  1099. 

L.R.A.  88,  30  S.  E.  273,  27  Ins.  L."  ^  Gardner  v.  North  State  Mutual 
J.  649,  656. 

314 


COMPLETION   OF   CONTRACT  §§  97,  97a 

request  of  a  broker,  and  delivered  to  liim  by  the  agent  of  the 
company  on  his  promise  not  to  regard  it  as  binding  until  the 
company  shall  have  inspected  and  accepted  the  risk,  the  policy 
being  subject  to  immediate  cancelation;  and  the  company  there- 
after promptly  inspects  and  rejects  the  risk;  and  the  agent  of  the 
company  so  notifies  the  broker,  who  thereupon  agrees  to  return  the 
policy ;  and  no  premium  is  charged  or  paid  as  between  the  broker 
and  agent, — there  is  no  final  and  absolute  delivery  of  the  policy. 
but  the  deli\ery  is  conditional  only.'^ 

§  97.  Parol  evidence  admissible  to  show  conditional  delivery. — 
Parol  evidence  is  admissible  to  show  a  conditional  delivery.  So 
in  a  case  where  the  policy  was  expressed  to  have  been  executed 
and  delivered,  parol  evidence  was  held  admissible  that  it  was  agreed 
that  a  previous  policy  should  be  surrendered  and  a  new  policy  issued 
as  a  substitute  therefore,  which  agreement  was  not  performed,  but 
the  prior  policy  enforced  and  the  amount  thereof  paid.*  Again, 
after  a  written  contract  of  life  insurance  is  made  its  terms  may 
not  be  contradicted  so  a.s  to  affect  its  continued  validity  or  to 
avoid  the  insurance,  but  the  company  caii  show  that  the  manual 
delivery  of  the  policy  was  conditional,  as  this  goes  to  the  execution 
of  the  contract,  or  it  may  prove  fraud  or  other  equitable  matter  in 
the  same  way  for  the  purpose  of  showang  it  never  took  effect  as  a 
contract,  so  it  may  be  shown  that  the  delivery  of  the  policy  was 
made  upon  false  representations  in  the  application  as  to  the  healtli 
of  insured,  and  as  to  his  not  having  been  exposed  to  certain  conta- 
gious disea.ses,  and  where  a  ''binding  receipt"  is  given,  and  tlio 
application  is  thereafter  accepted  and  delivered  the  insurance  relates 
back  to  the  date  of  the  receipt.^ 

§  97a.  Condition  precedent:  delivery  or  prepayment  of  premium 
during  lifetime  or  good  health,  etc.,  of  assured. — Whether  or  not  the 
applicant  is  in  an  insurable  condition,  is  an  insurable  risk,  at  the 
time  of  the  delivery  of  a  life  or  accident  policy  is  an  important 
factor,  and.  therefore,  where  it  is  stipulated  that  the  insurance  shall 
not  be  binding  unless  delivery  is  made  and  the  first  premium  paid 
during  the  lifetime  of  the  applicant  or  while  he  is  in  sound  or 
good  health,  or  some  like  provision  is  made  a  condition  precedent. 

Life  Ins.  Co.  163  N.  Car.  367,  48  8 -paunre  v.  State  Mutual  Life  As- 
L.R.A.(N.S.)  714  note,  79  S.  K.  80(i.   sur.  Co.  101  ]Mass.  279. 

■'Hartford  Fire  Ins.  Co.  v.  Wilson,        9  Gardner   v.   North    State    Mutual 
187  U.  S.  467,  23  Sup.  Ct.  189,  47    Life  Ins.  Co.  16.1  N.  Car.  367,  79  S. 
L.  ed.  261,  r/^e^Z  in  CotTin  V.  New  York    F.    806,   48    L.R.A.(N.S.)    714   note. 
Life  Ins.  Co.  127  Fed.  3r)6.  62  C.  C. 
A.  416.     Distinrjuished  in   Bieber  v. 
V.  Gans,  24  App.  D.  C.  517,  521.   . 

315 


§  (J7a  JOYCE  OX  INSURANCE 

it  must  be  complied  with  to  render  the  company  liable/"  unless 


^^  United  States. — Amos-Ricliia  v. 
Northwestern  Mutual  Life  Ins.  Co. 
(U.  S.  C.  C.)  152  Fed.  192,  36  Ins. 
549  (same  case  noted  below 
Micliigan)  ;  Cable  v.  United 
Life  ins.  Co.  Ill  Fed.  19,  49 
'•'d  191  U.  S. 
Sup.  Ct.  74, 


L.    J. 

under 

States 

C.  C.  A.  216,   (case  rev 

288,  48  L.  ed.  188,  24 


points  decided  in  Supreme  Court 
were :  The  power  of  States  to  con- 
trol and  regulate  foreign  corpora- 
tions; jurisdiction  in  ccjuity,  and  re- 
newal of  causes ;  case  below  of  bill  to 
have  policy  delivered  up  for  cancela- 
tion on  ground  that  it  was  procured 
by  fraud  of  deceased's  agents;  decree 
that  it  be  delivered  up  and  canceled 
affirmed  in  circuit  court  of  appeals; 
certiorari  granted  and  decree  re- 
versed; ease  remanded  with  order  to 
dismiss  without  prejudice)  ;  ^Manliat- 
tan  Life  Ins.  Co.  v.  Carder,  82  Fed. 
986,  27  C.  C.  A.  344  (insured  held  to 
have  been  in  "good  health"  when  pol- 
icy delivered). 

Alabama. — Powell  v.  Prudential 
Ins.  Co.  153  Ala.  611,  45  So.  208 
(policy  delivered  to  father  after  ap- 
plicant's death  of  wdiich  insurer  was 
ignorant  and  latter  was  mortally  ill 
at  time  of  payment  of  premium). 

Georgia. — Brown  v.  Mutual  Bene- 
fit Life  Ins.  Co.  131  Ga.  38,  61  S. 
E.  1122  (policy  required  first  pre- 
mium to  be  paid  during  life  time  of 
assured)  ;  Clark  v.  INIutual  Life  Ins. 
Co.  129  Ga.  571,  59  S.  E.  283  (pre- 
mium acquired  to  be  paid  during 
good  health  of  applicant;  non-suit 
granted). 

Indiana. — Michigan  Mutual  Life 
Ins.  Co.  V.  Thompson,  44  Ind.  App. 
180,  86  N.  E.  502  (policy  received  by 
company's  agent  w'lien  applicant 
mortally  ill)  ;  Reserve  Loan  Life  Ins. 
Co.  v. 'Hockett,  35  Ind.  App.  89, 
73  N.  E.  842  (policy  not  delivered 
until  after  applicant's  deatli.  al- 
though premium  paid). 

Kentuckij.  —  Provident  Savings 
Life  Assur.  Soc.  v.  Elliott's  Extr.  29 
Ky.  L.  Rep.  552,  93  S.  W.  659,  35 


316 


Ins.  L.  J.  713  (applicant  died  before 
policy  readied  agent)  ;  Torpey  v. 
National  Life  Ins.  Co.  29  Ky.  L.  Rep. 
:]71,  92  S.  W.  982  (applicant  died 
before  policy  issued  and  I)efore  ap- 
plication or  medical  examination  re- 
(^eived).  Hill's  Adrar.  v.  Penn 
Mutual  Life  Ins.  Co.  28  Ky.  L.  Rep. 
790,  90  S.  W.  544  (policy  received 
by  agent  of  insured  during  appli- 
cant'.s  last  sickness :  note  given  for 
premium). 

Micliigan. — Bowen  v.  Prv;dential 
Ins.  Co.  178  Mich.  63,  51  L.R.A. 
(N.S.)  587,  144  N.  W.  543;  Amos- 
Richia  v.  Northwestern  Mutual  Life 
Ins.  Co.  143  Mich.  684,  107  N.  W. 
707,  s.  e.  (U.  S.  C.  C.)  152  Fed.  192, 
36  Ins.  L.  J.  549  (requirement  that 
premium  be  actually  ]iaid  etc.  while 
insured  in  good  liealth;  policy  w'as 
found  by  beneficiary  among  insured's 
papers  after  his  death;  held  that 
policy  never  delivered.  There  was 
involved  the  point  of  cancelation  of 
stam{)s  under  the  *'war  revenue  act" 
of   1898). 

Missotiri. — Rhodes  v.  Kansas  City 
Life  ins.  Co.  156  Mo.  App.  281,  137 
S.  W.  907  (condition  must  be  com- 
plied with)  ;  Kilcullen  v.  Metropoli- 
tan Life  Ins.  Co.  108  Mo.  App.  61, 
82  S.  W.  966  (policy  sent  to  agent; 
insured  died  before  it  was  delivered 
or  premium  paid  in  full;  no  con- 
tract ) . 

Nebraska. — Anders  v.  Life  Ins. 
Clearing  Co.  62  Neb.  585,  87  N.  W. 
331,  31  Ins.  L.  J.  224  (condition  must 
be  complied  with). 

New  York. — Poste  v.  American 
Union  Life  Ins.  Co.  52  N.  Y.  Supp. 
910,  32  App.  Div.  189,  aff'd  (mem.) 
165  N.  Y.  631,  59  N.  E.  1129  (com- 
pany not  liable  where  no  actual  pre- 
payment during  lifetime  even  though 
policy  delivered  and  reported  in  re- 
turn to  insurance  department),  cited 
in  Hewitt  v.  American  Union  Life 
Ins.  Co.  70  N.  Y.  Supp.  1012,  1013, 
34  Misc.  738,  rev'd  73  N.  Y.  Supp. 
105,  106,  108,  66  App.  Div.  80. 


COMPLETION  OF  CONTRACT 
such  condition  is  waived  or  there  is  an  estoppel.^^ 


§  97a 


North  Carolina. —llavdv  v.  Aetna 
Life  ln.s.  Co.  154  N.  Car."  430,  70  S. 
E.  828,  40  Ins.  L.  J.  1148  (iirst  pre- 
mium to  be  paid  "during  good  health 
etc.,  evidence  of  delivery  for  jury); 
Perry  v.  Securitv  Life  &  Annuity 
Ins.  Co.  150  N.  Car.  143,  63  S.  E. 
679,  38  Ins.  L.  J.  432  (policy  de- 
livered conditionally ;  not  accepted 
for  purpose  of  taking  effect;  upon 
election  to  accept,  notice  should  have 
been  given  and  premium  paid  or 
tendered  during  good  health). 

Oregon. — Francis  v.  Mutual  Life 
Ins.  Co.  55  Oreg.  280,  106  Pac.  523. 

Pennsi/lvania. — Gordon  v.  Pruden- 
tial Ins.  Co.  of  America,  231  Pa.  404, 
80  Atl.  882,  40  Tns.  L.  J.  1838  (pre- 
mium paid  while  applicant  sutfering 
from  sickness  which  proved  fatal; 
policy  delivered  for  inspection  only; 
no  recovery.  But  compare  Barnes  v. 
Fidelitv  Mutual  Life  Ins.  Co.  101 
Pa.  618.  45  L.R.A.  264,  43  Atl.  341). 

Rhode  Island. — Mohr  v.  Prudential 
Ins.  Co.  of  America,  32  R.  I.  177,  78 
Atl.  554  (a  condition  precedent  to 
liability). 

Texas. — Aetna  Life  Ins.  Co.  v. 
Hocker,  39  Tex.  Civ.  A  pp.  330,  89 
S.  W.  26  (policy  sent  to  agent  for 
conditional  delivery;  agent  sent  it  to 
bank  for  delivery  witliout  mention- 
ing conditions ;  insured  was  killed  be- 
fore actual  delivery;  licld  no  con- 
tract although  bank  held  note  in  es- 
crow for  premium). 

Virginia. — Oliver  v.  Mutual  Life 
Ins.  Co.  97  Va.  134,  1  Va.  S.  C.  Rep. 
29,  33  S.  E.  536  (condition  prece- 
dent to  liability). 

Effect  of  stipulation  in  application 
or  policy  of  life  insurance  that  it 
shall  not  become  hindinr/  unless  de- 
livered to  assured  while  in  pood 
health.— ^ee  notes  17  L.R.A.(N.S.) 
1144,  43  L.R.A.(X.S.)  725,  L.K.A. 
1916F,  171,  as  follows: 

1.  Effect  of  assured's  ill  health  at 
time  of  application,  a.  Good  liealtli. 
2.  Effect  of  incontestable  clause.  '.->. 
Effect  of  cancellation.  4.  EtTect  of 
delivery    to    agent     as     delivery     to 

31 


assured.  5.  Effect  of  refusal  to 
deliver  because  of  illness  or 
death  of  assured.  6.  Effect  of  as- 
sured's knowledge  of  his  condition. 
7.  Effect  of  statutes  relieving  policy- 
holders from  representatioiio  and 
warranties.  8.  Waiver,  a.  Who  may 
waive,  b.  Effect  of  provision  that 
only  certain  officers  may  waive,  c. 
Effect  of  delivery  while  assured  is 
ill,  d.  Effect  of  delivery  after  death 
of  assured,  e.  Delivery  for  examina- 
tion, f.  Effect  of  acceptance  of  first 
premium  while  assured  is  ill,  g.  Ef- 
fect of  acceptance  of  first  premium 
after  assured's  death,  h.  Effect  of 
acknowledgment  of  payment  of  pre- 
mium, i.  Acceptance  of  subsequent 
premiums,  j.  Effect  of  approval  of 
application  after  breach,  k.  Effect  of 
giving  option  to  accept  policy,  1.  Ef- 
fect of  giving  time  to  pay  premium, 
m.  Effect  of  retention  of  first  pre- 
mivnn,  n.  Effect  of  delay  in  issuing, 
o.  Effect  of  initiation,  p.  Agreemenl 
by  agent  to  deliver  policy  when  is- 
sued, q.  Acceptance  of  note,  or  some- 
thing other  than  money,  in  payment 
of  the  first  premium. 

1^  Alcdjama. — Powell  v.  Prudential 
Ins.  Co.  153  Ala.  611,  45  So.  208  (no 
waiver). 

California. — Berliner  v.  Travelers 
Ins.  Co.  121  CaL  451,  53  Pac.  022, 
27  Ins.  L.  J.  84/  (accident  policy; 
uisured  killed  while  traveling;  de- 
livery valid,  and  payment  premium 
waived). 

Georgia. — Brown  v.  Mutual  Bene- 
fit Life  Ins.  Co.  131  Ga.  38.  61  So. 
1122  (policy  precluded  waiver  by 
agent;  non-suit  granted);  Reese  v. 
Fidelity  Mutn;il  Life  Assoc.  Ill  Ga. 
482,  :'.6  S.  E.  637  (hold  that  no  agent 
could  waive  such  condition  prece- 
dent ) . 

Illinois. — John  Hancock  Mutual 
Life  Ins.  Co.  v.  Schlink,  175  111. 
284,  51  N.  E.  795.  aff'g  74  ill.  Api^. 
.181     (prepayment    of   prcmiuiii    «l'n 


ing    lifetime    etc.     of    assured 
waived    notwith.«taiidinti'    polii'v 

7 


iicM 
pro- 


§  97b 


JOYCE  OX  INSURANCE 


§  97b.  Same  subject. — An  actual  or  constructive  delivery  is  es- 
sential especially  where  the  application  exi)ressly  provides  that 
the  policy  shall  be  actually  delivered  to  or  accepted  by  the  applicant 
while  he  is  in  good  health. ^^  But  where  a  policy  of  insurance  is 
ilelivcred,  such  delivery,  in  the  absence  of  fraud,  is  conclusive  that 
the  contract  is  completed,  and  is  an  acknowledgment  that  the 
premium  was  paid  during  the  good  health  of  the  insured."  So 
in  the  absence  of  fraud  the  deliver}^  of  an  accident  insurance  policv 
is  conclusive  proof  that  the  contract  is  completed  and  an  acknowl- 
edgment that  the  premium  was  properly  paid  during  good  health.^* 

And  if  insured  is  in  good  health  at  the  time  the  policy  is  mailed 
to  him,  such  a  condition  is  complied  with.^*  So  where  insured  is 
in  good  health  when  a  polic}^  is  received  by  insurer's  agent  to  be 
unconditionally  delivered  there  is  a  suflicient  delivery  even  though 


vision   proliibiting  waiver  except   by 
certain  officers). 

KentucJcif. — Natural  Life  Ins.  Co. 
V.  Twiddell,  22  Ivy.  L.  Rep.  881,  58 
S.  W.  699  (policy  delivered  after  ap- 
plicant had  fatal  disease;  company 
estopped)  ;  Connecticut  Indemnity 
Assoc.  V.  Groeans  Admr.  21  Ivv.  L. 
Rep.  717,  52  S.  W.  959,  28  Ins.  L.  J. 
1031  (prepayment  of  premium  when 
insured  in  good  health ;  wai\ed  by 
agent), 


584,  60  N.  E.  1106  (waived  by  de- 
livery and  acceptance  of  premium 
during  insured's  illness).  Cited  in 
Genung  v.  Metropolitan  Life  Ins.  Co. 
69  N.  Y.  Supp.  1041,  1045,  CO  App. 
Div.  424. 

North  Carolina. — Hardy  v.  Aetna 
Life  Ins.  Co.  154  N.  Car."  430,  70  S. 
E.  828,  40  Ins.  L.  J.  1148  (condition 
waived). 

Oregon.- — Stringham      v.      Mutual 

Life  ins.  Co.  44  Oreg.  447,  75  Pac. 

Louisiana.- — Kennedy  v.  ]\Ietropoli-    822,  33  Ins.  L.  J.  463  (policy  issued 

Ian  Life  Ins.  Co.  116  La.  (iO,  40  So.    but  not   delivered  before  illness  and 

533  (non-waiver).  death;  note  given  thereafter  to  agent 

Michigan. — Dennis  v.  Fidelitv  Mu-    who   had  no  knowledge  thereof;   no 

lual  Life  Ins.  Co.  159  Midi.  594.  16   waiver). 

Det.  Leg.  N.  1065,  124  N.  W.  575  Bhode  Island.— Mohr  v.  Prudential 
(l)o]i('v  delivered  and  first  premium  Ins.  Co.  of  America,  32  R.  I.  177,  78 
paid  shortly  after  death ;  insurer  sent  Atl.  554  (condition  precedent  unless 
letter  denying  any  liability;  no  waiv-    waived). 


er). 

Minnesota. — Murphv  v.  Metropoli- 
tan Life  Ins.  Co.  106  Minn.  112,  118 
N.  W.  .355  ("no  obligation  is  as- 
sumed by  the  comjiany  ]irior  to  the 
date  hereof,  nor  unless  on  said  date 
the  a.ssured  is  alive  and  in  sound 
health."  When  policy  issued  assured 
had  cancer:  defense  of  unsound 
health  not  waived.  ^liiin.  Rev.  Laws 
1905,  sec.  1695  construed). 

New  York. — Ames  v.  Manhattan 
Life  Ins.  Co.  58  N.  Y.  Supp.  244,  40 
App.  Div.  465,  52  N.  Y.  Supp.  759. 
31  App.   Div.   180.   aff'd  167  N.   Y. 


Tej-as. — Provident  Savings  Life 
Assur.  Soc.  V.  Oliver,  22  Tex.  Civ. 
App.  8,  53  S.  W.  594  (condition 
waived). 

^2  American  Home  Life  Ins.  Co.  v. 
:\lellon  (1912)  —  Tex.  Civ.  App.  — , 
144  S.  W.  362. 

iSGrier  v.  Mutual  Life  Ins.  Co. 
132  N.  Car.  542,  44  S.  E.  25. 

^*  Ravburn  v.  Pennsvlvania  Casu- 
altv  Co.  138  N.  Car.  379,  107  Am. 
St."  Rep.  548,  50  S.  E.  762. 

15  Mutual  Reserve  Fund  Life  As- 
soc. V.  Farmei-,  65  Ark.  581,  47  S.  W. 
850. 


318 


•I 


COMPLETION   OF  CONTRACT  §  97b 

tlie  at^ent  retains  possession  of  the  policy.^®  And  a  pienuum  is 
paid  during  insured's  lifetime  where,  without  conceahnent  or  fraud, 
it  is  paid  on  the  same  day  that  insured  dies."  If  a  policy  contains 
the  condition  that  it  ''does  not  take  effect  until  the  lirst  premium 
shall  have  been  actually  paid  during  the  lifetime  of  the  insured"' 
another  condition  requiring  payment  of  said  premium  while  insured 
is  in  good  health  cannot  be  incorporated  in  the  contract,  so  that 
if  the  policy  is  sent  to  the  insurer's  agent  for  deliveiy  and  said 
agent  is  absent  at  the  time  it  is  received,  but  thereafter  a  tender 
of  the  premium  is  made  while  the  insured  is  fatally  ill  and  such 
tender  is  refused  a  motion  for  a  nonsuit  is  properly  denied. ^^ 

A  condition  precedent  requiring  delivery  to  the  applicant  while 
in  good  health  is  waived  by  the  company's  collecting  from  its 
agent,  after  the  a])plicant's  death  and  with  knowledge  thereof  the 
])remium  paid  by  the  latter  to  the  agent.^^  And  if  a  health  certifi- 
cate is  also  required  the  furnishing  thereof  may  be  waived.^" 

Whether  such  a  condition  has  been  complied  with  may  be  a  ques- 
tion for  the  jury,^  or  there  may  not,  however,  be  such  a  vital  conflict 
of  evidence  upon  the  question  of  delivery  of  the  policy  as  to  warrant 
submission  of  the  case  to  the  jury.^  So  the  insurer  may  insist  that 
the  fact  that  the  condition  was  complied  Avith,  be  shown  by  a  pre- 
ponderance of  evidence  before  it  is  rendered  liable,  unless  there  is 
a  waiver  of  the  condition.^  When  a  life  insurance  policy  states 
that  it  is  "based  upon  the  payment  of  premiums  in  advance,"  and 
there  is  evidence  tending  to  show  that  by  the  rules  and  regiilations 
of  the  company,  a  new  examination,  of  assured  is  required  if  it  is 
not  delivered  within  a  specified  time;  that  the  premium  must  be 
paid  on  its  delivery,  and  that  it  cannot  be  delivered  unless  the 

16  New  York  Life  Tns.  Co.  v.  Bab-  Ross,  102  Fed.  722,  42  C.  C.  A.  601 

cock,  104  Ga.  67,  42  L.R.A.  88,  30  (Petition       for      certiorari      denied 

S.  E.   273,  27    Ins.  L.   J.   649.     See  [mem.l  179  U.  S.  683,  45  L.  ed.  38.'.. 

also  New  York  Life  Lis.  Co.  v.  Pike,  21  Sup.  Ct.  916)  ;  Lee  v.  Prudential 

51  Colo.  238,  117  Pac.  899.  40  Tns.  Life  Ins.  Co.  203  Ma.ss.  299,  89  N.  E. 

L.  J.  2079.  r)29,  17  Am.  &  Eng.  Ann.  Cas.  236; 

!■' Ken d rick  v.  IMutual  Benefit  Life  Cenung  v.  Metropolitan  Life  Ins.  Co. 

Ins.  Co.  124  N.  Car.  315,  32  S.  E.  69  N.  Y.  Supp.  1041,  60  A  pp.  Div. 

728.  70  Am.  St.  Rep.  592.  •t'^t:  Baldi  v.  :\retropoIitan   Ins.  Co. 

18  Going-    V.    Mutual    Beneiit    Life  18  Pa.  Super.  Ct.  599;  Going  v.  Mu- 

Tns.  Co.  58  S.  Car.  201,  36  S.  E.  556,  tual  Benefit  Life  Ins.  Co.  58  S.  Car. 

29  Tns.  L.  J.  801.  201,  36  S.  E.  556,  29  Tns.  L.  J.  801. 

i^'RIiodus  V.  Jvansas  Citv  Life  Ins.  ^  Anios-Richia  v.  Northwestern  Mu- 

Co.  156  Mo.  App.  281. 137"S.  W.  907.  tual  Life  Ins.  Co.  (U.  S.  C.  C.)  152 

20  Life   Insurance    Clearing   Co.   v.  Fed.  192,  36  Tns.  L.  J.  549.  s.  c.  143 

Altschuler,  55   Net).   341,   75   N.   W.  Mich.  684,  107  N.  W.  707. 

862,  s.  c.  53  Neb.  481,  73  N.  W.  942,  3  ]\fohr   v.   Prudential    Ins.   Co.   of 

27  Tns.  L.  .T.  262.  America,  32  R.  I.  177,  78  Atl.  554. 

iPnilcd    States   Life    Ins.    Co.    v. 

319 


§  97c  JOYCE  ON  INSURANCE 

applicant  is  in  good  health;  that  none  of  the«e  requirements  were 
complied  with  and  the  policy  was  delivered  when  insured  was 
sick,  only  a  few  days  before  his  death,  it  is  sufficient  upon  the 
issue  whether  there  had  been  a  valid  deliveiy  of  the  policy  sued  on.^ 

Again,  the  question  of  waiver  of  such  a  condition  may  be  prop- 
erly one  for  the  jury,^  and  such  waiver  must  be  specially  pleaded 
and  proven,^  and  while  evidence  tending  to  establish  waiver  is 
slight  yet  it  may  be  sufficient  to  require  its  submission  to  the  jury ; 
but  if  waiver  is  not  pleaded  there  is  no  issue  to  submit  and  the 
jury  may  be  instructed  to  tind  for  the  insurer.'  The  applicant's 
condition  of  health  at  the  time  the  policy  is  mailed  from  the  home 
office  to  a  bank  to  be  delivered  cannot,  in  the  absence  of  fraud,  be 
availed  of  where  the  statute  provides  that  where  an  applicant  sub- 
mits to  a  medical  examination  by  the  company's  physician  and 
is  pronounced  a  fit  subject  of  insurance,  such  company,  in  the 
absence  of  fraud,  shall  be  estopped  from  pleading  that  the  insured 
person  'Svas  not  in  the  condition  of  good  health  required  by  the 
policy  at  the  time  of  the  issuance  or  delivery  thereof."  ' 

§  97c.  Change  in  health  of  assured:  date  of  contract. — Where 
a  policy  of  life  insurance  is  delivered  it  is  based  on  the  status  of 
the  insured  at  the  time  of  the  application  and  the  company  assumes 
the  risk  of  subsequent  ill  health  of  the  insured.^  So  where  an 
application  expressly  provides  that  upon  payment  of  the  first  pre- 
mium and  upon  delivery  to  and  receipt  by  the  applicant  of  the 
policy  during  his  lifetime  the  policy  should  relate  back  to  and  take 
effect  as  of  the  date  of  the  application,  and  the  policy  also  so 
expressly  provides,  the  terms  of  the  contract  and  the  intention  of 
the  parties  are  both  established  and  a  change  in  the  health  of 
insured,  in  the  absence  of  any  proviso  in  the  policy,  or  in  the 
application,  that  such  change  would  avoid  the  policy  cannot  vitiate 
it  nor  divest  the  beneficiary'  of  his  rights  thereunder,  the  first 
premium  having  l^een  paid.  And  the  doctrine  of  continuing 
representations  is  eliminated  by   the   above  provisos.^"     In   case, 

-     *  Powell    V.    North    State    Mutual  ^  Unterharnscheidt       v.       ^Missouri 

Life  Ins.  Co.  153  N.  Car.  124,  69  S.  State  Life   Ins.   Co.  100   Iowa,  223, 

E.  12.  45    L.R.A.(N.S.)    743,    138    N.    W. 

^  Life    Insurance    Clearing'    Co.    v.  459. 

Allschuler  5?.  Neb.  481,  73  N.  W.  942,  ^  Grier  v.  Mutual  Life  Ins.  Co.  132 

27  Ins.  L.  J.  262,  s.  c.  55  Neb.  341,  N.  Car.  542,  44  S.  E.  28.     E.ramiue 

75  N.  W.  862.  Gardner  v.  North  State  Mutual  -Life 

6  Anders  v.  Life  Ins.  Clearing  Co.  Ins.  Co.  163  N.  Car.  367,  48  L.R.A. 

62  Neb.  585,  87  N.  W.  331,  3i  Ins.  (N.S.)   714,  79  S.  E.  806. 

L.  J.  224.  1°  New  York  Life  Ins.  Co.  v.  Moats, 

'  Anders  v.  Life  Ins.  Clearing  Co.  207  Fed.  481,  —  C.  C.  A.  — .     The 
62  Neb.  585,  87  N.  W.  331,  31  Ins. 
L.  J.  224. 

320 


COMPLETION  OF  CONTRACT  §  98 

however,  of  a  material  change  in  the  applicant's  health  prior  to  the 
con.-^uninuition  of  the  contract  the  insurer  should  be  informed 
thereof  otherwise  a  fraud  might  be  perpetrated  upon  insurer." 

§  98.  When  actual  delivery  of  the  policy  necessary. — If  there 
be  a  provision  or  an  agreement  that  the  policy  shall  not  be  in  force 
until  actual  delivery  to  the  insured,  the  contract  is  not  consum- 
mated nor  the  company  bound  in  the  absence  of  such  delivery;  ^^ 
and  if  an  intent  that  there  should  be  such  actual  or  manual  deliveiy 
is  evidenced  by  the  terms  of  the  application  or  contract,  such  re- 
quirement must  be  complied  with ;  ^^  and  this  has  been  so  held  even 
though  the  application  makes  the  policy  for  the  benefit  of  the 
applicant's  wife,  and  although  there  was  a  day's  delay  in  passing 
on  said  application,  when  otherwise  it  might  have  reached  the 
applicant  before  his  death. ^*  Again  if  the  application  for  life 
insurance  stipulates  that  the  insured  incurs  no  liability  until  the 
policy  is  issued  and  delivered,  there  can  be  no  recovery  in  the 
absence  of  such  issuing  and  delivery,  though  the  first  premium  is 
paid,  and  the  agent  who  solicited  the  insurance  assured  the  appli- 
cant that  it  would  go  into  effect  at  once."  And  where  the  applica- 
tion for  a  life  insurance  policy  contains  no  agreement  as  to  the 
time  of  taking  efi'ect  together  with  an  agreement  that  a  note  taken 
in  payment  of  the  first  premium  shall  not  be  negotiated  until  the 
delivery  of  the  policy,  the  insurance  does  not  take  effect  until  the 
issuance  and  delivery  of  the  policy. ^^     So  the  legal  delivery  of  a 

Court,  per  Morrow,  Cir.  J.,  distin-  Bates,  176  111.  194,  52  N.  E.  49; 
giiLshes,  as  to  continuing  representa-  Bowen  v.  Prudential  Ins.  Co.  of 
tions:  Cable  v.  United  Slates  Life  America,  178  Mich.  (i3,  144  N.  W. 
3  ns.  Co.  Ill  Fed.  19,  49  C.  C.  A.  543.  Holding  that  if  the  applica- 
216;  Equitable  Life  Assur.  Co.  v.  tion  I'equires  actual  delivery  tliere 
McElroy,  83  Fed.  631,  28  C.  C.  A.  mu.«t  be  actual  delivers,  and^  it  was 
365,  and  also  considei-s  Mutual  Bene-  declared  by  the  court,  per  Steere,  J., 
fit  Life  Ins.  Co.  v.  Higginbotham,  95  that  such  an  application  is  initiative 
U.  S.  380,  383,  24  L.  ed.  499.  Com-  of  the  proposed  contract,  becomes  a 
pare  cases  considered  near  end  of  §  part  of  it  when  consummated,  is  bind- 
53b  herein.  ing  on  the  applicant,  and  tixes  the 

^^  Gordon  v.  Prudential  Ins.  Co.  of   time  when  bis  policy  will  become  op- 
America,  231   Pa.   404,   80   Atl.  882,    eralivo  and  his  insurance  beoin. 
40  Ins.  L.  J.  1838.  "  Powell    v.    North    State    Mutual 

12  iMisselhorn  v.  Mutual  Reserve  Life  Ins.  Co.  153  N.  Car.  124,  69  S. 
Fund  Life  Assn.  30  Fed.  545;  Koh-  E.  12,  48  L.R.A.(N.S.)  714  note, 
en  V.  Mutual  Reserve  Fund  Life  i*  Kohen  v.  Mutual  Reserve  Fund 
Assn.  28  Fed.  705.  See  also  Moore  Life  Assoc.  28  Fed.  705. 
v.  Farmers  Mutual  Ins.  Assoc.  107  ^^  Chamberlain  v.  Prudential  Ins. 
Ga.  199,  33  S.  E.  65;  New  York  Life  Co.  109  Wis.  4,  83  Am.  St.  Rep.  851, 
Ins.  Co.  V.  Babcock,  104  Ga.  67,  42    85  N.  W.  128. 

L.R.A.  88,  69  Am.  St.  Rep.  134,  30        le  Summers  v.  ^Mutual  Life  Ins.  Co. 
S.  E.  273,  27  Ins.  L.  J.  649,  655;    12  Wvo.  369,  109  Am.  St.  Rep.  992, 
Commercial  Mutual   Accident   Co.  v.    66  L.R.A.  812,  75  Pac.  937. 
Joyce  Ins.  Vol.  I. — 2.1.  321 


§§  99,  100  JOYCE  ON  INSUKAXCE 

policy  of  fire  insurance  is  essential  to  its  existence  as  an  enforceable 
contract.^''^ 

Where  a  policy  upon  the  life  of  A  payable  to  B  was  conditioned 
not  to  be  binding  until  delivered  to  A  in  good  health,  it  was  held 
that  a  delivery  to  B  after  the  death  of  A  was  not  binding  upon  the 
insurer. ^^  The  rule  above  stated  is,  however,  subject  to  certain 
qualifications,  as  will  be  noted  elsewhere,  as  in  cases  of  waiver  or 
delivery  to  an  agent,  etc. 

§  99.  Delivery:  misrepresentation  or  fraud. — If  the  delivery  be 
obtained  by  misrepresentation  or  fraud,  it  can  have  no  effect  as  a 
binding  contract,  as  in  case  the  assured  has  knowledge  of  the  loss 
at  the  time  the  application  is  made  and  conceals  the  fact.^^  So 
fraud  or  other  equitable  matter  may  be  proven  to  show  that  the 
policy  never  took  effect  as  a  contract.*^" 

§  100.  Delivery:  notice  to  assured  of  execution  of  policy. — An 
actual  delivery  of  the  policy  is  not  essential  to  the  completion  of 
the  contract  where  an  application  has  been  made,  accepted,  and 
the  terms  agreed  upon,  and  the  policy  executed  and  notice  thereof 
given  to  the  assured.''  And  whether  or  not  an  insurance  policy 
has  been  delivered  after  its  issuance  does  not  depend  upon  its 
manual  possession  by  the  assured,  but  upon  the  intention  of  the 
parties  as  manifested  by  their  acts  or  agreement,  and  where  the 
contract  of  insurance  is  completed  and  put  in  Avriting,  and  the  in- 
sured is  notified  by  the  insurance  agent  that  this  has  been  done, 
and  that  the  policy  is  in  his  possession  for  the  insured,  this  must 
be  deemed  a  sufficient  delivery  of  the  policy  to  render  it  valid  and 
binding.^ 

"  Morriss  V.  Home  Ins.  Co.  139  N.  806    {considered    under    §    97    here- 

Y.   Supp.   674,  78  Misc.  303,  citing  in)  ;  Whitley  v.  Piedmont  &  Arling- 

Walrath   v.   Hanover   Fire   Ins.   Co.  ton  Life  Ins.  Co.  71  N.  C.  480 ;  Fitz- 

124  N.  Y.  Supp.  54,  139  App.  Div.  herbert  v.  Mather,  1  Term  Rep.  12; 

407.      See   also   Ikeller   v.  "Hartford  Edwards  v.  Footner,   1   Camp.   530. 

Fire  Ins.  Co.  53  N.  Y.  Supp.  323,  24  Examine  Commereial  Mutual  ins.  Co. 

Misc.  136.  V.  Bates,  176  111.  194,  52  N.  E.  49. 

Actual  or  constructive  delivery  is  ^^  Gardner  v.  North  State  Mutual 

essential      to      validity.        American  Life   Ins.   Co.   163   N.   Car.   367,  48 

Home  Life  Ins.  Co.  v.  Melton,  —  Tex.  L.R.A.(N.S.)  714  note,  79  S.  E.  806. 

Civ.  App.  — ,  144  S.  W.  362.  i  Bragdon  v.  Appleton  Mutual  Fire 

i^McClave     v.     Mutual     Reserve  Ins.  Co.  42  Me.  259;  Sheldon  v.  Con- 
Fund  Life  Assn.  55  N.  J.  L.  187,  26  necticut    Mutual    Life    Ins.    Co.    25 
Atl.  78.  Conn.  207,  65  Am.  Dec.  565.     See  § 

^^  Piedmont  &  Arlington  Life  Ins.  55c  herein. 

Co.  v.  Ewing,  92  U.  S.  377,  23  L.  ed.  ^  phoenix  Assur.  Co.  v.  McAuthor, 

610;    Wales    v.    New    York    Bowery  116  Ala.  659,  67  Am.  St.  Rep.  154, 

Fire  Ins.   Co.  37  Minn.   106,  33  N.  22  So.  903 ;  Fischer  v.  London  &  Lan- 

W.  322:  Gardner  v.  North  State  Mu-  cashire  Fire  Ins.  Co.  83  Fed.  807,  27 

tual  Life  Ins.  Co.  163  N.  Car.  367,  Ins.  L.  J.  417,  aff d  92  Fed.  500,  34 

48  L.R..A.(N.S.)   714  note,  79  S.  E.  C.  C.  A.  503. 

322 


COMPLETION   OF  CONTRACT  §  100 

Again,  notification  to  the  applicant  of  the  arrival  of  a  life- 
insurance  policy,  by  the  local  agent  who  receives  the  application 
and  to  whom  the  policy  is  forwarded  for  delivery,  completes  the 
contract,  which  the  insurer  cannot  deny  after  loss,  although  the 
insurer  in  fact  issues  a  different  form  of  policy  from  that  applied 
for,  and  notifies  the  agent  to  secure  an  amendment  to  the  applica- 
tion requesting  the  policy  issued,  Avhich  he  fails  to  do.^  But  it  is 
held  that  until  delivery  of  a  policy  or  payment  of  premium  there 
is  no  contract  of  insurance,  in  the  absence  of  any  oral  agreement 
for  insurance  prior  to  the  policy,  although  the  insured,  who  had 
previously  made  an  application,  has  been  notified  by  the  insurance 
agent  that  a  policy  is  ready  for  him.*  In  INIyers  v.  Liverpool  & 
London  &  Globe  Insurance  Company  ^  application  was  made  to  an 
agent  for  a  fire  policy ;  thereafter  the  applicant  was  notified  by  the 
agent  that  the  policy  was  ready,  and  he  was  requested  to  call  for  it, 
which  he  did  several  times,  but  did  not  find  the  agent  in.  The 
policy  was  finally  canceled  by  the  agent  and  soon  after  the  premises 
were  destroyed  by  fire,  and  it  was  held  that  no  action  could  be 
maintained  on  the  contract. 

§  lOL  Delivery  to  agent  of  insured  or  to  third  person. — The 
delivery  need  not  be  made  personally  to  the  insured  but  may  be  to 
a  third  person  for  him,  or  to  the  order  and  control  of  a  third  person, 
or  to  the  agent  of  the  insured,  so  the  delivery  is  effectual  to  bincl 
the  contract  where  the  company's  agent  under  an  agreement  with 
the  assured  holds  the  policy  subject  to  the  order  and  control  of  a 
third  person,  whose  mortgage  interest  is  covered  by  it,  though  such 
third  person  does  not  call  for  or  receive  it.^  So  a  delivery  to 
insurance  brokers  who  are  agents  of  the  insured  and  the  former's 
admission  that  they  handed  the  policy  to  insured  constitutes  a 
good  delivery  by  the  insurer  with  an  intent  to  be  bound  by  its 
terms  and  conditions  and  obligating  insured,'^  but  where  the  deliv- 
ery is  to  a  third  party,  until  it  can  be  learned  whether  the  company 
will  accept  the  risk,  and  it  is  understood  that  if  the  company 
refuses  to  insure,  the  applicant  will  try  to  obtain  insurance  in 
another  company,  and  a  loss  occurs  before  the  agent  learns  whether 

3  Kimbro  v.  New  York  Life  Ins.  ^  121  Mass.  338. 

Co.  134  Iowa,  84,  12  L.R.A.(N.S.)  eilome  Ins.  Co.  v.  Curtis,  32  Mich. 

421, 108  N.  W.  1025.  402. 

Annotated  on  effect  of  general  no-  '  Singer  v.  National  Fire  Ins.  Co. 

tificatiou  by  agent  of  arrival  of  policy  ]39  N.  Y.  Siipp.  375,  154  App.  Div. 

where  the   company  has   substituted  783.    Delivery  to  insured's  authorized 

another  form  of  policy  for  that  ap-  agent   is   sufficient.      American    Fire 

plied  for.  Ins.    Co.   v.   Minsker   Realty   Co.   83 

*  Wainer  v.  Milford   Mutual   Fire  Misc.  1, 144  N.  Y.  Supp.  305;  Holmes 

Ins.   Co.   153  Mass.   335,   11   L.R.A.  v.  Thomason,  25  Tex.  Civ.  App.  389, 

598,  26  N.  E.  877.  61  S.  W.  504. 

323 


§  102  JOYCE  ON  INSURANCE 

the  risk  has  been  accepted  or  not,  no  contract  is  consummated, 
although  the  applicant  has  paid  the  premium.^  If  the  policy, 
however,  is  handed  to  a  messenger  of  the  assured,  his  acts  and 
declarations  are  inadmissible  to  bind  the  assured  in  the  absence  of 
proof  of  his  authority.^ 

But  the  delivery  is  sufficient  to  complete  the  contract  where  it 
is  delivered  to  the  company's  agent  under  a  stipulation  in  a  proposal 
for  insurance  that  such  agent  shall  act  for  both  parties.^"  In  an 
Iowa  case  it  appeared  that  the  insured  had  experienced  some  trouble 
in  keeping  his  property  insured  and  made  arrangements  with 
an  insurance  agent  to  reinsure  upon  the  expiration  of  policies,  and, 
in  the  event  of  the  cancelation  of  any  policy,  to  insure  in  another 
company.  A  policy  having  been  canceled  the  agent  arranged  with 
an  agent  of  several  companies  to  issue  a  policy  on  one  of  them,  this 
having  been  done  and  the  policy  handed  to  the  first  it  was  held 
that  there  was  a  good  and  sufficient  delivery,  and  that  there  was 
nothing  incompatible  in  the  acts  of  the  agent,  in  his  employments 
and  the  performance  of  his  duties  as  to  the  cancelation  and  procur- 
ing another  policy. ^^  But  it  is  held  in  a  New  York  case  that  a 
contention  that  a  delivery  of  a  policy  to  an  agent  of  insured  em- 
ployed to  procure  insurance,  is  a  valid  delivery  to  insured  is  un- 
tenable, where  the  latter  never  paid  the  premium  and  never  had 
the  policy  physically  delivered  to  him,  nor  is  such  a  contention 
aided  by  the  claim  that  the  agent  had  a  credit  with  the  insurer, 
irrespective  of  any  agreements  between  the  agent  and  assured. ^^ 

§  102.  Delivery  by  and  to  agent;  policy  held  by  agent. — A 
delivery  of  a  policy  by  an  authorized  agent  is  effectual  to  bind  the 
principals  although  it  be  delivered  by  him  to  another  agent  from 
whom  the  application  was  received,  and  to  whom  the  premium  is 
charged,  it  being  delivered  by  the  latter  to  the  assured. ^^  But  the 
rule  is  otherwise  where  the  policy  is  intended  as  a  substitute  for 
an  existing  policy  in  another  company,  but  is  not  delivered,  and 
the  insured  has  no  knowledge  thereof  until  after  the  loss.  So  the 
company  will  be  bound  by  a  delivery  by  its  agent  where  the  pre- 
mium has  been  paid,  notwithstanding  the  actual  knowledge  of  the 

'  Brown  v.  American  Central  Ins.  Ins.  Co.  90  Kan.  355,  133  Pae.  715 ; 

•Co.  70  Iowa,  390,  30  N.  W.  G47.    See  Aetna  Ins.   Co.  v.   Renno,  96  Miss. 

Nutting  V.  Minnesota  Fire  Ins.   Co.  172,  50   So.  563,  37  Ins.  L.  J.  795. 

58  Wis.  26,  73  N.  W.  432.  Compare  Hartford  Fire  Ins.  Co.  v. 

'^  Williams  v.  Niagara  Fire  Ins.  Co.  McKenzie,  70  111.  App.  615.     See  § 

50  Iowa,  561.  661  herein. 

10  Alabama  Gold  Life  Ins.  Co.  v.  ^^  :\iorriss  v.  Home  Ins.  Co.  139  N. 
Herron,  56  Miss.  643.  Y.  Supp.  674,  78  Misc.  303. 

11  Warren  v.  Franklin  Fire  Ins.  Co.  i^  Stebbins  v.  Lancashire  Ins.  Co. 
161  Iowa,  440,  143  N.  W.  554.     See  60  N.  H.  65. 

also     Wilson     v.     German-American 

324 


COMPLETION  OF  CONTRACT  §  102 

assured  that  the  company  intended  to  revoke  the  agent's  authority, 
where  the  delivery  takes  place  hefore  such  revocation  and  the  agent 
has  no  knowledge  of  the  company's  purpose.^*  If  a  local  agent  of  a 
fire  insurance  company  has  power  to  write,  issue,  and  sign  policies, 
and  is  furnished  with  forms  of  policies  to  be  written,  issued  and  de- 
livered by  him  after  being  signed  by  him,  a  policy  becomes  effective 
upon  the  writing  and  delivery  by  such  agent,  unless  the  company 
cancels  the  policies  and  where  an  agent  has  authority  to  issue  and 
deliver  policies,  his  clerk  acting  under  his  instructions  may  do  the 
same.^^  And  a  person  who  makes  a  proposal  for  insurance  may  by 
the  company's  acts  be  made  its  agent  to  deliver  the  policy  and  so 
complete  the  contract."  Where  it  is  claimed  that  the  insured  was 
the  agent  of  the  company  at  the  time  the  policy  was  issued,  and 
that  it  was  delivered  to  him  as  such  agent,  to  be  held  for  delivery 
until  he  had  paid  the  first  premium  and  the  evidence  is  conflicting, 
a  charge  to  the  jury  is  correct,  that,  if  the  jury  found  that  insured 
received  the  policy  from  the  company,  not  as  agent  or  manager, 
but  as  an  ordinary  applicant  only,  and  that  he  was  trusted  by  the 
company  to  pay  the  first  premium,  instead  of  paying  it  in  advance, 
they  should  answer  the  issue  for  the  plaintiff,  or  "yes;  "  but  other- 
wise if  insured  was  to  hold  the  policy  as  agent  until  he  as  an  or- 
dinary applicant,  or  individually  should  pay  the  premium." 

Again  where  the  authorized  agent  delivers  the  policy  to  another 
to  deliver  to  the  assured,  this  is  a  delivery  by  the  company.^*  And 
where  an  agent  has  authority  to  issue  and  deliver  policies,  and  it  is 
issued  and  left,  with  a  bank,  of  which  the  agent  is  cashier,  for  safe- 
keeping, in  accordance  with  an  agreement  with  insured,  the  con- 
tract of  insurance  becomes  complete  and  effective,  as  there  is  a  suf- 
ficient delivery,  the  possession  of  the  bank  being  equivalent  to 
possession  by  insured. ^^  If  a  policy  is  sent  to  a  bank  at  insured's 
residence  to  be  delivered  to  him  when  the  premium  is  paid,  and  in- 
sured dies,  it  is  a  good  delivery.  And  mailing  of  the  policy  from 
the  home  office  constitutes  delivery  and  instructions  to  the  bank 
cannot  affect  a  contract  already  made.^°  And  where  the  ])olicy 
when  issued  was  sent  to  insurer's  agent,  in  conformity  with  the 
terms  of  the  application,  and  was  by  the  agent  sent  to  a  mortgagee, 
upon  notice  to  assured  and  without  objection  by  him,  the  policy 

"Lightbodv     v.     North     Ameriea  Life    Ins.    Co.    163   N.    Car.    98,   79 

Ins.  Co.  23  WeiuL   (N.  Y.)   18.  S.  E.  293.     Sec  §  660  herein. 

^^  Marvsvillo    Mercantile    Co.    Ltd.  ^^  Ivellj'  v.  Commonwealth  Ins.  Co. 

V.  Home' Fire  Ins.  Co.  21  Idaho,  377,  30  Bosw.  (N.  Y.)  82,  95. 

121  Pae.  1026.  ^^  Marysville    Mercantile    Co.    Ltd. 

"National     Mutual     Church     Ins.  v.  Home  Fire  1^"=;.  Co.  21  Idaho,  377, 

Co.  V.  Trustees  Methodist  Episcopal  121  Pac.  1026. 

Church.  105  111.  App.  143.  20  ^t^^^.  York  Life  In.«.  Co.  v.  Pike, 

"Pender   v.    North    State   Mutual  51  Colo.  238,  117  Pac.  899. 

325 


§  102  JOYCE  ON  INSURANCE 

was  held  eflfective,  at  least  from  the  time  the  application  was  ac- 
cepted, even  though  assured  never  saw  the  policy.^ 

Again,  the  delivery  may  bind  the  company  where  the  policy  is 
retained  by  its  agent,^  although  only  part  of  the  premium  has  been 
paid  by  the  assured.^  So  in  determining  whether  there  has  been  a 
delivery  of  a  policy  the  intention  of  the  parties  will  be  given  eftect 
and  where  the  assured  has  unconditionally  accepted  the  terms  of  an 
executed  policy,  and  it  has  subsequently  been  treated  by  the  parties 
as  in  force,  its  delivery  will  be  regarded  as  complete,  though  it  re- 
mains in  the  hands  of  the  insurer's  agent.*  And  where  it  is  ex- 
pressly agreed  that  the  policy  shall  be  held  by  the  agent  in  his  safe 
for  the  assured,  this  is  a  sufficient  delivery,  and  the  assured's  right 
is  perfected.^  So  where  an  agent  of  the  defendant  company  was 
also  agent  of  another  company,  and  he  had  charge  of  B's  insur- 
ance, selecting  the  companies  and  receiving  his  policies,  and  a  ])ol- 
icy  having  been  canceled  he  insured  the  property  in  the  defendant 
company,  notifying  both  parties  thereof,  charging  the  premium  to 
the  assured  in  their  private  account,  and  the  policy  was  placed  by 
him  in  his  safe,  it  was  held  that  this  completed  the  contract  and 
bound  defendant.® 

As  a  rule,  an  unconditional  delivery  of  the  policy  to  the  agent 
for  delivery  to  the  insured  binds  the  company,  and  the  agent  may 
not  refuse  to  deliver  upon  tender  of  the  premium,  although  the  in- 
sured may  be  seriously  sick.''^ 

^  House  V.   Security  Fire  Ins.   Co.  Minnesota  Fire  Ins.  Co.  98  Wis.  26, 

145   Iowa,   462,  121  "N.   W.   509,   38  73  N.  W.  432. 

Ins.  L.  J.  875.  ^Wheeler  v.  Watertown  Fire  Ins. 

2  United    States.— See    Fischer  .  v.  Co.  131  Mass.  1. 

London  &  Lancashire  Fire  Ins.   Co.  *  Newark  Machine   Co.   v.   Kenton 

83  Fed.  807,  27  Ins.  L.  J.  417,  aff'd  Ins.  Co.  50  Ohio  St.  549,  22  L.R:A. 

92  Fed.  500,  34  C.  C.  A.  503.  768  and  note,  35  N.  E.  1063. 

Alabama. — Stei)lionson    v.    Allison,  ^Franklin    Fire    Insurance    Co.    v. 

165  AUi.  238,  138  Am.  St.  Rep.  26,  Colt,  20   Wall.    (87   U.    S.)    560,  22 

51  So.  622 ;  Phoenix  Ins.  Co.  v.  Mc-  L.  ed.  423.     Cited  in  Phwnix  Ins.  Co. 

Author,  110  Ala.  650,  22  So.  903.  v.  Meier,  28  Neb.  132.  44  N.  W.  97. 

Indiana. — New  York  Life  Ins.  Co.  ^  Dibble  v.  Northern  Assur.  Co.  of 

V.  Greenlee,  42  Ind.  App.  82,  84  N.  London,  70  IVIieh.  1,  14  Am.  St.  Rep. 

E.  1101.  470,  37  N.  W.  704. 

.Massachusetts. — Wheeler    v.     Wa-  '  Schwartz  v.   Germania  Life  Ins. 

tertown  Fire  Ins.  Co.  131  Mass.  1.  Co.  21  Minn.  215;  Yonge  v.  Equitable 

Missouri.— CassviWe     Roller     Mill  Life  Assur.   Soc.  30  Fed.  902.     See 

Co.  V.  JEtna  Ins.  Co.  105  Mo.  App.  §§  103,  104  herein. 

146,  79  S.  W.  720.  On  effect  of  delivery  to  agent  as 

Soulh  Dal-ola. — Wheaton  v.  Liver-  delivery  to  assured  of  policy  contain- 

pool  &  London  &  Globe  Ins.  Co.  20  iug  stijndation  that  it  shall  not  be- 

S.  Dak.  62,  140  N.  W.  850.  come  binding  unless  delivered  to  as- 

Vermonl. — Porter  v.   Mutual   Life  snred,  see  notes  in  17  L.R.A.(N.S.) 

Ins.  Co.  70  Vt.  504,  41  Atl.  970.  1145,   43   L.R.A.(N.S.)    725,    L.R.A. 

Wisconsin. — Compare    Nutting    v.  1916F,  171. 

326 


COMPLETION   OF  CONTRACT 


§  103 


It  constitutes  a  sufficient  deliver)/  of  a  fidelity  bond,  where  the 
company's  agent  delivers  it  to  the  employee  whose  fidelity  is  guar- 
anteed, at  the  place  where  he  is  employed,  the  purpose  and  intent  of 
the  company's  agent  being  to  deliver  it  to  assured  and  to  pass  it  into 
his  custody.^ 

§  103.  Delivery:  agreement  completed  before  loss:  mortalillness 
or  accident. — "V^^here  the  contract  is  completed  and  the  risk  com- 
menced, but  the  loss  or  death,  or  a  dangerous  sickness  or  accident 
occurs  thereafter  and  before  delivery  of  the  policy  or  certificate,  the 
company  is  liable,  even  though  the  premium  has  not  been  paid, 
provided  there  be  no  fraud  or  concealment  by  the  insured.^     So 

See  also  the  following  cases  sup-  Co.    v.    Mcintosh    (1906)    —    Miss. 

porting  the  rule  as  to  unconditional  — ,   41   So.   381,   35  Ins.   L.   J.   857. 

delivery  to  agent.  See  86  Miss.  236,  38  So.  775. 

United      States. — Union       Central  Ne^v  Hampshire. — Busher  v.  New 

Life  Ins.   Co.   v.   Phillips,   102   Fed.  York   Life   Ins.    Co.   72   N.   H.   551, 

19,  41  C.  C.  A.  263 ;  Fischer  v.  Lon-  58  Atl.  41,  33  Ins.  L.  J.  761. 

don  &  Lancashire   Fire   Ins.   Co.   83  New     York.— Singer    v.     National 

Fed.  807,  27  Ins.  L.  J.  417,  aff'd  92  Fire  Ins.  Co.  139  N.  Y.  Supp.  375, 

Fed.  500,  34  C.  C.  A.  503.  154    App.    Div.    783 ;    Gallagher  .  v. 

Alabama. — Stephenson   v.   Allison,  Metropolitan  Life  Ins.  Co.  67  Misc. 

165  Ala.  238,  138  Am.  St.  Rep.  26,  115,  121  N.  Y.  Supp.  638,  39  Ins. 

51  So.  622.  L.  J.  570. 

Georgia. — New  York  Life  Ins.  Co.  Oregon. — Francis    v.    Mutual   Life 

V.   Babcock,   104   Ga.   67,  42  L.K,.A.  Ins.   Co.   55   Or.  280,   106  Pac.  523. 

88,  30  S.  E.  273,  27  Ins.  L.  J.  649.  Virginia.— Eqwituhle    Life    Assur. 

(So  even  though  delivery  to  insured  Soe.  of  U.  S.  v.  Kitts  Admr.  109  Va. 

is  made  essential  to  validity.)  105,  63  S.  W.  455. 

Illinois.— Bev'me    v.    Federal    Life  Vermont.— Porter  v.   Mutual   Life 

Ins.  Co.  250  111.  203,  95  N.  E.  174,  Ins.    Co.    70    Vt.    504,   41    Atl.    970. 

40  Ins.  L.  J.  1513;  Mulligan  v.  Met-  (Even  though  insured  does  not  know 

ropolitan  Life  Ins.  Co.  149  111.  App.  of  its  receipt  by  the  agent.) 

516.  8  Prosser     Power     Co.    v.     United 

Indiana.— New  York  Life  Ins.  Co.  States   Fidelity   &   Guaranty   Co.   73 

V.  Greenlee,  42  Ind.  App.  82,  84  N.  Wash.  304,  132  Pac.  48. 

E.  1101.      (Even  though  delivery  to  ^  United     States.— JJnion     Central 

applicant  made  essential.)  Life  Ins.   Co.   v.   Phillips,   102   Fed. 

/ou«.— Unterharnscheidt     v.     Mis-  10,  41  C.  C.  A.  263,  rev'g  101  Fed. 

souri  State  Life  Ins.  Co.  160  Iowa,  33 ;  Kohne  v.  Insurance  Co.  of  North 

223,  45  L.R.A.(N.S.)  743,  138  N.  W.  America,  1  Wash.   (U.  S.  C.  C.)  93, 

459  (even  though  agent  absent  when  Fed.  Cas.  No.  7920. 

policv  sent) ;   Kimbro   v.  New  York  Alabama.— Trii)\e  Link  Ins.  Co.  v. 

Life  Ins.  Co.  134  Iowa,  84,  12  L.R.A.  Williams,  121   Ala.  138,  77  Am.  St. 

(N.S.)  421,  108  N.  W.  1025,  35  Ins.  Rep.  34,  26  So.  19. 

L.  J.  57;  Mederis  v.  Anchor  Mutual  Arkansas.— Travelers  Fire  Ins.  Co. 
Fire  Ins.  Co.  104  Iowa,  88,  65  Am. 
St.  Rep.  428,  73  N.  W.  495. 

Minnesota. — Kilborn  v.  Prudential 
Ins.  Co.  99  Minn.  176,  108  N.  W. 
861,  35  Ins.  L.  J.  840. 

Mississippi. — New  York  Life  Iiis.  50  Ga.  339 

.327 


V.  Globe  Soap  Co.  85  Ark.  169,  122 
Am.  St.  Rep.  22,  107  S.  W.  326. 

Georgia. — Fireman's  Fund  Ins.  Co. 
V.  Pekor.  106  Ga.  1,  31  S.  E.  779; 
Southern  Life  Ins.  Co.  v.  Kempton, 


§  103 


JOYCE  ON  INSUKANCE 


where  an  application  was  made  for  life  insurance  and  the  sum  of 
fifty  dollars  was  paid  to  be  applied  on  tlie  lirst  year's  premium,  and 
the  policy  was  forwarded  to  the  agent  for  delivery,  and  the  insured 
died  and  the  agent  refused  to  deliver  it,  although  the  balance  of 
the  premium  was  offered,  the  policy  was  held  to  have  attached. ■^° 
So  where  the  premium  is  to  be  paid  on  delivery  of  the  policy,  and 
a  loss  by  fire  occurs  before  delivery,  the  company  is  liable.^^  In 
Fried  v.  Royal  Insurance  Company  ^'^  the  plaintiff  made  a  proposal 
for  insurance  on  the  life  of  her  husband,  and  advanced  the  usual 
premium  for  one  year,  and  received  therefor  a  receipt,  providing 
substantially  that  the  policy  was  to  be  forwarded  to  the  head  office 
at  Liverpool,  and  if  accepted  a  policy  was  to  be  issued;  if  rejected, 
the  premium  was  to  be  returned;  if  the  husband  died  before  deci- 
sion should  be  received  the  sum  insured  w^is  to  Ije  paid.  The  pro- 
posal Was  accepted  and  the  policy  returned  to  be  executed  by  the 
agent  and  delivered.  The  agent  executed  but  refused  to  deliver  it, 
on  account  of  an  alleged  unfavorable  change  in  the  husband's 
health.     The  husband  died  soon  after  and  the  defendant  refused 


Illinois. — National  Mutual  Church 
Ins.  Co.  V.  Trustees  M.  E.  Church, 
105  III.  App.  143. 

Iowa.- — Unterharnscheidt  v.  Mis- 
souri State  Life  Ins.  Co.  160  Iowa, 
223,  45  L.R.A.(N.S.)  743,  138  N.  W. 
459;  Kimbro  v.  New  York  Life  Ins. 
Co.  134  Iowa,  84,  12  L.R.A.(N.S.) 
421,  108  N.  AV.  1025,  35  Ins.  L.  J. 
57;  City  of  Davenport  v.  Peoria  Ma- 
rine Fire  Ins.  Co.  17  Iowa,  276. 

Kentucky. — Lee  v.  Union  Central 
Life  Ins.  Co.  19  Ky.  L.  Rep.  608, 
41  S.  W.  319. 

Maine.- — Walker  v.  ]\Ietropolitan 
Ins.  Co.  56  Me.  371.  (In  this  case 
the  policy  was  not  issued  nor  the 
premium  paid.) 

Michigan. — Dailey  v.  Preferred 
Masonic  Mutual  Accdt.  Assoc.  102 
Mich.  289,  26  L.R.A.  171,  57  N.  W. 
184,  60  N.  W.  694.  See  Shields  v. 
Equitable  Life  Assur.  Soc.  121  Mich. 
690;  80  N.  W.  793,  29  Ins.  L.  J.  122. 

Minnesota. — Ganser  v.  Firemen's 
Fund  Ins.  Co.  38  Minn.  74,  35  N. 
W.  584. 

Mississippi. — New  York  Life  Ins. 
Co.  V.  Mcintosh,  —  Miss.  — ,  41  So. 
.381,  35  Ins.  L.  J.  857,  86  Miss.  236, 
38  So.  775,  34  Ins.  L.  J.  1054. 


New  Jersey. — Commercial  Ins.  Co. 
V.  Hallock,  27  N.  J.  L.  645,  72  Am. 
Dec.  379. 

New  York. — Gallagher  v.  Metro- 
politan Life  Ins.  Co.  67  Misc.  115, 
121  N.  Y.  Supp.  638,  39  Ins.  L.  J. 
570;  Ellis  v.  Albany  City  Ins.  Co. 
50  N.  Y.  402,  10  Am.  Rep.  495.  See 
Loomis  V.  Jeft'erson  Count}'  Patrons' 
Fire  Relief  Assoc.  87  N.  Y.  Supp. 
5,  92  App.  Div.  601. 

Penns>/lva)iia. — Standard  Wheel 
Co.  V.  Phoenix  Ins.  Co.  29  Pa.  Co. 
Ct.  Rep.  367. 

Tennessee. — Gordon  v.  United 
States  Casualtv  Co.  (1899)  —  Tenn. 
Ch.  App.  — ,  54  S.  W.  98 ;  Whitman 
V.  American  Central  Ins.  Co.  14  Lea 
(Tenn.)  327  (case  of  substituted 
policy), 

Tej  as.— -Home  Forum  Benefit  Or- 
der V.  Jones,  20  Tex.  Civ.  App.  68, 
48  S.  W.  219. 

Virginia. — Ecjuitable  Life  Assur. 
Soc.  of  U.  S.  V.  Kitts'  Admr.  109 
Va.  105,  63  S.  E.  455. 

^°  Cooper  V.  Pacific  Mutual  Ins. 
Co.  7  Nev.  116,  8  Am.  Rep.  705. 

1^  Ansrell  v.  Hartford  Fire  Ins.  Co. 
59  N.  Y.  171,  17  Am.  Dec.  322. 

12  50  N.  Y.  243. 


328 


COMPLETION  OF  CONTRACT  §  104 

payment,  claiming  that  the  contract  was  never  consummated,  and 
that  the  acceptance  must  be  qualified  by  the  company's  standing 
instructions  to  the  agent  not  to  deliver  a  policy  if  a  change  had 
taken  place  in  the  health  of  the  assured.  The  court,  however,  de- 
cided that  the  acceptance  was  absolute  and  unqualified,  and  could 
.  not  be  limited  by  private  instructions  to  the  agent  of  which  the 
plaintiff  had  no  notice,  and  if  the  contract  was  in  violation  of  the 
instructions  or  inconsistent  therewith,  the  defendant  ratified  the 
same;  that  it  was  competent  for  the  defendant  to  contract  in  entire 
disregard  of  instructions  to  its  agent;  that  they  were  chargeable 
with  knowledge  that  the  contract  was  inconsistent  with  the  agent's 
alleged  instructions,  and  with  that  Icnowledge  had  assented  to  it, 
and  that  a  recovery  could  be  had  by  the  plaintiff.  And  where  the 
agreement  is  completed  before  los^,  the  assured  has  the  right  to  re- 
ceive a  policy  although  he  knows  that  the  company  intended  to  re- 
voke the  agent's  authority,  but  had  not  actually  done  so  when  the 
agent  tendered  the  polic5^^^  Again  an  application  to  an  insur- 
ance agent  representing  several  companies  for  a  certain  amount  of 
insurance  on  specified  property,  the  agent  to  select  the  companies 
and  distribute  the  risk,  and  his  agreement  so  to  do  and  give  the 
insurance,  constitute  a  valid  contract  of  insurance  with  each  com- 
pany as  soon  as  its  policy  is  signed,  although  the  policies  are  not 
delivered  until  after  the  property  is  destroyed  by  fire,  since  in  dis- 
tributing the  risk  the  agent  acts  for  the  assured.^* 

§  104.  Delivery:  agreement  incomplete  at  time  of  loss:  mortal 
illness,  or  accident. — If  the  contract  is  not  completed,  and  a  loss 
occurs  or  the  insured  dies,  or  is  dangerously  ill  or  is  accidentally 
injured,  the  company  may  refuse  to  deliver  the  policy  or  receive 
the  premium,  or  otherwise  consummate  the  contract,^^  as  where  the 

"  Lightbody  V.  North  America  Ins.  Civ.    Code   not    applicable);    W.    P. 

Co.  23  Wend^  (N.  Y.)  18.  Harper  &  Co.  v.  Ginners  Mutual  Ins. 

"  Michigan  Pipe  Co.  v.  Michigan  Co.  6  Ga.  App.  139,  64  S.  E.  567. 
Fire  &  Marine  Ins.  Co.  92  Mich.  482,        Indiana. — New    v.    Germania    Fire 

20  L.R.A.  277,  52  N.  W.  1070.  Ins.    Co.   171   Ind.   33,   131   Am.   St. 

^^  United     States.— Mohrstadt     v.  Hep.    245,    85    N.    E.    703;    Reserve 

Mutual  Life  Ins.  Co.  115  Fed.  81,  52  Loan   Life   Ins.    Co.   v.   Hockett,   35 

C.  C.  A.  075;   Steinle  v.  New  York  Ind.  App.  842,  73  N.  E.  843. 
Life  Ins.  Co.  81  Fed.  489,  52  U.  S.       Kentucky.— Claypool  v.  Continen- 

App.  235,  26  C.  C.  A.  481,  27  Ins.  tal   Casualty   Co.   129   Ky.   682,   112 

L.  J.  174.    Examine  Keen  v.  Mutual  S.  W.  835;  New  York  Life  Ins.  Co. 

Life  Ins.  Co.  131  Fed.  559,  33  Ins.  v.  Levy's  Adm'r  122  Ky.  457,  21  Kv. 

L.  J.  916,  rev'd  135  Fed.  677,  68  C.  L.  Rep.  21,  5  L.R.A. (N.S.)  739n,  92 

C.  A.  315.  S.  W.  325,  35  Ins.  L.  J.  455;  Blue 

Georgia.— Firemen's  Fund  Ins.  Co.  Grass  Ins.   Co.  v.   Cobb,  24  Ky.  L. 

V.  Rogers,  108  Ga.  191,  33  S.  E.  954,  Rep.  2132,  72  S.  W.  1099   (Ky.  St. 

28  Ins.   L.   J.   1025    (sec.   2095    Ga.  sec.    702);    Dickenson    v.    Provident 

329 


§  104  JOYCE  OX  INSURANCE 

policy  was  withheld  until  payment  of  the  premium,  which  had  not 
been  made  when  assured  died.^®  In  a  Pennsylvania  case  the  ap- 
plication was  made  to  a  mutual  company  and  the  agTeement  was 
that  the  premium  should  be  paid  on  delivery  of  the  policy.  The 
policy  was  drawn  without  the  applicant's  signature,  but  he  was  en- 
rolled on  the  company's  books  as  a  member.  A  fire  occurred  and 
delivery  of  the  policy  was  refused,  although  the  premium  was 
tendered,  and  it  was  held  that  the  applicant's  liability  to  con- 
tribute to  losses  was  not  fixed,  that  the  contract  was  not  com- 
pleted, and  therefore  no  action  could  be  maintained  for  a  policy." 
So  where  a  policy  provides  that  under  no  circumstances  shall  it  be 
enforced  until  the  premium  is  paid,  if  the  assured  dies  l>efore  such 
payment  and  before  delivery  of  the  policy,  the  policy  is  inoperative, 
notwithstanding  the  company's  agent  has  told  the  assured  that  he 
could  pay  when  the  policy  was  delivered.^*  And  where  a  policy 
was  assigned  and  left  with  the  company  to  be  approved,  and  such 
approval  was  delayed  until  assured  should  give  a  premium  note, 
and  a  loss  occurred  before  the  note  was  given,  it  was  held  that  the 
company  could  not  collect  his  assessment  for  the  loss,  as  no  contract 
of  insurance  existed.^^     And  where  in  an  action  upon  a  fire  policy 

Sav.  Life  Assur.  Soc.  21  Kv.  L.  Rep.  uisite,  and  couuter-sig-ned  in  ignor- 
Gll,  52  S.  W.  825.  '  ance  of  death). 

Massachuseils. — Cunningham  v.  Virginia. — Oliver  v.  Mutual  Life 
Connecticut  Fire  Ins.  Co.  200  Mass.  Ins.  Co.  97  Va.  134,  1  Va.  S.  C.  Rep. 
333,  86  N.  E.  787,  38  Ins.  L.  J.  315  29,  33  S.  E.  536,  28  Ins.  L.  J.  710. 
(cause  of  action  on  contract.  Case  See  Mutual  Life  Ins.  Co.  v.  Oliver, 
up  on  appeal  on  agreed  facts  with  95  Va.  445,  28  S.  E.  594,  28  Ins.  L. 
stipulation  that  court  might  draw  J.  710. 
inferences  of  fact).  Washington. — Harriman     v.     New 

.A^e^ras Ay/.— Lowe  v.  St.  Paul  Fire  York  Life  Ins.  Co.  43  Wash.  398,  86 
&  Marine  Ins.  Co.  80  Neb.  499,  114  Pac.  656,  35  Ins.  L.  J.  852 ;  Starr  v. 
S.  W.  536.  Mutual  Life  Ins.  Co.  41  AVash.  228, 

Neiv  Hampshire. — Busher  v.  New   83  Pac.  116,  35  Ins.  L.  J.  137. 
York  Life  Ins.  Co.  72  N.  H.  551,  58       Wisconsin. — Costcllo       v.       Grant 
i^tl.  41,  33  Ins.  L.  J.  761.  Countv  Mutual  Fire  &  Lig'htning  Ins. 

Neiv  Jersey.— Consumers  Match  Co.  133  Wis.  361,  113  N.  W.  639. 
Co.  v.  German  Ins.  Co.  70  N.  J.  L.  See  Nutting  v.  Minnesota  Fire  Ins. 
226,  57  Atl.  440,  33  Ins.  L.  J.  525.       Co.  98  Wis.  26,  73  N.  W.  432. 

Oregon. — Lathrop  v.  Modern  ^^  Collins  v.  Insurance  Co.  7  Phila. 
Woodmen  of  America,  56  Oreg.  440,  (Pa.)  201.  See  Merchants  &  Manu- 
106  Pac.  328,  109  Pac.  81.  facturers  Mutual  Ins.  Co.  v.  Baker, 

Pennsylvania.— CoWins  v.  Insur-  4  Neb.  (Unof.)  384,  94  N.  W.  627. 
ance  Co.  7  Phila.  (Pa.)  201.  "  Schaffei-    v.    Lehigh    Mut.    Fire 

Texas.— Dickey      v.       Continental  Ins.  Co.  89  Pa.  St.  296. 
Casualtv  Co.  40  Tex.  Civ.  App.  199,       "  Oi-mond   v.   Fidelity   Life  Assn. 
89   S.   W.  436    (case  where  counter-  96  N.  C.  158,  1  S.  E.  796. 
signal  ure  of  policy-writer  a  prereq-       ^^  Cranberrv'  Mutual  Fire  Ins.  Co. 

330 


*l 


COMPLETION  OF  CONTRACT  §  104a 

it  appeared  that  the  agent  of  the  insurer,  after  writing  the  policy, 
forwarded  it  to  one  S.,  with  instructions  to  tender  it  to  the  plain- 
tiff in  renewal  of  an  expired  policy,  but  before  it  was  so  tendered, 
the  property  was  destroyed  and  H.  received  instructions  by  wire  not 
to  deliver  the  policy,  and  he  told  the  plaintiff  of  the  receipt  of  the 
policy  by  him  and  his  instructions  not  to  deliver  it,  and  upon  the 
following  day  the  plaintiff  wired  S,  to  hold  the  policy,  which  had, 
however,  been  returned  to  the  agent  of  whom  a  demand  therefor 
was  made  and  the  premium  tendered,  it  was  held  that  the  contract 
was  not  complete.^"  So  where  an  agent  represented  several  com- 
panies and  an  application  was  made  to  him  for  insurance,  and  part 
of  the  premium  paid,  and  after  a  loss  the  balance  was  paid  and  a 
policy  demanded,  it  w^as  held  that  no  action  could  be  maintained 
to  compel  delivery  of  a  policy  in  the  absence  of  evidence  that  a 
contract  of  insurance  had  been  completed  with  some  particular  com- 
inmy.^  So  the  company  may  refuse  to  deliver  a  life  policy  al- 
though it  is  made  out  and  mailed  to  the  agent  to  be  countersigned 
and  delivered,  it  being  provided  that  it  shall  take  effect  only  when 
countersigned  by  the  agent,  and  the  party  dies  before  the  policy 
reaches  the  agent;  ^  and  where  a  life  policy  was  not  to  be  in  force 
until  "signed  by  the  officers  of  the  association  and  delivered  to  the 
applicant,"  and  was  not  made  out  until  after  the  death  of  the  ap- 
plicant and  in  ignorance  of  it,  and  was  then  delivered  at  the  proper 
place,  it  was  declared  void.'  Nor  is  the  company  liable  in  a  case 
where  an  applicant  for  life  insurance  dies  before  the  application 
is  forwarded  to  the  company,  although  the  applicant  has  given  his 
note  for  the  amount  of  the  first  premium.* 

§  104a.  Same  subject. — Where  the  property  is  burned  while  the 
risk  is  being  considered  and  the  ap])lication  then  rejected  there  is  no 
binding  contract,  although  the  agent  gives  a  receipt  for  the  first 
premium  where  said  receipt  provides  that  the  premium  should  be 
returned  if  no  policy  was  issued.*  And  the  indorsement  by  the 
clerk  of  an  insurance  company  of  a  slip  of  paper  notifying  the  com- 
pany of  a  shipment  to  be  covered  by  an  open  marine  policy  in  the 
usual  way  with  the  amount  of  the  premium  and  the  check  mark 
indicating  its  readiness  for  entry  in  the  books,  will  not  show  an  ac- 

V.  Hawk  (1888)  —  N.  J.  Eq.  — ,  14       2  j^T^j.^g    y_    Pha-nix    Mutual    Life 
Atl.  745.  Ins.  Co.  1  Mo.  App.  584. 

On  liability  of  insurance  company        ^  ^lisselhorn     v.     Mutual     Reserve 
for  neglioent  delay  in  passing  upon   Fund  Assoc.  30  Fed.  545. 
or  issuing-  policy  until  after  loss,  see       *  Covenant  Mutual  Benefit  Assn.  v 
note  in  40  L.K.A.(X.S.)  152.  Conway,  10  111.  App.  348. 

2"  New  York  Lumber  &  "Wood-  *  Shawnee  Mut.  Fire  Ins.  Co.  v. 
Working  Co.  v.  People's  Fire  Ins.  McClure,  39  Okla.  535,  49  L.R.A. 
Co.  96  Mich.  20,  55  N.  W.  434.  (N.S.)  1054,  135  Pae.  1150. 

^  New  Orleans  Ins.  Assn.  v.  Boniel, 
20  Fla.  815. 

331 


§  105  JOYCE  ON  INSUKAXCE 

ceptance  of  the  risk  in  the  face  of  its  positive  rejection  by  the  officers 
of  the  company  as  soon  as  they  learned  that  it  was  on  property  al- 
ready lost,  of  which  the  assured  is  notified  without  delay .^  A  per- 
son cannot  refuse  to  accept  a  policy,  repudiate  the  contract  and  then, 
after  loss,  accept  the  policy,  pay  the  premium,  give  notice  of  loss, 
and  sustain  a  claim  that  the  contract  was  completed,  even  though 
the  company  returns  the  policy  AA'ith  a  letter  requesting  acceptance, 
and  after  the  contract  is  again  repudiated  again  returns  the  policy 
with  a  request  by  letter  that  it  be  accepted  and  the  premium  paid, 
said  letter  being  received  after  the  loss,  it  appearing  that  the  com- 
pany at  the  time  of  the  receipt  of  the  premium  was  ignorant  of  the 
loss.'  Again,  a  binding  contract  by  an  insurance  company,  insur- 
ing its  agent's  property,  is  not  made  by  his  writing  the  policy,  en- 
tering it  on  his  register,  and  making  out  a  report  of  it  to  the  com- 
pany, if  the  property  is  destroyed  before  the  company  receives  the 
report,  which  it  refuses  to  approve.* 

An  accident  insurance  company  may  reject  an  application  when 
it  learns  of  an  accident  to  the  applicant,  even  though  it  had  in- 
tended to  accept  the  application,  and  had  made  some  minutes  upon 
it,  but  had  never  communicated  such  intention  to  the  applicant.^ 
And  an  accident  insurance  policy  is  not  in  force  where  a  renewal 
receipt  is  mailed  by  the  agent,  held  by  the  insured  a  couple  of 
weeks,  and  returned  with  a  notice  to  discontinue,  although  the 
agents  do  not  accept  the  discontinuance,  but  write  assured  that  they 
will  hold  the  receipt  for  him  and  give  him  credit  for  the  premium, 
where  he  dies  before  the  letter  reaches  him;  and  it  is  immaterial  that 
both  parties  think  that  the  policy  is  in  force  until  the  discontinu- 
ance is  accepted. ^° 

§  105.  Loss  before  date  of  contract:  policy  retroactive. — An 
insurance  policy  may  be  retroactive,  and  so  provide  for  indemnity 
for  a  loss  which  happened  anterior  to  the  date  of  the  policy.  In 
marine  insurance  a  policy  can  be  lawfully  effected  upon  property 
"lost  or  not  lost;  "  but  this  phrase  so  used  has  reference  to  ca.ses 
where  the  property  has  started  upon  its  voyage  and  the  parties  to 
the  insurance  have  no  knowledge  whether  it  has  been  lost  or  nol 
In  such  cases  the  insurance  is  against  an  unknown  event,  and  the 

6  Delaware  Ins.  Co.  v.  S.  S.  While  Ins.    Co.   110   Mich.   399,   33  L.R.A. 

Dental   Mfg.    Co.   48   C.   C.   A.   382,  098,  68  N.  W.  215. 

109  Fed.  334,  65  L.R.A.  387,  writ  of  ^  Allen    v.    Massachusetts    Mutual 

certiorari  denied    (mem.)    183  U.   S.  Accident  Assoc.  16/  Mass.  18,  44  N. 

700,  46  L.  ed.  396.  22  Sup.  Ct.  937.  E.  1053,  26  Ins.  L.  J.  316. 

'  Nordness  v.  Mutual  Cash  Guar-  ^°  Richmond  v.   Travelers  Ins.   Co. 

antv  Fire  Ins.  Co.  22  S.  Dak.  1,  114  123  Tenn.  307,  30  L.R.A.  (N.S.)  954, 

S.  W.  1092.  130  S.  W.  790. 

^  Zimmerman    v.    Dwelling    Houso. 

332 


i 


COMPLETION  OF  CONTRACT  §  105 

underwriter  takes  the  risk  of  the  arrival  of  the  property  at  its  desti- 
nation, and  thus  there  is  something  to  insure. ^^  ^;o  a  policy  may 
contain  the  words  ''lost  or  not  lost,"  and  cover  a  cargo  on  board  a 
ship  then  on  a  whaling  voyage,  beginning  the  adventure  on  said 
cargo  as  aforesaid,^^  and  the  property  may  be  covered,  although  it 
was  lost  eight  hours  before  the  policy  was  effected. ^^  So  an  insur- 
ance will  be  valid  where  there  is  no  fraud  in  the  case,  although 
made  after  a  loss  and  before  notice  thereof,  and  notwithstanding  the 
vessel  was  cast  away  and  lost  about  ninety  miles  from  the  port  of 
destination,  where  some  of  the  partners  who  procured  the  insur- 
ance resided.^*  And  a  policy  will  be  upheld  although  the  owners 
went  to  the  company's  ofhce  late  in  the  evening  and  obtained  in- 
surance on  a  vessel  which  was  past  due  and  lost,  and  news  of  such 
loss  had  reached  the  city,  although  it  was  not  proven  to  have  reached 
the  owners ;  ^*  and  a  policy  may  be  retroactive  where,  in  the  ab- 
sence of  fraud,  concealment,  or  misrepresentation,  it  is  signed  after 
a  loss  has  occurred  for  a  risk  taken  to  commence  before  its  date, 
though  there  be  no  clause  equivalent  to  "lost  or  not  lost;  '"'  ^^  for  the 
policy  need  not  contain  the  words  "lost  or  not  lost"  to  cover  losses 
prior  to  its  date.  It  is  sufficient  that  it  appear  that  the  insurance 
was  intended  to  cover  prior  losses.^''  And  a  retrospective  fire  insur- 
ance contract  made  when  the  thing  insured  is  distant  and  its  status 
unknown  to  either  party  will  bind  the  insurer  for  a  loss  occurring 
before  the  date  of  the  agTeement,  if  such  appear  either  from  the 
policy  or  from  circumstances  to  have  been  the  intention  of  par- 
ties;" and  extrinsic  evidence  is  admissible  to  prove  that  a  policy, 
dated  on  the  same  day  on  which  an  embargo  was  laid,  was  made 

"People  v.  Dimick,  107  N.  Y.  13,  26   N.    J.   L.    268;    Commercial    Ins. 

29,  per  Earle,  J.;   Gauntlett  v.   Sea  Co.  v.  Hallock,  27  N.  J.  L.  645,  72 

Ins.    Co.   127  Mich.   504,   86   N.   W.  Am.    Dec.    379;    Mercantile    Mutual 

1047,  30  Ins.  L.  J.  986,  991.  Ins.  Co.  v.  Folsom,  18  Wall.   (85  U. 

12  Paddock  V.  Franklin  Ins.  Co.  11  S.)  237,  21  L.  ed.  827. 

Pick.  (28  Mass.)  227.  ^'^  Mercantile    Mutual    Ins.    Co.    v. 

i^Blacklmrst   v.   Cockell,   3   Term.  Folsom,  18  Wall.  (85  U.  S.)  237,  21 

Ren.  360.     See  also  Clement  v.  Phop-  L.  ed.  827,  affirmmg  8  Blatchf.   (U. 

nix  Ins.  Co.  6  Blatchf.  (U.  S.  C.  C.)  S.  C.  C.)   170,  Fed.  Cas.  No.  4902,  9 

481,  Fed.  Cas.  2881;  Merchants'  Ins.  Blatchf.  (U.  S.  C.  C.)  201,  Fed.  Cas. 

Co.  V.  Paige,  60  111.  448 ;  Schroeder  No.  4903 ;  Hammond  v.  Allen,  2  Sum. 

V.  Stock  and  Mutual  Ins.  Co.  46  Mo.  (U.  S.  C.  C.)  396;  Hooper  v.  Robni- 

174:   Sutherland  v.  Pratt,  11  Mees.  son,  98  U.  S.  528,  53/,  2o  L.  ed.  219, 

&  -^Y  296  --'^;  1  Phillips  on  Ins.  (3d  ed.)  501, 

1*  Andrews   v.   Marine   Ins.    Co.   9  sec.  925;  3  Kent's  Comm.  259,  note 

Johns.  (N.  Y.)  32.  c-     See  also  §  104  herein. 

"Horler    x.     Merchants'     Mutual  ^^  Security   Fire  Ins.   Co.  v.  Ken- 
Ins.  Co.  28  La.  Ann.  730.  tucky  Marine  &  Fire  Ins.  Co.  7  Bush 

i«  Hallock  V.  Commercial  Ins.  Co.  (Ky.)  81,  3  Am.  Rep.  301. 

333 


§§  106,  107  JOYCE  OX  INSURANCE 

without  knowledge  of  the  embargo. ^^  And  whore  the  contract  is 
made  when  both  parties  are  ignorant  of  the  los.<,  the  policy  may 
be  valid  and  binding,  although  it  is  not  deliveredj^"  and  so  although 
the  policy  is  post-dated.^ 

§  106.  Where  both  parties  know  of  loss  when  contract  is  made  or 
executed. — Although  in  marine  risks  the  policy  may  be  upon  prop- 
erty "lost  or  not  lost,"  yet  if  the  property  has  been  totally  lost  and 
this  is  known  by  the  parties,  there  is  nothing  to  insure,  no  event  to 
be  indemnified  against,  no  unknown  event  upon  which  to  base  the 
contract,  and  hence  there  can  be  in  such  case  no  lawful  or  valid 
insurance.^  But  if  at  the  time  the  policy  is  executed  a  loss  has 
occurred,  and  it  is  known  to  both  parties,  the  contract  will  be  bind- 
ing if  the  risk  has  actually  attached  prior  thereto.^  And  it  is  held 
that  a  binding  contract  may  be  made  where  the  insurers  know  of 
the  loss  at  the  time  the  contract  is  entered  into,  and  it  appears  that 
they  intend  to  make  themselves  liable.*  For  if  the  amount  of  the 
loss  is  uncertain,  there  is  no  reason  why  the  insurance  should  not 
attach.^  Such  intention  where  the  loss  is  unknown  is  generally  ex- 
pressed by  the  words  ''lost  or  not  lost."  ^ 

§  107.  Knowledge  of  loss  by  assured  before  and  after  risk  at- 
taches.— Where  a  loss  occurring  before  the  risk  attaches  is  known 
only  to  the  applicant  and  he  obtains  a  policy  without  disclosing 
the  fact  of  loss,  the  policy  is  void,'  even  though  the  contract  be 

^^  Lorent    &    Steinmetz    v.    South  28  Ins.  L.  J.  1025,  considering  Ga. 

Carolina  Ins.  Co.  1  Nott  &  McC.  (S.  Civ.  Code,  see.  2095,  as  not  appliea- 

C.)  505,  506.  ble   as   said  code   relates  exclusively 

^^  Kohne  v.  Insurance  Co.  of  North  to  completed  contracts  of  insurance 

America,  1  Wash.   (U.  S.  C.  C.)   93,  made  between  parties  who  were  both 

Fed.  Cas.  No.  7920;  Union  Ins.  Co.  ignorant  that  the  loss  against  which 

V.  American  Fire  Ins.  Co.  107   Cal.  it  was  intended  to  insure  had  already 

327,  48  Am.  St.  Rep.  140,  28  L.R.A.  occurred. 

692,  40  Pac.  431.  *  Arkansas  Ins.  Co.  v.  Bostick,  27 

^  IMead    v.    Davison,    3   Ad.    &    E.  Ark.  539. .  But  see  People  v.  Dimick, 

303;   Giffard  v.    Queen's  Ins.   Co.   1  107  N.  Y.  14. 

Hann.  (N.  B.)  432;  Merchants'  Ins.  ^2  Phillips  on  Ins.   (3d  ed.)   502, 

Co.  V.  Paige,  60  111.  448;  Horter  v.  sec.  926. 

Merchants'   Mutual   Ins.   Co.   28  La.  « Mead   v.   Davison,   3   Ad.   &   El. 

Ann.  v30.  303;   Arkansas   Ins.   Co.   v.   Bostick, 

2  So  hold  in  People  v.  Dimick,  107  27  Ark.  539.     See  §§  104  and  105 

N.  Y.  13,  29,  per  Earle,  J.  herein. 

'     3  Mead   v.    Davison,   3   Ad.   &    E.  '  Gauntlett    v.    Sea    Ins.    Co.    127 

303;  Davenport  v.  Peoria  Marine  &  Mich.   504,  86  N.  W.  1047,  30  Ins. 

Fire  Ins.  Co.  17  Iowa,  276;  Walker  L.  J.  986;  Fitzherbert  v.  Mather,  1 

v.  Metropolitan  Ins.  Co.  56  Me.  371;  Term  Rep.  12;  Laidlaw  v.  Liverpool 

1  Phillips  on  Ins.   (3d  ed.)   502,  sec.  &_ London  Ins.  Co.  13  Grant  (Ont.) 

926;    Firemen's    Fund    Ins.    Co.    v.  3/7;  Mackie  v.  European  Ins.  Co.  21 

Rogers,  108  Ga.  191,  33  S.  E.  954.  L.  T.  R.  N.  S.  102.     See  People  v. 

334 


COMPLETION  OF  CONTRACT  §  108 

given  a  date  prior  to  the  loss.*  If  a  person  who  has  directed  a  ma- 
rine insurance  to  be  procured  at  a  distant  place  receives  intelli- 
gence of  a  loss  before  his  order  is  executed,  he  should  countermand 
the  order,  or  transmit  the  intelligence  by  the  earliest  and  most  ex- 
peditious usual  route  of  mercantile  communication.  But  it  is  not 
obligatory  on  him  to  resort  to  an  unusual  and  extraordinary  mode 
of  transmission.  So  where  the  Atlantic  cable  had  been  only  about 
three  months  in  operation,  and  the  rates  were  high,  it  was  held  suf- 
ficient to  send  notice  by  the  first  mail  from  Liverpool  to  New  York, 
where  the  insurer  resided.^  In  an  Illinois  case  a  marine  policy  was 
obtained  on  goods  lost  or  not  lost,  shipped  on  a  vessel  lost  two  days 
prior  to  the  date  of  the  policy ;  this  loss  was  known  to  the  insured 
at  the  time,  but  he  failed  to  inform  the  agent,  and  it  was  decided 
that  the  particular  agent  effecting  the  insurance  should  have  been 
informed ;  that  knowledge  by  the  company  of  the  loss  did  not  neces- 
sarily arise  from  the  fact  that  the  daily  papers  received  at  the  com- 
pany's office  on  the  day  the  policy  was  issued  contained  a  notice  of 
the  loss;  and  that  notice  to  one  agent  of  the  company  did  not  im- 
port necessarily  a  notice  to  the  other. ^°  In  Blake  v.  Hamburg- 
Bremen  Fire  Insurance  Company  ^^  the  agent  agreed  with  the  in- 
sured that  he  might  obtain  additional  insurance,  such  insurance  to 
take  eff^ect  for  an  amount  named  in  a  letter  from  the  time  it  was 
mailed.  It  was  determined  that  the  insurance  could  not  be  held 
to,  have  attached  from  the  mere  posting  of  an  unstamped  letter,  and 
that  giving  notice  after  the  fire  began,  the  insured  knowing  of  such 
fact,  was  insufficient  to  bind  the  company. 

§  108.  Assured  not  obligated  to  notify  company  of  loss  before 
delivery  of  policy  when  risk  has  attached. — There  is  no  legal  nor 
moral  obligation  resting  on  the  assured  to  voluntarily  notify  the 
company  of  a  loss  occurring  after  the  risk  has  attached,  although 
the  policy  has  not  been  delivered  nor  the  premium  paid.^^  So 
where  an  application  was  accepted  and  the  policy  made  out  and 
executed,  but  was  permitted  to  remain  in  the  hands  of  the  com- 
pany, and  the  plaintiff,  directly  after  the  occurrence  of  a  loss  paid 
the  premium  and  received  the  policy  without  disclosing  the  fact 
that  the  property  had  been  burned  in  the  meantime,  it  was  de- 

Dimick,  107  N.  Y.  13;  Mittaker  v.       "67  Tex.  160,  60  Am.  Rep.  15,  2 

Farmers'    Union   Ins.    Co.    29    Barb.  S.  W.  368. 

(N.  Y.)  312.  ^2  j^eim  v.  Home  Mutual  Fire  Ins. 

8  Wales  V.  New  York  Bowery  Fire  Co.   42   Mo.   38,   97  Am.   Dec.   291; 

Ins.  Co.  37  Minn.  106,  33  N.  W.  322.  American  Home  Ins.   Co.  v.  Patter- 

^  Snow  V.  Mercantile  Mutual  Ins.  son,  28  Ind.  17.     See  El  Dia  Home 

Co.  61  N.  Y.  160.  Ins.   Co.  v.   Sinclair,  228   Fed.   833, 

10  Merchants'  Ins.  Co.  v.  Paige,  60  840,  143  C.  C.  A.  231,  238,  47  Ins.  L. 

111.  448.  J.  43,  49. 

335 


§  108a  JOYCE  OX  INSURANCE 

termined  that  the  company  was  liable  and  that  upon  receipt  of  the 
premium  and  delivery  of  the  policy  the  contract  related  back  to 
the  date  of  the  policy,"  and  in  such  case  the  policy  will  also  relate 
back  to  the  time  when  it  was  made  out  and  signed,  notwithstand- 
ing a  provision  in  the  bj^-laws  that  the  policy  should  take  effect  on 
the  day  of  approval  and  be  binding  thereafter  ''providing  the 
premium  has  been  paid,  and  not  otherwise."  ^* 

§  108a.  Mutual  benefit  societies  or  associations:  issuance  of 
certificate. — .Although  a  statute  specifies  what  a  certificate  issued  by 
a  fraternal  benefit  society  shall  contain,  nevertheless  this  does  not 
require  such  societies  to  issue  one.^^*  But  the  issuance  of  a  cer- 
tificate is  held  to  be  necessary  in  a  fraternal  order,^^  and  a  pro- 
vision requiring  that  the  certificate  be  issued  and  dated  requires 
delivery  and  acceptance.^^  AVhere  an  application  was  made  for 
life  insurance,  the  first  annual  premium  contingently  paid, 
a  receipt  given  which  recited  that  it  would  be  binding  on  the 
company  from  the  date  of  the  medical  examination,  provided 
the  application  Avas  approved  and  a  policy  issued  by  the  com- 
pany, such  application  must  be  read  with  the  receipt;  thus  read 
it  was  an  ofi'er  for  a  contract  of  insurance  to  be  accepted  by  ap- 
proval of  the  application,  and  by  issuance  of  a  policy.  Accept- 
ance required  both.  Until  so  accepted  neither  party  was  obligated 
and  both  parties  had  a  right  to  a  locus  poenitentiae.  therefore  a 
mere  approval  revoked  or  not  does  not  constitute  acceptance,  and 
no  policy  having  issued  no  acceptance  was  made,  there  was  no 
meeting  of  minds  of  the  parties."  Again,  the  "issuing"  of  a  policy 
of  life  insurance,  within  the  meaning  of  a  statute  providing  that  an 
insurance  company  shall  be  estopped,  in  the  absence  of  fraud,  by 
the  certificate  of  its  medical  examiner  from  setting  up  that  the  in- 
sured was  not  in  the  condition  of  health  required  by  the  policy  at 
the  time  it  was  issued,  includes  a  delivery  of  the  policy  to  the  as- 

13  Baldwin  v.  Chouteau  Ins.  Co.  56  ^^  Supreme     Lodge     Knights     of 

Mo.  151,  17  Am.  Rep.  671.     See  also  Pythia^    v.    Graham,    49    Ind.    x\pp. 

Commercial  Mutual  Marine  Ins.  Co.  535,  97  N.  E.  806. 

V.  Union  Mutual  Marine  Ins.  Co.  19  '-Issued,''  see  Stringham  v.  Mutual 

How.  (60  U.  S.)   318,  15  L.  ed.  636.  Life  Ins,  Co.  44  Oreg.  447,  75  Pac. 

1*  Keim  v.  Home  Mutual  Fire  Ins.  822,  33  Ins.   L.  J.  463.     See  §   146 

Co.  42  Mo.  38,  97  Am.  Dec.  291.  herein. 

"^  Laws  N.  Y.  1911  (repealing  art.  ^^  Supreme    Council    Royal    Arca- 

VII.  c.  33,  Laws  1909,  as  am^d  by  e.  uum  v.  Pels,   209   111.   33,  70   N.  E. 

589)  p.  451,  e.  198,  sec.  232.    Report  697. 

of  Attv.  Genl.  1912,  Vol.  2,  p.  220.  "  Kennedy  v.  Mutual  Benefit  Life 

See  §  i46  herein.  Ins.  Co.  (U.  S.  D.  C.)  205  Fed.  677. 

336 


COMPLETION  OF  CONTRACT  §§  108b,  108c 

sured.     Until  such  delivery  is  made  there  is  no  "issuing"  of  the 
policy.^* 

Issuance  and  delivery  of  a  certificate  is  not  made  effective  though 
obtained  by  replevin  where  such  issuance  and  delivery  have  been 
refused  and  the  certificate  is  not  in  force.^' 

§  108b.  Mutual  benefit  societies  or  associations:  actual  delivery 
of  certificate  unnecessary,  unless. — Actual  delivery  of  a  certificate  is 
imnecessary  in  the  absence  of  an  express  agreement  or  contract  there- 
for.^" But  if  delivery  of  a  benefit  certificate  is  a  condition  prece- 
dent to  the  company's  liability  it  must  be  complied  with.^  And  if 
the  parties  agree  that  actual  delivery  of  a  certificate  is  essential  to 
the  completion  and  binding  effect  of  the  contract  such  actual  de- 
livery is  necessary.^  But  even  though  a  delivery  in  person  to  the 
applicant  is  made  a  condition  precedent  under  the  by-laws  this  doas 
not  mean  actual  manual  possession  by  insured,  and  the  acts  of  the 
society  may  be  such  as  to  constitute  a  sufficient  delivery  even  though 
there  has  been  no  delivery  in  person.^  And,  although  the  consti- 
tution and  by-laws  may  require  a  delivery  of  a  benefit  certificate  as 
a  condition  upon  which  liability  of  the  order  depends,  still  it  is  held 
that  actual  delivery  is  not  a  condition  precedent  to  recovery  where 
the  member  was  in  good  standing  when  he  died.* 

§  108c.  Mutual  benefit  societies  or  associations:  Initiation  as 
prerequisite  to  delivery. — If  initiation  is  reciuu'ed  under  the  by- 
laws of  a  fraternal  benefit  association  as  a  prerequisite  to  delivery 
of  a  certificate  it  must  be  complied  with.^  And  mere  delivery  of  a 
certificate  by  a  local  officer  of  a  fraternal  beneficiary  association 
does  not  obligate  the  association  where  conditions  precedent  to  such 
delivery  have  not  been  complied  with.^    But  even  though  delivery 

**  Cunningham  v.  ISoval  Neiglibors  McLendon  v.  Woodmen  of  the 
of  America,  24  S.  Dak/489,  140  Am.  World,  106  Tenn.  695,  64  S.  W.  36, 
St.  Rep.  793,  124  N.  W.  434.  52  L.R.A.  444. 

^^  National  Aid  Assoc,  v.  Braohter,  ^  Crohn  v.  Order  of  United  Com- 
65  Neb.  378,  91  N.  W.  379,  aft'd  93  mercial  Travelers  of  America,  170 
N.  W.  1122.  Mo.  App.  273,  156  S.  W.  472. 

^°  Crohn  V.  Order  of  United  Com-  ^  O'Neal  v.  Sovereigii  Woodmen  of 
mercial  Travelers  of  America,  170  the  World,  130  Kv.  68,  113  S.  W. 
Mo.  App.  273,  156  S.  W.  472 ;  Wag-   52. 

ner  v.  Supreme  Lodge  Knights  &  *  Pledger  v.  Sovereign  Camp 
Ladies  of  Honor,  128  Mich.  660,  8  Woodmen  of  the  World,  17  Tex.  Civ. 
Del.  Leg.  N.  815,  87  N.  W.  903.  App.  18,  42  S.  W.  653. 

In  certain  societies  no  certificates  ^  Kolosinski  v.  Modem  Brother- 
issued,  see  §  146  herein.  hood  of  America,  175  Mich.  684,  141 

^  Wilson  V.  Interstate  Business  N.  W.  589.  See  i\[c Williams  v.  Mod- 
Men's  Accident  Assoc.  160  Iowa,  184,  ern  Woodmen  of  America  (1912) 
140  N.  W.  860;  Kirk  v.  Sovereign  —  Tex.  Civ.  App.  — ,  142  S.  W. 
Camp  of  Woodmen  of  the  World,  641.  See  §  53c  herein. 
169  M  ..  App.  449,  1.55  S.  W.  39;  ^  kolosinski  v.  Modern  Brother- 
.royte  Ins.  Vol.  T— 22.  337 


§  lU8d  JOYCE  OX  INSURANCE 

to  the  applicant  in  person  is  required  still  the  society  may  be  es- 
topped to  deny  tlie  regularity  of  an  initiation  as  where  it  was  per- 
mitted to  proceed  although  the  society  had  knowledge  of  an  error 
in  the  certiticate.' 

If  initiation  is  expressly  forbidden  by  the  association's  constitu- 
tion the  fact  that  deceased  liad  l)een  initiated  will  not  warrant  a 
recovery  on  a  certificate  never  delivered  to  him,  when  such  delivery 
is  a  condition  precedent  to  a  binding  contract.* 

§  108d.  Delivery  of  certificate  to  subordinate  lodge,  local  camp, 
etc. — Delivery  may  be  made  and  the  contract  completed  by  send- 
ing a  certificate  to  a  subordinate  lodge  for  a  meml)er.^  So  where 
the  Supreme  Lodge  of  the  Knights  of  Honor  sends  a  benefit  cer- 
tificate properly  signed  and  sealed  to  a  subordinate  lodge,  for  a 
person  who  has  applied  for  membership,  been  balloted  for,  elected, 
and  had  a  degree  conferred  upon  him,  and  has  paid  his  fees  and 
passed  a  medical  examination  which  has  been  approved,  the  con- 
tract relations  between  him  and  the  supreme  lodge  are  complete, . 
although  the  subordinate  lodge  has  not  delivered  to  him  the  cer- 
tificate.^" But  compliance  with  conditions  precedent  contained  in 
the  constitution  and  by-laws  or  in  the  certificate  may  become  neces- 
sary to  make  sufficient  a  delivery  to  an  oflicer  of  a  subordinate  lodge 
'for  delivery  to  the  member."  And  delivery  of  a  certificate  and 
payment  of  assessments  and  dues  may  be  prerequisite  to  liability  on 
a  duly  executed  certificate  sent  to  the  clerk  of  a  local  society.^^  Rut 
the  clerk  of  a  local  camp,  without  authority  under  the  laws  of  the 
order  so  to  do,  cannot  preclude  recovery  by  not  delivering  a  bene- 
fit certificate,  where  the  member  had  fulfilled  all  requirements  en- 
titling him  to  such  certificate,  and  was  in  good  standing  at  the  time 
of  his  death  and  this  is  so  even  though  insured  was  not  in  good 
health  when  the  certificate  was  demanded.^^ 

The  beneficiary  may  recover  where  the  certificate  issued  by  the 
sovereign  camp  was  sent  to  the  wrong  local  camp  through  mistake, 
even  though  the  insured  was  killed  before  correction  of  the  error 

hood  of  America,  175  Mich.  684,  141  ^°  Lorscher     v.      Supreme     Lodge 

N.  \V.  589.  Kniglits  of  Honor,  72  Mich.  316,  2 

'O'Neal  v.  Sovereign  Camp  Wood-  L.R.A.  206,  40  N.  W.  545. 

men  of  the  World,  130  Kv.  68,  113  "  Wilcox      v.      Sovereign      Camp 

S.  W.  52.  Woodmen  of  the  World,  76  Mo.  App. 

^McLendon     v.     Sovereign     Camp  578,  1  Mo.  App.  Rep.  525. 

Woodmen   of  tlie  World,   106   Tenn.  ^^  ^Yii^^.^,^      v.      Sovereign      Camp 

695,  52  L.R.A.  444,  64  S.  W.  36.  Woodnu-n    of    the    World,    76    Mo. 

^Wagner      v.       Supreme      Lodge  App.  5/3,  1  Mo.  App.  Rep.  525. 

Knights    &    Ladies    of    Honor,    128  ^^  Pledger      v.      Sovereign      Camp 

Mich.    660,   8   Det.    Leg.    N.    815,   87  Woodmen  of  the  World,  17  Tex.  Civ. 

N.  W.  903.  App.  18,  42  S.  AV.  653. 

338 


COMPLETION  OF  CONTJJACT  §§  108e-108g- 

I)y  >c!i(Iiii.u  it  to  the  riglit  local  camp  for  delivery  and  although  it 
\viis  a  condition  ])recedent  that  the  certificate  t^hould  be  personally 
dehvercd  and  an  assessment  paid  before  benefits  should  accrue  it 
appeai-ing  that  deceased  had  oft'ered  to  pay  said  assessment.^* 

§  108e.  Mutual  benefit  societies  or  associations:  delay  in  execut- 
ing and  delivering  certificate:  retention  of  certificate. — Mere  delay 
in  executing  and  delivering  a  benefit  certificate,  during  which  the 
applicant  dies,  will  not  give  any  right  of  recovery  on  the  certificate 
where  the  terms  of  the  contract  prevent  it  from  taking  effect  until 
its  delivery  to  the  applicant  in  good  health,  the  delay  not  being  un- 
reasonable or  caused  l>y  bad  faith,  and  there  being  no  time  pre- 
scribed within  which  the  delivery  should  be  made.^^  If  an  associa- 
tion retains  the  certificate  after  the  contract  rights  of  a  member 
with  the  association  have  become  fixed  such  retention  does  not  pre- 
clude a  I'ecovery.^^ 

§  108f.  Where  officer  of  society  acts  as  custodian  of  certificate. — 
It  constitutes  a  sufficient  delivery  of  a.  certificate  when  mven  to  an 
officer  of  a  beneficial  society  who  acts  by  request  as  custodian  for 
assured.^'' 

§  108g.  Mutual  benefit  societies  or  associations:  delivery  of  cer- 
tificate or  prepayment  of  dues  during  life  or  good  health. — No 
recovery  can  be  had  against  fraternal  and  beneficial  orders  on  the 
death  of  an  applicant  before  delivery  to  him  of  the  benefit  certi- 
ficate where  such  delivery,  while  in  good  health,  Avag  by  the  terms 
of  the  application,  certificate,  constitution  and  by-laws,  a  condi- 
tion precedent  to  its  taking  eft'ect.^*  So  the  actual  payment  of  the 
premium  during  the  applicant's  good  health  may  by  the  terms  of 
the  application  and  the  policy  be  a  condition  precedent  to  the 
liability  of  an  as.sociation  which  no  agent  thereof  can  waive 
by  accepting  a  note  contrary  to  the  policy  prohibition.^^  Nor 
can  any  recovery  be  had  by  the  beneficiary  upon  a  certificate 
where  the  insured  named  therein  died  before  it  was  issued  and 

^*  Sovereign    Camp    Woodmen    of  healtli,     notes     in     17    L.R.A.(N.S.) 

the  World  v.  Dees,  45  Tex.  Civ.  App.  2144;     43    L.R.A.(N.S.)     725;     and 

318,  100  S.  W.  366.  L.R.A.1916F,  171. 

^^  McLendon    v.    Sovereign    Camp  ^®  Groat    Hive    Ladies    of    Modern 

Woodmen   of  the  World,  106   Tenn.  Maccabees  v.  Hodge,  130  111.  App.  1. 

695,  52  L.R.A.  444.  64  S.  W.  36.  ^^  Supreme    Court,    Order    of    Pa- 

On  ett'oct  of  delav  in  passing  ui)oii  Iricians   v.    Davis,    129   Mich.   318,   8 

application,   see   notes   in   36   L.R.A.  Det.  Leg.  N.  970,  88  N.  W.  874. 

(N.S.)    1211,    and    r>l    L.R.A. (N.S.)  !» McLendim    v.    Sovereign    Camp 

873.     On  effect  of  stij)uliition   in  ni>-  Witudnion   of   tlu'   Woi-ld,    106   Tenn. 

Iilicnlioii  on   i)olicy  of  life  insurance  695,  52  T>.IJ.A.  444,  ()4  S.   \V.  36. 

that   it   shall   not  l)ecoine  hindiiio    \!n-  ^^  Kccsc    \-.    Fidelity    INfiitual    Life 

less  (l('li\('i-ed  to  a.'^surcd  while  in  iiool  /xh.soc.  Ill  (Ja.  182,  36  S.  K.  ()37. 

339 


§  108g  JOYCE  ON  INSURANCE 

which  was  never  dehvered  either  actually  or  constructively,^" 
and  where,  under  the  by-laws,  expressly  made  a  part  of  the 
contract  delivery  of  the  certificate  by  the  cani})  clerk  and  the 
payment  of  dues  and  assessments  to  the  applicant  is  required, 
such  condition  i^recedent  must  be  complied  with  and,  a  de- 
livery by  the  head  office  is  insufficient.  And  if  the  insured  is  in- 
jured before  compliance  with  such  condition  no  liability  attaches, 
nor  is  a  payment  sufficient  when  made  after  the  accident  to  a  local 
clerk  in  the  absence  of  a  ratification  or  waiver.^  But  the  clerk 
of  a  benevolent  society,  without  authority  so  to  do  cannot  prevent 
a  recovery  on  the  certificate  by  refusing  delivery  because  of  a 
change  in  the  applicant's  health,  even  though  under  the  consti- 
tution and  by-laws  of  the  society  delivery  of  the  certificate  is  a 
prerequisite  to  liability.^  And  an  agreement  or  stipulation  in  a 
contract  of  fraternal  insiu'ance  with  a  married  woman,  that  the  con- 
tract shall  not  take  eft'ect  unless  delivered  to  her  "while  in  sound 
health"  is  not  violated  by  reason  of  the  applicant  being  pregnant 
at  the  time  of  the  delivery  of  the  policy.^  If  the  by-laws  provide 
for  an  increase  of  ])enefits  and  tlie  issuance  of  a  new  certificate  to 
a  member  in  good  standing,  upon  compliance  with  certain  condi- 
tions as  to  health  and.  fees,  without  any  other  reservation  or  dis- 
cretion as  to  the  issuance, — the  society  is  liable  where  such  condi- 
tions are  complied  with  even  though  insured  dies  after  issuance  of 
the  new  certificate  but  before  its  delivery  to  him.'* 

2°  Alexander   v.    Woodmen    of   the       ^  Rasieot    v.    Roval    Neighbors    of 
World,  161  Ala.  561,  49  So.  883.         Amerioa,  18  Idaho,    8.5,    29    L.R.A. 

iLathrop  v.  xModern  Woodmen  of    (N.S.)   433,  108  Pac.  1048. 
America,  5()  Oreg.  440,  lOG  Pae.  328,        *  Ran<'ii)her   v.    Women   of   AVood- 
109  Pac.  81.  craft,  50  Wash.  68,  96  Pac.  829. 

2  Pledger  v.  Sovereign  Camp 
Woodmen  of  World.  17  Tex.  Civ. 
App.  18,  42  S.  W.  653. 

340 


CHAPTER  V. 
REINSURANCE. 

§  112.     Reinsurance   defined. 

§  112a.  Evidence  admissible  to  show  "reinsurance"  has  technical  mean- 
ing of  agency  reinsurance. 

§  112b.  When   transfer   is   not   reinsurance,   but    an   illegal   transaction : 
assets  a  trust  fund :  deposit  with  state. 

§  113.     Reinsurance:  nature  of  contract. 

§  114.     Reinsurance:  validity  of  contract. 

§  115.     Reinsurance :  validity  of  company's  acts :  its  powers. 

§  115a.  Same  subject. 

§  115b.  Same  subject :  mutual  benefit  societies,  associations,  and  co-oper- 
ative companies :  Lloyds. 

§  116.     Reinsurance  not  within  statute  of  frauds. 

§  117.     Relations  between  parties  and  between  insured  and  reinsurer. 

§  117a.  Same  subject :  Lloyds. 

§  118.     Insurable  interest  of  reinsurer. 

§  118a.  Same  subject:  wagering  contract. 

§  118b.  Same  subject :  Lloyds. 

^  119.     Reinsurance:  the  risk. 

§  119a.  Same  subject. 

§  119b.  Same  subject:  mutual,  etc.,  companies, 

§  120.     Duration:  term  of  risk  may  be  controlled  by  original  insurance. 

§  121.     Custom  of  underwriters  may  affect  risk. 

§  122.     Limitation  of  risk  of  specified  date:  change  of  risk. 

§  122a.  Reinsurance    not    retroactive :    property    destroyed    when    contract 
made. 

§  123.     Limitation  of  risk  to  particular  locality. 

§  124.     Condition  as  to  assignment. 

§  125.     Condition  as  to  other  insurance. 

§  126.     Conditions:  time  limit  for  suing:  award. 

§  127.     Amount  of  reinsurance. 

?5  127a.  Same  subject:  separate  risks:  notice. 

§  128.     Representations  and  warranties  in  reinsurance:  eoneealment. 

§  129.     Abandonment  unnecessary  in  reinsurance. 

§  130.     Proofs  of  loss  in  reinsurance. 

§  131.     Extent  of  reinsurer's  liability. 

341 


§  112  JOYCE  OX  INSURANCE 

§  131a.  Same  subject. 

§  131b.  Same  subject :  mutual  benefit  societies,  etc. 

§  131e.  Same  subject :  reinsurer  not  liable  where  risk  materially  altered. 
§  132.     Agreements  affecting  reinsurer's   liability. 
^  133.     Reinsurer's  liability:  pro  rata  clause. 
§  133a.  Same    subject. 

§  134.   Reinsurer's  liability:  compromise:  insolvency  of  insurer, 
§  134a.  Same  subject :  mutual  benefit  societies,  etc. :  trust  fund. 
§  135.     When    suit    may    be    brought    against    reinsurer:    rights    of    origi- 
nal insured. 
§  135a.  Same  subject. 

§  135b.  Same  subject :  mutual  benefit  societies,  etc. 
§  135c.  Same  subject :  Lloyds. 
§  136.     Reinsurance:  recovery:  evidence. 

§  136a.  Same  subject :  mutual  benefit  societies,  etc. :  fraud  of  directors. 
§  136b.  Same  subject:  recovery  of  statutory  deposits. 
S  136c.  Reinsurance:  recovery  induced  by  fraud:  subrogation:  deduction 

of  expenses  of  recover^'. 
§  137.     Reinsurer  bound  by  judgment :  notice  to  defend. 
§  138.     Defenses  available  to  reinsurer. 

§  112.  Reinsurance  defined. — Tveinsuranee  is  a  contract  whereby 
one  for  a  consideration  agrees  to  indemnify  another  against  loss 
or  liability  assumed  by  the  latter  a.s  insurer  of  a  third  party.  Other 
definitions  have  been  given  as  follow.s:  A  contract  ''by  which  one 
insurer  causes  the  sum  which  he  has  insured  to  be  reassured  to 
him  by  a  distinct  contract  with  another  insurer,  with  the  object 
of  indemnifying  himself  against  his  own  responsibility.'"'  *  ''Re- 
insurance is  an  indenmity  against  a  risk  incurred  bj^  the  assured 
in  consequence  of  a  prior  insurance  upon  the  same  property  or 
some  part  of  it."  ®  Reinsurance  is  an  insurance  by  the  first  in- 
surer of  the  whole  or  of  some  part  of  his  interest  in  the  risk 
created  by  his  contract  of  insurance.  Reinsurance  is  a  contract 
that  one  insurer  makes  with  another  to  protect  the  first  from  the 
risk  he  has  already  assumed.''^  "A  contract  whereby  one  party, 
called  the  'rein.surer,'  in  consideration  of  a  premuim  paid  to  him, 
agrees  to  indemnify  the  other  against  the  risk  assumed  by  the  lat- 

^  Phoenix  Ins.  Co.  v.  Erie  Trausp.  Dak.  1895,  sec.  4533 ;  Rev.  Codes,  Id. 

Co.   117   U.    S.   312,   323,   29   L.   ed.  1899;    Civ.    Code,    sec.    4533;     Rev. 

873,  6  Sup.  Ct.  750,  1176,  per  Gray.  Codes  S.  Dak.  1903,  sec.  1879. 

See  Doering's  Annot.  Cal.  Civ.  Code,  ^  Mutual  Safetv  Ins.  Co.  v.  Hone, 

sees.   2646-49;   I^vLsee's  Dak.   Code,  2  N.  Y.  235,  240,"  per  Gardiner,  J. 

sees.   1559-62;    Annot.     Code    Mont.  '  Ruohs   v.    Traders    Fire   Ins.   Co. 

(1895),  sec.  .^530;   Civ.   Code  Mont.  Ill    Tenn.    405.    102    Am.    St.    Rep. 

(Rev.    Codes   1907) ;    Rev.    Code    N.  720,  78  S.  W.  85. 

342 


REINSURANCE  §  112 

ter  by  a  policy  in  favor  of  a  third  party."  '  "Reinsurance  is  where 
an  insurer  procures  the  whole  or  part  of  the  sum  which  he  has  in- 
sured (i.  e.,  contracted  to  pay  in  case  of  loss,  death,  etc.)  to  be 
insured  again  to  him  by  another  person.  This  is  commonly  done 
in  case  of  marine  insurance.  .  .  .  Formerly,  by  19  George 
11.,  chapter  37,  section  4,  reinsurance  Ava^  prohibited  except  in 
certain  cases,  but  this  provision  was  repealed  by  30  and  31  ^^ic- 
toria,  chapter  23."  ^  Sometimes,  however,  reinsurance  exists  where 
an  insurer  about  to  become  insolvent,  or  for  other  reasons,  trans- 
fers his  risks  to  another  company,  or  consolidates  with  some  other 
company,  and  the  transferee  or  consolidated  company  assumes  all 
the  risks. ^°  Whether  a  contract  is  or  is  not  one  of  reinsurance 
has  been  before  tlie  courts  in  several  cases.     It  was  held  in  New 

'1  Phillips  on  Ins.    (3d  ed.)    209,  1  Biddle  on  Ins.  sec.  378;  New  York 

see.  374.                                             .  Boweiy  Fire  Ins.   Co.  v.  New  York 

9  Sweet's     Dictionary    of    English  Fire  Ins.  Co.  17  Wend.  (N.  Y.)  359, 

Law  (1882)  689.           "  363. 

For  other  definitions  see :  North    Carolina. — Shoaf    v.    Pala- 

Uniled     States. — Allemannia     Fire  tine    Ins.    Co.    127    N.    Car.    308,    80 

Ins.    Co.    V.    Firemen's  Ins.  Co.  209  Am.  St.  Rep.  798,  37  S.  E.  451,  30 

U.   S.   326,  52   L.   ed.   815,   28    Sup.  Ins.  L.  J.  276. 

Ct.  544,  14   Am.   &   lllng.   Ann.    Cas.  Ohio. — Commercial      Mutual      Ins. 

948,  37  Ins.  L.   J.   316;   Providence-  Co.  v.  Detroit  Fire  &  Marine  Ins.  Co. 

Washington  Fire  Ins.  Co.  v.  Atlanta-  38  Ohio  St.  11,  15,  16,  43  Am.  Rep. 

Birmingham  Fire  Ins.  Co.   (U.  S.  C.  413. 

C.)   166  Fed.  548,  38  Ins.  L.  J.  461.  See    also    Rapalje    &    La\vrence's 

California.— Union      Mutual      Ins.  Law  Diet.  1089,  title  "Reinsurance;" 

Co.    V.   American    Fire   Ins.    Co.    107  1   jMay  on  Ins.    (3d  ed.)    sec.  11;  11 

Cal.  327,  28  L.R.A.  692,  330,  40  Pac.  Am.    &    Eng.    Ency.    of    Law,    343; 

431.  Words  &  Phrases,  vols.  7,  8. 

Illinois. — Vial    v.    Norwich    Union  "Beinfuirance  reserve'' meaning  oi: 

Fire  Ins.  Co.  257  111.  355,  Ann.  Cas.  Assessment     associations.       Betts    v. 

I914A,  1224n,  44  L.R.A. (N.S.)  317n,  Connectieu't    Indemnity    Association, 

100  N.    E.   929,   aff'g  172   111.   App.  71    Conn.    751,    44    Atl.    65;    Conn. 

134.  Genl.   Stat.  sees.  2854,  2870. 

Louisiana. — Chalaron  v.  Insurance  ^°  Glen  v.  Hope  Mutual  Life  Ins. 

Co.   of  North  America,  48  La.  Ann.  Co.  56  N.  Y.  3^9;  .Johannes  v.  Phoenix 

1582,   1590,   36   L.R.A.    742,   21    So.  Ins.   Co.    66    Wis.   50,   57   Am.   Rep. 

267.  249. 

Xebraska. — Allison  v.  Fidelity  Mu-  "The  insurance  of  the  solvency  of 

tual  Fire  Ins.  Co.  81  Neb.  494,  129  an  insurer  is  permitted  and  practiced 

Am.    St.   Rep.   694,  116   N.  W.   274,  in  some  foreign  countries   (Le  Guid- 

37  Ins.  L.  J.  602.  on,  c.  2,  art.  20;  Ord.  Louis  XIV.  h. 

New  Jersefi. — Iowa   Life   Ins.   Co.  t.    art.   20;    Valin,  h.   t.   65),   but   it 

V.  Eastern  Mutual   Life  Ins.  Co.   64  seems    never    to    have    been    in    use 

N.  ,J.   L.   340,   45  Atl.   762,   29   Ins.  amongst  us:"    1  Marshall  on  Ins.  (ed. 

L.  J.  299,  305.  1810)  *145;  Emerigon  on  Ins.  (Mere- 

New  York. — London  Assur.  Co.  v.  dith's  ed.  1850)    c.  viii.  sec.   114,  p. 

Thompson,  170  N.   Y.  94,   62  N.  E.  205. 
1066,  31  Ins.  L.  J.  351,  quoting  from 

343 


§  112  JOYCE  ON  INSURANCE 

York  that  there  was  no  contract  of  reinsurance,  but  simply  an 
original  insurance,  where  certain  policies  upon  a  mortgage  interest 
were  directed  to  be  canceled,  and  the  agent  applied  to  defendant  to 
reinsure  the  risks,  which  it  agi-eed  to  do,  but  under  a  subsequent 
agreement  the  policies  were  issued  directly  to  the  insured. ^^ 

The  word  "reinsurance"  is  sometimes  used  in  the  sense  of  a 
renewal  insurance.  Thus,  where  partnership  property  was  in- 
sured by  the  defendants,  and  thereafter  one  of  the  partners  hav- 
ing purchased  the  others'  interest  applied  to  defendant's  agent  for 
reinsurance,  which  was  agreed  to  be  effected;  but  the  agent  gave 
the  latter  a  paper  which  he  supposed  was  a  policy  and  so  did  not 
examine  it,  but  it  was  in  fact  only  a  renewal  of  the  old  policy,  and 
the  court  held  it  a  new  contract,  subject  to  the  same  terms  and  con- 
ditions as  the  first.^^  There  is,  however,  as  is  evidenced  by  the  pre- 
ceding definitions  of  reinsurance,  a  clear  distinction  between  that 
contract  and  a  renewal  of  a  contract  of  insurance. 

Reinsurance  is  also  entirely  different  from  what  is  termed  ''dou- 
ble insurance"  or  an  insurance  of  the  same  interest.^^ 

Again,  an  agreement  whereby  one  insurance  company  cove- 
nants that  it  will  make  as  prompt  adjustments  and  payments  of 
loss,  if  any,  under  any  and  all  of  its  policies  of  another  insur- 
ance company,  as  it  would  under  its  own  policies,  is  a  much 
broader  contract  thain  a  mere  technical  contract  of  reinsurance." 
If  a  tax  is  imposed  upon  gross  premiums  received  including  in 
addition  to  all  other  premiums,  such  premiums  as  are  collected  from 
policies  subsequently  canceled  and  "from  reinsurance"  the  word 
"reinsurance,"  as  used  in  the  statute  imposing  such  tax  means  prem- 
iums collected  by  such  company  for  reinsuring  the  risks  of  other 
companies,  and  such  premiums  are  included  in  the  term  "gross 
premxiums  received,"  the  sum  paid  out  by  such  company  to  other 
companies  for  reinsuring  its  own  risks  is  also  included  and  cannot 
be  deducted  from  the  amount  thereof,  since  such  sum  is  an  expense 
of  the  business. ■^^ 

"  Excelsior  Fire  Ins.  Co.  v.  Royal  553.  38  Ins.  L.  J.  461 ,  469.     See  also 

Ins.  Co.  55  N.  Y.  343,  14  Am.  Rep.  §  2455  herein. 
271.  ^*  Whitney  v.  American  Ins.  Co.  — 

12  Pierce  v.  Nashua  Ins.  Co.  50  N.  Cal.  — ,  56   Pac.   50,   28   Ins.   L.  J. 

H.  297,  9  Am.  Rep.  235.  254,  aff  d  127  Cal.  464,  59  Pac.  897. 

i^Allemannia     Fire     Ins.     Co.     v.        ^^  People  (ex  rel.  Continental  Ins. 

Firemen's  Ins.  Co.  209  U.  S.  326,  52  Co.)  v.  Miller,  177  N.  Y.  515,  70  N. 

L.  ed.  815,  28  Sup.  Ct.  544,  14  Am.  E.  10,  modifying  and  affg  85  N.  Y. 

&  Eng.  Ann.  Cas.  948,  37  Ins.  L.  J.  Supp.  1142,  90  App.  Div.  618,  under 

316,  per  Mr.  Justice  Peckham,  cited  N.  Y.  Tax  Law,  sec.  187  (Laws  1896, 

in  Providence-Washington  Fire  Ins.  c.  908,  p.  859,  Laws  1901,  c.  118,  sec. 

Co.  v,  Atlanta-Birmingham  Fire  Ins.  1,  p.  297). 
Co.  (U.  S.  C.  C.)  166  Fed.  548,  551, 

344 


EEINSURANCE  §§  112a-113 

§  112a.  Evidence  admissible  to  show  "reinsurance"  has  technical 
meaning  of  agency  reinsurance. — It  may  be  shown  that  the  word 
''reinsurance"  as  used  in  dealings  between  Hre  insurance  companies 
and  their  agents  has  a  technical  meaning  of  agency  reinsurance  and 
excludes  home  office  reinsurance.^* 

§  112b.  When  transfer  is  not  reinsurance,  but  an  illegal  trans- 
action: assets  a  trust  fund:  deposit  with  state. — A  transfer  made 
by  a  coriDoration  of  all  its  assets,  which  constitute  a  trust  fund  for 
the  payment  of  its  debts  and  upon  wdiich  creditors  have  a  lien 
against  stockholders  and  all  transferees  except  bona  fide  purchas- 
ers, including  bonds  deposited  under  the  insurance  law  with  the 
superintendent  of  insurance  as  a  condition  to  its  being  permitted 
to  do  business,  to  a  transferee  upon  its  agi*eement  to  assume  lia- 
bility on  all  outstanding  policies,  pay  all  death  losses  reported,  as 
per  schedule  attached  to  the  contract,  and  certain  named  commis- 
sions to  the  agents  as  well  as  rents  named,  is,  where  the  transferee 
must  be  deemed  to  have  known  that  the  transfer  would  make  the 
corporation  unable  to  pay  its  debts  and  terminate  its  exist- 
ence by  depriving  it  of  all  means  of  carrying  into  effect  the 
object  of  its  existence,  and  where  the  transfer  is  made  against  the 
will  of  a  considerable  number  of  stockholders  and  leaves  a  certain 
number  of  creditors  unprotected,  it  is  not  such  a  reinsurance  as  is 
contemplated  by  the  insurance  law  of  New  York,  but  is  as  to  credi- 
tors an  illegal  transaction  which  will  be  set  aside." 

§  113.  Reinsurance:  nature  of  contract. — Although  the  decisions 
show  a  difference  in  many  respects  betw^een  the  contract  of  insur- 
ance and  reinsurance,  yet  the  contract  involves  no  legal  principles 
essentially  different  from  those  applicable  to  contracts  generally.^' 
Nor  does  the  contract  necessarily  differ  in  form  from  original  in- 
surance.^^ It  is  held  that  an  agreement  to  reinsure  is  not  a  con- 
tract of  guaranty.^" 

As  we  have  seen  elsewhere,  reinsurance  is  a  contract  of  indemnity 
to  the  reinsured.^    This  rule,  however,  is  qualified  in  Illinois  to  the 

1^  Federal  Ins.  Co.  v.  Gilmonr,  206  v.  New  York  Fire  Ins.  Co.  17  Wend 

Mass.  203,  92  N.  E.  36,  39  Ins.  L.  J.  (N.  Y.)    359;   Pliiladelphia   Ins.   Co. 

1135.  V.   Washington  Ins.   Co.   23   Pa.    St. 

"  Raymond    v.    Security    Trust    &  250,  253. 

Ins.    Co.    89    N.    Y.    Supp.    753,   44  20  Bartlett  v.  Firemen's  Ins.  Co.  77 

Misc.  31;   Ins.   Law   N.   Y.   1892,   c.  Iowa,  158,  41  N.  W.  601. 

690.  p.  1940,  sec.  22.     See  §§  134a,  ^  §  28  lierein.     See  also  the  follow- 

136b   herein.      See   Wolfe   v.    Wash-  ing-  cases : 

ington  Life  Ins.  Co.  118  N.  Y.  Supp.  7>?r//ff»o.— Eagle  Ins.  Co.  v.  Lafay- 


ette Ins.  Co.  9  Ind.  443,  446. 


59!) 

^^  Smith  V.  St.  Louis  Mutual  Life  Iowa. — Bartlett  v.  Firemen's  Ins 
Ins.  Co.  2  Tenn.  Ch.  727,  742.  Co.  77  loAva,  158,  41  N.  W.  601. 

^^New  York  Bowery  Fire  Ins.  Co.       Massachusetts. — Faneuil   Hall  Ins. 

345 


§  114  JOYCE  ON  INSURANCE 

extent  tliat  tlie  aiTioiiiit  paid  by  the  reinsured  to  tlio  insured  is  the 
measure  of  indemnity  from  the  reinsurer.^  We  shall  consider  the 
force  of  this  qualification  hereafter.^  But  by  a  contract  of  reinsur- 
ance, in  whatever  language  expressed,  the  obligation  of  the  rein- 
surer's to  indemnify  the  insurer  against  his  liability  for  the  loss  by 
(ire  of  the  property  insured.*  It  is  a  contract  of  indemnity  against 
liability  and  not  merely  against  damage.*  It  is  simply  to  indem- 
nify the  original  insurer  for  a  loss  he  may  sustain  upon  his  con- 
tract of  insurance;  it  is  a  guaranty  to  reimburse  him  for  any  sum 
he  maj^  be  compelled  to  pay  under  his  contract  of  insurance  with 
the  owner.^ 

Reinsurance  not  to  take  effect  except  above  a  stated  amount  of 
loss  is  a  contract  of  a  special  character,  and  cannot  be  inferred  from 
the  mere  statement  of  the  original  insurer,  "we  carry  our  line," 
made  when  effecting  the  reinsurance,  least  of  all  when  the  written 
contract  of  reinsurance  is  in  the  ordinary  form  of  insurance  against 
loss  to  the  extent  of  the  amount  specified  in  the  policy.' 

§  114.  Reinsurance:  validity  of  contract. — Reinsurance  was  a 
valid  contract  at  conmion  law.^  but  in  1746  an  act  was  passed^ 
in  England  providing  that  it  should  not  be  lawful  to  make  reas- 
surance unless  the  insurer  should  be  insolvent,  become  a  bankrupt, 
or  die.^°     This  statute  remained  in  force  till  the  act  of  1864  " 

Co.  V.  Liverpool  &  London  &  Globe  *  Hunt  v.  New  Hampshire  Under- 

Ins.    Co.    153    Mass.    63,    67,    68,    10  writers  Assn.  68  N.  H.  305,  73  Am. 

L.R.A.  423,  2'6  N.  E.  244,  per  Mor-  St.  Rep.  602,  38  L.R.A.  514,  38  Atl. 

Ion,  .T. ;  Manufacturers'  Fire  &  Ma-  14."). 

rine  Ins.  Co.  v.  Western  Assur.  Co.  *  Union  Mutual  Ins.  Co.  v.  Ameri- 

145   Mass.   419,  423,  14  N.   E.   632,  can  Fire  Ins.  Co.  107  Cal.  327,  330, 

per  Knowlton,  J.  28  L.R.A.  692,  40  Pac.  431;  Cal.  Civ. 

Minnesota.— Bixrnes  v.  Hekla  Fire  ^'^de  sec.  2648. 

Ins.  Co.  56  Minn.  38,  45  Am.  St.  Rep.  Allison    v.   Fidelity   Mutual   Fire 

438,  57  N.  W.  314.  I"^-   ^'"-   §1   Neb.   494,  129   Am.   St. 

nj.        r.  ■  1      Tir  f     1      T        RPP-    '''*4,   116   N.    W.   274,   37   Ins. 

Ohio. — (  ommercial      Mutual      Ins.   y     j    ^^^  ' 

Co.  V.  Detroit  Fire  &  Marine  Ins.  Co.      '7'/,!    ,"'  -,  n         e 

38  Ohio  St.  11,  15,  16.  ^    H     a'"'"''"-  ""-    ,«"'r^''f        i^«o 

'      '  _  North   Amenca,   48   La.   Ann.    1582, 

Pennsi/lranm.— Fame        Insurance  33  l j^ ^   j^o,  21  So.  267,  26  Ins.  L. 

Company  s  Appeal,  83  Pa.   St.   396,  j    4(55 

398;  Philadelphia  Trust,  Safe  De-  '  'spyopiiix  Ins.  Co.  v.  Erie  &  West- 
posit  &  Ins.  Co.  V.  Fame  Ins.  Co.  9  grn  Transp.  Co.  117  U.  S.  312,  323. 
Phila.  (Pa.)  292  (a  contract  of  in-  09  L.  ed.  873,  6  Sup.  Ct.  750,  1176: 
demnity  against  liability  and  not  Merrv  v.  Prince,  2  Mass.  176,  185; 
merely  against  damage).  New  York  Bowery  Fire  Ins.   Co.  v. 

2  Illinois  Mutual  Ins.  Co.  v.  Andes  New   York    Fire  Ins.    Co.   17   Wend. 

Ins.  Co.  67  111.  362,  16  Am.  Rep.  (520.  ( N.  Y.)  359,  362; 
See    also    Commercial    Mutual    Ins.       ^  10  Geo.  II.  c.  37. 
Co.   V.   Detroit   Fire   &   Marine   Ins.        i"  This  act  covered  reassurances  in 

Co.  38  Ohio  St.  11,  15,  16,  England  made  in  England  either  l)y 

'  See  §  118  herein.  British  subjects  or  foreigners,  whoth- 

34() 


REINSURANCE  §  ll.j 

was  passed,  providing  that  reassurance  of  sea  risks  might  lawfully 
he  made. ^2  Reinsurances  have  always  been  valid  and  lawful  in 
this  country,  and  in  an  early  Ahi.>*sachusetts  case  the  court  de- 
cides that  the  statute  19  George  II.,  chapter  37,  did  not  extend  to 
the  then  British  colonies  here,  and  was  not  the  law  of" that  common- 
wealth." It  was  held,  however,  in  a  ISIaryland  case  "  that  the 
English  prohibitory  statute  "  was  in  force  in  that  state,  and  re- 
lated exclusivelv  to  marine  reinsurance.     Reinsurance  is,  however, 

*-  7  7 

not  only  a  valid  contract,  but  is  now  commonly  practiced,  and  it 
is  held  that  a  parol  agreement  by  the  underwriter  to  transfer  a 
risk  to  another  is  not  within  the  prohibition  of  the  .statute  19  George 
II.,  chapter  ?u  }^ 

§  115.  Reinsurance:  validity  of  company's  acts:  its  powers. — 
An  insurance  company  euii>o\vered  ''to  make  contracts  of  insur- 
ance," or  "all  kinds  of  insurance  against  losses  by  tire,"  may  make 
a  contract  of  reinsurance."  So  an  insurance  company  having 
a  controlling  interest  in  another  company  may  delay  a  statement 
demanded  of  the  superintendent  of  insurance  from  the  latter  com- 
pany, and  may  reinsure  its  risks  and  absorb  its  assets  pro  rata,  and 
the  assets  of  both  companies  being  available  to  the  superintendent 
and  the  reinsured  company,  which  is  solvent,  the  act  of  the  rein- 
surer is  neither  a  fraud  against  the  state  nor  against  public  policy,^* 
and  a  failure  to  comply  with  a  state  law  requiring  a  certain  amount 
of  capital  as  a  condition  precedent  to  doing  business,  wdll  not  pre- 
vent an  in.surance  company  from  indemnifying  itself  by  reinsur- 
ance against  risks  already  assumed. ^^  Again,  where  a  majority  of 
the  policy  holders  of  a  reinsured  company  assented  to  the  transfer 

cr  on  Briti.sh  or  foreign  sliips:     An-  Erie  &  Western  Transp.  Co.  117  U. 

<lree  v.   Fletcher,  2  Term    Rep.   161;  S.  32.3,  20  L.  ed.  873,  6  Sup.  Ct.  750, 

1  Marshall  on  Ins.   (ed.  1810)    *144.  117ti;  Commercial  Mutual  Ins.  Co.  v. 

See  Edgar  v.  Fowler,  3  East,  222.  Detroit   Fire  &  Marine   Ins,   Co.   38 

"27   &   28   Viet.   c.   56.      See  also  Ohio    St.    11,   16,   17,   43    Am.   Rep. 

30  &  31  Vict.  c.  23.  413;  Merchants'  Manufacturei-s  Mu- 

^^  Reinsurance  valid   under  inland  tual  Ins.  Co.  v.  Washington  Mutual 

revenue     (stamp    duties)     act,    1864  Ins.  Co.  1  Handy  (Ohio)  408,  425. 

(27  &  28  Vict.  c.  56)   sec.  1;  marine  ^^  Consolidated  Real  Estate  &  Fire 

ins.  act,  1906  (6  Edw.  VII.  c.  41,  sec.  Ins.  Co.  v.  Cashow,  41  Md.  59. 

9)    (1);  17  Earl  of  Halsbury's  Laws  ^^  10  Geo.  II.  c.  37. 

of  Eng.  p.  375,  see.  742.  is  Delver  v.   Barnes,   1   Taunt.   48. 

^3  Merry    v.    Prince,    2   Mass.    176,  ^'^  New  York  Bowery  Fire  Ins.  Co. 

185;  Hastie  v.  De  Pevster,  3  Caines  v.  New  York  Fire  Ins.  Co.  17  Wend. 

(N.  Y.)   190,  103;  New  York  Bow-  (N.  Y.)  359,  363. 

ery  Fire  Ins.  Co.  v.  New  York  Fire  "  Alexander  v.   Williams,   14  Mo. 

Ins.  Co.  17  Wend.  (N.  Y.)   359,  362.  App.  13. 

This  case  holds  that  there  is  no  dif-  ^^  Davenport     Fire     Ins,     Co.     v. 

ference    between    cases    of    fire    and  Moore,  50  Iowa,  619. 
marine   risks.      Phceni-x    Ins.    Co.    v. 

347 


§  115  JOYCE  ON  INSURANCE 

of  the  assets  to  the  reinsuring  company,  it  was  held  that  the  court 
might  decree  that  all  the  secm'ities  deposited  as  a  trust  fund  be 
given  .to  those  policy  holders  who  liad  neither  expressed  assent  nor 
disx'^ent.^"  and  a  policy  holder  in  the  reinsured  company  who  has 
paid  premiums  to  the  transferee  company  without  such  latter  com- 
pany issuing  a  new  policy  to  liim  is  entitled  to  recover  from  the 
reinsurer  the  premiums  so  jDaid.  with  interest  thereon.^  But  the 
reinsurance  of  the  policies  and  the  transfer  of  the  whole  reserve  of 
a  solvent  life  insurance  company  to  an  insolvent  company  without 
security  by  managers  who  have  bought  the  st-ock  of  the  former  un- 
der an  agreement  that  its  contract  obligations  shall  be  rigorously 
fulfilcd  to  the  same  extent  and  in  the  same  manner  as  if  no  change 
had  taken  place,  is  a  breach  of  such  contract  obligations  and  of 
such  agi'eement;  ^  and  where  the  intendment  of  a  law  was  that  in- 
surance should  be  made  in  the  name  of  and  for  the  benefit  of 
the  company,  and  not  individual  policy  holders,  such  law  cannot 
be  construed  so  as  to  allow  reinsurance  in  favor  of  a  policy  holder, 
and  thus  bring  it  into  conflict  with  a  statute  forbidding  a  corpora- 
tion giving  preferences.^ 

In  Iowa  it  is  held  that  a  contract  by  a  mutual  benefit  society, 
by  which  it  agrees  to  assume  the  liabilities  and  death  losses  of  an- 
other association,  is  ultra  vires  and  void.*  And  an  agreement  by 
Avhich  one  life  insurance  company  transfers  to  another  all  its 
assets  in  consideration  that  the  latter  company  will  reinsure  the 
risks  and  assume  the  debts  and  liabilities  of  the  former  company, 
is  ultra  vires  and  void,  although  the  vendor  company  is  authorized 
to  reinsure  its  risk.^  So  the  right  of  a  mutual  life  insurance 
company  to  reinsure  does  not  carry  with  it  the  power  to  sell  or  trans- 
fer all  its  property  against  the  will  of  the  minority  of  its  policy 
holders,  and  a  contract  to  so  sell  or  transfer  is  ultra  vires  and  void 
as  against  the  dissenting  policy  holders.^  If  the  subject  matter 
has  been  destroyed  and  the  reinsurer,  with  knowledge  thereof  is- 
sues a  policy  such  act  is  ultra  vires.'    But  where  the  act  of  incor- 

20  Relfe  V.  Columbia  Life  Ins.  Co.  ^  g„ji(h  y    g^.  Louis  Mutual  Life 

10  Mo.  App.  150.  Ins.  Co.  2  Tenn.  Ch.  727. 

^  Smitli  V.   St.  Louis  Mutual  Life  ^  Price   v.    St.   Louis   Mutual   Life 

Ins.  Co.  2  Tenn.  Ch.  727.  Ins.  Co.  3  Mo.  App.  262;  see  Harden 

2  Mason  v.  Cronk,  125  N.  Y.  496,  v.  St.  Louis  Mutual  Life  Ins.  Co.  3 
28  N.  E.  224,  35  N.  Y.  859,  reversing  Mo.  App.  248. 

27  N.  Y.  122.  '  Henshaw    v.    Insurance    Co.    of 

3  Cassevly  v.  Manners,  48  How.  State  of  N.  Y.  73  N.  Y.  Supp.  1,  36 
Pr.  (N.  Y.)  219.  Misc.    405.      See   Union    Ins.   Co.   v. 

*  Tw  iss  V.  Guaranty  Life  Assn.  87   American  Fire  Ins.  Co.  107  Cal.  327, 
•Iowa,  733,  55  N.  W.  8,  22  Ins.  L.  J.   28  L.R.A.  692,  48  Am.  St.  Rep.  140, 
ri39.  As  to  ultra  vires,  see  §§  115b,   40  Pac.  431,  Avhere  both  parties  were 
334,  350  herein.  ignorant  of  the  loss. 

348 


^ 


REINSURANCE  §  113a 

poration  of  tlie  F.  company  made  it  subject  to  the  general  laws  of 
(lie  i^tate  authorizing  companies  to  "reinsure  themselves/'  and  the 
F.  Company  agreed  to  reinsure  the  E.  Company  on  all  its  term 
risks  in  certain  enumerated  states,  and  to  indemnify  it  upon  all 
losses  in  one  class  not  exceeding  five  thousand  dollars,  and  in  others 
known  as  "extra-hazardous,"  exceeding  a  certain  sum,  and  to  con- 
tribute in  various  proportionate  amounts  on  another  class  of  risks, 
and  the  losses  were  payable  under  a  j^ro  rata  clause,  and  losses 
were  sustained  in  the  Cliicago  fire  in  1871,  it  was  held  that  the 
contract  was  not  ultra  vires,  and  would  be  enforced  by  a  court  of 
equity.' 

§  115a.  Same  subject. — The  right  of  an  insurance  company  to 
manage  its  business,  to  determine  the  terms  of  its  continuance,  how 
long  it  shall  carry  on  its  general  business,  Avhether  or  not  and  when, 
if  at  all,  it  shall  turn  over  business  by  reinsuring  its  risks,  and  ceas- 
ing to  do  business  is  vital  to  its  existence,^  and  the  charter  of  an  in- 
svu-ance  company  may  empower  it  to  make  contracts  of  reinsurance 
through  its  board  of  directors  of  any  or  all  risks, ^°  where  a  life  in- 
surance company  is  not  insolvent  in  a  conuiiercial  or  insurance  sense 
when  doing  a  losing  business  and  unable  to  continue  without  fur- 
ther loss,  it  may  by  a  contract  made  in  good  faith  for  the  best 
interests  of  its  creditors  and  stockholders,  sell  out  its  business  to 
another  corporation  and  cease  operations;  but  a  policy  holder  can- 
not be  compelled  to  relinquish  the  old  company  and  accept  reinsur- 
ance in  the  new  one.^^  An  insurer  may- also  have  power  to  reinsure 
a  single  risk  even  though  a  statute  requires  the  consent  in  writiii<>; 
of  two  thirds  of  the  "holders  of  the  policies"  proposed  to  be  insured, 
where  the  antecedent  words  "the  reinsurance  of  any  .  .  ,  out- 
standing risks"  are  used.  ^^  If  the  original  insured  is  notified  by  the 
reinsurer  of  the  transfer  of  the  risk  and  that  it  will  be  continued  on 
the  same  terms  the  presumption  is  that  the  company  have  power  to 
insure  him  on  the  terms  specified.^ 


13 


'Fame  Insuranre   Company's  Ap-  89   N.   Y.   Supp.   7.53,   44   Misc.   31, 

peal,  83  Pa.  St.  39G.  cilinrj  to  the  last  proposition  People 

9  Moore  v.   Security   Trust  &  Life  v.    Empire  Mutual  Life  Ins.   Co.  02 

Ins.  Co.  168  Fed.  496,  93  C.  C.  A.  N.  Y.  105. 

052,  38  Ins.  L.  .J.  745,  ease  of  agency        ^^  Iowa   Life   Ins.    Co.   v.    Eastern 

contract  and  reinsurance.  Mutual  Life  Ins.  Co.  64  N.  J.  L.  340. 

"Jameson   v.    Hartford   Eire   Ins.  45    Atl.    762,   29    Ins.    L.    J.    299.    2 

Co.  44  N.  Y.  Supp.  15,  14  App.  Div.  "Genl.    Stat.    N.   J.    p.    1755,   sec.    66 

380.  Ins.   act. 

^^  Raymond    v.    Socurilv    Trust    &        ^^  iMutual    Reserve    Life    Ins.    Co. 

Life  Ins.   Co.   97   N.   Y.   Supp.   557,  v.  Koss,  42  Tud.  App.  021.  SG  X.  E. 

Ill  App.   Div.   191,  rev";;  !)1    N.   Y.  506. 
Supp.  1041,  101  App.  Div.  54(i,  revV 

349 


§  115b  JOYCE  OX  INSURANCE 

§  115b.  Same  subject:  mutual  benefit  societies,  associations,  and 
co-operative  companies:  Lloyds. — Under  a  Federal  decision  the 
transfer  of  membership  of  one  company  to  another  being  legally 
made  results  in  making  ipso  facto  members  those  who  did 
not  request  to  be  transferred.  But  unless  surrendered  and  ex- 
changed for  certificates  of  the  reinsuring  company  nothing  con- 
tained in  the  contract  of  transfer  or  reinsurance  between  the  two 
associations  or  companies  can  alter  the  express  terms  of  the  original 
contracts  of  the  members  of  the  reinsured  company  or  association.^* 
But  under  another  Federal  case  a  member  may  be  l)ovnid  by  subse- 
quently enacted  by-laws  of  the  reinsurer  where  the  reinsurance  con- 
tract so  provides,  and  the  policy  holder  accepts  reinsurance  and 
without  dissent  pays  premiums  to  the  reinsurer  after  notice  received 
of  such  by-laws.^^  In  Iowa  a  statute  which  provides  for  the  transfer 
of  risks  by  reinsurance  conditioned  upon  a  two-thirds  vote  of  a 
meeting  of  the  members  and  that  upon  approval  of  such  transfer 
a  member  who  files  his  preference  for  transfer  to  another  corpora- 
tion than  the  one  specified  in  the  contract  shall  be  accorded  privi- 
leges in  aid  of  such  transfer,  and  also  limiting  rein.surance  or  trans- 
fers to  companies  authorized  to  transact  business  in  the  State  of 
the  enactment,  does  not  dictate  the  reinsurance  contract  nor  pro- 
hibit limiting  thereby  the  reinsurance  or  transfer  only  of  members 
in  o'ood  standino-.ifi  In  INIis-souri  it  is  decided  that  a  fraternal  in- 
surance  company  as  a  reinsurer  of  a  like  company  cannot  impose 
upon  a  member  of  the  reinsured  company  who  applied  for  rein- 
surance a  condition  precedent,  such  as  a  medical  examination,  to 
membership,  where  the  terms  of  the  reinsurance  contract  plainly 
])rovided  that  any  member  of  the  fraternal  company,  which  had 
reinsured,  should  if  in  good  standing  be  entitled  unconditionally  to 
reinsurance.^''^  Under  a  Pennsylvania  decision  a  mutual  insurance 
company  agreed  to  transfer,  or  cause  to  be  transferred  to  the  best  of 
its  ability  its  membership  to  another  company  and  the  statute  under 
which  the  contract  was  made  expressly  conceded  the  right  of  every 
member,  on  giving  the  required  notice,  to  elect  to  be  transferred  to, 
or  reinsured  by  another  comijany.     Tlie  latter  company  agreed  to 

1*  Robinson  v.  I\Iutual  Reserve  Life  ^^  Parvin  v.  Mutual  Reserve  Life 
Ins.  Co.  (Scovill  v.  Same)  (U.  S.  C.  Ins.  Co.  125  Iowa,  05,  100  N.  W.  39. 
C.)  182  Fed.  850,  40  Ins.  L.  J.  190.  "  Cox  v.  Kansas  City  Life  Ins. 
189  Fed.  .348,  111  C.  C.  A.  79;  175  Co.  154  Mo.  App.  464,  135  S.  W. 
Fed.  ()24,  (529,  159  Fed.  564.  1013.       Exawiiie    Holies    v.     :\Iutual 

^5  Stark   V.   Northwestern   National    K'oserve    Fund    Life    Assoc.    220    111. 
Life  In.s.  Co.  (U.  S.  C.  C.)  167  Fed.   -00,  77  N.  E.  198. 
191.     See  also  Ni)rtliwesleni  Life  Ins. 
Co.  V.  (irav.  Kit   Feci.  488,  88  C.  C. 
A.  430,  37  Ins.  L.  .J.  757. 

350 


I 


REINSURANCE  §  115b 

reinsure  the  members  of  the  former  company  upon  execution  of 
satisfactory  transfer  a|ij)lications.  on  the  basis  of  their  original  ap- 
plications to  it.  and  to  rate  them  at  the  same  amount,  with  premi- 
ums payable  at  the  same  date,  as  they  were  then  paying  in  it.  It 
was  determined  ihal  the  reinsurer  was  bound  to  reinsure  all  the 
members  who  elected  to  have  their  insurance  transferred,  and  could 
not  insist  upon  a  condition  that  the  age  and  health  of  the  applicant 
must  be  satisfactory,  and  that  a  subsequent  tender  of  the  premium 
was  waived  by  a  refusal  to  accept  the  same.^^  Under  a  Kew  York 
decision  a  reinsuring  company  may  accept  upon  consolidation  a 
policy  of  a  person  who  is  of  a  prohibited  age  at  that  time  where  he 
had  attained  that  age  when  the  policy  was  originally  issued  to  him.^^ 
]n  Nebraska  a  con.-^olidation  contract  between  associations  of  dif- 
ferent states  whereby  a  domestic  association  assumes  the  risks  of  a 
foreign  corporation  is  ultra  vires  and  being  so  is  void  also  in  the 
State  of  the  forei^Q,n  corporation  even  though  the  laws  of  the  latter 
State  regulate  the  consolidation  of  such  societies.^"  Under  another 
decision  in  that  State  nmtual  fire  insurance  companies  organized 
under  the  laws  of  1897,  are  not  authorized  to  transact  a  reinsurance 
business.  So  that  a  contract  of  reinsurance  made  by  such  a  com- 
pany is  ultra  vires. ^ 

If,  however,  a  mutual  insurance  company  on  the  assessment  plan 
reinsures  in  another  like  company  and  there  is  no  express  provision 
in  the  statute  governing  such  companies  which  prohibits  them  from 
reinsuring  property,— a  claim  will  not  be  sustained  in  an  action  on 
a  fully  executed  contract  of  reinsurance  that  such  contract  is  ultra 
vires.^     In  Washington  a  beneficial   association   which   reinsures 

"  National  Mutual  Ins.  Co.  v.  Mutual  Ins.  Co.  188  Mo.  1,  86  S.  W. 
Home  Benefit  Soc.  181  Pa.  443,  237,  34  Ins.  L.  J.  435.  The  Court, 
40  W.  N.  C.  517,  5!)  Am.  St.  Rep.  per  Burgess,  P.  J.,  said:  "Defen'd- 
()66,  37  Atl.  519,  26  Ins.  L.  J.  917.  ant,  however,  claims  that  this  eon- 
See  Welch  V.  Chicago  Guaranty  Fund  tract  is  ultra  vires  for  the  reason 
Life  Soc.  2  Mo.  App.  Rep.  678,  that  the  defendant  had  no  power  to 
noted  under  §  131b  herein.  make   it,   and   that    the    State    Town 

^8  Rand    v.    Massachusetts    Beneti-  Mutual  had  no  power  to  enter  into 

cial  Life  Assoc.  42  N.  Y.  Supp.  26,  such    a    contract,    Ix'cause    it    is    e.x- 

18  ]\Iisc.  336.  pressly   prohibited   from   transacting 

20  Starr  v.   Bankers'  Union   of  the  such    "business.      But    we    are    unable 

Worhd,    81    Neb.    377,    129    Am.    St.  to   agree   to   this  contention,  for  the 

Rep.  684,  116  N.  W.  61,  37  Ins.  L.  reason,  as  we  have  before  said,  that 

J.  74(5,  there  is  no  express  provision   in  the 

^Allison   v.    Fidelitv   Mutual    Fire  statute    prohibiting    such    companies 

Ins.   Co.   81  Neb.  494,  129   Am.   St.  from  reinsuring  property  which  has 

Rep.    694,   116    N.    W.    274,    37    Ins.  already  been  insured  by  another.     At 

L.  J.  602,  Sess.  Laws  Neb.  1897,  c.  most  the  prohibition  is  only  by  im- 

45,  p.  257.  plication;    and    as    the    contract    be- 

2  Cass  County  v.  Mercantile  Town  I  ween  the  companies  was  executed  to 

351 


§  IIG 


JOYCE  ON  INSURANCE 


another  association  is  estopped,  after  the  death  of  a  reinsured  mem  • 
ber,  to  deny  its  authority  to  enter  into  such  a  contract  where  it  re- 
ceiyes  dues  from  such  member  paid  under  tlie  original  contract.^ 

The  risks  of  town  and  co-operatiye  insurance  companies  may, 
under  the  hiws  of  New  York  1898,  be  reinsured  in  another  com])any 
of  like  character  and  the  subject  matter  thereupon  becomes  "in- 
sured property"  within  the  meaning  of  said  law.* 

In  New  Jersey  the  legislation  of  1895,,  1896,  does  not  prohibit, 
but  confers  upon  Lloyds  associations  authority  to  reinsure  and  in- 
demnify themsehes  against  loss  in  whole  or  in  part,  sustained  by 
reason  of  risks  taken  by  them  against  loss  by  fire  or  lightning.* 

§  116.  Reinsurance  not  within  statute  of  frauds. — Reinsurance 
is  not  a  contract  within  the  statute  of  frauds,  and  is  not  a  promise 
to  pay  the  debt  of  another,  and  need  not  be  in  writing.^  Notwith- 
standing the  aboye  rule,  it  is  held  in  Egan  v.  Fireman's  Insurance 
Company'  that  if  one  insurance  company  assumes  the  policies  of 
another,  that  such  agreement  cannot  be  enforced  unless  in  writing, 
as  it  is  a  promise  to  pay  the  debt  of  another.  Under  an  Oregon  de- 
cision a  consideration  must  be  shown  in  order  to  satisfy  the  statute 
of  frauds,  inasmuch  as  a  reinsurance  contract,  whereby  a  life  com- 
pany reinsures  the  members  of  a  fraternal  benefit  company  and 
agrees  to  meet  its  liabilities,  constitutes  a  promise  to  pay  another's 
debt.* 


the  fullest  extent  on  the  part  of  the 
Nevada  company,  and  the  policy  is- 
siu'd  to  it  by  dftVndant  in  considera- 
tion thereof,  the  defense  of  viltra 
vires  is  not  open  to  defendant  in 
this  case.  It  is  well  settled  in  this 
State  that  the  defense  of  ultra  vires 
is  not  open  to  a  corporation  when 
tlie  contract  has  been  fully  executed 
on  the  part  of  the  other  contracting 
party,  and  is  not  expressly  prohibit- 
ed by  law.  .  .  .  There  is  no  ques- 
tion of  pul)lic  policy  invoked  in  this 
case,  and  it  woidd  operate  as  a  fraud 
upon  j)laintitf  not  to  compel  de- 
fendant to  pay  the  amount  of  the 
policy  in  question;  and  it  should 
not  be  allowed  to  keep  the  premium 
paid  and  escape  liability  upon  the 
policy  on  the  ])lea  of  ultra  vires," 
reviewing  numerous  authorities.  See 
also  Sage  v.  Finney,  156  Mo.  App. 
30,  13o  S.  W.  996.  See  §§  334, 
350  herein. 


^  Campbell  v.  Order  of  Washing- 
ton, 53   Wash.  398,  102  Pac.  410. 

*  Skaneateles  Paper  Co.  v.  Ameri- 
can Undei-writers  Fire  Ins.  Co.  114 
N.  Y.  Supp.  200,  61  Misc.  457;  Ins. 
Law  (Laws  N.  Y.  1898,  p.  1506,  c. 
654)  sec.  278  as  am'd. 

*  Sun  Insurance  Office  of  London 
v.  Merz,  64  N.  J.  L.  301,  52  L.K.A. 
330,  45  Atl.  785,  29  Ins.  L.  J.  344, 
under  "Fire  Lloyd's  Statute  of  March 
25,  1895"  as  am'd  by  act  March  26, 
1896   (P.  L.  N.  J.   1896,  p.  156). 

6  Bartlett  v.  Fireman's  Fund  Ins. 
Co.  77  Iowa,  155,  41  N.  W.  601.  See 
Commercial  Mutual  Marine  Ins.  Co. 
V.  Union  Mutual  Marine  Ins.  Co.  19 
How.   (60  U.  S.)  318,  15  L.  ed.  636. 

7  2^7   La.   Ann.   368. 

*  Spande  v.  Western  Life  Indemni- 
ty Co.  61  Oreg.  220,  111  Pac.  973, 
122  Pac.  38. 


352 


REINSURANCE  §  117 

§  117.  Relations  between  parties  and  between  insured  and  rein- 
surer.—The  reinsured  sustains  as  to  the  reinsurer  the  same  relation 
wliich  tlie  original  insured  bears  to  the  reinsured,  but  the  contract 
of  reinsurance  does  not  inure  to  the  benefit  of  the  assured,  and  he 
has  no  claim,  legal  or  equitable,  against  the  reinsurer,^  nor  any  in- 
terest in  the  contract, ^°  and  the  reinsurer  is  not  liable  to  him  either 
as  surety  or  otherwise."  There  is  no  privity  of  contract  between 
them,  and  the  reinsured  remains  solely  liable  on  the  original  insur- 
ance, and  he  alone  has  a  claim  against  the  reinsurer.^^  jj^^j.  ^.^^  ^^^ 
insured  claim  a  right  to  share  in  the  assets  in  case  of  reinsurance 
where  he  has  not  paid  for  ten  years,  on  the  ground  that  the  mnsur- 
ance  excused  such  payment ;"  and  in  case  of  insolvency  of  the  re- 
insured and  a  recovery  in  full  against  the  reinsurer,  the  insured 
ha.s  no  claim  against  the  reinsured  over  the  per  cent  received 
from  him.^^  Notwithstanding  this  rule,  we  are  inclined  to  agree 
with  Mr.  Parsons  that  the  statement  that  assured  has  no  claim  on 
such  funds  is  ''too  sweeping,  but  that  his  claim  is  one  in  common 
with  other  creditors. "^^    The  rule  that  there  is  no  privity  of  contract 

^  Herckenrath  v.  American  Mutual    Co.    62   Mo.   289,   296,   297,  21   Am. 
Ins.  Co.  3  Barb.  Cb.   (N.  Y.)   63,  1   Rep.  417. 

Barb.  Cb.  (N.  Y.)  363;  Flint  v.  New  Yotk.—Kastie  v.  De  Peyster, 
Westebester  Fire  Ins.  Co.  207  Mass.  3  Caines  (N.  Y.)  190;  Hoffman  v. 
337,  93  N.  E.  646.  Nortb  Britisb  &  Mercantile  Ins.  Co. 

^"Faneuil  Hall  Ins.   Co.  v.  Liver-   70  N.  Y.  Supp.  106. 
pool  &  London  &  Cllobe  Ins.  Co.  1.53        Tennessee.— -Ruohs  v.  Traders  Fire 
Mass.  67,  68,  10  L.R.A.  423,  26  N.  E.    Ins.  Co.  Ill  Tenn.  405,  102  Am.  St. 
244,  per  Morton,  J. ;  Barnes  v.  Hekla   Rep.  790,  78  S.  W.  85. 
Fire  Ins.  Co.  56  Minn.  38,  45  Am.  St.        Texas.— Mutual      Reserve       Fund 
Rep.  438,  57  N.  W.   314;   Delaware   Life   Assoc,   v.   Green,  —   Tex.   Civ. 
Ins.  Co.  v.  Quaker  City  Ins.   Co.  3    App.  — ,  109  S.  W.  1131. 
Grant's  Cas.  71.  "  Empire  Mutual  Life  Ins.  Co.,  In 

Deeruig's   Annot.   Civ.    Code,    Cal.   re,  64  How.  Pr.  (N.  Y.)  51. 
sec.  2649;   Comp.   Laws,  Dak.   1887,       i*  Consohdated  Real  Estate  &  Fire 
sec.   4186;    Annot.    Civ.    Code   Mon.    Ins.  Co.  v.  Casbow,  41  Md.  59,  74. 
]805,  sec.  3533;  Rev.  Code,  N.  Dak.        ^^  He  savs   (1  Mav  on  Ins.    [Par- 
1895,  see.  4.5,36.  sons']   sec.  IIA)  :     "Tbe  assured  bas 

Tbe  original  insured  under  a  ma-  no  distinctive  claim  on  tbose  funds, 
rine  pobey  has  no  rigbt  or  interest  no  claim  different  from  tbat  of  any 
in  respect  to  tbe  reinsurance.  17  otber  creditor  of  tbe  insolvent  eom- 
Earl  of  Halsbury's  Laws  of  Eng.  p.  pany,  but  in  common  witb  tbe  otber 
375,  sec.  743.  creditors  be  did  bave  a  claim.     .     .     . 

Ruobs  V.  Traders  Fire  Ins.  Co.  Tbe  claim  against  the  receiver  was 
111  Tenn.  405,  102  Am.  St.  Rep.  part  of  tbe  assets  in  tbe  bands  of  tbe 
790,  78  S.  W.  85,  93  N.  E.  646.  receiver  to  be  administered  for  tbo 

^2  Minnesota. — Barnes  v.  Hekla  benefit  of  creditors."  This  statement 
Fire  Ins.  Co.  56  Minn.  38,  45  Am.  of  Mr.  Parsons  refers  to  words  of 
St.  Rep.  438,  57  N,  W,  314.  the  court  in  tbe  case  of  Consobdatod 

Missouri. —Strong  v.  Phoenix  Ins.  Real  Estate  etc.  Go.  last  above  cited, 
Joyce  Ins.  Vol.  I.— 23.  353 


§§  117a,  118  JOYCE  OX  INSURANCE 

between  the  insured  and  the  reinsurer  is  subject,  however,  to  such 
exceptions  as  may  arise  from  the  agreement  of  the  i)arties.  as  Avhere 
the  contract  provides  that  the  assured  may  sue  the  reassurer;^^  or 
in  ease  of  transfer  of  its  business  and  consohdation  of  the  insurer 
with  another  company,  the  reinsurer  becomes  directly  hable,  or 
where  the  reinsurer  assumes  all  risks  and  liabilities  of  the  insurer 
here,  the  insured  may  sue  the  reinsurer.^'  And  direct  liability  may 
be  incurred  bj'  the  insurer  to  the  original  insured,  if  the  intention  to 
create  it  sufficiently  appears  from  the  contract  of  reinsurance.^^ 

A  clause  in  a  policy  of  reinsurance  to  the  effect  that  the  reinsurer 
is  made  the  agent  of  the  original  insurer  for  the  purpose  of  doing,  in 
regard  to  outstanding  policies  covered  by  the  contract  of  reinsur- 
ance, all  acts  necessary  to  transfer  said  policies  according  to  their 
terms  and  conditions,  does  not  make  the  reinsurer  the  sole  agent  for 
that  purpose,  or  prevent  the  original  insurer  from  lawfully  consent- 
ing to  a  transfer.^' 

§  117a.  Same  subject:  Lloyds. — The  contract  of  reinsurance  is 
not  with  the  members  individually  of  a  Lloyds  association. 2° 

§  118.  Insurable  interest  of  reinsurer. — The  fact  that  the  insurer 
has  assumed  a  risk  gives  him  an  insurable  interest.^  The  relation 
which  the  reinsured  sustains  to  the  property  at  risk,  as  the  original 
insurer  thereof,  gives  an  insurable  interest.^  Insurers,  however, 
have  no  insurable  interest  in  the  property  insured  by  them,  regard- 
ed in  the  light  of  owners.^  It  is  not  necessary  to  specify  in  the  pol- 
icy that  the  interest  is  a  reinsurance,  although  the  nature  of  the 
contract  would  make  it  advisable  so  to  do  for  practical  reasons.* 

and  quoted  by  him  as  follows :   "  'The  ^  New    York    Bowery    Ins.    Co.    v. 

original  insured  has  no  claim  in  re-  New  York   Fire  Ins.   Co.   17  Wend, 

spect  of  the  money  so  paid.'"  (N.  Y.)   359;  Yonkers  &  New  York 

^^Glen  V.  Hope  Mutual  Life  Ins.  Fire  Ins.  Co.  v.  Hoffman,  6  Rob.  (N. 

Co.  56  N.  Y.  379.  Y.)    316;    Philadelphia    Ins.    Co.    v. 

"Barnes   v.   Hekla  Fire   Ins.    Co.  Washington  Ins.  Co.  23  Pa.  St.  250; 

56  Minn.  38,  45  Am.  St.  Rep.  438,  57  1  Phillips  on  Ins.   (3d  ed.)  209,  see. 

N.  W.  314;  Fischer  v.  Hope  Mutual  375.     See  also  §  941  herein. 

Life  Ins.  Co.  69  N.  Y.  161 ;  Glen  v.  "An    insurer   under   a   contract   of 

Hope  Mutual  Ins.  Co.  56  N.  Y.  37 ;  marine  insurance  has  an  insurable  in- 

Johannes  v.  Phoenix  Ins.  Co.  66  Wis.  terest  in  his  risk,  and  mav  insure  in 

50,  57  Am.  Rep.  248.  respect  of  it."    17  Earl  of  "Halsbuiw's 

^*  Ruohs  V.  Traders'  Fire  Ins.  Co.  Laws  of  Eng.  p.  375,  sec.  742. 

Ill  Tenn.  405,  102  Am.  St.  Rep.  790,  2  Manufacturers'    Fire    &    Marine 

78  S.  W.  85.  Ins.   Co.  v.  Western  Assur.   Co.  145 

i^Faneuil  Hall  Ins.  Co.  v.  Liver-  Mass.   419,   423,   14   N.   E.   632,  per 

pool  &  London  &  Globe  Ins.  Co.  153  Knowlton,  J. 

Mass.   63,  26   N.   E.  244,  10  L.R.A.  » Alliance    Marine    Assur.    Co.    v. 

423.  Louisiana    State    Ins.    Co.    8   La.    1, 

2°  Thompson  v.  Colonial  Assur.  Co.  28  Am.  Dec.  117. 

70  N.  Y.  Supp.  85,  60  App.  Div.  325.  *  This  question  is  considered  in  1 

354 


REINSURANCE  §  118a 

§  118a.  Same  subject:  wagering  contract. — A  contract  of  rein- 
surance of  such  marine  ri^ks  as  the  reinsured  has  when  the  contract 
was  entered  into,  or  might  have  or  take  during  the  year  that  it  was 
to  run,  is  not  void  as  a  wager  policy,  but  is  a  valid  contract  of  in- 
surance.^ So  a  contract  of  reinsurance  against  claims  for  loss  by 
fire,  not  to  exceed  a  certain  amount,  of  property  located  anywhere 
in  the  United  States,  is  not  void  as  a  wagering  contract,  although 
at  the  time  of  the  issuance  of  the  policy  the  party  indemnified  has 
no  insurable  interest  in  a  portion  of  the  property,  where  he  acquires 
such  interest  during  the  life  of  the  policy,  and  retains  it  at  the  time 
when  the  loss  occurs.^  A  reinsurance  of  losses  by  fire  as  part  of  a 
marine  risk  is  in  substance  and  eft'ect  a  marine  insurance,  and  an 
open  policy  of  this  character  for  one  year  is  not  a  wager  policy  al- 
though it  is  intended  to  cover  not  only  risks  which  the  reinsured 
had  taken,  and  Avhich  were  in  force  at  the  date  of  the  policy,  but 
is  also  intended  to  attach  to  and  cover  such  marine  risks  as  the  re- 
insured should  take  thereafter  during  the  continuance  of  the  policy. 
A  contract  is  a  valid  one  of  indenniity  in  regard  to  such  risks  by 
one  insurance  company  with  another,  which  shall  attach  as  the  risks 

Phillips  on  Ins.  (3d  ed.)  270,  sees,  hands  of  this  court"  (ease  decided 
498,  499,  and  he  concludes:  "That  in  1900).  The  court  continues:  "An 
an  assured  may  eft'ect  reins.uranee  examination  of  the  reasons  upon 
directly  on  the  insured  subject  which  the  earlier  rule  rests  has  led 
against  the  risks  or  any  part  of  the  us  to  the  conclusion  that  they  were 
risks  insured  against  in  the  original  not  well  founded,  and,  that  a  con- 
policy,  without  any  disclosure  in  the  tract  by  which  parties  provide  for 
policy,  or  otherwise,  that  it  is  a  re-  indemnity  against  loss  by  fire  upon 
insurance;"  but  he  adds:  "A  pi'acti-  property  to  be  subsequently  acquired 
cal  objection  may  arise  unless  a  re-  by  the  party  indemnified  is  not  in  any 
insurance  is  expressed  to  be  such  sense  a  gaming  contract,  and  void  on 
in  the  policy  ...  on  account  of  that  account;  in  other  words,  that  an 
the  usual  stipulations  .  .  .  rela-  insurable  interest,  subsisting  during 
tive  to  notice  of  prior  and  subsequent  the  risk  and  at  the  time  of  the  loss, 
insurance,  .  .  .  which  renders  it  is  sufficient  to  support  a  policy  in- 
expedient for  both  parties  that  it  suring  against  loss  by  tire."  The 
should  be  so  expressed;"  citing  Mu-  following  eases  were  cited  and  con- 
tual   Safety   Ins.   Co.  v.  Hone,  2   N.  ^idered: 

Y.  235;  Hone  v.  Mutual  Safety  Ins.  Iowa. — Mills   v.   Farmers  Ins.   Co. 

Co.  1  Sand.  (N,  Y.)  137.           '  37  Iowa,  400. 

^  Boston    Ins.    Co.    v.    Globe    Fire  Maine. — Lane     v.     Maine     Mutual 

Ins.  Co.  174  Mass.  229,  75  Am.  St.  Fire  Ins.  Co.  3  Fairf.  (Me.)  44. 

Rep.  303,  54  N.  E.  543.  Massachusetts.— Lee     v.      Howard 

«Sun    Ins.    Office    of    London    v.  Fire   Ins.    Co.   11   Cush.    (65   Mass.) 

Merz,  64  N.  J.  L.  301,  52  L.R.A.  330,  324. 

45  Atl.  785,  29  Ins.  L.  J.  344.     The  New     York.— WoUe     v.     Security 

court,   per    Gummere,    J.,    said   that  Fire  Ins.  Co.  39  N.  Y.  49;  Hoffman 

"up  to  the  present  time  the  question  v.  ^l^tna  Fire  Ins.  Co.  32  N.  Y.  405, 

has  not  received  consideration  at  the  88  Am.  Dec.  337;  Hooper  v.  Hudson 

355 


§§  118b,  119 


JOYCE  ON  INSURANCE 


are  taken  by  the  original  insurer^  But  although  a  purely  wager 
policy  is  void  still  one  who  has  accepted  the  benefits  of  a  partly  in- 
valid policy  will  be  estopped  from  setting  up  its  invalidity.* 

§  118b.  Same  subject;  Lloyds.^A  Lloyds  association  as  an  in- 
surer of  property  against  fire  acquires,  under  the  New  Jersey  stat- 
utes of  1895,  1896,  by  his  contract  an  insurable  interest  therein 
which  he  may  protect  in  whole  or  in  part  by  reinsurance,  by  a  con- 
tract of  indemnity  against  loss.^ 

§  119.  Reinsurance:  the  risk. — The  insurer  may  reinsure  all  or 
])art  of  the  risk  or  liability  he  has  assumed,^"  in  the  absence  of  any 
usage  or  specific  stipulation  in  the  policy  to  the  contrary,^""  whether 
the  perils  be  of  the  sea  or  fire,^^  but  the  same  subject-matter  or  peril 
is  implied  as  in  the  original,  although  it  need  not  be  the  same  spec- 
ific risk  or  identical  hazard,^^  and  while  it  mav  cover  a  less  it  cannot 
cover  a  greater  risk,^^  for  the  contract  of  reinsurance  covers  only  the 
insurable  interest  or  liability  of  the  original  insurer,  and  extends  no 


River  Fire  Ins.  Co.  17  N.  Y. 
424. 

Pennsylvania. — Western  &  Atlantic 
Pipe  Lines  v.  Home  Ins.  Co.  145  Pa. 
346,  27  Am.  St.  Rep.  703,  22  Atl.  665. 

Vermont. — Wood  v.  Rutland  &  Ad- 
dison Mutual  Fire  Ins.  Co.  31  Vt. 
552. 

Wisconsin. — Sawyer  v.  Dodge 
County  Mut.  Ins.  Co.  37  Wis.  503. 
See  §S  148  et  seq.,  901-904  herein. 

'  Boston  Ins.  Co.  v.  Globe  Fire 
Ins.  Co.  174  Mass.  229,  75  Am.  St. 
Rep.  303,  54  N.  E.  543,  28  Ins.  L.  J. 
927. 

*  Sage  V.  Finney,  156  Mo.  App. 
30,  135  S.  W.  996. 

®  Sun  Insurance  OfFice  of  London 
V.  Merz,  64  N.  J.  L.  301,  52  L.R.A. 
330,  45  Atl.  785,  29  Ins.  L.  J.  344; 
N.    J.    Fire    Llovds    act    March    25, 

1895,  as  am'd  March  26,  1896  (P.  L. 

1896,  p.  156). 

i°l  Phillips  on  Ins.  (3d  ed.)  sec. 
376;  Insurance  Co.  of  North  Ameri- 
ca V.  Hibemia  Ins.  Co.  140  U.  S. 
565,  11  Sup.  Ct.  909,  35  L.  ed.  517; 
Chalaron  v.  Insurance  Co.  of  North 
America,  48  La.  Ann.  1582,  36  L.R.A. 
742,  21  So.  267;  London  Assur.  Corp. 
V.  Thompson,  170  N.  Y.  94,  62  N.  E. 
1066,  31  Ins.  L.  J.  351.  Examine 
Insurance  Co.  of  State  of  Pa.  v.  Tel- 
fair, 57  N.  Y.   Supp.  780,  27  Misc. 


247,  rev'd  61  N.  Y.  Supp.  322,  45 
App.   Div.   564.     See   §   127   herein. 

"Section  92  of  the  Insurance  Law 
(Laws  of  1892,  c.  690)  permits  re- 
insurance of  the  whole  or  any  part 
of  any  policy  obligation  in  any  other 
insurance  corporation.  It  is  said, 
however,  that  this  provision  of  the 
statute  does  not  permit  an  insurance 
company  to  reinsure  its  policy  obli- 
gations as  a  whole,  whether  it  does 
or  not,  no  policy  holder  has  made 
himself  a  pai'ty  to  this  action  and 
objected,  nor  has  anj-  individual  cred- 
itor done  so."  Ravmond  v.  Security 
Trust  &  Life  Ins.  Co.  97  N.  Y.  Supp\ 
557,  111  App.  Div.  191,  rev'g  91 
N.  Y.  Supp.  1041,  101  App.  Div. 
546,  44  ^lisc.  31,  per  Houghton,  J. 

^^^  Insurance  Co.  of  North  America 
V.  Hibemia  Ins.  Co.  140  U.  S.  565, 
11  Sup.  Ct.  909,  35  L.  ed.  517. 

^^  New  York  Bowery  Ins.  Co.  v. 
New  York  Fire  Ins.  Co.  17  Wend. 
(N.  Y.)  359. 

^2  Philadelphia  Ins.  Co.  v.  Wash- 
ington Ins.  Co.  23  Pa.  St.  250;  Lon- 
don Assur.  Corp.  v.  Thompson,  170 
N.  Y.  94,  62  N.  E.  1066,  31  Ins. 
L.  J.  351. 

^3  London  Assur.  Corp.  v.  Thomp- 
son, 170  N.  Y.  94,  62  N.  E.  1066, 
31  Ins.  L.  J.  351. 


356 


REINSURANCE 


§  119 


further  than  the  risk  taken  by  it;  it  cannot  stipulate  for  indemnity 
against  a  risk  Avhich  it  has  not  assumed.^*  So  where  the  original 
insurance  covers  a  certain  voj-age,  there  can  be  no  indemnity  for  a 
different  voyage  under  the  contract  of  reinsurance,  ahhougli  the 
pohcy  for  reinsurance  is  made  "subject  to  such  risks,  vaUiations, 
and  conditions,  incUiding  the  risk  of  premium  note,  as  are  or  may 
be  taken*'  by  the  insurer.^*  And  where  a  reinsurance  policy  was  by 
its  terms  equally  applicable  to  two  charters,  both  of  which  were 
known  to  the  reinsuring  company,  such  policy  will  be  presumed  to 
refer  to  the  charter  on  which  the  insured  company  had  issued  its 
policy,  and  which  the  evidence  shows  was  the  one  intended. ^^  Al- 
though the  contract  of  reinsurance  applies  to  the  subject  matter  of 
insurance  specified  in  the  original  policy  and  to  risks  of  the  same 
kind,  the  risk  need  not  be  identical,  and  this  is  the  law,  in  the  ab- 
sence of  special  stipulations  except  such  as  have  no  application  to 
reinsurance,  and  the  words  ''subject  to  coinsurance  clause,"  in  the 
application  of  the  reinsured  company,  may  constitute  a  material 
part  of  the  description  of  the  risk  upon  which  reinsurance  is  sought, 
and  so  affect  the  liability  of  the  reinsurer." 


^*  Commonwealth  Ins.  Co.  v.  Globe 
Mutual  Ins.  Co.  35  Pa.  St.  475. 

^^  Commonwealth  Ins.  Co.  v.  Globe 
Mutual  Ins.  Co.  35  Pa.  St.  475. 

1^  Ocean  Ins.  Co.  v.  Sun  Mut.  Ins. 
Co.  15  Blatchf.  (U.  S.  C.  C.)  249, 
Fed.  Cas.  No.  10,408. 

^'  Royal  Ins.  Co.  v.  Home  Ins.  Co. 
68  Fed.  698,  15  C.  C.  A.  609.  Mc- 
Cormick,  C.  J.,  says:  "The  appellee 
— the  Home  Ins.  Co. — applied  to  the 
appellants  for  reinsurance,  and  re- 
ceived the  respective  policies,  Avhicli 
are  the  subjects  of  the  litigation.  The 
applications  to  the  Koyal  were  made 
on  printed  forms,  with  certain  blanks 
filled  in  in  writing.  The  application 
to  the  Imperial  does  not  appear  to 
have  been  in  writing,  but  was  sub- 
stantially the  same  in  effect  as  those 
made  to  the  Royal,  the  features  of 
which  material  to  note  here  Avere  and 
are  that  the  applicant  warranted  to 
retain  tAventy-five  thousand  dollars, 
and  described  the  property  -applicant 
had  insured  as  'cotton  subject  to  coin- 
surance clause.'  The  Royal  has  now 
abandoned  anj'  contention  on  the  re- 
tention clause.  The  Imperial  still 
insists    on    its    construction    of    thai 


clause,  but  the  proof  abundantly  sup- 
ports the  action  of  the  circuit  court 
on  the  issues  made  on  the  warranty 
by  the  Home  to  retain  twenty-five 
thousand  dollars  or  more  on  the  risk. 
During  the  life  of  these  policies  of 
coinsurance  a  large  amount  of  tlie 
cotton  was  desti'oyed  by  fire.  At  the 
lime  of  the  fire  the  appellee  had  writ- 
ten, and  in  force  on  the  cotton,  sub- 
ject to  the  fire,  policies  Avith  the  co- 
insurance clause  to  the  amount  of 
ninety-seven  thousand  seven  hundred 
dollars  and  policies  w-ithout  the  co- 
insurance clause  to  the  amount  of 
tAventy-five  thousand  dollars.  The 
loss  on  the  cotton  covered  by  the  first- 
named  class  of  these  policies  Avas 
thirty-eight  thousand  seven  hundred 
and  seven  dollars  and  fifty-eight 
cents,  and  the  loss  on  the  other  ex- 
ceeded the  amount  of  the  pohcies. 
There  is  substantially  no  issue  as  to 
Avliat  AA'ere  the  actual  facts  as  to  the 
conh-acts  and  the  loss,  and  there  can 
be  no  dispute  that  if  the  contention 
of  the  appellee  as  to  the  construction 
of  the  contract  of  coinsurance  is  cor- 
rect, the  decree  of  the  circuit  court 
should   be   affirmed. 


357 


Having   found 


§  119a 


JOYCE  ON  INSURANCE 


§  119a.  Same  subject. — Reinsurance  of  a  single  policy  oljligation 
may  be  made  under  a  statute  requiring  the  assent  of  two-tliirds  in 


that  its  construction  of  the  retention  insurance  policies  is  that  the  Home 
clause  is  eoiTect,  it  only  remains  to  are  insured  on  ten  thousand  dollars 
consider  the  other  clauses  of  the  poli-  of  their  liability  as  insurers  under 
cies  on  which  issue  is  joined.  The  their  various  policies  issued  to  vari- 
judgment  and  decree  of  the  circuit  ous  parties  for  various  amounts,  and 
court  construe  these  clauses  in  favor  covering  as  follows:  Ten  thousand 
of  the  appellee,  and  a  majority  of  dollars  on  cotton  in  bales,  their 
the  judges  of  this  court  concur  in  own  or  held  by  them  in  trust  or  on 
that  decision.  The  questions  here  in-  commission,  Avhile  contained  in  the 
volved  are  so  w-ell  stated,  and  the  au-  yard  No.  1,  Shippers'  Press,  New  Or- 
Ihorities.  so  far  as  any  authority  ex-  leans.  A  part  of  this  description  is 
ists,  bearing  on  the  Cjuestion  are  so  clearly  inapplicable  to  the  reinsur- 
well  applied  in  the  brief  of  counsel  ance,  for  the  words,  'their  own  or 
for  appellee,  that,  in  justice  to  our-  held  in  trust  or  on  commission,'  have 
selves  and  to  him,  we  must  adopt  no  meaning  as  between  the  insurer 
and  use  his  reasoning  almost  literal-  and  the  reinsurer.  The  cotton  itself 
ly,  and  substantially  to  the  full  ex-  was  not  the  subject  of  reinsurance  as 
tent  thai  he  has  advanced  it,  there  between  the  insurer  and  reinsurer, 
being  left  little  or  nothing  to  add  to  but  as  between  them  the  subject  of 
or  cjualify  what  he  had  said,  viz.:  It  the  insurance  was  the  liability  of  the 
is  urged  that  the  defendants  are  not  insurer,  as  an  insurer,  on  the  cot- 
liable  for  the  losses  paid  by  the  ton,  owned  or  held  by  the  original 
plaintiff  to  F.  and  B.  because  the  insui-ed.  This  policy  was  issued  for 
jjolicies  issued  to  them  did  not  con-  a  year,  and  to  cover  any  liability 
tain  the  coinsurance  clause.  It  is  that  the  insurer,  •  during  the  year, 
urged  that  the  two  slips  pasted  on  might  assume  as  insurer  of  cotton  in 
the  policies  of  reinsurance  are  de-  the  designated  j^ress.  It  was  not  re- 
scriptive  of  the  risk  assumed  by  the  strieted  to  a  liability  then  existing, 
reinsurer.  The  defendants  are  driven  but  extended  to  future  liability  which 
to  take  this  ground  because  the  re-  might  be  incurred  by  the  Home  on 
insurer  has  insured  the  liability  of  cotton  in  the  Shippers'  Press-yard  1. 
the  original  insurer,  whatever  that  What  was  the  stipulation  as  to  the 
be,  unless  in  the  contract  of  reinsur-  risk  assumed  by  the  reinsurer?  He 
ance  there  can  be  found  some  clause  agreed  to  cover  any  risk  which  the 
"whereby  the  reinsurer  stipulated  that  insurer  might  be  willing  to  take,  for 
it  assumed  no  risk,  unless  llio  original  that  is  the  meaning  of  the  words, 
contract  contained  the  coinsurance  'This  policy  to  be  subject  to  the  same 
clause.  It  is  observed  that  the  i)oli-  risks,  conditions,  etc.,  as  are  or  may 
cies  of  reinsurance  bear  the  follow-  be  assumed  by  the  reinsured,  and 
ing  dates:  That  of  the  Imperial  is  the  loss,  if  any,  payable  pro  rata  at 
dated  Nov.  23,  1891,  and  those  of  the  same  time  and  in  the  same  man- 
the  Koyal  Nov.  12,  '91,  and  Dec.  26,  ner  as  by  said  company,  etc'  Any 
'91;  the  F.  and  B.  policies  are  dated  printed  stipulation  having  reference 
Oct.  12,  '91,  Nov.  19.  '91,  Feb.  9,  '92,  to  the  property  itself  or  the  cash 
Feb.  11,  '92,  and  Feb.  26,  '92.  Only  value  thereof  cannot  be  applied  to 
one  of  the  policies  is  dated  before  the  contract  of  reinsurance  between 
those  of  the  Royal,  and  only  two  the  reinsurer  and  the  reinsured,  be- 
are  dated  Ijefore  that  of  the  Imperial,  cause  the  property  is  not  the  sub- 
Three  of  them  are  dated  after  all  the  ject  matter  of  their  contract.  It  is 
policies  of  reinsui'ance  were  issued,  true  that  the  contract  of  reinsurance 
The  description  of  the  risk  in  the  re-  juust  apply  to  the  subject  matter  of 

358 


4 


REINSURANCE  §  119a 

number  of  the  ''holders  of  the  policies"  proposed  to  be  reinsured 
where  the  antecedent  words  "the  reinsurance  of  any  .  .  .  out- 
insurance  specified  in  the  original  iul  how  far  provisions  which  relate 
policy;  that  is  to  say,  to  cotton  in  to  the  conduct  of  an  insured  person, 
Press-yard  1,  and  to  risks  of  the  as  general  owner  of  that  which  is 
same  kind  as  those  specified  in  the  the  subject  of  the  contract,  shall  be 
original  policy.  In  other  words,  if  given  effect  in  a  policy  to  indemnify 
tlie  original  policy  is  a  contract  of  against  a  risk  which  the  insured  has 
insurance  against  loss  by  fire,  the  re-  taken  on  the  property  of  another, 
insurance  must  be  against  loss  by  The  nature  of  the  risk  against  Avhich 
fire,  and  not  against  loss  by  storms  it  insured,  if  there  was  no  special 
on  land  or  at  sea.  But  the  specific  stipulation  regarding  it,  Avould  sug- 
risk  in  the  policy  of  reinsurance  need  gest  troublesome  questions  with  ref- 
not  be  identical  with  that  in  the  orig-  erence  to  the  applicability  of  these 
inal  policy;  that  is  to  say,  an  orig-  provisions  of  this  peculiar  kind  of 
inal  insurance  may  be  effected  for  insurance,  some  of  which  it  might  be 
six  months,  Avith  use  of  all  ports  of  necessary  to  decide.'  But  in  con- 
the  world,  except  those  of  Texas,  nection  with  the  statement  of  the  risk, 
The  reinsurance  may  be  for  a  single  the  following  sentence  was  inserted, 
voyage  within  bounds  not  prohibited  whicli  relieves  the  court  of  this  dif- 
and  for  a  less  amount :  Philadelphia  Mculty;  'This  policy  to  be  subject 
Ins.  Co.  V.  Washington  Ins.  Co.  23  to  the  same  risks,  conditions,'  etc.,  'as 
Pa.  St.  250.  Such  is  the  law  in  are  or  may  be  assumed  or  accepted 
the  absence  of  stipulations  contained  by  the  insured  company,'  etc.  The 
in  the  lower  printed  slip  annexed  hingUMge  of  the  clause  is  almost 
to  the  policies  sued  on.  That  slip  identic;ii  with  the  language  used  in 
provides  that  this  policy  is  to  be  the  lower  slij)  or  rider  attached  to 
subject  to  the  same  risks,  conditions,  the  policies  sued  on  in  these  cases, 
etc.,  that  are  or  may  be  assumed  by  The  court  said:  'By  this  language 
the  original  insurer.  Hence  rein-  the  defendant  bound  itself  by  what 
surance,  under  these  policies,  is  re-  had  been  done  and  by  what  might  be 
insurance  against  any  of  the  fire  risks  assumed  by  the  plaintiff,  properly 
assumed  by  the  original  insurer  in  pertaining-  to  the  risk  which  it  Avas 
any  of  its  policies  on  cotton  in  Press-  reinsuring.  This  agreement  rendered 
yard  1,  and  on  the  same  conditions  raigatory  many  printed  portions  of 
as  those  contained  in  any  of  the  orig-  the  policy  in  Avhich  it  Avas  inserted, 
inal  policies  issued  by  the  original  This  Avas  special  and  peculiar,  per- 
insurer  to  the  original  insured  on  taining  directly  to  the  subject  matter 
cotton  thus  located.  This  clause  of  the  contract,  and  it  controlled 
gives  to  the  original  insurer  the  privi-  those  pai'ts  of  the  policy  which  were 
lege  of  taking  such  risks  on  cotton  inconsistent  Avith  it.  It  assumed 
in  the  designated  place  as  it  may  knowledge  on  the  part  of  the  defend- 
choose.  The  reinsurer  says:  'I  will  ant  of  all  the  terms  and  conditions 
reinsure  whatever  contract  you  make,  of  the  plaintiff's  policy,  and  it  im- 
and,  to  protect  me  from  any  impru-  plied  that  the  plaintiff",  as  original  in- 
dence  on  your  part,  you  must  re-  surer,  migiit  properly  assume  risks, 
tain  at  least  tAventy-five  thousand  conditions,  etc.,  without  materially 
dollars  on  tlie  same  risk.'  This  view  changing  the  nature  of  the  liability 
is  taken  by  the  supreme  court  of  created  by  the  original  policy.'  This 
Massachusetts  in  Manufacturers'  Fire  Avas  a  ease  of  reinsurance  of  a  risk 
&  Marine  Ins.  Co.  v.  Western  Assur.  on  a  factory  Avhich  had  been  assumed 
Co.  145  Mass.  424,  14  N.  E.  632.  by  the  reinsured  company,  and  the 
The  court  said:     'It  is  often  doubt-   number  of  the  policy  designating  the 

359 


§  119a  JOYCE  ON  INSURANCE 

risk  was  inserted  in  the  contract  of  ted  by  the  reinsurer.  How  was  it 
reinsurance.  The  court  of  appeals  of  possible  to  desci-ibe  these  future  con- 
New  York,  in  the  case  of  Jackson  tracts  of  insurance  intended  to  be 
V.  St.  Paul  Fire  &  Marine  Insurance  covered  by  the  reinsurance?  They 
Co.  99  N.  Y.  129,  1  N.  E.  539,  con-  could  not  be  described  except  as  to 
lirms  the  doctrine  of  the  Massa-  the  species  of  property  and  their 
chiasetts  court.  Justice  Danforth  locality,  and  therefore  the  reinsurer 
says:  'The  reinsurers  had  no  prop-  said  to  the  reinsured:  'We  will 
erty  right  in  the  subject  insured  by  protect  you  against  any  loss  on 
them,  but,  by  underwriting  the  pol-  the  cotton  in  Shippers'  Press-yard  1 
ic}',  rendered  themselves  liable  to  loss  which  you  may  assume  as  insurer, 
by  fire,  and  they  thereby  acquired  an  and  we  agree  to  accept  the  terms  and 
insurable  interest  to  the  extent  of  conditions  3^ou  may  make  with  your 
that  liability.  But  it  Avas  in  relation  customers,  but  you  must  retain,  as 
only  to  the  peril  against  which  they  insurer,  a  liability  of  at  least  twenty- 
had  insured.  It  is  that  to  which  five  thousand  dollars  on  the  risk 
their  request  for  reinsurance  applied.'  which  we  take,  though  we  permit  you 
By  it,  in  effect,  they  say  as  insurers :  to  take  other  reinsurance,  and,  in  case 
'We  have  undertaken  a  risk  as  fol-  of  loss,  we  fix  the  proportions  in 
lows :  It  amounts  to  four  thousand  which  we  are  to  make  payment.  For 
five  hundred  dollars,  and  we  ask  in-  that  purpose  we  put  in  the  follow- 
demnity  against  a  portion  of  it.'  It  ing  stipulation:  This  policy  to  be 
is  not  pretended  that  they  did  not  subject  to  the  same  risks  as  are  or 
state  the  risk  literally  as  they  had  may  be  assumed  by  the  reinsured  corn- 
taken  it,  and  it  Avas,  in  fact,  de-  pany,  and  any  loss  payable  pro  rata 
scribed  in  their  policy  in  terms  simi-  at  the  same  time  and  in  the  same 
lar  to  those  used  in  the  policy  of  re-  manner  as  by  said  company','  etc. 
insurance.  The  case  may  indeed  be  The  court  of  appeals  of  New  York 
taken  in  like  mann'er  as  if  they  had  says,  in  Blackstone  v.  Alemannia  In- 
exhibited  to  the  defendants  the  orig-  surance  Co.,  56  N.  Y.  107,  that  by 
inal  policy,  and  the  defendants  had  the  virtue  of  this  clause  the  defend- 
indorsed  upon  it  an  assumption  of  ant  is  not  bound  to  pay  the  full 
the  risk  of  one  thousand  five  hundred  amount  reinsured  by  its  policy,  but 
dollars.  In  both  these  eases  the  re-  only  such  proportion  of  the  amount 
insurance  applied  to  a  specific  orig-  of  the  loss  as  is  in  the  ratio  of  the 
inal  policy  of  insurance,  designated  amount  of  reinsurance  to  the  amount 
by  number  in  the  contract  of  rein-  originally  insured.  Thus,  the  de- 
surance.  In  these  cases  the  original  fendant's  reinsurance  being  for  half 
contract  of  insurance  had  been  made  the  amount  of  the  onginal  insurance, 
before  the  reinsurance  contract.  In  the  defendant  is  to  pay  half  the  loss, 
this  case  most  of  the  original  insur-  The  agreement  to  pay  pro  rata  Avith 
ance  was  subsequent  to  the  contract  the  original  insurer  whatever  liabili- 
of  reinsurance,  and  none  of  the  poli-  ty  may  be  assumed  is  entirely  in- 
cies  of  insui'ance  originally  issued  consistent  with  the  clause  providing 
prior  to  the  contract  of  reinsurance  for  a  different  basis  of  liability,  and 
are  designated  by  numbers  or  other-  it  has  no  application  to  reinsurance, 
Avise.  Tlie  original  policies  are  not  Avhich  does  not  cover  property,  but . 
only  not  described  in  the  contract  of  covers  only  the  insurable  interest  of 
reinsurance,  but  the  contract  covers  the  reinsured  groAving  out  of  his  lia- 
a  period  of  one  year,  and  it  contem-  bility  as  insurer.  In  the  Massa- 
plated  subsequent  insurance.  It  also  chusetts  case  (145  Mass.  42-i,  14  N. 
contemplated  that  existing  policies  E.  Rep.  632)  it  AA-as  held  that  the 
might  expire  and  ncAV  policies  be  clause  requiring  the  Avritten  consent 
made.     Other  insurance  was  permit-  of  the  company  to  a  change  in  the 

360 


II 


REINSURANCE 


§  119a 


iitle  or  possession  of  llie  property  the  ship,  as  betAveen  the  plaintiffs 
insured  had  no  application  to  the  re-  and  the  defendants,  is  insured  at  one 
insurer,  and  no  notice  of  such  change  thousand  pounds.  The  policy  itself 
need  be  given  to  him.  It  sufficed  if  is  declared  to  be  a  reinsurance,  and 
such  change  Avas  assented  to  by  the  also  it  contains  the  suing  and  labor- 
original  insurer.  In  Uzielli  v.  Boston  ing  clause.  If  it  were  not  for  the 
Marine  Ins.  Co.  15  Q.  B.  11,  13,  it  clause  whereby  the  defendants  were 
was  held  that  the  reinsurer  was  not  rendered  subject  to  the  same  terms 
entitled  to  notice  of  abandonment,  and  conditions  as  were  contained  in 
though  the  primitive  insured  may  the  original  policy,  and  were  to  pay 
have  abandoned  to  his  insurer.  The  as  might  be  paid  thereon,  the  plain- 
court  quotes  Phillips  on  Insurance  tiffs,  in  my  opinion,  would  be  en- 
and  Hastie  v.  De  Peyster,  3  Caines  titled  to  recover  only  eighty-eight 
(N.  Y.)  196.  In  that  case  Chief  Jus-  per  cent,  etc.  The  plaintiffs  rely, 
tice  Kent  says :  'The  reinsurer  has  no  however,  upon  the  special  clause, 
connection  or  concern  with  the  first  whereby  the  defendants  have  under- 
insurance, and  is  at  all  times  bound  taken  to  pay  as  the  French  company 
in  indemnify  his  own  assured  when  shall  have  paid,  and  under  this  clause 
the  other  can  show  that  he  has  been  Ihey  aie  entitled  to  recover  any  sum 
damnified  in  consequence  of  the  first  not  exceeding  one  thousand  pounds.' 
insurance.'  Mr.  Justice  Livingston  This  special  clause  ref en-ed  to  is  in 
sa^ys  there  was  no  privity  at  all  be-  the  main  similar  to  that  contained  in 
tween  the  primitive  insured  and  the  the  lower  slip  of  the  policies  sued 
reinsurer.  In  the  Uzielli  case  it  was  on.  The  defendants  in  this  English 
held  that  the  suing  and  laboring  case  were  reinsurers  of  the  French 
clause  in  an  original  insurance  policy  company,  Avhich  itself  was  a  reinsur- 
and  in  the  policy  of  reinsurance  has  er  of  English  underwriters.  In  this 
no  application  to  reinsurers.  That  case  it  will  be  observed  that  though 
clause  provides  that  in  the  ease  of  the  suing  and  laboring  clause  was  a 
loss  or  misfortune  it  shall  be  lawful  part  of  the  policy  of  reinsurance,  the 
for  the  assured,  his  agents,  etc.,  to  court  held  it  had  no  application  to 
sue,  labor,  and  travel  in  and  about  the  reinsurers.  Why?  For.no  other 
the  safeguard,  defense,  and  recovery  reason  than  that  the  reinsurer  does 
of  goods,  etc.,  and  the  ship,  without  not  insure  the  owner  of  the  ship,  but 
prejudice  to  this  insurance,  to  the  the  insurable  interest  of  the  insurer, 
charges  whereof  the  insurers  agree  Hence  that  interest  is  the  loss  that 
to  contribute.  In  that  case  the  rein-  the  insurer  might  suffer  under  the 
surance  was  for  one  thousand  policy  issued  by  him,  and  the  master 
pounds,  but  the  loss  as  betAveen  the  of  the  rolls  said  the  suing  and  labor- 
insurer  and  the  assured  was  one  hun-  ing  in  that  case  for  the  safeguard  of 
dred  and  twelve  per  cent,  because  the  ship  AA-as  not  by  the  assured  un- 
Ihe  loss  Avas  eighty-eight  per  cent,  der  the  policy  of  reinsurance, 
and  the  expenses  incurred,  Avhen  add-  but  b.y  the  assured  under  the 
ed  to  the  loss,  made  the  original  in-  original  policy,  for  the  ship 
surer  responsible  for  one  hundred  was  not  insured  under  the  reinsur- 
and  twehe  per  cent;  that  is  to  say,  ance  policy.  So  totally  distinct  is 
eighty-eight  per  cent  of  the  loss,  the  original  insurance  from  the  re- 
plus  the  expenses.  The  court  said:  insurance,  that  the  premium  of  re- 
'The  plaintiffs  seeks  to  recover  eighty-  insurance  may  be  less  or  greater  than 
eight  per  cent  Avhich  the  French  com-  that  of  the  original  insurance,  as 
pany  have  paid  for  a  total  loss,  and  Avell  as  the  extent  of  the  risk.  The 
they  seek  to  recover  more  under  the  most  instructive  case  on  the  subject  is 
suing  and  laboring  clause  in  the  the  most  recent — Faneuil  Hall  Ins. 
policy.     NoAv,  in  the  policy  sued  on,  Co.  v.  Liverpool  &  London  &  Globe 

361 


§  llUa  JOYCE  OxV  INSURANCE 

Ins.  Co.  153  Mass.  70,  10  L.K.A.  tention  clause  in  policies  of  reinsur- 
423,  26  N.  E.  244.  The  reinsurance  ance  is  intended  to  discourage  and 
policy  in  that  ease  contained  a  clause  prevent  lull  reinsurance,  and  is,  in 
similar  to  that  in  the  lower  slip  at-  fact,  a  coinsurance  clause  as  between 
tached  to  the  policies  sued  on,  to  the  reinsured  and  his  reinsurer,  for 
wit :  'This  i)oliey  is  subject  to  the  the  retention  clause  is  a  contract  be- 
same  risks,  conditions,  mode  of  set-  tween  the  insurer  and  his  reinsurer 
tlenient,  and,  in  case  of  loss,  payable  that  the  original  insurer  will  not  ef- 
at  the  same  time  and  in  the  same  feet  reinsurance  to  the  extent  of  his 
manner  as  the  policies  reinsured.'  entire  liability,  but  will  carry  himself 
The  court  said  that  many  of  the  pro-  a  part  of  that  liability,  and  the  part 
visions  in  the  printed  blank  would  to  be  carried  was  fixed  in  this  case 
be  inapplicable,  and  quotes  one  pro-  as  not  less  than  twcnty-tive  thousand 
vision  at  the  very  commencement  of  dollars.  Hence  the  retention  clause, 
the  blank,  viz :  'This  company  shall  the  coinsurance  clause,  as  between  the 
not  be  liable  beyond  the  actual  value  reinsured  and  the  reinsurer,  is  in- 
ot  the  insured  property  at  the  time  tended  to  accomplish  an  object  total- 
of  any  loss  or  damage.'  This,  said  ly  diffei-ent  from  the  object  intended 
the  court,  does  not  measure  the  de-  to  be  secured  by  the  coinsurance 
fendant's  liability  under  the  contract  clause  in  the  primitive  policy  issued 
of  indemnity.  Tnder  that  it  may  be  to  the  insured.  It  is,  therefore,  plain 
liable,  not  only  for  the  original  loss,  that  the  clause  in  the  upper  slip  or 
but  for  the  costs  and  expenses  in-  rider  attached  to  the  policies  of  re- 
curred l)y  the  German  company  in  insurance  has  no  application  to  re- 
defending  itself  against  Chauncey's  insurance.  That  clause  provides  'that 
suit.  Again,  in  si)eaking  of  the  pro-  this  company  shall  be  liable  for  only 
vision  (juoted  above,  the  court  says:  such  proportion  of  the  whole  loss  as 
'We  think  this  provision  means,  not  the  sum  hereby  insured  bears  to  the 
that  the  various  terms  in  the  rein-  cash  value  of  the  property  hereby 
sured  policy  as  to  risk,  etc.,  and  insured.'  No  property  whatever  is 
time  and  mode  of  payment  in  case  insured  by  the  reinsurer.  His  policy 
of  loss  are  incorporated  with,  and  applies  to  a  liability  of  the  original 
form  part  of,  the  contract  for  indem-  insurer,  arising  out  of  his  insurance 
nity — so  that,  for  instance,  claims  by  of  the  property,  and  this  liability  is 
the  plaintiff  on  the  defendant  here  the  incorporeal  subject  matter  of  the 
be  settled  by  arbitration,  or  the  i)lain-  reinsurance  contract,  and  is  collateral 
tiff  shall  submit  its  books  to  the  in-  to  the  property.  If  the  above-quoted 
spection  of  the  defendant,  or  shall  clause  were  applicable  to  reinsurance, 
bring  suit  within  one  year — but  that  the  liability  of  the  Imperial  com- 
the  reinsured  or  original  policies  pany  on  its  ])olicy  for  ten  thousand 
furnish  in  these  and  other  particulars  dollars  would  be  only  eight  hundred 
the  basis  upon  which  the  contract  of  and  thirty-three  dollars  and  thirty- 
indenmity  stands,  and  that  in  all  three  cents,  or  one-twelfth  thereof, 
dealings  with  the  original  insured  inasmuch  as  the  amount  insured  (ten 
the  provisions  of  the  policy  issued  thousand  dollars)  is  one-twelfth  of 
to  him  are  to  l)e  observed.'  The  ob-  one  hundred  and  twenty  thousand 
ject  of  the  coinsurance  clause  is  to  dollars,  which  sum,  for  the  purpose 
make  the  owner  of  the  property  carry  of  illustration,  is  assumed  to  be  the 
a  part  of  the  risk,  unless  he  insures  total  value  of  the  cotton  insured, 
to  the  t'lUl  value  of  his  property.  The  This  result  is  almost  absurd  in  the 
purpose  is  to  compel  the  owner  to  face  of  an  agreement  contained  in 
take  out  policies  to  the  full  value  the  i)olicy  of  reinsurance  that  'this 
of  the  proj)eity,  and  pay  premiums  company  will  be  liable,  in  case  of  re- 
on  such  full   value,  whereas  the  re-   insurance,     for    the     loss     sustained 

362 


REINSURANCE  §  119a 

only  in  the  proportion  whieli  the  sum  value  of  the  whole  property  at  the 
reinsured  shall  bear  to  tlie  whole  sum  lime  of  the  Are.  The  answers  insist 
covered  by  the  reinsured  company.'  that  all  the  terms  of  the  contract  be- 
Besides,  there  is  an  express  pro  rata  tween  the  parties  are  to  be  found  in 
clause  in  the  lower  slip  attached  the  policies  of  reinsurance.  We  need 
lo  the  policy  which  proviiles  for  not  therefore  go  beyond  these  poli- 
])ro  rata  payments  to  be  made  by  cies  to  determine  the  rights  of  the 
the  reinsurer  at  the  same  time  and  in  parties,  and  lience  no  case  of  conceal- 
the  same  manner  as  by  the  Home  ment  or  misrepresentation  is  present - 
company.  It  is  apparent,  therefore,  ed  by  the  ple^ding-s.  The  defendant.s 
that  in  case  of  reinsurance  the  value  claim  that  the  clause  just  quoted  is 
of  the  property  is  abandoned  as  a  the  co-insurance  claim  and  that  their 
test  of  proportionate  liability,  and  liability  is  for  only  'such  proportion 
in  place  thereof  is  substituted  the  pro-  of  tlie  whole  loss  as  the  sum  insured 
portion  which  exists  between  the  bears  to  the  cash  value  of  the  whole 
iunount  of  insurance  carried  by  the  property  insured.'  It  appears  to  us 
reinsurer  and  the  total  amount  of  in-  that  this  clause  has  no  application  to 
suranee  carried  by  the  original  in-  reinsurance  and  is  inconsistent  with 
surer.  This  is  necessarily  the  case,  the  pro  rata  clause  which  provides 
as  the  property  is  not  insured  by  the  that  the  reinsurance  is  sul)ject  to  the 
reinsurer;  the  liability  of  the  original  risk  specihed  in  the  original  policy, 
insurer  in  respect  to  the  property,  and  that  the  reinsurer  is  to  pay  the 
being  the  subject  matter  of  the  re-  loss  pro  rata  with  the  reinsured.  It 
insurance  contract.  The  coinsurance  is  urged  that  one  of  the  applications 
clause  cannot  be  said  to  be  deserip-  for  reinsurance  expressly  asks  for 
live  of  the  risk,  as  lietween  the  reinsurance  subject  to  coinsurance, 
reinsured  and  the  reinsurer,  be-  and  appellants  insist  that  this  is  not 
cause  the  risk  which  the  reinsurer  only  a  material,  but  the  most  ma- 
takes  is  the  risk  described  in  the  terial,  of  the  descriptions  of  the  risk, 
original  policy,  whatever  that  may  because  when  these  contracts  of  re- 
be,  unless  some  clause  can  be  found  insurance  were  made,  the  market  rate 
ill  the  reinsurance  contract  which  ex-  at  New  Orleans  upon  policies  on 
pressly  varies  that  description.  We  cotton  containing  the  coinsurance 
Mnd  no  clause  in  the  reinsurance  poli-  clause  was  one  per  cent,  while  those 
cies  which  modifies  the  risk  as  as-  not  containing  such  clause  command- 
sumed  by  the  original  insurer.  Tlie  ed  a  premium  of  one  one-half  per 
comi)laint  is  not  that  any  clause  in  cent.  Let  us  see:  F.  and  B.  had — 
the  reinsurance  policy  has  been  vio-  to  use  round  numbers — sixty  thou- 
hited  by  the  Home  company,  but  that  sand  dollars'  worth  of  cotton.  They 
the  Home  company  did  not  insert  lost  tiiirty  thousand  dollars'  worth, 
llie  coinsurance  clause  in  its  contract  On  this  they  had  twenty-five  thou- 
with  the  primitive  insured.  This  re-  sand  dollars  of  insurance  without  the 
duces  the  case  to  one  of  misrepresen-  coinsurance  clause,  for  which  they 
tation  or  concealment.  No  averment  paid  one  and  one-half  per  cent  pre- 
in  the  answers  is  made  on  which  such  mium,  Or  three  hundred  and  seventy- 
a  defense  can  be  liased.  Indeed,  such  hve  dollars,  and  got  twenty-tive  tliou- 
a  defense  is  inconsistent  with  the  sand  dollars  on  these  policies.  Now, 
answers,  which  assert  that  the  coin-  on  that  property  and  that  amount  of 
suranee  clause  is  contained  in  the  loss,  how  much  coinsurance  must  they 
policies  sued  on,  and  treat  as  such  have  had  to  get  twenty-tive  thousand 
that  part  of  the  policy  which  declares  dollars  indemnity?  That  received 
that  the  insurer  shall  be  lial)le  for  was  tive-sixths  of  the  loss.  To  have 
only  such  part  of  the  whole  loss  as  received  a  like  anwuint  under  coinsur- 
the   sum    insured    l)ears    to    the    cash  ance    policies    thev    must    have    had 

3fi3 


§  119a  JOYCE  ON  INSURANCE 

standing  risks"  are  used.  ^^  The  surrender  of  a  policy  in  the  rein- 
sured company  and  the  relinquishment  of  the  right  to  a  return  pre- 
mium constitutes  a  consideration  for  issuance  of  a  policy  by  the  re- 
insurer, and  in  addition  thereto  gaining  of  new  business  by  the  re- 
insurance of  the  reinsured's  risks  is  to  be  considered  as  a  factor.^' 

policies  written  nominally  for  five-  ties  concerning  matters  of  insurance 
sixths  of  the  value  of  the  property  concur  in  the  position  that,  if  the 
insured;  that  is  to  saj^,  to  the  amount  concealment  is  material,  it  will  avoid 
of  fifty  thousand  dollars,  which,  at  the  policy,  notwithstanding  the  in- 
one  per  cent,  would  have  cost  them  sured  did  not  intend  to  commit  any 
five  hundred  dollars,  instead  of  three  fraud.  The  suppressio  veri  may  hap- 
hundred  and  seventy-five  dollars,  pen  by  mistake  and  be  entirely  with- 
This  is  basing  our  calculations  on  out  fraudulent  intention;  still  the 
the  facts  of  the  case.  The  proof  underwriter  is  deceived  and  the  policy 
shows  that  Mr.  B,  is  a  director  in  is  thus  void  for  the  very  plain  rea- 
the  Home  company,  and  that  he  son  that  the  risk  run  is  really  differ- 
would  not  accept  coinsurance  policies  ent  from  the  risk  understood  and  in- 
ou  his  cotton  at  risk.  It  shows  that  tended  to  be  run  at  the  time  of  the 
another  firm  of  cotton  factors,  who  agreement.  A  concealment  which  is 
took  more  insurance  in  the  Home  on  only  the  effect  of  accident,  inadvert- 
cotton  than  all  other  persons  com-  ence,  or  mistake  is  equally  fatal  to 
bined,  Avould  not  take  coinsurance  the  contract  as  if  it  were  designed, 
policies.  It  is  not  contended  that  The  principle  is  that,  if  the  party 
they  are  not  as  binding  according  to  loroposing  insurance  conceals  any- 
their  terms  as  other  policies,  or  that  thing  which  may  influence  the  rate 
they  present  any  dilficulty  in  the  of  premiums  which  the  underwriter 
matter  of  adjustment.  We  incline  may  require,  although  he  does  not 
to  think  that  those  who  preferred  know  that  it  would  have  that  effect, 
policies  without  the  coinsurance  such  concealment  entirely  vitiates  the 
clause  were  justified  in  resting  their  policy.  By  a  'material  fact'  is  meant 
choice  on  the  knowledge  they  had  one  which,  if  known  by  the  under- 
that  such  insurance  Avas  the  cheapest,  writer,  would  induce  him  either  to 
Therefore,  in  addition  to  the  reason-  decline  the  insurance  altogethei*,  or 
ing  of  appellee's  counsel  which  we  not  to  accept  it  unless  at  a  higher 
have  above  adopted,  we  suggest  that,  iiremium:'  Angell  on  Insurance,  sec. 
considered  as  a  representation,  tlie  1~5.  ^Vithin  the  meaning  of  the  au- 
materiality  of  the  Avords,  'subject  to  thorities,  it  was  not  material,  even 
coinsurance,'  is  not  made  to  ajipear  if  it  can  have  relation  to  the  con- 
by  the  proposition  which  we  have  tracts  of  reinsurance  here  involved, 
quoted  from  the  brief  of  appellant's  The  decree  of  the  circuit  court  in 
counsel,  which  is  the  proof  text  of  each  case  is  affirmed."  Pardee,  C.  J., 
their  discoui'se.  It  seems  to  be  clear  dissented  from  the  above  opinion, 
that  the  purpose  of  the  coinsurance  ^^  Iowa  Life  Ins.  Co.  v.  Eastern 
clause  is  to  stimulate  full  insurance.  ^Mutual  Life  Ins.  Co.  64  N.  J.  L. 
This  being  the  chief  object,  insurance  340,  45  Atl.  762,  29  Ins.  L.  J.  299, 
companies  cannot  claim  that  it  les-  sec.  66,  2  Genl.  Stat.  N.  Y.  ins.  act, 
sens    the    moral    hazard.      It    cannot  p.  1755. 

affect  tlie  physical  hazard.     The  fact       ^^  (-lazzam  v.   German   Union  Fire 
that   some  of  the  appellee's  policies  Ins.  Co.  155  N.  Car.  330,  Ann.  Cas. 
did  not  have  the  coinsurance  clause  1912C,  362,  71  S.  E.  434,  40  Ins.  L. 
cannot,  therefore,  be  relied  on  as  a  J.   1586. 
concealment,  though  'all  the  authori- 

364 


m 


REINSURANCE  §  120 

A  contract  for  reinsurance  cannot  be  sustained  where  the  sul^ject 
matter  has  been  destroyed  and  the  reinsurer  has  knowledge  thereof 
before  issuing  the  policy.^"  But  although  a  A-essel  is  lost  before  par- 
ticulars are  furnished  in  accordance  with  an  ad  interim  covering 
memorandum  providing  for  the  issue  of  a  policy  on  goods  on  re- 
ceipt of  particulars,  a  contract  for  reinsurance  on  such  goods  is  not 
affected  by  said  loss.  A  reasonable  time  will  be  allowed  to  furnish 
particulars.^ 

Failure  of  one  insurance  company  to  object  to  risks  contained  in 
schedules  sent  to  it  by  another  company,  a  certain  amount  of  whose 
risks  it  has  made  a  compact  to  reinsure,  will  not  amount  to  an  ac- 
quiescence on  which  the  latter  can  rely  in  case  they  are  not  covered 
by  the  compact,  since  reliance  may  be  placed  on  the  good  faith  of 
the  other  company  and  its  acting  within  the  contract,  without  the 
necessity  of  making  a  personal  investigation  of  the  property  cov- 
ered by  each  schedule.^ 

§  119b.  Same  subject:  mutual,  etc.,  companies. — Where  a  stock 
company  offers  to  the  policy  holders  of  a  defunct  mutual  company 
free  insurance  for  the  period  for  which  the  premiums  had  been  paid 
in  the  insolvent  company  there  is  no  guaranty  or  assumption  of 
the  old  contract  and  the  substituted  policy  need  not  conform  to  the 
original  one,  especially  so  when  the  insured,  in  accepting  the  offer, 
agreed  that  upon  the  issue  of  such  new  policy  his  existing  policies 
in  the  defunct  company  should  thereafter  be  void  and  of  no  effect.^ 
A  contract  of  insurance  is  not  completed  by  surrendering  and  send- 
ing in  a  certificate  of  original  insurance  to  the  reinsurer  with  a  re- 
quest for  a  policy  where  it  appears  that  the  latter  issued  several  dif- 
ferent kinds  of  policies  at  different  rates,  and  so  even  though  it  had 
offered  to  exchange  its  policies  for  certificates  of  members  of  the  re- 
insured company.'* 

§  120,  Duration:  term  of  risk  may  be  controlled  by  original  in- 
surance.— This  is  illustrated  by  a  Pennsylvania  case,  where  the  dur- 
ation of  the  reinsurance  was  stated  as  for  one  year,  but  the  policy 
did  not  mention  when  that  period  was  to  commence  or  terminate. 
The  original  insurance  was  for  one  year  from  February  24:th,  with 

^•^  Henshaw  v.  Insurance  Co.  of  Commercial  Fire  Ins.  Co.  95  Ala. 
State  of  N.  Y.  73  N.  Y.  Supp.  1,  469,  11  So.  117,  16  L.R.A.  291. 
36  Misc.  405.  Examine  Union  Ins.  '  ^  Brown  v.  United  States  Casual- 
Co.  V.  American  Fire  Ins.  Co.  107  tv  Co.  (U.  S.  C.  C.)  88  Fed.  38,  27 
Cal.  327,  28  L.R.A.  692,  48  Am.  St.  Ins.  L.  J.  951.  Dismissed  90  Fed. 
Rep.  140,  40  Pac.  431.  829. 

^  General  Marine  Assur.  Co.  v.  *  Cotton  v.  Southwestern  Mutual 
Ocean  Marine  Ins.  Co.  16  Rap.  Jud.  Life  Assoc.  115  Iowa,  729,  87  N.  W. 
Que.  C.  S.  170.  675. 

^  German    American    Ins.    Co.    v. 

'  365 


§  121  JOYCE  ON  INSURANCE 

])iivilege  of  renewing,  and  the  reinsurance  was  taken  out  May  olst 
of  the  ensuing  year,  and  it  was  decided  that  the  reinsurance  should 
be  construed  as  running  one  year  from  tlie  date  February  24th,  that 
being  the  date  of  commencement  of  the  original  risk,  and  that  the 
reinsurer  was  liable,  the  death  of  the  insured  having  occurred  be- 
tween February  24th  and  May  Blst.^  So  the  terms  of  the  original 
policy  may  control  the  contract  of  reinsurance.^  Contracts  of  re- 
insurance can  be  made  covering  a  different  period  of  time  from  that 
covered  by  the  original  policy  of  insurance,  they  need  not  be  co- 
terminus^ 

§  121.  Custom  of  underwriters  may  affect  risk. — Where  the 
custom  among  underwriters  in  the  city  of  New  Orleans  was  to  di- 
vide the  risk,  and  not  take  the  whole  of  it,  such  a  custom  wall  be 
understood,  although  not  mentioned  in  the  application.^  If  a  con- 
tract of  reinsurance  is  made  by  partias  with  reference  to  a  custom 
that  such  contracts  are  to  take  effect  from  the  time  when  granted, 
such  custom  W'ill  govern  and  the  reinsurer  is  not  liable  for  a  loss  of 
which  neither  party  had  knowledge,  but  wdiich  occurred  prior  to 
said  time.  "In  the  present  case  w-e  find  no  circumstance  indicating 
the  mutual  intention  of  .the  parties  to  give  to  their  contract  a  retro- 
spective effect.  The  stipulated  facts  show  that  at  all  tlie  times  men- 
tioned it  was  the  custom  among  fire  insurance  companies  doing  bus- 
iness upon  the  Pacitic  Coast,  granting  reinsurance  to  other  fire 
insurance  companies,  to  charge  and  collect  premiums  as  and  from 
the  date  of  reinsurance,  and  to  write  th^ir  policies  so  as  to  cover  the 
reinsured  company  from  the  date  upon  w^hich  the  reinsurance 
would  be  granted.  Both  plaintiff  and  defendant  were  fire  insurf.nce 
companies,  doing  business  in  San  Francisco,  and  may  be  presumed 
to  be  familial'  with  these  customs,  and,  in  the  absence  of  a  showing 
to  the  contrary,  to  have  contracted  with  reference  to  them.  Indeed, 
plaintiff'  alleges,  in  effect,  that  its  contract  with  defendant  was  sub- 
ject to  the  customs  in  vogue,  and  understood  by  insurance  men. 
when  it  avers  that  'defendant  did  agree  to  and  did  reinsure  plaintiff 
thereon  in  said  sum,  and  did  agree  to  issue  to  it  a  policy  of  reinsur- 
ance in  the  usual  form,  and  for  the  premium  usually  chargeable 
upon  risks  of  the  character  assumed.'    Where  there  is  a  known  us- 

5  Philadelphia  Life  Ins.  Co.  v.  On  limitation  clause  a.s  part  of  con- 
American  Life  &  Health  Ins.  Co.  23.  tract  of  reinsurance,  see  note  in  1  B. 
Pa.  St.  65.  R.  C.  184. 

^  Commonwealth  Ins.  Co.  v.  Globe       '  Milwaukee  Mechanics'  Ins.  Co.  v. 
Mutual    Ins.    Co.    35    Pa.    St.    475;    Palatine    Ins.    Co.    128    Cal.    71,    60 
London  Assur.  Co.  v.  Thompson,  47   Pac.  518,  30  Ins.  L.  J.  84. 
N.  Y.  Supp.  830,  22  App.  Div.  64,       «  Louisiana  Mutual  Ins.  Co.  v.  New 
aff'd  (mem.)  54  App.  Div.  637,  aff'd   Orleans  Ins.  Co.  13  La.  Ann.  246. 
170  N.  Y.  94,  62  N.  E.  1066,  31  Ins. 
L.  J.  351. 

366 


REINSURANCE  §  122 

age  of  trade,  persons  carrying  on  that  trade  are  held  to  have  con- 
tracted with  reference  to  the  usage,  unless  the  contrary  appears,  and 
the  usage  forms  a  part  of  the  contract.'  Without  pursuing  the  au- 
thorities further,  we  are  of  opinion :  1.  Where  the  exact  time  of  tlie 
commencement  and  termination  of  the  risk  are  specified  in  the  pol- 
icy, or,  if  no  policy  has  been  written,  in  the  contract,  such  specifi- 
cation governs;  2.  Where  no  time  has  been  expressly  indicated,  the 
circumstances  of  the  case  will  be  considered  for  the  purpose  of  de- 
termining it ;  3.  If  there  are  no  circumstances  indicating  the  inten- 
tion of  the  parties,  and  no  time  is  specified  in  the  contract,  the  risk 
will  be  deemed  to  have  commenced  at  the  date  of  the  contract;  4. 
Tn  the  ease  last  mentioned,  if  before  the  contract  of  insurance  is 
made,  the  property  has  ceased  to  exist,  although  unknown  to  the 
parties,  the  risk  never  attaches."  ^°  If  a  contract  for  reinsurance  is 
made  where  a  custom  exists  among  insurers  to  charge  and  collect 
premiums  as  and  from  the  date  of  reinsurance,  and  to  write  policies 
so  as  to  cover  the  reinsured  risk  from  the  date  of  reinsurance,  and 
there  is  nothing  indicating  a  mutual  intention  of  the  parties  to  give 
the  contract  of  reinsurance  in  suit  a  retroactive  ett'ect,  the  reinsurer 
is  not  liable  if  the  property  is  destroyed  prior  to  the  execution  of  the 
contract  of  reinsurance  without  the  knowledge  of  either  party  of 
the  loss  at  that  time.^^  But  a  general  custom  to  issue  reinsurance 
policies  for  the  same  period  of  time  covered  by  the  original  policy 
cannot  be  shown  against  the  plain  letter  of  a  contract  prescribing 
a  different  period  of  time  for  its  termination.^^ 

§  122.  Limitation  of  risk  of  specified  date:  change  of  risk. — 
If  a  policy  of  reinsurance  covers  by  limitation  only  risks  existing 
at  a  specified  date,  in  such  case  a  subsequent  alteration  or  change 
in  the  risk  by  the  original  insured,  even  with  the  consent  of  the 
original  insurer,  releases  the  reinsurer.^' 

If  the  reinsurance  is  made  subject  to  all  the  conditions  of  the  orig- 
inal policy,  which  are  or  may  be  adopted  by  the  insurer  therein, 
the  reinsurer  binds  itself  by  what  the  insurer  adopts  within  the 
terms  of  the  original  contract,  and  where  the  original  policy  is  con- 

'  Citing    Auzerais    v.    Naglee,    74  ^^  Milwaukee   Mechanics'    Ins.    Co. 

Cal.  60,  15  Pac.  371 ;  Taylor  v.  Cas-  v.  Palatine  Ins.  Co.  128  Cal.  71,  60 

tie,  42  Cal.  367;  Brown  v.  Howard,  Pac.  518,  30  lus.  L.  J.  84.     Examine 

1  Cal.  423.  London   Assur.   Corp.   v.   Thompson, 

1°  Union  Ins.  Co.  v.  American  Fire  47  N.   Y.   Supp.  830,  22  App.   Div. 

Ins.  Co.  107  Cal.  327,  28  L.R.A.  692,  64,  aff'd  54  App.  Div.  637,  atif'd  170 

40  Pac.  431.  N.  Y.  94,  62  N.  E.  1066,  31  Ins.  L. 

^^  Union  Ins.  Co.  v.  American  Fire  J.  351. 

Ins.   Co.   107   Cal.   327,   48   Am.    St.  "  gt.    Nicholas    Ins.    Co.    v.    Mer- 

Rep.   140,   28   L.R.A.    692,   40   Pac.  chants'  Fire  Ins.  Co.  83  N.  Y.  604. 
431. 

367 


§  122a  JOYCE  ON  INSURANCE 

clitioncd  to  be  void  in  case  of  a  change  of  ownership  of  the  property, 
without  consent  of  the  insurer,  and  the  reinsurance  is  made  subj-ect 
to  such  condition,  the  insured  need  only  be  required  to  look  to.  the 
insurer  for  consent  to  such  change.^*  The  court  said  in  this  case: 
"When  Marden  wished  to  transfer  his  policy,  that  (the  original 
insurer)  was  the  company  for  him  to  go  to.  The  policy  provided 
that  he  should  procure  its  assent,  and  not  that  of  any  other  com- 
pany. Moreover  there  was  no  provision  either  in  the  policy  received 
by  the  German  American  Company  from  the  plaintiff,  or  by  the 
plaintiff  from  the  defendant,  or  in  the  contract  between  the  plain- 
tiff" and  the  defendant  that  the  German  American  Company  or  its 
agent  should  not  a.ssent  to  the  transfer  of  its  policies.  The  insur- 
ance companies  must  be  held  to  have  entered  into  their  respective 
contracts  with  the  knowledge  that  as  matter  of  law  neither  jNlarden 
nor  any  other  German-American  policy  holder  could  be  compelled 
to  procure  the  assent  of  any  other  company,  and  with  the  knowledge 
that  in  the  ordinary  course  of  business  applications  of  this  kind 
would  be  made  to  that  company  by  its  policy  holders,  and  therefore 
to  have  contemplated  and  understood,  in  the  absence  of  any  con- 
trary provision,  that  the  original  insurer  or  its  agent  was  to  give  the 
required  assent  to  transfers,  to  receive  proof  of  loss,  and  to  attend 
to  what  may  be  called  the  local  conditions  of  the  policy,  subject,  in 
all  cases,  to  the  implied  condition  that  nothing  should  be  done  with- 
out its  assent  to  enhance  the  risk.  We  do  not,  therefore,  think  there 
IS  anything  in  the  nature  of  the  contract  of  reinsurance  or  of  in- 
demnity inconsistent  Avith  the  power  of  the  original  insurer  or  its 
agent  to  assent  to  the  assignment  of  the  policy."  ^^  The  reinsurer 
may  be  bound  by  the  insurer's  assent  in  writing  to  a  change  of  title 
and  by  an  assignment  of  the  policy,  as  where  a  mortgage  was  fore- 
closed by  a  trustee  to  whom  the  policy  was  payable,  and  the  prop- 
erty was  bought  by  an  agent  of  the  mortgage  bondholders,  where 
the  original  policy  permitted  such  change  upon  written  consent  of 
the  insurer.^® 

§  122a.  Reinsurance  not  retroactive:  property  destroyed  when 
contract  made. — An  agreement  to  issue  a  policy  of  reinsurance  in 
ihe  usual  form  and  for  the  usual  premium,  made  after  the  property 

i*Faneuil  Hall  Ins.   Co.  v.  Liver-  Mass.  419,  14  N.  E.  632;  Jackson  v. 

pool  &  Londou  &  Globe  Ins.  Co.  153  St.  Paul  Ins.  Co.  99  N.  Y.  124;  Fire 

Mass.   63,   10   L.R.A.  423,  26  N.   E.  Ins.  Assn.  v.  Canada  Ins.  Co.  2  On- 

244.  tario,  481,  495. 

^*  Citing  Consolidated  Real  Estate       ^^  ^Manufacturers'    Fiie    &   Marine 

&  Fire  Ins.  Co.  v.   Cashow,  41  Md.  Ins.   Co.  v.  Western  Assur.  Co.  145 

59;    Manufacturers'    Fire   &   Marine  Mass.  419,  14  N.  E.  632. 
Ins.  Co.  V.  Western  Assur.  Co.  145 

368 


REINSURANCE  §§  123,  124 

was  destroyed,  of  which  fact  both  parties  were  ignorant,  will  not 
become  operative  by  relating  back  to  the  beginning  of  the  original 
insurance,  but  will  be  deemed  to  commence  at  the  date  of  the  con- 
tract." 

§  123.  Limitation  of  risk  to  particular  locality. — When  th-e  con- 
tract of  reinsurance  limits  the  risks  to  a  particular  locality,  it  will 
only  include  policies  within  that  locality,  as  where  the  contract  lim- 
ited the  reinsurcmce  to  risks  in  the  state  of  New  York,  and  schedules 
describing  the  risks  to  be  reinsured  embraced  certain  risks  else- 
where, as  well  as  those  in  that  state.  It  was  decided  that  although 
the  policies  of  reinsurance  covered  in  terms  the  risks  which  were  set 
forth  in  the  schedules,  yet  they  only  included  the  risks  in  New  York 
state.^^  So  locality  is  important  as  where  wheat  is  reinsured  "while 
located  and  contained  as  described  herein  and  not  elsewhere"  and 
it  was  contained  in  an  elevator  for  which  the  rate  of  premium  was 
higher  than  that  of  the  warehouse  in  which  it  was  represented  that 
it  was  stored ;  and  the  policy  is  thereby  avoided.^^  And  w^here  the 
reinsured  risk  was  only  of  property  while  stored  in  a  certain  man- 
ner, in  a  certain  place,  as  in  case  of  rosin  which  was  not  to  be  cov- 
ered unless  it  was  in  or  on  specified  warehouses  and  sheds,  and  the 
reinsurance  policy  does  not  mention  property  in  any  other  place, 
it  is  necessary  in  order  to  recover  that  the  rosin  destroyed  should 
have  been  so  located.^" 

§  124.  Condition  as  to  assignment. — "Where  upon  the  decease  of 
the  insured  the  plaintiff  obtained  a  judgment  against  the  original 
■insurer,  and  an  assignment  from  it  of  its  contract  of  reinsurance 
which  prohibited  any  assignment  or  sale  thereof,  it  was  held  that 
an  action  would  lie  against  the  reinsurer  upon  said  contract,  and 
that  the  prohibition  was  limited  to  assignment  prior  to  loss.^  An 
insurer  who  has  reinsured  his  risks  with  another  insurer  has  power 
to  assent  to  the  transfer  of  one  of  his  policies,  according  to  its  pro- 
visions, in  the  absence  of  anything  in  the  contract  of  reinsurance 
expressly  depriving  him  of  such  power.  And  a  provision  in.  a  pol- 
icy of  remsurance  issued  in  accordance  with  a  contract  made  months 
previously  cannot  avail  to  make  invalid  a  consent  by  the  original 

"Union  Ins.  Co.  v.  American  Fire  Location,    locality    important    see 

Ins.  Co.  107  Cal.  327,  28  L.R.A.  692,  generally  §§  1742-1750,  2068  herein. 

48  Am.   St.  Rep.   140,  40  Pae.  431.  20  London  Assur.  Corp.  v.  Thomp- 

See  §  1442  herein.  son,  170  N.  Y.  94,  62  N.  E.  1066.  31 

^*  London   and  Lancashire  Fire  Ins.  Ins.   L.   J.   351,   aff'g  54  App.   Div. 

Co.  V.  Lycoming  Fire  Ins.   Co.  105  637,  aff'g  47  N.   Y.   Supp.   890,  22 

Pa.  St.  424.  App.  Div.  64. 

^^  Fireman's     Fund     Ins.     Co.     v.  ^  Lee  v.  Fraternal  Mutual  Ins.  Co. 

Aaclien    &    Munich   Ins.    Co.    2    Cal.  1  Handy   (Ohio)    217.     See  Faneuil 

App.  690,  84  Par.  253.  Hall  Ins.  Co.  v.  Liverpool  &  London 
Joyce  Ins.  Vol.  I. — 24.            369 


§§  125-127  JOYCE  ON  INSURANCE 

insurer  to  the  transfer  of  one  of  the  policies  covered  by  tlie  con- 
tract, which  wa8  oranted  between  the  date  of  the  contract  and  the 
issuance  of  the  pohcy,  where  such  consent  was  permitted  by  the 
contract.'^ 

§  125.  Condition  as  to  other  insurance. — A  condition  in  a  policy 
of  reinsurance,  providing:  auainst  otiier  insurance,  refers  to  other 
reinsurance,  and  the  reinsurer  cannot  evade  liability  under  this 
chuise  where  there  is  no  other  reinsurance;^  and  where  it  is  con- 
ditioned that  the  written  consent  of  the  company  shall  be  obtained 
within  ten  days^  in  case  the  jiroperty  should  be  reinsured,  the  mere 
})roof  of  the  existence  of  an  unauthorized  reinsurance,  without  evi- 
dence that  the  same  had  been  in  existence  at  lea.^t  ten  days  before 
the  tire,  will  not  avail  the  comi)any.* 

§  126.  Conditions:  time  limit  for  suing:  award. — Althou<i;h  the 
original  contract  for  insurance  contains  certain  limitations  provid- 
ino-  for  an  appraisal  and  award  before  suit,  and  limit's  the  time  for 
suing,  such  conditions  do  not  become  a  part  of,  nor  affect  the  con- 
tract of  reinsurance.^  But  the  six  years'  limitation  a})plies  to  a  pol- 
icy of  reinsurance.^ 

§  127.  Amount  of  reinsurance. —  it  is  the  loss  or  liability  of  tlie 
insurer  assumed  by  him  under  his  contract  with  the  insured  which 
forms  the  bavsis  of  the  contract  of  reinsurance.  The  contract  is  one 
of  indemnity,  and  the  insurer  has  an  insurable  interest  only  to  tlie 
(extent  of  that  liability,  and  for  this  reason  the  amount  of  interest 
in  reinsurance  is  limited  by  the  insurer's  liability  under  the  original 
contract.  Tt  need  not,  however,  be  for  the  si^ecilic  risk  thereunder, 
a.'^  the  insurer  may  reinsure  for  a  smaller  amount  than  his  total  lia- 
bility."=^ 

&   Globe  Ins.   Co.   153   Mass.   03,  10  Tcnii.  2(54,    .-^2  S.  W.  168,  28  Ins.  L. 

L.K.A.  423,  26  N.  E.  244.  -).  OK). 

2  Faneuil    Hall    Ins.    Co.    v.   Liver-        ^  Allver  v.  Rlioads,  76  N.  Y.  Supp. 
j)ool  &  London  &  Globe  lus.  Co.  153  808,  73  App.  Div.  158. 

Mass.   63,  26  N.   E.   244,   10  L.R.A.        When  statute  of  limitations  begins 

423.  to  run   against  reinsured,  see  Insur- 

3  Mulual  Safety  Ins.  Co.  v.  Hone,  ance  Co.  of  Pa.  v.  Telfair,  57  N.  Y. 
2  N.  Y.  (2  Comst.)   235.           '  Supp.  780,  27  Misc.  247,  rev'd  61  N. 

4  Cundierland  Mutual  Fire  Ins.  Co.  Y.  Supp.  .322,  45  App.  Div.  564. 

V.  Giltinan,  48  N.  J.  L.  495,  57  Am.  'See  Philadelphia  Ins.  Co.  v. 
Rep.  586,  7  Atl.  424.  Washington  ins.  Co.  23  Pa.  St.  250. 
*  Eagle  Ins.  Co.  v.  Lafayette  Ins.  "In  reinsurance  the  amount  of  inter- 
Co.  9  Ind.  446;  -Jackson  v.  St.  Paul  est  is  the  sum  insured  in  the  original 
Fire  &  Marine  Ins.  Co.  99  N.  Y.  124.  policy,  with  the  addition  of  the  pre- 
Ejamine  Providence  Ins.  Cn.  v.  mium  of  reinsurance  deducting  the 
^Etna  Ins.  Co.  16  U.  C.  Q.  B.  13-').  oriu-inal  premium:"  2  Phillips  on 
See  also  Alker  v.  Rhoads,  76  N.  Y.  Ins.  see.  1248.  See  §^  113,  119 
Supp.  808,  73  Ai)p.  Div.  l."8;  Roval  herein. 
Ins.  Co.  V.   Vandeibilt   Ins.  Co.  102 

370 


REINSURANCE  §§  r27a,  128 

A  policy  of  reinsurance,  to  apply  to  the  excess  wliieli  tlic  original 
insurer  iiia\'  liave  in  its  vai'ious  ])olicies  over  $50,000.  ])ro  rata  with 
all  insui'ance  policies  on  the  same  excess,  does  not  prevent  the  orig- 
inal insui-er  from  protecting  himself  hy  ohtaining  reinsurance  fi'om 
ither  c()iiij)anies  within  that  sum.*  And  if  a  statute  limits  the 
amount  which  an  indenniity  company  may  accept  as  a  single  risk 
to  a  certain  j)er  cent  of  its  capital  and  surplus  hut  also  j)ermits  it  to 
reinsure  such  excess  it  is  obligated  to  reimburse  where  it  accepts  a 
risk  in  excess  of  such  |)er  cent.^ 

§  127a.  Same  subject:  separate  risks:  notice. — 'i'lie  existence  of 
brick  partitions  extending  above  the  I'oof  and  dividing  a  building 
into  stores  or  sections  will  not  constitute  each  section  a  separate 
building  or  the  goods  therein  a  separate  risk,  within  the  meaning 
of  a  reinsurance  contract  limiting  tlie  amount  of  insurance  to  be 
placed  on  any  one  ''building  of  risk,"  if  all  the  sections  are  inclosed 
by  a  con)mon  exterior  wall  and  are  all  under  one  management  and 
devoted  to  the  same  use,  while  the  floors  of  the  different  stories  are 
on  the  same  level  and  connected  by  large  doors  through  the  parti- 
lion.  And  notice  that  three  stores  belonging  to  the  same  person 
are  all  located  at  the  foot  of  the  saine  street  is  not  notice  to  the  re- 
insurer that  they  are  all  in  the  same  building  so  as  to  l)ind  it  under 
a  contract  for  reinsurance  which  limits  the  amount  of  insurance 
on  any  one  building  or  risk.^° 

§  128.  Representations  and  warranties  in  reinsurance:  conceal- 
ment.— in  the  contract  of  reinsurance  it  is  incumbent  u))on  tbe  in- 
surer to  comimniicate  to  the  reinsurer  all  the  facts  of  which  he  has 
knowledge  which  are  material  to  the  I'isk.  And  where  he  states  as 
ri  fact  soruething  untrue  with  intent  to  deceive,  or  where  he  states 
a  fact  positivelv  as  true  without  knowing  it  to  be  ti'ue.  and  which 
tends  to  mislead,  the  policy  is  avoided  where  such  facts  materially 
affect  the  risk.  And  any  undue  concealment  or  intentional  with- 
holding of  facts  material  lo  the  risk  which  ought  in  good  consciences 
to  be  connnunicated  bv  him  likewise  a\()ids  the  contract. ^^     lUil  if 


/ 


*  Insurance  Co.  of  Noi'tli  Amerioa  v.  New  York  Fire  Tns.  Co.  17  Wond. 

V.   Hihernin   Tns.  Co.  140  V.   S.  5G5,  (N.   Y.)    35!);    Sun    Mutual   Ins.    Co. 

35  L.  I'd.  517,  11  Sup.  Ct.  !)()!).  v.   Ocean   Ins.   Co.   107  U.   S.  485.   1 

Miosicr  V.  United  States  Fidelity  Sup.   C{.  582,  27  L.   ed.  337.     It  is 

&    (luaranty    Co.    11!)    N.    Y.    Su]))).  also   said   in    lliis  case   lliat   the   "ex- 

157,  l.')4  App.  Div.  84!),  N.  Y.   Ins.  action    of    inlorinalion    in    some    in- 

Law    (Laws   18!)2,   c.    (>!)(),   p.   1941)  stances  may  be  {greater  in  a  case  of 

sec.  24,  and  Laws  lOOli,  p.  7(58,  c.  226,  jcinsui'ance  than  as  between  tlie  jiar- 

sec.  7.  ties  to  an  orif::iiial  insurance.''     Mer- 

^°  German    American    Ins.    Co.    v.  chants'    ]\fanufacturers    Mutual    tns. 

Commercial    Fire    Ins.    Co.    95    Ala.  Co.  v.  Washinii'lon  Ins.  Co.  1  Ilaiidv 

4m,  11  So.  117,  K)  L.R.A.  291.  (Ohio)    408.      Insurer  must    connnii- 

^^  New  York  Bowei'v  Fire  Ins.  Co.  nicate  all  the  representations  of  orig- 

371 


§  128  JOYCE  ON  INSURANCE 

the  reinsurer  issues  a  new  policy  as  a  substitute  for  one  issued  by 
the  reinsured,  any  warranty  of  the  truth  of  the  representations  re- 
lates to  the  date  of  the  original  application,  and  not  to  the  date  of 
the  new  policy,  and  if  such  representations  were  true  when  made, 
no  breach  of  warranty  arises  from  tlie  fact  that  they  were  false  at 
the  date  of  the  new  policy,  nor  is  it  any  defense  that  the  risk  was 
not  a  safe  one  at  the  time  of  the  issuance  of  the  latter  policy,  where 
by  the  agi'eement  between  the  reinsurer  and  insurer  the  former  was 
obligated  to  reinsure  all  the  risks  of  the  latter. ^^  And  where  it  ap- 
peared that  at  the  time  the  original  insurance  was  affected  the  word 
"charter"  was  understood  by  the  parties  thereto  to  mean  a  guano 
charter,  and  the  insurer  did  not  communicate  such  fact  to  the  re- 
insurer before  making  the  contract  of  reinsurance,  it  was  held  that 
the  information  was  material  to  the  risk,  and  the  reinsured  was  not 
entitled  to  recover  in  view  of  the  fact  that  in  the  absence  of  an  ex- 
planation to  the  contrary  the  "charter"  intended  must  be  regarded 
under  the  policy  as  covering  only  the  route  of  the  voyage  described 
in  the  policy,  and  that  a  recovery  against  the  reinsured  for  part  of 
the  insurance  money  based  upon  parol  proof  of  the  understanding 
of  the  parties  to  the  original  insurance  as  to  the  meaning  of  the 
word  "charter/'  did  not  bind  the  reinsurer,  and  that  a  payment  be- 
fore said  suit  of  a  portion  of  said  money  did  not  amount  to  a  recog- 
nition of  an  insurance  on  the  guano  charter ;  ^^  and  in  a  case  in  the 
United  States  Supreme  Court  ^*  it  was  held  ^^  that  it  was  not  sulh- 
cient  to  convey  specific  information  material  to  the  risk  in  general 
terms. 

Under  an  English  decision  a  reinsurance  policy  is  not  invalidated 
by  nondisclosure  of  a  clause  in  the  original  policy,  where  the  for- 
mer is  subject  to  the  same  clauses  and  conditions  as  the  original  pol- 
icy, and  "to  pay  as  may  be  paid  thereon."  Both  policies  were  for 
the  same  period  and  the  original  policy  provided  that  should  the 
vessel  be  at  sea  or  abroad  on  the  expiration  of  the  policy  it  should 

inal  insured,  and  also  all  the  knowl-  ^^  Cohen   v.    Continental   Life   Ins. 

edge    and    information    he    possesses  Co.  U9  N.  Y.  300.     See  also  Jackson 

material  to  risk,  whether  previously  v.  St.  Paul  Fire  &  jMarine  Ins.  Co. 

or  siibsequently  acquired.     See  opin-  99  N.  Y.  12-i. 

ion  (near  end)  in  note  17,  §  119  here-  ^^  Ocean   Ins.    Co.   v.    Sun   Mutual 

in.  Ins.  Co.  8  Ben.   (U.  S.  C.  C.)   272, 

See  Comp.  Laws,  Dak.   1887,  see.  Fed.    Cas.   No.    10407;    Sun   Mutual 

4184;    Civ.    Code,    Cal.    sec.    2647;  Ins.  Co.  v.  Ocean  Ins.  Co.  107  U.  S. 

Booth's  Aunot.  Civ.  Code,  Mon.  1895,  485,  27  L.  ed.  497,  2  Sup.  Ct.  355. 

sec.  3531;  Rev.  Code,  N.  Dak.  1895,  ^^  Sun   Mutual   Ins.   Co.   v.   Ocean 

sec.  4534.  lus.  Co.  107  U.  S.  485,  510,  511,  27 

When  moral  character  of  a-'^sured  L.  ed.  497,  2  Sup.  Ct.  355. 

may  become  material:     Beinsiirance.  ^^  Three  justices  dissenting. 
See  §  1864  herein. 

372 


REINSURANCE  §  129 

be  held  covered  until  her  arrival  at  her  port  of  final  destination  at 
a  pro  rata  daily  premium,  said  continuation  clause  being  a  usual 
clause.  The  policy  was,  however,  held  void  as  it  covered  a  period 
exceeding  twelve  months  that  being  the  duration  of  the  risk  ex- 
]*re.~sed  in  the  original  policy.^^  Under  another  English  case  fraud- 
ulent misrepresentations  of  an  official  in  the  employment  of  ship- 
OAvners  whereb}'-  the  payment  of  losses  on  vessels  is  induced  are  a 
ground  for  a  recovery  from  the  shipowners." 

In  Louisiana  a  statement  made  to  the  reinsurer  by  the  original 
insurer,  in  obtaining  reinsurance,  "We  carry  our  line,"  without 
specifying  any  amount,  will  not  be  deemed  falsified  if  in  point 
of  fact  the  insurer  does  bear  a  part  of  the  risk,  i.  e.,  to  the  extent 
not  reinsured.  And  the  failure  of  the  original  insurer  to  beax  any 
part  of  the  risk,  owing  to  the  fact  that  the  assured  did  not  put  on 
board  the  entire  cargo  agreed  to  be  insured,  will  not  avoid  a  rein- 
surance on  the  ground  of  fraud,  although  the  original  insurer  in 
obtaining  it  said,  ''We  carry  our  line,"  when  this  was  said  in  the 
belief  that  the  full  cargo  would  be  placed  On  board,  in  which  case 
he  would  have  borne  a  large  part  of  the  risk.^^ 

Where  a  statute  empowers  insurers  to  reinsure  their  risks  with 
insured's  consent  and  makes  the  reinsurer  liable  to  the  same  extent 
as  if  it  had  originally  issued  the  policy,  a  vested  right  under  the 
original  policy  cannot  be  impaired  by  a  reinsurance  contract  which 
imposes  conditions  as  to  representations  and  warranties  limiting  in 
effect  the  reinsurer's  liability,  where  the  original  policy  is  incontest- 
able after  two  years  for  breach  of  warranty  or  misstatement  in  the 
application.^^ 

§  129.  Abandonment  unnecessary  in  reinsurance. — The  insurer 
is  under  no  obligation  to  abandon  to  the  reinsurer,  nor  give  the  lat- 
ter notice  of  abandonment  to  him  by  the  insured,  for  it  would  be 
of  disadvantage  to  the  reassured  to  compel  him  to  accept  the  aban- 
donment of  his  assured,  as  he  would  be  compelled  to  do  before  he 
himself  could  abandon.^" 

^®  Charlesworth  v.  Faber,  5  Coml.  Reinsiu'ance :  concealment  by  agent 
Cas.  408.  of  insured,  .see  §  048  herein. 

Reinsurance :  nondisclosure  of  ^'  Assicurazioni  Generali  De 
material  fact :  policy  "subject  Avith-  Trieste  v.  Empress  Assur.  Corp.  Ltd. 
out  notice  to  the  same  clauses  and  [1907]  2  K.  B.  Law  Rep.  814. 
conditions  as  the  original  policy :"  ^^  Chalaron  v.  Insurance  Co.  of  N. 
liability  of  reinsurer.  Property  Ins.  A.  48  La.  Ann.  1582,  21  So.  267,  36 
Co.   V.    National    Protector   Ins.    Co.   L.R.A.  742. 

108  L.  T.  104,  18  Com.  Cas.  119,  12       ^^  Federal  Life  Ins.   Co.  v.  Kerr, 
Asp.  M.  C.  287,  57   S.  J.  284.     See  —  Ind.-App.  — ,  82  N.  E.  943,  85 
Scottish  National  Ins.   Co.  v.  Poole,   N.    E.    196,   aff'd   173   Ind.    613,    91 
18  Com.  Cas.  9,  57  S.  J.  45,  29  T.  N.  E.  230,  89  N.  E.  398. 
L.  R.  16.    See  note  17,  §  119  herein.       ^o  Hastie  v.  De  Peyster,  3  Caines 

373 


§§  130,  131  JOYCE  OX  INSURANCE 

§  130.  Proofs  of  loss  in  reinsurance. — Generally,  the  ori,o;inal  no- 
tices and  ])r(j()t's  of  lo.<s  are  sutlicienl  a.-^  against  the  reinsurer,^  and 
if  the  reinsurer  is  ])re.<c'nted  Avith  copies  of  the  proofs  of  loss,  he  must 
object  and  deniand  the  originals  at  the  time,  or  the  right  to  object 
will  be  presumed  to  have  Ijeen  waived.^  If  a  ])olicy  of  reinsurance 
is  conditioned  that  all  j)ersons  having  a  claim  for  loss  shall  proceed 
at  once  to  give  immediate  notice  and  render  a  particular  account 
of  the  loss,  this  means  that  the  notice  and  schedule  must  be  served 
m  a  reasonable  time  under  the  circumstances.^  Proofs  of  loss  may, 
imder  an  agreement  authorizing  the  company  assuming  the  liabil- 
ities of  another  company  to  receive  proofs  of  loss,  be  made  to  the 
former  com])any.*  Preliminary  proofs  of  loss  may.  however,  be 
<lispensed  with  by  the  terms  of  the  policy  of  reinsurance.^  If  risks 
of  an  insurance  company  have  been  reinsured  it  is  not  necessary  to 
furnish  proofs  of  death  to  the  original  insurer.^  If  prompt  notice 
is  given  by  the  reinsured  to  the  reinsurer  of  the  loss  immediately 
after  its  occurrence,  and  also  notice  of  the  resistance  of  the  rein- 
sured to  payment  of  the  loss  in  which  the  reinsurer  acquiesces,  it 
is  sufficient,  and  recovery  is  not  barred  even  though  no  formal 
})roofs  of  loss  or  demand  for  reimbursement  is  made  until  after 
settlement  with  the  original  insured  by  the  reinsured  which  had 
been  furnished  proofs  of  loss  immediately  by  the  former.' 

§  131.  Extent  of  reinsurer's  liability. — In  the  absence  of  an 
agreement  to  the  contrary  or  a  limitation  clause,  the  reinsurer  is 
hound  to  indenmify  the  reinsured  to  the  extent  of  the  hitter's  lia- 
bility,* pro\  ided  the  amount  of  such  liability  does  not  e.xceed  the 

(N.  Y.)    190.   194,  per  Kent,   C.  J..  ^  jN^^rwood,  Ex  parte,  3  Biss.    (U. 

195,   per   Livingston,   J.:    2    Phillips  S.   C.   C.)    504,   516,   517,   Fed.   Cas. 

on  Ins.  (3d  ed. )  246,  sec.  150(i.  No.  103(54. 

^  New  York  Bowerv  Life  Ins.  Co.  ^  Cashau   v.   Northwestern   Mutual 

v.  New  York  Fire  Ins.  Co.  17  Wend.  Ins.   Co.  5  Biss.    (U.   S.   C,  C.)    470, 

(N.    Y.)    359.      See    also    Cashau    v.  Fed.  Cas.  No.  2499. 

North    Western    Mutual    Ins.    Co.    5  *  Whitnev    v.    American    Ins.    Co. 

Biss.    (U.   S.   C.   C.)    476,  Fed.   Cas.  127   Cal.  464,  59  Pac.   897,  affg  56 

No.  2499.     See  §  3295  iierein.  Pac.  50,  28  Ins.  L.  J.  254. 

The  reinsured  must   prove  loss  in  ^  Consolidated  Real  Estate  &  Fire 

the    same    manner    as    assured    must  Ins.  Co.  v.  Cashow,  41  Md.  59. 

have  proved  it  against  him :    Yonkers  ^  Federal    Life    Ins.    Co.    v.    Pettv, 

&  New  York  Fire  Ins.  Co.  v.  Hoff-  177  Ind.  256,  97  N.  E.  1011. 

man   Fire  Ins.   Co.   6  Rob.    (N.   Y.)  '  Roval  Ins.  Co.  v.  Vanderbilt  Ins. 

316.  Co.  10"2  Tcnn.  264,  52  S.  W.  168,  28 

Proofs   of   loss   must    be   made    by  Ins.  L.  .J.  910. 

the  reinsured  under  a  marine  policy  *  Eagle    Ins.    Co.    v.    Lafayette,    9 

in   the   absence   of  any    provision    to  Ind.    443;    Chalaron    v.    Ins.    Co.    of 

the  contrarv  in  tlie  reinsurance  con-  North    America,   48    La.   Ann.    1582. 

tract.     17   Earl   of  Halsbury's  Laws  36   L.R.A.   742,  21   So.  267,  26   Ins. 

of  Eng.  p.  375,  sec.  744.  L.   J.   465;    Hone  v.   ]\Iutual   Safetv 

374 


I 


REINSURANCE 


§  131a 


actual  lo.-^s  and  is  within  the  amount  reinsured,^  and  in  ease  of  a 
reinsurance  (jf  a  tire  risk  a  total  loss  is  the  full  value  in  the  policy 
of  reinsurance,  provided  it  does  not  exceed  the  value  in  the  original 
policy,  nor  is  the  liability  of  the  reinsurer  limited  to  a  proportionate 
sum,  nor  can  the  liability  be  thus  limited  by  evidence  of  a  custom 
of  the  place  of  contract  so  to  do.^**  The  above  statements  are  sub- 
ject to  such  qualilications  as  appear  under  the  next  following  sec- 
lions. 

§  131a.  Same  subject. — The  terms  of  the  reinsurance  contract 
are  the  test. of  the  reinsurer's  liability  and  not  whether  a  legal  loss 
lias  been  suffered  by  the  insured  under  the  original  policy."  If 
(Hie  third  of  a  risk  is  reinsured,  and  one  half  of  this,  ()r  one  sixth  of 
;he  whole  risk,  is  again  reinsured  for  the  lirst  reinsuring  company, 
which  afterward  becomes  insolvent,  the  last  reinsuring  company  is 
answerable  ui  case  of  loss,  for  the  whole  amount  against  which  it 
is  indenmified;  and  not  merely  for  one  half  the  sum  which  the  in- 
solvent com})any  may  pay  to  its  creditors.^^  Again,  a  coni))any  re- 
ceiving the  transfer  of  all  the  busines.^  and  assets  of  a  life  insurance 
company  will  be  bound  by  its  express  contract  to  assume  and  pay 
all  the  latter's  outstanding  contractual  liabilities."  And  the  surren- 
der by  a  reinsured  to  the  reinsurer  of  its  covering  note  on  the  day 
after  the  insured  property  has,  without  the  knowledge  of  either 
party,  been  injured  by  fire,  upon  the  request  of  the  reinsurer  that 


Ills.  Co.  1  Sand.  (N.  Y.)  i:!7;  Heck- 
ciiralli  v.  American  Mntual  Ins.  Co. 
;!'Barb.  Cli.  ( N.  Y.)  63;  Hastie  v. 
De  Peyster,  3  Caines  (N.  Y.)  190; 
Delaware  Ins.  Co.  v.  Quaker  City 
ins.  Co.  3  Grant's  Ca.s.  (Pa.)  71. 
See  Ocean  Sleamsiiip  Co.  v.  JEiiia. 
Ins.  Co.  (U.  S.  C.  C.)  121  Fed.  882. 
As  to  liabilitv  of  reinsurer  see  notes 
in  8  L.K.A.(N.S.)  844,  and  44  L.R.A. 
( X.S. )  317.  See  §  119  herein,  at  end 
Uiereof,  and  note. 

"Il  seciiis  to  me  tliat  upon  tlie 
I'linciples  of  tlie  common  law,  under 
like  circumslaiK-es,  the  party  reas- 
sured is  entitled  to  recover  a  full  in- 
demnity for  the  entire  loss  sustained 
by  him,  and  also  for  the  costs  and 
o.xpenses  which  he  has  reasonably 
and  necessarily  incurred,  in  order  to 
protect  himself  and  entitle  him  to  a 
recovery  over  ao:ainst  the  reassur- 
ers."  New  York  State  Mutual  Ins. 
Co.  V.  Protection  Ins.  Co.  1  Story 
(U.  S.  C.  C.)  4o8,#461,  Fed.  Cas.  No. 

o 


10,216,.  per  Story,  J.,  cited  in  Hone 
v.  Mutual  Safety  Ins.  Co.  1  Sand. 
(N.  Y.)  137,  148.  See  also,  as  to 
costs,  Hastie  v.  De  Pevster,  3  Caines 
(N.  Y.)   190.     See  S§  28,  132  herein. 

9  New  York  State  Mutual  Ins.  Co. 
V.  Protection  Ins.  Co.  1  Story  (U. 
S.  C.  C.)  458,  Fed.  Cas.  No.  10,216; 
Commercial  Alutual  Ins.  Co.  v.  De- 
troit Fire  tV;  Marine  Ins.  Co.  38  Ohio 
St.  11,  43  Am.  Kep.  413. 

10  Hone  v.  Mutual  Safetv  Ins.  Co. 
1  Sand  (N.  Y.)  137;  2  Comst.  (2  N. 
Y.)   23.-). 

11  Firemen's  Fund  Ins. 
&    Muiiicli    Fire   Ins. 


Co.  V.  Aacli- 

Co.   2    Cal. 

See  §  132 


en 

App.   (590,  84   Pac.  253. 

herein. 

12  Hunt  V.  New  Hampshire  Fire  & 
Underwriters  Assn.  68  N.  H.  305,  73 
Am.  St.  Hep-  602,  38  L.R.A.  514,  38 
Atl.  145. 

12  Crowell  v.  Northwestern  Life  & 
SaviniTs  Co.  99  Minn.  214,  108  N. 
W.  962. 


§  131b  JOYCE  ON  INSURANCE 

the  risk  be  placed  elsewhere,  being  made  under  a  mistake  of  fact, 
may  under  the  statute  be  rescinded;  and  therefore  it  does  not  re- 
lieve the  reinsurer  from  liability  for  the  existing  loss.^*  But  a  com- 
pany is  not  liable  for  a  prior  occurring  loss  by  assuming  a  contin- 
gent liability  of  another  insurer.^*  And  a  reinsurer  may  reject  a  risk 
and  relieve  itself  of  liability  even  though  it  retains  the  premium 
sent  as  part  of  a  larger  check  in  settlement  of  current  accounts,  and 
there  is  no  estoppel  to  "assert  the.nonbinding  force  of  the  policy.^^ 

The  extent  of  the  reinsurer's  liability  was  also  determined  in  the 
following  English  case.  It  appeared  that  a  time  policy  of  insurance 
on  a  ship  was  expressed  to  be  "a  reinsurance  of  policy  or  policies"  ^^^ 
''and  subject  to  the  same  terms,  conditions  and  clauses  as  original 
policy  or  policies,  and  to  pay  as  may  be  paid  thereon."  The 
assured  had  underwritten  two  time  policies  on  the  shij:*,  and  these 
were  in  force  when  the  reinsurance  was  effected.  Subsequently, 
during  the  currency  of  the  reinsurance  policy,  the  two  other 
policies  came  to  an  end,  and  assured  undenvrote  a  fresh  time 
policy  of  insurance  on  the  same  subject  matter,  differing  as  to 
the  valuation  of  the  ship,  and  in  other  respects  from  the  two  earlier 
policies.  A  loss  occurred  and  was  paid  under  the  fresh  policy.  It 
was  decided  that  the  original  policies  referred  to  in  the  reinsurance 
polic}^  were  the  policies  then  in  existence,  and  that  the  liability  of 
the  reinsurer  did  not  extend  to  losses  which  might  be  incurred  by 
the  assured  under  a  policy  not  containing  the  same  terms,  condi- 
tions and  clauses  as  the  original  policies.^' 

§  131b.  Same  subject:  mutual  benefit  societies,  etc. — A  reinsur- 
ing association  which  assumes  the  certificate  contracts  of  another 
association  may  obligate  itself  by  the  terms  of  a  rider  attached  to 
an  original  certificate  assuming  the  obligations  and  benefits  there- 
of."   And  if  an  assessment  company  receives  the  benefits  of  a  writ- 

1* Traders    Ins.    Co.   v.   Aaclien   &  8  Asp.  M.  C.  380,  466,  rev'g  (1899) 

Munich  Fire  Ins.   Co.   150   Cal.  370,  1  Q.  B.  739,  07  L.  J.  Q.  B.  N.  S.  330, 

8   L.R.A.(N.S.)    844   note,    89    Pac.  78  Law.  T.  R.  496.     Also  held  that 

109.  the  words  "original  policy  or  policies" 

^^  Olson  V.  California  Ins.  Co.  11  in  tlie  policy  might  he  explained  by 

Tex.   Civ.  App.  371,  32   S.  W.  446.  admitting    in    evidence    the    slip    on 

^^  Noi'thwestern  Fire  &  Marine  Ins.  which  the  reinsurance  was  written. 
Co.  V.  Connecticut  Fire  Ins.  Co.  105       As  to   clause :      "Subject   to   same 

Minn.  483,  117  S.  W.  825.  risks,  conditions,"   etc.,  see  note  17, 

^^*  There    was    an    unfilled    blank  §  119  herein. 
space   after   "policies,"   as   in    above       ^^  Weber  v.  Ancient  Order  of  Pvra- 

text.  mids,  104  Mo.  App.  724,  78  S."W. 

"  Lower   Rhine   and   Wurtemburg  660.     Examine  Federal  Life  Ins.  Co. 

Insurance  Assoc,  v.  Sedgwick  (1899)  v.    Kerr    (1908)    —   Ind.    App.   — , 

1  Q.  B.  Div.  Law  Rep.  i79  (Syl.)  80  82  N.  E.  943,  85  N.  E.  796,  173  Ind. 

Law  T.  N.  S.  6,  47  Wkly.  Rep.  261,  613,  91  N.  E.  230,  89  N.  E.  398. 

376 


I 


REINSURANCE  §  131c 

ten  contract  of  reinsurance  it  is  estopped  from  denying  liability.^^ 
So  a  statute  together  with  a  reinsurance  contract  and  as  a  part  there- 
of may  obligate  the  reinsurer  to  the  same  extent  as  under  the  orig- 
inal certificate.^"  And  if  a  fraternal  order  issues  benefit  certificates, 
which  are  treated  by  its  successor,  another  order  of  like  character, 
as  though  issued  by  it,  and  the  holders  of  such  certificates  are  in 
every  respect  also  treated  as  members  of  the  new  association  and 
ihe  officers  of  the  old  are  continued  as  oflicers  of  the  new  associa- 
tion, such  association  will,  upon  death  of  the  beneficiaries,  be  held 
liable  to  the  same  extent,  that  the  association  issuing  the  certificate 
would  have  been  liable  had  it  continued  in  business.^  Again,  there 
may  be  a  w^aiver  of  the  reinsurer's  requirement  that  a  member  shall 
be  in  good  health  before  a  certificate  is  issued  to  him,  so  that  the 
reinsurer  will  be  held  liable.^  A  reinsuring  company  will  also  be 
liable  upon  a  certificate  of  a  member,  even  though  his  name  does 
not  appear  upon  its  books,  where  he  was  in  fact  in  good  standing, 
where  it  is  the  company's  duty  to  ascertain  what  persons  are  en- 
titled to  appear  upon  its  books  as  members  in  good  standing.^ 

But  the  wrongful,  unjust  or  mistaken  exclusion,  by  reinsured 
company,  of  a  member  from  a  transfer  under  a  reinsurance  con- 
tract cannot  affect  the  reinsurer's  liability.*  And  a  legally  incorpo- 
rated company  is  not  liable  upon  a  policy  or  certificate  issued  by  an 
old  but  illegally  incorporated  company  having  the  same  name, 
doing  the  same  general  business  and  composed  of  some  of  the  same 
members  even  though  the  latter  has  transferred  to  the  former  its 
reserve  fund  upon  certain  advantages  of  which  members  of  the  old 
association  may  avail  themselves  if  they  choose.* 

§  131c.  Same  subject:  reinsurer  not  liable  where  risk  materially 
altered. — In  an  English  case  insurance  was  by  a  covernote  issued 
by  plaintiffs  to  a  certain  firm  with  intent  to  provide  for  insurance 
of  all  shipments  of  coal  and  coke  for  one  yesa',  the  premiums  there- 
for varying  in  accordance  with  the  date  of  sailing  and  port  of  desti- 
nation.   On  July  30,  1900,  declaration  was  made  to  plaintiffs  under 

19  Watts  V.  Equitable  Mutual  Life  Life  Assoc.  220  111.  400,  77  N.  E. 
Assoc.  Ill  Iowa,  90,  82  N.  W.  441.         198,  111.   act   1898,   see.   16;   Hurd's 

20  Federal  Life  Ins.  Co.  V.  Risinoer,  Rev.  Stat.  111.  1903,  c.  73,  par.  246. 
46  Ind.  App.  146,  91  N.  E.  533,  See  also  Brown  v.  Mutual  Reserve 
Burn's  Ann.  Stat.  Ind.  1908,  sec.  Fund  Life  Assoc.  224  111.  576,  79  N. 
4753.  E.  943,  rev'g  124  111.  App.  277;  111. 

1  Coolev  v.  Gilliam,  80  Kan.  278,   Laws,  1893,  p.  124,  sec.  16. 

102   Pac.^  1091,   38    Ins.   L.    J.    954.  *  Parvin   v.    Mutual    Reserve   Life 

See  §  135b  lierein.  Ins.  Co.  125  Iowa,  95,  100  N.  W.  39. 

2  Welch  ^•.  Chicago  Guaranty  Fund:  *  Adams  v.  Northwestern  Endow- 
Life  Soc.  2  Mo,  App.  Rep.  678.  See  ment  &  Life  Assoc.  63  Minn.  184,  65 
§  115b  herein.  N.  W.  360,  25  Ins.  L.  J.  352. 

^  Bolles  V.   Mutual  Reserve  Fund 

377 


§  132  JOYCE  (JX  INSURANCE 

the  covernole  of  a  cari^o  of  coals  from  the  Tyiie.  Upon  receiving 
said  declaration  plaintittV  gave  instructions  to  reinsure  and  reinsur- 
ance was  effected  witli  defendant  and  others  at  I.loyds  on  August 
2d  at  a  premium  which  wiis  the  lowest  for  a  summer  risk 
and  varied  from  the  premium  the  plaintiff's  were  entitled  to  charge 
for  August  and  Sei)tember.  The  slip  was  initialed  on  said  day  hy 
underwriters  who  were  under  the  impression  tliat  the  sliip  would  sail 
in  a  few  days,  or  at  least  during  .Vugust.  Said  slip  named  the  vessel 
and  j)urported  to  be  subject  to  the  reinsurance  and  deviation  clauses. 
The  Brenttor  did  not  sail  until  September  2r)th.  and  became  with 
her  cargo  a  total  loss  on  October  2d.  The  policy  of  reinsurance 
was  issued  October  oth  in  j^ursuance  of  the  coverslip  of  August  2d. 
The  plaintiff's  having  paid  the  coal  owners  for  a  total  loss,  claimed 
payment  from  the  defendant  uj)on  the  ])olicv  of  reinsurance.  It 
was  held  that  the  delay  in  the  date  of  sailing  liaving  materially  al- 
tered the  risk,  the  underwriters  were  not  lial)le.® 

§  132.  Agreements  affecting  reinsurer's  liability. — The  parties 
may  agree  to  such  terms  in  reinsurance  as  will  bind  the  reinsurer 
10  the  settlement  or  adjustment  of  loss  made  between  the  parties  to 
The  original  insurance,  fis  where  the  policy  of  reinsurance  provided 
that  the  contract  was  "to  be  subject  to  the  saiue  risks,  valuations, 
conditions  and  mode  of  settlements  as  are  or  may  be  adopted  by  the" 
company  reinsuring.'  and  tlie  agreement  may  be  such  as  to  make 
the  reinsurer  and  reinsured  jointly  lialjle.*  The  reinsurer  may  also 
t)y  agreement  become  liable  directly  to  the  original  insurer.  So  in 
a  New  York  case  ^  the  reinsurer  agreed  to  reinsure  and  assume  all 
risks  on  outstanding  policies  of  another  company  and  to  pay  to  the 
policy  liolders  all  sums  thereon  for  which  the  insurer  would  be  lia- 
ble. Two  of  said  policies  were  life  risks  payable  to  ydaintiff'  upon 
the  death  of  the  insured,  'i'he  insured  collected  the  sums  due  under 
said  policies,  and  it  was  held  that  the  collection  of  .such  insurance 
by  tlie  insurer  did  not  under  the  agreement  prevent  a  recovery 
again.st  the  reinsurer  by  plaintiff'.  Where  a  policy  of  reinsurance 
to  a  company  which  had  insured  a  ship  contained  the  clause  "sub- 
ject to  tlie  same  terms  and  conditions  as  tlie  original  policy  and  to 
pa}'  as  may  be  paid  thereon,"  and  the  reinsured  company  became 

^Maritime    Ins.     Co.    v.     Stearns,       'Wliitiu'v    v.    American    In.>^.    Co. 

71  Law.  .1.  K.  B.  86,  [1901]  2  K.  B.  11:17   Cal.  464,  59   Pac.  897,  aff'g  56 

912,  50  Wkly.  Rep.  2.38,  (i  Com'I  Cas.  Pac.  .-)0,  28  In.s.  L.  J.  254. 
182.     As  to  delay  in  comraencing  ad-        ^  Glen    v.    Hope   Mutual   Life   Ins. 

venture,  see  SS    1494  et    seq.   herein.  Co.  .")6  N.  Y.  379;  Whitney  v.  Ameri- 

As  to  chanjiro  of  vovage,  see  chapter  can  Ins.  Co.  —  Cal.  — ,  56  Pac.  .lO,  28 

thereon  §§  2365  et  seq.  herein.  Ins.  L.  J.  254,  aff'd  127  Cal.  464,  59 

'  Consolidated  Real  Estate  &  Fire  Pac.  897. 
Co.  V.  CaslioWj  41  Md.  59.     See  note 
17,  §  119  herein. 

378 


i 


REINSURANCE  §  133 

liable  for  a  los.s,  but  bad  not  yet  \n\u\  tbe  aiuount  of  tlie  same,  it  wa.s 
held  tbat  payment  by  such  reinsured  conii)any  of  tbe  loss  was  not  a 
v-ondition  precedent  to  tbe  recovery  by  the  reinsured  of  the  rein- 
surer." But  a  clause  in  a  contract  for  reinsurance,  tiiat  "tliis  policy 
is  subject  to  the  same  risks,  conditions,  mode  of  settlement,  and,  in 
case  of  loss,  payable  at  tbe  same  time  and  in  the  same  manner  as 
the  policies  reinsured." — does  not  mean  tbat  the  various  terms  in 
tbe  reinsured  policies  as  to  risks,  conditions,  mode  of  settlement. 
Time,  and  manner  of  payment,  in  case  of  loss,  and  limitation  period, 
were  incorporated  with  and  form  a  part  of  tbe  contract  of  reinsur- 
ance, but  that  the  oriii,inal  policies  furnisb  in  those  particulars  the 
oasis  on  which  tbe  contract  of  reinsnranee  stands,  and  tbat  in  all 
(lealings  witb  tbe  oriii,inal  insured  the  provisions  of  the  policy  is- 
sued to  him  are  to  be  observed. ^^  The  reinsurance  contract  may 
also  limit  tiie  reinsurer's  liability  by  excludin.ii,  all  lial)ilities  of  the 
reinsured  to  members  or  beneliciaries  except  claims  for  death  oc- 
currin.i>,  after  the  agreement  has  been  ratified,  and  thereby  preclude 
recovery  upon  a  policy  providing  for  a  cash  surrender  value. ^^  Jf. 
however,  the  reinsurer  agreas  unconditionally  to  assume  the  rein- 
surecl's  liability  to  members  in  good  standing  it  cannot  im])ose  as  a 
condition  precedent  upon  a  member  tbat  be  submit  to  a  medical 
examination  in  order  to. obtain  tbe  Ijenefits  of  the  reinsurance.^^  Jf 
a  provision  of  a  reinsurance  contract  conflict^  with  the  policy  it  ha.-^ 
no  ef¥ect  upon  insured's  rights  a.s  fixed  l)y  the  i)olicy  and  this  ap- 
plies to  a  i)rovision  whereby  the  reinsurer  atteuii)ted  by  tbe  contract 
to  provide  for  forfeitnre  for  non])ayment  of  premiums.^* 

Tbe  New  York  standard  lire  jjolicy  })rovides  thai  •'liability  for 
reinsurance  siiall  be  as  specilically  agreed  hereon."' 

§  133.  Reinsurer's  liability:  pro  rata  clause. — If  the  jwlicy  con- 
tains a  clause,  "loss,  if  any.  payable  pro  rata  and  at  the  same  time 
with  the  reinsured.""  oi'  like  words,  the  recovery  is  limited  thereby 
to  that  i)roiM)rtion  which  tbe  amount  reinsured  sustains  to  the  orig- 
inal amount. ^^    If  two  insurers  ol>tain  reinsurance  from  a  third  ''the 

"  Eddystone  Marine  Ins.  Co.  Ill  re,  Co.   i:)4   Mo.    App.   4(i4,   135    S.   W. 

Western  Ins.  Co.  Ex  parte  (En.ii'.  ('.  101;!. 

A.    Cli      D     1892)     L.  R.   '2   Cli.    I).        i*  Federal  Lite  Ins.  Co.  v.  Arnold. 

(1892) '423',  7  Asp.  M.'  C.  167.  46  Ind.  App.  114,  90  N.  E.  493. 

^1  Faiieuil   Hall    Ins.   Co.  v.  Liver-i        ^^  Casliau  v.  Northwestern   Mutual 

pool  &  London  &  Globe  Ins.  Co.  153  Ins.   Co.  5   Biss.  U.  S.    (C.  C.)   4/(). 

Mass.   63,   26  N.   E.   244,  10  L.R.A.  Fed.    ('as.    No.    2499;    Con.'^olidated 

423.      Cited   and    considered    in    note  Real     Estate     &     Fire     Ins.     Co.  ^v. 

17,  {^  119  herein.  Cashow,  41    Md.   5!);    Hone  Ins.   Co. 

^2  Mutual       Reserve      Fund      Life  v.    Continental    [n.s.    Co.     70     N.     Y. 

Assoe.  V.  Green   (1908)  —  Tex.  Civ.  Siipp.  824,  62  App.  Div.  63,  aff'd  89 

App.  -,  109  S.  W.  1131.  App.    Div.    1,    180    N.    Y.    389,    73 

"  Cox   V.   Kansas    Citv   Life    Ins.  N.  E.  65.     See  §  134  hereui. 

379 


§  133  JOYCE  ON  INSURANCE 

loss,  if  any,  payable  pro  rata  at  the  same  time,  and  in  the  same  man- 
ner as  by  such  companies,"  the  respective  amounts  of  loss  which  the 
original  insurers  and  the  reinsurer  must  pa}'  is  proportionate  to  the 
amount  of  tJie  original  and  the  amount  of  the  reinsurance,  and  this 
proportion  cannot  be  changed  by  any  act  of  the  original  insurers  in 
diminishing  the  amount  of  the  insurance.  Therefore,  if  the  original 
insurance  was  for  ten  thousand  dollars  and  the  reinsurance  for  five 
thou^^and  dollars,  and  afterward  the  original  insurance  was  reduced 
to  two  thousand  dollars,  and  subsequently  a  loss  occurs,  the  rein- 
surer's liability  is  for  one  half  of  the  last-named  sum  only.^®  So  in 
case  the  reinsurance  is  for  half  the  amount  originally  insured  and 
a  loss  occurs  which  is  less  in  amount  than  the  original  insurance, 
the  recovery  is  limited  to  one  half  the  loss.'^'^  In  this  case  the  court, 
per  Johnson,  J,,  says:  "In  the  case  of  Hone  v.  The  Mutual  Safety 
Insurance  Company,^^  it  was  adjudged  that  under  a  contract  of  re- 
insurance the  extent  of  the  liability  of  the  reinsurer  was  not  affected 
by  the  insolvency  of  the  reassured,  nor  by  its  inability  to  fulfil  its 
own  contract  with  the  original  insured.  This  proposition  was  main- 
tained by  Mr.  Justice  Sandford,  giving  the  judgment  of  the  superior 
court  of  New  York  in  a  careful  and  learned  opinion,  thoroughly  set- 
ting forth  the  reasons  on  which  the  decision  rested  and  the  author- 
ities supporting  it.  This  judgment  was  affirmed  in  the  court  of  ap- 
peals.^^  We  have  examined  the  printed  record  as  it  was  presented 
to  the  court,  and  find  that  the  questions  mentioned  were  distinctly 
raised  both  by  the  exceptions  taken  at  the  trial  and  by  the  points 
of  the  counsel  on  both  sides  used  in  the  argument.  That  these  ques- 
tions were  not  particularly  noticed  in  the  opinions  delivered  in  the 
court  of  appeals  must  be  attributed  to  their  being  regarded  as  too 
well  settled  to  require  notice.  They  were  necessarily  involved  in 
the  judgment  pronounced,  and  the  silence  of  the  opinions  scarcely 
diminishes  the  force  of  the  precedent.  A  recovery  was  had  in  the  ■ 
case  for  the  full  amount  of  the  reinsurance,  notwithstanding  it  ap- 
peared that  the  reassured  company  was  insolvent  and  had  been  dis- 
solved, and  that  its  assets  were  not  sufficient  to  pay  more  than  .fifty 
per  cent  of  its  debts.  The  policy  now  in  suit  differs  from  that  in 
the  case  cited  in  containing  the  following  clause :  'Loss,  if  any,  pay- 
able pro  rata,  and  at  the  same  time  with  the  reinsured.'  By  virtue 
of  the  first  part  of  this  clause  the  defendant  is  not  bound  to  pay  the 
full  amount  reinsured  by  its  policy,  but  only  such  a  proportion  of 

16  Home    Ins.    Co.    v.    Continental        ^^  i  gand.  (N.  Y.)  137. 
Ins.  Co.  180  N.  Y.  389,  105  Am.  St.        ^^  In  2  N.  Y.  235. 
Rep.  772,  73  N.  E.  65. 

1'^  Blackstone    v.    Alemannia    Fire 
Ins.  Co.  50  N.  Y.  104. 

380 


REINSURANCE  §  133a 

the  amount  of  the  los.?  as  is  in  the  ratio  of  the  amount  of  the  rein- 
surance to  the  amount  ori2;inallv  insured.  Thus,  the  defendant's 
reinsurance  being  for  half  the  amount  of  the  original  insurance, 
the  defendant  is  to  pay  half  the  loss."  The  latter  part  of  such  clause 
does  not  require  that  payment  by  the  reinsured  should  precede  or 
accompany  payment  by  the  reinsurer,^"  and  where  in  addition  to 
the  pro  rata  clause  the  policy  also  contained  a  provision  that  the 
loss  should  be  settled  in  the  proportion  whi<'h  the  amount  reinsured 
bore  to  the  whole  amount  originally  covered,  the  reinsurer  was  held 
liable  to  the  reinsured  in  the  same  propoi-tion  it  was  obligated  to  in- 
demnify its  insured.^  It  is  held,  however,  that  the  pro  rata  clause 
merely  gives  the  company  the  benefit  of  any  defense,  deduction,  or 
equity  winch  the  first  insurer  may  have,  making  the  liability  of  the 
reinsurer  the  same  as  the  original  insurer,  and  that  it  does  not  limit 
such  liability  to  what  the  original  insurer  may  have  paid  or  be  able 
to  pay,^  and  in  Illinois  ^  it  is  decided  that  the  pro  rata  clause  limits 
the  liability  of  the  reinsurer  to  a  proportionate  share  of  the  amount 
actually  paid  by  the  reinsured.  In  this  case  the  original  insurance 
was  for  six  thousand  dollars,  the  reinsurance  was  for  two  thousand 
dollars,  and  the  insurer  becoming  insolvent  settled  with  the  insurer 
at  ten  per  centum  or  six  hundred  dollars,  and  the  court  held  that 
the  reinsurer's  liability  was  only  two  hundred  dollars.  This  deci- 
sion. hCwever.  involves  a  question  as  to  what  extent  the  insolvency 
of  the  insurer  affects  the  liability  of  the  reinsurer,  which  will  be 
considered  in  the  next  section. 

§  133a.  Same  subject. — AVhere  an  ordinary  policy  is  used,  and 
only  one  of  the  conditions  is  applicable  to  a  contract  of  reinsurance, 
but  a  slip  is  pasted  thereon  to  cover  the  reinsured's  liability,  and  it 
stipulates  that  such  reinsurance  is  a  pro  rata  part  of  each  and  every 
item  insured  by  the  policy  of  the  reinsured,  and  is  subject  to  the 
same  conditions  and  mode  of  settlement  assumed  by  the  reinsured, 
and  that  the  loss  is  payable  at  the  same  time,  in  the  same  manner, 
and  pro  rata  with  the  amount  paid  by  the  reinsured,  such  contract 
should  be  construed  most  strongly  against  the  reinsurer,  where  a 
time  limitation  clause  therein  is  inconsistent  with  said  stipulations 
and  tlie  reinsurer  is  liable  in  accordance  with  its  agreement.*  Again, 
inability  of  the  reinsured,  by  reason  of  insolvency,  to  pay  a  fire 
loss  in  full  or  in  part,  does  not  affect  the  liability  of  the  reinsurer 

^°  Blackstone  v.  Alemannia  Fire  ^  Illinois  Mutual  Ins.  Co.  v.  Andes 
Ins.  Co.  5G  N.  Y.  104.  Ins.  Co.  G7  111.  362,  16  Am.  Rejx  GiO. 

^Norwood  V.  Resolute  Fire  Ins.  ^Roval  Ins.  Co.  v.  Vnnderhilt  Ins. 
Co.  4  Jones  &  L.  (N.  Y.)  552.  Co.  102  Tenn.  264,  52  S.  W.  168,  28 

2  Norwood,  Ex  parte,  3  Biss.  (IJ.  S.    Ins.  L.  J.  910. 
C.  C.)  504,  and  note,  519,  Fed.  Cas. 
No.  10364. 

381 


§  134  JOYCE  OX  INSURANCE 

under  tlio  conlraet  of  reinsurance,  even  tlioufth  it  provides  that  the 
reinsurer  sliall  in  no  event  l>e  hable  for  an  amount  in  excess  of  a 
I'atable  proportion  of  the  sum  "actually  paid."'  etc..  since  the.se  words 
will  be  construed  to  mean. ''actually  payable."  * 

The  terms  of  the  contract  may  make  it  one  of  reinsurance  and 
not  of  coinsurance  to  pro  rate  the  loss  as  where  a  marine  carrier  re- 
insured a  I'i.'^k.  assumed  by  him  under  an  insured  bill  of  lading  is- 
sued to  a  shipper,  by  a  policy  providing  for  I'einsurance  of  risks  a.s- 
sumed  or  to  be  assumed  by  said  rea.^sured  and  agreeing  to  pay 
assured  in  full  all  claims  for  such  los,ses  arising  from  perils  enumer- 
ated in  the  policy  ''as  the  a.ssured  may,  in  their  judgment,  settle 
for  with  the  owners  or  other  persons  interested  in  the  merchan- 
dise;"' and  the  reinsurer  was  therefore  held  liable  for  the  full 
amount  paid  by  the  rea.ssured  for  the  loss  to  the  extent  specified  in 
the  policy.^  Under  a  Missouri  decision  if  the  extent  of  the  rein- 
surer's liability  is  not  in  any  way  contingent  upon  the  amount  paid 
on  a  loss  by  the  reinsured  company  and  the  contracts  of  both  were 
independent,  and  their  performance  did  not  depend  upon  each 
other  the  reinsurer  cannot  sustain  a  claim  that  it  is  liable  only  for 
a  pro  rata  share  of  the  amount  paid  on  a  loss  by  the  reinsured.' 

§  134.  Reinsurer's  liability:  compromise:  insolvency  of  insurer. — 
There  has  been  much  discussion.  Ijoth  l)y  the  courts  and  text-writers, 
as  to  what  effect  the  insolvency  of  the  insurer  and  his  cou'^equent 
inability  to  fully  pay  the  insured,  or  his  coujpi'omise  with  the  as- 
sured, has  upon  the  liability  of  the  ]'einsurer  to  him.  the  insurer. 
Mr.  ]\hirshall  *  asserts  that  the  reinsurer  can  gain  nothing  by  the 
insurer's  insolvency  but  must  pay  his  loss  in  full.  Mr.  Parsons,^ 
however,  upholds  the  doctrine  which  makes  the  reinsurer  liable  not 
in  full  but  only  to  the  extent  projiortionally  for  which  thfe  ini«ured 
settled.  He  bases  this  conclusion  upon  the  principle  of  indemnity, 
and  makes  a  distinction  between  a  settlement  by  the  insurer  with 
the  insured  before  and  after  having  rccoiu-se  to  the  I'einsurer.  and 
says  that  in  the  former  case  the  insurer  may  recover  to  the  extent 
of  his  liability  As  governed  by  the  i-einsunmce  conti'act,  and  settle 
as  best  he  can  with  the  insured,  while  in  the  latter  case  he  can  re- 
cover no  more  than  he  has  paid.     Mr.  Wood  ^°  says:   "The  reinsur- 

^  Allemannia  Fire  Ins.  Co.  v.  Fire-  On  effect  of  compromise  by  origi- 

nicn's    Ins.   Co.   '28    Apii.    1).    C.    '^'lO,  ual  insurer  upon  reinsurer's  liabilitv, 

14  L.K.A.(N.S.)    104!).  see  note  m  (i  P,.  li.  C.  896. 

^  Ocean    Steamship    Co.    v.    ^tna  ^1   Mav  on  Ins.   (3d  ed.)   sec.  11a. 

Ins.  Co.  (U.  S.  C.  C.)  121  Fed.  882.  See   also' Id.    (4th   ed.    Gould's)    sec. 

'Cass  Couiitv  V.  Mercantile  Town  Ha,   pp.  18,  19. 

Mutual  Ins.  ("o.  188  Mo.  1,  SO  S.  W.  ^^  1  Wood  on  Fire  Ins.  (2d  ed.)  p. 

2:57,  34  Ins.  L.  J.  43.").  194,  sec.   87. 

^1    Marshall    on    Ins.    143,    citituj 
Emeri£?on. 

382 


REINSURANCE  §  134 

er  mufit  pay  bis  share  of  the  lo^^s  whether  tlio  insurer  has  paid,  or 
has  the  ability  to  pay.  its  proportion  of  the  loss  or  not :  ""  but 
he  also  declares "  that  the  (juestion  is  an  open  one,  and  thai 
wliile  the  'Sveitibt  of  authority"  does  not  oive  the  reinsurer  tlie 
benefit  of  the  eoniproniise.  the  opposite  eonehision  ''wouhl  be  more 
consistent  and  consonant  with  principle,''  on  the  ground  of  indem- 
nit\'.  If  it  be  assumed  that  there  is  no  settled  rule  of  law  in  view 
of  which  the  parties  would  be  presumed  to  have  contracted,  and  the 
question  were  now  for  the  first  time  to  be  determined,  then  there 
would  seem  to  be  no  reason  why  the  reinsurer  should  not  be  obli- 
gated to  the  full  extent  of  the  liability  of  the  insurer  under  the  orig- 
inal contract,  notwithstanding  the  latter's  insolvency  or  settlement 
for  a,  less  sum  with  the  insured,  provided  always  that  such  liability 
is  not  in  excess  of  the  amount  covered  by  the  reinsurance.  If  re- 
insurance is  one  of  indenmity,  the  reinsured  should  only  recover 
for  the  actual  loss  sustained.  The  principle  of  indemnity  would 
not  seem  to  conflict  with  such  a  rule  since  the  indenmity  contem- 
plated relates  to  the  loss  or  liability  of  the  insurer  under  the  orig- 
inal insurance, ^^  and  the  reinsurer's  liability  must  be  held  to  have 
attached  when  that  loss  arises  and  the  insurer  becomes  liable  to  the 
insured.  The  reinsurer  has  agreed  to  pay  according  to  the  terms 
of  its  contract,  nor  can  another  and  different  agreement  be  engraft- 
ed thereon  to  the  effect  that  any  compromise  by  the  insurer  with 
the  insured  of  his  liability  shall  inure  to  the  benefit  of  the  rein- 
surer. Again  if  the  principle  of  indemnity  is  governed  by  the  fact 
whether  a  settlement  is  made  before  or  after  recourse  to  the  rein- 
surer, it  must  be  a  peculiar  one,  since  it  would  then  admit  of  a  j-trof- 
it  in  one  case  and  not  in  the  other,  which  is  a  perversion  of  the  ])rin- 
ciple.  Again  there  is  no  privity  of  contract  between  the  insured 
and  the  reinsurer  in  any  case  Avhere  this  question  could  arise. ^^  If 
the  insurer  be  insolvent,  the  reinsurance  moneys  form  part  of  the 
general  fund  for  the  payment  of  its  debts, ^*  and  the  sum  due  from 
the  reinsurer  belongs  to  his  creditors  pro  i-ata:  ^^  and  the  original 

^^  2  Id.  818.  On  proceeds  of  reinsurance  as  S|)e- 

^^  §  112  herein.  cial    fund   in  case   of   insolvency,   see 

"i^  117  herein.  note  in  38  L.R.A.  110. 

^*  Ilerckenrath  v.  American  IMutual  ^^  Hone  v.  Mutual  Safety  Ins.  Co. 

Ins.  Co.  3  Barb.    Ch.     (N.    Y.)     03.  1   Sand.   (N.  Y.)   137.    2    N.    Y.    (2 

See  also  May  on  Ins.    (3d  ed.)    see.  Comst.)      23.');      Goodrich's     xVppeal 

lla,  \vhere  Mr.  Parsons  says:     "Tlie  (Pa.    S.    C.)     lOn  Pa.  St.  ry23.     See 

cianu  against  the  reinsurer  \vas  part  Mason  v.   Cronk,  127^  N.  Y.  4J)(),  28 

(if  the  assets  in  the  hand.s  of  the  re-  N.  E.  224,  35  N.  Y.  SfjO,  reversing 

ceiver    to    be    administered    for    the  27  N.  Y.  122.     See  Home  Ins.  Co.  y. 

benefit  of  all  the  creditors."    See  also  Continental  Ins.  Co.  180  N.  Y.  309, 

Id.  (4th  ed.  Gould's)  sec.  11a,  p.  19.  105  Am.  St.  Rep.  772,  73  N.  E.  65. 

383 


§  134  JOYCE  ON  INSURANCE 

insured  has  no  equitable  lien  or  preferable  claim  upon  the  money 
duo  upon  the  contract  of  reassurance.^^  Again,  the  indemnity  in- 
tended is  that  which  the  contract  of  reinsurance  contemplates. 

Finally,  the  weight  of  authority  is  that  the  reinsurer  can  derive 
no  advantage  from  the  insolvency  of  the  insurer,  and  the  settlement 
by  him  with  the  insured  for  a  less  sum  than  his  liability  under  the 
original  contract.  So  where  the  amount  insured  was  ten  thousand 
dollars  and  the  reinsurance  five  thousand  dollars,  and  the  policy 
contained  a  pro  rata  clause,  the  reinsurer  was  held  liable  for  one- 
half  the  insurer's  loss,  notwithstanding  his  bankruptcy  and  settle- 
ment for  a  small  dividend,^'  and  other  cases  hold  that  the  reinsurer 
is  bound  to  pay  the  amount  which  the  original  insurer  becomes 
legally  liable  to  pay  to  the  assured  in  consec^uence  of  the  risk  as- 
sumed, and  not  merely  the  amount  which  the  original  insurer  ac- 
tually pays  in  consequence  of  the  risk  assumed  by  liim.^^  Since  the 
liability  of  the  reinsurer  does  not  depend  upon  the  insolvency  of 
the  reinsured  or  upon  the  latter's  inability  to  fulfil  its  contract  with 
the  original  insured,  the  reinsured's  claim  is  not  based  upon  its 
greater  or  less  ability  to  pay,  but  upon  its  liability  to  pay.^^  And 
under  a  New  Hampshire  decision  the  liability  of  a  reinsurer  is  not 
lessened  by  the  insolvency  of  an  intermediate  insurer  which  has  be- 
come unalDle  to  pay  the  loss,  but  the  reinsurer's  liability  is  for  the 
entire  amount  of  the  loss  against  which  they  agreed  to  indemnify 
the  prior  insurer.^" 

^^Consolidated    Real    Estate    Fire  Gantt  v.  American  Central  Ins..  Co.  68 

Ins.    Co.    V.    Cashow,    41    Md.    59.  Mo.  503;  Strong  v.  Phoenix  Ins.  Co. 

Strong-  V.  Pha-nix  In.s.  Co.    62    Mo.  62  Mo.  289,  296,  297,  21  Am.  Rep. 

289,    296,    297,    21   Am.   Rep.   417;  417;   Blackstone   v.   Alemannia   Fire 

Herckenrath     v.     American    Mutual  Ins.  Co.  56  N.  Y.  104;  Herckenrath 

Ins.  Co.  3  Barb.  Ch.  (N.  Y.)  63.  v.  American  Mutual  Ins.  Co.  3  Barb. 

1"' Consolidated    Real    Estate    Fire  Ch. '(N.   Y.)    63;    Hone    v.    Mutual 

Ins.    Co.    V.    Cashow,    41    Md.    59.  Safety  Ins.  Co.  1  Sand.  (N.  Y.)  138, 

Clause  in  this  case    was,    "Loss,    if  2  N.  Y.    (2   Comst.)    2.35;   Hastic  v. 

any,  payable  pro  rata  to  them    .    .    .  De  Peyster,   3   Caines    (N.  Y.)    193, 

at  same  time  and  in  .same  manner  as  194,  per  Kent,  C.  J.;  1  i\Iarshall  on 

Ihcy     pay."       See'  also    Providence-  Ins.    (ed.    1810)    *143.      See    §    133 

Washington  Fire  Ins.  Co.  v.  Atlanta-  herein. 

Birmingham    Fire    Ins.   Co.    (U.    S.  19  AUemannia     Fire     Ins.     Co.     v. 

C.  C.)  166  Fed.  548.    Here  the  settle-  Firemen's  Ins.  Co.  209  U.  S.  326,  52 

ment  with  the  creditors  was  30  per  l_  ej_  3^5^  28  Sup.  Ct.  544,  14  Am. 

cent  in  full  of    proved    claims    and  &  Eng.  Ann.  Cas.  948,  37  Ins.  L.  J. 

reinsurers   were   held   liable   for  full  2I6;      Providence-Washington     Fire 

amount  and  were  not  allowed  the  70  j^g.  Co.  v.  Atlanta-Birmingham  Fire 

per  cent.  Jns.  Co.  (U.  S.  C.  C.)  166  Fed.  548, 

"  Cashau  v.  Northwestern  Mutual  33  Ins.  L.  J.  461.     See  §  135  herein. 

Ins     Co.    5  Biss    (U.  S.  C.  C.)  476,  20  Hunt   v.   New   Hampshire   Fire 

Fed.  Cas.  No.  2499;  Eagle  Ins.  Co.  -^      ,   *         ra  xt   ti   on-    -q 

V.  Lafavette  Ins.   Co.    9    Ind.    443;  Underwriters'  Asso.  68  N.  H.  30o,  /3 

384 


REINSURANCE 


134a 


There  are  decisions,  however,  which  hold  that  the  sum  i3aid  by 
the  insurer  is  the  measure  of  indemnity.^ 

A  reinsurer  of  an  insolvent  company  may  by  assuming  all  its 
outstanding  risks  and  by  taking  possession  of  all  its  assets  be  pre- 
cluded from  as.<erting  its  non-liability  to  the  policy  holders.^  .Vnd 
a  reinsurer  may  be  required  to  pay  the  amount  of  the  loss  which  it 
is  liable  for,  directly  to  the  insured  or  the  party  ultimately  entitled 
to  the  money  when  the  prior  insurer  which  it  has  indemnified  has 
become  insolvent.^ 

§  134a.  Same  subject:  mutual  benefit  societies,  etc.:  trust  fund. — 
A  society  which  reinsures  an  insolvent  order  of  like  nature  is  liable 
uj)on  a  certificate  issued  by  the  reinsured  to  the  same  extent  that 
tiie  latter  would  have  been,  had  it  continued  in  business.  And  where 
the  reinsurer  succeeded  to  the  insolvent's  business,  property,  and  to 
a  fund  raised  by  assessments  to  pay  in  full  a  death  claim  which  it 
had  approved,  said  fund  constitutes  a  trust  fund  for  the  payment 
of  the  claim  to  the  amount  due  under  the  certificate.'*  If  reinsur- 
ance is  obtained  in  companies  which  had  either  gone  out  of  business 
or  had  become  insolvent  a  policy  holder  who  has  paid  a  ca.sh  pre- 
mium to  a  mirtual  insurance  company  is  entitled  upon  cancelation 


Am.  St.  Rep.  602,  38  L.R.A.  514,  38    leeted    was   intermingled   with    other 
Atl.  14o.  fund.s,   but  having-  on    hand    money 

^  Illinois  Mutual  Ins.  Co.  v.  Andes  sufficient  to  complete  the  payment 
Ins.  Co.  67  111.  362,  16  Am.  Kep.  620;  set  it  apart  and  reserved  it  in  the 
for  facts  in  this  case,  see  end  of  §  hands  of  its  secretary  and  treasurer 
133,  ante;  Commercial  Mutual  Ins.  for  that  purpose.  Becoming  embar- 
Co.  V.  Detroit  Fire  &  Marine  Ins.  rassed,  the  association  entered  into 
Co.  38  Ohio  St.  11,  43  Am.  Rep.  an  agreement  with  another  of  like 
413;  2  Wood  on  Fire  Ins.  818,  note  8.    nature  which  thereby  succeeded  to  its 

^Ruohs  V.  Traders'  Fire  Ins.  Co.  business,  property,  and  effects,  to 
111  Tenn.  405,  102  Am.  St.  Rep.  790,  which  successor  the  secretary  and 
78  S.  W.  85.  treasurer  paid  the  fund    so    resened 

'  Hunt  V.  New  Hampshire  Fire  upon  the  express  agreement  and 
Underwriters'  Assoc.  68  N.  H.  305,  ])romise  that  such  successor  should 
38  L.R.A.  514,  73  Am.  St.  Rep.  602,  ai)ply  the  fund  to  the  purpose  for 
38  Atl.  145.  whicli  it  had  been  so  reserved.     This 

*Cooley  V.  Gilliam,  80  Kan.  278,  application  was  not  made,  the  bal- 
102  Pac.  1091,  38  Ins.  L.  J.  954.  The  ance  due  upon  the  certificate  has  not 
following  syllabus  is  by  the  court  in  been  paid,  and  the  association  whicli 
this  case:  issued  it  is  insolvent.     Held,  That  the 

A  fraternal  order  approved  proofs  fund  so  set  apart  and  leserved  was 
furnished  upon  the  death  of  a  benefit  impressed  with  a  trust  for  the  pay- 
certificate  holder,  made  and  collected  ment  of  this  claim,  and  that  the 
an  a.ssessment  for  a  fund  to  pay  the  officer  so  parting  with  it.  and  the 
same  in  full,  and  ordered  its  secre-  company  so  receiving  it,  are  liable 
tary  and  treasurei'  to  pay  the  claim,  to  tlie  claimant  for  the  amount  due 
who  did  pay  a  i)art  thereof.  The  upon  tlie  certificate.  See  §§  112b, 
remainder  of  the  amount  so  col-  135,  136b  herein. 
Joyce  Ins.  Vol.  I. — 25.  385 


§  135  JOYCE  ON  INSURANCE 

of  the  policy  to  the  return  of  a  proportion  of  such  cash  premium 
and  this  ohligation  of  the  company  to  pay  must  be  discharged  by 
the  receiver.* 

§  135.  When  suit  may  be  brought  against  reinsurer:  rights  of 
original  insured. — The  insurer  may  wait  until  suit  brought  and 
judgment  obtained  by  the  insured  before  seeking  indemnity  from 
the  reinsurer,^  and  the  reinsurer  is  bound  under  a  valid  contract  of 
reinsurance  when  the  reinsured  has  been  found  liable  or  the  loss 
adjusted.'^  It  is  also  held,  however,  that  before  reinsurers  can  re- 
cover, they  must  show  that  they  have  paid  a  valid  claim,  bj'  show- 
ing that  the  primitive  insurers  had  a  risk  upon  the  subject  insured 
and  that  such  subject  was  destroyed;  *  but  it  is  not  necessary  that 
the  insured  should  have  paid  the  loss  before  proceeding  against  the 
reinsurer.  Suit  may  be  brought  as  soon  as  the  liability  occurs,  for 
the  contract  is  one  of  indemnity  against  the  liability  of  the  insurer 
for  loss,  and  it  is  sufficient  that  such  liability  to  pay  for  the  loss  ex- 
ists, for  the  contract  does  not  go  to  the  insurer's  payment  of,  or 
ability  to  pay,  the  loss.^ 

Where  a  company  transfers  its  stock  to  a  reinsuring  company 
upon  a  guaranty  that  its  obligations  to  its  policy  holders  shall  be 
fulfilled,  some  liability  to  such  policy  holders  must  accrue  before 
any  action  lies  upon  such  guaranty,  but  when  the  reinsurer  passes 
into  a  receiver's  hands,  and  the  claims  of  the  policy  holders  are  pre- 
sented and  established,  the  guaranty  should  be  turned  into  assets 
to  meet  the  claims  of  creditors.^"  If  a  policy  holder,  upon  learning 
of  the  insolvency  of  the  company,  enters  into  a  contract  of  reinsur- 
ance with  another  company,  he  may  lose  his  remedy  against  the 
original  company,"  and  where  a  New  York  company  had  an  office 

5  Raegener  v.  Equitable  Mutual  Ins.  Co.  v.  Atlanta-Birmingham  Fire 
Eire  Ins.  Corp.  60  N.  Y.  Supp.  478,  Ins.  Co.  (U.  S.  C.  C.)  106  Fed.  548, 
44  App.  Div.  41.  38  Ins.  L.  J.  4Q1 ;  Norwood,  Ex  parte, 

6  Hone  V.  Mutual  Safety  Ins.  Co.  3  Biss.  (U.  S.  C.  C.)  504,  Fed.  Cas. 
1  Sand.  (N.  Y.)  137,  2  N.  Y.  (2  No.  10364;  Eagle  Ins.  Co.  v.  La- 
Comst.)    235.  i'ayette  Ins.  Co.  9  Tnd.  443;  Gantt  v. 

'Jackson  v.  St.  Paul  Fire  &  Ma-  American  Central  Ins.    Co.    68    Mo. 

rine  Ins.  Co.  99  N.  Y.  124,  1  N.  E.  503;  Hone  v.  Mutual  Safety  Ins.  Co. 

539.      See    Noi-wood,    Ex    parte,    3  1    Sand.    (N.    Y.)   137;  2  N.  Y.   (2 

Biss.  (U.  S.  C.  C.)  504,  Fed.  Cas.  No.  Comst.)   235;  Blaekstone  v.  Aleman- 

10,364.  Ilia  Fire  Ins.  Co.  4  Daly  (N.  Y.)  299 ; 

8  Yonkers  &  New  York  Fire  Ins.  Philadelphia  Trust,  Safe  &  Deposit 
Co.  V.  Hoffman  Fire  Ins.  Co.  6  Bob.  Ins.  Co.  v.  Fame  Ins.  Co.  9  Phila. 
(N.  Y.)  316.  (Pa.)  292. 

9  Alemannia  Firo  Ins.  Co.  v.  i»  Mason  v.  Cronk,  125  N.  Y.  496, 
Firemens'  Ins.  Co.  209  U.  S.  326,  52  28  N.  E.  224,  35  N.  Y.  859. 

L.  ed.  815,  28  Sup.  Ct.  544,  14  Am.        "  Ewing  v.   Coffman,  12  Lea    (80 
&  Eng.  Ann.  Ca.s.  948,  37  Ins.  L.  J.    Tenn.)  79. 
316 ;     Providence-Washington      Fire 

386 


REINSURANCE  §  135 

in  Chicago,  and  reinsured  with  another  company  which  afterward 
became  bankrupt,  and  the  reinsured  went  into  insolvency  and  a  re- 
ceiver was  appointed  by  a  New  York  court,  it  was  held  that  such 
receiver  miglit  prove  the  debt  against  a  bankrupt  in  the  United 
States  court. ^^  Where  the  defendant  reinsured  all  its  risks  and  had 
a  large  sum  of  money  in  the  treasury',  being  the  proceeds  of  cash 
payments  hj  the  then  present  and  also  by  the  past  policy  holders, 
and  the  interest  on  the  investments  thereof,  which  sum  had  been 
of  about  the  same  amount  for  several  years,  it  was  held  that  all  the 
policy  Jiolders  who  contributed  to  such  sur|)his  were  entitled  to  a 
proportion  thereof  according  to  the  amount  of  their  respective  pay- 
ments, whether  they  continued  to  be  policy  holders  at  the  period  of 
distribution  or  not.^^  Where  an  insurance  company  sells  out  its 
business  to  another  company,  and  in  consideration  thereof  the  lat- 
ter reinsured  the  former  company's  risks,  and  agreed  to  pay,  satisfy, 
and  discharge  the  losses,  this  is  a  mere  contract  of  reinsurance,  and 
there  is  sufficient  privity  between  a  policy  holder  and  the  vendee 
company  to  enable  the  former  to  maintain  an  action  against  the 
latter  for  a  loss?^*  And  it  is  held  that  it  is  a  breach  of  contract  which 
constitutes  a  cause  of  action  where  a  company  transfers  and  assigns 
to  a  rein.suring  company  all  its  assets  including  its  legal  reserve  on 
life  policies. ^^  The  deposit  required  under  the  Missouri  statute  of 
a  life  insurance  company  is  a  trust  fund  for  tlie  benefit  of  the  policy 
holders  of  the  company  making  such  deposit,  and  where  notes  are 
made  to  take  the  place  of  this  fund  by  a  company  which  has  as- 
sumed the  policies  of  the  original  company,  these  notes  are  held  up- 
on the  same  trust  as  the  funds  they  were  intended  to  replace.^^  The 
fact  that  the  policy  holders  of  the  reinsured  company  have  paid 
premiums  to  the  reinsuring  company  does  not  deprive  them  of  the 
remedy  against  the  trust  fund,  nor  does  the  fact  that  the  reinsuring 
company  has  paid  many  policies  of  the  reinsured  company  dis- 
charge the  trust."  In  Glen  v.  Hope  Mutual  Life  Insurance  Com- 
pany ^^  the  insurer  reinsured  the  life  of  one  of  its  policy  holders  in 
two  other  companies  for  ten  thousand  dollars,  the  original  insurance 
being  for  fifteen  thousand  dollai-s.  Subsequently  a  third  company 
reinsured  all  the  outstanding  policies  of  the  original  insurer,  and 

12  Norwood,  Ex  parte,  3  Biss.  (U.  Co.  63  Misc.  571,  118  N.  Y.  Supp. 

S.  C.  C.)  504,  Fed.  Cas.  No.  10364.  50!).     See  §  112b  herein. 

"  Smith     V.     Hunterdon     Conntv  ^^  Relfe  v.  Columbia  Life  Ins.  Co. 

Mutual  Fire  Ins.  Co.  41  N.  J.  Eq.  10    Mo.    App.    150.      See    §§    112b. 

473,  4  Atl.  652.  134a,  136b  herein. 

1*  Johannes  v.  Phoeni.x  Ins.  Co.  66  ^"^  Relfe  v.  Columbia  Life  Ins.  Co. 

Wis.  50,  57  Am.  Rep.  249.  10  Mo.  App.  150. 

"  Wolfe  ^_  Washington  Life  Ins.  ^^  56  N.  Y.  379. 

387 


§  mia  JOYCE  OX  IXSllJANCE 

thereafter  the  insured  died.  In  an  action  upon  the  policies  it  was 
decided  that  the  last  reinsurer  was  liable  directly  to  the  policy  hold- 
ers, notwitlistandinti;  its  agreement  to  indemnify  the  original  in- 
surer against  losses.  It  was  also  held  that  said  last  reinsurer  was 
liable  to  the  policy  holders  for  the  whole  amount  reinsured,  al- 
tliough  arbitrators  acting  between  such  reinsurer  and  the  original 
insurer  alone,  the  policy  holders  not  being  parties  thereto,  had  ren- 
dered a  decision  limiting  such  liability  to  five  thousand  dollars. 

§  135a.  Same  'subject. — The  original  insurer  by  instituting  an 
action  against  the  reinsurer  adopts  only  such  a  reinsurance  contract 
as  the  law^  authorizes. ^^ 

If  an  insurance  company  covenants  with  another  to  make  as 
prompt  adjustments  and  payments  of  loss  under  any  and  all  of  the 
latter's  policies  as  it  would  under  its  own  policies  if  issued  direct  to 
said  assurer  the  reinsuring  company  is  directly  liable  to  insured.^" 
So  where  an  original  insurer  sells  its  lousiness  and  good  will  to  an- 
other person,  and  the  latter,  in  consideration  thereof,  reinsures  the 
risks  of  the  first  insurer,  and  contracts  to  pay  losses  under  its  out- 
standing policies,  the  reinsurer  becomes  liable  to  the  originally  in- 
sured policy  holders.  And  if  in  reinsuring  risks  for  which  policies 
are  outstanding,  the  reinsurer  contracts  with  the  reinsured  to  as- 
sume the  policies  and  to  pay  the  holders  thereof  all  such  sums  a.s 
the  reinsured  may  become  liable  to  pay,  the  original  policy-holders 
suffering  loss  may  recover  from  the  reinsurer  directly,  aUhough  not 
named  in  the  contract.^  A  policy  holder  in  a  reinsured  company 
2nay  also  sue  a  reinsurer  direct  to  recover  a  loss  under  his  policy 
without  first  suing  the  reinsured,  although  he  is  not  a  party  to  or 
in  privity  with  the  reinsurance  agreement  under  which  the  rein- 
sured company  was  not  to  be  paid  for  losses  exce]:)t  upon  duly  proven 
claims  in  a  suit  against  it,  which  the  reinsurer  agreed  to  defend.^ 
Again,  the  original  insured  may  have  the  same  rights  and  the  re- 
insurer may  be  obligated  to  the  same  extent  as  under  the  original 
co!itract  where  a  statute  fixes  said  rights  and  obligations  as  a  part 
of  the  reinsurance  agreement.^  And  where  the  reinsurer  and  orig- 
in Federal  Life  In.s.  Co.  v.  Kerr,  ^  Shoaf  v.  Palatine  Ins.  Co.  127 
(in08)  —  Jnd.  App.  —  82  N.  E.  N.  Car.  308,  37  S.  E.  451,  80  Am.  ^ 
1)43,  85  N.  E.  796,  aff'd  173  Ind.  013,  St.  Rep.  798,  30  Ins.  L.  J.  276.  First 
89  N.  E.  398,  91  N.  E.  230.  time  this  question  before  tliis  court. 

20  Whitney  v.  American  Ins.  Co.  ^  ppf],,,..^!  Ljfp  jj^^^  (^o  y  j^isinoner, 
_  Cal.  — ,  50  Pac.  50,  28  Ins.  L.  J.  40  Ind.  App.  146,  91  N.  E.  533, 
254,  aff'd  127  Cal.  464,  59  Pac.  897,  Burns'  Ann.  Stat.  Ind.  1908,  sec. 
Cal.  Civ.  Code.  55§  2646  et  aeq.  4753. 

^  Ruohs  V.  Traders'  Fire  Ins.  Co. 
Ill  Tenn.  405,  102  Am.  St.  Rep.  790, 
78  S.  W.  85. 

388 


REINSURANCE  §  135b 

inal  insurer  are  the  same  a  suit  may  be  brought  upon  proper  alle- 
gations setting  forth  the  fact.*  So  holders  of  policies  outstanding 
at  the  time  of  the  transfer  of  assets  and  who  were  entitled  to  certain 
payments  by  Ihe  original  insurer,  may  join  in  a  bill  for  enforce- 
ment of  a  trust  against  the  transferee  of  said  assets.* 

But  an  original  assured  is  estopped  where  he  fails  to  as.sert  liis 
original  contract  rights  hut  accepts  conditions  expressly  incoiT^o- 
rated  in  an  agreement  under  which  one  company  al^sorbs  and  rein- 
sures another  company.^ 

Under  a  Mississi])pi  decision  a  policy  holder  cannot  sue  on  a  strict 
contract  of  reinsurance.''^  Nor  can  the  insured  sue  the  reinsurer 
under  a  code  provision  wdiich  only  permits  the  party  in  whom  the 
legal  interest  is  vested  to  sue  the  party  who  made  the  contract  in 
person  or  by  agent.* 

§  135b.  Same  subject:  mutual  benefit  societies,  etc. — If  an  in- 
surance certilicate  is  surrendered  and  another  is  issued  in  its  place 
and  stead  any  claim  which  can  be  enforced  must  be  against  the 
company  issuing  the  last  certificate  and  the  former  company  which 
issued  the  first  certificate  is  relieved  of  all  obligation  thereunder.® 
If  an  insurance  company  enters  into  a  contract  by  which  it  agrees 
to  transfer  its  membership  to  another  company,  and  the  latter 
agrees  to  take  such  members  and  reinsure  them  on  the  basis  of  their 
original  applications  in  the  former  company,  on  the  execution  of 
satisfactory  transfer  applications,  and  a  member  of  the  former  com- 
pany sends  a  check  for  a  premium  due,  and  fills  out  a  transfer  ap- 
plication, in  which  he  states  that  he  has  recently  recovered  from  an 
attack  of  pneumonia,  but  that  his  health  is  then  fair,  the  latter 
company  has  no  right  to  return  his  check  and  reject  his  a]iplication 
on  the  ground  that  it  "is  not  satisfactory  on  account  of  physical 
condition  and  age,"  nor  to  insist  that  the  applicant  submit  to  a  med- 
ical examination,  and  hi.s  failure  to  pay  a  subsequent  premium 
Avhen  it  falls  due  does  not  forfeit  the  right  to  recover  on  the  ])()li(  y.^° 
So  where  an  association  in  addition  to  a.ssuming  all  the  liabilities 
on  certiticates  of  membership  of  another -society  in  consideration  of 

*SniilIi  V.  Bankers'  Union  of  Chi-  ^  j^Tq^.^j   British   &  Mercantilp   Ins. 

c-ao-o,  144  111.  A))]).  384.  Co.  v.  Speer.  7  Ga.  App.  330,  66  N. 

MVat.son  v.  National  Life  &  Trust  E.     815,     Ga.    Civ.    Code,   1895,   see. 

Co.   (U.  S.  C.  C.)   162  Fed.  87.  4930. 

^Davilt  V.  National  Life  A.ssoe.  56  ^  Gallenbeok        v.        Northwe.stern 

.N.  Y.  Snpp.  839,  36  Apji.  Div.  632.  :\Iutnal  Benefit  Assoc.  84  Minn.  184, 

''' Moseley   v.    Liverpool   &   London  87  N.  W.  614, 

.&  Globe   Ins.  Co.  104  Miss.  326,  61  i"  National     Mutual     Ins,    Co.    v. 

So.  428.     See  also  Hoffman  v.  North  Howe  Benefit  Soe.   181  Pa.   St.  443, 

British   &   Mercantile     Ins.     Co.     35  59  Am.  St.  Rep.  666. 
-Misc.  10,  70  N.  Y.  Supp.  106. 

389 


§§  135c,  136  JOYCE  ON  INSURANCE 

a  transfer  of  its  assets  and  good  will,  specifically  assumes  liability 
upon  a  certain  cerlificate  it  is  a  direct  contract  of  reinsurance  meas- 
uring the  reinsurer's  liability  thereon  to  the  certificate  holder  from 
the  date  of  the  reinsuring  agreement.^^ 

Where  a  mutual  insurance  company  on  the  assessment  plan  rein- 
sures in  another  like  company,  and  the  performance  of  their  con- 
tracts does  not  depend  upon  each  other  but  the  contracts  are  inde- 
pendent, if  a  loss  occurs  which  is  covered  by  both  policies,  suits  can 
be  instituted  at  once  upon  both  policies  by  the  holders  thereof,  un- 
less otherwise  provided  by  the  policies. ^^ 

§  135c.  Same  subject:  Lloyds. — A  contract  of  reinsurance  with  a 
Lloyds  association  as  the  reinsured  is  not. one  with  the  individual 
members  so  as  to  enable  one  of  tliem  to  sue  thereon  for  his  propor- 
tionate share  of  the  loss  even  though  each  of  them  is  liable  only 
for  his  proportionate  share  of  losses  sustained  on  policies  issued  by 
the  association.^^ 

§  136.  Reinsurance:  recovery:  evidence. — If  it  appears  that  no 
liability  has  attached  against  the  insurer  under  the  original  con- 
tract, there  can  be  no  recovery  against  the  reinsurer,  for  nothing 
exists  upon  which  to  base  an  indemnity,^*  and  if  the  claim  of  the 
insured  is  paid  it  must  have  been  a  valid  one  to  warrant  a  recovery 
from  the  reinsurer.^^  It  must  also  appear  that  the  insurer  has  an 
insurable  interest,  although  this  is  evidenced  by  the  fact  that  he  is 
a  reinsurer  of  the  original  insured;  he  must  also  prove  his  loss  and 
the  amount  the  same  as  the  original  insured  must  have  proved  it 
against  him;  ^^  and  proof  of  a  judgment  against  the  insurer  upon 
the  original  contract,  in  defense  of  which  the  reinsurer  engaged,  is 
sufficient  evidence  of  the  insurable  interest  of  the  insurer,  and  a 
sufficient  proof  of  the  loss.^'''  An  order  for  the  production  on  oath 
of  ship's  papers  will  be  granted  in  an  action  on  a  marine  policy  of 
reinsurance  by  a  reinsured  underwriter  against  the  reinsurer. ^^ 

When  a  reinsurer  has  agreed  to  pay  the  amount  stipuUited  in  the 
original  certificate  the  beneliciary  cannot  recover  the  amount  speci- 

^^  Cosmopolitan  Ufe  Ins.  'Assoc,  v.  Co.  v.  Hoffman  In.'?.  Co.  (i  Rob.   (N. 

Koegel,    104    Va.    619;    52    So.    166.  Y.)    316. 

See  §  131b  herein.  ^^  Yonkers  &  New  York  Fire  Ins. 

12  Cass  County  v.  Mercantile  Town  Co.  v.  lloi^'man  Ins.  Co.  6  Eob.  (N. 
Mutual  Ins.  Co."  188  Mo.  1,  86  S.  W.  Y.)    316. 

237,  34  Ins.  L.  J.  435.  ^"^  Ocean  Ins.  Co.  v.  Sun.  Mut.  Ins. 

13  Thompson  V.  Colonial  Assur.  Co.  Co.  15  Blatclif.  (U.  S.  C.  C.)  249, 
70  N.  Y.  Supp.  85,  60  App.  Div.  325,    Fed.  Cas.  No.  10408. 

afE'g  68  N.  Y.   Supp.  143,  33  Mm:  ^^  China  Traders'  Ins.  Co^  v.  Royal 

37  Exchanoe    Assur.    Corp.    6/    Law    J. 

14  Eagle  Ins.  Co.  v.  Lafavette  Ins.  Q.  B.  736  [1898]  2  Q.  B.  187,  78  Law 
Co.  9  Ind.  443.                        '  T.  N.  S.  783,  46  Wkly.  Rep.  497,  8 

15  Yonkers  &  New  York  Fire  Ins.  Asp.  409. 

390 


REINSURANCE  §  136a 

fied  in  a  rider  attached  to  such  certificate.^'  In  a  New  Jersey  case 
the  defendant,  a  life  insurance  company,  agreed  in  writing  with 
the  plaintiff,  another  life  company,  to  pay  the  plaintiff,  in  consid- 
eration of  a  specified  premium,  a  certain  sum  of  money  upon  proof 
that  a  named  person,  who  was  originally  insin-ed  in  the  latter's  com- 
pany should  have  died  on  or  before  a  certain  future  date,  a  later  date 
was  fixed  by  a  supplementary  written  agreement.  The  plaintiff 
sued  on  the  agreements,  alleging  the  death  of  said  insured  before 
said  date,  proof  thereof  to  defendant,  and  payment  by  the  plaintiff 
of  the  amount  of  the  insurance  on  said  life.  It  did  not  appear  from 
the  declaration  what  this  amount  was.  The  general  issue  was  plead- 
ed and  also  specifically  in  bar  of  the  action,  that  the  defendant  was 
a  New  Jersey  corporation,  and  that  the  agreements  were  contracts 
of  reinsurance  and  were  invalid,  because  not  made  in  conformity 
with  the  statutory  requirements.  A  demurrer  was  overruled  and 
judgment  rendered  in  favor  of  the  defendant  on  which  record  error 
was  assigned.     It  was'held  that  there  was  no  error.^^ 

If  there  is  a  second  reinsurance  of  fire  risks,  and  a  loss  covered  by 
one  of  the  original  policies,  and  a  suit  by  the  insured  against  the 
reinsurer,  of  which  the  second  reinsurer  is  not  notified,  in  which  the 
reinsurer  is  successful ;  and  a  subsequent  suit  by  the  original  insur- 
er, after  paying  the  loss,  against  the  reinsurer  of  which  the  second 
reinsurer  is  notified,  in  which  the  reinsurer  is  defeated, — in  a  suit 
by  the  reinsurer  on  the  second  reinsurance  policy  a  recovery  may 
be  had  against  the  second  reinsurer  for  the  costs  incurred  by  the 
reinsurer  in  the  second  suit  against  him,  but  not  for  those  incurred 
in  the  first  on"e.-^ 

§  136a.  Same  subject:  mutual  benefit  societies,  etc.:  fraud  of 
directors. — If  a  reinsurer  a.'^sociation  expressly,  agrees  to  pay  the  full 
benefit  provided  for  in  the  certificate  at  death  less  amounts  previous- 
ly paid  for  disability  benefits,  and  unpaid  assessments,  whether  such 
benefit  is  provided  for  under  its  laws  or  not,  it  cannot  claim  the  ben- 
efit of  its  by-law  reducing  benefits  where  the  original  contract  of  iu- 
.'^urance  neither  contained  nor  was  subject  to  such  a  by-law ;  noth- 
ing can  be  deducted  except  amounts  previously  paid  for  disability 
etc..  and  none  such  amounts  were  shown.^  Under  an  Iowa  decision 
if  the  directors  of  a  mutual  benefit  insurance  com[)any  dissolve  the 
corporation  by  consolidating  it  with  another,  and  attempt  to  turn 

^' Ilatolier    v.    National     Annuity  ^  Faneuil   Hall   Tns.   Co.  v.   Liver- 

As.soc.   153   Mo.   App.    538,    134    S.  pool  &  L.  &  (J.  Ins.   Co.  153  Mass. 

W.  1.  63,  26  N.  E.  244,  10  L.K.A.  423. 

^°  Iowa  Life  Ins.  .Co.    v.    Eastern  ^National   Annuity  Ins.   Assoc,  v. 

Mutual  Life  Ins.  Co.  64  N.  J.  L.  340,  Carter,  96  Ark.  4!)5"  132  S.  W.  633, 

45  All.  762,  29  Ins.  L.  J.  299.  40  Ins.  L.  J.  205. 

391 


§  136b  JOYCE  ON  INSURANCE 

over  the  insurance  to  such  other  company ;  and  such  company  re- 
fuses to  issue  to  a  i)olicy  holder  a  new  policy  in  lieu  of  the  one  held 
by  him,  on  the  ground  that  he  has  contracted  a  certain  disease. — 
such  policy  holder  may  maintain  an  action  for  fraud  against  the 
directors  of  the  former  corporation,  and  may  recover  from  them  the 
amount  which  he  has  paid  into  the  company.  And  he  is  not  es- 
topped by  his  application  to  the  consolidating  company,  as  such  ap- 
plication does  not  amount  to  a  ratitication  of  the  consolidation.^  A 
member  of  an  accident  company  which  has  reinsured  its  business 
is  not  obliged,  where  he  has  not  so  agreed,  to  show  in  an  action  on 
his  policy,  that  he  has  complied  with  the  constitution  and  by-laws  of 
the  reinsuring  company,  even  though  compliance  with  the  rein- 
sured's  constitution  and  by-laws  was  a  condition  ])recedent  to  as- 
sured's  right  to  ])artici])ate  in  its  benefit  fund.* 

§  136b.  Same  subject:  recovery  of  statutory  deposits. — The  re- 
insurer is  entitled  to  deposits  made  with  the  state  treasurer  by  the 
reinsured  company  under  mistake  that  the  law  required  such  de- 
posits, where  there  is  nothing  in  the  contract  of  reinsurance  requir- 
ing the  reinsurer  to  maintain  the  same,  and  a  decree  winding  up  the 
affairs  of  the  reinsured,  and  which  embodied  the  reinsurance  con- 
tract, granted  the  reinsurer  all  securities  and  property  of  the  rein- 
sured with  authority  to  sue  for  possession  thereof.  And  the  fact 
that  the  reinsurer  stated  in  letters  to  each  policy  holder  that  the  de- 
posits would  be  maintained  does  not  estop  it  from  recovering  them 
where  the  state  departnient  held  them  unlawfully.^  In  an  English 
ca.se  it  appeared  that  in  1904  the  Popular  Life  Assurance  Company 
was  incorporated  and  made  the  statutory  deposit  of  i"20,000.  They 
did  not  accumulate  out  of  premiums  any  life  assurance  fund,  and 
in  1906  they  agreed  to  sell  their  busines^s  and  a.^sets  to  the  United 
Provident  Assurance  Company  in  consideration  of  shares  in  that 
company.  The  vendor  company  passed  resolutions  for  a  voluntary 
Avinding-up,  and  their  property  and  policies  had  been  transferred, 
the  shares  allotted,  all  claims  on  the  vendor  company  discharged, 
and  the  company  itself  dissolved.  The  })urchasiug  company  now 
petitioned  for  the  payment  out  of  court  to  them  of  the  £20.000 
deposited  by  the  vendor  company.     It  was  held  that,  although  the 

^  Gravson  v.  Willouohby,  78  Iowa,  p.   511,  c.   320,  sec.  3 ;  Kan.   Const. 

83,  4  L.R.A.  3()5n.  42  N.  "W.  591.  art.  12,  sec.  1. 

*  Young  V.  Eaihvay  ]\Iail  Assoc.  Wlicu  foreign  company  entitled  to 
120  i\Io.  App.  325,  103  S.  W.  557.  withdraw  funds  on   deposit  where  it 

*  lllinoi.s  Lite  Ins!  Co.  v.  TuUy,  174  reinsures  domestic  company,  see 
Fed.  355,  98  C.  C.  A.  259,  Kan.  Laws  Prewitt  v.  llhnois  Life  Ins.  "Co.  29 
1901,  sec.  3424,  ins.  act,  1879  (Kan.  Kv.  L.  Rej).  447,  93  S.  W.  633.  35 
Laws  1879,  c.  115,  p.  225,  amending  Jns.  L.  J.  688.  See  §§  112b,  134a, 
Laws  1871,  c.  93),  Kan.  Laws  1903.  135  herein. 

392 


REINSURANCE  §  13Gc 

vendor  conipany  liad  not  accumulated  a  life  a?^^llrance  fund,  yet, 
inasniucli  as  their  obligations  had  come  to  an  end  on  di.'ssolution, 
the  deposit  ought  to  be  paid  out  to  the  petitioners  as  their  assignees.^ 
§  136c.  Reinsurance:  recovery  induced  by  fraud:  subrogation: 
deduction  of  expenses  of  recovery. — The  rig] it  of  the  reinsurer  to 
subrogation  where  the  reinsured  recovers  damages  over  the  in.surer 
appears  under  the  following  facts.  The  plaintiffs  gave  the  defend- 
ants an  open  cover  slip  by  which  they  undertook  to  reinsure  the 
defendants  to  tlie  extent  of  one-half  their  interest  up  to  £1,000  on 
certain  shipments  of  lumber.  Pursuant  to  the  cover  slip,  the  plain- 
tifi's  reinsured  tlie  defendants  by  two  policies  respectively  on  inter- 
ests by  two  vessels.  Under  the  policies  the  defendants  claimed  and 
were  paid  by  the  plaintiffs  sums  amounting  to  £1,354  4s.  lOd.  The 
defendants  subsequently  recovered  from  the  shipowners  damages 
by  reason  of  having  been  induced  to  pay  losses  on  the  two  vessels  by 
fraudulent  misrepresentations  of  an  official  in  their  emj^loynient. 
The  measure  of  the  damages  so  recovered  by  the  defendants  was  the 
sum  which  upon  inquiry  appeared  to  flow  from  the  liability  of  the 
defendants  as  insurers  in  respect  of  the  two  vessels,  and  included 
the  £1,354  4s.  lOd.  The  plaintiff's  then  sued  the  defendants  for  the 
repayment  of  the  £1,354  4s.  lOd.  as  money  received  by  them  to  tlie 
use  of  the  plaintiffs.  Held,  (1)  That  the  plaintiff's  were  entitled 
upon  principles  laid  down  in  prior  cases,  to  recover  the  £1,354  4s. 
lOd.  upon  the  ground  that  the  money  was  obtained  by  the  defend- 
ants by  enforcing  a  right  which  diminished  the  defendants'  loss, 
and  that  therefore  the  doctrine  of  subrogation  applied;  (2)  that  the 

^  Popular  Life  Ins.  Co.  Ltd.,  In  re  dissohition,  and  there,  therefore, 
(Syl.)  [1909]  1  Ch.  Div.  Law  Rep.  being  no.suoh  body  in  existence  as  the 
80,"  (Life  Assur.  Co.'s  act,  1870  [33  original  contracting  party,  all  con- 
&  34  Vict.  61]  sec.  3)  dist'g  Scottish  tracts  to  which  that  body  was  a  party 
Economic  Life  Assur.  Soc.  [1890]  45  must  of  necessity  have  come  to  an 
Ch.  Div.  220.  The  court,  per  War-  end,  not  merely  by  the  action  of  the 
rington,  J.,  said :  "Under  these  cir-  creditors  in  not  making  a  claim,  but 
cumstances  the  question  is,  what  is  the  by  the  fact  that  through  no  such 
proper  thing  to  be  done?  In  the  claim  having  been  made  the  statutory 
first  place  the  mere  payment  of  the  provision  has  taken  effect  and  the 
]iremiums  l)y  tlie  ]ioli(-y  holders  does  obligor  has  cea.'^ed  to  exist.  It  .seems 
}iot,  in  accordance  with  the  provisions  to  read,  therefoi'c,  that,  so  far  a.s 
of  the  act  of  1872,  amount  to  a  re-  that  is  concerned,  the  position  of  the 
lease  of  the  liability  of  the  Popular  ]iolicy  holders  is  exactly  the  same  as 
Life  Assurance  Company,  but  it  if  they  had  relca.sed  tlie  I^opular  Life 
seems  to  me  that  in  this  case,  no  Assurance  Company  from  their  obli- 
daim  having  been  made  in  the  wind-  gation,  and  not  merely  as  if  the  Unit- 
ing up  by  any  policy  holder,  the  ed  Provident  Assurance  Company 
winding  up  having  resulted    in    the  had  made  itself  liable  to  them." 

393 


§  137  JOYCE  OX  IN8L'RANCE 

defendants  were  entitled  to  deduct  from  the  £1,354  4s.  lOd.  the 
reasonable  expenses  of  recovering  that  sum  from  the  owners.' 

§  137.  Reinsurer  bound  by  judgment:  notice  to  defend. — The 
insurer  may,  before  proceeding  against  the  reinsurer,  contest  the 
right  of  the  insured  to  recover  on  the  original  contract,  and  in  such 
cases,  if  the  reinsurer  is  notified  and  it  refuses  or  neglects  to  defend, 
it  is  bound  by  the  judgment  against  the  insurer  and  is  liable  for  the 
reasonable  and  necessary  expenses  and  costs  incurred  bona  fide  in 
such  defense,*  although  the  reinsurer  is  not  a  party  of  record.^  espe- 
cially where  such  suit  was  defended  by  the  advice  and  for  the  benefit 
of  the  reinsurer.^"  So  it  is  liable  for  the  costs  and  expenses  incurred 
bona  fide  and  paid  to  the  insured  after  notice  to  it  to  defend. ^^  In 
Gantt  V.  American  Central  Insurance  Company,^^  an  agreement  was 
made  with  the  reinsurers  by  the  insurer  under  which  the  latter  Ava.s 
to  employ  counsel  and  defend  a  suit  of  the  insured,  and,  in  case  of 
a  successful  defense,  the  reinsurers  were  to  pay  pro  rata  the  counsel 
fees  and  costs.  If  unsuccessful,  then  to  pay  its  pro  rata  of  the  judg- 
ment, counsel  fees  and  costs.  Pending  suit  a  compromise  was  effect- 
ed with  the  insured  without  the  reinsurer's  consent,  whereby  the 
insured  was  paid  a  certain  amount  of  cash  and  the  policies  of  rein- 
surance were  to  be  assigned  to  him  in  case  of  judgment  in  his  favor, 
and  he  was  to  enter  satisfaction  of  the  judgments  on  receiving  the 
assignments.  The  right  of  the  insurer  to  continue  the  suit  was  re- 
served, but  the  money  paid  the  insured  was  to  be  retained  whether 
the  suit  should  be  lost  or  won.  The  insured  obtained  judgment. 
The  policies  were  assigned  to  him  and  satisfaction  was  entered  of 
the  judgment.  Although  the  reinsurers  knew  of  this  agreement, 
they  did  not  defend  nor  prevent  the  insurer's  doing  so.  An  action 
was  brought  by  a  trustee  of  the  insured  upon  the  assigned  policies. 
The  court  decided  that  the  insurer  was  the  agent  of  the  reinsurers 
to  conduct  the  defense,  but  that  the  reinsurers  were  not  prevented 
from  also  coming  in  and  defending  for  themselves ;  that  the  insurer 
had  the  right  to  compromise  as  it  did,  and  the  authority  to  continue 

'  Assicurazioni  Generali  De  Trieste  Y.)  190b;    Hone    v.    Mutual    Safety 

V.  Empress  Assur.  Corp.  Ltd.  [1907]  Ins.  Co.  1  Sand.  (N.  Y.)  148. 

2  K.  B.  Law  R.  814  (Svl.  for  greater  ^  Strong  v.  Pha?nix  Ins.  Co.  02  Mo. 

part.)                                '  289,  21  Am.  Rep.  417. 

8  New  York  State  Marine  Ins.  Co.  1°  Strong   v.    Pho?nix   Ins.    Co.   62 

V,  Protection  Ins.  Co.  1  Story  (U.  S.  Mo.  289,  21  Am.  Rep.  417. 

C.   C.)   4:58,  Fed.    Cas.    No.    10216;  "  New  York  State  Marine  Ins.  Co. 

Strong  V.   Phcpnix  In.s.   Co.   62   Mo.  v.    National    Protection    Ins.    Co.    1 

289,  21  Am.    Rep.    417;    New    York  Storv   (U.  S.  C.  C.)   458,  Fed.  Cas. 

Central  Ins.  Co.  v.  National  Protee-  No.  1021(5. 

tion  Ins.  Co.  20  Barb.  (N.  Y.)  468;  ^^  08  Mo.  503. 
Hastie  V.  De  Peyster,  3  Caines   (N. 

394 


i 


REINSURANCE  §  138 

the  suit  thereafter;  that  the  reinsurers'  neglect  to  defend  must  be 
considered  as  an  acquiescence  on  their  part  to  the  defense  made  by 
the  insurer,  and  that  tlie  reinsurers,  in  the  absence  of  a  showing  of 
a  lack  of  bona  fides  on  the  part  of  the  insurer  in  defending  were 
liable. 

§  138.  Defenses  available  to  reinsurer. — liiasmuch  as  the  rein- 
surer is  only  liable  for  the  amount  for  which  the  insurer  is  legally 
liable,"  the  former  may  avail  himself  of  every  defense  which  could 
have  been  made  by  the  insurer.  This  rule  is  well  settled.^*  So  the 
reinsurer  may  defend  on  the  ground  that  the  loss  was  partial  and 
obtain  the  benefit  thereof  notwithstanding  the  insurer  has  paid  a 
total  loss.^*  But  the  reinsurer  cannot  avail  himself  of  defenses 
which  did  not  exist  in  favor  of  the  reinsured. ^^  And  policies  in- 
contestable when  reinsurance  is  taken  out  are  incontestable  bv  the 
reinsurer."  If  the  insurer  makes  an  assignment,  and  before  the 
tiling  of  a  petition  in  bankruptcy  the  reinsurer  purchases  claims 
against  the  insurer  for  losses,  such  claims  may  be  set  up  as  counter- 
claims when  covered  by  the  reinsurance,  otherwise  not.^^  But  where 
the  insurer,  without  fraud  or  falsehood,  makes  an  oral  promi.ssorv 
representation  before  the  policy  issues,  and  it  is  not  mentioned  in 
the  policy,  the  failure  to  comply  therewith  by  the  insurer, does  not 
constitute  a  defense.^^  A  reinsurer  who  ha.s  accepted  the  benefits  of 
,  a  contract  is  estopped  to  deny  liability  on  the  ground  that  its  con- 
tract is  ultra  vires  even  though  a  part  of  said  contract  is  invalid,  nor 
can  he  deny  such  parts  thereof  as  are  against  his  interests.^ 

"Delaware    Ins.     Co.    v.    Quaker  IVIanufacturer.s'    ^futual    Ins.    Co.    5 

City  Ins.  Co.  3  Grant  Cas.  (Pa.)  71.  Ohio  St.  4.')(). 

See  cases  next  note.  ^^  Merchants'    Mutual    In.s.    Co.    v. 

^*  United  States. — New  York  State  New  Orleans  Ins.  Co.  24    La.    Ann. 

Marine    Ins.    Co.    v.    National  Prot.  30."). 

Ins.  Co.  1  Stoiy   (U.  S.  C.  C.)   458.  ^^  Federal  Life  Ins.   Co.    v.    Kerr 

Fed.  Cas.  No.  10210.  (1908)    —   Ind.   A  pp.  — ,  85  N.  E. 

/«rf(a«a.— Eagle    Ins.    Co.    v.    La-  'i'SG,   s.   c.   82    N.    E.    !)4;{,   s.   c.   173 

fayette  Ins.  Co.  9  Ind.  443,  447.  I»c1.  613,  91  N.  E.  230,  89  N.  E.  398. 

LoM/.sw«a.— Merchants'    Mut.    Ins.  ^^<'  Brown  v.  ^lutual  Reserve  Fund 

Co.  V.  New  Orleans  Mutual  Ins.  Co.  I^'^'^  ^^ssoc.  224  111.  57_6,  79  N.  E.  949, 

24  La.  Ann.  305.  ''^\^^^~^  ^!'-  ApP'  •■^''"• 

New  York.-Uastie  v.  De  Peyster,  -,--  r*^*:^L.    n-  It'^-t.^'^. ''•  ^^^^^^ 

3  Can.es  (N.  Y.)   190,  *195.  ''    ^'t--^^''  "/o,^"  ^^  \^-^\^^'''' 

P.«».sv/rr,»m.-Dclaware   Ins.    Co.  i"^"    If  ^ /^  «      '    '!--q '''    ^"'"' 

„   n     1       ,^-,     T        ri      o  r^       ^  r<  A""-  ^^^t.  1908,  see.  4/o3. 

^Quaker  City  Ins.  Co.  3  Grant  Ca...  18  cievelan.l   ln.s.    Co.    In    re,    22 

U:i-)    '1.                                              .  Fed    200 

See  Hone  ;^  Mual    Safety    Ins.  i9  Prudential  Assur.   Co.   v.  mna 

Co.  1  Sand.  (N.  Y.)  13^;  St.  Nioho-  Life  Ins.  Co.  23  Fed.  438. 

las   Ins.    Co.    v.    IMercIiants'  Ins.  Co.  i  Sage  v.  Finnev,  156  Mo.  App.  30, 

11  Hun    (N.  Y.)    103.     Washington  135   S.   W.   996.  "  See   §§   115,   115b 

Mutual    Ins.    Co.    v.    Merchants'    &  heroin. 

395 


CHAPTER  VI. 

THE  POLICY— ITS  FORM  AND  REQUISITES— SUBSTANCE 

GENERALLY. 

§  145.     Policy  defined. 

§  146.     Certificates  in  mutual  benefit  societies  or  associations. 

§  147.     Division  and  kinds  of  policies. 

§  148.     Wager  policies. 

§  149.     AYager  policies,   valid  at  common   law,  now  void. 

§  150.     Wager  policy :  conflict  oi*  laws. 

§  151.     Valued  policy  may  be  shown  to  be  a  wager. 

§  152.     Policy  valid  at  inception  cannot   become  wager. 

§  153.     Wager  policies:  loss  should  be  total. 

§  154.  Wager  policies:  what  are  and  are  not.     (Transferred  to  §§  894a, 

954a  herein.) 
§  155.     Interest  policy  defined. 
§  156.     Open   or  unvalued  policy  defined. 
^  156a.  Named  policy  defined. 

§  157.     Running  policies:  blanket  policies:  floating  policies. 
§  157a.  Blanket   or   compound    policies:    floating   policies:    distinguished 

from  specific  policies. 
§  157b.  "Drummer  floater"  policy  defined:    when  risk  suspended. 
§  158.     Open  or  unvalued  policies:    what  are:    whether  policy  open  or 

valued. 
§  158a.  Same  subject :   standard  policy. 
§  159.     Valued  policy  defined. 

§  160.     Valued  policy :    what  the  valuation  includes. 
S  161.     Valued  policy:    how  far  valuation  conclusive. 
§  162.     Valued  policy:    effect  of  overvaluation:    fraudulent  valuation. 
§  163.     Valued  policies:    statutory  regulations. 
§  163a.  Same  subject :    confiicting  clauses. 
§  163b.  Valued  policy  laws:    three-fourths  value. 
§  163c.  Valued  policy  laws:    overvaluation:    fraudulent  valuation. 
i^  163d.  Valued  policy  law :    property  destroyed  by  more  than  one  fire. 
§  163e.  Valued  policy  law :    real  and  personal  property. 
§  163f.  Valued  policy  law :    improvements  upon  real  proj^erty :    loss  of 

rents  not  covered. 
§  163g.  Valued  policy  laws:    mutual  companies:    mutual  benefit  societies. 

396 


THE  POLICY  §  145 

§  164.     Valued  policies:   partial  loss. 

§  165.     Valued  policy :   pro  rata  recovery. 

§  166.     Valued  policies:    "valued  at"  not  conclusive. 

§  167.     Valued  policies  :   prior  insurance. 

§  168.     Valued  policies:    what  are. 

§  168a.  ]?ent  insurance  policy  analogous  to  valued  policy. 

^  169.     Mixed  policy  defined. 

^5  170.     Time  policy  defined. 

§  171.     Time  policy:  computation  of  time. 

5^  172.     Time  policy:    trading  voyage:    nature  of  contract. 

i^  173.     Time  policy:    continuance  after  expiration  of  time. 

§  174.     Voyage  policy  defined. 

5:)  175.     Voyage  policy:    voyage  must  conform  to  course  fixed  by  usage. 

^  176.     The  form  of  the  policy:    statutory  provisions:    standard  policy. 

§  176a.  Standard  policy:  constitutional  law:  power  of  legislature  and 
of  commission:  review  by  court:  injunction. 

§  176b.  Standard  policy:    stipulations  contra,  additions,  changes,  etc. 

§  176c.  Standard  policy :  waiver. 

§  176d.  Standard  policy  law:    effect  as  to  valued  policy  law. 

§  176e.  Statutory  requirements  as  to  size  of  type,  written  conditions,  etc. 

§  176f .  Standard  policy  :  mutual  companies  or  associations :  "special  reg- 
ulations" as  part  of  policy. 

§  177.  The  policy:  what  it  usually  contains:  policy  to  contain  entire 
contract :    statutes. 

§  178.     Execution  of  the  policy. 

§  178a.  Fidelity  bond  :   necessity  of  signing  by  employee  :   agency:   waiver. 

§  179.     Execution  of  policy :    affixing  date. 

§  180.     Execution  of  policy:    affixing  seal. 

§  180a.  Life  annuity:    insurance  contract :   non-necessity  of  seal. 

§  180b.  Printed  signatui'e  is  sullieient  to  satisfy  the  statute  of  frauds. 

§  181.     Requisites  of  a  valid  policy. 

§  145.  Policy  defined. — A  policy  of  insurance  is  the  written  or 
printed  form  to  which  the  contract  has  been  reduced,  and  Avhich 
evidences  the  agreement  or  contract  between  the  parties,  and  it  may, 
as  we  have  stated,  be  either  a  specialty  or  simple  contract.^ 

^"Policy"  covers  any    contract    or  Hart  v.  Simey)  pp.  8,  9,  sec.  7;  Id.  p. 

agreement  for  sea    insurance    under  4."),  sec.  .31. 
the  stamp  act :  30  Vict.  e.  23,  sec.  4.        When   "Open   Cover"  is  "contract 

Definitions       under       stamp       act,  for  sea  insnrance  under    stamp    act 

England,    of    policy    of    insurance:  1891    (54  &  55   Vict.  c.  39)    sec.  9.'), 

"policy    of   sea-insurance;"    "a    con-  subsec.  1,  but  iield  invalid    as    such 

tract      of      sea-insurance."       See     1  jiolicy   under  subsec.   3.     Home   Ma- 

Aruould   on   Marine    Ins.     (8th    ed.  rine  Ins.  Co.  Ltd.  v.  Smith  [1898]  2 

397 


§  146                              JOYCE  ON  INSURANCE 

§  146.  Certificates  in  mutual  benefit  societies  or  associations. — 

In  mntiial  benefit  companies  or  associations  whose  legal  status  is 
that  of  mutual  insurance  companies,  and  which  issue  certificates  of 
membership,  such  certificates  are  in  effect  insurance  policies  and 
the  measure,  to  a  certain  extent,  of  the  rights  of  the  parties,^  al- 
though they  may  not  be  strictly  policies,*  especially  in  regard  to  the 

Q.  B.  D.  Law  R.  351,  67  L.  J.  Q.  B.  Throughout  the  insurance  laws  and 

N.  S.  777,  78  Law  T.  Rep.  734,  aft'g  in     insurance     parlance     the     word 

[1898]_  1  Q.  B.  829,  78  Law   T.  R.  ''policy"  is  ordinarily  used    to    indi- 

465,  6/  L.  J.  Q.  B.  N.  S.  554.  cate  the  contract  of  insurance  upon 

"The  instrument  in  which  the  con-  which    there    is    a    fixed    premium, 

tract  of  marine  insurance  is  general-  Pennsylvania  Life  Ins.  Co.  of  Phila. 

ly  embodied  is  called  a  policy'"   (ma-  In  re,  36  Pa.  Co.  Ct.  687  (opinion  of 

rine  insurance).     Earl  of  Halsbury's  atty.    genl.).      For   other   definitions 

Laws  of  England,  vol.  17,  p.  336.  see  6   Words  &   Phrases,  pp.   5440- 

Anchor  policy:     Lloyds.     "Strict-  5442. 

ly     speaking,     however,     the     term  Fire  policy  after  loss  not  an  instru- 

'Lloyds  policy'  denotes  a  policy  with  ment  for  payment  of  money  under  N. 

the  device  of  an  anchor  in  the  mar-  Y.  Code  Civ.  Proc.  sec.  649,  subdiv. 

gin,    encircled    by  the  words :     'For  2,  providing  for  levy  upon  such  an 

signature  by  the  underwriting  mem-  instrument  since  the  obligation  of  in- 

bers   of   Lloyds    only.'  "      1    Aruould  surer  is  conditioned  upon  proofs  of 

on    Marine    Ins.     (8th    ed.    Hart    &  loss  being  submitted.     But  levy  was 

Simey)   p.  17,  sec.  10.  held  valid.     Trapagnier  &  Bros.  Ltd. 

"A  policy  is  a  contract  in  writing  v.  Rose,  46  N.  Y.  Supp.  397,  20  App. 

by  which  the  insurer  for  a  reasonable  Div.    621,    aff'd    (mem.)    loo    N.    Y. 

compensation,    engages    that    certain  637,  49  N.  E.  1105  (N.  Y.  C.  A.) 

property  of  the  insured,  specified  in  ^  Chart  rand  v.   Brace,  16   Col.   19, 

the  policy,  shall  sustain    no    loss    or  25  Am.  St.  Rep.  235,  32  Cent.  L.  J. 

damage  from  any  of  the  perils  enu-  '410.       Supreme     Council     Order    of 

rcerated  in  tlie  contract  between  the  Chosen    Friends    v.    Foi'singer,    125 

parties."    Ins.  Co.  of  North  America  Ind.  52,  9  L.R.A.  501,  25  N.  E.  129, 

V.  Jones,  2  Bin.  (Pa.)  547,  561.  21  Am.  St.  Rep.  196:  Elkhart  Mutual 

"Policy"  will  be  construed   as    re-  Aid   Benevolent   &   Relief   Assoc,   v. 

ferring  to  the  insurance  contract  pro-  Houghton,  98  Ind.  149,  103  Ind.  286, 

viding  for  the  payment  to  the  bene-  2  N.  E.  763,  53  Am.  Rep.  513.     See 

fieiary  of  a  certain  sum  on  the  death  Holland  v.  Taylor,  111  Ind.  125,  12 

of  the  insured.     Schaeffer,  In  re  (JJ.  N.  E.  116;  National  Ben.    Assn.    v. 

S.  D.  C.)  189  Fed.  187.  Bowman,   110   Ind.   357,    11    N.    E. 

"The  written  instrument  in  which  316;  Bolton  v.  Bolton,  73  Me.  299; 

a  contract  of  insurance  is  set  forth  Knights  of  Honor  v.  Nairn,  60  Mich, 

is  called  a  policy  of  insurance."     Cal.  44,  26  N.  W.  826;  State  v.  Farmers^ 

Civ.   Code,  sec.   2586;    Comp.  Laws,  &  Mechanics'  Mut.  Ben.  Association, 

Dak.  1887,  sees.  4141,  4142;  1  Lev-  18  Neb.  276.  281,  25  N.  W.  81.     1 

isee's  Dak.   Codes,  sec.  1517.     Same  Bacon  on  Benefit  Societies  and  Life 

definitions  in  Civ.  Code  Mont.   (Rev.  Ins.  (2d  ed.)  sec.  304. 

Codes  Mont.  1907)    sec.    5591     (sec.  On  whether  benefit  association  is  an 

3450)  ;  Rev.  Codes  N.  Dak.  1899,  sec.  insurance    company,   see   note   in    38 

4487:    Rev.     Codes    S.    Dak.    1903,  L.R.A.  33. 

sec.  1837,  p.  808.  *  Alabama. — Supreme      Command- 

"Old  line   i)olicv"  defined.     Knott  erv  Kniyhts  of  the  Golden    Rule    v. 

v.  Security  INIntnal  Life  Ins.  Co.  161  Ainsworlli.  71  Ala.  436,  46  Am.  Rep. 

Mo.  App.  579,  144  S.  W.  178.  332. 

398 


THE  POLICY  §  146 

right  to  change  beneficiaries  and  as  regards  assignment.^  Again, 
a  ^'certificate  of  niembership"  refers  only  to  the  contract  between  a 
mutual  company  or  a  beneficial  association  and  its  members.  It 
difi'ers  from  a  "policy"  in  that  the  latter  indicates  a  contract  based 
upon  a  fixed  premium  and  does  not  indicate  a  certificate  of  member- 
ship or  a  contract  with  a  member  of  a  beneficial  association  or  mu- 
tual insurance  company.^  But  under  a  Georgia  decision  if  a  cer- 
tain sum  of  money  is  payable  on  the  death  of  a  member  of  an 
association  who  agrees  to  pay  a  fixed  sum  at  fixed  periods  the  con- 
tract is  a  life  insurance  policy  irrespective  of  its  designation  and  not 
merely  a  certificate  of  membership.''^ 

Again,  as  said  by  Mr.  Niblack,  they  are  only  a  part  of  the  written 
evidence  of  the  contract,  the  charter,  constitution,  and  by-laws  in 

Illinois.— Mavtin  v,  Stubbings,  126  of  the  World,  165  Pa.  St.  292,  30  Atl. 

111.  387,  403,  18  N.   E.   657,  9  Am.  830  (under  act  Pa.  May  11,  1881,  No. 

St.  Rep.  625.  23.  P.  L.  20). 

Kansas.— State  v.  Viedant  Ins.  Co.        ^  Freund  v.  Freund,  218  111.  189, 

30  Kan.  585,  587,  588,^2  Pac.  840.  109  Am.  St.  Rep.  283,  75  N.  E.  925; 

Kentucky. — Sherman   v.    Common-  Holland  v.  Taylor,  111  Ind.  125,  12 

wealth,  82  Ky.  102.  N.    E.    116;    Nye    v.    Grand    Lodge 

Massachusetts. — Commonwealth    v.  Ancient    Order   U.   W.   9   Ind.   App. 

Weatherbee,  105  Mass.  160.  148,  36  N.  E.  429,  per  Lotz,  J.,  who 

Missouri. — State  v.  Merchants'  Ex-  says :     "For  many  purposes  such  as- 

change  Mutual  Benevolent    Soe.    72  sociations  as  the  appellee,  the  A.  0. 

Mo.  160.  U.  W.,  are  insurance  companies,  and 

Nebraska. — State    v.     Farmers'   &  the  certificate  issued  by  them  is  gov- 

Mechanics'  Mutual  Benefit  Assoc.  18  erned  by  the  same  rules  applicable 

Neb.  276.  to     insurance     policies.      There    are, 

As   to   distinction    between   certiti-  however,  essential  differences  between 

cate  and  policy,  see  notes  5  L.R.A.  them;   the  most  usual   is  the   pow<^r 

98,  12  Id.  210.  on   the  part  of  the  assured  in  such 

The    application     and     certificate  associations     to     change     the     bene- 

constitute     the     contract:      Supreme  ficiary:"     Where  charter,  etc.  against 

Lodge  New  England  Order  of  Pro-  such  right.     See  chapter  on  Beneh- 

tection   v.    Hine,    82    Conn.    315,   73  ciaries   §§   727   et   seq.   herein;   Nib- 

Atl.  79]  ;  Redmond  v.  Industrial  Ben.  lack's   Mutual   Benefit    Societies   and 

Assn.  78  Ilun  (N.  Y.)  104,  60  N.  Y.  Accident    Ins.    (ed.    1888)    199,    sec. 

531,    28    N.    Y.    Supp.    1075;    citing  166a;  Id.  2d  ed.  sees.  136  et  seq.,  165 

Hutchinson  v.  Supreme  Tent  Knights  et  seq.  211  et  se*]. ;  1  Bacon's  Benefit 

of  Maccabees  of  The  World,  68  Hun  Societies  and  Life  Ins.   (2d  ed.)  sec. 

(N.  Y.)   355;   Smith    v.-  Brown,    75  304. 
Hun,  231,  27  N.  Y.  Supp.  11.  ^  Pennsylvania    Mutual    Life    Ins. 

Wlien  not  a  policy :    The  certificate  Co.  of  Phila.  In  re,  36  Pa.  Co.  Ct. 

of  membership  of  a  beneficial  associa-  Rep.  687  (opinion  of  atty.  genl.). 
tion  is  not  an  insurance  policy  with-        '  Cosmopolitan    Life    Ins.    Co.    v. 

in  the  meaning  of  an  act  providing  Koegel,  104  Va.  619,  52  S.  E.  166, 

for  the  attachment  of  application  to  Va.  Code,  sec,  3251,  Va.  Code  1904, 

policy,  otherwise  that  it  shall  not  be  p.  1178,  sec.  2415a,  acts  1897,  1898, 

admitted    in    evidence:      Lithgow    v.  p.'  734,  c.  688. 
Supreme  Tent  Knights  of  Maccabees 

•    309 


§  146  JOYCK  ON  INSURANCE 

force  at  the  time  of  the  meml)er's  admisj^ion.  being  a  part  of  the  con- 
tract, while  a  policy  should  express  the  entire  contract.*  It  has  been 
held  that,  under  certain  requirement.^  of  the  charter  and  by-laws 
of  a  mutual  l)enefit  society  relating  to  beneficiaries,  the  issuing  of  a 
certificate  of  membership  was  not  a  condition  precedent  to  the  right 
to  recover  the  benefit  fund,  and  that  such  certificate  was  only  neces- 
sary where  the  money  was  to  be  paid  as  directed  by  a  member  to 
some  person  or  body  other  than  the  family,  heirs,  or  legal  represen- 
tatives of  the  decea.'^ed  member.^  It  is  decided,  however,  that  such 
certificate  of  membership  issued  by  an  insurance  benefit  society  i.s 
a  contract,  and  can  be  changed  only  by  and  with  the  consent  of  both 
l)arties.^*'  But  a  certificate  of  a  benefit  society,  such  as  the  Ancient 
Order  of  United  Workmen,  is,  like  a  policy  of  insurance,  evidence 
of  a  property  right. ^^  80  a  certificate  in  a  fraternal  benefit  associa- 
tion constitutes  the  measure  of  the  rights  of  the  parties  as  it  also 
does  of  the  contract  rights  of  the  named  beneficiaries.^*^  And  in 
making  a  prima  facie  case  for  recovery  upon  a  benefit  certificate, 
the  action  is  to  be  treated  as  founded  on  so  much  of  the  contract  as 
is  set  forth  in  the  policy. ^^ 

When  the  company  is  one  that  issues  certificates,  these  together 
with  the  charter  or  articles  of  association  and  the  by-laws  or  rules 
of  the  organization,  and  the  general  laws  of  the  state,  constitute  the 
contract;  "  but  the  certificate  may  show  that  certain  by-laws  have 
been  waived,  or  that  they  are  inconsistent  with  its  terms,  or  they 
may  not  be  annexed  thereto  as  required  by  certain  statutes,^^  all  of 
which  factors  are  important  in  considering  what  weight  should  be 
given  to  the  certificate  as  evidence  in  controlling  the  construction 
of  the  contract,  and  such  contracts  are,  therefore,  subject  to  the 
rules  of  law  governing  insurance  policies  in  like  cases,  except  so  far 


1 


^Niblack's    Benefit    Societies    and  i2]vji„i(|  y,  Reliannie,  51  Col.  129, 

Occident  Ins.    (I2d   ed.)    p.   '271,  sec.  Ann.  Cas.  19L3A,  I'i^H,  117  Pae.  159. 

|3(i  13  ox'onncil   v.   Snpreuie   Conclave 

9  Bishop  v.  Grand  Loda:e  of   Em-  Kniahts  of  Damon,  102  Ga.   143,  .6 

pire  Order  of  IMutual  Aid^  112  N.  Y.  Am.  Si.  Rep.  i:)9,  28  S.  E.  282. 

627,  20  N.  E.  562,  reversing  43  Hnn  "See    SS    186,   191,    herein;    King 

(N.  Y.)  472.  "^ .  Wynema  Council  No.  10,  Dangh- 

i**  Russ  v.  Supreme  Council  Ameri-  lers  of  Pocalionta.-^,  etc.  25    Del.     (2 

can  Legion  of  Honor,  110  La.  588,  9S  Boyce's)    255,  78   Atl.  845;   Downes 

Am.  St.  Rep.  469,  34  So.  697.     See  v.  Knights  of   Columbus,   76  N.   H. 

also  Supreme  Council  of  the  Order  of  165,  80  Atl.  227;  Haywood  v.  Grand 

Chosen    Friends    v.    Forsinger,    125  Lodge  of  Texas  K.  P.  —  Tex.  Civ. 

Tnd.   52,  21  Am.    St.    Rep.    196,    9  App.  — ,  138  S.  W.  1194. 

L.R.A.  501,  25  N.  E.  129.  ^^  §§  186-I88  herein. 

"Grimblev  v.  Harrold,    125    Cal. 
24,  73  Am.  St.  Hep    19,  57  Pac.  558. 

400 


THE  POLICY  §§  147,  148 

as  these  rules  must  be  held  to  be  modified  by  the  peculiar  organiza- 
tion, objects,  and  policy  of  such  societies  or  companies.^^ 

In  certain  mutual  benefit  or  fraternal  societies,  however,  no  cer- 
tificate is  required  to  be  issued.  In  such  case  the  charter,  constitu- 
tion, and  by-laws  must  be  looked  to  to  determine  the  contract,  both 
in  relation  to  the  member  himself  and  the  beneficiary.^"^ 

§  147.  Division  and  kinds  of  policies. — Policies  are  divided  with 
reference  to  (1)  insurable  interest,  (2)  the  amount,  and  (3)  dura- 
tion. Insurable  interest  covers  wager  and  interest  policies.  The 
amount  covers  open  and  value  policies.  Open  policies  are  sometimes 
known  as  floating  or  blanket  policies.  Duration  covers  time  and 
voyage  policies.  There  is  also  a  class  of  policies  known  as  ''mixed 
policies,"  which  may  relate  to  the  amount,  as  where  the  policy  is 
partly  open  and  partly  valued;  or  to  the  duration,  as  where  the 
policy  sets  out  the  termini  but  limits  the  risk  by  time.  There  are 
also  many  other  kinds  of  policies,  or,  rather,  plans  of  insurance, 
such  as  endowment,  tontine,  semi-tontine,  etc.  These  will  be  con- 
sidered hereafter,  however,  under  the  sections  relating  to  the  terms 
and  stipulations  in  the  policy,  so  far  as  there  are  decisions  bearing 
thereon. 

§  148.  Wager  policies. — Wager  policies  are  those  in  which  the 
insured  has  no  interest  whatever  in  the  subject  matter  insured,  but 
only  an  interest  in  its  loss  or  destruction.^^    This  contract  is  an  in- 

^6  Martin  v.  Stubbings,  126  111.  104  U.  S.  775,  26  L.  ed.  924;  ^tna 
38/,  403,  9  Am.  St.  Rep.  62.-^,  18  N.  Life  Ins.  Co.  v.  France,  94  U.  S.  561, 
E.  657;  Elkliart  Mutual  Aid  Benevo-  24  L.  ed.  287;  Cammack  v.  Lewis,  15 
lent  &  Relief  Assoc,  v.  Houoliton,  98  Wall.  (82  U.  S.)  643,  21  L.  ed.  244; 
Ind.  149.  Gordon    v.   Ware   National   Bk.    132 

See,  as  to  change    of    beneficiary,    Fed.  444,  65  C.  C.  A.  580,  67  L.R.A. 
Miner   v.    Michigan    Mutual    Benefit   550;  Langdon  v.  Union  Mutual  Life 
Assn.  63  Mich.  338,  29  N.  W.  852;    Ins.  Co.  14  Fed.  272,  274. 
Titsworth  v.  Titsworth,  40  Kan.  571,        Georgia.— West    v.    Sanders,    104 
20   Pac.   213;   Union   Mut.   Assn.   v.    Ga.  727,  31  S.  E.  619. 
Montgomery,  70  Mich.  587.  14  i\m.        I II hi o is. —Cisna  v.  Shelbley,  58111. 
St.  R_ep.  519,  38  N.  W.  588,  and  note,    App.  385. 
526,  527.  Indiana. — American    Mutual    Life 

"Baldwin  v.  Golden  Star  Fra-  Ins.  Co.  v.  Bertram,  163  Ind.  51,  64 
ternity,  47  N.  J.  L.  Ill,  112.  See  L.R.A.  935,  70  N.  E.  258;  Davis  v. 
Tyrell  v.  Washburn,  6  Allen  (88  Brown,  159  Ind.  644,  647,  65  N.  E. 
Mass.)  466,  468;  Bishop  v.  Grand  908;  Prudential  Insurance  Co.  of 
Lodge  of  Empire  Order  of  Mutual  America  v.  Ilunn,  21  Ind.  App.  525, 
Aid,  112  N.  Y.  627,  20  N.  E.  562,  re-  69  Am.  St.  Rep.  380,  52  N.  E.  772. 
versing  43  Hun   (N.  Y.)   472.  A'awsa.s.—Metropolitan     Life     Ins. 

^8  Connecticut  Mutual  Life  Ins.  Co.  Co.  v.  Elison,  72  Kan.  199,  115  Am. 
V.  Scliaefer,  94  U.  S.  457,  460,  24  L.  St.  Rep.  189,  3  L.R.A. (N.S.)  934,  83 
ed.  291.  Pae.  410. 

See  also  the  following  cases:  Michigan. — Smith     v.     Pinch,     80 

Uiiited  State.'i.—WarnoQk  v.  Davis,    i\Iieh.  332,  45  N.  W.  183. 
Joyce  Ins.  Vol.  I. — 26.  40I 


§  148 


JOYCE  ON  mSUKANCE 


surance  in  name  only.^^  It  is  speculative  in  its  nature  and  does  not 
deal  with  real  values.  The  usual  words  in  a  wager  policy  are  * 'in- 
terest or  no  interest,"  or  ''without  further  proof  of  interest  than  the 
policy,"  or  ''free  of  average  without  benefit  of  salvage  to  the  as- 
sured "  although  these  words  are  not  conclusive  in  this  country  in 
determining  whether  or  not  the  policy  is  a  wager.^"     So  w^here  a 


Missouri. — Whitmore  v.  Supreme  maritime  wagers  although  framed  ex- 
Lodge  Knights  &  Ladies  of  Honor,  teriially  as  policies  of  sea-assurance, 
100  yio.  36,  35  S.  W.  495.  and  therefore  called    wager    i^olicies 

North   Carolina. — Hinton    v.    ]\Iu-  were     .     .     .     prohibited       in       this 

tual  Reserve  Fund  Life  Assoc.  135  country  nearly  two  centuries  ago  by 

N.  Car.  314,  323,  65  L.R.A.  161,  165,  a  solemn  act  of  the  legislature,  anil 

166,  102  Am.  St.  Rep.  545,  47  S.  E.  in    most    other    maritime    states    are 

474.  either  expressly  forbidden  or  practi- 

Wisconsitu — Sawj'er       v.       Dodge  callv  disused,  and  thus  on  the  ground 

County  Mutual  Ins.  Co.  37  Wis.  538,  that  it  is  plainly  opposed  to  the  true 

539.  interests    of    a    mercantile    state    to 

See  17  Earl  of  Halsbury's  Laws  of  enable  those  who  have  no  real  stake 

Eng.  pp.  377,  378.     Wager  policies;  in  the  safety  of  a  maritime  adven- 

gambling  act  of  1774.     See  Id.  pp.  ture  to  give  themselves  (by  means  of 

514  et  secj.     See  next  following  sec-  such  a  contract)   a  great  interest  in 

tion  herein.  its  loss  or  destruction."     See  also  Id. 

When     charge     does     not      define  pp.  409  et  seq.,  sees.  311  et  seq.     ' 
wagering     contract.      McFarlane     v.        ^^  Emerigon    on    Ins.     (Meredith's 

Robertson,  137  Ga.  132,  73  S.  E.  490.  ed.  1850)  4. 

For  other  definitions  see  8  Words  &       2°  A     wager     (or     honor     policy) 

Phrases  pp.  7368-9.  may  be  defined  as  one  in  which  the 

An  insurance  against  fire  must  be  parties,   by   express    terms,   disclaim 

based  on  an  interest  in  the  property  on    the    face    of  it,  the  intention  of 

insured    or    it    is    void.     Bennett  v.  making     a     contract     of    indemnity. 

Mutual  Fire  Ins.  Co.  100    Md.    337,  Such  a  iiolicj^  is  generally  known  by 

60  Atl.  99.  having  one  or  other  of  the  following 

"The  term  Wager  Policij  relates  to  clauses  wi-itten  on  the    face    of    it : 

the  form  of  the  instrument  as  well  'Interest    or    no    interest,'    or    'This 

as  to  the  nature  of  the  contract."     1  policy  to  be  deemed  sufficient  proof 

Amould    on    Marine    Ins.     (8th    ed.  of  interest,'  or  any  other  terms  which 

Hart  &  Simey,  1909)  see.  311,  p.  409.  purport  either  to  entitle  the  assured 

As  to  the  distinction  between  con-  to  recover  against  the  underwriters 
tracts  of  marine  insurance  and  a  stipulated  sum  of  money,  wliether 
wagers  it  is  said,  1  Arnovild  on  he  has  any  interest  in  the  ship  or 
Marine  Ins.  (8th  ed.  Hart  &  Simey)  cargo  or  not;  or  to  bind  the  under- 
p.  7,  sec.  6:  "It  appears  that  two  writer  not  to  require  anj'  proof  of 
things  are  mainly  essential  to  every  the  a.^sured's  interest  other  than  the 
contract  of  marine  insurance :  1.  An  policy  itself."  {Citing  judgment  of 
interest  in  the  subject-matter  insured.  Best,  C.  J.,  in  Murphy  v.  Bell  [1828] 
2.  ■  Exposure  of  that  interest  to  risk  4  Bing.  567-572,  "A  clause  of  this 
of  loss  or  detriment  by  sea  perils,  kind  is  usually  called  a  'p.  p.  i.' 
It  is  the  necessity  for  these  requisites  [policy  proof  of  interest]  clause,  and 
which  entirely  distinguishes  contract  the  policy  containing  it  is  also  known 
of  marine  insurance,  properly  so-  as  a  'p.  p.  i.'  policy").  "As,  more- 
called  from  mere  wagers  upon  the  over,  in  these  cases  there  is  nothing 
issue  of  maritime  adventures.     Such  actually  at  ri.sk  which  can    be    sea- 

402 


THE  POLICY  §  149 

policy  was  underwritten  for  ten  thousand  dollars  on  profits  on  mer- 
chandise on  board  a  brig  from  C.  to  B.,  free  of  average  and  salvage, 
and  the  policy  to  be  the  only  proof  of  interest  required,  it  was  held 
not  a  gaming  policy,  the  insured  having  property  on  board  and 
neither  he  nor  the  insurers  intending  a  wager  policy,  but  an  in- 
terest policy,^  it  being  declared  in  this  case  tliat  both  parties  must 
intend  to  wager,  and  that  if  one  party  only  intends  a  gaming  pol- 
icy, and  procures  the  otlier  to  underwrite  it  as  a  policy  on  interest, 
the  policy  is  void  for  fraud.  The  Avhole  question  depends  upon 
whether  the  contract  covers  an  actual  insurable  interest  or  is  intend- 
ed as  an  indemnity  therefor,  or  whether  it  is  a  mere  wager.  For 
an  insurance  made  without  such  interest  is  void,^  the  presumption 
being  in  such  case  that  the  policy  was  taken  out  for  the  purpose  of 
a  wager  or  speculation ;  ^  although  where  for  a  premium  of  two  and 
a  half  per  cent  A.  agreed  with  B.  to  insure  a  negro  slave,  at  the  time 
reported  to  be  lost  while  on  board  a  boat,  and  B.  had  no  interest  in 
the  negro,  but  his  loss  was  proved  as  reported,  he  was  held  entitled 
to  recover  his  value.*  But  precisely  what  interest  is  necessary  to 
exist  in  order  to  make  the  policy  not  a  wager  has  been  much  dis- 
cussed. In  that  class  of  insurances  where  the  contract  is  strictly 
one  of  indemnity,  as  in  marine  and  like  insurances,  there  is  not  so 
much  difficulty  as  in  life  insurance  or  in  accident  insurance  where 
the  injury  results  in  death,  since  in  such  cases  the  loss  can  seldom 
be  measured  by  pecuniary  values.*  A  wager  policy  may  exist  where 
the  insured  has  an  interest  in  the  subject  matter  and  still  wagers 
respecting  it.^ 

§  149.  Wager  policies,  valid  at  common  law,  now  void. — It 
is  well  settled  that  wager  policies  and  wagers  which  were  not  con- 
trary to  the  policy  of  the  law  were  valid  contracts  at  common  law.' 

damaged  or  abandoned,  such  policies  y.  McDonald,  122  Pa.  324,  1  L.R.A. 

frequently  also   contain    the    clause,  238,  15  Atl.  439,  9  Am.  St.  Rep.  Ill, 

'Free    of    all    average,   and  without  1  L.R.A.  238. 

benefit  of  salvage."     1    Arnould    on  *  Shepherd  v.  Sawyer,  2  Murph.  (6 

:\rarine  Ins.   (8th  ed.  Hart  &  Simey,  N.  C.)   26,  5  Am.  Dec.  517. 

1009)   sec.  311,  p.  409.     Interest  or  *  Connecticut  Mutual  Life  Ins.  Co. 

no  interest.     See  article  40  L.  T.  83;  v.  Schaefer,  94  U.  S.  457,  460,  24  L 

same  art.  21  Ir.  L.  T.  313.  ed.  251,  per  Bradley,  J. 

^  Alsop     V.  Commercial  Ins.  Co.  1  ^  Kent  v.  P>ird.  2  Cowp.  583.     See 

Sum.    (U.   S.   C.   C.)    451,  Fed.   Cas.  Juliel  v.  Church,  2  Johns.  Cas.    (N. 

No.  262.     See  Hemminwav  v.  Eaton,  Y.)  333. 

13  Mass.  108;  Glendinning  v.  Church,  'Trenton  Mutual  Life  &  Fire  Ins. 

3  Caines  (N..  Y.)  141,  144.  Co.  v.  .Johnson,  4  Zab.  (24  N.  J.  L.) 

^Goddart  v.  Garrett,  2  Vern.  269.  576,  583;  Buchanan    v.    Ocean    Ins. 

See  Spare  v.  Home  ^Mutual  Ins.  Co.  Co.  6  Cow.   (N.  Y.)  331;    Abbott    v. 

15   Fed.   707;    Farmers'   Ins.   Co.   v.  Scbor,  3  Johns.  Cas.   (N.  Y.)   39,  2 

Butler,  38  Ohio  St.  128,  133.  Am.   Dec.   239;    Juhel   v.   Church,   2 

3  United  Brethren  Mutual  Aid  Soc.  .Tohns.   Cas.    (N.   Y.)     333,    note    b; 

403 


§  149 


JOYCE  OX  INSURANCE 


Although  it  if?  said  that  this  doctrine  had  never  been  applied  to  fire 
insurance,*  yet  it  has  been  held  that  such  insurances  were  void  as 
wager  policies  at  the  common  law.^  In  1740,  however,  the  statute 
19  George  II.,  chapter  37,  was  enacted  prohibiting  this  class  of  con- 
tracts in  marine  risks  with  certain  exceptions,  and  a  few  years  later, 
in  1774,  the  statute  14  George  III.,  chapter  48,  was  passed  prohib- 
iting insurances  upon  lives  by  way  of  gaming  or  wagering.^°    Al- 


Dalbv  V.  India  &  London  Life  Assur. 
Co.  1.3  Com.  B.  365,  386,  13  Eng.  Rul. 
Cas.  383 ;  Crauf ord  v.  Hunter,  8 
Term.  Rep.  23;  Cousins  v.  Nantes,  3 
Taunt.  522,  13  Eng.  Rul.  Cas.  312; 
Dean  v.  Dicker,  2  Str.  *1250.  See 
Allen  V.  Hearn,  1  Term  Rep.  56,  12 
Eng.  Rul.  Cas.  385;  Atherton  v. 
Beard,  2  Term  Rep.  610;  Roebuck  v. 
Hammerton,  Cowp.  737;  Evans  v. 
Jones,  5  Mees.  &  W.    77;    Goddart 

V.  Garrett,  2  Vem.  269 ;  Bunyon  on  of  marine  insurance  by  way  of  gam- 
Life  Assui'ance  (2d  ed.)  8  Arnould  ing  or  wagering  is  void.  (2)  A  con- 
on  Marine  Ins.  (8tli  ed.  Hart  &  tract  of  marine  insurance  is  deemed 
Simey)  see.  311,  p.  410.  Contra,  to  be  a  gaming  or  wagering  contract 
Ruse  V.  Mutual  Benefit  Life  Ins.  Co.  — (a)  Where  the  as.sured  has  not  an 
23  N.  Y.  516.     See  cases  pro  and  con    it>surable  iutere.st  as  defined  by  this 


surance  "on  the  life  or  lives  of  any 
person  or  i^ersons,  or  on  any  other 
event  or  events  whatsoever  wherein 
the  person  or  persons  for  whose  use, 
benefit,  or  on  whose  account  such 
policy  or  policies  shall  be  made  sliall 
have  no  interest,  or  by  way  of 
gaming  or  wagering." 

Act  George  II.,  c.  37,  repealed  by 
sec.  92  marine  insurance  act,  .sec.  4, 
which  provides:     (1)    Every  conti'act 


*c5o.     See  also  notes  6  L.R.A 
7  Id.  217,  12  Id.  409,    13    Id. 

J.  632-3,  699;  17 


as  to  validity  of  wagers  generally :  2 
Parsons  on   Contract    (7t-h  ed.)    896, 

137, 
434; 
Articles  in  43  L. 
Bench  &  Bar,  43-48;  53  Sol.  L.  J. 
209-10;  15  Case  &  Comment,  78-9; 
100  L.  T.  195,  213. 

*  Wood  on  Fire  Ins.  sec.  37,  p.  94. 

^  Fi'eeman  v.  Fulton  Fire  Ins.  Co. 
14  Abb.  Pr.  (N.  Y.)  398.  But  see 
Juhel  V.  Church,  2  Johns.  Cas.  (N. 
Y.)  333,  note  b. 

10  The  act  19  George  IT.,  chapter 


act,  and  the  contract  is  entered  into 
with  no  expectation  of  acquiring 
such  an  interest;  or  (b)  Where  the 
policy  is  made  "interest  or  no  inter- 
est," or  "without  further  proof  of 
interest  than  the  policy  itself,"  or 
"without  benefit  of  salvage  to  the  in- 
surer," or  subject  to  any  other  like 
term :  Provided  that,  where  there  is 
no  possibility  of  salvage,  a  policy 
may  be  etfected  without  benefit  of 
.salvage  to  the  insurer.  1  Arnould 
on  Marine  Ins.  (8th  ed.  Hart  & 
Simey,  1909)  see.  313,  p.    412,    con- 


37,  provides  that  any  assurance  made  sidering  the  changes  which   this  act 

on  ships,  "or  on  any  goods,  merchan-  effects,    stating    that   wager    policies 

discs,  or  effects  laden  or  to  be  laden  are  void  in  Ireland,  considering  the 

on  board  of  any  such  sJiip  or  ships,  effect   of  no  expectation  of  interest, 

interest   or  no  interest,    or    without  also  whether  wager  policies  are  void 

further    proof    of    interest  than  the  under  the  gaming  act  1845    (8  &  9 


policy  or  by  way  of  gaming  or  wager- 
ing, or  without  benefit  of  salvage  to 
the  assurer,"  shall  be  void,  excepting, 
however,  assurance  on  private  ships 
of  war,  assurances  on  effects  from 
Spain  and  Portugal,  etc.  The  act  14 
George  III.,  chapter  48,  prohibits  in- 


Vict.  c.  109),  sec.  18  (although  no 
imderwriter  had  raised  the  question, 
and  reviewing  the  cases."  See  also 
17  Earl  of  Halsbury's  Laws  of  Eng- 
land, sees.  746  et  seq.,  pp.  377  et  seq. 
where  the  above  matters  are  con- 
sidered, and  it  is  also  said:     "A  still 


4U4 


THE  POLICY 


149 


though  there  are  statutes  in  some  of  the  states  against  wagering  con- 
tracts, and  although  wager  policies  were  held  valid  in  New  York 
prior  to  the  enactment  of  the  statute  in  that  state,"  yet  a  wager  in- 
surance should  be  held  void  on  general  principles  of  public  policy 
and  morality,  and  the  tendency  of  our  courts  has  been  against  up- 
holding these  contracts, ^2  and  courts  should  not  concern  themselves 

more  modern  statute,  marine  insur-  necticut    Mutual    Life    Ins.    Co.    v. 

anee  (gambling  policies)  act  1909  (9  Schaefer,  94  U.  S.  457,  460,  24  L.  ed. 

Edw.   VII.   c.   12)    sec.    1,    declares  251 ;  Gordon  v.  Ware  National  Bank, 

every   contract   of   marine   insurance  132  Fed.  444,  65   C.   C.  A,  580,  67 

effected  by  any  person  not  having  a  L.R.A.  550;  Kentucky  Life  &  Acci- 

bona  fide  interest  or  expectation  of  dent  Ins.   Co.  v.  Hamilton,  63  Fed. 

interest,  and  every  such  contract  ef-  101,  11  C.  C.  A.  50,  22  U.  S.  App. 

tected  by  any  person,  not    being    a  548. 

part  owner,  in  the  employment  of  the  Alahanw. — White      v.      Equitable 

owner"    ("owner"  includes  charterer  Nuptial   Benefit   Union   Co.   76   Ala. 

under  sec.  1   [8]    of  the  act)    "of  a  251,  52  Am.  Rep.  325. 

ship,  in  relation  to  that  ship  in  the  Maryland. — Bennett      v.      Mutual 

terms  above  specified   (marine  insur-  Fire  Ins.   Co.  100  Md.  337,  60  Atl. 

anc€  act  1906   [6  Edw.  Yll.  e.  41],  99. 

sec.  4  [2]    [b]),  to  be  a  'contract  by  Massachusetts. — King  v.  State  Mu- 

way  of  gambling  on  loss  by  maritime  tial  Fire  Ins.  Co.  7  Cush.  (61  Mass.) 

perils;'  and  the  person  who  effects  it,  1,  10,  54  Am.  Dec.  683. 

and  the  broker    through    whom    and  Missouri. — Sage     v.    Finney,    156 

the  insurer  with  whom  it  is  effected  Mo.  App.  30,  135  S.  W.  996. 

(if  these  persons  act  knowingly)  are  New  Hampshire. — Hoit  v.  Hodge, 

guilty  of  a  criminal  offense  "punish-  6  N.  H.  104, 105,  25  Am.  Dec.  451. 

able    on   summarv    conviction."      Id.  New  York. — Ruse  v.  Mutual  Bene- 

.sec.  747,  pp.  377,  "378.    See  53  Sol.  L.  fit  Life  Ins.  Co.  23  X.  Y.  422. 

J.  464.  North    Carolina. — Trinity    College 

"  See  Buchanan  v.  Ocean  Ins.  Co.  v.  Travelei-s'  Ins.  Co.  113  N.  C.  248, 

6  Cow.  (N.  Y.)  318;  Juhel  v.  Church,  22  L.R.A.  291,  18  S.  E.  175,  23  Ins. 

2  Johns.  Cas.    (N.  Y.)   333,  note  b.  L.  J.  53,  per  Burwell,  J. 

As    to    statutes     affecting     wagering  Pennsiilvauia. — United       Brethren 

policies  see  note  128   Am.   St.  Rep.  Mutual  Aid   Soc.   v.  McDonald,  122 

304,  305.                         ■  Pa.  324,  1  L.R.A.  238,  15  Atl.  439; 

"Every  stipulation  in  a  policy  of  Pritchett  v.  Insurance  Co.  of  North 

insurance  for  the  payment    of    loss,  America,  3  Yentes   (Pa.)   461. 

whether  the  person  in.suredhas  or  has  Texas. — iVIanhattan  Life  Ins.  Co.  v. 

not  anv  interest  in  the  property  in-  Cohen   (1911)  —  Tex.  Civ.  Ajip.  — , 

sured,  or  that  the  policy  shall  be  re-  139  S.  W.  51,  40  Ins.  L.  J.  1685. 

ceived  as  proof  of  such"  interest,  and  Vermont. — Callamer  v.  Day,  2  Vt. 

every   policy   executed    by    way    of  144. 

gaming  or  wagering,  is  void:"     Cal.  England. — Anctil    v.    Manufactur- 

Civ.  Code,  sec.  2558.        '  ers  Life  Ins.  Co.  68  L.  J.  P.  C.  123 

Statutes  14  Geo.  lir.  chap.  48.  was  [1899]    App.    Cas._  Law   R.    604,   81 

never  in  force  in  Wisconsin,  Hard  v.  Law  L.  T.  N.  S.  2/9;  >AIanufacturers 

Dotv,  86  Wis.  1,  21  L.R.A.  746,  56  Life  Ins.  Co.  v.  AnctU,  28  Can.  S. 

N.  W.  371.  C.  103. 

12  United  States.— Crotty  v.  Union  See  also  3  Kent's  Comm.  (13th  ed.) 

Mutual  Life  Ins.  Co.  144 'U.  S.  621,  277;  1  Duer  on  Ins.   (ed.  1845)  92. 

12  Sup.  Ct.  749,  36  L.  ed.  566;  Con  Emerigon,  in  his  work  on  Insurance 

405 


§  130  JOYCE  ON  INSURANCE  , 

with  the  dis^position  of  the  proceeds  of  wagering  policie;^,"  for  tlie 
above  reason  and  also  on  the  ground  ah-eady  indicated,  that  the 
contract  of  insurance  is  intended  only  to  protect  an  actual  insurable 
interest,  or  to  indemnify  for  an  actual  loss,  and  deals  with  real 
values,  and  is  not  intended  to  be  speculative,  and  it  is  innnaterial 
that  the  policy  is  taken  in  good  faith  and  with  full  knowledge.  The 
policy  of  the  law  does  not  admit  of  such  insurance,  although  the 
parties  may  willingly  contract  therefor.  The  foundation  of  all  in- 
surance,'^, unless  of  the  wager  kind,  is  the  real  value  of  the  thing 
insured.  ^^ 

§  150.  Wager  policy:  conflict  of  laws. — It  is  held  in  Pennsylva- 
nia that  a  wagering  life  policy  cannot  be  enforced  there,  although 
valid  in  the  state  where  it  was  signed  and  is  to  be  paid."    And  under 

(Meredith's  ed.  18.50)   c.  i.  see,  1,  p.    Fire  Ins.  Co.  38  Barb.   (N,  Y.)  247, 
4),  writing  of  wager  policies,  declares   14  Abb.  Pr.  (N.  Y.)  398. 
that   the   reason   of  their   not   being        Ohio. — Farmers'  Ins.  Co.  v.  Butler, 
more   generally   allowed   to   embrace   38  Ohio  St.  133,  per  Mcllyaine,  J. 
the  fortune  of  ships  is,  that  ''naviga-       Reinsurance;   Wagering  contracts, 
tion  has  been  viewed  as  a  matter  in-   see  §  118a  herein, 
teresting  the  state.     .     .     .     It  is  not        Concealment  of  "honour"  policies 
to  be  borne,  therefore,  that  one  should  and  of  overinsuranee  will  make  poli- 
be   placed    in    a   situation    to    desire   ey  void.     Thames  tfe  Mersey  Marine 
the  loss  of  a  vessel.     The  greediness   Ins.    Co.    v.    "Gunford"    Ship    Co.; 
of    gain    is    capable    of    producing   Southern  Marine  Ins.  Assoc,  v.  "Gun- 
crimes  which  it  is  desirable  to  pre-   ford"  Ship  Co.  80  L.  J.  P.  C.  146, 
vent.     Hence  the  cause  that  in  most    [1911]  A.  C.  529,  105  L.  T.  312,  15 
commercial   places  wager  insurances   Com.  Cas.  270,  55  L.  J.  631,  27  T.  L. 
have  been  prohibited."  R.  518,  H.  L.  (Sc). 

See  note  128  Am.  St.  Rep.  304.  "  :\IcDermott    v.    Prudential    Ins. 

13  Exchange  Bank  v.  Loh,  104  Ga.  Co.  7  Kulp  (Pa.)  246.  See  §  232 
446,  44  L.R.A.  372,  31  S.  E.  459,  a  herein. 

case  of  insurance  of  life  for  creditor's  Upon  the  general  rule  it  is  held 
benefit.  that  if  a  contract  is  valid  by  the  laws 

1*  See  the  following  eases :  of  one  state  and  invalid  by  those  of 

United  States. — Connecticut  Mutu-  another,  the  parties  are  presumed  to 
al  Life  Ins.  Co.  v.  Schaefer,  94  U.  S.  incorporate  in  the  contract  the  law 
457,  460,  24  L.  ed.  251;  Snell  v.  Del-  which  would  piake  it  operative.  Ca- 
aware  Ins.  Co.  1  Wash.  (U.  S.  C.  C.)  rev  v.  Mackey,  82  Me.  516,  9  L.R.A. 
509,  Fed.  Cas.  No.  13,137.  113,  20  Atl.  84,  17  Am.  St.  Rep.  500. 

Massachusetts. — Mutual  Life  Ins.  But  it  is  also  held  that  courts  will 
Co.  v.  Allen,  138  Mass.  24,  27,  52  Am.  enforce  contracts  valid  by  the  laws 
Rep.  246,  247;  Stetson  v.  Massachu-  of  the  state  or  country  wherein  they 
setts  IMutual  Fire  Ins.  Co.  4  Mass.  were  made,  unless  clearly  contrary  to 
336,  337,  3  Am.  Dec.  219,  per  Sewall,  good  morals  or  repugnant  to  the  poli- 
J.  cy  or  positive  statutes  of  the  juris- 

Michigan. — Agricultural  Ins.  Co.  v.  diction  in  which  it  is  sought  to  be 
Montague,  38  Mich.  548,  7  Ins.  L.  J.  enforced.  Sondlieim  v.  Gilbert,  117 
708,  31  Am.  Rep.  326.  Tnd.  71,  5  L.R.A.  432,  18  N.  E.  687, 

Neiv    York. — Freeman    v.    Fulton   10    Am.    St.   Rep.    23;    Robinson   v. 

406 


THE  POLICY 


151 


a  Texas  decision  where  an  assignment  of  a  policy  was  made  in  that 
state  by  a  resident  there  to  the  assignee's  agent  there  it  was  held 
that  the  Texas  law  governed  in  determining  the  validity  of  the  as- 
signment and  not  the  laws  of  Georgia  where  the  assignee  resided. ^^ 
But  in  Indiana  a  statute  which  makes  void  assignments  of  policies, 
of  corporations  organized  in  that  state,  where  the  assignee  has  no 
insurable  interest  does  not  apply  to  policies  issued  by  a  foreign  cor- 
poration." 

§  151.  Valued  policy  may  be  shown  to  be  a  wager. — Since 
wager  policies  were  valid  prior  to  the  act  19  George  II.,  chapter  37, 
the  value  in  a  valued  policy  ought,  it  would  seem,  to  have  been  con- 
clusive whether  merely  speculative  or  founded  on  a  real  interest. 
But  subsequent  to  the  statute,  Lord  Mansfield,  in  Lewis  v.  Rucker,^* 
while  declaring  that  it  was  only  necessary  for  the  assured  to  prove 
some  interest  in  case  of  valued  policies  to  take  them  out  of  the  stat- 
ute,^^  yet  he  adds  that  ''the  insured  can  never  be  allowed  in  a  court 
of  justice  to  plead  that  he  has  greatly  overvalued  or  that  his  interest 
was  a  trifle  only,"  and  that  "if  it  should  come  out  in  proof  that  a 
man  had  insured  two  thousand  pounds,  and  had  interest  on  board 
to  the  value  of  a  cable  only,"  the  statute  could  not  be  defeated  by 
such  an  evasion. 2°     This  doctrine  of  Lord  Mansfield  is,  of  course, 


Queen,  87  Tenn.  445,  3  L.R.A.  214, 
11  S.  W.  38,  10  Am.  St.  Kep.  690. 

And  a  contract  made  in  Connecti- 
cut after  sunset  on  Sunday,  being 
\alid  in  that  state,  may  be  enforced 
in  Rhode  Lsland,  altliough  tlie  law  of 
the  latter  state  prohibits  business  in 
one's  ordinary  calling  during  all  Sun- 
day. The  enforcement  of  such  a  con- 
tract does  not  involve  a  breach  of 
good  morals.  Brown  v.  Browning, 
15  R.  I.  222,  7  Atl.  403,  2  Am.  St. 
Rep.  908. 

^^  Manhattan  Life  Ins.  Co.  v.  Co- 
hen (1911)  —  Tex.  Civ.  App.  — .  139 
S.  W.  51,  40  Ins.  L.  J.  1685.  The 
court  per  Neill,  J.,  declares  that  there 
is  a  conflict  of  authorities  as  to  what 
law  governs  such  an  assignment  re- 
views the  authorities  at  length  and 
holds  that  the  contract  was  consum- 
mated in  Texas,  The  court  also  says : 
"The  consideration  for  the  assign- 
ment of  these  policies  having  been 
advanced  by  Hilsman  for  the  express 
purpo.se  of  assisting  the  insured  to 
participate    in    a    gambling   transac- 

40 


tion  with  said  Hilsman  and  his  agent 
at  San  Antonio,  Tex.,  the  considera- 
tion was  void  in  law  and  the  attempt- 
ed assignment  of  the  policies  for  that 
reason  alone  vested  no  right  in  Hils- 
man to  either  the  policies  or  the  pro- 
ceeds thereof."     See  §  232  herein. 

^■^  jMetropolitan  Life  Ins.  Co.  v. 
Brown  (Davis  v.  Brown)  159  Ind. 
644,  65  N.  E.  908,  32  Ins.  L.  J.  322. 

18  2  Burr.  1171,  14  Eng.  Rul.  Cas. 
215. 

1^  See  Barclay  v.  Cousins,  2  East, 
544;  Kane  v.  Commercial  Ins.  Co.  8 
Johns.   (N.  Y.)   229. 

20  1  Marshall  on  Ins.  (ed.  1810) 
*136,  et  seq.,  Mr.  Wood  (1  Wood  on 
Fire  Ins.  [2d  ed.]  sec.  3S_,  p.  94)  says 
that  "a  partial  interest  in  the  prop- 
erty insured,  bearing  a  small  propor- 
tion to  the  sums  insured  if  the  policy 
is  valued,  does  not  save  the  policy 
from  being  a  mere  wager,  unless  the 
assured  stands  in  such  a  relation  to 
the  property  that,  as  to  all  the  bal- 
ance of  the  sura  insured,  he  stands  as 
trustee  for  the  owner." 


§§  15^-155  JOYCE  ON  INSURANCE 

based  upon  the  statute,  and  should  be  held  applicable  in  all  cases 
where  there  is  legislative  prohibition  against  wagering  contracts,  and 
in  those  cases  where  a  wager  policy  is  held  void  on  the  ground  of 
public  policy,  there  would  seem  to  be  no  reason  why  the  same  rule 
should  not  govern.  But  in  Alsop  v.  Commercial  Insurance  Com- 
pany ^  it  is  decided  that  there  cannot  in  strictness  be  a  gaming  pol- 
icy under  the  laws  of  I\lassachusetts  unless  both  parties  intend  to 
wager,  and  that  if  the  valuation  is  a  mere  cover  for  a  wager  it  will 
be  set  aside  and  the  insured  may  recover  according  to  his  actual  in- 
terest.*^ 

§  152.  Policy  valid  at  inception  cannot  become  wager. — Where 
a  life  insurance  policy  is  valid  at  its  inception,  the  insured  may  dis- 
pose of  it  at  his  pleasure,  nor  can  it  be  afterward  converted  into  a 
wager  policy  by  any  use  of  it  by  the  insured  subsequent  to  effecting 
a  valid  contract.^ 

§  153.  Wager  policies:  loss  should  be  total. — In  wager  policies 
the  loss  must  be  absolutely  total.  This  follows  from  the  fact  that 
the  contract  is  not  based  on  any  insurable  interest,  and  necessarily 
there  can  be  no  liability  for  a  partial  loss.  And  for  the  reason  that 
the  insurer  could  claim  no  benefit  from  what  may  have  been  saved, 
the  clauses  existed  in  wager  policies  ''free  of  average,"  and  "without 
benefit  of  salvage."  * 

§  154.  Wager  policies:  what  are  and  are  not.  (Transferred  see 
§§  894a,  914a,  954a  herein.) 

§  155.  Interest  policy  defined. — An  interest  policy  is  one  in 
which  it  appears  that  the  insured  has  an  actual,  assignable, 
insurable  interest  in  the  subject  matter,  and  this  is  the  im- 
port   of   the   general    form   of  contract   now   in    use.^      In   cases 

^1  Sumner  (U.  S.  C.  C.)  451,  Fed.  'interest  or  no  interest,'  or  'without 

Cas.  No.  262.  further   proof   of   interest    than   the 

2  Clark  V.  Ocean  Ins.  Co.  16  Pick,  policy,'  to  preclude  all  inquiry  into 

(33    Mass.)     289.      See    Wolcott    v.  the  interest  of  the  insured.     .     .     . 

Eagle  Ins.   Co.   4  Pick.    (21   Mass.)  The   parties   mean    to    play   for   the 

429.  v\'hole  stake,  and  when  the  underwrit- 

^  Yalton    v.    National   Assur.    Soc.  er  pays  a  loss,  he  cannot,  as  in  the 

22  Barb.  (N.  Y.)  9;  Phillips  Estate,  case   of  an  insurance  upon  interest, 

In  re,  238  Pa.  423,  45  L.R.A.(N.S.)  claim    any    benefit    from   what    may 

982,  note,  86  Atl.  289;  Grant  v.  Inde-  have  been  saved,  and  to  preclude  all 

pendent  Order  Sons  &  Daughters  of  claim  of  that  sort,  the  words  'free  of 

Jacob,  97  Miss.  182,  52  So.  698 ;  Peck  average'  and  'without  benefit  of  sal- 

V.  Washington  Life  Ins.   Co.  87  N.  vage'     are    always    introduced    into 

Y.    Supp.    210,    91    App.    Div.    597.  wager  policies."     1  ^Marshall  on  Ins. 

But  compare  §§  914-919  herein.  (ed.  1810)   *121.     See  §  148  herein. 

*  See  Glendenning  v.  Chi;rcb,  3  ^  See  Sawver  v.  Dodge  County 
Caines  (N.  Y.)  141;  Buchanan  v.  Mutual  Ins.  Co.  37  Wis.  539;  Will- 
Ocean  Ins.  Co.  6  Cow.  (N.  Y.)  318.  iams  v.  Smith,  2  Caines  (N.  Y.)  13; 
"It  is  usually  conceived  in  the  terms  1   May  on   Ins.    (Parsons')    sec.   33; 

408 


THE  POLICY 


§  156 


of  fire  risks  the  policies  are  interest  policies.' 

§  156.  Open  or  unvalued  policy  defined, — An  open  policy  is  one 
in  which  the  value  is  not  fixed,  but  is  left  to  be  definitely  determined 
in  case  of  lossJ  An  open  policy  is  frequently  necessitated  by  rea- 
son of  the  character  of  the  subject  matter,  as  in  case  of  an  insur- 
ance upon  a  class  rather  than  upon  a  particular  or  specitic  thing, 
or  where  the  property  insured  has  changed  as  to  specific  articles 
at  the  time  of  loss,  although  the  class  is  of  the  same  character  as  at 


Black's  Law  Diet.  908,  "Policy."  1  ly  called,  an  open  policy  is  one  which 
Arnould  on  Marine  Ins.  (8th  ed.  does  not  specify  the  value  of  the 
Hart  &  Simey)  p.  11,  sec.  9.  subject-matter    but    leaves    it    to    be 

^  1  Wood  on  Fire  Ins.  (2d  ed.)  95,  subsequently  ascertained."  Earl  of 
see.  39.  Halsbury's  Laws  of  England,  vol.  17, 

'See  Snell  v.  Delaware  Ins.  Co.  4  p.  378  {citing  marine  ins.  act  190G 
Dall.  (4  U.  S.)  430,  1  L.  ed.  896;  L<J  Edw.  VII.  c.  41j  sec.  28).  See  also 
Peninsular   &   Occidental    Steamship    Id.  p.  336  note. 

Co.  v.  Atlantic  Mutual  Ins.  Co.  (U.  "An  open  or  unvalued  policy  is  one 
S.  D.  C.)  185  Fed.  172,  40  Ins.  L.  J.  where  the  value  of  the  property  in- 
1274  (in  this  case  there  was  a  valu-  sured  is  not  settled  in  the  policy,  and 
ation  clause  but  the  blank  for  th3  in  case  of  loss  must  be  agreed  upon 
amount  was  not  filled  in)  ;  Snowden  or  proved."  Insurance  Co.  of  North 
v.  Guion,  101  N.  Y.  458,  5  N.  E.  322;  America  v.  Willey,  212  Mass.  75,  77, 
Lawver  v.  Globe  Mutual  Ins.  Co.  25  98  N.  E.  677,  citing  Hemminway  v. 
S.  Dak.  549,  560,  127  N.  W.  615.         Eaton,  13  Mass.  107,  108. 

"The  expression  'open  policy'  is  al-  English  statute  adopts  term  ''un- 
so  sometimes  used  in  reference  to  one  valued  policy"  instead  of  "open  poli- 
kept  open  for  neAv  subscriptions,  or  ci/'  definition:  reasdn  for  clmnge. 
one  on  cargo  kept  open  for  new  sub-  "An  unvalued  policy  is  defined  in  see. 
jeets  of  insurance,  in  which  latter  28"  (of  the  marine  insurance  act, 
case  the  voyage  and  risks  are  de-  1906  [6  Edw.  VII.,  c.  41].  Butter- 
scribed  in  the  body  of  the  policy,  and  worth's  20th  Cent.  Stat.  [1900-1909] 
additional  amounts  or  new  cargoes  p.  406)  "as  a  policy  which  does  not 
are  afterward  entered  from  time  to  specify  the  value  of  the  subject-mat - 
time  at  the  foot  of  the  instrument,  ter  insured,  but,  subject  to  the  limit 
by  merely  specifying  the  amount  or  of  the  sum  insured,  leaves  the  insur- 
by  naming  a  different  vessel,  or  spe-  able  value  to  be  subsequently  ascer- 
cifying  whatever  eircurastanee  dis-  tained,  in  the  manner  specified  in  the 
tinguishes  the  risk  or  subject  from  act.  Hitherto  the  policy  called  an  un- 
those  described  in  the  body  of  the  valued  ]iolicy  in  the  Act  has  usual- 
policy."  1  Phillips  on  Ins.  (3d  ed.)  ly  been  called  an  open  policy.  The 
25,  see.  27;  Ricliards  on  Ins.  (2d  ed.)  reason  why  the  former  name  has 
sec.  14;  2  Bouvier's  Law  Diet.  430;  been  adopted  in  the  act  is  that  the 
6  Words  &  Phras.  pp.  4987  et  seq.      term  open  policy  is  sometimes  used 

See  Comp.  Laws  Dak.  1887,  see.  in  mercantile  language  to  denote  a 
4150;  Lester,  Rowell  &  Hill's  Ga.  floating  policy  which  has  not  been 
Code  1882,  see.  2833;  S.  Dak.  Civ.  exliausted  by  declarations."  1  Ar- 
Codes  see.  1846.  considered  in  Law-  nould  on  Marine  Ins.  (8th  ed.  Hart 
ver  v.  Globe  INIutual  Ins.  Co.  25  S.  &  Simey)  p.  12,  see.  9.  The  author 
Dak.  549,  127  N.  W.  615,  39  Ins.  L.  gives  also  the  definitions  of  valued 
J.  1588.  and   open   policies   "in   the   previous 

"An  unvalued,  or,  as  it  is  frequent-   editions  of  this  work." 

409 


§§  IjGu,  157 


JOYCE  ON  INSURANCE 


the  inception,  as  is  instanced  by  merchandise  in  store,  or  the  risk 
may  bo  fluctuating  as  to  quantity  and  location.*  In  an  open  policy 
it  is  held  that  the  plaintiff  must  prove  his  interest  and  the  value  of 
his  property  or  he  cannot  recover,^  but  the  bill  of  lading  of  the  out- 
ward cargo  is  no  proof  of  the  interest  of  the  plaintiii'  in  the  home- 
ward cargo. ^° 

§  156a.  Named  policy  defined. — ''Named  policy  is  one  in  which 
the  adventure  is  limited  to  a  ship  specifically  named  therein."  " 

§  157.  Running  policies:  blanket  policies:  floating  policies. — A 
running  policy  contemplates  successive  insurance;?  whereby  the  ob- 
ject of  the  policy  may  from  time  to  time  be  defined  as  to  the  sub- 
ject, places,  and  amounts  of  insurance  by  additional  indorsements 
as  agreed  upon  by  the  parties. ^^  An  open  or  running  policy  is  also 
defined  as  one  to  insure  goods  shipped  at  a  distant  ])ort  where  it  is 
impossible  to  be  advised  to  the  particular  ship  upon  which  the  goods 
are  laden  and  it  cannot  be  named  in  the  policy. ^^  A  floating  policy 
ai)plies  to  goods  of  a  class  or  kind  which  from  its  fluctuating,  chang- 
ing nature  diff^ers  as  to  specific  articles,  as  in  case  of  a  stock  of  mer- 
chandise or  fluctuating  goods  where  the  insurance  covers  to  a  certain 
amount  goods  of  the  same  character  and  description  successively  in 
store,^*  and  the  goods  on  hand  at  the  time  of  loss  may  not  be  the 


*  1  Wood  ou  Fire  Ins.  see.  40  p. 
95;  Richards  on  Ins.  (2d.  ed.)  sec. 
1-t  (3d  ed.)  sees.  18,  20,  pp.  21,  22, 
734;  1  May  on  Ins.  (3d  ed.)  sees.  30, 
31. 

^  Millaudon  v.  Western  Ins.  Co.  5 
La.  (9  La.  0.  S.)  (top  pa^e  20)  27, 
29  Am.  Dec.  433:  Beale  v.  Pettit, 
1  Wash.  (U.  S.  C.  C.)  241,  Fed.  Cas. 
No.  1158. 

"Tvstirahle  value"  of  ship  in  open 
policy,  see  Peninsular  Si  Occidental 
Steamship  Co.  v.  Atlantic  Mutual 
Ins.  Co.  (U.  S.  D.  C.)  185  Fed.  172, 
40  Ins.  L.  J.  1274. 

lORsale  v;  Pettit,  1  Wash.  (U.  S. 
C.  C.)  241,  Fed.  Cas.  No.  1158. 

See,  as  to  averment  and  proof  of 
interest,  the  following-  cases: 

Kentucky  Life  &  Accident  Ins.  Co. 
V.  Hamilton,  63  Fed.  93,  11  C.  C.  A. 
42;  Illinois  Mutual  Fire  Ins.  Co.  v. 
Marseilles  Mf^r.  Co.  1  Gilm.  (111.) 
236;  Gilbert  v.  North  American  Ins. 
Co.  23  Wend.  (N.  Y.)  43,  35  Am. 
Dec.  543 ;  Dickerman  v.  Vermont  Mu- 
tual Fire  Ins.  Co.  67  Vt.  99,  30  Atl. 
808. 


410 


^^  1  Arnould  on  Marine  Ins.  (8th 
ed.  Hart  &  Simey),  p.  14,  see.  9. 

^^  See  the  following-  eases : 

United  States. — Orient  Mutual  Ins. 
Co.  v.  W^ioht,  23  How.  (64  U.  S.) 
401,  16  L.  ed.  524. 

California. — Wells  v.  Pacific  Ins. 
Co.  44  Cal.  397. 

Maryland. — Sehaefer  v.  Baltimore 
Marine  Ins.  Co.  33  Md.  109. 

Massachusetts. — Carver  Co.  v. 
Manufacturers'  Ins.  Co.  6  Gray  (72 
Mass.)  215;  Kennebec  v.  Anausta 
Ins.  Co.  6  Gray  (72  Mass.)  204." 

Neic  York. — Snowden  v.  Guion, 
101  N.  Y.  458,  5  N.  E.  322;  Arnold 
v.  Pacific  Mut.  Ins.  Co.  78  N.  Y.  7. 

England. — Stephens  v.  Australa- 
sian ins.  Co.  L.  R.  8  Com.  P.  18. 

13  Orient  Mutual  Ins.  Co.  v. 
Wright,  23  How.  (64  U.  S.)  401,  16 
L.  ed.  524;  Sun  Mutual  Ins.  Co.  v. 
Wright.  23  How.  (64  U.  S.)  412,  16 
L.  ed.  529. 

1*  Hoffman  v.  ^^tna  Fire  Ins.  Co. 
32  N.  Y.  405,  411,  416,  88  Am.  Dec. 
337.  ''The  policy  in  question  havin<? 
been  issued  to  a  mercantile  firm,  the 


/ 


THE  POLICY  §  157a 

specific  ones  in  stock  at  the  inception  of  the  risk,  or  it  may  be  ap- 
plied to  goods  which  cannot  be  well  described,  because  fluctuating 
or  shifting  as  to  ciuality  or  location,  as  goods  in  warehouses,  etc. 
Blanket  and  floating  policies  are  sometimes  issued  to  factors  or  to 
warehousemen,  intended  only  to  cover  margins  uninsured  In-  other 
policies,  or  to  cover  nothing  more  than  the  limited  interest  which 
the  factor  or  warehouseman  may  have  in  the  property  which  he  has 
in  charge. ^^ 

§  157a.  Blanket  or  compound  policies:  floating  policies:  distin- 
guished from  specific  policies. — lUaukel  policies  ditier  from  specific 
policies  in  certain  particulars.  The  diflerence  is  one  which  inheres 
in  the  nature  of  the  two  contracts  and  has  its  recognition  in  the  ac- 
cepted advantages  of  a  blanket  policy  to  the  assured  and  its  dis- 
advantages .to  the  insurer,  and  in  the  more  exacting  terms  which 
are  customarily  demanded  for  its  issue.  The  very  essence  of  a 
blanket  policy  of  tire  insurance  is  that  it  invarial)ly  attaches  to  and 
covers  to  its  full  amount  every  item  of  property  described  in  it. 
If  the  loss  upon  one  item  exhausts  the  full  amount  of  the  policy,  the 
whole  insurance  must  be  paid  and  there  can  be  no  apportionment 

company  must  be  deemed  to  have  had  See  Macon  Fire  Ins.  Co.  v.  Pow- 
in  view  the  fluctuating  nature  of  a  ell,  116  Ga.  703,  43  S.  E.  73,  S'i  Ins. 
partnership  business,  and  the  changes  L.  J.  283 ;  United  Underwriters  Ins. 
of  relative  interest  incident  to  that  Co.  v.  Powell,  94  Ga.  359,  21  S.^  E. 
relation.  These  might  be  very  ira-  565,  26  L.  J.  526.  See  also  17  Earl 
portant  to  the  assured,  though  wholly  of  Halsbury's  Laws  of  England,  p. 
immaterial  to  the  risk."  Id.  4li.  362,  sec.  713,  p.  336,  sec.  672. 
"  'It  was  manifestly  tlie  intention  of  "A  floating  policy  was  defined  in 
the  parties  to  the  policy  that  it  should  this  work  as  one  in  which  there  is 
cover  to  the  amount  of  the  insurance  no  limitation  of  the  risk  to  a  par- 
anv  goods  of  the  character  and  de-  ticular  ship,  as  where  goods  'on  sliip 
.scription  specified  in  the  policy  or  ships'  are  insured  for  the  same 
which,  from  time  to  time  during  its  voyage.  In  sec.  29  (1)  of  the  marine 
continuation,  might  be  in  the  store,  insurance  act  it  is  more  broadly  de- 
A  ]:)olicy  for  a  long  period  upon  fined  as  'a  policy  which  describes  the 
goods  in  a  retail  shop  applies  to  the  insurance  in  general  terms,  and  loaves 
goods  successively  in  the  shop  from  either  the  name  of  the  ship  or  ships 
time  to  time.  Any  other  construction  or  other  particulars  to  be  defined  by 
of  a  policy  of  insurance  upon  a  stock  subsequent  declaration.'  "  1  Arnould 
in  trade  continually  changing  would  on  Marine  Ins.  (8th  ed.  Hart  &  Si- 
render  it  worthless  as  an  indemnity.'  mey)  p.  14,  sec.  9. 
.  .  .  The  insurance  was  intended  i^  jjome  Ins.  Co.  v.  Baltimore 
to  cover  the  mercantile  stock  of  which  Warehouse  Co.  93  U.  S.  527,  541, 
the  assured  were  proprietors,  stored  23  L.  ed.  868,  per  Strong,  J.  See 
from  time  to  time  in  the  building  in  Smith  v.  Carmack  (1901)  —  Tenu. 
which  the  business  was  conducted."  Ch.  App.  — ,  64  S.  W.  372. 
Id.  415,  416,  citing  Hooper  v.  Hud- 
son Fire  Ins.  Co.  17  N.  Y.  425. 

411 


§§  157b,  158  JOYCE  OX  IXSURAX'CE 

of  it.  In  a  case  in  which  these  principles  are  asserted  thirty-one  of 
the  policies  Avere  of  the  kind  known  as  ''blanket"  or  "compound" 
policies ;  that  is,  they  insured  buildings,  machinery  and  stock  as  a 
whole,  without  distributing  the  amount  of  the  insurance  among  the 
several  items.  The  remaining  policies  were  of  the  kind  known  as 
"specific ;  "  that  is,  the  amount  insured  thereby  was  distributed 
among  the  several  items  of  property,  a  specified  amount  to  each 
item.  Each  of  the  specific  policies  covered  in  the  whole  precisely 
the  same  property  as  did  the  compound  insurance,  but  distributive- 
ly.  This  distribution  was  uniform  among  the  specific  policies.^^ 
So  in  another  case  mills  and  machinery  were  insured  under  a  num- 
ber of  policies,  each  specific  item  being  insured  for  a  fixed  sum  by 
some  of  the  policies,  and  all  the  machinery  being  insured  for  a 
gross  sum  under  other  policies.^'  And  where  cotton  Avas  insured  in 
a  designated  warehouse  it  was  held  "specific"  insurance  as  distin- 
guished from  "floating"  policies  insuring  cotton  in  bales,  in  all  or 
any  of  the  stores,  presses,  warehouses,  sheds,  yards,  railroad  yards 
and  wharves,  or  while  in  transit  in,  or  while  in  any  of  the  streets 
in,  etc.,  but  mentioning  no  particular  warehouse.  The  loss  was 
also  in  excess  of  that  covered  by  the  specific  policies. ^^ 

§  157b.  "Drummer  floater"  policy  defined:  when  risk  suspended.. 
— The  purpose  of  a  '"drummer  floater"  policy  is  to  cover  the  goods 
mentioned  while  the  commercial  salesman  is  on  the  road  selling 
goods,  and  the  samples  and  goods  carried  by  him  would  not  be 
covered  by  the  ordinary  insurance  cai-ried  upon  merchandise  lo- 
cated in  the  stores  or  warehouses  of  the  merchants.  And  where  the 
goods  are  insured  "while  located  and  contained  as  described  herein 
andnotelsewhere,  to  wit:  Drummer  Floater  .  .  .  w^hile  travel- 
ing in  any  part  of  the  United  States,"  the  term  "while  traveling"' 
etc.,  implies  that  where  the  goods  have  been  returned  to  the  stalling 
point  and  are  in  the  store  and  are  not  traveling,  the  insurance  is 
suspended  and  the  same  goods  are  then  covered  by  the  general  in- 
surance carried  by  the  merchant  upon  all  his  goods  in  his  store 
or  warehouse. ^^ 

§  158.  Open  or  unvalued  policies:  what  are:  whether  policy  open 
or  valued. — Whether   a  policy  is  open  or  valued  depends  upon  the 

16  Schmaelzle  v.  London  &  Lanca-   Ins.  L.  J.  526.     See  also  Macon  Fire 
shire  Fire  Ins.  Co.  75  Conn.  3fl7,  96    Ins.  Co.  v.  Powell,  116  Ga.  703,  43 
Am.  St.  Rep.  233,  60  L.R.A.  536,  53    S.  E.  73,  32  Ins.  L.  J.  283. 
Atl.  863,  33  Ins.  L.  J.  632.     See  §§        ^^  Jacobson   v.    Liverpool,   London 
2492,  2493,  3457  herein.  &   Globe  Ins.   Co.   135   111.   App.  20 

"  American    Central    Ins.    Co.    v.    vM<\.  on  point  of  practice  231  111.  61, 
Landau,  62  N.  J.  Eq.  73,  49  Atl.  738.    83  X.  E.  95.     See  as  to  location  §§ 

18  United  Underwriters  Ins.  Co.  v.    1742  et  seq.  1966,  2068  herein.     Sus- 
Powell,  94  Ga.  359,  21  S.  E.  565,  26  pension  of  Risk,  see  §  1473  herein. 

412 


THE  POLICY  §  158 

intention  of  the  parties  to  be  ascertained  by  a  legal  construction  of 
the  whole  instrument  and  the  question  is  frequently  difficult  of 
determination.^"  It  may  also  depend  upon  the  terms  of  a  valued 
policy  statute  without  which  the  policy  would  be  an  open  one.^ 
Where  the  value  of  wheat  shipped  can  be  determined,  in  ca,se  of 
its  loss,  only  by  proof  of  its  market  price,  no  value  being  fixed  in 
the  certificate,  the  policy  is  an  open,  not  a  valued,  one.^  So  a  policy 
of  insurance  for  eight  hundred  dollars  on  a  certain  dwelling-house, 
which  sum  does  not  exceed  two-thirds  of  the  value  of  the  house,  as 
appears  from  the  application  which  was  made  a  part  of  the  policy, 
which  also  contains  a  stipulation  that  the  company  will  pay  ''all 
loss  or  damage"  not  exceeding  the  sum  named  within  ninety  days 
after  notice  and  proof  of  loss,  is  an  open  and  not  a  valued  policy.^ 
A  marine  policy  providing  that  no  risk  shall  attach  to  it  until  the 
amount  and  description  of  the  same  shall  be  approved  and  indorsed 
thereon  by  the  insureris  not  changed  into  an  open  and  unrestricted 
policy  covering  all  property  which  the  assured  elects  to  report,  even 
after  notice  of  loss,  by  the  adoption  of  an  agreement  fixing  a  uni- 
form premium,  the  supplying  of  the  assured  with  blanks  on  which 
to  report  risks,  and  the  custom,  extending  over  a  long  period  of 
years,  of  reporting  risks  by  the  assured,  when  convenient,  in  due 
course  of  business  after  departure  of  the  vessel,  and  the  uniform  ac- 
ceptance of  the  risks  by  the  insurer.*  In  a  recent  Massachusetts 
case  it  was  held  that  the  policy  was  in  form  a  valued  rather  than  an 

20  See  the  following  cases:  Pe^uis/jlvavia.—Lyeoming  Ins.  Co. 

United  States.— McKim  v.  Phoenix  v.  Mitchell,  48  Pa.  St.  3G/. 

Ins.  Co.  2  Wash.    (U.  S.  C.  C.)   89,  South   CaroUna.-Cox  v.   Cliarles- 

Fed.  Cas.  No.  8,862.  ton  Five  &  Marine  Ins.  Co    3  Rich. 

Connecticnt.-miev     v.     Hartford  (S-   C.)    331,  332,  45.  Arn^  Dec    ^1- 

T        /-I      o  /-c           or'o  Oklahoma    i  armers     Mutual    in- 

Ins.  Co.  2  Conn.  3b8.  ^^^^^    ^^^^^^    ^^    ^^^^.^1      21  Okla.  006, 

Lou^.«>m.-^\allace  v^  Insurance  g_  p^^^  ^70,  38  Ins.  L.  J.  108;  under 
Co.  4  La.  0.  S.  (2  La.  559)   «289.       ^  wUson's  Rev.  &  Ann.  Stat.  Okla. 

Maine.— Ci^ahman  v.  Northwestern  -^gQg^  ^^  -f,()^  ^^^  3204.  See  this 
Ins.  Co.  34  Me.  48/.  page  ^^^^^^^  §  qq^,  "iving  statute. 

Massachusetts.— Brown  v.  Quincy  2  ^yiUiams  v.  Continental  Ins.  Co. 
Mutual  Fire  Ins.  Co.  105  ]\Iass.  39G,  24  Fed.  767,  And  see  eases  in  last 
7  Am.  Rep.  538.  note. 

Neiv  York. — Snowden  v.  Guion,  3  Farmers'  Ins.  Co.  v.  Butler,  38 
101  N.  Y.  458,  5  N.  E.  322;  Oj?den  v.    Ohio  St.  128. 

Columbian  Ins.  Co.  10  Johns.  (N.  «  Delaware  Ins.  Co.  v.  S.  S.  Wliito 
Y.)  273  (considered  under  §  166  Dental  :\If2:.  Co.  109  Fed.  334,  48  C. 
herein)  ;  Mellen  v.  National  Ins.  Co.  C.  A.  332,  65  L.R.A.  387,  writ  of  cer- 
1  Hall  (N.  Y.)  500;  Laurent  v.  Chat-  liorari  denied  (mem.)  183  U.  S.  700, 
ham  Ins.  Co.  1  Hall  (N.  Y.)  50,  51.  4(i  L.  ed.  396,  22  Sup.  Ct.  937. 

413 


§  158  JOYCE  ON  INSURANCE 

open  policy,  but  that  upon  the  facts  and  points  under  discussion  it 
took  effect  as  an  open  policy.* 

5  Insurance  Co.  of  North  America  plain  that  the  invoice  price  with  the 
V.  Willey,  212  Mas.s.  75,  98  N.  E.  677.  rate  of  exchange  fixed  for  the  Eng- 
The  court  per  Rugg,  C.  J.,  said:  lish  pound  and  the  percentage  to  be 
"The  contract  in  the"  case  at  bar  pro-  added  to  the  American  dollar  was  the 
vidod  that  'the  said  goods  and  mer-  agreed  value  of  the  property  at  risk. 
(  haudises,  hereby  insured,  arc  valued  Wliile  it  is  not  expressed  with  dear- 
( premium  included)  at  as  per  form  uess  nor  with  grammatical  accuracy, 
attached.'  These  words,  as  far  as  more  of  the  words  can  be  given  a 
they  go,  tend  to  indicate  that  the  par-  reasonable  effect  if  the  clause  is  in- 
lies  contemplated  a  valued  rather  terpreted  as  fixing  the  value  at  in- 
than  an  open  policy.  But  as  no  voice  plus  the  additions  stated  than 
amount  is  stated  in  that  immediate  to  hold  tlie  meaning  to  be  no  valua- 
connection,  they  are  indecisive.  Ref-  tion  at  all.  There  was  no  sufficient 
erence  is  made"  to  the  form  attached  occasion  for  referring  to  the  invoice 
which  contained  these  words:  'Val-  except  for  fixing  value.  This  con- 
ned premium  included,  at  $5.50  to  the  struetion  receives  some  confirmation 
£  sterling  and  if  invoiced  in  Ameri-  from  the  clause  printed  on  the  side 
can  Gold  at  invoice  and  10%.'  The  of  the  policy  which  required  of  the 
point  to  be  decided  is  the  fair  mean-  insured,  'all  risks  to  be  reported  as 
ing  of  these  words.  If  after  the  Avord  soon  as  known,  the  amounts  declared 
Sained'  in  this  clause  only  the  rate  as  soon  as  ascertained.'  There  seems 
of  exchange  had  appeared,  it  would  to  be  no  reason  for  a  stipulation  for 
not  have  been  a  valued  policy.  It  declaration  of  amount  of  risk  as  soon 
then  would  not  have  been  a  statement  as  it  is  learned  except  for  the  purpose 
of  value  of  the  subject  of  the  risk,  of  determining  valuation.  These  con- 
but  onlv  a  means  of  translating  into  siderations  incline  us  to  the  conclu- 
United  States  money  the  unit  of  Eng-  sion  that  this  was  a  valued  rather 
lish  monev.  To  this  effect  is  Ogden  than  an  open  policy,  and  that  the 
V.  Columbian  Insurance  Co.  10  .Johns,  value  agreed  upon  was  that  given 
(N.  Y.)  273.  While  the  expenses  of  in  the  invoice.  There  can  be  no 
insurance  premiums  are  added  to  the  agreement  upon  value,  however,  until 
true  value  at  the  place  of  shipment  the  amount  is  actually  known  to  both 
in  an  open  policy  and  are  not  added  parties,  the  effect  of  which  will  be 
to  the  stipulated  value  of  the  prop-  discussed   later. 

orty  in  a  valued  policy,  the  use  of  The  question  then  arises  as  to  the 
the"  words  'premium  included'  may  meaning  of  invoice  value.  The  plain- 
be.  in  explanation  of  the  high  rate  tiff  alleges  that  the  word  as  used  in  a 
of  exchange  for  the  English  pound  contract  of  insurance  to  cover  inl- 
and the  ten  per  cent  added  to  the  ports  alone,  as  this  one  did,  made  in, 
American  valuation.  Moreover,  it  is  this  Commonwealth  means  such  an 
not  unusual  to  state  in  valued  poli-  invoice  as  is  required  by  U.  S.  St.  of 
cies  of  marine  insurance  whether  the  -Tune  10,  1890,  c.  407  (26  U.  S.  Sts. 
stipulated  value  includes  or  excludes  at  Large,  131)  which  governed  all 
the  premium.  INIayo  v.  Maine  Fire  importations  at  the  times  of  the 
&  .Alarine  Ins.  Co.  12  Mass.  258.  But  events  here  in  issue.  That  act  pro- 
the  clause  to  be  inteVpreted  contains  vided  in  brief  that  no  importation 
something  more  than  the  mere  rate  of  merchandise  exceeding  $100  in 
of  exchange,  in  the  words  'at  invoice.'  value  (with  an  exception  not  liere 
If  these  words  were  transposed  and  material)  should  be  made  into  tliis 
apfieared  directlv  after  the  word  country.  exce)it  upon  an  invoice  and 
'valued'   the   sense   would   have   been  aflidavit,  Avhich  should  show 'the  actu- 

414    , 


THE  POLICY 


§  158a 


§  158a.  Same   subject:   standard   policy. — If  a    standard    policy 
contains  no  words  showing  that  the  property  insured  is  worth  or 


al  cost/  if  purchased,  or  if  obtained  scribed  in  see.  5  of  the  act,  which  pur- 
otherwise,  'the  actual  market  value 
or  wholesale  price  thereof  at  the  time 
of  exportation  to  the  United  States 
in  the  principal  markets  of  the  coun- 
trj-  from  whiclT  the  importation  is 
made,  verified  by  tlic  oath  of  the  own- 
er or  his  agent.  This  act  is  general 
in  its  terms  and  applies  to  all  impor- 
tations of  merchandise  of  every  char- 
acter. The  use  of  the  word  'in^'oice' 
in  the  policy  under  these  circum- 
stances, in  the  absence  of  anything 
to  show  that  thei-e  was  any  other  in- 
voice known  or  commonly  employed 
in  importations,  must  be  held  to  re- 
fer to  that  required  by  this  statute. 
Apparently  this  is  not  in  dispute  be- 
tween the  parties.  The  defendants 
claimed  and  received  their  payment 
upon  presentation  of  a  paper  which 
purported  to  be  sucli  an  invoice.  The 
defendants  contend,  however,  that 
the  policy  takes  etfect  as  a  valued 
policy  to  the  same  extent  by  refer- 


ported  to  state  a  faithful  valuation 
of  the  merchandise  at  its  'actual 
market  value  or  wholesale  price'  in 
the  principal  markets  of  England 
whence  the  importation  was  made. 

A  valued  policy  is  ordinarily  one 
Avhere  the  agreed  value  in  terms  of 
a  money  standard  are  written  into 
the  contract  of  insurance.  It  is  still 
a  valued  policy,  when  the  agreement 
by  parties  is  that  the  value  shall  be 
fixed  and  defined  by  reference  to 
some  other  instrument.  Such  an 
agreement  must  be  based  upon  some 
standard  certain  in  itself  or  capable 
of  being  made  certain,  and  known  to 
and  accepted  by  both  parties.  It 
cannot  be  a  valued  policy,  which  by 
its  terms  means  a  value  fixed  by 
agreement,  when  the  value  is  deter- 
mined wholly  by  the  volition  of  one 
]iarty  to  the  contract,  and  may  be 
invoice  based  on  value  at  place  of 
lading  or  on  expected  value  at  place 


ence  to  the  invoice  as  it  would  if  the   of  import,  including  the  anticipated 


profit  and  all  intervening  expenses. 
Wliere  the  reference  in  the  policy  for 
the  standard  of  value  is  to  a  legal 
document,  which  by  law  has  a  fixed, 
definite  and  unchangeable  method 
of  ascertaining  value,  a  value  found 
by  that  standard,  and  by  that  alone, 
must  be  held  to  have  been  in  con- 
templation of  the  parties.  There 
could  be  no  value  stated  in  an  in- 
voice for  importation  save  market 
value  in  the  country  of  export.  It 
is  urged  by  the  defendants  that  al- 
though the  invoice  may  not  have  been 
in  compliance  with  the  federal  stat- 
ute, yet  the  value  as  stated  in  the 
actual  invoice,  when  ascertained  and 
declared  to  the  plaintiff,  because  the 
agreed  price  for  the  purpose  of  the 
insurance.  There  is  force  in  the  ar- 
gument. But  the  stronger  reason  ap- 
ing the  payment,  and  that  the  invoice  pears  to  support  the  view  that  in\oice 
in  fact  used  by  the  defendants  in  meant  the  invoice  required  by  law,  a 
making  the  impoi-tation  was  accom-  standard  known  to  all  parties.  0th- 
jjanied  by  that  form  of  anidavit  pre-    crwise,  the  insured  would  be  enabled 

415 


figures  of  the  invoice  had  been  writ- 
ten into  the  valuation  clause.  The 
plaintiff  alleges  that  the  reference  to 
the  in\oico  value  meant  not  the  fig- 
ures actually  written  into  the  invoice, 
but  such  valuation  as  should  have 
been  written  into  a  true  and  just  in- 
voice, which  in  its  statement  of  val- 
ue actually  conformed  to  the  terms 
of  the  federal  act.  The  plaintiff 
further  alleges  that  the  defendants 
procured  the  payment  to  them  of  loss 
by  presentation  to  it  of  an  invoice 
showing  values  of  wool  ranging  from 
eight  and  one  quarter  to  fourteen 
and  one  half  pence  per  pound,  when 
in  fact  it  was  worth  only  seven  pence 
per  pound  in  the  general  markets 
of  Englanil,  from  which  the  impor- 
tation was  made,  and  that  it  relied 
upon  the  truth  of  this  invoice  in  mak- 


§  159  JOYCE  ON  INSURANCE 

valued  at,  the  amount  stated  as  limiting  the  loss,  but,  on  the  con- 
trary, shows  that  the  intent  of  the  parties  is  that  proof  should  be 
ottered  as  to  the  value  of  the  property  in  case  of  loss  it  is  an  open 
and  not  a  valued  policy.^ 

§  159.  Valued  policy  defined. — A  valued  policy  is  one  wherein 
the  value  of  the  subject  matter  is  agreed  upon  beforehand  at  a  speci- 
fied sum.'    A  valued  policy  is  also  defined  as  one  where  the  parties 

to  fix  any  value,  provided  only  that  parties,  thei-efore,  stand  on  the  same 
he  was  willing  to  pay  the  premium,  footing  as  though  no  statement  of 
But  this  would  greatly  increase  the  invoice  value  had  been  made  before 
moral  liazard  and  the  actual  risk  the  loss.  In  that  event  the  policy 
without  giving  the  insurer  any  real  would  have  been  an  open  policy, 
knowledge  of  time  value  or  of  the  Harman  v.  Kingston,  3  Camp.  150, 
setise  in  which  value  was  used  upon  14  Eng.  Rul.  Cas.  232;  Gledstanes 
which  to  charge  premium.  Carson  v.  Roval  Exchange  Ins.  Co.  34  L.  J. 
V.  Marine  Ins.  Co.  2  Wash.  C.  C.  Q.  B.' 30,  14  Eng.  Rul.  Cas.  234;  1 
468,  470,  Fed.  Cas.  No.  2,465.  It  Arnould  in  Marine  Insurance  (7th 
would  put  it  in  the  power  of  the  in-  ed.)  sec.  360.  That  is  the  basis  on 
sured  to  fix  absolutely  the  value  while  which  the  rights  of  the  parties  must 
the  whole  theory  of  a  valued  policy  is  be  settled.  The  invoice  value  fur- 
that  i^arties  on  an  equality  have  come  nished  was  not  such  an  invoice  as 
to  an  understanding  as  to  value.  The  the  contract  required,  and  hence  no 
declaration  alleges  that  the  invoice  value  became  known  to  the  parties 
values  did  not  comply  with  the  fed-  and  fixed  by  the  standard  which  they 
eral  statute  in  that  they  were  far  too  had  adopted  before  it  was  too  late 
high.  Hence  the  invoice  value  did  to  make  it  a  valued  policy, 
not  comply  with  the  contract  of  in-  The  plaintiff's  declaration  sets  out 
surance.  The  policy  was  in  form  a  cause  of  action  to  recover  excess 
a  valued  one,  but  to  be  completed  it  of  paj'ment  of  insurance  above  the 
required  a  declaration  of  value  in  ae-  amount  which  should  have  been  paid 
cordance  with  its  terms  before  the  under  an  open  or  unvalued  policy  of 
loss.  In  substance  the  policy  was  on  insurance.  Demurrer  overruled;  de- 
goods  thereafter  to  be  declared  and  fendants  to  answer  over." 
at  the  agreed  value,  namely,  that  ^  Ulmer  v.  Phnenix  Fire  Ins.  Co.  61 
shown  upon  such  an  invoice  as  the  S.  Car.  459,  39  S.  E.  712,  31  Ins.  L. 
federal  statute  required.  In  order  J.  38.  As  to  valued  policy  laws  in- 
that  such  a  policy  may  become  ef-  corporated  in  standard  policy,  see 
fective  as  a  valued  policy,  the  in-  Minnesota,  New  Hampshire  and 
voice  must  be  notified  to  the  insurer  South  Dakota  cited  under  §  176  here- 
before    loss,    although    such    notifiea-    in. 

tion  is  not  a  condition  precedent  to  '  Schaefer  v.  Baltimore  Marine 
the  right  to  recover  on  the  contract  Ins.  Co.  33  Md.  109 ;  Cox  v.  Charles- 
of  insurance.  The  policy  could  not  ton  Fire  &  Marine  Ins.  Co.  3  Rich, 
become  a  valued  policy  until  the  in-  (S.  Car.)  331,  45  Am.  Dec.  771; 
formation  as  to  the  invoice,  which  of  Lawver  v.  Glove  Mutual  Ins.  Co.  25 
nor-fssity  must  come  from  the  insured,  S.  Dak.  549,  560,  127  N.  W.  6l5,  39 
had  been  communicated  to  the  insur-  Ins.  L.  J.  1588;  1  Arnould  on  Ma- 
er.  No  such  invoice  price  having  rine  Ins.  (8th  ed.  Hart  &  Simey) 
been  furnished  by  the  insured,  this  p.  12,  sec.  9;  8  Words  &  Phrases 
policy  never  became  operative  as  a  p.  7282;  Comp.  Laws  Dak.  1887,  see. 
valued    policv.      The    rights    of    the  4151;    Deering's    Anno.    Civ.    Code, 

416 


I 


THE  POLICY  §  159 

by  the  contract  of  insurance  fix  for  the  purpose  of  the  risk  the  defi- 
nite vakie  of  the  property  insured  so  that  dispute  on  that  subject  is 
foreclosed  for  all  time  thereafter,  except  in  cases  of  fraud  or  wager, 
no  matter  how  high  the  valuation  may  be.'  It  estimates  not  merel\' 
the  value  of  the  property  or  interest  insured,  but  values  the  loss, 
and  is  equivalent  to  an  assessment  of  damages,  or  is  in  the  nature  of 
liquidated  damages  in  case  of  loss.^  And  where  there  is  an  abso- 
lute loss  of  any  article  distinctly  valued  in  the  policy,  the  loss  is 
to  be  estimated  according  to  the  valuation,  it  being  in  the  nature  of 
liquidated  damages." 

Again,  a  valued  policy  is  ordinarily  one  where  the  agreed  value 
in  terms  of  a  money  standard  are  written  into  the  contract  of  insur- 
ance. It  is  still  a  valued  policy  when  the  agreement  by  parties  is 
that  the  value  shall  be  fixed  and  determined  by  reference  to  some 
other  instrument.  Such  an  agreement  must  be  based  upon  some 
standard  certain  in  itself  of  being  made  certain  and  known  to  and 
accepted  b}'  both  parties.^^ 

Valued  policies  may  be  made  upon  the  ship,  or  on  ship  and 
freight  and  under  the  same  policy,  or  upon  freight  or  goods,  and 
valuation  may  be  in  policies  upon  profits. ^^ 

Valued  policies  are  also  effected  upon  fire  risks. 

Cal.  sec.  2596;  Levisee's  Dak.  Code,  E.   677    (citing   Marine   Ins.   Co.   of 

sec.    1527;    Civ.    Code    S.    Dak.    sec.  Alexandria    v.    Hodgson,    6    Cranch 

1847,  see  §  163  herein.  (10    U.    S.)    206,    220;    Coolidge   v. 

"A    valued    policy    is    one    which  Gloucester  Marine  Ins.  Co.  15  Mass. 

specifies  the  agreed  value  of  the  sub-  340 ;    Irving    v.    Manning,    1    H.    L. 

ject-matter  insured."     Earl  of  Hals-  Cas.  287,  307;  Barker  v.  Jansen,  L. 

bury's    Laws    of    England,    Vol.    17,  R.   3   C.  P.   303,  14  Eng.  Rul.   Cas. 

p.  378,  sec.  748   (citing  marine  ins.  222). 

act,  1906   [6  Edw.  VII.,  c.  41]   sec.  ^  Lveoming  Ins.  Co.  v.  Mitchell,  48 

27  [1]  [2] ) ;  Id.  p.  336  and  note,  sec.  Pa.  St.  367.     See  Shaw  v.  Felton,  2 

672.  East,  114,  13  Eng.  Rul.  Cas.  631,  per 

Valuation   clause:   Lloyd's   marine  Mr.  Justice  Laurence. 

policy.      The   said   ship,    etc.,    goods  "Hams    v.     Eagle    Fire     Co.    5 

and  merchandise,  etc.,  for  so  much  Johns.  (N.  Y.)  368. 

as  concerns  the  assured  by  agreement  ^^  Insurance  Co.  of  North  America 

between  the  assured  and  assurers  in  v.  Wille\-,  212  Mass.  75,  80,  98  N.  E. 

this  policy  are   and  shall  be  valued  677,  per  Rugg,  C.  J. 

at  [ ].    1  Amould  on  Marine  Ins.  ^^  ^yg^-gp^     y      Insurance     Co.     of 

(8th  ed.  Hart  &  Simey)  p.  31,  sec.  North  America,  3  Wash.  (U.  S.  C. 
19.  "This  clause  is  in  all  the  com-  C.)  1,  Fed.  Cas.  No.  17,286  (valued 
mon  printed  forms  of  policy,  though  policy  on  ship,  valuation  generally 
the  blank  it  contains  is  not  always  conclusive)  :  Coolidge  v.  Gloucester 
filled  up;  if  filled  up,  the  policy 'is  Mutual  Ins.  Co.  15  Mass.  341  (in- 
called  a  valued  policy;  if  not  filled  surance  of  ship  and  freight  each 
up,  an  open  or  unralued  policy."    Id.  separately   valued,   and   liability   for 

On   conflict   of  laws   as   to   valued  total    loss    of    freight,    even    though 

policy,  see  note  in  63  L.R.A.  866.  overvalued)  ;  Mayo  v.  Maine  Fire  & 

'Insurance  Co.  of  N'>rth   America  Marine    Ins.    Co.' 12   Mass.    250    (in- 

V.   Willey,  212  Mas,^.    ,.'),  77,  98  N.  surance  on  ship  valued,  assured  mak- 
Joyce  Ing.  Vol.  I. — 27.             417 


§  160  JOYCE  ON  INSURANCE 

A  valued  policy  does  not  cover  propertj^  which  is  fluctuating  or 
changeable,  but  applies  to  that  which  is  fixed  or  to  specific  articles/^ 
or  it  is  used  where  it  is  difficult  or  impossible  to  ascertain  the  amount 
of  interest  of  the  insured  in  the  subject  matter,  "as  where  returns 
are  expected  from  abroad,  the  exact  value  and  even  the  nature  of 
which  are  uncertain.  So  in  case  of  a  prize  where  the  real  value  of 
it  can  only  be  ascertained  when  it  is  brought  into  port  and  sold,  and 
in  every  instance  where  the  owners  have  been  prevented  from  re- 
ceiving regular  or  satisfactory  advices  from  which  the  true  amount 
of  their  interest  might  be  ascertained."  ^* 

§  160.  Valued  policy:  what  the  valuation  includes. — The  valu- 
ation determines  prima  facie  the  amount  of  interest  of  the  insur^d,^* 
and  a  gross  valuation  should  include  the  premium,  unless  the  man- 
ner of  valuing  or  a  construction  of  the  policy  indicates  otherwise.^® 
And  it  is  also  held  that  the  owner  of  a  ship  and  cargo  may  insure 
in  a  valued  policy  to  the  amount  of  the  prime  cost  of  the  goods 
and  the  premium  and  the  cost  of  freight  thereon  to  the  first  port, 

ing  no   representation  as  to   owner-       ^^1  Wood  on  Fire  Ins.    (2d  ed.) 
ship,    and    was    owner    of    one-third   96,  see.  41. 

only,  and  was  held  entitled  to  recover        ^*  1   Marshall   on   Ins.    (ed.  1810) 
whole    loss) ;    Post    v.    Phoenix    Ins.    *288. 

Co..  10  Johns.  (N.  Y.)  79  (one-quar-  ^^  pgigg  v_  Aguilar,  3  Taunt.  506, 
ter  of  ship  valued  at  sum  insured;  per  Mansfield,  J.;  Shaw  v.  Felton,  2 
recovery  for  whole  loss  for  sum  -in-  East,  109, 115, 13  Eng.  Rul.  Cas.  631; 
sured;  valuation  applicable  to  inter-  1  Marshall  on  Ins.  (ed.  1810)  *290; 
est  insured  and  not  to  whole  ship)  ;  1  Arnould  on  Marine  Ins.  (Perkins' 
Mintum  v.  Columbia  Ins.  Co.  10  ed.  1850),  317,  sec.  125;  2  Id.  (Mae- 
Johns.  (N.  Y.)  75  (case  of  valuation  lachlan's  ed.  1887)  303,  et  seq. 
on  cargo);  Mumford  v.  Hallett,  1  ^^  Brooks  v.  Oriental  Ins.  Co.  7 
Johns.  (N.  Y.)  433  (where  a  printed  Pick.  (24  Mass.)  259  (premium  in- 
blank  policy  on  cargo  was  used,  and  eluded) ;  Insurance  Co.  of  North 
the  blank  filled  up  for  an  insurance  America  v.  Willey,  212  Mass.  75,  98 
on  profits,  and  the  valuation  in  writ-  N.  E.  677  ("are  valued  [premium 
ing,  when  taken  in  connection  with  included]  at"  and  "valued,  premium 
the  printed  words,  was  a  valuation  included,  at,"  but  held  an  open  and 
of  the  goods  and  not  of  the  profits;  not  a  valued  policy) ;  Mayo  v.  Maine 
every  policy  on  profits  must  of  ne-  Fire  &  Marine  Ins.  Co.  12  Mass. 
cassity  be  a  valued,  and  not  an  open  259,  where  premivim  was  held  in- 
policy) ;  Davy  v,  Hallett,  3  Caines  eluded;  Ogden  v.  Columbian  Ins.  Co. 
CN.  Y.)  16  (on  a  valued  policy  on  10  Johns.  (N.  Y.)  273  (premium  in- 
freight;  if  there  be  an  inchoate  right  eluded  but  held  an  open  poHcy) ; 
to  save,  and  the  transaction  bona  Mintum  v.  Columbian  Ins.  Co.  10 
fide,  the  value  cannot  be  inquired  Johns.  (N.  Y.)  75  (premium,  prime 
into) ;  Crauford  v.  Hunter,  8  Term,  cost,  and  charges  included) ;  2  Phil- 
Rep.  10,  n.  13  (case  of  value  to  be  de-  lips  on  Ins.  (3d  ed.)  16,  1200,  1201; 
clared  upon  ship  and  goods;  loss  1  Marshall  on  Ins.  (ed.  1810)  *288, 
happened  before  any  declaration  of  2  Id.  621,  who  says:  "The  value  in 
value  could  be  made).  the   policy   being   always   considered 

418 


THE  POLICY  §  161 

the  insurance  being  to  two  ports  in  the  West  Indies."  Though  in 
estimating  the  vahie  of  the  vessel  the  valuation  in  the  policy,  ex- 
clusive of  the  premium,  is,  it  is  held,  to  be  taken  as  the  value  of  the 
vessel.  ^^ 

§  161.  Valued  policy:  how  far  valuation  conclusive. — As  a  gen- 
eral rule  a  valued  policy  is  conclusive  of  the  value  of  the  subject 
covered  and  the  assured  is  entitled  to  recover  the  whole  amount  of 
the  valuation  in  the  policy  in  case  of  total  loss  by  the  perils  insured 
against,  unless  the  valuation  is  fraudulent  or  enormously  excessive/* 
or  unless  the  policy  be  a  wager.^"  And  neither  party  will  be  heard 
to  claim  a  different  valuation  of  a  vessel  than  that  stated  in  the 
policy;  nor,  after  loss  by  collision,  and  the  full  payment  of  the 
policy  valuation  by  the  insurer,  can  a  larger  valuation  be  claimed  by 
the  owner.^  And  the  value  stated  in  the  application  is  also  binding 
upon  the  parties,  and  after  a  loss  the  assured  is  not  at  liberty  to  show 
that  in  fact  the  property  was  worth  a  much  larger  sum.^ 

But  the  rule  only  applies  as  between  parties  to  the  same  policy. 
Thus,  where  a  portion  of  the  insured's  interest  in  the  ship  was 
valued  at  six  thousand  pounds,  and  insured  six  hundred  pounds, 

as  the  fair  amount  of  the  prime  cost       Missouri. — Loekwood    v.    Sangamo 
and  charges."  Ins.  Co.  46  Mo.  71. 

^"^  Pritchett  v.  Insurance  Co.  of  New  York. — Kane  v.  Commercial 
North  America,  3  Yeates  (Pa.)  458.  Ins.  Co.  8  Johns.  (N.  Y.)  229;  Amer- 
It  is  said  in  Lewis  v.  Rucker,  2  Burr,  ican  Ins.  Co.  v.  Whitney,  5  Cow.  (N. 
1167,  1171,  14  Eng.  Ruh  Cas.  215,  Y.)  712;  Whitney  v.  American  Ins. 
that  the  effect  of  the  valuation  is  to  Co.  3  Cow.  (N.  Y.)  210. 
tix  conclusively  the  prime  cost.  Pennsylvania. — Commonwealth  Ins. 
Prime  cost  and  charges  included:  Co.  v.  Sennett,  37  Pa.  St.  205,  78 
McKim  V.  Phopnix  Ins.  Co.  2  Wash.  Am.  Dec.  418. 
(U.  S.  C.  C.)  94;  Id.  189.  Valued  policy:  Evidence  of  value, 

^^  Orrok  v.  Commonwealth  Ins.  Co.   see  §  3771  herein. 
21    Pick.    (38    Mass.)    456,    32    Am.       Indemnity:        Stipulation     as     to 
Dec.    271.      In    Lewis   v.    Rucker,   2   value  in  policy,  see  §  25  herein. 
Burr.  1167,  1169,  14  Eng.  Rul.  Cas.       20  gee  §  151  herein.     ■ 
215,  the  valuation  was  considered  the       "As  long  as  the  contract  of  insur- 
prime  cost.  a  nee  is  unimpeached  the  valuation  is 

^^  United  States. — Griswold  v.  binding  on  the  parties."  17  Earl  of 
Union  Ins.  Co.  3  Blatchf.  (U.  S.  C.  Halsbury's  Laws  of  England,  p.  379, 
C.)  231;  Fed.  Cas.  No.  5840;  Wat-  sec.  749. 

son  V.  Insurance  Co.  of  North  Amer-       i  St.  Johns,  The  (U.  S.  D.  C.)  101 
ica,  3  Wash.  (U.  S.  C.  C.)  1.  Fed.  469;  Central  Railroad  Co.  of  N. 

Louisiana. — Howes  v.  Union  Ins.  J.  In  re.  Id.;  Sea  Ins.  Co.  v.  In- 
Co.  16  La.  Ann.  235;  Millaudon  v.   teiwenors.  Id. 

Western  Ins.  Co.  9  La.  0.  S.   (5  La.       ^  Holmes    v.    Charlestown    IMutual 
20),  27,  29  Am.  Dec.  433.  Fire  Ins.   Co.  10  Mete.    (51  Mass.) 

Maryland. — Patapsco    Ins.    Co.    v.  211,  43  Am.  Dee.  428. 
Biscoe,  7  Gill  &  J.    (Md.)    293,  28 
Am.  Dec.  219. 

419 


§  162  JOYCE  ON  INSURANCE 

and  in  another  policy  upon  another  portion  of  his  interest  in  the 
ship  the  vahiation  was  fixed  at  eight  thousand  pounds,  and  she  was 
insured  six  thousand  pounds,  the  vahiation  in  the  first  policy  does 
not  limit  the  insured  to  the  sum  he  may  recover  on.  the  other,  for 
the  policy  upon  which  the  suit  is  brought  is  conclusive  between  the 
parties  thereto,  and  transactions  between  the  insured  and  third 
parties  cannot  be  considered  unless  the  sum  received  amounts  to  a 
complete  indemnity.  In  this  case  the  insured  showed  that  the  ship 
was  worth  over  eight  thousand  pounds.^  The  rule  as  to  conclusive- 
ness is  also  further  qualified  by  the  question  of  what  was  intended 
to  be  valued,  and  the  underwriter  may  show  that  only  part  of  the 
subject-matter  was  actually  at  risk,  so  that  valuation  is  declared  to 
be  binding  only  as  far  as  it  goes.* 

Where  a  policy  of  fire  insurance  was  issued  to  plaintiff,  "the 
amount  insured  being  not  more  than  three-fourths  of  the  value  of 
the  property  as  stated  by  the  applicant,"  it  was  held  that  this  valua- 
tion was  conclusive,  in  the  absence  of  fraud,  although  a  subsequent 
proviso  restricted  the  whole  amount  of  insurance,  if  an  additional 
policy  was  obtained,  to  'Hhree-fourths  of  the  actual  value  of  the 
property  at  the  time  of  loss,"  and  although  there  was  a  covenant 
in  the  application  (but  not  in  the  policy)  that  such  valuation  should 
not  be  conclusive.^ 

If  the  same  valuation  is  fixed  under  two  policies  upon  the  same 
subject,  the  insured  is  conclusively  bound  and  cannot  show  a  great- 
er value.  Even  though  the  subject  insured  be  in  fact  worth  more 
than  the  sum  fixed,  the  valuation  limits  the  recovery.® 

§  162.  Valued  policy:  effect  of  overvaluation:  fraudulent  valu- 
ation.— When  the  insured  has  some  interest  at  risk,  and  there  is  no 
fraud,  a  valuation  of  the  subject  insured  in  the  policy  is  held  con- 
clusive upon  the  parties  in  law  and  equity  notwithstanding  an  over- 
valuation,' unless  such  overvaluation  be  grossly  excessive,  but  this 

3  Bousfield  v.  Barnes,  4  Camp.  228,  ^  Irving  v.  Richardson,  1  Moody  & 

229,  per  Lord  Ellenborougli.  R.  153. 

*  Substantially  so  declared  in  17  '  United  States.— Gardner  v.  Co- 
Earl  of  Halsbury's  Laws  of  England,  lumbian  Ins.  Co.  2  Crauch  (U.  S. 
p.  379,  sec.  750,  quoting  marine  ins.  C.  C.)  550;  Carson  v.  Marine  Ins. 
act  1906  (6  Edw.  VII.,  c.  41),  see.  Co.  2  Wash.  (U.  S.  C.  C.)  468,  Fed. 
75   (2),  which  is  also  given  in  But-  Cas.  No.  2465. 

terworth's    20th    Cent.    Stat.    (1900-  loiva.—Behren    v.    Germania   Fire 

1909),  p.  418.  Ins.  Co.  64  Iowa,  19. 

5  Luce  V.   Dorchester  Mutual  Fire  Kentiich)j. — Teutonic    Ins.    Co.    v. 

Ins.  Co.  105  Mass.  297,  7  Am.  Rep.  Howell,  21  Ky.  L.  Rep.  1245,  54  S. 

522.     See  §§  163a,  3461  herein.  W.  852,  29  Ins.  L.  J.  356. 

420 


THE  POLICY  §  162 

is  in  itself  presumptive  evidence  of  fraud,^  although  not  sufficient.^ 
And  fraud  is  not  established  by  the  fact  that  the  property  is  con- 
siderably overvalued.^"  But  it  is  held  that  a  gross  exaggeration  of 
the  value  prevents  a  recovery,^^  and  fraudulent  overvaluation 
avoids.^^  And  if  the  owner  of  property  insured  knowingly  exag- 
gerates the  value  of  the  property  to  an  amount  far  beyond  the  cost 
price  and  the  market  value,  and  the  insurer  relies  upon  the  state- 
ment of  such  excessive  value  in  entering  into  the  contract,  such 
overvaluation  is  a  conclusive  presumption  of  fraud,  sufficient  to 

Maiiie. —Cnshman  v.  Northwestern  Co.  3  Blatchf.  (U.  S.  C.  C.)  233, 
Ins.  Co.  34  Me.  487.  Fed.  Cas.  No.  5840 ;  Alsop  v.  Com- 

Maryland. — Patapsco  Ins.  Co.  v.  mercial  Ins.  Co.  1  Sumn.  (U.  S.  C. 
Biscoe,  7  Gill  &  J.  (Md.)  293,  28  C.)  471,  Fed.  Cas.  No.  262;  Phoenix 
Am.  Dee.  219.  Ins.  Co.  v.  McLoon,  100  Mass.  476; 

Massachusetts. — Phoenix  Ins.  Co.  Michael  v.  Prussian  National  Ins. 
V.  McLoon,  100  Mass.  475.  Co.   171    N.    Y.   33,    63   N.    E.    810; 

Missouri. — Loekwood  v.  Sangamo  Whitnev  v.  American  Ins.  Co.  3  Cow. 
Ins.  Co.  46  Mo.  71.  .       (N.  Y.)    219;   Milwaukee  Mechanics 

New    York. — Davy    v.    Hallett,    3   Ins.    Co.   v.   Russell,   65   Ohio    State 
Caines  (N.  Y.)   16,  2  Am.  Dec.  241;    258,  56  L.R.A.  161,  62  N.  E.  338. 
Mumford  v.  Hallett,  1  Johns.  (N.  Y.)        ^  Sturm  v.  Atlantic  Ins.  Co.  63  N, 
434.  Y.  77. 

Virginia. — Morostock    Ins.    Co.    v.       ^  See  §  25  herein. 
Fostoria   Novelty   Glass    Co.   94   Va.        ^°  Insurance  Co.  of  North  America 
361,  26   S.  E.  850;  Lynchburg  Fire  v.  Coombs,  19  Ind.  App.  331,  49  N. 
Ins.  Co.  V.  West,  76  Va.  575,  44  Am.   E.  471. 
Rep.  177.  "  Whittle  v.  Farmville  Ins.   Co.  3 

Indemnity:  Stipulation  as  to  Hughes  (U.  S.  C.  C.)  421,  Fed.  Cas. 
value  in  policy,  see  §  25  herein.  17()03. 

Valued  policy  laws :  overvaluation,  ^^  Hersey  v.  Merrimack  Co.  Ins. 
see  §  163c  herein.  Co.   7   Fost.    (27   N.   H.)    149;    Ger^ 

Overvaluation :  Proofs  of  loss,  see  hauser  v.  North  British  »&  jMercantile 
§  3320  herein.  Ins.  Co.  7  Nev.  174.     See  the  follow- 

Overinsurance  defined,  see  §   2456   ing  cases: 
herein.  United    States. — Oshkosh    Packing 

Valued    policy :    double   insurance,   &   Provision    Co.   v.   Mercantile   Ins. 
see  17  Eari  of*  Halsbury's  Laws  of   Co.  31  Fed.  200. 
England,  pp.  380  et  seq.  Kentucky. — Protection  Ins.  Co.  v. 

It    is    no    ground    for    mitigating    Hall,  15  B.  Mon.  (54  Ky.)  411. 
damages   that   the    value    of   the   in-       Maine. —  Williams  v.  Phoenix  Fire 
sured  vessel  is  less  than  that  stated   Ins.  Co.  61  Me.  67. 
in  a  valued  policy,  as  the  policy  is       North    Carolina. — Dupree   v.    Vir- 
conclusive   on  that   point  in  the  ab-   ginia  Home  Ins.  Co.  92  N.  C.  417. 
sence  of  fraud  and  false  representa-       England. — Chapman  v.  Pole,  22  L. 
tions.     Marine  Ins.  Co.  v.  Hodgson,   T.  R.  N.  S.  306. 
1  6  Cranch    (10  U.   S.)    206,  3  L.  ed.       "Overvaluation   may  be   a  ground 
200.     Cited  in  Livingstone,  The,  122   for  avoiding  the  contract.     Thus,  if 
Fed.  281 ;   St.  Johns,  The,  101  Fed.   the  overvaluation  be  part  of  a  scheme 
475;  International  Navigation  Co.  v.   for  defrauding  tlie  underwi-iters,  the 
Atlantic   Mutual   Ins.    Co.    100    Fed.   poHcy  will  be  voidable  {citing  Haigh 
316;  Griswold  v.  Union  Mutual  Ins.    v.  De  la  Cour  (1812)   3  Camp.  319; 

421 


§  162 


JOYCE  ON  INSURANCE 


annul  the  contract.*'  The  fact  that  the  assured  was  an  ignorant 
German,  and  did  not  understand  English,  is  held  no  excuse  for  his 
rating  his  house  at  double  its  value  in  effecting  insurance  on  it.** 
The  courts,  however,  are  little  disposed  to  permit  the  insurer  to 
object  to  a  valuation  which  has  been  deliberately  fixed  upon  in  good 
faith, *^  and  in  order  to  avoid  a  policy  for  overvaluation,  it  must 
appear  that  such  overvaluation  was  intentional,  fraudulent,  and  not 
an  honest  expression  of  opinion.*^  So  an  honest  representation  of 
the  value  of  a  building  does  not  avoid  the  policy,  even  though  it  is 
somewhat  in  excess  of  the  actual  value;  *''  and  an  overestimate  by 
the  insured  of  the  value  of  his  property  and  the  amount  of  the  loss, 
if  unintentional  and  with  no  purpose  of  defrauding  the  company, 
will  not  preclude  a  recoyery.*^     So  where  there  is  a  slight  over- 


marine  ins.  act.  1906  [6  Edw.  VII.,  true  valuation,  will  not  invalidate  a 
c.  41],  sec.  27  [3]).  Similarly  an  policy  of  fire  insurance,  notwith- 
overvaluation  made  in  order  to  standing  a  provision  that  any  over- 
cover  a  gambling  transaction  will  valuation  of  the  property  or  interest 
avoid  the  whole  contract.  .  .  .to  be  insured  shall  render  absolutely 
Thirdly,  an  overvaluation,  although  void  any  policy  issued  upon  such  de- 
not  fraudulent,  may  be  so  great  as  scription  or  valuation."  Susquehan- 
to  constitute  a  material  fact,  the  con-  na  JMutual  Fire  Ins.  Co.  v.  Staats, 
eealment  of  which  will  enable  the  102  Pa.  529,  quoted  in  Post  v.  Araeri- 
underwriter  to  avoid  the  policy."  17  can  Central  Ins.  Co.  51  Pa.  Super. 
Earl  of  Halsbury's  Laws  of  Eng-  Ct.  352,  360,  per  Jones,  J. 
land,  p.  379,  sec.  749.  *^  United    States. — Rochester    Ger- 

^^  Sturm  V.  Great  Western  Ins.  Co.  man  Ins.  Co.  v.   Schmidt    (U.   S.  C. 

40  How.  Pr.  (N.  Y.)  423.  C.)   151  Fed.  681,  36  Ins.  L.  J.  726, 

1*  Nassauer    v.    Susquehanna    Mu-  rev'd  162  Fed.  447,  89  C.  C.  A.  333 ; 

tual  Fire  Ins.  Co.  100  Pa.  St.  507.  175  Fed.  720,   99   C.   C.  A.  296,  37 

^^  Miller  v.  Alliance  Tns.  Co.  7  Fed.  Ins.  L.  J.  1044,  on  gi'ound  that  in- 

049 ;  Brooke  v.  Louisiana  State  Tns.  sured  was  not  sole,  etc.,  owner. 

Co.  8  Mart.  (La.)  322  (4  N.  S.  640)  ;  Z//i»o;s.— Merchants'  &  Mechanics' 

Fuller  V.  Boston  Mutual  Ins.  Co.  4  Ins.   Co.  v.   Schroeder,  18   111.  App. 

Met.    (45  Mass.)   206.     See  National  216. 

Bank  v.   Hartford  Fire  Ins.   Co.  95  Indiana. — Insurance  Co.  of  North 

U.   S.  673,  24  L.  ed.  563;   Franklin  America    v.    Coombs,    19   Ind.   App. 

Fire  Ins.  Co.  v.  Vaughan,  92  U.  S.  331,  49  N.  E.  471. 

516,  23  L.  ed.  740 ;  Helbig  v.   Svea  loiva. — Behrens  v.   Gerraania  Fire 

Ins.  Co.  54  Cal.  156,  35  Am.  Rep.  72;  Ins.  Co.  64  Iowa,  19,  19  N.  W.  838. 

Cox  V.  ^]tna  Ins.  Co.  29  Ind.  586;  Kentucky. — Protection  Ins.  Co.  v. 

Huth  V.  New  York  Mutual  Ins.  Co.  Hall,  15  B.  Mon.  (54  Ky.)  411. 

8  Bosw.  (N.  Y.)  538.  Massachuf<etts. — Phillips  v.  Merri- 

*6  Wheaton    v.    North    British    &  mack  Mutual  Fire  Ins.  Co.  10  Cush. 

Mercantile   Ins.    Co.   76    Cal.   415,   9  (64  Mass.)  350. 

Am.  St.  Rep.  216,  18  Pac.  758.  Virginia. — Lynchburg      Fire      Ins. 

*'  Susquehanna    Mutual    Fire   Ins.  Co.  v.  West,  76  Va.  575,  44  Am.  Rep. 

Co.  v.  Staats,  102  Pa.  529.  177. 

"The  honest  representation  of  the  Wisconsin. — Vergeront  v.   German 

valuje  of  the  property  to  be  insured,  Ins.  Co.  86  Wis.  425,  56  N.  W.  1096. 
although   somewhat   in   excess   of  its 

422 


THE  POLICY  §  162 

estimate  which  may  be  accounted  for  by  a  difference  of  opinion,  and 
the  amount  of  the  policy  is  within  the  actual  value,  and  the  prop- 
erty was  examined  by  the  agent  before  the  risk  was  accepted,  the 
fact  that  there  is  a  warranty  as  to  value  does  not  make  such  over- 
estimate a  sufficient  ground  for  avoiding  the  policy.-'^  And  when 
the  sum  slightly  exceeds  the  value  of  the  thing  insured  and  the 
freight  added  to  the  point  of  destination,  the  valuation  is  conclu- 
sive,^" and  where  the  excess  of  a  bona  fide  valuation  of  the  ship  was 
twelve  thousand  five  hundred  dollars  and  that  of  the  freight  and 
outfits  ten  thousand  three  hundred  dollars,  such  overvaluation  was 
held  not  fraudulent,  and  the  valuation  was  recovered.^ 

An  overvaluation  of  property  in  an  application  for  insurance  will 
not  avoid  policy,  where  the  policy  contains  no  condition  to  that  ef- 
fect, and  where  the  agent  of  the  insurance  company  knows  or  can 
judge  of  the  value  of  the  property,  and  accepts  the  application  with- 
out objection :  although  an  overvaluation  is  a  circumstance  which 
may  be  considered,  in  connection  w4th  others,  in  determining 
whether  the  insured  destroyed  the  property  for  the  purpose  of  de- 
frauding the  company,  where  that  is  relied  upon,  as  a  defense.^ 
And  if  an  agent  of  the  insurer  who  negotiates  the  insurance  in- 
dorses on  the  a])plication  that  he  is  personally  acquainted  with  the 
application  and  the  risk  and  advises  its  acceptance  and  the  repre- 
sentation of  vahie  of  the  building  is  honestly  made  the  policy  is 
not  avoided  even  though  the  stated  value  somewhat  exceeds  the 

19  Hubbard    v.    North    British    &  v.   Schmidt   (U.  S.   C.   C.)   151  Fed. 

Mercantile  Ins.  Co.  57  Mo.  App.  197.  681,  36  Ins.  L.  J.  726,  revd.  162  Fed. 

See  also  Laird  v.  Piedmont  Mutual  447,  89  C.  C.  A.  333,  175  Fed.  720, 

Fire  Ins.  Co.  82  S.  Car.  424,  64  S.  99  C.  C.  A.  296,  37  Ins.  L.  J.  1044, 

E.  404.     But  see  case  noted  in  test  on  ground  that  insured  was  not  sole, 

at  end  of  this  section.  etc.,  owner. 

That  overvaluation  not  conclusive,       As  to  value  stated  in  application, 

see  Miller  v.  Alhance  Ins.  Co.  7  Fed.  see : 

649 ;  Ocean  Ins.  Co.  V.  Fields,  2  Stoi-y        Calif orriM.—Wheaton      v.      North 

(U.  S.  C.  C.)  59,  Fed.  Cas.  No.  10,-  ^ntish  &  ^Mercantile  Ins.  Co  76  Cal. 

406;  Behrens  v.  Germania  Fire  Ins.  415,  9  Am.  St.  Rep.  216  18  Pac.  /58 

Co.  64  Iowa,  19,  19  N.  W.  838;  Bon-  ,  ///'"O'^.-Merchants    &  Mechanics 

,  T         /-.i-T       /-10-T  Ins.   Co.   V.   bchroeder,  18  111.  App. 

ham  V.  Iowa  Cent.  Ins.  Co.  2o  Iowa,  r)-|fj 

328 ;  Harrington  V.  FitchburgMutu-  "  3/«,-„,._williams  v.  Phoenix  Fire 

al  Fire  Ins.  Co.  124  Mass.  126.  j^^   (.^   g^  j^I^   qj 

20Pritchett  V.  Insurance  Co.  of  3fas.sac/j  Jtse^s.— Holmes  v.  Charles- 
North  America,  3  Yeates  (Pa.)  463,  ton  Mutual  Fire  Ins.  Co.  10  Met. 
464.  (51  Mass.)  211,  43  Am.  Dec.  428. 

1  Phopnix  Ins.  Co.  v.  McLoon,  100  New  Ilampshire. — Hersey  v.  Mer- 

Mass.  475.  rimack  Co.  Ins.  Co.  7  Fost.   (27  N. 

^Insurance  Co.  of  North  America  H.)  149. 

V.  McDowell,  50  111.  120,  99  Am.  Dec.  North    Carolina.— Dupree   v.   Vir- 

497.     See  Rochester  German  Ins.  Co.  ginia  Home  Ins.  Co.  92  N.  C.  417. 

423 


§  162  JOYCE  ON  LS'SURANCE 

actual  value.'  And  an  overvaluation  of  a  vessel,  upon  applica- 
tion for  marine  insurance,  does  not  necessai'ily  avoid  the  policy.'* 
The  insurer  may  also  be  estopped  to  question  the  valuation  and 
to  set  up  a  wilfully  false  statement  in  the  application,  by  the  agent's 
acts  in  valuing  the  property  with  which  he  is  familiar  and  in  mak- 
ing out  the  application.^  It  is  held  that  except  in  case  of  valued 
policies  the  contract  is  not  avoided  by  misrepresentations  as  to  value, 
even  though  fraudulent,  where  the  risk  is  in  no  manner  affected 
thereby,^  and  where  the  policy  is  not  a  valued  one,  misrepresenta- 
tions as  to  value  only  go  to  the  question  of  fraud  and  false  swearing 
generally,  and  are  not  material  to  the  riskj  And  in  case  of  valued 
policies  a  misrepresentation  as  to  value,  even  if  material,  to  the  risk, 
must,  it  is  held,  be  more  than  a  liiere  error  in  judgment,  it  must 
be  fraudulently  or  intentionally  made.  It  is  insufficient  that 
the  property  was  not  worth  the  value  stated.*  Again,  the  rule  that 
to  avoid  a  policy  for  overvaluation,  it  must  appear  that  such  over- 
valuation was  intentional,  fraudulent,  and  not  an  honest  expression 
of  opinion,  prevails  although  the  policy  contains  the  stipulation  and 
condition:  ''If  any  false  representation  is  made  by  the  assured  of 
the  condition,  situation,  or  occupancy  of  the  property,  or  any  over- 
valuation, or  any  misrepresentation  whatever,  either  in  a  written 
application  or  otherwise,  this  policy  is  void."  ^ 

'  Susquehanna    Mutual    Fire    Ins.   notwithstanding  Ga.  Civ.  Code,  sees. 
Co.  V.  Staats,  102  Pa.  529.  2008,  2099,  requiring  representations, 

*  Hodgson    V.    Marine   Ins.    Co.    5   if  material,  to  be  true  or  the  policy 
Cranoh   (9  U.  S.)   100,  3  L.  ed.  48.  is  void. 

Cited  in  Brooke  v.  Louisiana  State  'Delaware  Ins.  Co.  v.  Hill  (1910) 
Ins.  Co.  4  Mart.  N.  S.  (La.)  643;  —  Tex.  Civ.  App.  — ,  127  S.  W.  283. 
Phwnix  Ins.  Co.  v.  MeLoon,  100  Fraud  and  false  swearing:  fraud- 
Mass.  476;  Milwaukee  Mechanics'  ulent  .«:tatements  as  to  value,  see  § 
Ins.  Co.  V.  Russell,  65  Ohio  St.  258,  3339  herein. 
56  L.R.A.  161,  62  N.  E.  338.  Fraud  and  false  swearing:  proofs 

5  Miller    v.    Fireman's    Fund    Ins.    of    loss,    see    §§    3319,    3320,    3339- 
Co.  6   Cal.  App.  395,  92  Pac.  332.   3344. 

See  also  Teutonic  Ins.  Co.  v.  Howell,  As  to  overvaluation  in  open  policy 
21  Kj'.  L.  Rep.  1245,  54  S.  W.  852,  being  immaterial,  see  Aurora  F.  Ins. 
29  Ins.  L.  J.  356  (there  being  no  Co.  v.  Johnson,  46  Ind.  315;  Cohen 
fraud)  ;  Williams  v.  Bankers  &  Mer-  v.  Charleston  Ins.  Co.  Dudl.  L.  (S. 
chants  ToAvn  Mutual  Fire  Ins.  Co.  C.)  147;  31  Am.  Dec.  549. 
73  Mo.  App.  607,  1  Mo.  App.  Rep.  *  Delaware  Ins.  Co.  v.  Hill  (1910) 
100.  See  Laird  v.  Piedmont  Mutual  —  Tex.  Civ.  App.  — ,  127  S.  W.  283. 
Fire  Ins.  Co.  82  S.  Car.  424,  64  S.  See  Co-Operative  Ins.  Assoc,  of  San 
E.  404.  Angelo  v.  Ray   (1911)   —  Tex.  Civ. 

As  to  valued  policy  laws,  misrepre-   App.  — ,  138  S.  W.  1122. 
sentations  and  warranties,  see  §  163b       ^  TMieaton  v.  North  British  &  Mer- 
herein.  eantile  Ins.  Co.  76  Cal.  415,  9  Am. 

6Rosser  v.  Georgia  Home  Ins.  Co.    St.  Rep.  216,  18  Pac.  758. 
101  Ga.   718,  29   S.   E.  286,  and  so 

424 


THE  POLICY  §  163 

But  if  statements  as  to  value  are  made  warranties,  the  assured  is 
obligated  to  place  a  fair  and  reasonable  value  upon  the  property, 
otherwise  the  policy  may  not  be  enforced;  ^°  and  a  false  warranty 
as  to  value  will  annul  the  policy,  as  where  the  value  is  warranted  to 
be  tlie  value,  it  goes  beyond  the  expression  of  opinion. ^^  And  an 
untrue  affirmative  warranty  as  to  the  value  of  an  automobile,  made 
in  an  application  will  avoid  the  policy,  the  policy  stipulation  being 
that  statements  are  material  and  if  untrue  will  avoid  the  policy." 
So  statements  in  an  application  that  the  value  of  the  property  is 
estimated  by  applicant  does  not  prevent  a  gross  overvaluation  from 
avoiding  the  policy,  where  the  statement  of  value  is  warranted.  And 
the  valuation  at  .$1,500  in  an  application  for  insurance  of  a  build- 
ing which  is  worth  only  $200  cannot  be  regarded  as  so  approximate- 
ly correct  as  to  comply  with  such  a  warranty."  But  it  is  held  that 
there  must  be  a  substantial  breach  to  avoid  a  policy  on  account  of 
a  breach  of  warranty  as  to  value,^*  and  a  substantially  true  state- 
ment of  the  value  of  a  building,  in  an  application  is  a  compliance 
with  a  warranty  of  the  statement  of  value."  So  it  is  also  held  that 
if  a  policy  of  fire  insurance  is  conditioned  to  be  void  for  overvalua- 
tion, it  is  avoided  by  any  substantial  overvaluation,  whether  fraudu- 
lent or  innocent." 

If  the  facts  are  admitted  by  demurrer  the  question  of  overvalua- 
tion is  for  the  court,  otherwise  it  is  one  for  the  jury.^' 

§  163.  Valued  policies:  statutory  regulations. — Several  states 
have  adopted  valued  policy  laws  "  relating  to  fire  risks  on  real 

"  Sun  Fire  Office  v.  Wich,  6  Col,  Ins.  Co.  51  Vt.  4,  31  Am.  Rep.  666 ; 
App.  103,  39  Pac.  587.  Shelden    v.    Michigan    Millers'    Fire 

"  School  District  v.  State  Ins.  Co.  Ins.  Co.  124  Mich.  303,  82  N.  AV. 
61  Mo.  App.  597.  See  Carson  v.  1068  (not  changed  by  Pub.  Acts 
Jersey  City  Fire  Ins.  Co.  43  N.  J.  L.  1897,  act  no.  167).  See  Lycoming 
300,  '39  Am.  Rep.  584.  But  see  Fire  Ins.  Co.  y.  Rubin,  79  111.  402; 
Wheaton  y.  North  British  Ins.  Co.  Bobbitt  y.  Liyerpool  &  London  & 
76  Cal.  415,  18  Pac.  758,  9  Am.  St.  Globe  Ins.  Co.  66  N.  C.  70,  8  Am. 
Rep.  216.  Rep.  494;  Keeler  v.  Niagara  Ins.  Co. 

^2  Miller  v.  Commercial  Union  16  Wis.  523,  84  Am.  Dec.  714.  But 
Assur.  Co.  69  Wash.  529,  125  Pac.  compare  Insurance  Co.  of  North 
782.  America   y.    Coombs,    19    Ind.    App. 

"  Duncan  y.  National  Mutual  Fire   331,  49  N.  E.  471. 
Ins.    Co.   44    Colo.    472,    20    L.R.A.       ^^  gjafter  v.    Concordia   Fire   Ins. 
(N.S.)  340,  98  Pac.  634.  Co.  142  Iowa  116,  120  N.   W.   706; 

^*  Phoenix  Ins.   Co.  y.   Pickel,  119   Laird  v.  Piedmont  jNIutual  Fire  Ins. 
Ind.  155,  12  Am.   St.  Rep.   393,  21   Co.  82  S.  Car.  424,  64  S.  E.  404. 
N.  E.  546.  is^rA-flHsas.— Sandels  &  Hill's  Dig. 

"  Duncan  v.  National  Mutual  Fire  Stat.  Ark.  1894,  p.  982,  sec.  4140, 
Ins.  Co.  44  Colo.  472,  20  L.R.A.  Laws  1889,  p.  57,  c.  42;  acts  1899, 
(N.S.)  340,  98  Pac.  634.  p.  112,  no.  61. 

^^  Boutelle     y.     Westchester     Fire 

425 


§  1G3  JOYCE  ON  INSURANCE 

property  or  on  buildings,  making  the  value  in  the  policy  the  meas- 
ure of  damages  and  conclusive  in  case  of  a  total  loss  or  a  loss  within 
the  intent  of  the  statute,  notwithstanding  there  may  be  stipulations 

California. — Civ.   Code  1903,  sees.  7970,  7979   (last  section  takes  prece- 

2596,  2756.  denee   as   amendment   of  sees.    7969, 

Dakota. — Comp.   Laws  1887,   sees.  7970,  so  far  as  in  conflict,  Hower- 

-1151,    4243;    Levisee's    Dak.    Codes,  ton  v.  Iowa  State  Ins.  Co.  105  Mo. 

sees.  1527,  1619.  App.  575,  80  S.  W.  27)  construed  in 

Delaware. — Laws    Del.    Rev.    Code  Williams    v.    Bankers    &    Merchants 

1852,  as  amended  1893,  pp.  586,  587,  Town  Mutual  Fire  Ins.   Co.  73  Mo. 

vol.  18,  c.   696,  vol.  19;  Act  March  App.  607,  1  Mo.  App.  Rep.  100. 

29,  1889,  vol.  18  Laws  1889,  p.  961,  Montana.— Booth's       Ann.       Civ. 

c.  695,  sees.  1,  2,  am'd  vol.  19  Laws  Code,  1895,  sec.  3553. 

p.  889,  e.  696.  Nebraska.— Bvown     &     Wheeler's 

F/o rider..— Chap.    4677,    p.    33,    act  Comp.  Stat.  1893,  p.  536.  c.  43,  sec. 

approved  Mav  31,  1899;  Gen.   Stat.  43;  Comp.  Stat.  1903,  sec.  3906. 

1906,  sees.  1528,  2776.  New  Hampshire.— Fiih.  Stat.  1891, 

Georgia. — Lester,  Rowell   &  Hills'  p.  485,  c.  170,  sees.  1,  5 ;  Pub.  Stat. 

Ga.    Code,    1882,    sees.    2814,    2815,  1901,  c.  170,  sec.  5,  p.  571. 

2834;     Code    1895,    sec.    2110;     see  North    Dakota.— Rev.    Code,    sees. 

Laws  1895,  p.  51.  4497,    4593,    4607;     Laws    1907,    c. 

/o»a.— McClain's  Ann.  Code  1888,  158,  p.  253. 

p.  434,  see.  1734;   Ann.   Code  1897,  0/(/o.— Smith    &    Ben.    Ver.    Rev. 

see.  1742,  Supp.  1907,  sec.  1742,  con-  Stat.  6th  ed.  1890,  sec.  3643 ;  Bates 

strued  in  Zalesky  v.  Home  Ins.  Co.  Ann.  Stat.  1906,  sec.  3643. 

108  Iowa,  341,  79  N.  W.  69.  Oklahoma.— Stat.  1890,  p.  631,  sec. 

Kaiisa.s. — Laws  1893,  c.  102;  Laws  3159.  c.  44,  art.  3,  see.  4;  1  Wilson's 

1897,  c.  142;  Gen.  Stat.  1905,  sec.  Rev.  &  Ann.  Stat.  1903,  p.  790,  sees. 
3538;    Gen    Stat.    1909,   sees.    4260-3199,3204. 

4263.  Oregon. — Ballinger      &      Cotton's 

Kentucky.— Act  1893,  see.  700  Ky.  Ann.  Codes  &  Stats.  1902,  sees.  3720, 

Stat,   (construed  in  Sachs  v.  London  3721. 

&  Lancashire   Fire  Ins.   Co.  23  Ky.  Pennsylvania. — Laws  1887,  p.  186, 

L.  Rep.  2397,  67  S.  W.  23,  31  Ins.  No.    128,   Pepper   &   Lewis'   Di^.   p. 

L.   J.   426);    Stat.   1909,   sees.   4307,  2387,  par.  101  (boiler  insurance). 

4308  (live  stock).  South    Carolina. — Civ.    Code,    see. 

Louisiana. — Const.    &    Rev.    Laws  1816,    vol.    1;    Code    of   Laws   1902, 

1904,     pp.     888,     889;     Laws    1906,  p.    695;    see   act   Feb.    28,    1896,   22 

adopted  in  1900,  act  no.  135.  Stat,  at  Large,  113,  114,  construed  in 

Maine. — Rev.    Stat.    1883,    p.   445,  Home  Ins.  Co.  v.  Virginia  Carolina 

c.  49,  title  IV.  see.  20  (statements  of  Chemical  Co.  (U.  S.  C.  C.)  109  Fed. 

\alue  in  application  are  representa-  681. 

tions  and  not  warranties).  South  Dakota. — Laws  1905,  c.  126; 

Minnesota. — Rev.   Laws  1905,  sec.  Civ.    Code    1903    (mar.)    sec.    1939, 

1642,  see  also  Minn.  Standard  policy,  (fire)  sec.  1953;   (life)  sec.  1958. 

Mississippi. — Pamph.  acts  1894,  p.  Tennessee. — Shannon's  Ann.   Code 

51;   Laws   1896,   c.   56;    Code   1906,  1896,  p.  775,  sec.  3348. 

sec.  2592.  Texas.— Civ.   Stat.   art.  2971,  title 

Missouri.— Hev.      Stat.     1889,     p.  53,  e.  3;  Rev.  Stat.  1895,  art.  3089; 

1401,   sees.   5897,  5898,   5899;   Laws  Suppl.  Sayle's  Rev.  Civ.  Stat.  1903, 

1895,   p.    194;    Ann.    Stat.    1896,   p.  art.  3089. 

3793;    Rev.    Stat.    1899,   sees.    7969,  Washington.— Ballingefs         Ann. 

426 


THE  POLICY  §  163 

in  the  policy  that  the  true  value  shall  be  proved,  and  notwithstand- 
ing other  clauses  inconsistent  with  the  statute.  And  the  actual 
value  of  the  real  estate  when  destroyed,  or  the  value  when  insured, 
and  the  consequent  actual  loss  to  the  insured  have  been  held  wholly 
immaterial.  The  statute  is  a  part  of  the  contract,  and  the  amount 
written  in  the  policy  is  regarded  as  liquidated  damages  agreed  upon 
by  the  parties  conclusively  in  such  contract.^^     The  insured,  under 

Codes  &  Stats.  1897  &  Suppl.  1899-  Ins.  Co.  107  Mo.  App.  456,  81  S.  W. 
1903,  sec.  2833.  637  (policy  conclusively  fixes  value). 

West  Virginia.— Acts  1899,  p.  120,  Bode  v.  Firemen's  Ins.  Co.  103  Mo. 
c.  33;  Code  190G,  sec.  1108.  App.  289,  77  S.  W.  116,  Rev.  Stat. 

Wisconsin.— 1  Sanborn  &  Berr.  1899,  sec.  7<)69  (policy  conclusively 
Ann.  Stat.  p.  1165,  sec.  1943.  fixes     value).       Millis     v.     Scottish 

^^  Arkansas. — Minneapolis  Fire  &  Union  &  National  Ins.  Co.  95  Mo. 
Marine  Ins.  Co.  v.  Fultz,  72  Ark.  App.  211,  68  S.  W.  1066 ;  R^v.  Stat. 
365,  80  S.  W.  576,  33  Ins.  L.  J.  690;  1899,  sees.  7969,  7970  (insurer  liable 
acts  1890,  p.  112,  no.  61  (insurer  to  full  value  stated  in  policy,  not- 
bound  to  pay  amount  of  insurance  withstanding  policy  provisions  con- 
on  house  in  ease  of  total  loss).  tra). 

Kentiicky.—GeTmiima.  Ins.  Co.  v.  Nebraska. — Lancashire  Fire  Ins. 
Ashlv,  112  Kv.  303,  99  Am.  St.  R*p.  Co.  v.  Bush,  60  Neb.  116,  82  N.  W. 
295,  65  S.  W.' 611  (all  policies  cover-  313,  29  Ins.  L.  J.  1028  (policy 
ing  real  estate  are  valued  policies  amount  conclusive;  statute  is  part  of 
and  the  value  fixed  therein  on  which  contract).  Home  Fire  Ins.  Co.  v. 
the  premium  is  paid  is  conclusive  Bean,  42  Neb.  537,  47  Am.  St.  Rep. 
notwithstanding  a  clause  in  the  pol-  711,  60  N.  W.  907  (amount  in  policy 
icy  contra).  Continental  Ins.  Co.  v.  conclusive);  German  Ins.  Co.  v. 
Moore,  23  Kv.  L.  Rep.  72,  62  S.  W.  Eddv,  36  Neb.  461,  22  Ins.  L.  J.  468, 
517,  30  Ins.  L.  J.  1021  (amount  in  19  L.R.A.  707,  54  N.  W.  856. 
poUcv  on  dwelling  house  conclusive).  Ohio. — Queen  Ins.  Co.  v.  Leslie,  47 
Phcenix  Ins.  Co.  v.  Peak,  20  Kv.  L.  Ohio  St.  409,  9  L.R.A.  45,  24  N.  E. 
Rep.  1035,  47  S.  W.  1089;  act  1893,  1072  (value  fixed,  conclusive).  See 
Ky.  Stat.  sec.  700  (conclusive  in  case  Sun  Mutual  Ins.  Co.  v.  Hock,  8  Ohio 
of  total  loss).  Cir.   Ct.  R.   341,  32  Week.  L.   Bui. 

Mississippi. — Western  Assur.  Co.  341;  United  Firemen's  Ins.  Co.  v. 
v.  Phelps,  77  Miss.  625,  27  So.  Kukral,  7  Ohio  Cir.  Ct.  356,  30 
745,  29  Ins.  L.  J.  506  (amount  Week.  L.  Bull.  356. 
named  in  policy  and  on  which  Texas. — Co-operative  Ins.  Assoc, 
the  insured  pays  premiums  is  of  San  Angelo  v.  Kay  (1911)  —  Tex. 
practically  liquidated  damages  in  Civ.  App.  — ,  138  S.  W.  1122;  acts 
case  of  loss,  and  valued  policy  stat-  Tex.  1903,  c.  69  (amount  specified  in 
ute  is  integrated  into  and  made  part  policy  conclusive  as  liquidated  de- 
of  policy  of  insurance;  Laws  1896,  mand,  in  ease  of  total  loss  irrespec- 
c.  56.  See  as  to  statutory  law  being  tive  of  value  of  property)  ;  Sun  Mu- 
part  of  policy,  §  194  herein.  tual  Ins.  Co.  v.  Holland,  2  Tex.  App. 

Missouri. — Gragg  &  Gragg  v.  Civ.  Cas.  sec.  448. 
Northwestern  National  Ins.  Co.  132  West  Virginia. — Ritchie  County 
Mo.  App.  405,  111  S.  W.  1184,  Rev.  Bank  v.  Firemen's  Ins.  Co.  55  W. 
Stat.  1899,  sec.  7979  (in  case  of  Va.  261,  47  S.  E.  94;  acts  1890, 
total  loss  recovery  may  be  had  to  p.  120,  c.  33  (amount  stated  in  pol- 
value  of  insured  property  less  dcpre-  icy  ou  real  estate  conclusive  in  case 
ciation).      Siegle   &j   Sou   v.   Phcenix   of  total  loss). 

427 


§  163  JOYCE  ON  INSURANCE 

an  allegation  describing  the  property,  need  not  attempt  to  show 
that  the  property  was  personal,  or  that  the  loss  was  upon  real  prop- 
erty and  total  and  so  rely  upon  the  valued  policy  law,  but  he  may 
prove  its  value  immediately  before  and  after  the  loss  with  evidence 
of  its  total  destruction  as  a  basis  for  recovery.^"  It  is  only  necessary 
to  show  a  total  loss.^  But  in  Washington  proof  must  be  given  as  to 
the  value  of  insured's  special  interest  in  personal  property.^  If, 
however,  the  policy  contains  no  words  showing  that  the  policy  is  a 
valued  one,  but  is  an  open  policy  the  statutory  provision  that  in 
case  of  a  total  loss  the  insured  can  recover  the  full  amount  of  the 
insurance  does  not  apply,  especially  so  where  the  statute  prescribes 
no  penalty  and  contains  no  provision  fixing  the  amount  named  in 
the  policy  as  conclusive  evidence  of  value,  so  that,  in  such  case,  tlie 
insurer  is  only  liable  for  loss  not  to  exceed  the  amount  named  in 
the  policy.' 

So  it  is  held  in  California  that  a  contract  between  a  life  insur- 
ance company  and  the  insured,  whereby  the  latter  waives  his 
statutory  rights,  is  ultra  vires  and  void.*  But  a  submission  to  arbitra- 

TT'iscoHsf??.— Bourgeois    v.    North-  Car.  459,  39  S.  E.  712,  31  Ins.  L.  J. 

■western   National   Ins.    Co.    86   Wis.  38. 

606,  57  N.  W.  347 ;  Sevk  v.  Millei-s  *  In  this  case  the  condition  related 
National  Ins.  Co.  74  '  Wis.  67,  3  to  forfeiture :  Griffith  v.  New  York 
L.R.A.  523n,  41  N.  W.  443;  Oshkosh  Life  Ins.  Co.  101  Cal.  627,  40  Am. 
Gas  Light  Co.  v.  Germania  Fire  Ins.  St.  Rep.  96,  36  Pac.  113. 
Co.  71  Wis.  457,  5  Am.  St.  Rep.  233,  As  to  right  to  tix  conditions  as  to 
37  N.  W.  819;  Cayon  v.  Dwelling-  the  cancellation  under  sections  3664 
House  Ins.  Co.  68  Wis.  510,  516,  32  to  3667  of  R-evised  Statutes  of  Ohio, 
N.  W.  772;  Baumessel  v.  Bruners  and  obligation  to  comply  with  stat- 
Fire  Ins,  Co.  43  Wis.  463;  Thomp-  ute,  see  Phoenix  Mutual  Fii-e  Ins.  Co. 
son  V.  St.  Louis  Ins.  Co.  43  Wis.  v.  Brecheisen,  50  Ohio  St.  542,  23 
459;  Reilly  v.  Franklin  Ins.  Co.  43  Ins.  L.  J.  56,  35  N.  E.  53.  Insured 
Wis.  449 ;  7  Ins.  L.  J.  391 ;  28  Ajn.  cannot  waive  statutory  provision  re- 
Rep.  552.  quiring   insurer  to   tix   the  insurable 

That    policy    may    contain    clause  value  of  the  property  conclusively  in 

not  provided  for  by  statute,  see  Arm-  the  policy  as  the  measure  of  recovery 

strong    V.     Western    Manufacturers'  in  ease  of  total  loss.     Queen  Ins.  Co. 

Mutual  Fire  Ins.  Co.  95  Mich.  137,  v.  Leslie,  47  Ohio  St.  409,  9  L.R.A. 

54    N.    W.    637,    under    How.    Stat.  45,  24  N.  E.  1072;  Ohio  Rev.  Stat. 

Mich.  4349.  sec.  3643,  3644. 

^^  Granite    State   Fire   Ins.    Co.   v.        That  condition  as  to  limitation  of 

Buckstaff    Bros.    Mfg.    Co.    53    Neb.  action    (Rev.    Stat.    Ind.    1881,    sec. 

123,  73  N.  W.  544.  37*0)    controls    condition    in    polic}', 

^  Oklahoma   Farmers'    JMutual    In-  see   Small  v.   Westchester  Fire   Ins. 

dem.   Assoc,   v.   MeCorkle,   21    Okla!  Co.  (U.  S.  C.  C.)  51  Fed.  789. 
606,  97  Pac.  270,  38  Ins.  L.  J.  108;        That  statute  relating  to  statements 

1  Wilson's  Rev.  &  Ann.   Stat.  Okla.  in  application  controls,  see  Hermany 

1903,  p.  790,  sec.  3204.  v.    Fidelitv   Mutual    Life   Assn.   151 

2  Bright  v.  Hanover  Fire  Ins.  Co.  Pa.  St.  17,  24  Atl.  1064. 
48  Wash.  60,  92  Pac.  779. 

'Ulrner  v.  Phenix  Ins.   Co.  61  S. 

428 


THE  POLICY  §  163 

tion  of  the  amount  of  loss  on  an  insured  building  does  not  consti- 
tute a  waiver  of  the  benefits  of  the  statute  ^  nor  is  the  statute  waived 
by  accepting  a  policy  prescribing  a  different  rule  for  fixing  the 
amount  of  the  loss  to  be  paid,  nor  does  it  exclude  the  operation  of 
the  statute.^ 

These  laws  have  been  declared  valid  and  founded  upon  con- 
siderations of  public  policy,  being  intended  to  guard  against  over- 
insurance  and  against  carelessness,  and  every  other  incentive  to  de- 
stroy property  or  permit  its  destruction  for  the  purpose  of  gain  on 
the  part  of  the  insured.'  So  it  is  held  in  the  Federal  Supreme 
Court  that  the  Missouri  valued  policy  law  is  constitutional;  that  it 
does  not  present  the  alternative  of  wager  policies  to  indemnity  pol- 
icies but  changes  open  policies  into  valued  policies;  and  the  court 
declares  that  it  makes  no  contract  for  the  parties,  but  permits  ab- 
solute freedom  in  this,  and  leaves  them  to  fix  the  valuation  upon 
such  prudence  and  inquiry  as  they  choose.*  So,  under  a  Florida 
decision,  a  statute  requiring  insurer  to  fix  the  insurable  value  of  the 
property  insured  and  to  state  such  value  in  the  policy,  the  measure 

Where  policies  are  not  signed  as  (ed.  1892)  sees.  243,  505  et  seq. ; 
required  by  statute,  and  the  poUcy  New  Orleans  Real  Estate  Mortgage 
failed  to  specify  that  funds  alone  &  Security  Co.  v.  Teutonia  Ins.  Co. 
are  liable,  a  deed  of  settlement  is  128  La.  45,  54  So.  466,  40  Ins.  L.  J, 
required,  and  the  policy  has  no  valid-  998  (valued  policy  "is  a  measure  in 
ity:  Hambro  v.  Hull  &  London  Fire  public  interest  and  in  order  to  secure 
Ins.  Co.  3  Hurl.  &  N.  789.  See  greater  certainty  in  the  contract  of 
Prince  of  Wales  L.  Assur.  Co.  v.  insurance,"  per  Breaux,  C.  J.)  ;  Lan- 
Harding,  El.  B.  &  E.  183.  cashire  Fire  Ins.  Co.  v.  Bush,  60  Neb. 

The  fact  that  a  statutory  condition  116,  82  N.  W.  313,  29  Ins.  L.  J. 
is  not  inserted  does  not,  it  is  held,  1028;  Comp.  Stat.  Neb.  1899,  c. 
prevent  its  being  read  as  a  condition  43,  sec.  43.  ("This  statute  is  ground- 
in  the  contract,  even  though  there  ed  on  public  policy.  It  is  designed 
are  other  conditions  not  printed  as  to  prevent  overinsurance,  and  to 
variations:  Findley  v.  Fire  Ins.  Co.  avoid  the  evils  resulting  therefrom." 
of  North  America  (1894)  14  Can.  Citing  Oshkosh  Gaslight  Co.  v.  Ger- 
L.  T.  340.  mania  Fire  Ins.  Co.  71  Wis.  454,  37 

5  Seyk  v.  Milldrs  National  Ins.  Co.  N.  W.  819,  5  Am.  St.  Rep.  233 ; 
74  Wis.  67,  3  L.R.A.  523,  41  N.  W.  Queen  Ins.  Co.  v.  Leslie,  47  Ohio  St. 
443.  409,  9  L.R.A.  45,  24  N.  E.  1072.) 

On  effect  of  valued  policy  statutes  *  Orient  Ins.  Co.  v.  Daggs,  172  U. 
on  agreements  for  arbitration,  see  S.  557,  19  Sup.  Ct.  281,  43  L.  ed. 
note  in  47  LR.A.(N.S.)   433.  552,  28  Ins.  L.  J.  97,  48  Cent.  L.  J. 

« Western  Assur.  Co.  v.  Phelps,  77  228,  aff'g  Daggs  v.  Orient  Ins.  Co. 
Miss.  625,  27  So.  745,  29  Ins.  L.  J.  136  Mo.  382,  35  L.R.A.  227,  38  S. 
506.  ("Public  policy  declared  by  W.  85,  26  Ins.  L.  J.  67,  see  list  of 
the  statute  cannot  thus  be  contracted  valued  policy  laws  at  beginning  of 
away,"  per  Whitfield,  J.)  this     section."^      See     also     Word     v. 

'See  Reilly  v.  Franklin  Ins.  Co.  Southern  Mutual  Ins.  Co.  112  Ga. 
43  Wis.  449,  7  Ins.  L.  J.  391,  28  Am.  585,  37  S.  E.  897  (valued  policy 
Rep.   552;    Ostrander   on    Fire   Ins.   laws  are  constitutional). 

429 


§  163  JOYCE  ON  INSURANCE 

of  damaf^es  in  cage  of  total  loss  to  be  the  amount  so  fixed,  and 
in  case  of  partial  loss,  such  proportion  of  the  amount  upon  which 
premiums  are  paid  as  the  damage  sustained  is  of  the  insurable 
value  as  fixed  by  the  agent,  and  providing  that  the  insurer  shall  be 
estopped  to  deny  that  the  property  insured  was  worth  at  the  time  of 
insuring  the  amount  so  fixed,  and  that  the  agent  soliciting  the 
insurance  shall  be  held  the  agent  of  the  insurer, — is  not  repug- 
nant to  either  the  state  or  Federal  Constitution.®  So  it  is  held  in 
Georgia  that  the  statute  does  not  make  an  arbitrary  or  unreasonable 
classification  because  it  is  limited  to  insurance  companies,  and  be- 
cause it  excludes  from  its  operation  losses  sustained  by  reason  of 
the  destruction  of  specified  kinds  of  personal  property.^" 

®  Hartford  Fire  Ins.  Co.  v.  Red-  tual  value  of  the  property  at  the 
ding,  47  Fla.  228,  67  L.R.A.  518,  37  time  of  loss  may  be  recovered;  pro- 
So.  62;  act  approved  May  31,  1899,  vided,  the  loss  does  not  exceed  the 
e.  4677,  p.  33.  amount  expressed  in  the  poliej\'    The 

See  article  on  "Effect  of  Fixing  the  point  raised  in  the  assignment  of 
Face  of  a  Policy  of  Insurance  as  a  error  is  without  merit,  for,  even  if 
Liquidated  Demand."  Concluding  it  be  conceded  that  the  section  quoted 
that  it  is  authoritatively  settled  '"that  abridges  some  privilege  or  immunity 
these  valued  policies  are  effective  of  citizens  of  the  United  States  pro- 
and  binding,"  by  W.  C.  Rogers  in  53  tected  by  the  Fourteenth  Amendment 
Cent.  L.  Joum.  (1901)  106.  to    the  "Constitution    of    the    United 

^^  JEtna  Ins.  Co.  v.  Brigham,  120  States,  it  has  been  detinitelv  settled 
Ga.  925,  48  S.  E.  348,  33  Ins.  L.  J.  by  the  decisions  of  the  Supreme 
941.  The  court,  per  Cobb,  J.,  said:  Court  of  the  United  States  that  a 
"What  is  familiarly  known  as  the  corporation  is  not  a  citizen,  within 
'Dodson  Law,'  contained  in  Civ.  Code  the  meaning  of  that  provision  of  the 
1895,  sec.  2110,  is  attacked  in  this  amendment.  See  Orient  Insurance 
case  as  being  unconstitutional,  upon  Co.  v.  Daggs,  172  U.  S.  557,  19  Sup. 
the  ground  that  it  impairs  and  re-  Ct.  281,  43  L.  ed.  552,  28  Ins.  L.  J. 
stricts  the  right  of  contract,  which  97,  48  Cent.  L.  J.  228,  and  citations, 
is  one  of  the  privileges  and  immuni-  It  was  argued  that  the  law  also  in- 
ties  guaranteed  to  citizens  by  the  fringes  those  clauses  of  the  Four- 
Fourteenth  Amendment  to  the  Con-  teenth  Amendment  which  prohibit  the 
stitution  of  the  United  States.  The  states,  from  passing  any  law  which 
act  in  question  is  as  follows:  'All  deprives  'any  pei-son'.  of  Ufe,  liberty 
insurance  companies  shall  pay  the  or  property  without  due  process  of 
full  amount  of  loss  sustained  upon  law,  or  which  deny  to  any  person 
the  property  insured  by  them;  pro-  within  their  jurisdiction  the  equal 
vided,  said  amount  of  loss  does  not  protection  of  the  laws.  The  assign- 
exceed  the  amount  of  insurance  ex-  ments  of  error  in  the  record  are  not 
pressed  in  the  policy;  and  all  stipu-  broad  enough  to  cover  these  ques- 
lations  in  such  policies  to  the  tions;  but,  even  if  they  had  been, 
contrary  shall  be  null  and  void;  pro-  they  would  seem  to  be  without  merit, 
vided,  that  in  eases  of  loss  on  stocks  under  the  decision  in  Orient  Insur- 
of  goods  and  merchandise  and  other  ance  Co.  v.  Daggs,  supra,  affirming 
species  of  personal  property  chang-  Daggs  v.  Orient  Ins.  Co.  136  Mo.  382, 
ing  in  specifics  and  quantity  by  the  35  L.R.A.  227,  38  S.  W.  85,  26  Ins. 
usual  customs  of  trade,  only  the  ac-  L.   J.   67,   where   a  similar  law   was 

430 


THE  POLICY 


§  163 


Notwithstanding  the  rule  stare  decisis,  we  are  inclined  to  the  be- 
lief that  the  system  is  open  to  serious  objections,  for  the  reason  that 
the  assured  can  gain  nothing  in  case  of  undervaluation,  and  the 
same  inducement  to  incendiarism  exists  in  case  of  overvaluation. 
Nor  can  such  legislation  protect  against  overinsuranee  even  though 
the  insurer  incurs  a  great  expense  and  loss  of  time  in  determining 
the  actual  value  of  property.  Again,  the  legislation  is  restrictive,  and 
abridges  the  rights  of  parties  to  freely  enter  into  contracts,  and  it 
would  seem  that  it  would  best  conform  to  tlie  doctrine  of  indemnity 
that  the  value  of  the  property  at  the  time  of  loss  should  be  proved." 

held    not    to    be   violative    of    these  tion,  and  that  especially  is  the  classi- 

clauses    of    the    Fourteenth    Amend-  fication  arbitrary  when  it  is  kept  in 

ment.      Various    attacks    have    been  mind    that    the    legislation    does   not 

made  upon  laws  similar  to  the  one  apply   at   all   to   private   individuals 

now  under  discussion,  and  in  almost  engaged   in   the   business  of  writing 

every  instance  they  have  been  held  fire    insurance.      While    the    General 

to  be  constitutional  and  valid.     See  Assembly    is    permitted    to    classify 

Reilly  v.  Franklin  Insurance  Co.  43  subjects    for    legislation,    the    courts 

Wis.  449,  28  Am.  Rep.  552 ;  Phoenix  will  restrain  them  from  making  arbi- 

Ins.  Co.  V.  Levy,  12  Tex.  Civ.  App.  trary     and    unreasonable     classifica- 

45,  33   S.   W.  992;   Dugger  v.  Me-  tions.     At  the   same   time   the   law- 

chanics  &  Traders  Ins.  Co.  95  Tenn.  making    power    is    allowed    a    wide 

245,  28  L.R.A.  796,  32  S.  W.  5;  In-  latitude  in  respect  of  such  matters. 

Burance    Co.    of    North    America    v.  Without  undertaking  to   discuss  the 

Bachler,  44  Neb.  549,  62  N.  W.  911,  question  at  length,  we  hold  that  the 

915.    Our  decision  is,  however,  neces-  legislation  under  consideration  is  not 

sarily  confined  to  the  one  ground  of  subject  to  the  objection  made.     See 

attack  raised   by  the  assignment  of  majority  opinion  in   Union    Savings 

error.     4.  One  of  the  assignments  of  Bank  &  Trust  Co.  v.  Dottenheim,  107 

error  is  that  the  law  above  quoted  in  Ga.    606,   34   S.   E.   217 ;   Dugger  v. 

'unconstitutional,  in  that  it  is  special  Mechanics    &    Traders    Ins.    Co.    95 

legislation  affecting  the  rights  of  con-  Tenn.  246,  28  L.K:A.  796,  32  S.  W. 

tract  on  the  part  of  insurance  com-  5." 

panics,  without   the  consent   of  said  "It  is  said  by  Mr.  Richards  that 

companies,    which    is    prohibited    by  "these  laws  are  not  to  be  commended, 

paragraph   1,   sec.   4,  art.   1,  of  the  because  they  impose  too  arbitrary  a 

Constitution  of  the  state  of  Georgia,  standard  and  may  be  used  as  an  in- 

which  provides  that  laws  of  a  general  strumeut    of    fraud:"    (Richards    on 

nature  shall  have  uniform  operation  Ins.  ed.  1892,  sec.  20  "and  encourage 

throughout  the  state,  and  no  general  fraudulent  oven-aluation  and  arson" 

law  affecting  private  rights  shall  be  Id.  3rd  ed.  note  p.  31) ;  and  another 

varied  in  any  particular  case  by  spe-  author,   while   maintaining  their  ya- 

cial  legislation,  except  with  the  con-  lidity,  admits  that  the  policy  of  these 

sent  in  writing  of  all  persons  to  be  laws  "contemplates  an  abridgment  of 

affected   thereby.'      Civ.    Code   1895,  the  natural  rights  of  the  parties  to 

sec.  5732.     Under  this  assignment  of  make  contracts :"     Ostrander  on  Fire 

eiTor,  it  is  argued  that  the  act  makes  Ins.  sec.  245,  p.  510. 

tire     insurance     companies     writing  The    system    of    "valued    policies" 

policies   upon    houses    and    personal  is    open    to    "grave    objections,    for 

property  other  than   specified  kinds  apart    from    the    labor   and    cost    of 

the  subject  of  an  arbitrary  classifica-  valuing    a    thousand    properties    in 

431 


163a 


JOYCE  OX  INSURANCE 


§  163a.  Same  subject:  conflicting  clauses. — The  rule  above  stated 
that  the  value  specified  in  a  valued  policy  is  conclusive  in  case  of  a 
total  loss,  or  a  loss  within  the  intent  of  the  statute,  notwithstanding 
stipulations  or  clauses  inconsistent  or  in  conflict  with  the  expres.^ 
terms  of  the  statute  applies  to  and  makes  invalid  a  clause  which 
limits  recovery  to  an  amount  less  than  that  fixed  in  the  policy;  ^ 
the  rule  also  applies  to  and  voids  a  condition  that  insurer  shall  not 
be  liable  beyond  the  actual  cash  value  at  the  time  of  any  loss ;  ^^  to  a 
condition  limiting  the  amount  of  recovery  to  the  sum  or  sums  item- 
ized, and  to  the  actual  cash  value  at  the  time  of  loss ;  ^*  that  appraisal 


preparation  for  the  total  destruction  large  is  directly  concerned  in  prevent- 
of  four  or  five,  it  is  obvious,  if  tbe  ing  the  recovery  on  any  lire  insur- 
value  fixed  is  less  than  the  real  value,  ance  policy  of  more  than  the  actual 
there  is  no  advantage  to  the  insured,  value  of  the  property  destroyed." 
but  the  contrary;  and  if  it  is  greater  Id.  pp.  654,  655. 

than  the  real  value,  then  no  doubt  the  Compare  Editorial,  entitled  ''Fire 
insured  might  make  a  profit  by  a  Insurance — Adjustment  of  Loss." 
fire,  but  this  would  offer  an  induce-  urging  enactment  of  valued  policy 
ment  to  carelessness,  if  not  to  in-  law,  in  19  Canadian  Law  Times 
eendiarism.      In    the    United    States,    (1899)    124. 

however,  several  state  legislatures  ^^  Daggs  v.  Orient  Ins.  Co.  136  Mo. 
have  been  so  imprudent  as  to  force  382,  35  L.R.A.  227.  38  S.  W.  85,  26 
the  issue  of  'valued  policies:'"  13  Ins.  L.  J.  67,  aff'd  Orient  Ins.  Co. 
Encv.  Britt.  164.  v.  Daggs,  172  U.   S.  557,  43  L.  ed. 

It'  is  worthy  of  note  that  at  the  552,  19  Sup.  Ct.  281,  28  Ins.  L.  J. 
30th  annual  meeting  of  the  American  97,  48  Cent.  L.  J.  228  (clause  limit- 
Bar  Assoc,  held  at  Portland  Me.  in  ing  insurer's  liability  in  ease  of  loss 
Aug.  1907,  the  committee  on  Insur-  contrary  to  express  provisions  of  val- 
ance Law  recommended  the  adop-  ued  policy  law  will  not  be  sustained) ; 
tion  of  certain  re.solutions  one  of  Home  Fire  Ins.  Co.  v.  Weed,  55  Neb. 
which  was  the  repeal  of  the  valued  146,  75  N.  W.  539 ;  Comp.  Stat.  1893, 
policy  laws.  And  this  recommenda-  e.  43,  sec.  43,  see  Comp.  Stat.  1903, 
tion  was  one  of  those  adopted.  Vol.  sec.  3906;  Home  Fire  Ins.  Co.  v. 
31  Reports  of  American  Bar  Associ-  Bean,  42  Neb.  537,  47  Am.  St.  Rep. 
ation  1907,  pp.  11,  654-659.  ''In  19  711,  60  N.  W.  907. 
or  20  of  the  states  are  statutes  known  ^^  Hartford  Fire  Ins.  Co.  v.  Bour- 
as  valued  policy  laws,  which  require  bon  County  Court,  24  Ky.  L.  Rep. 
insurance  companies  to  pay  their  as-  1850,  72  S.  W.  739,  32  Ins.  L.  J. 
sured  in  the  event  of  the  total  de-  481  (act  1893,  Ky.  Stat.  700); 
struction  of  real  or  personal  propertv  Queen  Ins.  Co.  v.  Leslie,  41  Ohio  St. 
insured,  the  full  amount  of  the  in-  409,  9  L.R.A.  45,  24  N.  E.  1072.  But 
surance  on  said  property  without  compare  Burkett  v.  Georgia  Home 
regard  to  the  value  thereof  at  the  Ins.  Co.  105  Tenn.  548,  58  S.  W. 
time  of  the  loss.    These  laws  have  in-   848;  act  1893. 

creased  both  the  cost  of  insurance  ^*  Oklahoma  Farmers  Mutual  In- 
and  the  fire  waste;  they  invite  fraud,  dem.  Assoc,  v.  McCorkle,  21  Okla. 
perjury,  and  arson;  they  present  be-  606,  97  Pac.  270,  38  Ins.  L.  J.  108; 
fore  every  evilly-disposed  person  the  1  Wilson's  Rev.  &  Ann.  Stat.  Okla. 
temptation  to  over-insure  and  then  1903,  p.  790,  sec.  3204,  providing  that 
to  bum  his  property  for  the  gain  "if  there  is  no  valuation  in  the  policy, 
there   is  in   it.     .     .     .     Society   at   the  measure  of  indemnity  in  an  in- 

432 


THE  POLICY 


lG3a 


fix  tlie  cash  value  of  the  loss  with  proper  decluotion  for  deprecia- 
tion, however  caused;  ^*  an  agreement  to  submit  the  question  to  ar- 
bitration ;  ^^  that  the  loss  or  damage  shall  in  no  event  exceed  what 
it  would  cost  insured  to  repair  or  replace  the  same."  But,  under  a 
Tennessee  decision,  a  policy  provision  thai  the  amount  of  loss  or 
damage  should  be  based  upon  the  actual  cash  value  of  the  property 
at  the  time  of  the  fire,  not  to  exceed  the  cost  of  replacing  the  build- 


surance  against  fire  is  the  full 
amount  stated  in  the  policy,  but  the 
eflfeet  of  a  valuation  in  a  policy  of 
lire  insurance  is  the  same  as  in  a 
policy  of  marine  insurance." 

^5  Hartford  Fire  Ins.  Co.  v.  Bour- 
bon County  Coui-t,  24  Kv.  L.  Rep. 
1850,  72  S.  W.  739,  32  "ins.  L.  J. 
481.  Examine  Stevens  v.  Norwich 
Union  Fire  Ins.  Co.  120  Mo.  App. 
88,  96  S.  W.  684,  as  to  allowing  de- 
preciation in  value  under  Rev.  Stat. 
1890,  sec.  7969;  Siegle  &  Son  v. 
Phoenix  Ins.  Co.  107  Mo.  App.  456, 
81  S.  W.  637.  Rev.  Stat.  1899,  sec. 
7979. 

But  compare  Zaleskv  v.  Home  Ins. 
Co.  108  Iowa,  341,  79  N.  W.  69 
(Iowa  Code  sec.  1742,  does  not  pre- 
clude making  appraisement  a  condi- 
tion precedent  to  action  on  policy,  as 
the  statute  does  not  tix  the  value  of 
the  property  destroyed  but  makes  it 
necessary  for  assured  to'  prove  the 
loss,  as  the  amount  stated  is  only 
prima  facie  evidence  of  insurable 
value). 

^6  Hartford  Fire  Ins.  Co.  v.  Bour- 
bon County  Court,  24  Kv.  L.  Rep. 
1850,  72  S.  W.  739,  32  'ins.  L.  J. 
481;  act  1893,  Ky.  Stat.  700;  Mer- 
chants Ins.  Co.  V.  Stephens,  22  Ky. 
L.  Rep.  999,  59  S.  W.  511  (agree- 
ment to  arbitrate  or  arbitration  not 
valid  under  act  1893,  Ky.  Stat.  700)  ; 
Lancashire  Ins.  Co.  v.  Bush,  60  Neb. 
116,  82  N.  W.  313,  29  Ins.  L.  J. 
1028;  Comp.  Stat.  Neb.  1899,  c. 
43,  sec.  43.  ("The  statute,  which  is 
to  be  regarded  as  part  of  the  con- 
tract, fixes  conclusively  the  worth  of 
the  building  which  is  the  subject  of 
insurance.  If  the  property  is  wholly 
destroyed,  its  actual  value  is  not  to 


Joyce  Ins.  Vol.  I.— 28. 


be  determined  by  evidence,  agree- 
ment or  arbitration.  The  damages 
are  liquidated  and  the  measure  of 
recovery  already  ascertained.  .  .  . 
To  receive  evidence  for  the  purpose 
of  ascertaining  the  amount  of  the 
loss  .  .  .  would  violate  the  pol- 
icy of  the  law,  which  is  to  make  the 
insurer  pay  the  amount  of  the  risk 
on  which  he  has  taken  premiums. 
.  .  .  It  is  believed  that  it"  (the 
insurer)  "could  have  made  no  bargain 
by  which,  in  the  event  of  a  total  loss 
of  the  insured  propertj',  it  could 
escape  from  its  obligation  to  pay  the 
full  amount  of  the  indemnity  for 
which  the  policy  was  written.  As  be- 
fore remarked,  the  statute  re.sts  on 
considerations  of  public  policy,  and 
it  is  probable  that  the  insured  could 
not,  even  by  ex])ress  contract,  relin- 
quish the  beneiit  of  its  provisions. 
Reillv  V.  Franklin  Ins.  Co.  43  Wis. 
449,  "28  Am.  Rep.  552;  Emery  v. 
Piscataqua  Fire  &  Marine  Ins.  Co. 
52  Me.  322."  Per  Sullivan,  J.) 
Queen  Ins.  Co.  v.  Leslie,  47  Ohio  St. 
409,  9  L.R.A.  45,  24  N.  E.  1079. 
Examine  Stevens  v.  Norwich  Union 
Fire  Ins.  Co.  120  Mo.  App.  88,  96 
S.  W.  684,  under  Rev.  Stat.  1899, 
sec.  7964;  Seyk  v.  Millers  National 
Ins.  Co.  74  Wis.  67,  3  L.R.A.  523,  41 
N.  W.  443. 

^''  Hartford  Fire  Ins.  Co.  v.  Bour- 
bon County  Court,  24  Ky.  L.  Rep. 
1850,  72  S.  W.  739,  32  "ins.  L.  J. 
481;  act  1893,  Ky.  Stat.  700;  Mil- 
waukee Mechanics'  Ins.  Co.  v.  Rus- 
sell. 65  Ohio  St.  230,  56  L.R.A.  159, 
62  N.  E.  388;  Rev.  Stat.  sec.  3643 
(condition  void  which  gives  insurer 
option  to  rebuild  in  case  of  total 
loss). 


433 


§  163a  JOYCE  ON  INSURANCE 

ing  is  held  valid. ^^  Again,  a  policy  stipulation  requiring  insured 
if  required  to  furnish  verified  plans  and  specifications  of  the  de- 
stroyed or  damaged  property  is  of  no  binding  force.^^  So  a  three- 
quarters  clause  whereby  insured  is  made  a  coinsurer  and  reducing 
the  insurer's  liability  below  the  amount  specified  in  the  policy  is 
nugatory .2°  So  where  a  policy  Avas  issued  after  the  enactment  of 
a  valued  policy  law  the  insurers,  whether  foreign  or  domestic  com- 
panies, cannot  deny  that  the  value  of  the  property  Avas  that  upon 
which  the  insurance  was  calculated,  nor  can  they  deny  that  the 
amount  of  the  policy  was  but  three-fourths  the  valuation.^  And 
under  a  statute  making  the  amount  of  insurance  Avritten  on  real 
property  conclusive  as  to  its  value,  insurance  companies  cannot 
avoid  their  fixed  liability  for  losses  on  such  property  by  agjreeing 
with  the  owner  to  denominate  it  personal  property.'^ 

The  valued  policy  law  of  Louisiana,  adopted  in  1900,^  conflicts 
with  the  standard  policij,  borrowed  from  the  New  York  standard 
policy  and  made  a  law  in  1808,*  and  repeals  it.  A  valued  policy 
statute  does  not  confer  a  personal  privilege  w^hich  may  be  renounced. 
The  statute  was  adopted  as  a  measure  of  policy,  and  it  controls  as  a 
measure  of  public  interest  and  to  secure  greater  certainty  so  that 
an  attempt  to  limit  the  insurer's  lial)ility  by  exempting  them  from 
liability  for  loss  occasioned  by  ordinance  or  law^  regulating  con- 
struction or  repair  of  buildings  in  conflict  with  the  valued  policy 
statute  cannot  avail  the  insurer.^  And  the  same  limitation  of  lia- 
bility clause  is  held  void  in  Mississippi.^ 

"Burkett   v.    Georgia   Home    Ins.  822,    30    Ins.   L.    J.    181,    under   act 

Co.  105  Teun.  548,  58  S.  W.  848;  act  1894,  Pamph.  acts  Miss.  1894,  p.  51; 

1893.  Code   see.    2592.      See    also   Mitcliell 

^^  Mississippi    Home    Ins.    Co.    v.  v.  Potomac  Ins.  Co.  16  App.  D.  C. 

Barron,   91   Miss.   722,   45    So.   875,  241  (under  Mo.  Laws  1895,  p.  194), 

Code  Miss.  1906,  sec.  2592.  affd.  on  other  points  183  U.  S.  42, 

20  Western       Assurance       Co.      v.  46  L.  ed.  74,  22  Sup.  Ct.  22,  31  Ins. 

Phelps,  77  Miss.  625,  27  So.  745,  29  L.  J.  570. 

Ins.  L.  J.  506 ;   Sachs  v.  London  &  ^  Havens    v.    Germania    Fire    Ins. 

Lancashire  Fire  Ins.   Co.  23  Kv.  L.  Co.  123   Mo.  403,  45   Am.   St.  Rep. 

Rep.  2397,  67  S.  W.  23,  31  Ins.  L.  570,  27  S.  W.  718,  26  L.R.A..  107. 

J.   426    (coinsurance   clause   void   as  ^  Act  no.  135. 

contra  to  act  1893,  Kv.  Stat.  700);  *Aet  no.  105,  of  1898,  art.  3,  see. 

Phcenix  Ins.  Co.  v.  Peak,  20  Kv.  L.  22. 

Rep.  1035,  47   S.  W.  1089   (Insurer  ^  New   Orleans  Real  Estate  Mort- 

cannot  limit  liability  to  three-fourths  gage    &    Securities    Co.    v.    Teutonia 

value    where    total    loss.      Compare  Ins.  Co.  128  La.  45,  54  So.  466,  40 

Hudson  v.  Scottish  Union  &  National  Ins.   L.  J.  999.      Compare  Melancon 

Ins.  Co.  110  Ky.  722,  23  Kv.  L.  Rep.  v.  Phoenix  Ins.  Co.  116  La.  324,  40 

116,   62    S.   W..  513,   30    Ins.   L.   J.  So.  718. 

1023,  an  insurance  on  personal  prop-  As  to  legislature  adopting   stand- 

erty).  ard  form  so  as  not  to  conflict  with 

^  Scottish    Union    &    National    Ins.  valued    policy    law,    see    opinion    of 

Co.  v.  Enslie,  78  Miss.  157,  28  So.  Elliott,  J.,  in  Wild  Rice  Lumber  Co. 

434 


THE  POLICY 


§  163b 


§  163b.  Valued  policy  laws:  three-fourths  value. — A  policy 
fixing  the  amount  at  risk  not  in  excess  of  three-fourths  the  vaUie  of 
the  property  as  required  by  statute  constitutes  a  valued  policy  and 
the  amount  so  fixed  cannot  be  questioned.'  So  a  statute  which  pro- 
hibits an  insurer  from  taking  a  risk  at  a  ratio  greater  than  three- 
fourths  of  the  value  of  the  property,  and  precludes  questioning  such 
value,  does  not  estop  the  insurer  from  proving  the  value  of  insured 
mercantile  stock  at  the  time  of-  loss,  but  only  precludes  denying 
their  specified  value  at  the  time  the  insurance  was  taken.^  And  the 
same  rule  applies  where  the  policy  covers  an  engine  and  dynamo  on 
a  power  house,  so  attached  as  to  be  part  of  the  realty  and  not  per- 
sonal property,  the  items  not  being  separately  insured  but  insured 
together  as  a  lump  sum.^  And  the  amount  fixed  may  be  reduced 
by  showing  depreciation,  decay  or  salvage ;  "  and  a  policy  clause 
limiting  recovery  to  the  cash  value  at  the  time  of  loss,  is  valid,  and 
an  arbitration  clause  is  a  condition  precedent ;  "  such  a  statute  does 
not  conflict  with  an  enactment  which  prohibits  requiring  insured 

V.  Koyal  Ins.  Co.  99  Minn.  190,  108    Stat.    1899,    sec.    7979;    Stevens    v. 
N.  W.  871,  35  Ins.  L.  J.  824.  Norwich    Union    Fire    Ins.    Co.    120 

Standard  policy  in  South  Dakota  Mo.  App.  88,  96  S.  W.  684;  City  of 
is  a  strictly  valued  one  as  to  real  De  Soto  v.  American  Guaranty  Fund 
property  when  wholly  destroyed.  Mut.  Fire  Ins.  Co.  102  Mo.  App.'  1, 
Lawver  v.  Globe  Mutual  Ins.  Co.  25  74  S.  W.  1.  And  it  is  unnecessary 
S.  Dak.  549,  127  N.  W.  615,  39  Ins.  to  prove  such  value.  Hilburn  v. 
L   J   1588  Phoenix  Ins.  Co.  140  Mo.  App.  355, 

'« Palatine  Ins.  Co.  Ltd.  v.  Nunn,  124  S.  W.  63;  Mo.  Rev.  Stat.  1899, 
99  Miss.  493,  55  So.  44;  Code  1906,  sec.  7969;  Howerton  v.  Iowa  State 
sec.  2592.  Ins.  Co.  105  Mo.  App.  575,  80  S.  W. 

'Gibson  v.  Missouri  Town  Mu-  27;  Rev.  Stat.  1899,  sec.  7979.  And 
tual  Ins.  Co.  82  Mo.  App.  515,  Mo.  it  is  sufficient  to  allege,  in  an  action, 
Laws  1895,  p.  194.  See  §§  3461  the  amount  so  fixed  by  the  policy, 
et  seq.  herein.  Bode  v.  Firemens  Ins.  Co.  103  Mo. 

*  Surface  v.  Northwestern  Nation-  App.  287,  77  S.  W.  116.  Compare 
al  Insurance  Co.  157  Mo.  App.  570,  Farmers'  Bank  v.  Manchester  Assur. 
139  S.  W.  262;  Rev.  Stat.  1909,  sec.  Co.  106  Mo.  App.  114,  80  S.  W.  299. 
7030.  ^°  Mitchell  v.  Potomac  Ins.  Co.  16 

8  Rogers  v.  Connecticut  Fire  Ins.  App.  D.  C.  241  (Mo.  Laws  1895,  p. 
Co.  157  Mo.  App.  671,  139  S.  W.  194).  Aff'd  on  other  points,  183  U. 
265,  40  Ins.  L.  J.  1776.  The  company  S.  42,  46  L.  ed.  74,  22  Sup.  Ct.  22, 
under  the  statute  "estopped  itself  31  Ins.  L.  J.  570;  Stevens  v.  Nor^ 
from  aftei-wards  asserting  that  the  wich  Union  Fire  Ins.  Co.  120  Mo. 
total  insurance  exceeded  75  per  cent  App.  88,  96  S.  W.  684;  Rev.  Stat. 
of  the  value  of  the  property  at  the  1899,  sec.  7979;  Gibson  v.  Missouri 
lime  the  policy  wa.s  issued"  per  John-  Town  Mutual  Ins.  Co.  82  Mo.  App. 
son,  J.  Statute  fixes  value  of  prop-  515;  Laws  1895,  p.  194. 
erty  at  time  of  contract  and  is  "  Stevens  v.  Norwich  Union  Fire 
conclusive.  Gragg  &  Gragg  v.  North-  Ins.  Co.  120  Mo.  App.  88,  96  S.  W. 
western  National  Ins.  Co.  132  Mo.  684;  Mo.  Rev.  Stat.  1899,  sec.  7979. 
App.    405,    111    S.    W.    1184;    Rev. 

435 


§§  163c-163e  JOYCE  ON  INSURANCE 

beoomino;  a  coinsurer;^^  nor  preclude  oilier  insurance  up  to  the 
miionnt  liiniterl.^' 

§  163c.  Valued  policy  laws:  overvaluation:  fraudulent  valuation. 
— Even  in  case  of  i)olioies  under  the  valued  |)olicy  law  where  an- 
other statute  provides  that  misrepresentations  must  be  material  to 
the  risk  or  contribute  to  the  loss  to  avoid  the  policy  it  is  no  defense 
that  insui'od  misrei^rasented  the  value. ^*  And  a  policy  is  valid 
though  the  property  is  overinsured,  under  the  valued  policy  law  of 
]\Iississippi.^^  But  subsequent  insurance  to  a  larger  value  than 
under  a  prior  policy  contrary  to  the  express  terms  of  a  statute  voids 
the  policy.^®  So  a  statute  requiring  insurer  to  state  in  the  policy  the 
insurable  value  of  the  property  insured  and  that  the  sum  so  fixed 
shall  constitute  the  measure  of  damages  in  case  of  loss,  and  provid- 
ing also  that  the  insurer  shall  thereby  be  estopped  that  the  value  of 
the  property  at  the  time  of  insuring  was  worth  the  amount  so  fixed, 
•  does  not  take  away  from  the  insurer  the  right  to  plead  that  the  in- 
sured by  fraud  procured  the  insurable  value  to  l)e  fixed  at  an 
excessive  amount.^'  And  gross  overvaluation,  fraudulent  misrepre- 
sentation, and  concealment  may  be  alleged  as  a  ground  for  contest- 
ing the  valuation  notwithstanding  an  incontestable  clause  of  a 
valued  policy  law.^^ 

§  163d.  Valued  policy  law:  property  destroyed  by  more  than  one 
tire. — The  statute  applies  none  the  less  because  the  property  is  de- 
stroyed by  two  fires  instead  of  one,  and  if  the  actual  damages  for 
the  partial  loss  occasioned  by  the  first  fire  are  paid,  and  the  prop- 
erty is  thereafter  wholly  destroyed,  the  amount  lixed  in  the  policy 
is  conclusive  and  the  value  of  the  remainder  is  the  policy  valuation 
less  the  actual  amount  paid  for  loss  by  the  first  fire.^^ 

§  163e.  Valued  policy  law:  real  and  personal  property. — The 
Delaware  act  confines  the  valuation  to  real  property  but  if  realty  and 

12  Surface    v.     Northwestern     Ins.  ding,  47  Fla.  228,  67  L.R.A.  518,  37 

Co.   157   Mo.   App.   570,   139   S.   W.  So.  02;  act  approved  IMav  31,  1899, 

262;  Mo.  Rev.  Stat.  1909,  sec.  7030.  c.  4677,  p.  33. 

12  Busli  V.  Missovari   Town  Mutual  ^^  Home  Ins.  Co.  v.  Virginia-Caro- 

Ins.  Co.  85  Mo.  App.  155.  lina  Chemical  Co.  (U.  S.  C.  C.)  109 

1*  Co-Operative  Ins.  Assoc,  of  San  Fed.  681.     See  §  162  lierein. 

Angelo  V.  Rav   (1911)   —  Tex.  Civ.  ^^  Lancashire     Fire     Ins.     Co.     v. 

App.  — ,  138 "S.  W.  1122;  acts  Tex.  Bush,   60   Neb.   116,  82   N.  W.  313, 

1903,  c.  09.     See  §  162  herein.  29  Ins.  L.  J.  1028 ;  Comp.  Stat.  Neb. 

15  Mississippi    Home    Ins.    Co.    v.  1899,  c.  43,  sec.  43. 

Barron,   91    Miss.    722,   45    So.    875.  Total  loss  under  policy  issued  after 

See  §  162  herein.  loss  by  fire  and  before  building  re- 

1^  Thurber    v.    Roval    Ins.    Co.    1  paired.     See  §  3030  herein. 

Marv.  (Del.)  251,  40  Atl.  1111.  Total    loss    subseriuent    to    partial 

1' Hartford  Fire  Ins.  Co.  v.  Red-  loss;  marine  risk.    See  §  3016  herein. 

436 


THE  POLICY  §  163e 

personalty  are  valued  specifically  the  contract  is  so  far  divisible  as 
not  to  be  invalid  as  to  the  personal  property.^"  The  Kentucky 
valued  policy  law  of  1893,  act  1893,  sec.  700,  Ky.  Stat.,  ap- 
plies only  to  real  estate  and  has  no  reference  to  a  policy  up- 
on personal  property.^  But  a  valued  policy  law  as  to  real 
estate  does  not  apply  to  a  three-fourths  value  stipulation  in 
a  policy  on  personal  property.^  In  Louisiana  it  is  decided 
that  only  property  immovable  by  nature  is  within  the  valued  pol- 
icy law  of  that  state.^  In  Missouri  it  is  held  that  the  direct  provi- 
sions of  the  statute  *  apply  only  to  real  property  and  not  to  personal 
property,*  and  also,  that  a  stipulation  that  property  insured  shall  be 
considered  personal  property  cannot  change  the  nature  of  the  prop- 
erty so  as  to  take  it  out  of  a  statute  making  the  amount  of  insur- 
ance written  on  such  property  conclusive  as  to  its  value,^  and 
that  buildings  and  machinery  placed  on  a  mining  lease  are  not  real 
property  within  the  statute.'''  But  an  engine  and  dynamo  in  a 
power  house  are  covered  when  so  attached  as  to  be  part  of  the  realty 
and  not  personal  property.*  And  an  uncompleted  structure  may 
be  regarded  as  a  building.^  But  it  is  also  held  that  the  statute  of 
1899  applies  to  personal  as  well  as  to  real  property  ^°  and  the  valued 
policy  law  of  that  state  applies  in  favor  of  a  builder,  who,  as  such 
has  insured  a  building  being  constructed  by  him  under  a  contract 
with  the  owners  of  real  property  in  which  real  estate  said  builder 

20Thurber    v.    Royal    Ins.    Co.    1  Co. .  102  Mo.   App.   1,  74   S.   W.   1; 

Marv.    (Del.)    251,  40  Atl.  1111.  Millis  v.  Scottish  Union  &  National 

1  Hudson  v.  Scottish  Union  &  Na-  Ins.  Co.  95  Mo.  App.  211,  68  S.  W. 
tional  Ins.  Co.  110  Ky.  722,  23  Kv.  1066. 

L.  Rep.  116,  62  S.  W.  513,  30  Ins.  ^  Havens    v.    Germania    Fire    Ins. 

L.    J.    1023;    Germania   Ins.    Co.    v.  Co.  123  Mo.  403,  26  L.R.A.  107,  45 

Ashby,    112    Ky.    303,    99    Am.    St.  Am.  St.  Rep.  570,  27  S.  W.  718. 

Rep.  295,  65  S.  W.  611.  '  Millis  v.  Scottish  Union  &  Nation- 

2  Hudson  V.  Scottish  Union  &  Na-  al  Ins.  Co.  95  Mo.  App.  211,  68  So. 
tional  Ins.  Co.  110  Ky.  722,  23  Kv.  1066. 

L.  Rep.  116,  62  S.  W.  513,  30  Ins.  *  Rogers  v.   Connecticut   Fire   Ins. 

L.  J.  1023;  Kv.  Stat.  sec.  700;  case  Co.   157   Mo.   App.   671,   139    S.   W. 

decided  1901.  265,  40  Ins.  L.  J.  1776. 

^  Melancon  v.  Phoenix  Ins.  Co.  116  ^  Bode  v.   Firemen's   Ins.   Co.   103 

La.   324,  40   So.   718;   Act  No.   135,  Mo.  App.  287,  77  S.  W.  116. 

of   1900,   p.   209.      But   compare   as  ^°  Hilburn  v.  Phoenix  Ins.  Co.  140 

to  ett'eet  in  relation  to  standard  pol-  Mo.   Ai)p.  355,  124  S.  W.  63;   R<>v. 

icy  law    (act   no.   lO.i,  of   1908,   art.  Stat.  1899,  sec.  7969;  Gragg  &  Grair<? 

3,  sec.  22)  ;  New  Orleans  Real  Estate  v.  Northwestern  National  Ins.  Co.  132 

Mortgage   &   Securities    Co.   v.   Teu-  Mo.  App.  405,  111  S.  W.  1184,  Rev. 

tonia   Ins.    Co.    128   La.   45,   54    So.  Stat.    1899,    sec.    7979    (Ann.    Stat. 

466,  40  Ins.  L.  J.  999.  1896,    p.    3973),    prohibiting    taking 

^  Rev,  Stat.  1899,  sees.  7969,  7970.  risks    on    any    property    at    a    rale 

*  City    of    De    Sota    v.    American  greater  than   three-fourths  its  value. 

Guaranty    Fund    Mutual    Fire    Ins.  See  also   Rev.   Stat.  1909,  sec.  7030. 
*                                         437 


§§  163f,  163g  JOYCE  ON  INSURANCE 

has  no  interest.^^  Again,  under  an  Ohio  decision,  the  rule  as  to 
the  eonchisiveness  of  the  amount  stated  in  a  policy  under  the  val- 
ued policy  law  has  heen  a])plied  to  an  insurance  of  a  life  estate  in  a 
huilding,  even  though  the  policy  amount  was  gTeater  than  the  life 
estate  was  wortli.^*^  It  is  held  in  Texas  that  property  will  be  prima 
facie  regarded  as  realty  where  the  description  in  the  policy  shows 
that  it  was  so  considered  under  a  statute  making  the  amount  stated 
in  the  policy  conclusive  except  insurance  on  personal  property.^^ 
In  Washington  the  valued  policy  law  does  not  apply  to  insurance 
on  personal  property/*  and  the  West  Virginia  statute  applies  to 
real  estate.^* 

§  163f.  Valued  policy  law:  improvements  upon  real  property: 
loss  of  rents  not  covered. — A  valued  policy  law  providing  that  the 
amount  of  insurance  written  in  a  policy  insuring  improvements 
upon  real  property  shall,  in  case  of  a  total  loss,  be  taken  conclusive- 
ly to  be  the  true  value  of  the  property  insured,  does  not  apply  to  a 
policy  which  insured  against  the  loss  of  rents  through  the  destruc- 
tion of  such  improvements,  even  though  such  a  policy  insures  real 
property  within  the  meaning  of  that  term  as  used  in  the  statut^.^^ 

§  163g.  Valued  policy  laws:  mutual  companies:  mutual  benefit 
societies. — A  statute  limiting  the  amount  of  risk  which  the  insurer 
may  take  to  a  ratio  not  greater  than  three  fourths  of  the  value  of 
the  property  applies  to  mutual  insurance  companies  even  though 
such  companies  are  by  another  statute  exempt  from  the  operation 
of  the  general  insurance  laws.^''     And  the  valued  policy  law  of 

"Property"    under    said    statute    in-   men's  Ins.  Co.  55  W.  Va.  261,  47  S. 

eludes  both  real  and  personal.    How-   E.  94. 

erton  v.  Iowa  State  Ins.  Co.  105  Mo.       ^^  Amusement     Syndicate     Co.     v. 


in    conflict    therewith.      But    see    §  Gen.    Stat.    1909,    sees.    4260-426.3; 

163b  herein.  Laws  1893,  e.  102.)     See  §§  13a,  168 

^^  King    V.    Phoenix    Ins.    Co.    195  herein. 

Mo.  290,  113  Am.   St.  Rep.  678,  92  i'^  Mitchell  v.  Potomac  Ins.  Co.  16 

S.  W.  892.  App.  D.  C.  241  (Laws  Mo.  1895,  p. 

12  Hubbard  v.  Winshel's  Exetr.  6  194;  Laws  Mo.  1895,  p.  200)  aflf'd  on 
Ohio  Nisi  P.  Rep.  (41  Wklv.  Law  other  points  183  U.  S.  42,  46  L.  _ed. 
Bull.)  249,  Rev.  Stat.  see.  3643  (Rev.  74,  22  Sup.  Ct.  22,  31  Ins.  L.  J.  5/0; 
Stat.  1906,  sec.  3643).  Gibson  v.  Missouri  Town  Mutual  Ins. 

13  Co-operative  Assoc,  v.  Hubbs,  53  Co.  82  Mo.  App.  515;  Laws  1895,  p. 
Tex.  Civ.  App.  68,  115  S.  W.  670;  194. 

Tex.  Rev.  Stat.  1895,  art.  3089.  Under  the  Missouri  statute  of  1889, 

1*  Bright  v.  Hanover  Fire  Ins.  Co.  Mo.  Rev.  Stat.  sees.  589/,  .3898,  town 

48  Wash.  60,  92  Pac.  779 ;  Laws  1899,  mutual     insurance    companies    have 

p.  332,  c.  145,  sec.  2.  been  exempt  from  the  provisions  of 

1*  Ritchie    County    Bank   v.    Fire-  the   statute  which   fixes  liability  for 

438 


THE  POLICY  §  l(>i 

1895,  of  Ceorgia  "  requiring  "all  insurance  companies  to  pay  the 
full  amount  of  loss"  etc.,  applies  to  purely  mutual  fire  insurance 
companies  as  they  are  not  exempted. ^^  So  the  valued  policy  law 
of  Nebraska  applies  to  mutual  companies  even  though  incorporated 
under  a  special  act  of  later  date.^" 

Under  the  Missouri  statute  of  1899  ^  the  insurer  is  required  to 
specify  in  the  policy  or  certificate  the  exact  amount  which  it  prom- 
ises to  pay  and  it  becomes  thereby  obligated  to  pay  the  beneficiary 
the  specilied  amount  unless  the  contract  shall  have  become  void.^ 

§  164,  Valued  policies:  partial  loss. — In  the  case  of  a  partial 
loss  under  a  valued  poHcy  the  valuation  may  be  inquired  into  to 
a  certain  extent  ^  merely  for  the  purpose  of  ascertaining  how  it 
may  be  applied,  rather  than  for  the  purpose  of  setting  it  aside.* 
So  in  a  case  in  Mif^sissippi,^  the  partial  loss  was  estimated  upon  the 
basis  of  the  valuation  in  the  policy,  the  loss  tliere  being  held  to  be 
the  difference  between  the  agreed  value  and  the  damaged  value, 
adding  the  costs  and  expenses.®  That  the  loss  should  be  adjusted 
so  far  as  practicable  upon  the  basis  of  the  valuation  seems  to  be 
the  settled  doctrine.'''  It  is  held  that  in  ca.'^e  of  a  partial  loss  under  a 
valued  policy  on  a  vessel  the  insurer  pays  that  proportion  of  the 

property    destroyed    at    the    amount  East,  327,  13  Eng.  Rul  Cas.  673;  per 

stated    in    the    policy.      Warren    v.  Lord  Ellenborough. 

Bankers  &  Merchants  Town  Mutual  *  Forbes  v.  Aspinall,  13  East,  327, 

Ins.  Co.  72  Mo.  App.  188.  13    En^.    Rul.    Cas.    G73,    per   Lord 

18  Ga.    Civ.    Code    see.    2100    (act  Ellenborough.      See   Howell   v.   Pro- 

Nov.  23,  1895).  tection  Ins.   Co.  7  Ohio,  287. 

1^  Word   v.   Southern  Mutual  Ins.  ^  Natchez   Ins.    Co.   v.   Buckner,   4 

Co.  112  Ga.  585,  37  S.  E.  897.  How.  (5  Miss.)   63. 

20  Farmers  Mutual  Ins.  Co.  v.  Cole,  6  gpg  Stanton  v.  Natchez  Ins.  Co. 

4  Neb.  (Unof.)  130,  93  N.  W.  730,  5  How.  (6  Miss.)  744  Le  Pyre 
Comp.  Stat.  Neb.  1899,  e.  43,  sec.  43.  y  Parr  2  Vem  716 

iRev.  Stat.  1899,  sec.  7903.  '70  pi  mi-  t  10m      i, 

2  a       1-     „  M  rl  R     fl  Phillips  on  Ins.  sec.  1203,  who 

,      jr..      '^  ■    ^■-i.ii.^T.f  ^"^  *    ^^  r?no'   says:      "The  valuation   is  to  be  ad- 
hood  of  America,  126  Mo.  App.  693,   .  ^    ,    ,  ,    an,)lied    so   far  as   it 
105  S.  W.  685  (amount  due  from  as-   -^      .^.^eticable,  in  settling  partial  as 
sessment    company    a    question    for    ^^/^  ^^  ^^^^,  j^^^^^  „ 
court ) . 

3  Watson  V.  Insurance  Co.  of  North  ^  See  Forbes  v^  Manufacturers'  Ins. 
America,  3  Wash.  (U.  S.  C.  C.)  1,  ^o.  1  Gray  (6/  Mass.)  3/1;  Lewis 
Fed.  Cas.  17,286;  Forbes  v.  Manu-  v.  Rucker,  2  burr.  116/,  14  Eng.  Rul. 
facturers'  Ins.  Co.  1  Gray  (67  Mass.)    C'^^-  "^^• 

375;  Clark  v.  United  Fire  &  Marine  Mr.  Marshall  says  (2  Marshall  on 

Ins.  Co.  7  Mass.  365,  5  Am.  Dec.  50;  Ins.     [ed.     1810]     *631)  :       "Where 

Murray  v.  Ins.  Co.  of  Pennsylvania  there  is  a  partial  loss  upon  a  valued 

2  AVas'h.  (U.  S.  C.  C.)  186,  Fed.  Cas.  policy,   but   the   value   in   the   policy 

No,  9,961;  Harris  v.  Eagle  Fire  Co.  exceeds   the   interest  of  the  assured, 

5  Johns.  (N.  Y.)  368;  Lewis  v.  it  is  the  constant  usage  to  adjust  a 
Rucker,  2  Burr.  1170,  14  Eng.  Rul.  partial  loss  in  the  same  manner  as 
Cas.    215;    Forbes    v.    Aspinall,    13  it  the  policy  were  an  open  one,  and 

439 


§§  l(io,  166  JOYCE  ON  INSURANCE 

actual  loss  as  the  sum  insured  sustains  to  the  value  of  the  vessel.^ 
If  a  valued  policy  law  provides  that  in  cases  of  partial  loss  the  in- 
surer's liability  shall  not  exceed  the  actual  loss  of  the  party  insured 
the  insured  is  obligated  to  pay  insured  the  actual  damage  he  sus- 
tains.^ 

§  165.  Valued  policy:  pro  rata  recovery. — Although  a  valued 
policy  fixes  the  price,  this  is  not  an  admission  that  so  much  is  at 
risk,^°  as  where  by  mistake  or  design  only  a  part  of  the  goods  have 
been  shipped,  a  recovery  can  only  be  had  of  such  proportion  of  the 
valuation  as  the  goods  at  risk  bear  to  the  whole  value."  So  the 
amount  of  a  bottomry  bond  may  be  deducted  from  the  real  value,^^ 
and  if  one  insures  property  expected  to  be  on  board  ship  to  a  certain 
amount  upon  a  valued  policy,  and  much  less  is  in  fact  shipped,  he 
is  entitled  to  recover,  in  case  of  loss,  a  proportion  pro  rata  notwith- 
standing the  valuation. ^3 

§  166.  Valued  policies:  "valued  at"  not  conclusive. — Usually  in 

a  valued  policy  the  phrase  appears  ''valued  at ,"  and  the  blank 

being  filled,  the  agreed  value  is  settled.  But  the  policy  remains 
open  if  this  blank  is  unfilled  and  no  valuation  of  the  subject  insured 
is  specified  in  the  indorsement;  ^*  and  since  the  question  of  inten- 
tion controls,  the  policy  must  disclose  an  intent  to  make  it  a  valued 
one,^*  for  the  words  ''valued  at"  are  not  in  themselves  conclusive. 
So  in  a  case  wdiere  the  policy  contained  this  clause:  "The  said  goods 
and  merchandise  hereby  insured  are  valued  at as  indorsed ;  " 

the   computation    must    therefore   be  ^^  Haven  v.  Gray,  12  Mass.  76. 

by  the  real   interest   on   board,   and  "  Wolcott  v.  Eagle  Ins.  Co.  4  Pick, 

not  by  the  value  in  the  polify."  (21  Mass.)   429;  Tobin  v.  Hartford, 

Under  a  Massachusetts  decision  it  17  Com.  B.  N.  S.  528.     See  Brook  v. 

seems    that    the    valuation    may    be  Louisiana    Ins.    Co.    4   Mart.    N.    S. 

opened:      Clark    v.    United    Fire    &  (La.)   640,  681;  Atlantic  Ins.  Co.  v. 

Marine  Ins.  Co.  7  Mass.  365 ;  Brewer  Lunar,    1    Sand.    Ch.     (N.    Y.)    91; 

V.  American  Ins.  Co.  123  Mass.  78.  Patrick    v.    Eames,    3    Camp.    441; 

8  Western    Assur.    Co.    v.    South-  Forbes  v.  Aspinall,  13  East.  327,  13 

western  Transp.  Co.  68  Fed.  923,  16  Eng.  Rul.  Cas.  673;  Denoon  v.  Home 

C.    C.    A.    65.      See   §§    3452,    3075,  &  Colonial  Assur.  Co.  L.  R.  7  C.  P. 

3077  et  seq.  herein.  341. 

^  Sachs    V.    London    &    Lancashire  ^^  Watson  Ins.  Co.  of  North  Ameri- 

Fire  Ins.   Co.  23  Kv.  L.  Rep.  2397,  ca,  3  Wash.    (U.   S.   C.  C.)    1,  Fed. 

67    S.    W.    23,    31    Ins.    L.    J.    426;  Cas.  17,286. 

Lancashire  Fire  Ins.  Co.  v.  Bush,  60  ^^  Alsop  v.  Insurance  Co.  1  Sumn. 

Neb.  116,  82  N.  W.  313,  29  Ins.  L.  (U.  S.  C.  C.)  451,  Fed.  Cas.  262. 

J.  1028  (if  a  partial  loss  occurs  un-  ^^  Snowden   v.    Guion,   101    N.    Y. 

der   a   valued   policy   the   insured   is  458.  46/.  5  N.  E.  322.  case  reverses 

entitled  to  actual  damages  only,  be-  18   Jones   &    S.    (N.   Y.)    137.      See 

cause   the   statute   has   not   tixed   the  Hemmenway  v.  Eaton,  13  Mass.  108. 

value    of    any    part    of   the   insured  ^^  Cox  v.  Charleston  Ins.  Co.  4  La. 

property).  0.  S.  (2  La.  559)  289. 

440 


THE  POLICY  §  167 

the  blank  was  not  filled  up.  It  wa>s  stipulated  therein  as  follows: 
"No  shipment  to  be  considered  as  insured  until  approved  and  in- 
dorsed on  this  policy  by  the  assurer.  ,  .  .  Indorsements  val- 
ued at  the  same,  provided  they  do  not  vary  from  the  cost  more 

than per  cent,"  and  it  was  held  that  the  policy  was  an  open, 

not  a  valued  one ;  that  the  statement  in  the  indorsement  of  the  sum 
insured  was  not  a  valuation.^®  And  where  the  policy  contained  the 
following  words:  ''The  said  goods  and  merchandise  are  valued  at 
eighteen  francs,  valued  at  four  dollars  and  forty-four  cents,"  it 
was  held  to  be  an  open  policy,  these  words  merely  ascertaining  at 
what  rate  the  value  of  the  cargo  paid  for  in  francs  was  to  be  re- 
duced into  our  money.^'^  And  a  policy  enumerating  certain  articles 
with  figures  indicating  dollars  placed  opposite  to  each,  does  not 
constitute  a  valued  policy. ^^ 

§  167.  Valued  policies:  prior  insurance. — Where  insurance  was 
effected  on  a  vessel,  valuing  her  at  the  amount  insured,  being  four 
thousand  dollars,  and  afterward  another  policy  was  effected  to  the 
amount  of  four  thousand  dollars,  without  notice  of  the  prior  insur- 
ance, and  a  partial  loss  occurred  which  the  phiintiffs  claimed  as  a 
charge  upon  the  whole  amount  insured  in  the  second  policy,  it  was 
held  that  defendants  were  liable  for  as  much  of  the  agreed  value  of 
the  vessel  as  was  not  covered  by  the  prior  insurance,  being  to  the 
extent  of  two  thousand  dollars,  and  that  it  was  not  necessary  to 
give  notice  of  the  first  insurance  to  the  defendants.^^  In  another 
case  it  is  held  that  on  a  double  insurance,  if  the  first  policy  be  open 
and  the  other  valued,  and  the  insured  cedes  to  the  insurers  on  the 
open  policy  as  much  as  they  insured,  and  obtains  payment  as  for  a 
total  loss,  and  he  has  short  property  on  board,  he  can  only  recover 
on  the  valued  policy  for  the  loss  of  the  property  he  could  cede  on 
the  same.^°  In  a  Massachusetts  case  the  question  arose  whether  the 
goods  were  covered  by  a  valued  policy  or  an  open  one.  Under 
the  valued  policy  goods  were  included  which  were  shipped  between 
the  first  day  of  February  and  the  fifteenth  day  of  July,  the  second 
policy  to  cover  goods  shipped  subsequently  to  July  14th  and  prior 
to  October  loth.  The  goods  in  question  were  shipped  on  the  15th 
of  July,  and  the  court  held  that  they  were  not  within  the  protec- 
ts Snowden  V.  Guion,  101  N.  Y.  iniurray  v.  Insurance  Co.  of 
458,  5  N.  E.  322.  See  §  158  herein.  Pennsylvania,  2  Wash.  (U.  S.  C.  C.) 
"Ogden  V.  Columbia  Ins.  Co.  10  186,  Fed.  Cas.  9961.  See  §  2489 
Johns.  (N.  Y.)  273.  See  §  158  herein, 
herein.  *  2°  Crais?  v.  Murgatroyd,  4  Yeates 

"Luce  V.  Springfield  Fire  &  Ma-    (Pa.)  161. 
rine  Ins.  Co.  1  Flip.    (U.  S.  C.  C.) 
281,  Fed.  Cas.  8,589. 

441 


§  168  JOYCE  ON  INSURANCE 

tion  of  the  first  policy.^  Where  a  cargo  is  insured  by  diverse  pol- 
icies, in  some  of  which  the  rate  of  exchange  is  fixed  at  which  tlie 
prime  cost  of  the  cargo  shall  be  valued,  in  ascertaining  the  amount 
of  the  interest  of  the  insured,  upon  settlement  of  those  policies  in 
which  the  rate  of  exchange  is  fixed,  the  whole  cargo  is  to  be  valued 
at  that  rate,  without  regard  to  the  rate  by  which  the  values  were 
ascertained  in  the  other  policy.^ 

§  168.  Valued  policies:  what  are. — Life  insurance  policies  are. 
valued  in  that  the  amount  is  fixed  as  the  sum  to  be  paid,  without 
deduction,  in  case  of  loss,  or  the  happening  of  the  specified  con- 
tingency,^ and  in  so  far  as  mutual  benefit  certificates  resemble  life 
policies,'  the  same  rule  applies  as  it  does  also  in  accident  policies 
where  a  certain  amount  is  to  be  paid  in  case  of  death  resulting  from 
injury.  So  every  policy  on  profits  is  necessarily  a  valued  policy,'* 
and  policies  on  ships  are  generally  valued.^  When  a  policy  recites 
that  the  amount  insured  is  not  more  than  three  fourths  of  the  value 
of  the  property,  ''as  appears  by  the  proposal  of  the  insured,"  and  the 
application  of  the  insured  contains  a  valuation  of  the  property,  the 
policy  is  a  valued  one.^  AVhere  a  running  policy  of  marine  insur- 
ance contained  a  stipulation,  "No  shipments  to  be  considered  as 
insured  until  approved  and  indorsed  on  this  policy  by  this  com- 
pany," the  valuation  to  be  fixed  by  the  indorsement,  it  was  held  that 
the  policy  was  not  an  open,  but  a  valued  one ;  that  each  indorse- 
ment of  a  shipment  and  the  valuation  thereof  constituted  a  separate 
and  distinct  contract  of  insurance,  and  that  the  contract  was  not 
complete,  as  to  any  specific  shipment,  until  the  indorsement  of  value 
on  the  policy.' 

A  policy  covering  loss  caused  by  lightning  is  held  not  to  be  within 
a  valued  policy  law.* 

1  Atkins  V.  Bovlstoii  Fire  &  Ma-  *  Patapseo  Ins.  Co.  v.  Coulter,  3 
rine  Ins.  Co.  5 "  Mete.  (46  Mass.)  Pet.  (28  U.  S.)  222,  239,  7  L.  ed. 
439  659;    Riley   v.    Hartford   Ins.    Co.   2 

2  Pleasants  v.  Maryland  Ins.  Co.  8  Conn.  368 ;  Mumtord  v.  Hallett,  1 
Craneh  (12  U.  S.)  55,  3  L.  ed.  486.  Johns.  (N.  Y.)  433.  See  Eyre  v. 
(This  was  not  a  valued  policy.)  Glover,    16    East,    218;    Barclay    v. 

3  Connecticut  Mutual  Life  Ins.  Co.  Cousins,  2  East,  544;  2  Phillips  on 
V.    Schaefer,   94  U.   S.  457,  463,  24  Ins.    (3d  ed.)    1209. 

L.  ed.  251;  per  Bradley,  J. ;  Cammack       *  Examine  14  Am.  &  Eng.  Ency.  of 

V.  Lewis,  15  Wall.  (82  U.  S.)  643,  21   Law,  340. 

L.    ed.    244:    Chisholm    v.    National       ^Nichols   v.   Fayette   Mutual  Fire 

Capital  Life  Ins.  Co.  52  Mo.  213,  215,   Ins.  Co.  1  Allen  (83  Mass.)  6.3. 

14  Am.  Rej).  414.  416,  per  Wagner,       ''  Schaefer     y.     Baltimore     Manna 

J.;   St.  John  y.  American  Life^Ins.   Ins.  Co.  33  Md.  109. 

Co.  2  Duer   (N.  Y.)    419,  13  N.  Y.       » Katjleman     v.     Fire     Assoc,     of 

38,   64  Am.   Dec.  529,   per  Crippen,   Phila.  /9  Mo.  App.  447,  2  Mo.  App. 

J.;   Miller   v.   Eagle   Life   &   Health   Repr.  487. 

Ins.  Co.  2  E.  D.  Smith  (N.  Y.)  268. 

442 


THE  POLICY  §§  l(i8a-170 

§  168a.  Rent  insurance  policy  analogous  to  valued  policy. — 
A  policy  insuring  against  loss  of  rent  may  validly  stipulate  for  a 
method  of  ascertaining  and  computing  the  loss  without  violating 
in  any  way  the  principle  that  insurance  shall  furnish  only  indem- 
nity against  loss.  And  w^here  it  is  stipulated  that  the  loss  of  rents 
shall  be  deemed  to  be  the  amount  of  rentals  that  would  be  collected 
by  the  insured  during  the  period  required  to  restore  the  building  to 
a  tenantable  condition,  assuming  that  the  rentals  would  have  con- 
tinued to  be  the  same  in  amount  as  at  the  time  of  fire,  excluding  all 
elements  except  those  of  actual  rentals  at  the  time  of  fire  and  the 
time  required  for  rcpaii'.  in  such  a  case  the  policy  is  analogous  to 
a  valued  policy  in  so  far  as  it  prescribes  a  method  of  determining 
as  between  the  parties  the  amount  of  loss.^ 

§  169.  Mixed  policy  defined. — Sometimes  a  policy  may  be  open 
as  to  certain  proi)erty  and  valued  as  to  other  property,  as  where  a 
policy  is  for  ten  thousand  dollars,  being  on  a  vassel  and  freight,  and 
the  vessel  is  Talued  at  eight  thousand  dollars,  but  the  blank  for 
valuation  of  the  freight  is  not  filled.  It  is  a  mixed  policy,  open  as 
to  the  freight,  and  valued  as  to  the  vessel ;  ^°  or  as  in  case  of  a  house 
and  furniture,  the  house  being  valued  and  the  furniture  not/^ 
although  in  this  case  the  valuation  was  held  not  conclusive;  or  u 
policy  may  be  mixed  as  to  the  duration,  as  where  it  sets  out  the 
termini  but  limits  the  risk  by  time.^^  AVhere  a  policy  insured  a 
vessel  for  a  specified  time  for  a  particular  voyage  outward,  after  the 
voyage  was  made  bui  before  the  time  had  expired  the  same  under- 
writer insured  the  vessel  for  the  return  voyage,  by  a  certificate  made 
"under  and  subject  to  the  conditions  of  the  existing  policy,"  it  was 
held  that  no  liability  accrued  for  a  loss  occurring  after  the  time 
specified  in  the  original  policy. ^^ 

§  170.  Time  policy  defined. — A  time  policy  limits  the  duration 
of  the  risk  by  definite  periods  of  time  by  fixing  its  beginning  and 
end ;  "  as  where  a  policy  was  effected  December  17,  1845,  for  one 

^Whitney  Estate  Co.  v.  Northern  ^^14  Am.  &   Eng.   Ency.  of  Law, 

Assurance     Co.     155     Cal.     521,    2.3  335.     See  Manly  v.  United  Marine  & 

L.R.A.(N.S.)    123,  101  Pae.  911,  18  Fire  Ins.  Co.  9  Mass.  85;  Martin  v. 

Am.  &  Eng.  Ann.  Cas.  512.     See  §§  Fishing  Ins.  Co.  20  Pick.   (37  Mass. 

13a,  163f  herein.  389;  1  Arnould  on  Marine  Ins.   (6th 

On  construction  of  policy  or  con-  ed.)  373;  Id.  (8th  ed.  Hart  &  Simey) 

tract  insuring  against  loss  of  rents,  p.  13,  sec.  9;  17  Earl  of  Halshury's 

see  notes  in   16  L.K.A.(N.S.)    1055;  Laws  of  England,  p.  383,  sec.  759. 

23     L.R.A.(N.S.)     123;     47     L.R.A.  Attachment  and  duration  of  risk: 

(N.S.)  296,  and  L.R.A.r916F,  694.  mixed  policy.     See  §  1490  herein. 

10  Riley  v.  Hartford  Ins.  Co.  2  ^^  Pitt  v.  Phtt'nix  Ins.  Co.  10  Dalv 
Conn.  368.  (N.  Y.)  281. 

11  Post  V.  Hampshire  Mutual  Ins.  i^  Grousett  v.  Sea  Ins.  Co.  24 
Co.  12  Met.  (53  Mass.)  555,  46  Am.  Wend.  (N.  Y.)  209;  1  Arnould  on 
Dec.  702.  Marine  Ins.  (6th  ed.  Maclachlan)  p. 

443 


§  171  JOYCE  ON  INSURANCE 

year  commencing  and  ending  at  12  o'clock  noon."  In  the  cai?e 
here  instanced  it  was  lield  that  the  meridian  of  the  phice  where 
the  contract  was  made  determined  the  ]»arties'  rights."  "Sometimes 
attempts  are  made  to  construe  time  poUcies  as  voyage  policies,  but 
the  courts  have  not  encouraged  them."  " 

§  171.  Time  policy:  computation  of  time. — It  is  held  that  ''from 
the  day  of  the  date"  excludes  the  day,  while  "from  the  date"  in- 
cludes it:"  while  in  Pugh  v.  Leeds  ^^  it  was  determined  that  no 
distinction  exists  between  those  terms.^"  In  Perry  v.  Provident  Life 
Insurance  &  Investment  Company,^  the  rule  of  computation  was 
that. time  computed  from  the  act  done  includes  the  day,  but  com- 
puted from  the  day  of  the  act  excludes  the  day.  In  this  case  the 
policy  was  from  noon  to  noon  where  the  injury  should  ''occasion 
death  within  ninety  days  from  the  happening  thereof,"  and  it  was 
held  that  an  accident  happening  at  nine  o'clock  A.  M.,  causing 
death  at  the  same  hour,  on  the  ninty-lirst  day,  was  not  within  the 
policy ,2  although  in  a  later  case  in  the  same  state  ^  concerning  a 
deposit  of  a  copy  of  the  writ  and  of  the  return  of  the  attachment  in 
the  town  clerk's  office,  it  w^as  held  that  in  computing  time  from  the 
date  or  from  the  day  of  the  date  or  from  a  certain  act  or  event,  the 
day  of  the  date  is  to  be  excluded,  unless  a  different  intention  is 
manifested  by  the  instrument  or  statute  under  which  the  question 
arises.*  So  in  a  South  Carolina  case  the  day  of  passage  of  an  act 
laying  an  embargo  for  a  specified  time  from  its  passage  was  ex- 

.S71;  Id.  (8th  ed.  Hart  &  Simey)  .shipped  between  February  1  and  July 
p.  13,  sec.  9;  17  Earl  of  Halsbury^s  15,  1840,  it  was  held  that  the  policy 
Laws  of  England,  p.  336  and  note,  did  not  cover  shipments  made  on  the 
sec.  170;  Id.  pp.  381,  382,  sees.  754,  fifteenth  day  of  July,  1840:  Atkins 
755,  V.  Boylston  Fire  &  INIarine  Ins.  Co. 

"Walker    v.    Protection    Ins.    Co.  5  Met.   (46  Mass.)  439. 
29  Me.  317.  Computation  of  time:    attachment 

16  Walker   v.    Protection    Ins.    Co.  xind  duration  of  risk,  see  §  1446. 
29  Me.  317.  Time  policy :   attachment  and  dura- 

1'  Porter's   Law   of   Ins.    (2d   ed.)    tion  of  risk,  "see  §  1489  herein. 
100,  citing  Crowlev  v.  Cohen,  3  Bam.       "  Cowp.  714. 

&  Adol.  478,  13  Eng.  Rul.  Cas.  314;  20  gee  Atkins  v.  Boylston  Fire  & 
Joyce  V.  Kennard,  L.  R.  7  Q.  B.  78.  M.  Ins.  Co.  5  Mete.   (46  Mass.)  440. 

18  Sir  Robert  Howard's  case,  2  ^  99  Mass.  162. 
Salk.  625;  Holt,  K.  B.  195  (case  of  2  ggg  also  Perry  v.  Provident  Life 
policy  of  assurance  on  H.'s  life  for  Ins.  &  Investment  Co.  103  Mass.  242. 
a  year.  He  died  on  the  last  dav,  and  ^  Bemis  v.  Leonard,  118  Mass.  502, 
insurer  was  held  liable).  See  Weeks  19  Am.  Rep.  470.  This  is  a  leading 
V.  Hull,  19  Conn.  376,  1  Am.  Dec.  case,  reviewing  the  authorities  at 
249 ;  Blake  v.  Crowninshield,  9  N.  H.  length. 

304;  Isaacs  v.  Roval  Ins.  Co.  39  L.  J.  *  Case  cited  with  approval  m  Lane 
Ex.  189,  22  L.  J."  Q.  B.  681;  Cornell  v.  Holman,  145  Mass.  222,  13  N.  E. 
v.  Moulton,  3  Denio  (N.  Y.)  12.  602. 

Where     the     goods     were     to     be 

444 


THE  POLICY  §  171 

eluded,  and  a  policy  made  on  that  day  was  held  yalid.^  Again,  in 
case  of  insurances  in  mutual  benefit  societies,  where  the  member  is 
required  to  pay  an  assessment  within  a  specified  number  of  days 
from  the  date  of  notice  or  from  the  time  notice  is  ''served  on"  or 
''sent  to"'  the  assured,  that  day  is  excluded.^  The  intent  of  the 
parties  as  to  the  commencement  and  end  of  the  risk,  however,  gov- 
erns if  it  can  be  ascertained  from  the  policy  or  subject  matter^ 
Where  a  policy  of  insurance  is  expressed  to  be  "from  August  1, 
1854,  to  August  1,  1854,"  it  may  be  shown  by  reference  to  the  in- 
dorsements made  by  the  insurers  on  the  back  of  the  policy,  to  the 
application,  which  is  made  a  part  of  the  policy,  and  to  the  amount 
of  the  premium  and  deposit  note,  to  be  an  insurance  for  five  years 
from  August  1,  1854.*  In  conclusion,  the  general  rule  on  the 
question  of  exclusion  or  inclusion  of  the  day,  so  far  as  it  is  possible 
to  formulate  one,  seems  to  be  that  the  question  is,  in  the  absence  of 
some  governing  statute,  one  of  construction,  dependent  upon  the 
intent  of  the  parties  evidenced  and  deducible  from  the  contract  and 
attendant  circumstances,  so  far  as  the  latter  are  admissible  in  evi- 
dence. "If,  however,"  says  Mr.  Parsons,  "there  is  nothing  in  the 
language  which  clearly  indicates  the  intention  of  the  parties,  time 
should  be  computed  exclusive  of  the  day  when  the  contract  was 
made."  ^  Mr.  May  says:  "The  circumstances  and  intent  of  the 
parties  are  to  control ;  and  such  construction  should  l)e  given  as  will 
operate  most  to  the  ease  of  the  party  entitled  to  fav.or.  and  by  which 
riiihts  will  be  secured  and  forfeitures  avoided."  ^^  We  are  inclined, 
however,  to  the  opinion  that  time  computed  from  the  date  or  day 
of  date,  or  from  some  certain  act  or  event,  excludes  the  day  or 
event,^^  particularly  so  when  such  a  construction  would  come  with- 

5  Lorent  v.  South  Carolina  Ins.  Co.  ing,  43  Conn.  56,  21  Am.  Rep.  634 

1  Nott.  &  McC.  (S.  C.)  505.  (see  48  Vt.  '201,  given  below). 

^  Protection  Life  Ins.  Co.  v.  Palm-  Kentuckij. — Chiles  v.  Smith,  13  B. 

er,  81  111.  88.     See  §  1339  heroin.  Mon.  (Kv.)  460. 

'O'Connor  v.  Towns,  1  Te.x.  107;  Mkhi<jan.—\Yixvren    v.    Slade,    23 

1  Phillips  on  Ins.  (3cl  ed.)  918  et  seq.  I\Iicli.  1,  i)  Am.  Rep.  70   (here  judg- 

p.  499  et  seq.;  2  May  on  Ins.   (Par-  ment  was  barred  by  statute  ten  yeai-s 

sons')   sec.  400,  see  also  Id.    (4lli  ed.  after    judgment    was    entered.      The 

Gould's)  sec.  400,  p.  919.  day  of  entry  was  held  e.xduded). 

*  Liberty    Hall    Assoc,    v.    Housa-  Missouri. — Baumeister     v.     Conti- 

tonic   Mutual  Fire  Ins.   Co.   7   Gray  nental    Casualty    Co.   124   Mo.    App. 

(73  Mass.)    261.  38,   101   S.   W.   152    (notice   of   dis- 

^2  Parsons  on  Contracts  (7th  ed.)  ability    sufTicient    when    given    within 

bottom  p.  796,  *p.  663.  time  specified  after  beginning  of  dis- 

^°2   May   on    Insurance    (3d   ed.)  ability:     accident   policy), 

sec.  400,  id.    (4th   ed.   Gould's)    sec.  Bhode     Island.— Ci\rro\    v.     Salis- 

400,  p.  919.  bury,  28  R.  I.  16,  65  Atl.  274   (day 

^^  Connecticut. — Blackman  v.  Near-  of  date  on  which  act  was  done  ex- 

445 


§  172  JOYCE  ON  INSURANCE 

in  the  rule  contra  proferentem,  whereby  in  insurance  policies  the 
conHtruction  is  against  tlie  insurer  and  most  favorable  to  the  as- 
sured, or  where  such  a  rule  would  operate  to  save  forfeitures.^^ 

§  172.  Time  policy:  trading  voyage:  nature  of  contract. — A 
policy,  on  time  simply,  where  no  ports  are  mentioned  or  goods  laden 
or  to  be  laden,  the  risk  to  commence  from  the  loading  on  board  the 
vessel,  necessarily  implies  a  trading  voyage  with  liberty  to  dispose 
of  the  goods  insured;  and  the  policy  attaches,  however  often  the 
goods  may  be  changed;^'  and  it  is  held  that  a  time  policy,  upon 
the  cargo,  on  a  trading  voyage  is  in  tlie  nature  of  a  new  insurance 
upon  the  new  cargo  or  the  goods  remaining  at  risk,  every  time  the 
cargo  is  increased  or  diminished  otherwise  than  by  the  perils  in- 
sured against,  but  the  total  amount  for  which  the  underwriters  are 
to  be  made  liable  during  the  whole  time  or  voyage  cannot  be  an 
amount  exceeding  his  subscription,  except  for  general  average  and 
expenses  incurred  in  preserving  or  attempting  to  recover  the  prop- 
erty for  his  benefit.  If  after  the  delivery  of  a  portion  of  the  first 
cargo,  the  residue,  to  an  amount  equal  to  or  exceeding  the  subscrip- 
tion, be  lost  on  a  voyage  to  another  port,  the  insurer  is  liable  to  the 
amount  of  his  subscription,^* 

eluded:     levying  execution   so   as   to       New    York. — Judd    v.    Fukon,    10 

prevent  discharge  of  attachment).         Barb.  (N.  Y.)  118. 

Vermont. — Beeman  v.  Cook,  48  Vt.        England. — Mercantile  Marine   Ins. 

201,  21  Am.  Rep.  123   (it  was  held   Co.  v.  Titherington,  5  Best  &  S.  765. 

in   this   and   the   43    Conn.   56,   case       See   also   2   Parsons   on   Contracts 

given   above,   that  in   computing  the    (7th   ed.)    bottom  p.    635,  n.   A.   *p. 

time   of   the   limitation   of  an   action   504,   bottom   pp.    795-98,    *pp.    662- 

on    a    promissory    note    the    day    on    65,    where    the    authorities    are    ex- 

which  it  matures  is  to  be  excluded.)    haustively  considered;  7  Wait's  Ac- 
See  a.s  to  general  rule :  tions  &  Defenses,  231, 
United  States. — Pearpoint  v.  Gra-       General   rule   as   to  first  and  last 

ham,  4  Wash.  (U.  S.  C.  C)  232,  Fed.    davs    in    computation    of    time,    see 

Cas.  10,877.  notes  49  L.R.A.  193,  15  L.R.A.(N.S.) 

Alabama. — Boyett     v.     Frankfort   686;    i8  Am.   St.   Rep.  370  et  se<].; 

Chair  Co.  152  Ala.  317,  44  So.  546   notes  7  Am.  Dee.  250;  46  Am.  Rep. 

(tirst  day  excluded  and  last  day  in-   410. 

eluded  for  taking  appeal) ;  Lang  v.       The    code^^    of   many   states    make 

Phillips,  27  Ala.  311.  special  provisions  governing  the  mat- 

('(difornia. — Bank    of    Lemoore    v.    ler. 

Fulgham,  151  Cal.  234,  90  Pac.  936       ^^  ^ee  e.  viii.  herein,  and  §§  220- 

( first  day  excluded,  last  day  includ-   24. 

ed:  notice  of  tax  sale).  ^^  Grousset  v,  Louisiana  Ins,  Co.  24 

Louisiana. — Wetmore     v.     Mutual   Wend.    (N.   Y.)    209;    Coggeshall   v. 

Aid  &  Ben.  Life  Assoc.  23  La.  Ann.   American  Ins.  Co.  3  Wend.   (N.  Y.) 

770.  283. 

Neio  Hampshire. — Blake  v.  Crown-       ^*  American  Ins.  Co.   v.   Griswold, 

inshield,  9  N.  H.  304.  14  AVend.  (N.  Y.)  399,  479. 

446 


THE  POLICY  §§  173-175 

§  173.  Time  policy:  continuance  after  expiration  of  time. — A 
time  policy  may  also  be  made  to  be  continued  in  force  from  the  date 
of  its  expiration  until  notice  of  discontinuance,  as  where  a  marine 
policy  provided  that  it  should  "continue  in  force  from  the  date  of 
expiration  until  notice  is  given  to  this  company  of  its  discontinu- 
ance, the  assured  to  pay  for  such  privilege  pro  rata  for  the  time 
used,"  and  the  term  of  the  policy  expired  October  5th.  The  as- 
sured sent  on  October  9th  a  month's  premium,  stating  that  it  was 
"one  monthly  premium  from  October  5th  to  November  5th"  on 
the  insurance  "as  specified  in  the  policy,"  and  it  was  determined 
that  the  company  was  liable  for  a  loss  occurring  November  6th,  and 
that  the  payment  was  not  notice  to  discontinue  the  policy,  nor  an 
election  to  continue  it  another  month,  and  no  longer,  but  that  the 
policy  continued  in  force  by  its  own  terms  until  notice  given  by 
assured  of  discontinuance.^^ 

§  174.  Voyage  policy  defined. — A  voyage  policy  is  one  which 
establishes  the  duration  of  the  risk  and  specifies  the  voyage  by 
setting  out  the  termini,  as  where  the  words  are  used  "at  and  from 
New  York  to  San  Francisco"  they  describe  the  voyage  during  which 
the  risk  is  to  continue. ^^  It  may  cover  risks  of  transportation  by 
land  and  may  also  include  a  voyage  out  and  home,  a.s  a  single  risk." 

§  175.  Voyage  policy:  voyage  must  conform  to  course  fixed  by 
usage. — It  is  a  well-settled  rule  of  law  that  the  underwriters  are 
bound  to  know  the  usages  of  trade  in  which  they  are  insurers,  and 
to  make  their  contracts  in  reference  thereto, ^^  and  the  insurer  in 
estimating  the  premium  is  presumed  to  have  considered  the  usual 
course  of  the  voyage  as  fixed  by  mercantile  usage  between  the  termi- 
ni, and  describing  the  voyage  in  the  policy  is  an  express  reference 

15  Greenwich    Ins.    Co.    v.    Provi-    limits.     Practically,  they  impose  up- 

dence   &    Stonington    Steamship    Co.    on    the   insurer    the    liahility    of    the 

119   U.   S.  481,  7   Sup.   Ct.  292,   30   common  carrier  between  the  two  ends 

■  L.  ed.  473.  of  the  journey.     The  risk  begins  in 

See  §  1506  herein,  as  to  extending  such  policies  when  the  goods  start  or 
the  time  where  the  ship  is  "on  a  pas-  get  into  the  carrier's  hands,  and  con- 
sage,"   etc.  tinues   from   thence   until   arrival   in 

18  xMeh'lier  v.  Ocean  Ins.  Co.  5fl  Me.  the  hands  of  the  consignee  or  other 
217;  17  Enr\  of  Halsbury's  Laws  specified  determination  of  the  transit, 
of  England,  p.  336,  sec.  174.  See  I'ut  it  will  not  continue  during  a 
§  2365  lierein.  deviation.     In  some  cases  the  carrier 

"  Patapsco  Ins.  Co.  v.  Biscoe,  7  makes  himself  the  insurer.  Thus, 
Gill  &  J.  (Md.)  293;  Bermon  v.  railway  companies  will  grant  insur- 
Woodbridge,  2  Dong.  781,  14  Eng.  ances  on  goods  carried  by  them  for 
Bui.  Cas.  507.  "Voyage  policies  the  safe  carriage  of  which  they  are 
against  land  risks  are  sometimes  tak-  not  liable  under  the  carriers'  act." 
en  out,  but  are  not  so  common  as  Porter's  Law  of  Ins.  (2<1  ed.)  100. 
time  policies.  They  cover  the  things  ^^  Grant  v.  Lexington  Fire,  Life  & 
insured  between  certain  geographical   Marine  Ins.  Co.  5  Ind.  23,  61  Am. 

447 


§  17G  JOYCE  ON  INSURANCE 

to  the  usual  manner  of  making  it  as  much  as  if  every  circumstance 
were  mentioned. ^^  Therefore,  the  voyage  must  conform  to  the 
usual  course  of  sailing  prescrihed  by  mercantile  usage  between  the 
places  designated  as  the  termini;  ^°  but  if  no  usual  course  be  tixed 
by  usage,  then  the  way  should  be  that  which  the  master,  if  of  ordi- 
nary skill  and  discretion  and  acting  according  to  his  best  judgment, 
shall  determine  to  be  the  safest  and  most  direct,  and  which  shall 
conduct  the  adventure  in  the  most  advantageous  and  expeditious 
manner  consistent  with  safety.^  This  subject  of  description  of  the 
voyage  will,  however,  be  more  fully  considered  hereafter.^ 

§  176,  The  form  of  the  policy:  statutory  provisions:  standard 
policy. — A  policy  of  insurance  is  the  contract  reduced  to  writing. 
It  is  a  simple  or  parol  contract,  since  it  need  not  be  under  seal,^  and 
is  of  very  ancient  date.  But  slight  changes  had  been  made  therein 
prior  to  1785,  when  the  statute  25  George  III.,  chapter  44,  requir- 
ing the  insertion  of  names  in  certain  policies,  was  enacted.*  Pol- 
Dee.  74;  AVall  v.  Howard  Ins.  Co.  numerous  disputes,  the  committee  of 
14  Barb.  (N.  Y.)  383;  Wadsworth  v.  Lloyds  proposed  a  general  form 
Pacific  Ins.  Co.  4  Wend.  (N.  Y.)  33;  wliicli  was  adopted  by  the  members 
Noble  V.  Kennoway,  2  IDoug.  511;  on  the  12th  of  January,  1779,  and 
Salvador  v.  Hopkins,  3  Burr.  1707.      remains   in   use,   with   few  slight  al- 

19  Pellv  V.  Kovul  Ex.  Assur.  1  terations  to  this  day."  IGth.  Ency. 
Burr.  341,  14  Eng.  Rul.  Cas.  30;  1  Britannica  (11th  ed.)  ^'Llovds"  pp. 
Arnould  on  Ins.  340.  833,    834.      See    also    14th    Id.    "In- 

^^  See  Deering's  Annot.  Civ.  Code,  suranee"  (subhead  "Lloyds")  p.  661. 
Cal.  sees.  2692,  2693.  For   forms    of    policies    of   insur- 

1  See  Deering's  Annot.  Civ.  Code,  ance,  sued  on  in  early  English  cases, 
Cal.  sec.  2693.  in  tiie  originals  and  in  their  trans- 

^  See   §   2365  herein.  lations,  see  11  Publicat.     Seldon  Soc. 

^  Viele  V.  Germania  Ins.  Co.  26  pp.  45  et  seq.  in  Cavalchant  v.  May- 
Iowa,  9,  96  Am.  Dec.  83;  Sanborn  v.  nard,  1548;  Broke  v.  Maynard,  1547; 
Fireman's  Ins.  Co.  16  Gray  (82  De  Salizar  (or  Salazar)  v.  Black- 
Mass.)  448,  77  Am.  Dec.  419,  man,     1555;     Braschett     v.     Smithe, 

*  Changes  were  made  some  j^ears  1559;  Ravens  v.  Hopton,  1558;  Rid- 
prioi-  to  1785  by  inserting  a  memo-  olploye  v.  Nunez,  1562;  Whyte  v. 
randum  at  the  foot  of  the  policy,  and  Beeswicke,  15(13  De  ]Moucheron  v. 
the  words  "as  well  in  his  own  name  Sadler,  1565;  Dutch  policy,  1638. 
as  for  and  in  the  name  and  names  of  For  statutory  form  of  marine  pol- 
all  and  every  person  or  persons  to  icy  in  England,  see  1  Arnould's  Ma- 
whom  the  same  doth,  may,  or  shall  rine  Ins.  (Perkins'  ed.  1850)  20,  *21; 
appertain  in  part  or  in  all,"  and  1  Id.  (Maclachlan's  ed.  1887)  231, 
the  words  "as  interest  mav  appear:"  232,  who  says  it  was  printed  in 
See  Stat.  25  Geo.  III.  c.  56   (1788).   schedule   35   George   III.   c.   63,  and 

"One  of  the  first  improvements  in   reprinted  in  schedule  30  Vict.  e.  23, 
the  mode  of  effecting  marine  insur-    Consohdated  Stat.  Ins.  Law;  Gorman - 
ance  was  the  introduction  of  a  print-    v.    Lineating,    2    Saund.    201,    n.    c; 
ed  form  of  policy.     Hitherto  various    "Wolfe    v.    Horncastle,    1    Bos.    &    P. 
forms  had  been  in  use;  and,  to  avoid    316,    320,    13    Eng.    Rul.    Cas.    265, 

448 


II 


THE  POLICY 


§  170 


icies  have  been,  however,  very  inaccurately  and  loosely  drawn  in- 
struments, although  it  would  necessarily  follow  that  some  degree  of 
certaint}'  would  have  been  attained  through  usage,  lengthened  ex- 
perience, and  frequent  constructions  thereof  by  the  courts.*  An 
examination  of  the  numerous  cases  arising  upon  the  construction 
of  policies  in  the  United  States  shows  a  lack  of  uniformity  in  form 
of  policies  written  in  this  country,  and  owing  to  attempted  modifi- 
cations and  introduction  of  new  features,  the  policies  here  are  varied, 
and  this  applies  even  to  standard  fire  policies. 


Buller,  J.      See   also  as  to  form   or   tract.     See  Henderson   (ed.  1911)  p. 
copy   of   Lloyds   policy,   17    Earl   of   339. 

HalsVjurv's  Laws  of  England,  p.  340;       For     form     of     clause,     insuring 
15  Chitty's  Stat.  England,  p.  906.  against  loss  or  damage  io   properti/ 

Almost  all  insurances  in  England  and  also  against  loss  of  human,  life 
are  framed  on  model  of  form  given  or  injury  to  person  whether  to  as- 
in  17  Earl  of  Halsbury's  Laws  of  sured,  to  employees  or  to  any  other 
England,  p.  340.  In  an  English  case  pei-son  caused  by  the  explosion  or 
Lord  Alverstone,  C.  J.,  says:  "It  rupture  of  steam  boilers,  under  policy- 
is  necessary,  in  the  first  place,  to  issued  prior  to  New  York  act  of 
point  out  that  we  must  not  attach  1892,  c.  690,  sec.  55,  expressly  au- 
any  special  importance  to  the  fact  thorizing  employer  to  take  an  acei- 
that  the  form  of  policy  which  has  dent  insurance  covering  his  em- 
been  adopted  in  this  case  is  that  of  a  ployees  collectively  for  the  benefit  of 
Lloyd's  policy,  for  it  is  well  known  such  as  should  be  injured.  See  Em- 
that  that  form  of  policy  is  no  longer  bier  v.  Hartford  Steam  Boiler  Ins. 
confined  to  the  marine  risks  to  which  Co.  158  N.  Y.  431,  44  L.R.A.  512,  53 
it  is  more  strictly  applical)le  but  is   N.  E.  212. 

now  used  to  cover  many  other  kinds  For  form  of  certification  of  benefit 
of  risks."  Tannebaum  &  Co.  v.  association  and  of  its  by-laws  and 
Heath,  77  L.  J.  K.  B.  634,  [1908]  1  rules,  see  Lawler  v.  Murphy,  58 
K.  B.  1032,  99  L.  T.  237,  13  Ann.  Conn.  294,  8  L.R.A.  113. 
Cas.  264,  24  T.  L.  R.  450-C.  A.  a  *  In  1791  Lord  Kenyon,  in  Brough 
case  where  an  order  for  discovery  of  v.  Whitmore,  4  Term  Rep.  208,  says : 
ships  papers  was  refused,  such  dis-  "I  remember  it  was  said  many  years 
covery  being  peculiar  to  marine  in-  ago  that  if  Lombard  street  had  not 
suranee.  The  policy  was  in  the  form  given  a  construction  to  policies  of 
of  Lloyd's  marine  policy  insuring  insurance,  a  declaration  on  a  policy 
goods  against  risk  of  fire  on  land  and  would  have  been  bad  on  a  general 
risks  of  transportation  on  shipments,   demurrer,  but  that  the  uniform  prac- 

For  forms  of  policies  in  use  in  the  tice  of  merchants  and  underwriters 
commercial  world  in  1834,  see  Van-  had  rendered  them  intelligible;"  and 
cher's  Guide  to  Marine  Ins.  (ed.  Buller,  J.,  in  the  same  case,  adds 
1834).  "that   a   policy   of  assurance  has  at 

Form  of  Philadelphia  Marine  pol-  all  times  beeti  considered  in  courts  of 
icv  of  1749.  See  History  of  Ins.  Co.  law  as  an  absurd  and  incoherent  in- 
of  North  America,  published  1885  in  strument."  See  also  Maryland  Ins. 
Philadelphia.  Co.  v.   Woods,  6  Cranch    (10  U.  S.) 

Form  of  fire  policy,  England.  See  29,  45,  3  L.  ed.  143;  Yeaton  v.  Fry, 
17  Earl  of  Halsbury's  Laws  of  Eng-  5  Cranch  (9  U.  S.)  335,  342,  3  L. 
land,   p.   527.  ed.  117;  Simond  v.  Boydell,  1  Doug. 

Form   of   casualty   insurance   con-  270;  Marsden  v.  Reid,  3  East,  578. 
Joyce  Ins.  Vol.  I. — 29.  449 


§  176  JOYCE  ON  INSURANCE 

The  form,  however,  is  not  essential  unless  required  hy  statute. 
Statutes,  however,  have  been  passed  in  a  number  of  states  adopting 
standard  fire  policies.^ 

Statutory  provisions  also  exist  in  New  York  for  forms  of  life, 
accident  and  health  policies  J     So  the  statute  may  authorize  forms 

^  Connecticut.— Comp.    Ins.    Laws   1887,   c.   429,   amd'g   Laws   1886,   c. 
1905,  p.   18,  sees.   3497,  3499,  Genl.   488. 
Stat.  1902,  sees.  3497,  3499.  North  Carolina.— Rev.  Stat.  1905, 

/owa.— Acts    1907,    pp.    79-83,    c.   sees.  4759,  4760. 
76,   additional   to   e.   4,   title   IX.   of       North    Dakota.— Civ.    Code    1899, 
Code.      See    also  '  acts    1911,    p.    13,  sec.  4608 ;  Laws  1890,  p.  253,  c.  74. 
amdg.     sec.     1758-b     of     Suppl.    to        Oregon.— L&ws  1907,  c.  137. 
Code  1907,  sees.  1758a,  1758b.  Bhode   Island.— Genl.   Laws   1896, 

Loicisiana.-Act  No.  105  of  1908,   pp.  570,  580,  sees.  4,  5. 
art.  3,  sec.  22;  Const.  &  Rev.  Laws       South  Dakota.— Lnws  1907,  c.  170, 
1904,  p.  864.    N.  Y.  form  was  adopt-   amdg.    Sess.   Laws  1905,   c.  126,  re- 
ed by  sec.  22  of  act  no.  105  of  1898,   pealing    Rev.    Codes    1903,    p.    682, 
p.  151.  sees.    664-666. 

Maine. — Laws  1905,  e.  18,  Rev.  West  Virrjinia. — Acts  1907,  c.  77, 
Stat.  c.  49,  see.  4,  Laws  1895,  p.  sec.  68,  p.  313,  amending  and  re-en- 
14  c.  18,  expressly  repealed  all  in-  acting  c.  34,  Code. 
consistent  prior  laws.  See  Kuowl-  Wisconsin. — Laws  1907,  c.  525; 
ton  V  Patrons  Androscoggin  Mut.  Laws  1905,  c.  102,  108;  Laws  1895, 
Fire  Ins.  Co.  100  Me.  481,  2  L.R.A.  e.  387,  Rev.  Stat.  1898,  sec.  1941, 
(NS)  517n,  62  Atl.  289,  35  Ins.  subsees.  43-65;  (Sand.  &  Berr.  Ann. 
L.  J.  81.  i^tat.    1898);    Laws    1891,   vol.    1,   c. 

Massachusetts. — Acts  1907,  e.  576,  195,  last  law  invalid.  See  Vorous  v. 
sec.  60,  pp.  882-886;  Rev.  Laws  c.  Phoenix  Ins.  Co.  102  Wis.  76y  78  N. 
118,  see  60;   Stat.  1894,  c.  522,  sec.   W.  162. 

59,  Pub.  Stat.  c.  119,  sec.  138;  acts  England.— In  Canada  the  statutes 
1887,  c.  214,  sec.  60;  St.  1881,  c.  regulate  the  form  of  the  policy :  See 
166-    Stat.  ]873    c.  331.  Hartney  v.   North  British   Fire  Ins. 

Michigan.— Fuh.     acts     1905,     p.   Co.  13  Ont.  R.  581;  Citizens' Ins.  Co. 
423,    act    No.    277,    Howell's    Annot.   v.  Parsons,  4  Can.  Sup.  Ct.  R.  215. 
Stat   1882   sees   4344—53.  Reasons  for  adoption  of  standard 

Minnesota.— Rev.   Laws   1905,  see.   poUcy   considered.     Gazzam   v.   Ger- 
1640,  Genl.  Laws  1897,  e.  254;  Genl.   man  Union  Fire  Ins.  Co.  155  N.  Car. 
Laws  1895,  c.  175;    Stat.   1891,  vol.  330,  336,  Ann.   Cas.  1913E,  282,  71 
1,  sees.  2973-77;  Gen.  Laws  1889,  c.   S.  E.  434. 
927  Marshall,  however,  in  his  work  on 

Neiv  Hampshire.— Fnh.  Stat.  1901,  Insurances  (vol.  1,  ed.  1810),  says: 
.c.  170;  Laws  1885,  c.  93,  see.  3.  "There  does  not  seem  to  be  any  rea- 
For  historv  of  New  Hampsliire  laws  son  for  prescribing  by  law  the  con- 
as  to  standard  policy,  see  Franklin  tents  of  a  policy  of  insurance  any  > 
v.  New  Hampshire  Fire  Ins.  Co.  70  more  than  those  of  any  other  species 
N.  H.  251,  47  Atl.  91,  30  Ins.  L.  J.  of  contract.  .  .  .  The  common 
73    (decided  in  1900).  course  appears  to  be  the  better  one, 

New  Jerseij.-r-1902,  p.  437,  c.  134,  namely,  to  leave  parties  to  make  such 
par.  77'  Laws  1892,  c.  231.  stipulations    and    in    such    terms    as 

Neiv  '  YorA-.— Laws    1903,    c.    106,  they  may  choose." 
amd'g  Laws  1901,  c.  513,  amd'g  Laws       '  Laws   N.   Y.   1910,   sec.   107    (in 

450 


I 


THE  POLICY  §  176a 

of  life  policies  M'hich  provide  for  payment  of  fixed  premiums  or  as- 
sessments at  certain  times  for  a  term  of  years  or  during  life.' 

§  176a.  Standard  policy:  constitutional  law:  power  of  legisla- 
ture and  of  commission:  review  by  court:  injunction. — That  a 
state  has  the  right  or  power  to  prescribe  by  legislative  enactment 
one  standard  form  of  fire  insurance  policy  and  to  limit  incorporated 
insurance  companies,  domestic  or  foreign,  to  the  issuance  thereof 
upon  property  witliin  its  borders,  is  undoubted,  and  such  statutes 
are  constitutional.^ 

effect,  Jan.  1,  1911)  amdg.  art  2,  c.  fire  insurance  companies.  "While  the 
33.  Laws  1909,  constituting  c.  636  individual  ha-s  existence  and  conse- 
of  Consol.  Laws.  Laws  N.  Y.  1907,  quent  rights  independent  of  the  legis- 
c.  623,  am'd'g  Laws  1906,  c.  326,  .sec.  lature,  the  corporation  or  incorporat- 
101.  See  Conn.  Pub.  Laws  1909-11,  ed  company  derived  its  existence  and 
p.  1297,  for  form  of  accident  policy;  rights  solely  from  legislative  action. 
Mich.  Pub.  acts  1907,  no.  187,  The  legislature  may  refuse  to  grant 
Minn.  Laws  1907,  c.  220 ;  N.  Dak.  any  corporate  rights  or  pow  ers  what- 
act  March  19,  1907.  Ohio  act  ap-  ever,  and  even  existence,  or  it  may 
proved  May  21,  1910,  am'd'g  and  re-  grant  one  only.  Until  the  legisla- 
pealing  sec.  9419,  Genl.  Code;  Laws  ture  acts,  these  do  not  and  cannot 
1908,  pp.  139  et  seq.  exist.     So  the  legL'ilature  may  by  gen- 

In  New  York,  single  policy  may  eral  law  or  special  act  'amend,  alter, 
embrace  life,  health,  accident  and  dis-  or  repeal'  any  corporate  charter  or 
ablement  from  sickness.  Laws  N.  Y.  corporate  right  or  existence  once 
1912,  p.  446,  c.  232,  sec.  70,  subd.  granted  (except,  of  course,  where  it 
10.  But  in  Massachusetts  the  form  has  stipulated  not  to  do  so),  and  in 
of  policy  cannot,  under  the  statute  so  doing  it  may  cut  away  the  powers 
combine  classes  of  insurance  such  as  of  a  corporation  one  after  another, 
life,  accident  and  health  in  the  same  and  from  time  to  time,  and  finally 
policy,  or  health  and  accident  as  in-  destroy  the  last  one  and  the  corpora- 
cidental  to  life  insurance.  x'Etna  Life  tion  itself.  It  cannot,  of  coui-se,  con- 
Ins.  Co.  V.  Hardison  (Travelers  Life  fiscate  the  property  of  the  corpora- 
Ins.  Co.  V.  Hardison)  199  Mass.  181,  tion  once  lawfully  acquired.  It 
85  N.  E.  410,  37  Ins.  L.  J.  818.  cannot    impair   the    obligation    of    a 

®  Home  Life  Assur.  Co.  v.  May-  contract  once  lawfully  made  by  a  cor- 
nard,  112  Mich.  497,  4  Det.  L.  N.  96,  iioralion.  So  far  tJie  legishTturo  is 
70  N.  W.  103;  Mich.  Pub.  acts  1895,  restrained  by  the  State  and  Federal 
act  No.  58,  see.  11,  am'd'g  Pub.  actS'  Constilulions.  But  it  can  prohibit 
1887,  act  no.  187.  See  Franklin  tlie  acquisition  oE  any  more  proper- 
Life  Ins.  Co.  V.  Commissioner  of  ty  by  the  corporation.  It  can  pro- 
Ins.  159  Mich.  636,  16  Det.  L.  N.  hibit  tlie  making  of  any  new  con- 
994,  39  Ins.  L.  .1.  468  construing  Pub.  tracts  whatever  by  the  corporation, 
acts  1907,  no.  187,  sec.  1,  subd.  1  and  or  any  new  contract  except  one  of 
2.  a     particular    prescribed     kind     and 

^  Opinion  of  Justices,  In  re,  97  Me.  form  with  prescribed  stipulations 
590,  55  Atl.  828,  33  Ins.  L.  J.  44.  therein.  This  power,  sweeping  as  it 
It  was  declared  in  iliis  case  that:  if.  in  its  scope,  is  necessarily  im]ilied 
*'We  do  not  find  in  <'ither  Constitu-  and  included  in  the  reserved  power  to 
tion,  Federal  or  State,  any  section  or  amend,  alter,  or  repeal  the  very  Icgis- 
clause  in  terms  inhibiting  such  an  lative  acts  which  gave  life  powers 
exercise  of  the  legislative  power  over   and  rights  to  the  corporation.     This 

451 


176a 


JOYCE  OX  INSURANCE 


But  a  delegation  of  power  to  a  commission  to  draft,  etc.,  a  stand- 
ard form  of  fire  insurance  policy  is  unconstitutional  as  conferring 


power  is  inberent  in  tlie  legislature, 
unlimited  by  any  section  or  clause 
in  the  Federal  or  state  Constitution 
which  we  have  been  able  to  And. 
Head  v.  Providence  Insurance  Co.  2 
Cranch  (6  U.  S.)  127,  2  L.  ed.  229; 
Bank  of  Augusta  v.  Earle,  13  Pet. 
(38  U.  S.)  519,  10  L.  ed.  274;  Miller 
V.  New  York,  15  Wall.  (82  U.  S.)  478, 
21  L.  ed.  98 ;  Greenwood  v.  Union 
Freight  Co.  105  U.  S.  13,  26  L.  ed. 
961;  Spring  Vallev  Water  Works  v. 
Schottler,  110  U.'S.  347,  28  L.  ed. 
173,  4  Sup.  Ct.  48;  Norfolk  &  West- 
ern Railroad  Company  v.  Pennsyl- 
vania, 136  U.  S.  114,  34  L.  ed.  394, 
10  Sup.  Ct.  958;  State  v.  Brown  & 
Sharpe  Manufacturing  Co.  18  R.  I. 
16,  17  L.R.A.  856,  25  Atl.  246; 
Schaft'er  v.  Union  IMiuing  Co.  55  Md. 
74;  State  v.  Maine  Central  R.  Co.  60 
Me.  490,  affirmed  in  Maine  Cent.  R. 
Co.  V.  Maine,  96  U.  S.  499,  2  L.  ed. 
836. 

"As  to  foreign  fire  insurance  com- 
panies, those  incorporated  in  other 
states  and  countries,  they,  of  course, 
are  equally  subject  to  the  legislative 
power  of  this  state  so  far  as  the  ex- 
t<rcise  of  their  rights  or  powers,  and 
their  presence  or  existence  within  this 
state,  are  concerned.  They  are  not 
protected  by  the  intei-state  commerce 
clause  of  the  Federal  Constitution. 
Hooper  v.  California,  155  U.  S.  648, 
39  L.  ed.  247,  15  Sup.  Ct.  207.  The 
legislature  can  wholly  exclude  them 
from  the  state,  and  hence  can  impose 
such  conditions  and  limitations  upon 
the  exercise  of  any  rights  and  pow- 
ers and  business,  and  even  presence, 
in  this  State,  as  it  sees  fit.  Norfolk 
&  Western  Railroad  Company  v. 
Pennsylvania,  136  U.  S.  114.  34  L. 
ed.  394,  10  Sup.  Ct.  958;  Hooper  v. 
California,  155  U.  S.  648,  39  L.  ed. 
247,  15  Sup.  Ct.  207;  Dryden  v. 
Grand  Trunk  Rv.  of  Canada,  60  Me. 
512. 

"The  statute  does  not"  offend 
against  the  14tli   Amendment  to  the 


452 


Constitution  of  the  United  States, 
since  it  bears  equally  upon  all  fire 
insurance  companies,  domestic  and 
foreign,  without  attempting  any 
discriminations,  and  does  not  de- 
prive any  person  of  life,  liberty, 
or  property  without  due  process  of 
law.  .  .  .  But  the  broad  question 
of  the  constitutional  right  of  the  in- 
dividual to  make  and  enforce  con- 
tracts for  the  acquirement,  posses- 
sion, and  protection  of  property,  by 
insurance  or  othenvise,  free  from  leg- 
islative interference,  is  not  presented 
here.  Whatever  the  extent  of  the 
constitutional  right  of  the  individual 
to  make  insurance  contracts  with 
other  individuals,  or  unincorporated 
associations  of  individuals,  we  think 
it  clear  from  the  principles  above 
stated  that  he  has  no  constitutional 
right  to  make  any  particular  insur- 
ance contract  with  a  corporation. 
True,  the  complete  power  of  the  legis- 
lature to  limit  or  destroy  the  right 
of  a  corporation  to  make  contracts 
necessarily  includes  the  power  to 
limit  or  destroj'  the  right  of  the  in- 
dividual to  make  contracts  with  it, 
but  this  incidental  result  cannot  be 
held  to  limit  the  power  of  the  legis- 
lature over  its  own  creature,  the  cor- 
poration. The  legislature  is  not  re- 
quired by  the  Constitution  to  create 
corporations  for  individuals  to  make 
contracts  with,  nor  is  it  prohibited 
from  limiting  or  dissolving  corpora- 
tions with  which  individuals  may 
wish   to  contract. 

"It  follows  that  the  statute  cited 
and  inquired  about  is  constitutional, 
being  within  the  legislative  cogni- 
zance, and  not  forbidden  by  any  sec- 
tion or  clause  of  the  Constitution, 
state  or  Federal." 

As  to  the  power  of  the  legislature 
to  regulate  the  insurance  bu.siness, 
see  also  opinion  of  the  court,  per 
Knowlton,  C.  J.,  in  New  York  Life 
Ins.  Co.  V.  Hardison,  199  Mass.  190, 
127  Am.  St.  Rep.  478.  85  N.  E.  410, 


I 


THE  POLICY  §  176a 

legif^lative  •po^A-el■.^"  So  in  Pennsylvania  it  is  held  that,  whether 
or  not,  the  legislature  itself  may  prescribe  a  form  of  contract  of  in- 
surance, it  cannot  delegate  the  power  to  an  insurance  commissioner 
to  prescribe  a  standard  policy  of  insurance ;  and  that  a  statute  pro- 
viding "for  a  uniform  contract  or  policy  of  insurance  to  be  made 
and  issued  by  all  insurance  companies  taking  lire  risks  on  property 
within  tlie  state,"  directing  the  insurance  connnissioner  to  prescribe 
a  standard  policy  of  insurance,  and  forbidding  the  use  of  any  other, 
is  unconstitutional,  as  an  unauthorized  delegation  of  legislative 
power.^^  So  in  Minnesota  a  statute  directing  the  insurance  com- 
missioner of  the  state  to  prepare  and  adopt  a  blank  policy,  together 
with  such  provisions  and  conditions  as  may  be  added  thereto  or  in- 
dorsed thereon  to  form  a  part  thereof,  such  form  to  conform  as  near 
as  the  same  can  be  made  practicable  to  the  form  known  as  the  New 
York  standard  life  insurance  policy,  and  requiring  all  insurance 
corporations,  after  the  adoption  of  such  form,  to  use  it  in  all  pol- 
icies for  fire  insurance,  and  all  renewals  thereof,  does  not,  of  itself, 
adopt  the  form  referred  to  as  in  use  in  New  York,  but  leaves  the 
commissioner  a  discretion  to  add  to,  or  omit  from,  the  provisions 
of  such  policy,  and  is  therefore  void,  because  it  delegates  to  tlie  com- 
missioner legislative  power,  which  can  be  exercised  only  by  the  leg- 
islative department  of  the  state. ^^  Tn  INIassachusetts  the  legislature 
has  power  to  prescribe  requirements  controlling  or  regulating  the 
forms  of  life  insurance  policies  and  to  give  to  the  insurance  com- 
missioner authority  to  pass  upon  forms  of  policies  issued  and  to 
provide  that  the  insurance  companies  shall  be  liable  criminally  for 
issuing  policies  in  a  form  not  approved  by  him.  And  it  may  not 
only  prescribe  such  requirements  and  confer  on  such  commissioner 

37  Ins.   L.   J.   848,   see   §§   327,   328  per  Peasleo,  J.   (historical  statement 

herein.  m   opinion). 

^•^  Kin^^  V.  Concoidia  Fire  Ins.  Co.  Tliat   stanflard   policy   law   invalid 

140   ]\Iich.   258,   12   Det.   L.   N.   160.  as    delegating    power    to    insurance 

See  Phenix   Ins.   Co.  v.  Perkins,  19  commi.ssioner,  see  Vorous  v.  Phenix 

S.  Dak.  59,  101  N.  W.  1110.  Ins.  Co.  102  Wis.  76,  78  N.  W.  162, 

^^  O'Neil  V.  American  Fire  Ins.  Co.  so  declared  as  to  Laws  1891,  c.  195, 

166  Pa.  St.  72,  45  Am.  St.  Rep.  650,  sec.  1,  and  under  Laws  of  1895,  p. 

26  L.R.A.  715,  30  Atl.  943.  778,  .sec.  5,  the  form   of  policy  was 

^2  Ander.son  v.  Manchester  Fire  As-  pre.scribed    by    the    legislature.      See 

sur.   Co.  59   Minn.   182,  50  Am.   St.  also  Dowlins:  v.  Lancashire  Ins.  Co. 

Rep.  400,  28  L.R.A.  609,  60  N.  W.  92  Wis.  63,  31  L.R.A.  112,  65  N.  W. 

1095.  738. 

As  to  statute  delegating-  power  to  Secretarif   of   State   has  power   to 

comrais.sioner   and   subsequent   enact-  approve.  rei}isurance  contract!^  of  life 

ments    under    the    New    Hampshire  risks;  statute  conferring  such  i)ower 

standard  policy  act,  see  Franklin  v.  constitutional.     Iowa  Life  Ins.  Co.  v. 

Now  Ilampsliirc  Fire  Ins.  Co.  70  N.  Fa.^torn   Mutual  Life  Ins.  Co.  64  N. 

H.  251,  47  Atl.  91,  30  Ins.  L.  J.  73,  J.  L.  340,  45  Atl.  762. 

453 


§  176a 


JOYCE  UN  INSURANCE 


authority  to  see  that  said  requirements  are  ('01111)116(1  witli.,  l)iit  it  may 
also  autliorize  a  court,  where  there  is  a  qiiestion  between  the  com- 
missioner and  the  companies  concerning  the  point  wliether  the 
forms  used  by  them  comply  with  the  statute,  to  determine  the  ques- 
tion.^^     In  Missouri  it  is  held  that  an  injunction  against  the  ap- 


^^  New  York  Life  Ins.  Co.  v.  Har-  court   for  the   determination   of   the 

(lison,    199   Mass.    190,   127   Am.    St.  que.stion      whetlicr      their      proposed 

Rop.  478,  85  N.  E.  410,  37  Ins.  L.  J.  action  was  within  the  law. 

848   (Stat.  1907,  p.  895,  c.  576,  sec.  "With  the  power  of  regulation  of 

75).     The   court,   per   Knowlton,    C.  the  business  of  insurance,  and  of  the 

J.,    said:      "The    tirst    suggestion    is  conduct     of     corporations,     domestic 

that    the    legishiture    could    not    give  and  foreign,  belonging  to  tlie  legis- 

the  insurance  commissioner  power  to  lature,  it  seems  to  us  that  such  com- 

jiass   upon   the   forms   of   policies   to  panies    may    be    forbidden    to    issue 

be  issued,  and,  especially,  could  not  policies  that  are  deemed  contrary  to 

jirovide  that  an    insurance    company  law  by  an  administrative  oflicer,  un- 

sliould  be  liable  criminally  for  issu-  til  the  court  can  determine  the  legal 

ing  a  policy  in  a  form  not  approved  questions    involved.      The    insurance 

by  liim.      Secondly,    it    is    suggested  commissioner    cannot    decide    liiudly, 


tliat  jurisdiction  could  not  be  given 
to  this  court  to  review  the  action  of 
the  insjLirance  commissioner  in  a  case 
of  this  kind. 


nor  exercise  any  judicial  p(nver  in 
the  premises.  In  these  cases,  the 
companies  failed  to  satisfv  an  ad- 
ministrative    ollicev,     nclina    for'    1ho 


"The  insurance  commissioner  is  an  protection    of   the    public,   that    they 

administrative     officer.       The     legis-  were   ]>roceeding   legally.      The    stal- 

lature  prescribed  the  requirements  in  ute    declares    that,    thereupon,     they 

the  forms  of  policies.     It  did  not  see  shall  do  no  more  business  until  there 

fit  to  prescrilie  a  standard  form  for  is   a   judicial   determination   of  their 

life  insurance  companies,  but  stopped  rights  by  tliis  court.     This    part    of 

witii    an    enactment    of    substantive  the  case  is  cov(?red  by  the  decision  in 

provisions    for   all    jmlicies.      It   was  Provident   Savings   Life   Assur.   Soc. 

j)roper  to  leave  to  the  insurance  com-  v.  Cutting,  181  Mass.  261,  92  Am.  St. 

missioner  the  management  of  details  Rep.  415,  6.'5  N.  E.  433,    and    there 

in  the  administration  of  tlie  law.     It  are  many  other  cases    in    which    au- 

was    pro))er   to    proliibit    the    use    of  thority  souu'what  like  this  is  held  to 

policies  that  did   not   (Conform  to  the  have  been  rightly  exercised  by  public 

law,   and    to   miiiish   disobedience   on  officers:     Dwelling  House  Ins.  Co.  v. 


the  i)art  of  an  insurance  company. 
It  was  a  reasonable  regulation  to  re- 
quire companies  to  sulimit  the  forms 
of  policies  to  the  insurance  commis- 


AVilder,  40  Kan.  561,  20  Pac.  265; 
State  ex  rel.  v.  Moore,  42  Ohio  St. 
103;  Rrodt)ine  v.  Revere,  182  Mass. 
598,  66  N.  E.  607;  Commonwealth  v. 


sioner  before  using  them,  so  tliat  he  Sisson,  189  Mass.  247,  109  Am.  St. 
could  see  whether  the  law  was  being 
obeyed.  His  <luty  was  to  approve  of 
every  form  of  policy  that  seemed  to 
him  correct.  The  insurance  com- 
panies, after  submitting  their  forms 
to  him,  had  notliing  to  do  but  to  go 
on    with    their    business,    unless    he 


Rep.   tr.O,  1  L.R.A.(N.S.)    752n,  75 
N.  E.  71. 

"The  authority  for  a  so-called  re- 
view by  this  court  is  simplv  a  pro- 
vision for  an  original  judicial  pro- 
ceeding which  an  insurance  company 
mav  bring  Ijcfore  a  court  of  law,  to 


made  objection  within  thirty  days,  ascertain  whether  its  action  in  estab- 
If  he  made  such  objection,  they  were  lishing  the  form  of  its  jiolicy  is  legal, 
given   a   right    to   bring  suit   in   this    The    jtarty    on  one  side  is  the  com- 

454 


THE  POLICY  §  176b 

proval  by  the  superintendent  of  insurance  of  a  uniform  policy  of 
insurance,  under  a  statute  which  is  alleged  to  be  unconstitutional 
as  an  attempt  to  delegate  to  him  legislative  powers,  cannot  be  grant- 
ed on  behalf  of  individuals  in  order  to  protect  them  in  the  right 
to  make  contracts  of  insurance  to  suit  their  vaiying  needs  and  cir- 
cumstances, as  the  statute  if  luiconstitutional  cannot  stand  in  the 
way  of  any  contracts  that  may  be  made.  And  the  mere  possibility 
of  injury  by  an  unconstitutional  statute  which  may  prevent  insur- 
ance companies  from  making  such  contracts  as  persons  might  other- 
wise procure  them  to  make  will  not  authorize  injunctive  relief  in 
behalf  of  those  wlio  wish  such  contracts.^* 

§  176b.  Standard  policy:  stipulations  contra,  additions,  changes, 
etc. — Emerigon,  in  considering  whether  it  is  "permitted  to  stipu- 
late agreements  contrary  to  the  dispositions  of  the  Ordonnance," 
says:  ''One  may  not  derogate  from  the  prohibitory  dispositions  of 
the  Ordonnance"  or  "from  the  directions  of  the  Ordonnance  in 
points  that  are  of  essence  of  the  contract.  But  it  is  jjermitted  to 
vary  from  them  in  all  points  which  not  being  prohibited  by  any 
express  text  concern  neither  the  essence  of  the  contract  nor  good 
morals  nor  public  law,  and  such  is  the  doctrine  of  the  common 
law."  ^*  And  where  a  statute  authorizes  the  attachment  to  the  pol- 
icy of  separate  slips  or  riders  upon  which  the  insurer  may  write  or 
print  in  type,  not  smaller  than  long  primer,  provisions  adding  to 

pany,  tlie  party  on  the  other  side  is  The  Ordonnance  de  la  Marine,  art. 
the  in.surance  commissioner,  repre-  3  des  Assur.,  makes  certain  pre- 
senting the  public.  It  is  a  convenient  visions  as  to  what  the  policy  shall 
and  proper  method  of  settling  the  contain.  Emerigon  (id.)  also  says: 
rights  of  the  company  and  of  the  "The  Reglement  of  Barcelona  and 
people,  by  a  regular  trial  of  the  dis-  the  Reglement  of  Anis((M-dam  declare 
puted  question  whether  the  company,  null  and  of  no  value  all  contracts  of 
in  its  plan  for  conducting  its  busi-  assurance  made  and  pas.'^ed  in  their 
ness,  is  within  the  statute.  Tiiere  is  prejudice,  tliough  the  ]iarties  have 
no  reason  why  the  legislature  should  stipulated  and  contracted  to  the  con- 
iiot  provide  such  a  judicial  tribunal  trary.  This  principle  is  too  general;" 
for  such  a  purpose.  See  Stat.  1800,  tlien  follows  what  we  have  above 
]>.  258,  c.  304.  Employers'  Liability  quoted  in  the  text. 
Assur.  Corp.  v.  Merrill,  155  Mass.  As  to  effect  of  variations  from 
404,  29  N.  E.  529;  Janvrin,  In  re,  statutory  ])rovisions  concerning 
374  Mass.  514,  47  L.R.A.  319,  55  N.  policy  in  Canada,  see  Hartney  v. 
E.  381;  Movnihan,  Appeal  of,  75  North  British  Fire  Ins.  Co.  13  Ont. 
Conn.  358,  53  Atl.  903.  We  see  no  R.  581 ;  Parsons  v.  Queen  Ins.  Co.  2 
constitutional  objection  to  this  part  Ont.  R.  45. 
of  the  act."          '  As    to    statutory     provisions     see 

^*  Business  Men's  League  v.  Wad-  Connecticut,     Massachusetts,    Minne- 

dill,  143  Mo.  495,  40  L.R.A.  501,  45  sola,  New  Hampshire,    New    Jersey, 

S.  W.  262.  New  York,  North  Carolina,  Pennsyl- 

^^  Emerigon  on  Insurance  (Mere-  vania,  Rhode  Island,  South  Dakota. 
dith's  ed.  1850)  e.  ii.  sec.  8,  p.  48. 

455 


1701) 


JOYCE  ON  INSUKANCE 


or  modifying  those  contained  in  the  standard  form  of  policy,  more 
tlian  one  such  niodifyino;  provisions  may  be  written  or  printed  on 
the  same  slip  of  paper,  and  the  words  ''separate"  and  "to  be  at- 
tached thereto,"  used  in  the  statute,  expresses  the  idea  of  something 
not  originally  a  part  of  the  policy,  but  distinct  therefrom. ^^  But 
the  Minnesota  statute  of  1895  did  not  authorize  the  parties  to  modi- 
fy or  add  to  the  stdtutory  form,  and  the  enactment  of  1897  in  ex- 
press terms  prohibited  the  making  of  any  changes  except  such  as 
were  specifically  enumerated  in  the  statute;  and  the  purpose  of 
the  law  required  that  all  conditions  should  appear  in  one  written 
instrument. ^'^     In  New  Hampshire  every  policy  stipulation  in  con- 


^*  Rolfe  V.  Patrons'  Androseogo-in 
Mutual  Fire  Ins.  Co.  105  Me.  58,^76 
Atl.  879,  Rev.  Stat.  e.  49,  sec.  4. 

^"^  Wild  Rice  Lumber  (Jo.  v.  Roval 
Ins.  Co.  99  Minn.  190,  108  N.  W. 
871,  35  Ins.  L.  J.  824.  The  court, 
per  Elliott,  J.,  said:  "The  lumber 
company  contends  that  the  provision 
injects  forbidden  conditions  into  the 
standard  policy,  and  the  insurance 
companies  that  it  merely  determines 
one  of  the  'conditions  of  insurance' 
authorized  by  see.  52,  c.  175,  p.  417, 
Gen.  Laws  1895,  and  is  also  express- 
ly authorized  bv  sec.  1,  subd.  2,  c. 
254,  p.  468,  Gen.  Laws  1897.  A 
glance  at  the  history  of  the  standard 
form  of  policy  makes  it  very  clear 
tliat  the  legislature  of  this  state  in- 
tended to  deprive  fire  insurance  com- 
panies of  the  right  to  add  to  or 
change  the  terms  and  conditions  of 
the  prescribed  form.  The  right  to 
make  such  changes  and  additions  is 
one  of  the  principal  distinguishing 
characteristics  of  the  two  class&s  of 
standard  forms.  The  Massachusetts 
and  New  York  standard  policies  went 
into  effect  about  the  same  time,  and 
have  formed  the  models  for  the  legis- 
lation in  other  states.  Bolli  states 
were  seeking  uniformity  of  insur- 
ance conti'acts,  but  Massncluisotts  did 
not  attempt  to  deprive  llie  |)tnties  ot" 
the  liberty  of  making  their  own  con- 
tracts. It  merely  adojjted  a  model 
which  the  parties  Avere  at  liberty  to 
modify  at  will.  But  New  York  went 
further,    and    determined     the     form 


Avhieh  all  must  use,  with  the  privilege 
of      adopting      certain      prescribed 
clauses  to  cover  particular  conditions. 
The  Minnesota  act  of  1889  imposed 
upon  the  insurance  commissioner  the 
duty  of  preparing  a  standard  form 
of  policy  which  should  be  obligatory 
after  that  year.    The  New  York  form' 
was  prepared  and  went  into  use,  but 
the  act  was  declared  unconstitution- 
al  because  it  attempted  to   delegate 
legislative  powers  to    the    insurance 
commissioner.      In    1895    the    legis- 
lature    adopted     the     Massachusetts 
form,    with     such    modifications     as 
were  necessary  to  avoid  conflict  witli 
the   valued   policy   law.      Section   53 
provided  that  a  company  may  write 
upon   the  margin   or  across  the  face 
of  the  polie}^,   or  write  or  print  in 
type  not  smaller  than  long   primer, 
upon  separate  slips  or  riders  to  be 
attached    thereto,    provisions    adding 
to  or  modifying  those    contained    in 
the    standard    form.     The    insurance 
companies    then    adopted    a    general 
rider    which    embraced     substantially 
all   tlie   provisions  of  the  New  York 
form.     But  the  legislature  of  1897, 
amending    .sec.     53,    c.    175,    p.   417, 
Gen.     Laws    1895,   in  express   terms 
prohibited  the  making  of  any  changes 
excejit      such      as     were    specifically 
enumerated     in     the     statute.      The 
conclusion  is  inevitable  that  the  legis- 
lature intended  to  deprive  the  parties 
of  the  right  to  make  insurance  con- 
tracts in  any  form  except    as    pre- 
scribed   by    the  statute."     The  court 


456 


THE  POLICY  §  176c 

flict  with  llie  statutory  form  is  void.^*  Under  the  Massachusetts 
statute,  whicli  requires  every  life  insurance  company  to  tile  with 
the  insurance  commissioner  for  his  approval  a  copy  of  any  form 
of  policy  that  it  purposes  to  issue,"  it  is  his  duty  to  determine 
whether  the  policy  contains  the  substantive  provisions  of  the  law 
called  for  by  statute,  in  such  a  form  as  to  give  the  contract  proper 
eflfect.  In  other  words,  it  is  the  commissioner's  duty  to  consider 
matters  of  substance  called  for  by  the  statute,  and  he  is  not  con- 
fined in  his  examination  to  merely  matters  of  form,  such  as  the  size 
or  shape  of  the  paper  on  which  the  contract  appears,  or  to  the  size 
of  type,  or  the  order  in  whicli  the  different  parts  of  the  contract  are 
set  forth.  And  provisions  inserted  in  the  policy  need  not  be  identi- 
cal with  those  provided  for  by  statute ;  it  is  suflicient  if  they  are  con- 
tained in  substance  in  the  policy,  and  their  form  may  be  varied, 
and  additional  provisions  beneficial  to  insured  may  be  inserted,  pro- 
vided they  satisfy  the  statutory  requirement,  and  do  not  diminish 
them  by  such  added  policy  provisions.^"  Under  another  case  in 
that  state  it  is  held  that  no  departure  from  the  exact  provisions  of 
a  life  policy  required  by  statute  should  be  permitted,  unless  the  sub- 
stituted provision  is  plainly  as  advantageous  in  every  way  to  the 
insured  as  the  prescribed  one.^ 

§  176c.  Standard  policy:  vi^aiver. — In  New  Hampshire  the  stand- 
ard policy  act  is  a  part  of  every  contract  of  insurance.  No  waiver 
of  any  part  of  it  can  be  set  up  by  the  insurer,  every  policy  stipula- 
tion in  conflict  therewith  is  void,  and  every  other  form  is  forbidden. ^ 

then  gives  tlie  statute  (sec.  53,  e.  254,  and  specification  of  the  property  in- 

p.  468,  Gen.   Laws  1897)    and   con-  sured,  the  .so-called    "space    clause" 

tinues:      "The  prescribed  form   with  may  contain  effective  languag'e  limit- 

the  changes   thus  authorized    is    the  ing  the  general  descriptive  language 

only  form  of  tire  insurance  contract  of  the  policy. 

authorized  by  the  laws  of  the  state.  ^^  Franklin     v.     New     Hamp-shire 

.     .     .     Changes    and    additions    are  Fire  Ins.  Co.  70  N.  H.  251,  4i    Atl. 

now  forbidden,  except  as  specifically  91,   30   Ins.  L.   J.   73,   considered  in 

permitted,  but  the   policy  must  still  next  following  section  herein, 

contain  all  the   conditions  of  insur-  ^^  Mass.  Stat.  1907,  p.  895,  c.  576, 

anee."     And  it  is  held  that  a  fire  in-  see.  75.- 

suranee  company  has  no  authority  to  ^^  2FAna  Life  In's.  Co.  v.  Hardison 

attach     to     the    standard     form    of  (Travelers  Life  Ins.   Co.    v.    llardi- 

policy  a  clause  by  which  the  insured  son)    199   Mass.  181,  85  N.   E.  410, 

Avarrants  the  maintenance  of  a  desig-  37  Ins.  L.  J.  818. 

nated  clear  space  about    the    insured  ^  New  York  Life  Ins.  Co.  v.  Ilardi- 

premises.     Such  a  "space' clause,"  at-  son,  199  Mass.  190,  127  Am.  St.  Rep. 

tached  as  a  rider,  is  void  in   so  far  478,  85  N.  E.  410,  37  Ins.  L.  J.  848. 

as  the  warranty  is  concerned;  but,  as  ^  j^-'i-yj^i^ji,!      y       ]Sfew      Hampshire 

the  statute    expressly   authorizes   an  Fire  Ins.  Co.  70  N.  H.  251,  47  Atl. 

insurance   company   to   print   or   ii.se  91,   30   Ins.   L.    J.    73     (decided    in 

in   its  policies  forms   of   description  1900);  Laws  1879,  c.  13  (Pub.  Stat. 

457 


§  17Gd  JOYCE  ON  INSURANCE 

But  although  the  Maine  act  of  1895  prescribes  the  form  of  a  stand- 
ard policy  and  the  stipulations  to  be  contained  therein  it  does  not 
restrict  tlie  ri,2,ht  of  waiver,  and  even  though  the  policy  requires 
"assent  in  writing  or  in  print  of  the"'  insurer  a  waiver  of  the  exj)ress 
terms  of  the  policy  may  arise  from  acts  done  and  knowledge  on  the 
part  of  the  insurer  without  ''assent  in  writing  or  in  print."  ^  And 
in  North  Dakota  while  the  enactment  of  a  standard  form  of  policy 
law  may  affect  a  question  of  pure  waiver  it  does  not  abrogate  the 
doctrine  of  estoi)pel,  especially  where  policies  are  by  statute  such 
policies  are  subject  to  waiver  the  same  as  other  policies  *  and  under 
a  Michigan  decision  a  defense  of  forfeiture  under  a  standard  policy 
by  a  mutual  company  may  be  waived.^  In  Pennsylvania  the  pro- 
visions of  a  policy  under  an  unconstitutional  statute,  providing  for 
a  uniform  fire  policy  and  directing  the  insurance  commissioner  to 
prescribe  a  standard  form  of  policy,  must  be  construed  as  those  of 
a  voluntary  contract  between  the  parties  which  may  be"  waived  by 
them  in  any  manner,  and  not  as  the  requirements  of  a  statute, 
which  can  be  waived  only  in  the  manner  prescribed  thereby.^ 

§  176d.  Standard  policy  law:  effect  as  to  valued  policy  law. — 
In  Louisiana  the  standard  policy  law  has  been  held  to  have  been 
repealed  by  the  valued  policy  law  in  so  far  as  the  latter  conflicts 
with  the  former.'  But  the  Minnesota  legislature  in  1895  adoj^ted 
the  Massachusetts  standard  form  of  policy  with  such  modifications 
as  were  necessary  to  avoid  conflict  with  the  valued  policy  law.*  In 
South  Dakota  the  standard  form  of  fire  insurance  policy  is  open  as 

0.  170)  enacted  immediately  after  de-  One     judge     dissented.      See    chaps. 

eision  that  a  provision  in  the  policy  18-21,   §§    432    et    seq.    herein    as  to 

which  conflicted  with  the  statute  was  waiver  by  agents. 

a  waiver  of  the    lattei-:      Ta.sker    v.  ^  First  Baptist  Cluircli  of  Jackson 

Kenton  Ins.  Co.  58  N.  H.  469.     See  v.  Citizens'  Mutual  Fire  Ins._Co._lin 

Gleason  v.   Canterbury  Mutual  Fire  I\Iich.   203,  5  Det.  L.  N.    i6,,  It   N. 

Ins.  Co.  73  N.  H.  '583,  fi4  Atl.  187,  \V.  702,  28  Ins.  L.  J.  I(i5. 

35  Ins   L   J    932.  ^  O'Neil  v.  American  Fire  Ins.  Co. 

3  Bigelow"  v.    Granite    State    Fire  166  Pa.  72,  45  Am.  St.  Rep.  650,  ^^6 

Ins.  Co.  94  Me.  39.  46  Atl.  808,  30  L.R.A.  715,  30  Atl.  945,  revV  3  D. 

Ins.  L.  J.  77;  Pub.  Laws  1895,  c.  18.  R.  778  (act  April  1891,  Pub.  L.  22, 

See  also  Goodhue  v.  Hartford  Fire  see.  1). 

Ins.    Co.    175    Mass.    187,    55    N.    E.  'New  Orleans  Real    Estate    Mort- 

1039,  29  Ins.  L.  J.  1087.     But  com-  gage    &    Securities    Co.    v.    Teutonia 

pare  Straker  v.  Phoenix  Ins.  Co.  101  Ins.  Co.  128  La.  45,  54  So.  466,  40 

Wis.  413,  77  N.  W.  143,  28  Ins.  L.  Ins.  L.   J.  999.     Compare  Melancon 

J.  143.  V.  Plio^nix  Ins.  Co.  116  La.  324,  40 

*  Leisen  v.  St.  Paul  Fire  &  Marine  So.  718. 

Ins.  Co.  20  N.  Uak.  316,  .30  L.R.A.  «  WUd  Rice  Lumber  Co.  v.  Royal 

(N.S.)   539,  127  N.  W.  837,  39  Ins.  Ins.   Co.   99   Minn.   190,   108   N.   W. 

L.  J.  1729,  the  question  of  waiver  871,  35  Ins.  L.  J.  824,  per  Elliott,  J. 
by  agents  is  exhaustively  considered. 

458 


THE  POLICY  §§  176e-177 

to  personal  property  and  a  strictl}^  valued  policy  as  to  real  estate 
where  the  .^anie  is  wholly  destroyed.^ 

§  176e.  Statutory  requirements  as  to  size  of  type,  written  con- 
ditions, etc. — Statutory  provisions  requiring  conditions  or  restric- 
tions to  be  printed  in  a  certain  sized  type  or  written  in  ink  in 
order  to  constitute  a  valid  defense  to  the  non-performance  of  such 
conditions  or  restrictive  provisions,  must  be  complied  with.^°  And 
this  aj)plies  to  the  application  as  well  as  to  the  policy,^^  but  does  not 
apply  to  conditions  concerning  risks  insured  which  impose  no  bur- 
den on  the  insured. ^^  In  an  action  against  an  ''old-line  company" 
it  is  held  error  to  instruct  the  jury  that,  under  the  Kentucky  stat- 
ute,^^  such  parts  of  an  application  as  were  printed  in  type  smaller 
than  brevier  were  not  to  be  considered  by  them  as  constituting  any 
part  of  the  application,  as  the  statute  does  not  apply  to  such  com- 
panies, but  only  to  co-operative  insurance  companies.^* 

§  176f.  Standard  policy:  mutual  companies  or  associations: 
"special  regulations"  as  part  of  policy. — Where  a  standard  form  of 
fire  policy  is  prescribed  and  the  statute  is  subsequently  amended  so 
as  to  enable  mutual  companies  or  associations  incor})orated  under 
the  law  of  the  same  state,  having  special  regulations  to  eml)ody 
them  in  the  policy  as  a  part  thereof,  such  companies  cannot,  by 
merely  designating  some  regulations  as  ''special,"  overthrow  the 
provisions  of  the  law  otherwise  binding  upon  all  insurance  com- 
panies. It  was  the  intent  of  the  legislature  l)y  the  amendment  to 
limit  such  regulations  to  those  lawful  regulations  which  are  s])ecial 
or  ])eculiar  to  such  nmtual  organizations;  to  those  specially  appli- 
cable to  its  organization,  etc.,  as  distinguished  from  other  kinds  of 
insurance  companies.^* 

§  177.  The  policy:  what  it  usually  contains:  policy  to  contain 
entire  contract:  statutes. — Although  the  form  is  not  essential  unless 

9  Lawver  v.  Globe  Mutual  Ins.  Co.        ^^  Provident    Savings    Life    Assur. 

25  S.  Dak.  549,  127  N.  W.  615,  39  Sop.  v.  Elliott,  29  Ky.  L.  Rep.  552, 

Ins.  L.  J.  1588.  9.",  S.  W.  659,  35  Ins.  L.,  J.  7i:^. 

1"  Equitable  Life  Assur.  Soe.  of  U.        ^^  Nielsen     v.     Mercliants'     Mutual 

S.  V.  Wilson,  110  Va.  571,  2  Va.  App.  Ins.  Co.  26  S.  Dak.  405,  128  N.  W. 

943,  4()  S.  E.  836,    Va.    Code    1904,  491,   40   Ins.   L.   J.   65;   Laws   1905, 

sec.  3252.     See  National  Life  Assoc,  c.  126,  sec.  2   (standard  policy  law), 

V.   Berkeley,   97   Va.   571,   34   S.   E.  amd.  Laws  1907,  e.  170,  sec.  1  (iiuitu- 

469.     See  2514  herein.  al       companies:         ''Special       re<iu- 

iiRurruss  v.  National  Life  Assoc,  lations").     See    Gleason    v.    Canter- 

96  Va.  543,  1  Va.  S.  C.  Rep.  57,  32  bury  Mutual  Fire  Ins.  Co.  73  N.  H. 

S.  E.  49.  583",  64  Atl.  187.  35  Ins.  L.  J.  932; 

^2  Cline  V.  Western  Assur.  Co.  101  Conunonwealth  Mutual  Fire  Ins.  Co. 

Va.  496,  44  S.  E.  100;   Code  1887,  v.  Edwards,  124  N.  Car.  116,  32  S. 

sec.  3252.  E.  404. 

"  Kv.  Stat.  1903,  sec.  679. 

459 


§  177  .      JOYCE  ON  INSURANCE 

required  by  statute,  and  although  the  parties  may  enter  into  what- 
ever legal  and  valid  contract  they  choose,  yet  the  policy  usually 
contains,  either  in  itself  or  by  express  reference  to  the  application  or 
other  papers,  (1)  the  names  of  the  parties,  (2)  the  consideration 
or  premium,  (3)  duration  or  term  insured,  (4)  the  peril  or  risk  or 
voyage  insured,  (5)  the  amount  insured,  (G)  the  subject  matter 
or  the  description  of  the  interest  when  necessary,  (7)  the  warranties 
and  conditions,  (8)  the  attestation  clause,  signatures,  dates,  etc., 
and,  if  necessary,  the  seal.^*     This  rule,  however,  is  subject  to  many 

16  The  30  Vict.  c.  23  (1867),  sec.  sured;  3.  Of  the  subject  insured; 
7,  provides  that  no  contract  for  sea  4.  Of  the  perils  insured  against;  -5. 
in.surance,  other  than  that  referred  to  The  name  of  the  sliip  and  master 
in  the  merdiant  sliipping  act  1862  (except  where  the  insurance  is  on 
sec.  55,  shall  be  valid  unless  expressed  goods  by  ship  or  ships) ;  6.  The 
in  the  policy,  and  that  every  policy  premium  or  consideration  of  the  con- 
shall  specify  the  particular  risk  or  tract;  7.  The  sums  insured;  8.  The 
adventure,  the  names  of  the  sub-  subscription  of  the  underwriter;  9. 
scriber,  or  underwriter,  and  the  sum  Dated;  10.  Stamped  before  exe- 
or  sums  insured,  and  the  omission  of  cution ;"  and  he  states  the  statutory 
any  of  them  shall  avoid  the  policy;  requisites  to  be:  1.  The  insertion  of 
and  see  statute  25  &  26  Vict.  e.  63,  the  name  of  some  party  really  or 
sec.  64;  28  Geo.  III.  c.  56,  sec.  2.  nominally  assured;  2.  The  stamp;  3. 

Mr.  Marshall  (Marshall  on  Insur-  The  risk  or  adventure;  4.  The  names 
ance,  ed.  1810,  305-43),  says  "the  of  the  undei-\vriters;  5.  The  sums  in- 
usual  requisites  of  a  policy  are  ten,"  sured;  6.  At  common  law,  the  premi- 
they  relate  to  marine  insurance,  and  urn.  This  author  also  inserts  what 
are:  1.  The  name  of  the  insured,  is  known  as  the  running  down  clause: 
his  agent,  or  trustee ;  2.  The  name  of  Id.  251.  This  differs  slightly  from 
the  ship  and  the  master;  3.  The  sub-  those  given  by  Mr.  Arnould  (Perkins' 
ject  matter  of  the  insurance;  4.  A  de-  ed.  1850)  page  40.  And  also  from  1 
scription  of  the  voyage  with  the  com-  Arnould  on  Marine  Ins.  (8th  Ed. 
meneement  and  end  of  the  ri.sk;  Hart  &  Simey)  p.  41,  sec.  28.  See  17 
5.  The  perils  insured  against ;  6.  The  Earl  of  Ilalsbury's  Laws  of  England, 
powers  of  the  insured  in  case  of  a  pp.  337,  338.  By  sec.  23  of  the 
misfortune;  7.  The  promise  of  the  marine  ins.  act.  "'A  marine  policy 
insurers  and  their  receipt  for  the  must  specify  (1)  the  name  of  the  as- 
preraium;  8.  The  common  memoran-  sured  or  of  some  person  who  effects 
dum;  9.  The  date  and  subscription;  the  insurance  in  his  behalf;  (2)  the 
10.  The  stamp.  This  first  I'equiro-  subject-matter  insured  and  tlie  risk 
ment  arose  from  llie  statutes  25  Geo.  insured  against;  (3)  the  voyage,  or 
]1I.  c.  44,  and  28  Geo.  III.  c.  56.  The  period  of  time,  or  both,  as  the  case 
second  depends  upon  usage,  since  it  may  be,  covered  by  the  insurance; 
is  very  ancient  and  exists  in  the  (4)  the  sum  or  sums  insured ;  (5)  tlie 
forms  of  foreign  policies.  name    or    names    of   the   subscribers, 

Mr.  jMaclaciilan  (1  Arnould  on  and  sec.  24  (1)  declares  that  a  'ma- 
Marine  Ins.  [ed.  1887]  251)  states  rine  policy  must  be  signed  by  or  on 
the  following  as  substantial  requisites  behalf  of  the  insurer.'  "  1  Arnould 
of  a  marine  policy  in  England:  on  Marine  Ins.  (8th  ed.  Hart  & 
1.  The  name  of  some  party,  either  Simey)  sec.  8,  p.  11;  Id.  sec.  11,  p. 
really  or  nominally  insured;  2.  A  20.  And  in  case  of  a  corpoi'ation  the 
description  of  the  voyage  or  I'isk  in-  r-orporate  seal  may  be  sufficient.     17 

460 


THE  POLICY  §  177 

qualifications.  Thus,  it  is  not  absolutely  necessary  to  the  validity 
of  the  policy  in  all  cases  that  the  name  should  appear,^'  nor  need 
the  nature  and  extent  of  the  interest  be  specifically  set  out  in  every 
case,^*  and  the  valuation  is  sometimes  not  written  in  the  policy. 
Thus,  a  cargo  policy  may  provide  in  the  blank  form  that  if  no  valu- 

Earl  of  Halsbury's  Laws  of  England,  tliat  defendant  intended  to  insure 
pp.  337,  338.  such  persons  and  their    interests    in 

Although  a  contract  may  be  one  said  premises  as  were  or  miglit  be 
of  sea  insurance  within  Stamp  Act  represented  under  said  name  or  title. 
1891  (54  &  55  Vict.  c.  39)  sec.  93,  But  see  30  Viet.  c.  23.  sec.  7;  Lee  v. 
subsec.  1,  still  it  will  be  invalid  as  Massachusetts  Fire  &  Marine  Ins. 
such  policy  which  cannot  be  stamped  Co.  6  Mass.  215,  216. 
or  sued  on  as  such  or  as  a  contract  A  policy  issued  in  the  adopted 
to  issue  a  policy  wliere  it  does  not  name  of  the  applicant,  rather  than 
specify,  as  required  by  subsec.  3  of  in  that  given  him  by  his  [)areuts  is 
said  act,  the  sum  or  sums  insured,  valid.  Smith  v.  United  States  Casu- 
Ilome  Marine  Ins.  Co.  Ltd.  v.  Smith,  alty  Co.  197  N.  Y.  420,  26  L.R.A. 
(1898]  2  Q.  B.  D.  Law  R.  351,  67  (N.S.)  1167,  18  Am.  &  Eng.  Ann. 
L.  J.  Q.  B.  N.  S.  777,  78  Law  T.  Rep.  Cas.  631,  90  N»  E.  947. 
734,  affg.  [1898]  1  Q.  B.  829,  78  Law  A  policy  issued  to  one  in  his  own 
T.  Rep.  465,  67  L.  J.  Q.  B.  N.  S.  name  as  "receiver  for"  a  firm  on  their 
554.  "one-half  interest"  in  a  certain  build- 

Stamp  tax  on  policies  (marine,  in-  ing  evidences  clearly  an  intent  to  in- 
land, fire);  war  revenue  act  consti-  sure  the  receiver  as  the  representative 
tutional :  whether  insurance  policies  of  the  interest:  Steel  v.  Phoenix  Ins. 
as  documents  are  exports.  See  Co.  51  Fed.  715;  2  C.  C.  A.  463,  154 
Thames  &  Mersey  Marine  Ins.  Co.  U.  S.  518,  14  Sup.  Ct.  1153,  38  L.  ed. 
Ltd.  V.  United  States  (U.  S.  D.  C.)  1064  (court divided).  See  also  Tliomp- 
217  Fed.  683,  war  revenue  act  1898,  son  v.  Phenix  Ins.  Co.  136  U.  S.  287, 
act  June  13,  1898,  c.  448,  see.  25,  34  L.  ed.  408,  10  Sup.  Ct.  1019,  19 
Sched.  A,  30  Stat.  461.  Ins.  L.  J.  481. 

The  "sum  at  risk,"  in  a  marine  As  to  policy  to  corporations  in 
policy,  is  the  valuation  placed  upim  their  name,  see  Holbrook  v.  St.  Paul 
the  property  by  the  policy  itself.  Ins.  Co.  25  Minn.  229;  Clark  v.  Ger- 
Standard  Marine  Ins.  Co.  v.  Nome  man  Mutual  Fire  Ins.  Co.  7  Mo.  App. 
Beach  Lighterage  &  Transp.  Co.  133  77;  Bon  Aqua  Imp.  Co.  v.  Standard 
Fed.  636,  67  C.  C.  A.  602,  1  L.R.A.  Fire  Ins.  Co.  34  W.  Va.  764,  12  S. 
(N.S.)  1095.  E.  771.     And  an  insurance  company 

"The  thing  or  property  insured  cannot  escape  liability  for  a  fire  loss 
is  called  the  subject  matter  of  insur-  because  the  deed  to  the  plaintiff 
ance  (Marine  insurance)  17  Earl  of  corporation  was  made  before  it 
Halsbury's  Laws  of  England,  p.  received  its  cliarter,  and  the  name 
336.  used  in  the  deed  was  slightly  difter- 

^'  See  §§  310,  1689  herein.  ent  from  that  subsequently  given  it. 

See  AVeed  v.  London  &  Lancashire  Sumter  Tobacco  Warehouse  Co.  v. 
Fire  Ins.  Co.  116  N.  Y.  106,  112,  Ph«?nix  Ins.  Co.  76  S.  Car.  76,  10 
22  N.  E.  231,  where  the  defend-  L.R.A.  736,  121  Am.  St.  Rep.  941, 
ant    by    the    policy    in    suit    under-   56  S.  E.  654. 

took  to  insure  tlie  "Estate  of  0.  ^^  Vannatta  v.  Mutual  Security 
Richards"  against  loss  or. damage  by  Ins.  Co.  2  Sand.  (N.  Y.)  490,  494. 
fire,  and  the  referee  found  as  a  fact   See  §§  1691  et  seq.  herein. 

461 


§  177 


JOYCE  ON  INSURANCE 


ation  be  written  herein  then  the  property  inserted  is  herel)y  vahied 
at  invoice  cost  on  board.  Nor  is  a  written  date  essential/^  except 
possibly  in  case  of  marine  policies  in  England  subscribed  by  Lloyds 
underwriters,^"  and  stipulations  relating  to  signing  and  counter- 
signing are  sometimes  dispensed  with.^ 

Where  a  statute  prohibits  unjust  discrimination  between  insurants 
of  the  same  class  and  makes  it  unlawful  for  any  life  insurance  com- 
pany to  promise  to  give  any  advantage  or  valuable  consideration 
whatever,  not  expressed  or  specified  in  the  policy  and  requires  the 
contract  to  be  wholly  expressed  therein,  an  option  to  purchase 
shares  of  the  insurers  stock,  not  expressed  in  the  policy,  violates  the 
statute,  a.s  any  act  which  is  a  benefit  to  one  party  and  a  disadvantage 
to  the  other  is  a  valuable  consider  ation. ^ 

Under  the  statutes  of  several  states  a  life  policy  must  contain  the 
entire  contract,'  and  what  must  or  must  not  be  specified  in  a  policy 
is  provided  for  by  statute  in  many  states,* 


^^  Lee  V.  Massachusetts  Ins.  Co.  6 
Mass.  218,  219.  See  §  157  herein. 
If  oral  agreement  mentions  no  date, 
the  risk  begins  immediately:  Potter 
V.  Phoenix  Ins.  Co.  63  Fed.' ,382. 

2°  1  Arnould  on  ^larine  Ins.  (Mac- 
lachhin's  ed.  1887)  249,  250. 

^  Mvers  v.  Kevstone  ^Nlntual  Life 
Ins.  Co.  27  Pa.  St.  268,  67  Am.  Dec. 
462.  See  §§  33-35,  528,  530-532 
lierein. 

^  People  V.  Commercial  Life  Ins. 
Co.  247  111.  92,  93  N.  E.  60,  40  Ins. 
L.  J.  163;  act  June  19,  1891.  Laws 
1891,  p.  148. 

3  Colorado. — Sess.  Laws  1907,  c. 
193,  .see.  36,  p.  455. 

Delaware. — Laws  1907,  c.  106,  p. 
190. 

Illinois. — Laws  1891,  p.  148,  dis- 
crimination as  to  rates  etc.  requires 
fontracts  to  be  \\iiolly  expressed  in 
the  application  and  policy  construed 
in  People  v.  Commercial  Life  Ins. 
Co.  247  111.  92,  93  N.  E.  90,  40  Ins.  L. 
J,  163 :  Rev.  Stat.  sec.  208u,  clause  3, 
&  sec.  209,  c.  73,  Rev.  Stat,  construed 
in  McCarthy  v.  Pacific  Mutual  Life 
Ins.  Co.  178  111.  App.  502. 

Keiitiickij.—Siat.  1909,  sec.  4400. 

Louisiana. — Acts  1906,  act  no.  52, 
p.  86. 

Massachusetts. — Acts      and      Res. 

46 


1907,  c.  576,  sec.  75,  pp.  895  et  .seq. 
providing  that  life  policy  and  appli- 
cation must  contain  entire  contract. 
Construed  in  New  York  Life  Ins.  Co. 
v.  HardLsen,  199  ^lass.  190,  127  Am. 
St.  R^^p.  478,  85  N.  E.  410,  37  Ins. 
L.  J.  848;  .Etna  Life  Ins.  Co.  v. 
Hardison  (Travelers  Life  Ins.  Co.  v. 
Hardi.'^on)  199  Ma.ss.  181,  85  N.  E. 
407,  37  Ins.  L.  J.  818.  See  §§  186, 
187  herein. 

Michigan. — Pub.  acts  1907,  p. 
243. 

Minnesota. — Laws  1907,  e.  44,  p. 
49. 

Montana. — Rev.  Codes  1907,  see. 
5593. 

New  Hampshire. — Laws  1907,  c. 
110,  p.  109. 

Netv  York.— Ins.  Law  1892,  e.  690, 
se,c.  58,  and  1906,  c.  326,  construed, 
in  connection  with  non-attachment 
of  medical  examination  to  policy,  in 
Becker  v.  Colonial  Life  Ins.  Co.  138 
N.  Y.  Supp.  491,  153  App.  Div.  382, 
a%.  133  N.  Y.  Supp.  481,  75  Misc. 
213. 

North  Dakota. — Laws  1907,  c.  155, 
p.  246. 

Tennessee.— Acts  1907,  p.  1530. 

See  5<i5  190,  190a  herein. 

*  Alabama. — Code  1907,  sec.  4579, 
provides  that  no  Ufe,  nor  any  other 


THE  POLICY 


§  178 


§  178.  Execution  of  the  policy. — The  policy  is  executed  by  the 
insurer,  and  although  it  is  not  signed  by  the  assured,  except  where 
certificates  of  membership  in  certain  mutual  benefit  societies  are  re- 
quired to  be  signed  by  the  assured,  and  although  the  promise  is  by 
the  assurer  and  not  by  the  assured,  except  in  causes  where  the  pre- 
mium is  not  presumed  to  have  been  prepaid,  he  is  bound  to  an  ob- 
servance of  all  its  valid  conditions  if  he  intends  to  claim  the  indem- 
nity, or  as  in  life  policies,  the  sum  specified,  his  right  to  recover  de- 
pends upon  a  performance  by  the  insured  of  the  valid  conditions  of 
the  policy,  since  the  violation  of  conditions  of  any  policy  constitutes 
a  valid  defense  by  the  insurer.    A  policy  may  be  subscribed  by  the 


insurance  company,  nor  any  agent 
tliereof,  shall  make  any  contract  of 
insurance  or  agreement  other  than 
is  plainly  expressed  in  the  policy. 
"Plainly  expressed''  construed  in 
Hunt  V.  Preferred  Accdt.  Ins.  Co. 
172  Ala.  442,  55  So.  201,  sec.  2002, 
Code  1890,  is  same,  and  is  construed 
in  Manliattan  Life  Ins.  Co.  v.  Veme- 
uille,  150  Ala.  592,  47  So.  72,  37  Ins. 
L.  .1.  892.  When  application  and 
policy  one  contract  under  code.  See 
SS  186,  187,  190  herein.  When 
(loenmcnts  are  part  of  policy  under 
code,  see  §  191  herein. 

Arizona. — Civ.  Code,  par.  809, 
and  act  March  21,  1907,  Sess.  L. 
1907,  p.  162. 

Cah'forvia. — Civ.  Code,  sees.  450, 
2587,  .>^ec.  2587  covers  parties,  rate  of 
l)remium ;  property  or  life  insured ; 
interest  of  insured  in  property,  if  not 
absolute  owner;  risks  insured 
against;  period  during  wiiicli  insur- 
ance to  continue.  Cited  in  Davis  v. 
Plia-nix  Ins.  Co.  Ill  Cal.  409,  411, 
412,  43  Pac.  1115.  Quoted  in  part 
in  Union  Mutual  Ins.  Co.  v.  Ameri- 
can Fire  Ins.  Co.  107  Cal.  327,  330, 
28  L.R.A.  092,  40  Pac.  431. 

Colorado. — Sess.  Laws  1907,  p. 
455,  sees.  36,  37,  c.  193. 

Illinois.— Rev.  Stat.  1908,  pp. 
1248-1250,  sees.  208u,  208v. 

Indiana.-^^ee  Burns  Ann.  Stat. 
Rev.  1908,  sees.  4725,  4752. 

.I/fl,s,sflc7(M.s(?^/.'.— Stat.  1894,  c.  522, 
sec.  59,  requring  conditions  of  fire  in- 
surance to  be  stated    in    full.     Con- 


.strued,  in  connection  with  Pub.  Stat. 
c.  119,  sec.  138  (standard  policy)  so 
as  not  to  preclude  certain  temporaiy 
oral  agreement  in  Goodhue  v.  Hart- 
ford Fire  Ins.  Co.  175  .Ma.ss.  187,  29 
Ins.  L.  J.  207,  55  N.  PI  1039. 

Michigan.— Puh.  acts  1907,  p.  252. 

Minnesota. — Genl.  Laws  1895,  c. 
175,  p.  417,  as  am'd  Genl.  Laws  1897, 
c.  254,  p.  468,  all  conditions  of  fire 
policy  to  appear  in  one  written 
instrument.  So  construed  in  Wild 
Rice  Lumber  Co.  v.  Royal  Ins.  Co. 
99  Minn.  190,  108  N.  W."871,  35  Ins. 
L.  J.  824.    See  §  170b  herein. 

Missouri. — Rev.  Stat.  1899,  sec. 
7903.  Exact  sum  of  money  which 
insurer  promises  to  pay  must  be 
specified  in  policy  or  certificate. 
Construed  in  Courtney  v.  Fidelity 
Mutual  Aid  Assoc.  120  Mo.  App.  110, 
94  S.  W.  768,  101  S.  W.  1098.  Good- 
son  V.  National  ^Ia.sonic  Accident 
A.SSOC.  91  Mo.  App.  339. 

Montana. — Civ.  Code  (Rev.  Codes 
1907)  sec.  5592  (sec.  3451). 

New  Jersey. — Laws  1907,  c. 
133. 

North  Carolina. — See  Rev.  of  1905, 
sec.  4773. 

North  Dakota.—  Tiev.  Codes,  1899, 
sec.  4488  (same  as  Cal.). 

(97((V).— Laws  1908,  pp.  171-174. 

Porto  Pico. — Rev.  Codes  (Civ.) 
1902,  sec.  1095. 

South  Dakota.— Jlev.  Codes  1903, 
sec.  1837   (same  as  Cal.). 

Tennessee.^Acis  1907,  c.  457,  p. 
1529.     See  e.  441,  p.  1490. 


72, 


463 


178 


JOYCE  ON  INSURANCE 


underwriter  or  by  his  duly  authorized  agent  or  attorney ,5  and  the 
statute  niav  require  that  tlie  contract  be  signed  by  the  insurer  or 
some  authorized  person.^.  But  in  this  country  the  business  of  in- 
surance is  carried  on  principally  by  chartered  or  incorporated  com- 
panies or  associations,  and  the  policy  or  certificate  is  generally  sub- 
scribed by  the  executive  officers  of  the  company,  although  the  act 
of  incorporation,  charter,  articles  of  association,  or  by-laws  may 
designate  certain  ofhcers  or  agents  to  attest  the  policy,  and  the  pol- 
icy may  also  provide  for  the  countersignature  of  a  certain  agent  as 
a  condition  precedent  to  its  validity.'    And  it  is  held  that  a  provi- 

5  Guthrie  v.  Armstrong,  5  Barn.  &  Form   of   execution;  standard  fire 
Aid.  628;  1  D.  &  K.  248.  iiolicij   of   Massachusetts:      "In    wit- 

6  Delaware    Ins.    Co.    v.    Pennsyl-    uess  whereof,  the  said  company 

vania  Fire  Ins.  Co.  126  Ga.  ■^S0,  55  has  caused  this  policy  to  be  signed  by 

S.   E.   330.  its  president,  and  attested  by  its  sec- 

'7  See     §§     528,     530-532     herein,   retary  (or  by  such  proper  officers  as 
See    also   '§§     39-41    herein;     Com-   may  be  desig-nated).  at  their  office  in 

niercial  Mutual  Ins.  Co.  V.  Union  Ma-   (date)." 

rine  Ins.  Co.  19  How.  (60  U.  S.)  Forw  of  execution;  ^elv  YorK 
318,  15  L.  ed.  636,  2  Curt.  (U.  S.  C.  Standard  pre  poVioi :  "In  witness 
C.)  524;  Head  v.  Providence  Ins.  whereof,  this  company  has  executed 
Co.  2  Cranch  (6  U.  S.)  127,  150,  2  and  attested  these  presents,  but  this 
L.  ed.  229 ;  Peoria  Fire  &  Marine  Ins.  policy  shall  not  be  valid  unless 
Co.  V.  Walser,  22  Ind.  73;  Myers  v.    countersigned  by  the  duly  authorized 

Keystone   Mutual   Life   Ins.    Co.   27    agent     of     the     company     at     

Pa.'  St.  268,  67  Am.  Dec.  462.  this  day  of 19—." 

Form   of  execution  of  marine  and        Form,   of   execution;   certificate   of 
fire    policy:      "In    witness    whereof,    membership     of     mutual     companij: 

tlie    Insurance    Company    has    "In  witness  whereof,    the    .said 

caused  these   presents  to    be    signed    company  of  have-   caused    tliis 

by  its  duly  authorized  officers  in  the    certificate  to  be  signed  by  tlieir  presi- 

_: state    of   this  —  day    of    dent,  and  attested  by  tiunr  secretary 

^  one  thousand hundred  and    in  the  city  of ,  state  of ,  this 

^ secretary, presi-    day  of ,  a.  d.  18 — .     

dent."  president,  .  secretary.     Counter- 

Anotlier  marine  form  of  execution    signed   at 
is:     "In  witness  whereof,  the  presi-    ]8 — .     — 
dent    or    vice-president    of    the    said 
Insurance  Company  hath  here- 
unto  subscribed   his   name     and    the 


—  this  — day  of 
-,  agent." 


sum  insured,  and  caused  the  same  to 

be  attested  by  the  secretary  in 

the  —  day  of  ,  one  thousand," 

etc.    Memorandum  clause:     " , 

secretary, ,  president." 

Another    form    of    execution;    fire 
polici/:      "In    witness    whereof,    this 


Form  of  execution;  certificate  in 
m.utual  benefit  or  heneficiarij  associa- 
tion:    "In  witness  whereof,  the  said 

association  of    ,    state    of 

-,  has  by  its  president    and    sec- 


retary signed,   sealed,   and   delivered 

this    certificate    at  its  office  in , 

state  of ,  this  day  of ,  18 — . 

-,  president. 


,  secretary'," 
noiicii:        "in    wiuie-ss'     witncuj.    n'^a       «.    •        *  -■  i 

company  has  executed   and   attested   affixing  corporation  seal. 

these  presents  this  -  day  of  ,       I' orm  ^ofexecntwn  of  Jew  Jork 

189—.       — 
president." 


secretary, 


464 


standard    life    policy:     "In    witiie-ss 
whereof,  the  company  has  caused  this 


THE  POLICY  §  178 

sion  requiring  the  policy  to  be  countersigned  must  be  complied 
with.^  Again,  that  a  policy  of  life  insurance  shall  be  countersigned 
by  the  agent  of  the  company  before  it  shall  become  a  valid  obliga- 
tion is  a  stipulation  that  the  company  has  a  right  to  make,  and  the 
completion  of  tlie  contract  with  the  signature  of  such  agent  during 
the  lifetime  of  the  insured  is  essential  to  the  existence  of  an  obliga- 
tion which  can  be  enforced  against  the  company.^  A  mutual  ben- 
efit certificate  is  not  properly  and  completely  executed  where  it  is 
not  countersigned  by  the  protector  and  secretary  of  the  subordinate 
lodge  as  provided  by  said  certificate  although  the  seal  of  such  lodge 
is  impressed  thereon,  and  the  mere  possession  of  the  certificate  is 
not  a  waiver  of  such  requirement.^"  The  validity  of  a  policy  or  cer- 
tificate constituting  a  contract  between  a  benefit  society  and  a  mem- 
ber thereof  is  not  destroyed  by  the  adoption  of  some  impracticable 
scheme  for  execution  of  the  contract. ^^  So  it  is  held  that  if  the  copi- 
pany's  charter  requires  that  contracts  shall  be  signed  by  the  presi- 
dent and  countersigned  by  the  secretary  the  subscription  to  be  valid 
must  be  made  in  that  way.^^  The  statute  of  ^Massachusetts,  how- 
ever, which  provides  that  insurance  corporations  can  make  valid 
policies  only  by  having  them  signed  by  their  president  and  secre- 
tary only  directs  the  formal  mode  of  signing  policies,  and  has  no 
application  to  agreements  for  insurance. ^^  Again,  it  is  held  that 
it  does  not  constitute  subscribing  a  pohcy  where  the  insurer's  name 
appears  only  at  the  beginning  but  not  at  the  end  of  the  instru- 
ment.^* In  Nebraska  the  statute  of  1903  requiring  all  policies  and 
contracts  of  whatever  kind  for  life  insurance  to  be  signed  by  cer- 

policv    to    be    executed     this —  v.   Walton,   24   Okla.   671,   104   Pae. 

day  of .  009. 

Form    of    execution;    life    policy:  ^°  Caywood     v.     Supreme     Lodare 

"In  witness  whereof,  the  said  ■  Knights    &    Ladies     of    Honor,    171 

Life  Insurance  Company  [or  society]  Tnd.  410,  131  Am.  St.  Rep.  2o3,  23 

has  caused  this  policy  to  be  signed  L.R.A.(X.S.)    304n,  17  Am.  &  Eng. 

by  two  of  the  executive  officers  at  its  Ann.  Cas.  503,  86  N.  E.  482,  38  Ins. 

office  in  this  day  of ,  L.  J.  147. 

A.    D.    one    thousand    .     ,  As  to  countersigning  by  agent  or 

secretary,  actual^."  sub-agent,  see  S§  530,  531  herein. 

Another   form    of    execution;   life  ^^  Failey   v.    Fee,    83    Md.    83,    32 

policy:      "In    witness    whereof,    the  L.R.A.  311,  34  Atl.  8.39. 

said Life  Insurance  Company  ^^  gpi^^er  v.  St.  ]\Jarks  Ins.  Co.  6 

has  by  its  president    and    secretary  Duer    (N.    Y.)    6.      But   see   §§    31, 

signed  and  delivered  this  contract  at  32,  423,  425-27  herein. 

the ,  this day  of ,  one  -   ^^  Commercial  ]\Iutual  Marine  Ins. 

thousand    ,    ,     secretary,  Co.  v.  Union  Mutual  Ins.  Co.  1!)  How. 

,  president."  (60  U.  S.)  318,  l.')  L.  ed.  63(). 

8  Badger  v.  American  Popular  Life  ^*  Globe  Accident  Ins.  Co.  v.  Reid, 
Ins.  Co.  103  ^lass.  244.  19   Ind.   App.   203,   47    N.    E.    947, 

9  Fidelity  &  Casualty  Co.  of  N.  Y.  modified  49  N.  E.  291,  7  Am.  &  Eng. 

Jcivce  Ins.  Vol."  I.— 30.  465 


§  178 


JOYCE  ON  INSURANCE 


tain  officers  of  tlie  companies  is  limited  to  companies  formed  tTiere- 
under.^*  And  wliere  a  contract  for  employer's  insurance  provides 
for  indemnity  to  the  insured  in  case  of  liability  to  employees  for 
damages  for  accidents  and  injuries  sustained  by  them  in  the  coui-se 
of  their  employment,  and  also  further  provides  for  hospital  treat- 
ment for  sick  or  disabled  employees,  in  consideration  that  the  in- 
sured pays  a  monthly  assessment  based  on  the  number  of  employees, 
such  a  contract,  being  in  the  name  of  the  corporation  as  the  insur- 
er, may  be  signed  officially  by  its  president,  and  such  subscription 
IS  valid.^^ 

In  case  of  marine  policies  in  England  private  insurers  underwrite 
with  their  own  names,  and  Lloyds'  policy  is  ordinarily  executed  by 
individual  underwriters,  and  against  each  subscription  is  generally 
set  in  words  and  figures  the  date  and  also  the  sum  insured.^'  And 
in  fact  the  act  incorporating  the  society  of  Lloyds  ^^  prohibits  sub- 
scribing in  the  name  of  a  partnership  or  otherwise  than  in  the  name 


Corp.  Cas.  N.  S.  770;  Rev.  Stat. 
1894,  sec.  455.  But  compare  Dela- 
Avare  Ins.  Co.  v.  Pennsvlvania  Fire 
Ins.  Co.  126  Ga.  SSO,  So'S.  E.  330. 

^^  Carter  v.  Bankers  Life  Ins.  Co. 
83  Neb.  810,  120  N.  W.  455,  acts 
1903,  c.  52,  see.  15,  p.  332. 

^^  National  Protective  Ai^soc.  v. 
Prentice  Brown  Stone  Co.  49  Minn. 
220,  51  N.  W.  916. 

^"^  Form  of  subscript  ion  of  Englisli 
marine  policy  as  recognized  in  the 
marine  insurance  act  as  the  standard 
form  of  policy  (Lloyds)  :  "In  wit- 
ness wliereof,  we,  the  assurers,  have 
subscribed  our  names  and  sums  as- 
sured in  London ;"  then  follows 
memorandum  clause,  then  si^jnatures 
and  sums  affixed  as  follows:  £ 
[figures] ;  A  B   [sum  in  figures  and 

words],  day  of ,  A.  D."  for 

each  underwriter  the  sum  subscribed 
being  specified,  and  date  of  each' 
subscription  affixed.  See  1  Arnould 
on  Marine,  Ins.  (8th  ed.)  Hart  & 
Simey)  p.  17,  sec.  10;  Id.  p.  37,  sec. 
26  (as  to  club  policy,  sec.  2  Id.  Ap 


of  Halsbury's 
p.  339,  citing 
( 6  Edw.  TIL  c. 


foot  of  the  policy,  writing  opposite 
thereto  the  sum  insured  by  each; 
and  the  effect  of  this  is  that  each 
makes  a  separate  contract  with  the 
assured  for  the  amount,  set  opposite 
to  liis  name,  the  assured  thereby 
acquiring  a  right  of  action  against 
each  separately  and  not  against  all 
jointly."  17  Earl 
Laws  of  England, 
marine  ins.  act  1906 
41)  see.  24  (2)  :  Tyser  v.  Ship  Own- 
ers Syndicate  (reassured),  [1896]  1 
Q.  B."l35;  Leo  Steamship  Co.  Ltd.  v. 
Corderoy  (1896),  1  Com.  Cas.  300, 
379,  C.  A. 

"The  mode  employed  in  effecting 
an  insurance  at  Lloyds  is  simple. 
The  business  is  done  entirely  by 
brokers,  who  write  upon  a  .slip  of 
paper  the  name  of  the  ship  and  ship- 
master, the  nature  of  the  voyage,  the 
subject  to  be  insured,  and  the  amount 
at  which  it  is  valued.  If  the  risk  is 
accepted,  each  underwriter  subscribes 
his  name,  and  the  amount  he  agrees 
to  take  or  underwrite,  the  insurance 


pendix  B.)    17  Earl    of    Halsbury's   being  effected  as  soon  as    the  J^otal 
Laws  of  Eng.  p.  340,  sec.  678,  note. 

Execution  of  policg.  "\Yhere  the 
policy  is  underwritten  by  individuals 
as,  as  in  clause  nineteen  of  Lloyd's 
policy,  they  sign  their  names  at  the 


value    is    made    up."      16th    Ency. 
Britannica    (11th  ed.)    "Llovds,"  pp. 
833,  834.     See  also  14th   Id.   "Insur- 
ance," subliead  "Llovds,"  p.  661. 
18  34  Vict.   (1871),  c.  21. 


466 


THE  POLICY 


§  178 


of  an  individual,  being  an  underwriting  member  of  the  society  for 
each  separate  sum  subscribed.  The  policy  becomes,  therefore,  a 
separate  contract  with  each  underwriter  obligating  him  to  the  ex- 
tent of  his  subscription  or  for  some  proportionate  part  thereof  in 
case  of  a  pai'tial  or  average  loss,  thereby  precluding  an  action 
against  the  subscribers  jointly,  and  necessitating  a  separate  action 
against  each  underwriter.  Partnerships  should  subscribe  as  such, 
and  if  there  be  a  separate  subscription  by  indi\idual  partners  this 
does  not  preclude  resort  to  partnership  assets.  The  mode  of  sub- 
scription by  companies  may  depend  upon  the  act  of  incorporation, 
charter,  or  deed  of  formation.  In  case  of  subscription  by  what  w-ere 
known  as  insurance  clubs  in  England  some  question  has  arisen  as 
to  the  manner  of  subscription,  and  the  specilication  of  the  sum  or 
sums  insured,  owing  to  the  principles  upon  which  these  organiza- 
tions were  originally  formed,  and  the  necessity  of  conforming  with 
the  requirements  of  the  act  of  1867,  30  Victoria,  chapter  23,  section 
7,  that  each  policy  shall  specify  the  names  of  the  underwriters  and 
the  sum  or  sums  insured.  These  clubs,  however,  are  now  registered 
under  the  companies  act  of  1862,^^  still  preserving,  as  far  as  consis- 
tent with  existing  laws,  their  mutual  features.^" 


1^25  &  26  Viet.  e.  89.  See  also 
7  &  8  Vict.  c.  110.  See  stamp  act 
1891.     See  §§  IV.,  V.  33,  41d  herein. 

^°  Validily  of  policy  wliere  sums 
not  specified.  Policy  in  the  common 
form  by  an  insnrance  chib,  where  the 
members  are  not  responsible  for  the 
solvency  of  each  other,  is  valid,  al- 
though the  sums  which  they  re- 
spectively insure  are  not  speeitied  on 
the  face  of  the  policy.  Dowell  v. 
Moore,  4  Camp.  166  (1815). 

No  stamped  policy  executed  and  no 
recovery  allowed,  under  30  Vict.  c. 
23,  sees.  7,  9 :  Foster  v.  Liverpool 
Marine  Ins.  Co.  9  L.  R.  Q.  B.  418, 
43  L.  J.  Q.  B.  114,  ariirminj;  42  L.  J. 
Q.  B.  224  (1874).  See  §§  33,  41d 
herein. 

As  to  stamping  of  policies  of  ma- 
rine insurance  in  the  United  King- 
dom see  1  Arnould  on  Marine  Ins. 
(8th  ed.  Hart  &  Simoy)  p.  44,  sec. 
31,  stamp  act  1891  (54  &  55  Vict.  c. 
39),  repealing  all  theretofore  exist- 
ing enactments  as  to  stamping 
policies,  a.s  amended  bv  the  finance 
act  1908  (8  Edw.  VII.  c.  16)  sec.  5. 


467 


As  to  stamping  the  policy  after  exe- 
cution. See  Id.  (1  Arnould)  p.  47, 
sec.  32;  as  to  effect  of  the  provision, 
see  Id.  p.  46,  sec.  32;  as  to  penalties 
for  breach  of  stamp  act  see  Id.  p. 
47,  sec.  32;  as  to  spoiled  stamps  see 
Id.  p.  48,  sec.  33;  as  to  legal  effect 
of  the  slips  under  the  stamp  act,  see 
Id.  p.  48,  sees.  34  et  seq. 

"Policy  of  sea  insurance  other 
than  such  insurance  as  is  refei'red  to 
in  the  merchant  shipping  act  1894, 
sec.  506,  is  not  valid  unless  expressed 
in  a  policy,  Avhich  cannot  be  given  in 
evidence  unless  stamped,  and  this 
must,  except  in  certain  specilied  cases 
be  done  before  it  is  executed;  but  a 
])olicy,  although  not  duly  stamix'd, 
may  for  the  purpose  of  production 
in  evidence,  be  stamped  after  exe- 
cution on  payment  of  a  penaltv  of 
£100."  17  Karl  of  Halsbury's  Laws 
of  England,  sec.  676,  p.  338. 

Unregistered  association;  Com- 
panies act:  A  mutual  marine  insur- 
ance association  was  not  registered 
under  companies'  act.  Eules  provid- 
ed that  all  persons  insuring  with  the 


§  178a 


JOYCE  ON  INSURANCE 


§  178a.  Fidelity    bond:    necessity    of    signing    by    employee: 
agency:    waiver. — The  failure  of  aii  employee  to  sign  a  bond  of  in- 


association  should  be  members.  No  nection  with  these  mutual  assurance 
ship  was  to  be  insured  for  more  than  associations.  In  the  ease  of  Lion 
tliree-fourths  its  value.  The  person  Mutual  Marine  Ins.  Assn.  v.  Tucker 
insuring  paid  a  deposit  of  twenty-  (49  L.  T.  7ti4,  12  Q.  B.  D.  17G),  I 
five  shillings  per  cent  on  the  amount  endeavored  to  explain  the  business 
for  which  he  had  insured  it,  ratably  relation  of  the  members  of  such  an 
according-  to  tiie  amounts  assured  to  association  to  each  other.  It  is  nec- 
them  respectively.  There  were  more  es&ary  to  consider  the  form  in  which 
than  twenty  members.  An  insured  the  parties  have  carried  out  those 
vessel  was  lost,  and  the  amount  was  business  relations  in  order  to  ascer- 
ref erred  to  arbitration.  The  insured  tain  what  remedies  are  available  for 
assigned  his  claim,  judgment  wa.s  ob-  the  purpose  of  enforcing  them.  The 
tained,  and  a  petition  presented  to  first  tiuestion  which  it  may  be  materi- 
wind  up  the  association,  as  its  com-  al  to  consider  is,  whether  the  different 
pany  consisted  of  more  than  twenty  members  of  the  association  have  any 
members  and  was  not  registered.  Its  remedies  or  rights  of  action,  and  if 
formation  was  forbidden  by  the  com-  so,  wha<  as  between  themselves.  It 
panics'  act,  1862,  sec.  4,  and  the  is  obvious,  as  explained  in  the  case 
court  discharged  an  order  for  wind-  I  have  referred  to,  that  members  can- 
ing up,  as  it  could  not  recognize  the  not  sue  other  members  in  respect  of 
association  as  having  any  legal  exist-  payments  due  from  the  other  mem- 
ence:  Padstow  Total  Loss  Assur.  bers  as  such  to  the  association.  Only 
Assn.  In  re,  L.  R.  20,  Ch.  D.  137  the  association  can  sue  in  respect  to 
(1882)  ;  Arthur  Average  Assn.  Ch.  &  such  pjiyments.  Then  can  members 
In  re,  L.  R.  10  Ch.  542  (1875).  sue  other  members  in  respect  of 
Contributions;  Managing  oicner;  claims  arising  out  of  the  insurance 
Relations  of  members;  Oicners'  lia-  of  ships"?  In  the  case  of  Lion  Ins. 
hility  clauses:  One  T.  was  the  man-  Assn.  v.  Tucker  (ubi  sup.),  I  stated 
ager  and  part  owner  of  a  steamship,  that  the  business  relation  between  the 
of  which  N.,  the  defendant,  was  also  members  was  that  they  were  in 
part  owner.  T.  became  a  member  of  i-eality  both  insurers  and  insured ;  but 
jjlaintiffs'  association  and  took  out  that  business  relation  is  carried  out 
a  policy  with  sucli  association  in  re-  by  means  of  a  policy  given  under 
spect  to  the  steamship.  T.  became  seal  of  the  a.ssociation.  The  members 
bankrupt,  and,  being  unable  to  pay  of  each  class  are  insurers  and  insured 
contributions  due  to  association,  ac-  as  between  themselves  and  the  other 
rion  was  brought  to  make  N.  liable  as  members  of  the  class ;  they  are  in- 
luiilisclosed  principal.  Lord  Esher,  sured,  not  by  the  whole  association, 
M.  a.,  said:  "The  action  is  brought  but  by  a  part  only  of  the  association, 
against  the  defendant,  the  part  own-  viz.,  the  members  of  the  same  class. 
cr  of  a  ship,  as  the  undisclosed  prin-  A  member  wlio  had  suffered  a  loss 
cipal  of  Tully,  the  ship's  manager,  must,  however,  sue  on  the  policy 
who  had  taken  out  a  policy  on  the  given  by  the  association.  In  order 
ship  in  his  own  name,  and  had  become  to  sue  the  other  members  of  the  class 
thereby  a  member  of  the  plaintiffs'  who  are  really  his  insurers,  he  would 
association  according  to  its  rules.  The  have  to  say  that  they  were  the  prin- 
question,  therefore,  arises  whether  cipals  of  the  association  in  giving 
the  plaintiffs  can  sue  the  defendant  him  a  policy  under  the  seal  of  th.j 
as  TuUy's  principal.  There  is  much  corporation.  I  do  not  think  he  could 
complication    and    difficulty    in    con-  do  so.     I  think  that  in  the  case  of 

468 


I 


THE  POLICY 


§  178a 


demnity  renders  it  entirely  inoperative,  where  such  bond  declares 
on  its  face  that  it  will  be  invalid  unless  signed  by  the  employee,  and 
that  it  is  essential  to  the  validity  of  the  bond  that  his  signature 
be  thereto  subscribed,  and  that  these  are  conditions  precedent  to  the 
right  of  the  employer  to  recover  under  the  bond.  This  freedom 
from  liability  on  the  part  of  the  insurer  continues  notwithstanding 

such  a  contract  as  thi?  under  seal,  it  that  he  is  a  member  of  the  association 
is  not  allowable  to  go  behind  the  in-  to  which  he  is  wholly  disclosed  and 
strument  to  make  undisclosed  prin-  unknown.  The  association  was  divid- 
cipals  responsible  because  they  are  ed  into  three  different  classes,  with 
not  parties,  and  have  not  attached  a  separate  code  of  rules  for  each 
their  seals  to  the  contract  under  seal,  class,  and  the  agi-eement  in  the  policy 
Moreover,  it  is  to  be  observed  that  was,  'that  the  association,  under  all 
in  this  case  the  contract  is  that  he  is  their  policies  of  insurance  of  the  said 
to  be  paid,  in  respect  of  the  loss  he  class,  shall  be  liable  in  the  whole  only 
has  suffered,  only  the  amount  which  to  the  extent  of  so  much  of  the  funds 
the  association  can  collect  from  the  as  the  said  association  is  able  to  re- 
other  members  of  the  class.  Tliere  cover  from  the  members  of  the  said 
would  be  this  difficulty  in  suing  the  class,  and  their  respective  heirs,  ex- 
other  members,  viz.,  that  they  might  ecutors,  and  administrators  liable  for 
have  satisfied  their  liability  W  pay-  the  same,  and  which,  under  and  by 
ment  of  their  contributions  to*  the  virtue  of  the  rules  of  said  class,  are 
association,  and  the  member  is  not  to  for  the  time  being  applicable  for  the 
receive  his  pavment  direct  from  them,  purpose  of  paying  claims  under  this 
but  is  to  receive  the  sum  collected  by  and  other  policies  issued  in  respect 
the  association.  There  is  no  contract,  of  the  said  class.'  "  United  Kingdom 
as  it  seems  to  me,  between  the  mem-  Mut.  S.  S.  Assur.  Assn.  Lim.  v.  Nev- 
ber  who  has  suffered  the  loss  and  the  ill,  6  Asp.  M.  C.  226  (1887),  dis- 
other  mombers,  but  only  between  him  tinguished  in  Ocean  Iron  Steamship 
and  the  association,  aiid  such  mem-  Ins.  Assn.  v.  Leslie,  6  Asp.  M.  C. 
ber,  therefore,  cannot  sue  the  other  226    (1887). 

members,  although  they  are  really  his       But  where  insurance  was  effected 

insurers.    If  a  member  could  not  sue,  by  managing  owners,  "as  well  in  his 

a  person  could  not  sue  as  his  undis-  or  their  own  names  as  for  and  in  the 

closed   principal.      Then,   as  regards  name  or  names  of  all  and  every  other 

anv  action  against  the  person  alleged  person  or  persons  to  whom  tlic  same 

to 'be  the  undisclosed  principal  of  a  doth,  may,  or  shall  appertain,  in  part 

member    by    the    other    members,    it  or    in    all,"    etc.,    and    contributions 

would  be  impossible  to  allege  that  a  were  to  be  paid  by  "assured,"  it  was 

person   is   an    undisclosed   principal,  held  that  other  part  owners  were  lia- 

in  respect  of  the  contract,  unless  the  ble  as  the  "assured"  for  contributions, 

parties  who  allege  that  lie  is  a  party  but  it  was   questioned   whether   they 

to  the  contract  as  an  undisclosed  prin-  became  members   of  the  association, 

cipal  could  be  sued  bv  him  as  well  Great  Britain  lOOAl  Steamship  Ins. 

as  by  them.     .     .     .     I  do  not  think  Assn.   v.   Wyllie,   6   Asp.   ^lar.    Cas. 

that"  a  person  actually  interested  in  N.    S.    3f)8    (1889),   noting   the   last 

a  .ship,  who  has  authorized  another  two  cases  above, 
person  to  enter  into  a  policy  in  his        Estoppel   of  member  to   deny  va- 

own    name   with    the    a.ssociation,    is  lidity  of  contract  because  not  stamped 

a  party  to  the  contract  as  an  undis-  or    in    writing.      Barrow-in-Furness 

closed  *  principal,    because,    to    make  Mut.  Ship  Ins.  Co.  Lim.  v.  Ashburn- 

him  so,  it  would  be  necessary  to  say  er,  5  Asp.  M.  C.  443,  527, 

469 


§  179  JOYCE  ON  INSURANCE 

the  receipt  of  premiums  and  the  issuing  of  two  renewal  receipts,  if 
they  declare  tliat  they  are  subject  to  all  the  conditions  contained 
in  the  original  bond.^  The  conditions  of  a  fidelity  bond  to  indem- 
nify against  an  employee's  dishonesty,  and  which  also  contains  an 
undertaking  of  the  employee  to  the  obligor,  may  require  signing  by 
the  employee  to  bind  the  obligor  unless  such  signing  is  waived  and 
the  employee  is  not  made  the  obligor's  agent  to  waive  such  signa- 
.  ture  by  the  obligor's  signing  the  bond  and  delivering  it  to  the  em- 
ployee nor  is  such  signing  waived  by  a  retention  of  the  premium 
l)aid  by  the  employee.^ 

§  179.  Execution  of  policy:  affixing  date. — Although  it  is  cus- 
tomary in  this  country  to  affix  the  date,  a  policy  bearing  date  the 
day  the  premium  is  paid,  but  not  delivered  till  after  its  date,  will 
take  effect  by  relation  from  its  date.^  So  the  policy  may  relate 
back  and  take  effect  so  as  to  cover  a  loss  prior  to  its  date  where  the 
contract  has  been  completed ;  *  although  where  the  policy  was  ex- 
ecuted and  dated  but  not  delivered,  because  the  insured  had  not 
called  for  the  same  and  paid  the  premium  as  required,  the  contract 
was  held  not  completed.^  And,  as  a  general  rule,  the  date  is  not 
conclusive  evidence  of  the  fact,  and  if  the  actual  date  of  execution 
and  delivery  differs  from  and  is  subsequent  to  that  specified,  such 
fact  may  be  shown,  although  it  is  questioned  whether  the  error  may 
be  corrected  in  law  courts  where  the  execution  and  delivery  precede 
the  date  written.^    And  it  is  not  such  a  material  variation,  as  to  in- 

1  Union  Central  Life  Ins.  Co.  v.  N.  W.  836,  signature  of  employee: 
United  States  Fidelitv  &  Guaranty  omission  when  not  fatal,  see  100  Am. 
Co.   99  Md.  423,  105 "'Am.   St.   Rep.    St.  Rep.  779. 

313,  r)8  Atl.  437,  33  Ins.  L.  J.  808.  ^  Ljo^h^jjo^iy  y,  North  American 
See  Blackmore  v.  Guarantee  Co.  of  Ins.  Co.  23  Wend.  (N.  Y.)  18.  See 
North  America,  71  Fed.  3(53,  18  C.  C.  Potter  v.  Phoenix  Ins.  Co.  63  Fed. 
A.   77;   Novak  v.  Pitlick,  120  Iowa,   382. 

286,  94  N.  W.  916;  Adelberg  v.  ^  Commercial  In«.  Co.  v.  Halloek, 
United  States  Fidelity  &  Guar-  27  N.  J.  L.  645,  72  Am.  Dec.  374, 
anty  Co.  90  N.  Y.  Supp.  463.  affirming  26  N.  J.  268.  See  §  105 
Examine  Proctor  Coal  Co.  v.  United  herein. 

States  Fidelity  &  Guaranty  Co.  (U.  ^  Flint  v.  Ohio  Ins.  Co.  8  Ohio, 
S.  C.  C.)  124  Fed.  424.  Compare  502.  See  §§  100  et  seq.  herein, 
^tna  Indemnity  Co.  v.  J.  R.  Crowe  ®  See  Jackson  v.  Bard,  4  Johns. 
Coal  &  Mining  Co.  154  Fed.  545,  83  (N.  Y.)  230,  233;  Lorent  v.  South 
C.  C.  A.  431,  certiorari  denied  Carolina  Ins.  Co.  1  Nott  &  McC.  (S. 
(mem.)  207  U.  S.  589,  52  L.  ed.  354,  C.)  505;  Hall  v.  Cazenone,  4  East; 
28  Sup.  Ct.  256;  Title  Guaranty  &  477,  14  Eng.  Rul.  Cas.  737;  1  Duer 
Surety  Co.  v.  Bank  of  Fulton,  89  on  Marine  Ins.  (ed.  1845)  90;  1 
Ark.  471,  33  L:R.A.(N.S.)  676,  38  Phillips  on  Ins.  (3d  ed.)  p.  84,  see. 
Ins.  L.  J.  722.  128. 

2  United  States  Fidelity  &  Guar-  Attachment  and  duration  of  risk- 
anty  Co.  v.  Ridgelev,  70  Neb.  622,  97   date  of  contract,  see  §  1441  herein. 

470 


THE  POLICY  §  180 

validate  a  life  policy  that  it  is  of  a  later  date  than  called  for  by  the 
application.'  In  a  Massachusetts  case  a  policy  of  fire  insurance  in 
the  form  required  by  statute  ^  purported  to  insure  a  buildin,^  for 
five  years  from  its  date,  January  2o,  1889.  On  that  day  the  plain- 
tiff called  upon  an  agent  of  the  defendant  company  and  signed  the 
application,  and  was  told  that  it  would  be  considered  and  decided 
upon  later.  About  two  weeks  after  that  time  he  received  notice 
from  the  agent  that  the  policy  was  ready  for  him,  and  he  did  not 
call  for  it  until  about  March  13,  1889,  when  he  went  to  the  agent's 
office,  paid  the  premium,  and  it  wa.s  delivered,  and  it  was  held  tliat 
the  contract  did  not  take  effect  till  March  llUh.^  But  it  is  held  in 
Ohio  that  where  an  application  naming  the  day  for  the  commence- 
ment of  the  risk  has  been  sent  to  the  office  of  the  agent  authorized 
to  issue  the  policy,  that  the  company  is  liable  for  a  loss  occurring 
after  the  date  named  and  before  the  policy  issued.^" 

§  180.  Execution  of  policy:  affixing  seal. — A  seal  is  not  neces- 
sary in  the  absence  of  a  statutory  requirement  or  some  provision  of 
the  company's  or  association's  charter,  act  of  incorporation,  or  ar- 
ticles of  association."  It  is  decided  in  Maine  that  a  printed  impres- 
sion of  a  seal  is  not  a  seal,  and  that  upon  a  contract  of  insurance 
having  thereon  such  an  impression  an  action  of  assumpsit  can  be 
maintained,  since  it  is  not  a  sealed  instrument.^^  So  a  scroll  with 
the  word  "seal"  affixed  to  an  instrument  not  required  to  be  sealed 

'Porter  v.  Mutual  Life  Ins.  Co.  tive  consideration  of  the  entire  sub- 
70  Vt.  504,  41  Atl.  070.  See  Hal-  jeet  of  execution  of  corporate  con- 
stead  V.  Iivan  (9  Kan.  App.  860  tracts,  seals,  etc.,  4  Thompson  on 
not  reported  in  full)  57  Pac.  852  Corporations,  title  9,  c.  cv.  sees, 
reported  in  full.  5015-39;   Id.  art.  2;  2  Id.    (2d  ed.) 

8  Stat.  1887,  c.  214,  sec.  60.  As  to  sees.  1809  et  .seq.,  c.  66,  pp.  93.')  et 
act  relating  to  dating  life  insurance  seq.  "Manner  of  executing  sealed 
policy,  see  acts  &  res.  Mass.  1912,  instruments  by  corporations:"  Id. 
p.   85.  sees.  5069  et  seq.;  Id.   (2d  ed.)   see. 

^Wainer  v.   Milford   Mutual  Fire   1915. 
Ins.   Co.   153   Mass.   335,   11   L.R.A.       Execution  of  policy:  seal.     Where 
598,  26  N.  E.  877.  a  policy  is   underwritten  by  a  com- 

^°  Krumm  v.  Jefferson  Fire  Ins.  pany  "the  corporate  seal  may  be  suf- 
Co.  40  Ohio  St.  225.  ficient;    but    the    form    of   execution 

"  See  Bank  of  United  States  v.  may  be  indefinitely  varied  by  the 
Dandridge,  12  Wheat.  (25  U.  S.)  64,  statute,  charter,  deed,  or  memoran- 
67  et  .seq.,  0  L.  ed.  552;  McCullough  diim  of  association  under  which  the 
V.  TaUadei^a  Ins.  Co.  46  Ala.  376;  company  is  constituted  or  the  arti- 
Nationai  Banking  &  Ins.  Co.  v.  cles  by  wiiich  .it  is  regulated.  17 
Knaup,  55  Mo.  154;  Hamilton  v.  Earl  of  Halsbury's  Laws  of  P'ngland. 
Lycoming  Mutual  Ins.  Co.  5  Pa.  St.  pp.  337-339,  and  note. 
(5  Barr.)  344,  345.  See  also  c.  iii.  ^^  j^iitei,^.!!  y^  Union  Life  Ins.  Co. 
§  35  herein.  See  for  general  rule,  45  Me.  104,  71  Am.  Dec.  529;  See 
1  Morawetz  on  Private  Corporations,  Freeman's  Supp.  Stat.  Me.  1885-95, 
2d  ed.  sees.  338^1.    See  for  exhaus-   p.  271  (5) ;  Laws  1889,  c.  163,  p.  153. 

471 


§  180a  JOYCE  ON  INSURANCE 

does  not  necessarily  and  conclusively  show  that  a  sealed  instrument 
was  intended."  If  a  policy  is  sealed  and  renewed  for  another  year 
it  is  not  necessary  that  the  renewal  receipt  should  be  sealed,  for  the 
policy  evidences  the  contract  and  covenant  lies  therein.^*  Even 
though  a  seal  is  impressed  upon  a  mutual  benefit  certificate  still  the 
contract  will  not  be  properly  executed  where  the  certificate  also  re- 
quires countersigning  and  it  is  not  done."  A  presumption,  how- 
ever, is  held  to  exist  that  the  fundamental  law  of  a  fraternal  bene- 
fit order,  requiring  a  seal  to  a  certificate,  has  not  been  violated  by 
the  officers  of  such  order."  In  many  of  the  states  there  are  legis- 
lative enactments  by  virtue  of  which  policies  of  insurance  do  not 
require  a  seal."  Under  an  Indiana  decision  based  upon  a  statute 
a  policy  need  not  have  a  seal  affixed  but  it  is  executed  by  subscrib- 
ing and  delivering  it,  so  as  to  be  admissible  in  evidence.^^ 

§  180a.  Life  annuity:  insurance  contract:  non-necessity  of  seal. — 
A  contract  for  a  life  annuity  not  issuing  out  of  or  charged  upon 
lands,  but  by  which  an  insurance  company,  in  consideration  of  a 
sum  certain,  agrees  to  pay  the  annuitant  specified  sums  annually 

^'  Clegg  V.  Le  Messurier,  15  Gratt.  575.     See  3   Sanders'  Annot.   Codes 

(Va.)  108.  (1895).  sees.  3220-25;  Id.  Civ.  Code, 

1*  Herron  v.  Peoria  Marine  &  Fire  sees.  2189-91. 

Ins.  Co.  28  111.  235,  81  Am.  Dec.  272.  Nebraska.— Comp.  Stat.  1903,  sec. 

15  Cavwood  v.   Supreme  Lodge  of  3876;  Comp.  Stat.  1891,  p.  529,  e.  43, 

Knights  &  Ladies  of  Honor,  171  Ind.  sec.  12.     See  Laws  1907,  p.  282,  c. 

410,  131  Am.  St.  Rep.  253,  23  L.R.A.  75,  sec.  9. 

(N.S.)    304n,  17   Am.  &   Eng.  Ann.  New   Mexico. — Comp.   Laws   1897, 

Cas.  503,  86  N.  W.  482,  38  Ins.  L.  sec.    2106;    Comp.    Laws    1884,   sec. 

J.  147.  1465. 

1^  MeClure     v.      Supreme     Lodge  North    Dakota. — Rev.    Code    1895, 

Knights  of  Honor,  59  N.  Y.   Supp.  sees.  3891,  3892. 

764,  41  App.  Div.  131.  Ohio. — Bates  Ann.  Stat.  1906,  sec. 

^'^  Arizona.— Rev.    Stat.   1891,   see.  3645;    1    Smith    &    Ben.    Rev.    Stat. 

786;  Rev.  Stat.  1887,  sec.  253.  1890,  sec.  3645. 

Colorado. — Sess.     Laws     1907,     p.  Penusi/lvania. — 1  Pepper  &  Lewis' 

453,  c.  193,  see.  31 ;  1  Mills'  Annot.  Dig.  Col.  2364,  sec.  41 :  Bright.  Pur. 

Stat.  1891,  sec.  2227.  Dig.   12th   ed.   1700-1894,   vol.   1,  p. 

Idalio.— Civ.  Code  1901,  see.  2216;  1046,  see.  63. 

Rev.  Stat.  1887.  see.  2742.  Washington.— mil's  Annot.   Code, 

■      Indiana. — Burns'  Anno.  Stat.  Rev.  1891,  sec.  2/39. 

1908,  sec.  4652.  Wyoming.— Rev.    Stat.    1899,    sec. 

/owa.— Ann.  Code,  1897,  sec.  1712.  3166;   Rev.   Stat.   1887,  p.   223,   sec. 

Kansas.— Gen.     Stat.     1905,     sec.  614. 

3528;    Gen.    Stat.   1889,   vol.   1,   sec.  "  Globe  Accident  Ins.  Co.  v.  Reid, 

.3347.  19    Ind.   App.    203,   47  N.   E.    947, 

'     Maine.— Rev.    Stat.    1903,    p.   476,  modified  49  N.  E.  291,  7  Am.  &  Eng. 

■c.   49,   sec.  15;   Rev.    Stat.   1883,   p.  Corp.    Cas.    N.    S.    770;    Rev.    Stat. 

•  445,  e.  49,  sec.  12.  1894,   sees.   454,   455.      See   §   3758 

Montana. — Rev.    Code    1907,    sec.  herein. 
4051;   Rev.   Stat.  1887,  p.   772,  sec. 

472 


THE  POLICY  §§  180b,  181 

during  life,  is  a  mere  chose  in  action  for  the  payment  of  money, 
which  need  not  be  made  in  the  form  of  a  deed  or  under  seal.  And 
a  charter  authorizing  an  insurance  company  to  grant  purchase  or 
dispose  of  annuities,  does  not  limit  the  company  to  the  grant  of  an- 
nuities by  deed  or  contract  under  seal.  Nor  does  the  failure  to  at- 
tach the  seal  of  the  insurance  company  to  a  policy  granting  an 
annuity,  nor  the  omission  of  some  other  technical  requirement  con- 
stitute a  defense  to  a  suit  for  annuity  after  the  insurer  has  received 
the  purchase  money. ^^ 

§  180b.  Printed  signature  is  sufficient  to  satisfy  the  statute  of 
frauds. — Where  the  instrument  is  delivered  under  circumstances 
showing  an  intention  to  regard  the  printed  name  as  the  person's 
own,  and  this  appHes  to  the  printed  signature  of  insurer's  president 
and  secretary  to  an  indorsement  on  the  back  of  a  policy  the  face  of 
which  is  signed  by  the  president  in  his  own  hand.  The  court  per 
Hobson  C.  J.,  said:  "It  is  insisted  that  the  contract  is  one  not  to 
be  performed  in  a  year,  and  that  under  our  statute  a  contract,  which 
is  required  by  law  to  be  signed,  must  be  subscribed  at  the  end  or 
close  of  the  writing.  The  policy  is  signed  by  the  president  in  his 
own  hand.  The  names  of  the  president  and  secretary  are  printed 
at  the  close  of  the  list  of  privileges  indorsed  on  the  back  of  the 
policy.  When  the  president  signed  his  name  on  the  face  of  the 
policy,  with  his  name  printed  under  what  w^as  on  the  back  of  the 
policy,  he  made  the  whole  policy  the  contract  of  the  company.  A 
printed  signature  is  suflicient  to  satisfy  the  statute  of  frauds,  where 
the  paper  is  delivered  under  circumstances  showing  an  intention  to 
regard  the  printed  name  as  the  person's  own."  ^^^ 

§  181.  Requisites  of  a  valid  policy. — In  case  the  form  of  the 
policy  is  not  prescribed  by  statute  and  the  contract  is  reduced  to 
writing,  it  should  contain  either  by  itself  or  by  reference  to  other 
papers  the  exact  agTeement  between  the  parties  set  forth  therein  in 
clear,  precise,  and  unambiguous  terms.  The  policy  should  likewise 
embody  all  the  requirements  of  a  valid  insurance  contract;  2°  for 
policies  of  insurance  have  ever  been  considered  instruments  of  a 
solemn  nature,  though  not  under  seal,  and  should  embody  in  their 
terms  expressly  or  by  reference  the  w-hole  contract  between  the  par- 
ties.^   It  is  upon  this  contract  that  the  suit  must  be  brought,  where 

^^  Cahill  V.  Maryland  Life  Ins.  Co.  as  to  sufficiency  of  printed  signature 

90  Md.  333,  47  L.R.A.  614,  45  Atl.  within  statute  of  frauds. 
180.  2°  See  §§  43,  176,  177  herein. 

^^1  Equitable   Life   Assurance   Soc.       ^  See  Merchants'   Mutual  Ins.   Co. 

V.  Meuth,  145  Ky.  160,   140   S.   W.  v.  Lyman,  15  Wall.   (82  U.  S.)   664, 

137,  41  In.s.  L.  J."  71,  73,  ease  modi-  21  L.  ed.  246 ;  Higginson  v.  Ball,  13 

tied    145    Kv.    746,    141    S.    W.    37,  Mass.  96,  per  Parker,  C.  J. 
Annot.  Cas.  lOlBB,  661,  and  note  663, 

473 


§  181 


JOYCE  ON  INSURANCE 


tliere  is  no  fraud,  duress,  or  mistake.  All  prior  negotiations,  pro- 
posals, and  conversations  are  considered  waived  or  merged  in  this 
written  contract.^  And  no  rule  is  better  settled  than  that  parol  evi- 
dence is  inadmissible  to  vary  or  control  the  plain  and  unambiguous 
terms  of  a  written  contract  of  insurance.^ 


2  Merchants'  Mutual  Ins.  Co.  v.  Barker,  2  Johns.  (N.  Y.)  346,  3  Am. 
Lyman,  15  Wall.  (82  U.  S.)  664,  21  Dec.  437;  Vandervoort  v.  Smith,  2 
L.   ed.    246;    Higginson   v.   Dall,   13  Caines  (N.  Y.)  155. 

Mass.  96,  per  Parker,  C.  J.  Pennsylvania. — Stacey  v.  Franklin 

3  United  States.— VA  Dia  Home  Fire  Ins.  Co.  2  Watts  &  S.  (Pa.) 
Ins.   Co.   V.   Sinclair,   228   Fed.   833,  506. 

143  C.  C.  A.  231,  47  Ins.  L.  J.  43.  y^ms.— Waxahachie  Bank  v.  Lan- 

Missouri. — Keim     v.     Home     Mu-  casliire  Ins.  Co.  62  Tex.  461. 

-Weston     V.     Emes,     1 


V. 

tual  Ins.  Co.  42  Mo.  38,  97  Am.  Dec. 
291. 

New  York. — Walton  v.  Agricultu- 
ral Ins.  Co.  116  N.  Y.  317,  26  N.  Y. 
S.    780,   22   N.   E.   443;    Cheriot   v. 

474 


England.- 
Taunt.  115. 

See  also  1  Marshall  on  Ins.    (ed. 
1810)  345a.    See  §  160  herein. 


CHAPTER  VII. 
CONSTRUCTION— WHAT  IvS  PART  OF  THE  POLICY. 

§  185.     What  is  part  of  the  policy :  general  rule :  parol  evidence. 

§  185a.  Same  subject. 

§  186.     When  application  is  part  of  the  policy. 

§  186a.  Same  subject.        i 

§  187.     When  application  is  not  part  of  policy. 

§  187a.  Same  subject :  subsequent  application. 

§  188.     When  charter  and  by-laws  are  and  are  not  part  of  contract. 

§  188a.  Same  subject. 

§  189.     Effect  of  subsequent  amendment  of  by-laws  or  enactment  of  ne\l 
by-laws. 

§  ISOa.  Same  subject. 

§  190.     Application  and  by-laws:  when  part  of  contract:  statutory  pro- 
visions. 

§  190a.  Standard  policy :  what  is  part  of  contract :  application,  by-laws, 
etc.,  special  provisions. 

§  190b.  What  is  part  of  contract :  contract  to  be  plainly  expressed  in  pol- 
icy :  policy  to  contain  entire  contract :  statutes. 

§  190c.  State  has  power  to  enact:  such  statutes  constitutional. 

§  190d.  Purpose  or  intent  of  such  statutes. 

§  190e.  Construction  of  such  statutes,  the  policy  and  application  or  con- 
tract. 

§  190f.  Such  statutes  govern  only  relative  rights  of  parties. 

§  190g.  Retroactive  effect  of  such  statutory  requirements. 

§  190h.  Necessity  of  true,  correct,  or  entire  copy  of  application. 

§  190i.  Such  statutes  do  not  apply  to  oral  contracts. 

§  190 j.  Copy  of  application  for  renewal  or  reinstatement  to  be  annexed, 
etc. 

§  190k.  Mere  reference  to  application  insuflftcient  under  such  statutes. 

§  1901.  Right  of  insurer  to  provide  forms  of  application  under  such  stat« 
utes. 

§  190m.  What  is  and  is  not  part  of  contract :  statutes. 

§  190n.  Same  subject:  medical  examination. 

§  190o.  Foreign  contracts :  effect  of  statutes. 

§  190p.  What  companies  or  associations  are  within  such  statutes. 

§  190q.  Failure  to  comply  with  such  statutes  does  not  preclude  defensea 
based  upon  policy  alone. 

475 


§  185  JOYCE  ON  INSURANCE 

§  190r.  Application  as  part  of  contract:  statutes:  fraud  as  defense:  mis- 
representations. 

§  190s.  Conspiracy  a  defense  though  application  not  attacked. 

§  190t.  Waiver  of  statutory  rights  by  insurer  or  insured. 

§  190u.  When  question  whether  copy  of  application  annexed  to  or  in- 
dorsed on  policy  is  for  jurj'. 

§  191.     When  other  papers  are  and  are  not  part  of  policy. 

§  191a.  Receipt  books,  manuals,  and  schedules  as  part  of  contract. 

§  191b.  Riders  or  slips  as  part  of  contract :  standard  policy, 

§  192.     Whether  prospectus  ox  pamphlet  part  of  policy. 

§  193.     Same  subject:  the  cases. 

§  194.  Whether  common  or  statutorv^  law  part  of  contract :  city  ordi- 
nances or  local  laws. 

(a)  City  ordinances  or  local  laws. 

(b)  Statutes  relating  to  foreign  insurance  companies. 

(c)  As  to  prospective  or  retroactive  statutes,  or  in  case  of  re- 

peal or  amendment. 

(d)  As  to  mutual  companies,  benefit  societies,  and  the  like. 

(e)  Total  loss:  vahaed  policy  statutes. 

(f)  As  to  representations  and  warranties. 

(g)  As  to  stipulations  in  the  policy  contrary  to  statutory  re- 

quirements, 
(h)  Express  statutory  provisions  making  void  policy  stipula- 
tions contra. 
§  194a.  Same  subject:  what  statutes  are  and  are  not  part  of  contract: 

miscellaneous  cases. 
§  195.     Indorsements:  marginal  references:  when  part  of  policy:  when 

not. 
§  195a.  Same  subject. 

§  196.     Indorsements  continued:  conditions  annexed  to  policy,  etc.:  when 
and  when  not  part  of  same. 
(a)   Conditions  and  stipulations  when  indorsed  upon  the  back 
of  a  policy. 
§  197.     Whether  premium  note  part  of  policy. 
§  197a.  Same  subject :  statutory  provisions :  standard  policy. 
^  198.     Usage :  how  far  a  part  of  policy. 

§  185.  What  is  part  of  the  policy:  general  rule:  parol  evidence. — 
Whatever  is  intended  to  be  made  a  part  of  the  policy  should  be 
either  inserted  therein  or  be  incorporated  by  proper  words  of  refer- 
ence, and  whether  the  correspondence  or  application,  or  other  pa- 
pers or  indorsements  on  the  jiolicy.  are  a  part  thereof,  are  questions 
that  have  frequently  been  before  the  courts.  If  parol  evidence  were 
admissible  to  vary  a  written  contract  of  insurance,  then  all  prior 

476 


CONSTRUCTION  §  185 

negotiations,  correspondence,  proposals,  and  other  acts  would  be- 
come as  much  a  part  of  the  contract  as  though  actually  embodied 
in  the  policy,  and  it  could  never  be  known  exactly  what  the  terms 
of  the  contract  were,  except,  perhaps,  after  extended  litigation,  and 
the  safeguard  wliich  a  poHcy  ought  to  afford  would  be  valueless  if 
its  terms  could  thus  be  added  to  or  limited.  It  is,  therefore,  a  gen- 
eral rule  that  all  prior  negotiations  are  considered  as  waived  or 
merged  in  the  written  contract,  and  that  in  the  absence  of  fraud, 
duress,  or  mistake,  parol  evidence  is  inadmissible  to  contradict  or 
vary  its  terms.  The  entire  engagement  of  the  parties,  with  all  the 
conditions  upon  which  its  fulfillment  can  be  claimed,  must  be  con- 
clusively presumed  to  have  been  stated  in  the  policy,  as  the  terms  of 
the  policy  when  explicit  must  control.*    So  it  cannot  be  shown  that 

*  United  States. — Union  Mutual  Massachusetts. — Sanborn  v.  Fire- 
Life  Ins.  Co.  V.  Mowry,  96  U.  S.  544,  man's  Ins.  Co.  16  Gray  (82  Mass.) 
24  L.  ed.  674;  El  Dia  Home  Ins.  Co.  448,  77  Am.  Dec.  419;  Finney  v. 
y.  Sinclair,  228  Fed.  833,  143  C.  C.  A.  Bedford  Commercial  Ins.  Co.  8  Mete. 
231,  47  Ins.  L.  J.  43;  United  States  (49  Mass.)  348,  41  Am.  Dec.  515. 
Casualty  Co.  y.  Charleston  South  Car-  Michigan. — Hartford  Fire  Ins.  Co. 
olina  Mining  &  Mfg.  Co.  (U.  S.  C.  C.)  v.  Davenport,  37  Mich.  609. 
183  Fed.  238;  Candee  y.  Citizens'  Minnesota. — Calmenson  v.  Equita- 
Ins.  Co.  4  Fed.  143;  Connecticut  ble  Mutual  Fire  Ins.  Co.  92  Minn. 
Fire  Ins.  Co.  y.  Buchanan,  4  L.R.A.  390,  100  N.  W.  88. 
(N.S.)  758,  141  Fed.  877,  73  C.  C.  A.  Netv  Hampshire.— Gleason  v.  Can- 
Ill,  157  Fed.  604;  Payne  v.  Mutual  terbury  Mutual  Fire  Ins.  Co.  73  N. 
Life  Ins.  Co.  141  Fed.  339,  72  C.  C.  H.  583,  64  Atl.  187,  35  Ins.  L.  J.  932. 
A.  487;  Ocean  Steamship  Co.  v.  z-Bt-  Neiv  Jersey. — Franklin  Fire  Ins. 
na  Ins.  Co.  (U.  S.  C.  C.)  121  Fed.  Co.  v.  Martin,  40  N.  J.  L.  568,  29 
882;    McIMaster   v.    New    York    Life  Am.  Rep.  271. 

Ins.  Co.  99  Fed.  856,  40  C.  C.  A.  119,  Neiv  TorA;.— Ripley  v.  yEtna  Ins. 

35  Ins.  L.  J.  385,  afif'g  90  Fed.  40,  Co.  30  N.  Y.  130,  86  Am.  Dec.  362; 

rev'd  183  U.  S.  25,  46  L.  ed.  64,  22  Enthoyen   v.   American   Fidelity   Co. 

Sup.  Ct.  10.  128  N.  Y.   Supp.   805,  aff'd    (inem.) 

.4/aba>w«.— Blanks    v.    Moore,    139  135  N.  Y.  Supp.  1110,  150  A  pp.  Diy. 

Ala.  624,  36  S.  E.  783.  928 ;    Black   y.   New   York  Life   Ins. 

California. — Kinney    y.    Maryland  Co.    69   Misc.   167,  126  N.  Y.   Suj^p. 

Casualty  Co.  15  Cal.  App.  571,  115  234;    Saunders    v.    Agricultural    Ins. 

Pae.  456.  Co.   57   N.   Y.    Supp.   683,   39   App. 

Georgia. — Mutual  Benefit  Life  Ins.  Div.  631. 

Co.  y.  Reise,  8  Ga.  536.  Ohio. — Union  Central  Life  Ins.  Co. 

7»mo?s.— Davis    y.    Fidelity    Fire  y.  Hook,  62  Ohio  St.  256,  56  N.  E. 

Ins.  Co.  208  111.  375,  70  N.  E.  359;  900,  29  Ins.  L.  J.  646. 

Winnesheik  Ins.  Co.  y.  Holzgrafe,  53  Oklahoma. — Deming        Inyestment 

111.  516,  5  Am.  Rep.  64.  Co.    v.    Shawnee    Fire    Ins.    Co.    16 

/oua.— Kirkpatrick      y.      London  Qkla.    1,    4    L.R.A. (N.S.)    607n,    83 

Guarantee   &    Accdt.    Co.    139    Iowa  Pac.  918,  35  Ins.  L.  J.  241;  Liyerpool 

370,    115    N.    W.    1107,    19    L.R.A.  &  London  &  Globe  Ins.  Co.  v.  T.  M. 

(N.S.)  102n.  Richardson  Lumber  Co.  11  Okla.  579, 

Louisiana.— Bail   v.    Western    Ma-  09  Pac.  936,  938,  31  Ins.  L.  J.  993. 
rine  &  Fire   Ins.   Co.   5  Rob.    (La.) 
423,  39  Am.  Dec.  542. 

477 


§  185  JOYCE  ON  INSURANCE 

only  a  pai'ticiilar  interest,  as  that  of  a  warehouseman,  was  intended 
where  the  contract  is  unambiguous ;  ^  nor  can  the  intention  of  the 
parties  be  explained  by  parol  evidence,  although  part  of  the  policy  is 
written  and  part  printed,  where  there  is  no  contradiction  between  the 
two  parts  and  there  is  no  ambiguity.^  Nor  is  parol  evidence  admis- 
sible to  show  that  the  insured  did  not  agree  to  the  conditions ; '  for 
whatever  proposals  or  negotiations  are  made  or  conversations  had 
are  to  be  considered  as  w^aived  or  merged  in  the  written  contract.' 
In  case  the  vessel  insured  be  warranted  as  neutral,  it  cannot  be 
shown  by  parol  evidence  that  such  warranty  was  not  intended,^  nor 
can  the  intention  be  shown  by  parol  evidence  in  contradiction  of 
the  terms  of  the  policy,^"  nor  is  the  memorandum  admissible  to 
change  the  intent  evidenced  by  the  policy.^'^ 

And  where  a  writing  which  assigns  a  bond  and  mortgage  does 
not  in  terms  transfer  a  chose  in  action,  nor  the  policy  of  insurance 
on  which  it  is  claimed  to  rest,  and  neither  party  intends  that  it 
should,  a  contract  different  from  that  made  by  the  written  agree- 
ment cannot  be  read  into  it  to  give  it  a  more  extensive  meaning 
than  that  expressed.  This  applies  in  an  action  at  law,  founded  up- 
on a  written  contract  expressed  in  unambiguous  language.^^  Nor 
can  a  condition  as  to  the  time  and  place  of  payment  of  the  premiums 
be  varied  by  such  evidence;  ^^"nor  is  it  permitted  to  show  that  prior 

Englmtd.  —  AVeston  v.  Ernes,  1  S.)  664,  21  L.  ed.  646;  Dewees  v. 
Taunt.  115.  Manhattan  Ins.  Co.  35  N.  J.  L.  366, 

As  to  parol  evidence  rule,  see  note  372;  United  States  Casualty  Co.  v. 
36  L.R.A.(N.S.)  1165,  see  also  §§  Charleston  South  Carolina  Mining?  & 
3802-3809  herein.  Mfg.    Co.    (U.    S.    C.    C.)    183   Fed. 

"The  law  is  well  settled  that,  in  the  238 ;  Union  Central  Life  Ins.  Co.  v. 
absence  of  a  plea  and  showing  of  Hook,  62  Ohio  St.  256,  56  N.  E.  906, 
fraud  or  mistake,  the  intention  of  29  Ins.  L.  J.  646. 
the  parties  to  a  written  contract  ^  Lewis  v.  Thatcher,  15  Mass.  431. 
must  be  gathered,  not  from  what  the  ^^  Hough  v.  People's  Fire  Ins.  Co. 
parties  said  or  did,  or  thought  they   36  Md.  398. 

intended,  but  fi'om  the  contract  it-  ^^  Hogan  v.  Delaware  Ins.  Co.  1 
self."  Prussian  National  Ins.  Co.  v.  AVash.  (U.  S.  C.  C.)  419,  Fed.  Cas. 
Terrell,  142  Kv.  732,  135  S.  W.  416,  6582;  Ewer  v.  Washington  Ins.  Co. 
40  Ins.  L.  J.  944,  per  Clay,  C.  16    Pick.    (33    Mass.)    502,    28    Am. 

5  Lancaster     Infills     v.     JNIerchants'   Dec.    258;    Higginson    v.    Dall,    13 
Cotton-Press  Co.  89  Tenn.  1,  24  Am.   Mass.  96. 
St.  Rep.  586,  14  S.  W.  317.  ^^  Kupferschmidt    v.    Agricultural 

SMumford  v.  Hallett,  1  Johns.  (N.  Ins.  Co.  80  N.  J.  L.  441,  34  L.R.A. 
Y.)  433.  (N.S.)    503    (annotated   on   admissi- 

'  Liverpool  &  London  &  Globe  Ins.  bility  of  extrinsic  evidence  to  extend 
Co.  V.  Morris,  79  Ga.  666,  5  S.  E.  125.   scope   of   mortgage   clause)    78   Atl. 

8  See  opinion  of  Chief  Justice  Par-   225.  40  Ins.  L.  J.  1938. 
ker  in  Higginson  v.  Dall,  13  Mass.       ^^  Mobile  Life  Ins.   Co.  v.  Pruett, 
ft6,   98,   cited   in    Merchants'    ]\Iutual    74  Ala.  487. 
Ins.  Co.  V.  Lyman,  15  Wall.   (82  1^. 

478 


II 


CONSTRUCTION  §  185a 

to  issuing  the  policy  an  agreement  was  made  and  not  inFcrted  there- 
in that  upon  the  happening  of  a  certain  event  the  policy  should  be- 
come void ;  ^*  nor  that  before  the  contract  was  executed  the  parties 
agreed  to  insure  "outfits"  under  the  term  "advances;  "  ^*  nor  can  a 
contemporaneous  agreement  to  waive  a  provision  affecting  the  risk 
in  the  policy  be  shown  by  parol ;  ^^  nor  can  it  be  shown  after  a  loss 
that  the  application  was  for  a  policy  materially  different  from  the 
one  issued;  ^'  and  parol  evidence  is  inadmissible  of  the  contents  of 
an  application  which  is  not  attached  to  the  policy  as  required  by 
statute;  ^*  nor  in  an  action  on  a  fire  policy  which  clearly  states  the 
property  insured  is  parol  evidence  admissible  to  show  a  mistake, 
and  that  it  was  the  intention  to  insure  other  property.^' 

So  parol  evidence  cannot  be  received  to  control  a  warranty  in  a 
policy  of  insurance,  and  accordingly  evidence  to  prove  that  the  in- 
surer was  informed  that  a  watchman  was  not  kept  in  the  building 
insured  from  twelve  o'clock  Saturday  night  till  twelve  o'clock  Sun- 
day night,  there  being  a  warranty  for  a  watchman  every  night, 
should  be  rejected.^" 

§  185a.  Same  subject. — A  written  contract  of  insurance  cannot  be 
altered  or  varied  by  parol  evidence  of  what  occurred  between  the 
insured  and  the  agent  of  the  insurer  at  the  time  of  effecting  the  in- 
surance. Such  evidence  will  not  be  received  to  raise  up  an  estoppel 
in  pais  which  shall  conclude  the  insurer  from  setting  up  the  defense 
that  the  policy  was  forfeited  by  a  breach  of  the  conditions  of  insur- 
ance.^ Although  the  better  rule  is  that  parol  evidence  is  admissible 
of  the  agent's  misrepresentations  or  mistakes  in  filling  out  the  ap- 
plication where  he  has  knowledge  or  has  been  correctly  informed 
as  to  the  facts ;  ^  and  where  an  application  is  procured  by  a  soliciting 
agent  through  the  influence  of  fraud  parol  evidence  is  admissible 
to  show  the  circumstances  evidencing  the  fraud.^    And  it  may  be 

"Candee   v.    Citizens'   Ins.    Co.   4  Fire  Co.  10  Met.  (51  Mass.)  211,  43 

Fed.  143.  Am.  Dec.  428. 

1*  Burnham  v.  Boston  Marine  Ins.  2°  Riplev  v.  ^tna  Ins.  Co.  30  N, 

Co.  139  Mass.  399,  1  N.  E.  837.  Y.  130,  86  Am.  Dee.  362. 

^^Lamott  V.  Hudson  River  Ins.  Co.  ^  Franklin  Fire  Ins.  Co.  v.  Martin, 

17  N.  Y.  199.  40  N.  J.  L.  568,  579,  11  Vroom  (N. 

I'' Pindar  v.   Resolute   Ins.   Co.   47  J.  L.)  568,  29  Am.  Rep.  271;  I^mon 

N.  Y.  114.  Central   Life   Ins.    Co.   v.   Hook,   62 

"  Southern     States     Mutual     Life  Ohio  St.  256,  56  N.  E.  906,  29  Ins. 

Ins.  Co.  V.  Herlihv,  138  Kv.  359,  128  L.  J.  646.     Compare  Royal  Ins.  Co. 

S.  W.  91;   Wheeiock  v.   Home  Life  v.   Walrath,   17   Ohio    Cir.   Ct.   Rep. 

Ins.  Co.  115  Minn.  177,  131  N.  W.  (41  Wkly.  L.  Bull.)  509. 

1081.      See    Metropolitan    Life    Ins.  ^  See  chapter  on  A}2;ents,  herein. 

Co.  V.  Gibbs,  34  Tex.  Civ.  App.  131,  ^  Maxson    v.    Llewelyn,    122    Cal. 

78  S.  W.  398.     See  also  §  190  herein.  195,    54    Pac.    732^    Cal.    Code    Civ. 

"Holmes   v.    Charlestown   Mutual  Proc.  sec.  1856. 

479 


§  185a  JOYCE  ON  INSURANCE 

phown  that  the  a,i2;ent  inserted  a  different  date  in  the  application 
than  that  agreed  upon.*  80  in  an  action  to  rescind  a  contract  parol 
evidence  is  competent  to  establish  fraud  on  the  part  of  the  medical 
examiner  in  writing  false  statements  in  the  application,  and  such 
proof  is  admissible  to  show  that  the  contract  as  written  does  not  ex- 
press the  real  contract  and  intention  of  the  parties.^  But  a  policy 
cannot  be  changed  or  altered  by  parol  evidence  where  the  party  is 
named  and  his  interest  specified,  except  fraud  or  mistake  be  al- 
leged. The  intent  as  shown  by  the  instrument  itself  must  be  sought, 
since  the  same  principles  of  construction  obtain  in  this  regard  as  in 
other  written  contracts.^ 

In  case  of  fraud  or  mistake,  as  where  the  terms  of  an  order  to 
insure  have  been  materially  departed  from  in  the  policy  by  fraud 
or  mistake,  the  order  will  be  considered  as  containing  the  contract 
between  the  parties,  although  it  can  only  be  resorted  to  in  so  far  as 
it  varies  from  the  policy.  In  all  other  respects  the-policy  should  be 
considered  as  the  contract.'  But  the  order  for  insurance  may  be 
adopted  as  a  part  of  the  policy,  and  is  to  be  resorted  to  when  con- 
struing it.' 

AVhere  a  party  made  an  application  in  writing,  signed  by  him, 
for  insurance  upon  certain  property,  gave  his  note  payable  to  the 
insurance  company  to  the  agent  of  the  company  for  the  premium, 
and  took  from  the  agent  a  receipt  showing  the  giving  of  the  note, 
and  stating  that,  in  ca.«e  the  policy  shopld  not  be  issued,  the  note 
was  to  be  returned,  it  was  decided  that  these  papers  must  be  regard- 
ed as  the  contract  of  the  parties,  and  could  not  be  varied  or  explain- 
ed by  parol  evidence.^ 

In  another  case  it  appeared  that  the  agent  of  the  company  omit- 
ted to  insert  in  a  policy  on  general  merchandise  permission  to  the 
assured  to  keep  kerosene  oil  and  powder  in  the  same  building  with 
such  stock,  which  permission  was  in  accordance  with  the  actual  con- 
tract.   It  wa.*  held  that  parol  evidence  was  admissible  to  show  knowl- 

*  Pacific  Mutual  Ins.  Co.  v.  Shaf-  Ins.  Co.  5  Rob.    (La.)    423,  39  Am. 

fer,  30  Tex.  Civ.  App.  313,  70  S.  W.  Dee.  542. 

566.  "^  Delaware   Ins.    Co.   v.   Hogan,   2 

5  Bennett  v.  Massachusetts  Mutual  Wash.  (U.  S.  C.  C.)  4,  Fed.  Cas. 
Life  Ins.   Co.  107  Tenn.  371,  64  S.  3765. 

W.  758,  31  Ins.  L.  J.  150.  The  '  :\raryland  v.  Bossiere,  9  Gill.  &  J. 
court  declared,  however,  that  had  the    (Md. )  121. 

suit  been  upon  the  contract  and  in  ^  Winnesheik  Ins.  Co.  v.  Holz- 
aflfirmance  thereof  the  evidence  might  grafe,  53  111.  516,  5  Am.  Rep.  64. 
properly  have  been  rejected  as  seek-  See  also  Creditors  Union  v.  Lundy, 
ing  to  vary  by  parol  the  terms  of  a  16  Cal.  App.  567,  117  Pac.  624,  40 
wi-itten  contract.  Ins.  L.  J.  1981.     Compare  Maxson  v. 

6  Bell   V.   Western  Marine  &  Fire   Llewelvn,  122  Cal.  195,  54  Pac.  732. 

480 


CONSTRUCTION  §  186 

edge  by  the  agent  both  before  and  at  the  time  of  issuing  the  policy 
that  such  goods  were  to  be  kept.^°  If  the  terms  of  the  policy  are 
not  clear  and  unambiguous,  parol  evidence  not  inconsistent  there- 
with may  be  resorted  to  to  explain  the  same ;  as  in  case  of  a  clause, 
"loss,  if  any,  payable  to  G.  and  B.  of  N."  "  So  the  words  ''in  full 
of  all  claims"  in  a  receipt  given  in  settlement  of  a  loss  under  a  pol- 
icy may  be  explained  by  parol  evidence  of  the  agreement  under 
which  the  receipt  was  executed ;  ^^  and  an  additional  contempora- 
neous agreement  in  writing  may  be  admitted  in  evidence  to  explain 
a  release."  So  parol  evidence  of  the  contents  of  an  order  verbally 
communicated  by  the  broker  to  the  insurer  is  admissible,  as  this  is 
not  evidence  of  the  contents  of  a  writing.^*  So  where  an  insurance 
was  on  goods  in  the  D.  &  Co.'s  car  factory  it  may  be  shown  by  parol 
what  building  was  meant,^^  or  what  property  was  included  where 
by  design  or  inadvertence  certain  property  was  not  covered  by  the 
policy.  ^^ 

§  186.  When  application  is  part  of  the  policy. — The  question 
whether  the  application  is  part  of  the 'contract  or  not  is  of  great 
importance  in  construing  policies  and  determining  the  force  and 
effect  of  the  statements  in  such  application.  There  is  a  great  want 
of  unanimity  in  the  cases,  but  it  may  be  stated  as  a  general  rule 
that  a  clear  purpose,  unequivocally  expressed,  manifest  from  the 
papers,  to  make  an  aj^plication  a  part  of  the  contract  will  have  that 
effect,  and  make  them  one  entire  contract.  But  where  the  reference 
to  the  application  is  expressed  to  be  for  another  purpose,  or  where 
it  is  not  clearly  expressed  that  it  is  intended  to  make  the  applica- 
tion a  part  of  the  contract,  the  courts  are  not  inclined  to  make  it 
so  by  construction.  This  rule  accords  with  the  rules  of  construc- 
tion regarding  the  intent  of  the  parties,  and  that  warranties  and 
forfeitures  are  not  favored,  as  well  as  with  such  rules  in  other  re- 
spects." So  if  the  policy  exprcs.sly  refers  to  the  application  as  a 
part  thereof,  all  the  stipulations  and  conditions  in  the  application 

^^  Mobile  Fire  Department  Ins.  Co.  (Same  v.   Hanks)    8.3  Kan.  96,  110 

V.  Miller,  58  Ga.  420.  Pae.  99. 

^^  Graham  v.  Fireman's  Ins.  Co.  2  ^*  Livinsfston  v.  Delafield,  1  Johns. 

Disn.  (Ohio)  255.     See  also  Maxson  (N.  Y.)  522. 

V.  Llewelyn,   122   Cal.  195,  54  Pac.  ^^  Blake  v.  Exchange  Mutual  Ins. 

732.  Co.  12  Gray  (78  Mass.)  265. 

^^  Haas   Bios.   v.   Hamburger-Brc-  ^^  Roval   Ins.    Co.   v.   Walrath,   17 

men  Fire  In.^.  Co.  181  Fed.  916,  104  Ohio    Cir.    Ct.    Rep.    (41   Wkly.    L. 

C.  C.  A.  354,  40  Ins.  L.  J.  93.     See  Bull.)  509. 

Prussian   National   Ins.   Co.   v.    Ter-  "  See   Campbell   v.   New   England 

rell,  142  Ky.  732,  135  S.  .W.  410,  40  Mutual  Life  Ins.  Co.  98  Mass.   380, 

Ins.  L.  J.  944,  and  criticism  by  editor,  391,  per  the  court;  Daniels  v.  Hud- 

p.  050.  son    River    Ins.    Co.    12    Cush.     (66 

13  Farmers  Alliance  Ins.  Co.  v.  At-  IVLiss.)  423,  59  Am.  Dec.  192;  Kelly 

chison,  Topeka  &  Santa  Fe  Rv.  Co.  v.  Metropohtan  Life  Ins.  Co.  152  111. 
Joyce  Ins.  Vol.  I.— 31.   '         481 


§  186  JOYCE  ON  INSURANCE 

are  thereby  engrafted  into  it,  and  made  as  much  a  part  of  the  pol- 
icy as  if  written  in  terms  therein,  and  are  to  be  construed  together 
with  it.^*  And  a  written  and  printed  copy  of  the  application  on 
the  back  of  the  policy  is  a  part  thereof  where  the  latter  states  that 
a  copy  of  the  former  is  annexed.^^  And  a  statement  in  a  writing 
over  assured's  signature,  attached  to  a  policy  and  purporting  to  be 
an  application  is  a  part  of  the  application  and  the  application  is  a 
part  of  the  contract  where  the  application  is  also  expressly  made  a 
part  of  the  policy  by  a  provision  therein.^"  So  where  a  written  ap- 
plication calls  for  insurance  for  a  certain  amount,  specifying  the 
different  items  and  the  sum  for  which  each  is  insured,  the  insur- 
ance will  be  for  the  total  amount  specified  even  though  one  of  the 
items  is  omitted  in  the  descriptive  clause  of  the  policy  where  such 
clause  is  followed  by  another  which  refers  to  and  makes  the  appli- 
cation a  copy  of  which  is  attached,  a  part  of  the  policy.^ 

It  is  also  said  that  the  application  is  in  itself  collateral  merely 
to  the  contract  of  insurance,  and  to  make  it  a  part  of  the  policy 
there  must  be  an  obvious  intent  so  to  do ;  ^  and  that  the  language 

App.  179,  39  Nat.  Corp.  App.  710;  Kentucky. — See  Kentucky  &  Louis- 
Supreme   Lodge   of   Sons   &  Daugh-  ville  Mutual  Ins.  Co.  v.  Southard,  8 
ters  of   Protection  v.   Underwood,   3  B.  Mon.  (Ky.)  634. 
Neb.    (Unoff.)    798,  92  N.  W.  1051.  J/rts'^ac/rMse^s.— Holmes  v.  Charles- 

On  conflict  of  laws  as  to  necessity  ^o^n  Mutual  Fii-e  Ins.  Co.  10  Met. 

of    attaching    application    or    copy  ^^1  Mass.)  211,  43  Am.  Dec.  428. 

thereof    to    policy,    see    notes    in    63  ^«'"'    lorA:.— Bumtt    v.    Saratoga 

L.R.A.    867;    23   L.R.A.(N.S.)    982;  County  Mutual  lire  Ins.  Co.  5  Hill 

and  52  LR  A.(N.S.^  285  (N-  Y.)  188,  40  Am.  Dec.  345;  Eban 

"  United  States.-C\^xV  v.  Manu-  ^-    ^^''^^]^    ^^\    %  ^^ ,  Albany,    5 

facturers' Ins.  Co.  8  How.  (49  U.  S.)  ^f^     ^    \r  ;^   t    '    p'^'Tff    ''• 

oQf;     io   T       A     inn      ^t  ivr    <-  Chenango  Mutual  Ins.   Co.  2  Demo 

.^35,    12   L.    ed.    1061     MeMaster   v.  /xr     v\     r^      q,           ,                ^, 

XT        V    1    T  •*     T        n      /TT    c?     r-  ^^-     J^-)     '^'j     Shoemaker    v.    Glen 

New  York  Lite   Ins.   Co.    (U.   S.   C.  -r^^u^  t  ^    n      an  x>    v.    /xt    v  \   o^ 

r<  \    nn   T?  J     ^n    oo   t        t      t    nan  1^  alls  Ins.  Co.  60  Barb.    (N.  Y.)   84. 

C.)    90   led.   40,  28  Ins.   L.  J.  960,  nn  i              o^  t     ivr  i.     i  t       r- 

1QO  TT    o    OK    xi«  T       ;:    (n    oo  c  Oklahoma. — State  Mutual  Ins.  (  o. 

183  U.  S.  25,  46  L.  ed.  64,  22  Sup.  <-,     •      ot  m  i      nn    m   n       o.^c 

p,    ,Q              '                         '             ^  V.  Craig,  2/   Okla.  90,  111  Pae.  325. 

Oreoon. — Chrisman    v.    State   Ins. 

Alabama. — Satterfield    v.    Fidelity    Qq   \q  Qr.  283   18  Pac.  466 
Mutual  Life  Ins.   Co.  171  Ala.  429,       England.— \Xors\ey   'v.     Wood,    6 
55  So.  200.     So  construed  in  coiinec-   Durn.  &  E.  710. 
tion^with  Ala.  Code  1907,  sec.  4579,        19  Kellv  "v.  Metropolitan  Life  Ins 
requiring  contract  to  be  plainly  ex-    Co.  152  111.  App.  179,  39  Nat.  Corp. 
pressed  in  policy.     Same  principle  an   Rep.   710.     See  Pearson  v.  Knights 
Powell    V.    Prudential    Ins.    Co.    153   Templars  &  Masons  Life  Indemnity 
Ala.   611,  45  So.  208,  37  Ins.  L.  J.   ing.  Co.  114  Mo.  App.  283,  89  S.  W. 
•l-l-  588. 

Illinois. — Quinn    v.    North    Ameri-       ^o  Heilig  v.  National  Life  Ins.  Co.  • 
can    Union,    162    111.    App.    319,    42   162  N.  Car.  521,  77  S.  E.  997. 
Nat.   Corp.  Rep.  593;  Kellv  v.  Met-        ^American  Ins.  Co.  v.  Dillahuntv, 
ropolitan  Life  Ins.  Co.  152  111.  App.   89  Ark.  416,  117  S.  W.  245. 
179,  39  Nat.  Corp.  Rep.  710;  Peck-       2  (Campbell   v.   New   England   Mu- 
ham  V.  Modern  Woodmen  of  Amer-   tual  Life  Ins.  Co.  98  Mass.  380,  389, 
ica,  151  111.  App.  95.  391,     per     the     court;     Holmes     v. 

482 


CONSTRUCTION  §  186a 

making  tlie  application  a  part  of  the  policy  must  unequivocally 
api)ear  on  the  face  of  the  policy.'  But  the  phraseology  is  imma- 
lerial  where  the  intent  to  make  the  application  a  part  of  the  policy 
is  clear.*  The  langiiage  of  the  policy,  however,  and  not  that  of 
the  ai^plication  must  be  considered  in  determining  whether  the 
latter  is  a  part  of  the  contract.  The  fact  must  affirmatively  ap- 
pear from  the  policy  itself.*  But  a  clause  cannot  be  eliminated 
from  the  policy  on  the  ground  that  it  was  not  expressly  referred 
to  in  the  application,  as  the  application  and  the  policy  constitute 
the  contract.^  So  the  words  "reference  being  had  to  the  applica- 
tion .  .  .  for  a  more  particular  description,  and  as  forming 
a  part  of  this  policy,"  are  held  a  sufficient  reference.' 

An  insurance  company  which  absorbs  another  by  merger,  may 
by  reference  make  the  application  to  the  absorbed  company  a  part 
of  a  substituted  policy.* 

Again,  where  there  was  a  provision  in  a  policy  that  "in  con- 
sideration of  the  statement  of  facts  warranted  to  be  true  in  the  ap- 
plication for  this  policy,  and  of  the  payment"  of  certain  specified 
sums,  the  company  assumed  the  risk,  it  was  held  that  the  applica- 
•  tion  was  thus  made  a  part  of  the  contract.^  So  a  declaration  in 
an  application  constitutes  a  portion  of  the  policy  where  the  latter 
provides  that  it  shall  be  void  if  the  declaration  "upon  the  faith  of 
which  this  agreement  was  made"  is  untrue.^" 
.  §  186a.  Same  subject. — It  is  held  that  where  a  policy  is  made  and 
issued  upon  a  survey  and  description  of  certain  property,  the  sur- 
vey being  referred  to  by  number  as  filed  in  the  office  of  the  com- 

Charlestown  Mutual  Fire  Ins.  Co.  10  '  Kennedy  v.  St.  Lawrence  County 

Met.   (51  Mass.)    211,  43  Am.  Dec.  Mut.  Ins.  Co.  10  Barb.  (N.  .Y.)  285. 

428.  What  reference  sufficient  to  make 

3  Hartford   Protection   Ins.   Co.   v.  application  part  of  policy,  see  notes 

Ilarmer,  2  Ohio  St.  452,  59  Am.  Dec.  33  L.R.A.(N.S.)   676,  and  19  L.R.A. 

684;    Stebbins   v.    Globe   Ins.    Co.   2  (N.S.)  88. 

Hall    (N.    Y.)     632.      See    Supreme  *  T^j^jidox  v.  Southern  Mutual  Life 

Lodge  of  Sons  &  Daughters  of  Pro-  Assoc.  6  Ga.  App.  681,  65  S.  E.  789. 

lection      v.      Underwood,      3      Neb.  See  Nelson  v.  Equitable  Life  Assur. 

(Unoff.)  798,  92  N.  W.  lO.'^l.  Soe.  73  111.  App.  133,  3  Chic.  L.  J. 

*Arrowsmith   v.   Old   Colony   Life  Wklv.  32;  Vilas  v.  New  York  Cen- 

Ins.  Co.  164  111.  App.  44;   Kelly  v.  tral  Ins.   Co.  72  N.  Y.  590,  28  Am. 

Metropolitan   Life  Ins.   Co.   152   111.  Rep.    186,   both   noted   under   §    187 

App.  179;  Blasingarae  v.  Royal  Cir-  herein, 

cle,  111  111.  App.  202.  9  Standard    Life    &   Accident    Ins. 

*  Spence  v.   Central  Accident   Ins.  Co.  v.  Martin,  133  Ind.  376,  33  N. 

Co.    236    111.   444,   19    L.R.A.(N.S.)  E.    105.      See    §§    1886-1891,   1916, 

88n,  86  N.  E.  104,  38  Ins.  L.  J.  87.  1958-1960  herein. 

«  Blunt  V.  Fidelity  &  Casualty  Co.  i°  Dav  v.  Mutual  Benefit  Life  Ins. 

145  Cal.  268,  104  Am.   St.  Rep.  34,  Co.  1  Mac  Arthur  (D.  C.)  41.  29  Am. 

67  L.R.A.  793,  78  Pac.  729,  34  Ins.  Rep.  565.     See  §§  1886-1891,  1916, 

L.  J.  166.  1958-1960  herein. 

483 


§  186a  JOYCE  ON  INSURANCE 

pany,  such  survey  is  a  basis  of  the  contract  and  part  of  the  policy.^* 
So  where  the  reference  is  to  the  appHcation  filed  in  the  oftice  of  the 
conipany,^^  and  where  an  application  and  surve}'  is  made  to  ac- 
company a  policy  or  is  referred  to  therein  as  a  part  thereof,  they 

should  be  construed  together  with  the  policy  as  one  entire  con- 
tract.i3 

So  the  proposals  and  conditions  attached  to  the  policy  form  a 
part  of  it,  and  are  of  the  same  force  as  if  embodied  in  the  policy,^* 

But  it  is  also  held  that  the  application  need  not  be  expressly  re- 
ferred to  in  the  policy  as  a  part  thereof,^*  and  that  a  written  aj)pli- 
cation  for  a  fire  policy  becomes  a  part  of  the  contract  if  the  policy 
is  issued  thereon.^^  It  is  also  held  that  the  application  is  a  part 
of  the  policy  where  the  latter  recites  that  "the  basis  of  this  con- 
tract is  the  application  of  the  insured;  "  "  and  where  the  "applica- 
tion is  made  and  accepted  subject  to  all  other  clauses  and  condi- 
tions in  the  policies  of  the  company,"  it  is  part  of  the  policj'-  ;  ^*  and 
this  is  so  where  the  policy  is  issued  and  accepted  in  consideratioc 
of  the  agreements  made  in  the  application.^^ 

11  Stewart  v.  Phoonix  Ins.  Co.  5  55,  81  S.  E.  1014,  which  follows  also 
Hun  (N.  Y.)  261.  Examine  Rankin  Cuthbertson  v.  North  Carolina  Home 
V.  Amazon  Ins.  Co.  89  Cal.  203,  23  Ins.  Co.  96  N.  Car.  400,  2  S.  E.  258. 
Am.  St.  Rep.  460,  26  Pae.  872.  See  ^^  ^v^inberger  v.  Merchants'  Ins. 
§§   187,   1916,  1958-1960   herein.  Co.  41  La.  Ann.  31,  5  So.  728. 

On  what  must  be  attached  in  order  ^^  Mandego   v.    Centennial   Mutual 

to  satisfy  requirement,  that  '-applica-  Life  Assn.  64  Iowa,  134,  17  N.  W. 

tion"  be  attached  to  poUcv,  see  note  656,  19  N.  W.  877;  Parish  v.  Mulual 

in  18  L.R.A.(N.S.)  1190.  "  Benetit   Life   Ins,    Co.    19    Tex.   Civ. 

12  Draper  v.  Charter  Oak  Fire  Ins.  App.  457,  49  S.  W.  153.  See  also 
Co.  2  Allen  (84  Mass.)  569.  See  Becker  v.  Colonial  Life  Ins.  Co.  138 
also  Aiiierican  Ins.  Co.  v.  Dillahunty,  N.  Y.  Supp.  491,  153  App.  Div.  382, 
89  Ark.  416,  117  S.  W.  245.  See  aftg.  133  N.  Y.  Supp.  481,  75  Misc. 
§  187  herein.  213.  so  under  statute  of  N.  Y.     Com- 

1^  Clinton    V.    Hope    Ins.    Co.    51  pare  Speiice  v.  Central  Accident  Ins. 

Barb.  (N.  Y.)  647.    Examine  Rankin  Co.    236    111.    444,    19    L.R.A.(N.S.) 

V.  Amazon  Ins.  Co.  89  Cal.  203,  23  88n,  86  N.  E.  104,  38  Ins.  L.  J.  87; 

Am.  St.  Rep.  460,  26  Pac.  872.     See  Kansas  Mutual  Life  Ins.  Co.  v.  Pin- 

§§  1916,  1958-1960  liercin.  son,  94  Tex.  553,  63  S.  W.  531. 

1*  Dewees   v.    Manhattan    Ins.    Co.  AVhat  is  part  of  policj^,  see  the  fol- 

34  N.  J.  L.  244;  Duncan  v.  Sun  Fire  lowing  cases: 

Ins.   Co.   6   AA'end.    (N.   Y.)    488,   22  United    States.— Jewries    v.    Life 

Am.  Dec.  539.  Ins.  Co.  22  Wall.   (89  U.  S.)  47,  22 

1^  IVturdock    v.    Chenango    Mutual  L.  ed.  833. 

Ins.  Co.  2  N.  Y.  210.  Illinois. — Supreme    Council    Royal 

16  Cronin  v.  Fire  Assoc,  of  Phila.  Templars  v.  Curd,  111  111.  284.   Com- 

123  Mich.  277,  6  Det.  L.  News  1048,  jjare  Spence  v.  Central  Accident  Ins. 

82  N.  W.  40,  29  Ins.  L.  J.  564.  Co.    236    111.    444,    19    L.R.A.(N.S.) 

I'Bobbitt  V.   Liverpool  &  London  8Sn,  86  N.  E.  104,  38  Ins.  L.  J.  87. 

&  Globe  Ins.  Co.  66  N.  C.  70,  8  Am.  .l/rt/»r.— Philbrook    v.    New    Eug- 

Rep.  494,  followed  in  Sehas  v.  Equi-  land    Mutual   Fire   Ins.    Co.   37   Me. 

table  Life  Assur.   Soc.   166  N.   Car.  137. 

484 


CONSTRUCTION  §  186a 


Again  tlie  application,  bond  and  schedule  in  credit  .insurance 
are  a  part  of  the  contract.^" 

It  is  held  that  the  application  for  membership  in  a  mutual  bene- 
fit society  constitutes  a  part  of  the  contract  even  without  regard  to 
the  fact  whether  there  is  any  constitutional  requirement  of  such 
character.^  And  if  the  application  is  referred  to  in  the  contract 
and  made  a  part  thereof  it  binds  the  named  beneficiary.^*  And 
the  application  becomes  a  part  of  the  contract  in  a  fraternal  in- 
surance association  where  it  is  expressly  so  provided  by  indoi-se- 
ments  upon  the  certilicatc  and  it  is  also  expressly  stated  that  both 
the  application  and  certificate  constitute  the  complete  and  only 
contract.^  An  insurance  application  with  answers  to  questions, 
the  medical  examiners  report,  and  an  agreement  which  recites 
that  the  preceding  statements  and  answers,  the  application,  and 

Massachusetts.— Lee  v.  Prudential  ^o  Lexington  Grocery  Co.  v.  Phila- 

Life  Ins.  Co.  203  Mass.  299,  17  Am.  delphia    Casualty    Co.    157    N.    Car. 

&  Eng.  Ann.  Cas.  236,  89  N.  E.  529,  116,  72  S.  E.  870. 

considered  in  §  190  herein.  ^  Grand   Lodge   Ancient   Order  of 

Nebraska.— Yarmers'    Mutual    Aid  United    Workmen    v.    Jesse,    50    111. 

Assoc.   Co.  V.  Kinney,  64  Neb.  808,  App.    101.       See     Quiun    v.    North 

90  N.  W.  926.  American  Union,  162  HI.  App.  319, 

New  York.— ¥oot  v.  Life  Ins.  Co.  42  Nat.  Corp.  Rep.  593 ;  Peekham  v. 

61  N.   Y.   575;    Studwell  v.   Mutual  Modern   Woodmen   of  America,   151 

Benefit    L.    Assoc,    of    America,    29  111.    App.    95;    London    v.    Modern 

Jones  &  S.  287,  19  N.  Y.  Supp.  709,  Brotherhood  of  America,  107  Minn, 

aff'd   (mem.)    139  N.  Y.  615,  35  N.  12,  119  N.  W.  425;  Robson  v.  United 

E.  204.  Order  of  Eorestere,  93  Minn.  24,  100 

North  Carolina.— Cnihhertson  v.  N.  W.  381,  33  Ins.  L.  J.  945;  Farm- 
North  Carolina  Home  Ins.  Co.  96  N.  ers'  IMutual  Ins.  Co.  v.  Kinney,  64 
C.  480,  2  S.  E.  238.  See  also  Follette  Neb.  808,  90  N.  W.  926.  (Compare 
V.  United  States  Mutual  Accident  Supreme  Lodo-e  of  Sons  &  Daughters 
Assoc.  107  N.  Car.  240,  12  L.R.A.  of  Protection^  v.  Underwood,  3  Neb. 
315,  22  Am.  St.  Rep.  878.  12  S.  E.  (unoff.)  798,  92  N.  W.  1051) ;  Mont- 
370 ;  Mace  v.  Provident  Life  Assn.  gomery  v.  Whitbeck,  12  N.  Dak.  385, 
101  N.  C.  122,  7  S.  E.  624;  also  note  90 'N.  W.  327,  32  Ins.  L.  J.  983; 
33  L.R.A.  (N.S.)  676.  Niekum  v.  Grand  Lodge,  A.  0.  U.  W. 

North     Dakota.— Montgomery     v.  37    Pa.    Co.    Ct.    104;    McLendon   v. 

Whitbeck,  12  N.  Dak.  385,  96  N.  W.  Sovereign  Camp  of  Woodmen  of  the 

327,  32  Ins.  L.  J.  983.  World,    106    Tenn.    695,    32    L.R.A. 

Tennessee.— Kimhro  v.  Continental  444,    64    S.    W.    36.      Examine    §§ 

Ins.  Co.  101  Tenn.  245,  41  S.  W.  413.  188,     1886-1891,     1916,     1958-1960 

See  further  on  these  points  chapters  herein. 

on  Representations  and  Warranties,  ^'^  Blasingame  v.  Royal  Circle,  111 

§§  1886-1891,  1916,  1958-1960  here-  111.  App.  202. 

in.  ^  Covenant   Mutual  Life  Assoc,  v. 

Where  policy  refers  to  application  Tuttle,  87  111.  App.  309.    See  Grand 

as  part,  and  it  is  defective  or  even  Lodge    of    Brotherhood    of   Railroad 

not   made   in   writing,   see   Blake   v.  Trainmen  v.  Daly,  54  Ohio  Law  Bull. 

Exchange  Mutual  Ins.   Co.  12  Gray  391. 
(78  Mass.)  265. 

485 


§  187  JOYCE  ON  INSUKANCE 

this  agTeement  are  made  part  of  the  poHcy,  form  a  part  of  the 
insurance  contract.^  And  if  the  appHcation  in  a  fraternal  and 
beneficial  order  provides  that  it  with  this  constitution  and  by-laws 
shall  form  the  basis  of  the  contract  it  becomes  a  part  thereof.* 

§  187.  When  application  is  not  part  of  policy. — When  the  refer- 
ence to  the  application  is  expressed  to  be  for  another  purpose,  or 
when  no  purpose  or  intention  is  indicated  to  make  it  a  part  of  the 
policy,  it  will  not  be  so  treated.^  So  it  is  held  that  a  mere  general 
reference  to  the  application  or  survey  does  not  make  it  a-  part  of 
the  contract.^  It  is  also  held  that  the  application  is  not  a  part 
of  the  contract  so  as  to  require  setting  forth  in  pleading,  though 
the  policy  provides  that  if  it  is  issued  upon  or  refers  to  "an  applica- 
tion, survey,  plan,  or  description,"  it  should  be  made  a  part  of  the 
contract,  and  this  although  the  policy  was  issued  on  such  applica- 
tion signed  by  the  insured ;  '^  and  a  reference  to  and  making  an 
application  a  part  of  the  contract  does  not  bind  the  applicant  where 
the  application  is  not  signed,  authorized,  or  ratified  by  him.^  It 
is  also  held  that  the  agreements  and  statements  in  the  application 
do  not  become  a  part  of  the  policy,  although  it  is  provided  in  the 
application  that  they  should  "be  the  basis  and  form  part  of  the  con- 
tract or  policy,"  and  although  the  policy  provided  that  the  contract 
was  "in  consideration  of  the  representations."  ^  Nor  does  an  indi- 
cation in  the  policy  of  the  place  where  the  application  is  on  file 
make  it  a  part  of  the  policy,^"  and  a  condition  in  the  application 
does  not  make  it  a  part  of  the  policy  where  the  policy  does  not  re- 
fer to  it,^  and  it  is  held  that  a  slip  or  application  is  inadmissible  to 

^  Northwestern  Masonic  Aid  Assoc,  sentins:    upon    the   authority   of   nu- 

V.   Bodurtha,   23  Ind.  App.   121,   77  merous    cases.      See    §§    186,    1958- 

Am.  St.  Rep.  414,  53  N.  E.  787.  1960  herein. 

*  McLendon  v.  Sovereign  Camp  of  ^  Lvcomins'  Fire  Ins.  Co.  v.  Jack- 
Woodmen  of  the  World,  106  Tenn.  son,  83  111.  302,  25  Am.  Rep.  386. 
695,  52  L.R.A.  444,  64  S.  W.  36. ,  ^  American  Popular  Life  Ins.  Co. 

5  Campbell   v.   New   Enoland   Mu-  v.  Day,  39  N.  J.  L.  89,  23  Am.  Rep. 

tual  Life  Ins.  Co.  98  Mass.  380,  389,  198.     See  also  Spence  v.  Central  Ac- 

392,  per  the  court ;  Jefferson  Ins.  Co.  cident  Ins.  Co.  236  111.  444,  19  L.R.A. 

V.  Cotheal,  7  Wend.   (N.  Y.)   72,  22  (N.S.)    88   note,   86   N.   E.   104,   38 

Am.   Dec.   567;    Supreme   Lodge   of  Ins.  L.  J.  87. 

Sons   &  Daughters  of  Protection  v.  ^^  Commonwealth  Ins.  Co.  v.  Mon- 

Underwood,   3   Neb.    (Unoffic.)    798,  ninger,    18    Ind.    352.      Compare    § 

92  N.  W.  1051.  186  herein. 

^  Wheelton  v.  Hardisty,  8  El.  &  B.  ^  Brogan  v.  Manufacturers'  &  Mer- 

285,  295;  Burritt  v.  Saratoga  County  chants' ^Mutual  Fire  Ins.   Co.  29  U. 

Mutual  Fire  Ins.  Co.  5  Hill  (N.  Y.)  C.  C.  P.  414. 

188,  40  Am.  Dee.  345 ;  Weed  v.  Sche-  On  retention  of  policy  as  waiver  of 

nectady  Ins.  Co.  7  Lans.  (N.  Y.)  452.  mistake   or   fraud   in   insurer  or  its 

See  §§  1958-1960  herein.  agent  as  to  facts  appearing  in  appli- 

'  Tliroop  V.  North  American  Fire  cation  only  where  copy  is  attached  to 

Ins.  Co.  19  Mich.  423,  one  judge  dis-  policy,  see  note  in  67  L.R.A.  734. 

486 


CONSTRUCTION  §  187a 

show  the  intention  of  the  parties,  since  the  policy  is  the  only  legal 
evidence  of  the  contract.^  Where  a  fire  policy  had  expired  and  the 
application  therefor  was  used  in  obtaining  insurance  in  another 
company,  the  policy  in  which  contained  the  words  "as  per  applica- 
tion No.  1234,"  which  was  the  nuinber  of  the  original  application, 
it  was  determined  not  to  be  a  sufficient  reference  to  make  it  a  part 
of  the  policy.^  And  where  a  policy  issued  subsequently  to  and  in 
lieu  of  another  refers  to  "said  application,"  such  a  reference  does 
not  make  the  application  on  which  the  original  policy  was  based 
a  part  of  the  second  policy  where  such  an  intent  does  not  appear.* 
In  another  case  the  court  excluded  the  application  as  evidence  in 
an  action  on  a  time  policy  of  marine  insurance,  on  the  ground  that 
the  application  was  merged  in  the  policy.^  And  where  the  policy 
refers  only  to  the  application  as  the  consideration  in  part  for  the 
insurance,  the  legal  construction  of  the  policy  cannot  be  controlled 
by  a  statement  in  the  application  of  the  understanding  of  the  as- 
sured and  what  the  insurance  will  "extend  to."  ^ 

An  application  addressed  to  a  certain  company  is  not  a  part  of 
contracts  with  other  companies  which  the  agent  represents  and 
among  which  he  splits  up  the  insurance,  where  no  reference  is  made 
to  the  application  except  in  the  policy  issued  by  the  company  to 
which  it  is  addressed  and  it  is  therein  "made  the  basis  upon  which 
said  policy  is  issued  and  becomes  a  part  of  the  same."  ' 

§  187a.  Same  subject:  subsequent  application. — An  application 
subsequently  delivered  is  not  a  part  of  the  original  completed  con- 
tract where  the  policy  is  issued  without  a  written  application,  or 
where  it  does  not  appear  that  the  execution  of  the  application  was 
a  condition  precedent  to  the  policy  taking  eftect,  or  that  it  was  issued 
under  an  agreement  to  execute  one  afterward.*     In  the  first  Colo- 

2  Dow  V.  Whelton,  8  Wend.  (N.  213,  12  S.  E.  1027.  See  further  on 
Y.)  160.  See  Spenee  v.  Central  Ae-  this  point  chapter  on  Kepresentations 
cident  Ins.  Co.  236  111.  444, 19  L.R.A.  and  Warranties  §§  1886-1891,  191G, 
(N.S.)  88,  86  N.  E.  104.  1958-1960  herein. 

3  Vilas  V.  New  York  Central  Ins.  '  Waukau  Milling  Co.  v.  Citizens 
Co.  72  N.  Y.  590,  28  Am.  Rep.  186.  Mutual  Eire  Ins.   Co.  130   Wis.  47, 

*  Nelson  v.   Equitable  Life  Assur.  118  Am.  St.  Rep.  998,  10  Am.  &  Eng. 

Soe.  73  111.  App.  133,  3  Chic.  L.  J.  Ann.   Cas.  795,  109  N.  W.  937,  36 

Wklv.  32.     See  Maddox  v.  Southern  Ins.  L.  J.  119. 

Mutual  Life  Ins.  Co.  6  Ga.  App.  681,        »  j^oyal  IMutual  Fire  Ins.  Co.  v.  J. 

65    S.    E.    789,   noted    under    §    186  S.  Brown  &  Bro.  Mercantile  Co.  47 

herein.  Colo.  467,  107  Pac.  1098,  39  Ins.  L. 

*Folsom  V.  Mercantile  Ins.  Co.  9  J.   870;    Fire    A.ssociation    of   Phila. 

Blatchf.  (U.  S.  C.  C.)  201,  Fed.  Cas.  v.  Bynum,  —  Tex.  Civ.  App.  — ,  44 

No.  4  903,  S.   W.   579.      See   Michigan   Fire  & 

8  Accident  Ins.  Co.  V.  Crandal,  120  Marine    Ins.    Co.    v.    Wicb,    8    Colo. 

U.  S.  527,  7  Sup.  Ct.  685,  30  L.  ed.  App.  409,  46  Pac.  687. 
740.     See  Hunter  v.  Scott,  108  N.  C. 

487 


§  187a 


JOYCE  ON  INSURANCE 


rado  case,  cited  below  to  the  above  rule,  it  appeared  that  the  agent  of 
the  company,  a  mutual  one,  called  at  insured's  place  of  business  to 
solicit  insurance,  the  latter  was  absent  and  his  wife  was  requested 
to  sign  an  application  in  his  name  but  she  refused.  The  agent  then 
stated  that  he  would  send  insured  a  policy  and  an  application  which 
the  latter  could  sign  and  return.  A  few  days  later  he  mailed  to 
insured  the  policy  involved  and  also  a  blank  application  which  he 
requested  insured  to  sign  and  return  to  him.  The  policy  was  ac- 
cepted by  insured  who  signed  the  application  in  blank  without 
answering  any  of  the  questions  or  making  any  statements  in  rela- 
tion to  the  property  insured.  The  policy  referred  to  an  application 
made  by  insured  and  made  it  a  part  thereof,  and  recited  that  one 
of  the  considerations  for  its  issuance  was  the  agreements,  cove- 
nants, statements,  and  w^arranties  of  the  assured  in  the  application.^ 
So  an  application  constitutes  no  part  of  the  written  contract 
where  it  was  issued  by  request  of  the  general  agent  after  the  policy 
was  issued  and  delivered  and  was  not  suggested,  considered,  written 
or  signed  prior  to  said  delivery. ■^° 


^  See  criticism  of  this  case  in  note    policy  to  the  plaintiif  in  error,  and 


in  39  Ins.  L.  J.  876. 

^°  Colorado  Leasing,  Mining  & 
Millins:  Co.  v.  Palatine  Ins.  Co.  57 
Colo.  235,  141  Pac.  860.  The  court, 
per  Scott,  J.,  gave  the  following 
opinion:  "Every  contention  raised 
in  this  ease  has  been  adjudicated  in 
the  case  of  Connecticut  Ins.  Co.  v. 
Leasing  Min.  &  Mill.  Company,  50 
Colo.  424,  116  Pac.  154,  Ann.  Ca.>^. 
1912C,  597.  This  case  involves  one 
of  the  insurance  policies  issued  at  the 
same  time  upon  the  same  property 
and  to  the  same  owner  as  in  the  fore- 
going case. 

The  defendant  in  error  here  issued 
its  policy  for  $20,000,  being  one 
third  of  the  entire  insurance  taken 
upon  the  mill  and  property  of  plain- 
tiff in  error,  on  the  27th  day  of  iMay, 
1904.  An  exhaustive  and  detailed 
statement  of  the  case  will  be  found  in 
Connecticut  Company  v.  Colorado 
Company,  supra,  and  it  can  ser\-e  no 
good  purpose  to  repeat  it  here.  The 
only  question  urged  in  this  case  is 
the  admission  in  evidence  of  an  ap- 
plication for  insurance  signed  and  de- 
livered to  the  defendant  company, 
after  the  delivery  of  the  company's 


the  consideration  given  by  the  court 
to  one  of  the  questions  and  answers 
contained  in  such  application.  These 
points  liave  been  determined  in  the 
Connecticut  Insurance  Case,  supra, 
but  it  may  be  well  to  refer  to  them 
further. 

"The  record  makes  it  clear  that  the 
application  relied  on  by  the  insurance 
company  in  this  case  was  not  written, 
signed,  suggested,  or  considered  prior 
to  the  delivery  of  the  policy  in  ques- 
tion, but  was  first  requested  by  the 
general  agent  of  the  company,  in  a 
letter  written  from  his  office  in  San 
Francisco,  two  days  after  the  policy 
was  issued  and  delivered  by  the  agent 
of  the  company  at  Florence,  Colo., 
where  this  cause  of  action  arose. 
This  very  application  was  offered  in 
the  Connecticut  Company  Case  and 
there  held  to  be  inadmissible  in  any 
case  under  the  state  of  facts  present- 
ed, and  particularly  so  in  that  case, 
where  it  did  not  purport  to  be  an  ap- 
plication for  the  policy  nor  to  the 
company  involved  in  the  action.  The 
court  there  said  of  this  application : 
'The  defendant  says  the  court  eiTed 
in  refusing  to  admit  in  evidence  an 


488 


CONSTRUCTION 


§  188 


§  188,  When  charter  and  by-laws  are  and  are  not  part  of  con- 
tract.— Wlien  a  party  complies  with  the  requirements  of  a  mutual 
benefit  or  like  society,  association  or  corporation,  and  becomes  a 
member,  its  charter,  constitution,  and  by-laws  are  presumed  to  have 
been  known  by  him  from  the  date  of  his  membership,  and  they 
enter  into  and  form  a  part  of  his  contract  even  though,  in  the  ab- 
sence of  a  statutory  requirement  to  the  contrary,  they  are  not  set 
forth  in  his  policy  nor  expressly  made  a  part  of  it  by  reference,^^ 


application  for  insurance  made  by 
the  plaintifif  to  a  company  other  than 
the  defendant,  and  dehvered  to  Me- 
Candless  several  days  after  the  poli- 
cy in  this  case  was  issued.  That  the 
application  was  inadmissible,  even  if 
made  to  the  defendant,  when  it  does 
not  appear  that  the  making  of  the 
application  was  a  condition  prece- 
dent to  the  policy  taking  effect  or 
that  it  was  made  under  an  agreement 
on  the  part  of  plaintiff  to  make  one 
after  the  issuance  of  tlie  policy,  is 
settled  by  this  court  in  Loyal  ]\Iutu- 
al  Fire  Ins.  Companv  v.  J.  S.  Brown 
&  Bros.  Company,  47  Colo.  467,  107 
Pae.  1078.  and,  when  made  to  an  en- 
tirely different  compaiiv  than  the 
defendant,  there  is  much  more  reason 
for  not  admitting  it.' 

"This  lias  been  the  consistent  hold- 
ing of  this  court. 

"In  Loyal  Mutual  Company  v. 
Brown,  supra,  the  court  said:  'It 
should  be  borne  in  mind  that  it  does 
not  appear  the  execution  of  the  ap- 
plication was  a  condition  precedent 
to  the  policy  taking  effect,  or  that  it 
was  issued  under  an  agreement  on 
the  part  of  Beach  to  execute  one 
afterwards.  In  such  circumstances 
the  rule  of  law  is  that  where  a  policy 
of  insurance  has  been  issued  without 
a  written  application,  and  without 
an  agreement  to  execute  one  after- 
wards, an  application  subsequently 
delivered  is  not  a  part  of  the  contract 
of  insurance.  Michigan  Fire  and 
Marine  Ins.  Co.  v.  Wich,  8  Colo. 
App.  409,  46  Pac.  687;  Le  Roy  v. 
Park  Fire  Ins.  Co.  39  N.  Y.  56.' 

"The  court  in  the  case  at  bar  in- 
structed a  verdict  for  the  defendant 


company,  and  such  instructed  verdict 
was  based  solely  upon  the  erroneous 
theory  that  such  application  was  a 
part  of  the  contract  of  insui'ance, 
and  therefore  admissible,  and  that 
the  answer  to  a  specific  question  in 
such  application  was  material. 

"Holding,  then,  that  the  applica- 
tion was  no  part  of  the  contract  of 
insurance  in  this  case,  it  is  immateri- 
al as  to  what  questions  and  answers 
it  contained.  They  were  not  under 
such  circumstances  either  represen- 
tations or  warranties  and  constituted 
no  consideration  or  basis  for  the  is- 
suance of  the  policy.  The  questions 
raised  by  the  appellee  having  been 
fully  disposed  of  and  determined  in 
this  case  and  in  Connecticut  Compa- 
ny V.  Colorado  Company  supra,  and 
the  amount  of  the  judgment  to  be  ren- 
dered exactly  ascertainable  from  the 
record,  the  judgment  is  reversed,  and 
the  cause  remanded,  Avith  directions 
to  enter  judgment  in  favor  of  plain- 
tiff's below  and  against  the  defend- 
ant below  in  the  sum  of  one-third  of 
the  amount  found  by  the  adjuster's 
committee  to  be  the  actual  loss  by 
reason  of  the  burning  of  the  insured 
property  together  with  interest  from 
the  commencement  of  this  suit  and 
with  costs  to  be  taxed."  Colorado 
Leasing,  Mining  &  Milling  Co.  v.  Pal- 
atine Ins.  Co.  57  Colo.  235,  141  Pac. 
860.  See  §§  1886-1891,  1916,  1958- 
1960  herein. 

11  United  States. — Fry  v.  Charter 
Oak  Ins.  Co.  31  Fed.  197 ;  Wiggin  v. 
Knights  of  Pythias,  31  Fed.  122. 

Arkansas. — Supreme  Royal  Circle 
of  Friends  of  the  "World  v.  MoiTison, 
105  Ark.  140,  150  S.  W.  561. 


489 


§  188  JOYCE  ON  INSURANCE 

for  a  certificate,  in  a  fraternal  benefit  society,  standing  by  itself, 
does  not  measure  the  rights  of  the  parties,  but  it  must  be  read  in 

Calif ornm.— Conway    v.    Supreme  W.  949;  Wendt  v.  Iowa  Legion   of 

Council  Catholic  Knights  of  America,  Honor,  72  Iowa,  682,  34  N.  W.  470; 

131  Cal.  437,  63  Pae.  727;  Hass  v.  Simeral  v.  Dubuque  Mutual  Fire  Ins. 

Mutual    Relief   Assoc,    of   Petaluma,  Co.  18  Iowa,  319. 

118  Cal.  6,  49  Pac.  1056,  26  Ins.  L.  Kansas.— Triple  Tie  Benefit  A.ssoe. 

J.  992.  V.  Wood,  73  Kan.  124,  84  Pae.  565. 

Connecticut. — Treadway  v.  Hamil-  Louisimm. — Maginnis  v.  New  Or- 

ton  Mutual  Ins.  Co.  29  Conn.  68.  leans   Cotton   Exchange  Mutual  Aid 

District    of    Columbia. — Clark    v.  Assoc.  43  La.  Ann.  1136,  10  So.  180. 

Mutual  Reserve  Fund  Life  Assoc.  14  Maryland. — Supreme     Council    of 

App.  D.  C.  154,  27  Wash.  Law  Rep.  Royal  Arcanum  v.  Brashears,  89  Md. 

114,  43  L.R.A.  390.  624,  73  Am.   St.   Rep.   244,  43   Atl. 

Georgia. — Union  Fraternal  League  866,  28  Ins.   L.   J.   751;    Condon  v. 

V.  Walton,  109  Ga.  1,  77  Am.  St.  Rep.  Mutual  Reserve. Fund  Life  Assoc.  89 

350,  46  L.R.A.  424,  34  S.  E.  317,  29  Md.   99,   73   Am.    St.   Rep.   169,  42 

Ins.  L.   J.  1055;   Barbot  v.   Mutual  Atl.  944,  44  L.R.A.  149. 

Reserve   Fund  Life   Assoc.   100    Ga.  Massachusetts.— ']^\\\q  v.  Hamilton 

681,  28  S.  E.  498,  27  Ins.  L.' J.  338.  Mutual  Ins.  Co.  6  Gray   (72  Mass.) 

Illinois. — Love    v.    Modern   Wood-  174. 

men  of  America,  259  111.  102,  102  N.  Michigan. — Douville     v.     Farmers 

E.  183,  rev'g  177  111.  App.  76;  Pro-  Mutual  Fire  Ins.  Co.  113  Mich.  158, 

tection  Life  Ins.  Co.  v.  Foote,  79  111.  4  Det.  Leg.  N.  245,  71  N.  W.  517. 

361.      See   also   Enright   v.  National  Minnesota. — Davidson  v.  Old  Peo- 

Council,  Knights  &  Ladies  of  Honor,  pie's  Mutual  Benefit   Soc.  39   Minn. 

253  111.  460,  91  N.  E.  681,  rev'g  161  303,  304,  1  L.R.A.  482. 

111.  App.  365;  Kaemmerer  v.  Kaem-  Mississiiipi.  —  Supreme        Lodse 

merer,   231  111.  154,  83   N.   E.  133;  Knights  of  Pythias  v.  Stein,  75  Miss. 

Benes  v.  Supreme  Lodge  Knights  &  107,  37  L.R.A.  775,  65  Am.  St.  Rep. 

Ladies   of   Honor,   231   111.   134,   14  589,  21  So.  559. 

L.R.A. (N.S.)   540    (annotated  on  es-  '     Missouri. — Purdy  v.  Bankers'  Life 

toppel   of  mutual  benefit  society  by  Assoc.  104  Mo.  App.  91,  74  S.  W. 

misreiDresentations  as  to  laws  of  or-  486. 

der)      83     N.     E.     127,     121     Am.  Montana.— Kennedy  v.  Grand  Fra- 

St.     Rep.     304;     Quinn     v.     North  ternity,    36  Mont.    325,    25    L.R.A. 

American     Union,     162     111.     App.  (N.S.)  78n,  92  Pac.  971. 

319,  42  Nat.  Corp.  Rep.  593 ;  Harvick  Neiv      Hampshire.- — Burbank      v. 

V.  Modern  Woodmen  of  America,  158  Rockingham  Ins.  Co.  24  N.  H.  550, 

111.     App.     570;     Supreme     Council  558,  57  Am.  Dee.  300. 

Catholic  Knights  &  Ladies  of  Ameri-  Neiv    Jersey. — Grand    Lodge    An^ 

ca  V.  Beggs,  110  111.  App.  139 ;  Roy-  cient  Order  United  Workmen  v.  Con- 

al    Arcanum    v.    Coverdale,    93    111.  nolly,  58  N.  J.  Eq.  180,  43  Atl.  286. 

App.  373.  Neiv    York. — Hvatt    v.    Wait,    37 

Indiana.— V&ster    v.    Gerwig,    122  Barb.    (N.  Y.)    29;   Bird  v.   Mutual 

Ind.  567,  23  N.  E.  1041;  Farra  v.  Union  Assoc.  52  N.  Y.  Supp.  1044, 

Braman,  171  Ind.  529,  86  N.  E.  843;  30  App.  Div.  346. 

Gray  v.  Supreme  Lodge  Knights  of  North    Carolina. — Boyle   v.   North 

Honor,  118  Ind.  293,  20  N.  E.  833;  Carolina  Mutual  Ins.  Co.  7  Jones  (N. 

Almy  V.   Commercial   Travelers   Ins.  C.)    373. 

Assoc.  59  Ind.  App.  249,  106  N.  E.  North  Dakota.— J.  P.  Lamb  &  Co. 

893.  V.   Merchants  National   Mutual   Fire 

/owa.— Farmers  Mutual  Hail  As-  Ins.  Co.  18  N.  Dak.  253,  119  N.  W. 

soc.  V.  Slattery,  115  Iowa,  410,  88  N.  1048. 

490 


CONSTRUCTION 


§  188 


connection  with  the  constitution  and  by-laws  of  the  society,  and  the 
application  for  membership,  and  the  nature,  object,  and  purposes 
of  the  society  must  also  be  considered.^^     And  all  the  provisions  of 


Pennsylvania. — Susquehanna  Mut. 
Fire  Ins.  Co.  v.  Leavy,  136  Pa.  St. 
499,  20  Atl.  502,  505. 

Texas.  —  Bennett  v.  Sovereign 
Camp,  Woodmen  of  the  World,  — 
Tex.  Civ.  App.  — ,  168  S.  W.  1023; 


775,  21  So.  559.  And  an  amended 
charter  may  become  a  part  of  a  con- 
tract thereafter  issued.  Harrison  v. 
Philadelphia  Contributionship  for 
Insurance  of  Houses  from  Loss  bv 
Fire,  171  Fed.   178,  aff'd  176  Fed. 


Hayworth  v.  Grand  Lodge  of  Texas,    323,  99  C.  C.  A.  613 
Knights    of    Pythias,    —    Tex.    Civ. 
App.  — ,  138   S.  W.  1194;   Modern 
Woodmen  of  America  v.  Owens,  — 
Tex.  Civ.  App.  — ,  130  S.  W.  858. 

Vermont. — Wilson  v.  Union  Mutu- 
al Fire  Ins.  Co.  77  A' t.  28,  58  Atl. 
799. 

Virginia.    —    Supreme  Lodge 

Knights  of  Honor  v.  Oeters,  95  Va. 
610,  29  S.  E.  322. 

England. — Great  Britain  Steam- 
ship Assn.  V.  Wyllie,  L.  R.  22  Q.  B. 
D.  710. 

"Undoubtedly,  when  the  plaintiff  884. 
complied  with  what  was  required  of  Neiv 
him  as  a  member,  the  by-laws  con- 
stituted a  contract."  Stohr  v.  San 
Francisco  Musical  Fund  Soe.  82  Cal. 
557,  559,  22  Pac.  1125.  See  §  318 
herein. 

When  application  etc.  a  part  of 
certificate  or  contract,  see  Bacon  on 
Benefit  Soe.  &  Life  Ins.  (3d  ed.) 
sees.  181-184. 


So  by-laws  existing  when  the  in- 
sured became  a  member  of  the  asso- 
ciation are  a  i^art  of  the  contract. 

Illinois. — Covenant  ^lutual  Life 
Assoc.  V.  Kentner,  188  111.  431,  58 
N.  E.  966. 

Michigan. — Pokrefky  v.  Detroit 
Firemens  Fund  Assoc.  121  iMich. 
456,  6  Det.  Leg.  N.  527,  80  N.  W. 
240. 

Missouri.— Grn-weW  v.  National 
Council  Knights  &  Ladies  of  Securi- 
ty,  126   Mo.   App.   496,   104   S.    W. 

Hampshire.  —  Downs  v. 
Knights  of  Columbus,  76  N.  H.  165, 
80  Atl.  227,  40  Ins.  L.  J.  1674. 

Rhode  Island. — Newton  v.  North- 
ern Mutual  Relief  Assoc.  21  R.  I. 
476,  44  Atl.  690. 

Member  is  bound  to  take  notice  of 
by-laws.  Farmers  Ins.  Co.  v.  Bord- 
ers, 26  Ind.  App.  491,  60  N.  E.  174; 
Montgomery  v.  Whitbeck,  12  N.  Dak. 


The  constitution  and  bv-laws  of  a   385,  96  N.  W.  327,  32  Ins.  L.  J.  983; 


beneficial  association  are  elements  of, 
and  enter  into,  its  contracts  of  insui-- 
anee,  and,  while  they  measure  and  de- 
termine the  member's  duties  and  lia- 
bilities, also  measure  his  right  as  Avell. 
Sourwine  v.  Supreme  Lodge,  12  Ind. 
App.  447,  54  Am.  St.  Rep.  532,  40 
N.  E.  646.  See  also  Haywood  v. 
Grand  Lodge  of  Texas  Knights  P. 
(1911)  —  Tex.  Civ.  App.  — ,  138 
S.  W.  1194. 

The  charter  of  a  beneficial  associa- 
tion is  as  much  a  part  of  the  con- 


Wilson  V.  Union  ]Mutual  Fire  Ins. 
Co.  77  Vt.  28,  58  Atl.  799. 

Constitution  and  by-laws  of  secret 
society  bind  a  member  as  he  is  pre- 
sumed to  know  them.  Emmons  v. 
Hope  Lodge,  No.  21,  I.  0.  0.  F.  1 
Mury.   (Del.)   187,  40  Atl.  956. 

^2  FuUen wider  v.  Supreme  Coun- 
cil of  the  Royal  League,  73  III.  App. 
321,  per  Windes,  J.  case  is  aff'd,  on 
the  point  of  the  right  to  change  by- 
laws, in  180  111.  621,  72  Aiii.  St.  Rep. 
239,  54  N.  E.  485,  but  the  court,  per 


tract  of  insurance  made  by  it  as  if  Phillips,  J.,  also  declares  that :  ''The 
written  therein.  Sui)reme  Lodge  contract  between  a  beneficiary  mem- 
Knights  of  Pythias  v.  Stein,  75  Miss,  ber  and  the  corporation  is  not  to  be 
107,  65  Am.  St.  Rep.  589,  37  L.R.A.    construed  as  merely  a  part  of  any 

491 


§  188  JOYCE  OX  INSURANCE 

the  by-laws  not  inconsistent  with  the  terms  of  the  policy,"  or  with 
the  charter  provisions,  or  the  law  of  the  land,  and  which  are  law- 
fully enacted,  bind  the  member,^*  and  become  a  part  of  the  con- 
tract ;  "  and  when  they  are  within  the  scope  of  the  purposes  and 
nature  of  the  organization,  will  be  held  binding.^^ 

So  the  constitution  by-laws  and  regulations  are  a  part  of  the 
contract  of  membership  as  it  is  presumed  to  have  been  entered  into 
with  reference  to  them ;  ^'^  and  it  is  harmless  error  in  instructing  the 
jury  to  state  that  the  policy  and  application  constitute  the  contract 
without  mentioning  the  by-laws  and  rules." 

The  constitution  and  by-laws  are  binding  on  a  charter  member 
and  form  part  of  the  contract  where  his  attention  has  been  directed 
to  them ;  "  or  Avhere  they  are  referred  to  in  the  policy  and  printed 
on  the  back  thereof,^^  or  where  they  are  expressly  referred  to  in  a 
deposit  note  as  a  part  thereof  said  note  being  a  part  of  the  contract 
both  by  statute  and  by  a  policy  reference,  and  so  even  through  such 
by-laws  are  not  copied  into  the  policy  nor  upon  any  attached  rider 
or  paper.^ 

proceeding  in  connection  with  or  in  See  Conway  v.  Supreme  Council 
relation  to  the  issuing  of  a  certifi-  Catholic  Knights  of  America,  131 
cate.  In  construing  the  contract  by  Cal.  437,  63  Pac.  727;  Hass  v.  Mu- 
the  holder  of  the  certificate,— or  rath-  tnal  Relief  Assoc,  of  Pet^luma,  118 
er  that  made  between  the  member  and  Cal.  6,  49  Pac.  1056,  26  Ins.  L.  J. 
the  corporation, — the  application,  the   992. 

examination  by  the  phvsician,  the  ^"^  King  v.  Wynema  Council,  No. 
constitution  and' by-laws  and  the  cer-  10,  Daughters  of  Pocahontas  Imp. 
tificate  issued  are  all  to  be  construed  Ord.  Red  Men,  25  Del.  (2  Boyce's) 
too-ether  as  the  contract  between  the  255,  78  Atl.  845.  See  also  Kimball 
pa'i-ties "  See  Triple  Tie  Benefit  As-  v.  Lester,  59  N.  Y.  Supp.  540,  43 
^oc  V  AVood,  73  Kan.  124,  84  Pac.  App.  Div.  2i ;  Wilson  v.  Union  Mu- 
565;  Examine  Soehner  v.  Grand  tual  F.  Ins.  Co.  77  Vt.  28,  58  Atl.  799. 
Lodo-e  of  Order  of  Sons  of  Herman,  ^^  Smith  v.  Covenant  Mutual  Bene- 
74  Neb.  399,  104  N.  W.  871.  fit  Assoc.  16  Tex.  Civ.  App.  593,  43 

13  Davidson  v.  Old  People's  Mutu-    S.  W.  819. 
al  Ben.  Soc.  39  Minn.  303,  1  L.R.A.        19  Sargent      v.      Supreme      Lodge 
482.  Knights   of  Honor,   158   Mass.   557, 

On  conflict  between  by-laws  and  33  N.  E.  650,  22  Ins.  L.  J.  545; 
certificate  or  policy  of  mutual  bene-  Sabin  v.  Senate  of  National  Union, 
fit  society  or  insurance  company,  see  90  Mich.  177,  51  N.  W.  202;  and  see 
note  in  47  L.R.A.  681.  cases  in  last  note. 

1*  Purdy  v.  Bankers  Life  Assoc.  20  Pearson  v.  Knight's  Templars  & 
104  Alo   App.  91,  74  S.  W.  486.  Mason's  Life  Indemnity  Ins.  Co.  114 

i5Bra.shears  v.  Perry  County  Mo.  App.  283,  89  S.  W.  588.  See 
Farmers  Protective  Ins.  Co.  51  Ind.  also  Montgomery  v,  Whitbeek,  12  N. 
App.  8,  98  N.  E.  889.     J.  P.  Lamb    Dak.  385,  96  N.  W.  327,  32  Ins.  L.  J. 

6  Co  V.  Merchant's  National  .Mutu-  983;  Stone  v.  Lorentz,  19  Pa.  Co. 
al  Fire  Ins.  Co.  18  N.  Dak.  253,  119  Ct.  51,  6  Pa.  Dist.  R.  17;  Wilson  v. 
N.  W.  1048.  Union  Mutual  Ins.  Co.  77  Vt.  28,  58 

"  Mutual  Assurance  Soc.  v.  Korn,    Atl.  999. 

7  Craneh  (11  U.  S.)  396,  3  L.  ed.  383.        1  Russell  v.  Oxford  County  Patrons 

492 


CONSTRUCTION  §  188a 

§  18Sa.  Same  subject. — AVliere  the  application  provides  that  it 
as  well  a,s  the  constitution  and  by-laws  shall  form  the  ba.sis  of  the 
contract  they  become  a  part  of  it,^  and  bind  the  designated  bene- 
ficiary.^ So  where  a  member  of  a  benevolent,  fraternal  or  mutual 
benefit  association  agrees  to  be  bound  by  its  constitution  and  by- 
laws the  terms  of  his  contract  are  determined  thereby ;  *  and  this 
is  so  where  the  certificate  is  expressly  conditioned  that  the  member 
will  abide  by  the  laws,  rules  and  regulations  of  the  society ;  ^  or 
where  in  the  application  the  member  agrees  to  be  bound  by  the  con- 
stitution, laws,  rules  and  regulations  of  the  order.^  And  where  the 
by-laws  are  expressly  recognized  in  the  certificate  which  is  issued 
subject  to  all  the  conditions  and  provisions  of  the  articles  of  in- 
corporation and  by-laws  thereof  they  constitute  a  part  of  the  con- 
tract and  the  member  cannot  be  heard  to  deny  a  knowledge  of 
their  contents."^ 

The  constitution  and  by-laws  of  an  insurance  on  the  assessment 
plan  may  constitute  a  part  of  the  contract  even  though  the  policy 
does  not  in  terms  make  them  a  part,*  and  they  become  a  part  of 
the  contract  with  such  a  company  where  the  application  expressly 
refers  to  and  makes  them  a  part,  and  the  member  thereby  becomes 
charged  with  a  knowledge  thereof.^ 

Where  the  policy  declares  that  the  insurance  is  made  with  ref- 

of  Husbandry  Mutual  Fire  Ins.  Co.  of  America  v.  Beshara,  42  Okla.  684. 

107  Me.  362,"' 78  Atl.  459.  142  Pac.  1014. 

2  McLendon  v.  Sovereign  Camp  of  ^  Grand  Lodge  A.  0.  U.  W.  of  N. 

Woodmen   of  the  World,  106   Tenn.  J.  v.  Gandv,  63  N.  J.  Eq.  692,  53  Atl. 

695,  52  L.R.A.  444,  64  S.  W.  36.  142.     See  also  French  v.  Society  of 

^  Cotter  V.   Grand   Lodge   Ancient  Select    Guardians,    51    N.    Y.    Supp. 

Order  United  Workmen,  23  Mont.  82,  675,  23  :\Ii.^c.  86. 

37  Pac.   650.     Compare  Knowles  v.  ^  United    Moderns   v.    Colligan,   34 

Knowles,   205   Mass.   290,   91   N.   E.  Tex.  Civ.  App.  173,  77  S.  W.  1032. 

213.                              .  'Fee  v.  National  Masonic  Accident 

*  Connecticut.  —  Coughlin            v.  Assoc.  110  Iowa,  271,  81  N.  W.  483, 

Knights  of  Columbu.s,  79  Conn.  218,  29  Ins.  L.  J.  6.35. 

64  Atl.  223,  36  Ins.  L.  J.  44.  *  ]\roran  v.  Franklin  Life  Ins.  Co. 

District   of   Columbia.— Bvnm   At-  160  Mo.  App.  140*,  140  S.  W.  954, 

my  Mutual  Aid  Assoc,  v.  Benton,  13  dependent  upon  .statute  defining  and 

App.  D.  C.  245,  26  Wash.  Law  Rep.  relating  to  the  assessment  plan.    Rev. 

642,  31  Chic.  Leg.  News,  72.  Stat.  Mo.  sec.  1889,  Rev.  Stat.  1909, 

Nebraska. — Farmers'    Mutual    Aid  6950.       Citing     and     quoting     from 

As-soc.   V.   Kinney,   64  Neb.   SOS,   90  Havden   v.    Franklin    Life   Ins.    Co. 

N.  W.  926.  136  Fed.  285,  290,  291,  69  C.  C.  A. 

Missouri. — Gibbs    v.     Knights    of  423,  428.    But  compare  McDonald  v. 

Pvthias   of   I\lo.   173   Mo.    App.    34,  Bankers  Life  Assoc.  154  IMo.  618,  55 

356  S.  W.  11;  Gallop  v.  Royal  Neigh-  S.  W.  999,  29  Ins.  L.  J.  780. 

bors  of  America,  107  ]\Io.  App.  85,  ^  Willison    v.   Jewelers'   &   Trades- 

150  S.  W.  1118.  men's   Co.   30   IMisc.   197,   61    N.   Y. 

Oklahoma. — Modern     Brotherhood  Supp.  1125;   Barbot  v.  IMutual  Re- 

493 


§  189  JOYCE  ON  INSURANCE 

erence  to  its  conditions  and  the  terms  of  its  constitution  and  by- 
laws, the  fact  that  each  of  the  conditions  annexed  to  the  policy  re- 
fers to  a  by-law  cannot  warrant  the  assumption  on  the  part  of  the 
insured  that  the  by-laws  contain  no  other  conditions/"  and  the 
rights  of  the  parties  in  a  fraternal  benefit  association  are  measured 
by  the  certificate.^^  Where  the  charter  and  by-laws  are  a  part  of 
the  contract  between  the  member  and  the  society,  the  latter  is  also 
bound  thereby,  and  where  the  by-laws  provide  for  mortuary  bene- 
fits the  fact  that  the  certificate  does  not  provide  for  such  benefits 
will  not  relieve  the  society  from  its  liability.^^ 

If  there  is  nothing  in  the  contract  making  any  reference  to  by- 
laws, and  nothing  in  the  record  to  show  what"  by-laws  were  in  force 
when  the  certificate  was  issued,  it  cannot  be  held  that  any  provi- 
sion of  them  is  a  part  of  the  contract, ^^  arid  a  by-laAv  prohibiting 
insurance  for  over  two-thirds  the  estimated  value  of  the  property  is 
not  a  part  of  the  contract,  but  is  merely  directory ;  ^*  and  the  charter 
of  a  foreign  insurance  company  must  be  brought  to  the  notice  of  a 
party  to  bind  him  as  to  conditions  therein. ^^  And  the  constitution, 
by-laws  and  application  are  not  a  part  of  the  contract  where 
the  fact  is  not  shown  by  the  language  used  or  by  proper  aver- 
ments in  the  pleadings.^^  And  by-laws  are  not  included  as  a  part  of 
the  contract  under  a  stipulation  that  the  above  application  and 
declaration  with  the  certificate  issued  thereon  constituted  the  basis 
of  the  contract. -^"^ 

Where  insured  is  a  member  of  a  subsociety  its  constitution  is  a 
part  of  his  contract  with  the  principal  society  in  so  far  as  his  mem- 
bership rights  are  concerned.^* 

§  189.  Effect  of  subsequent  amendment  of  by-laws  or  enactment 
of  new  by-laws. — The  question  has  arisen  not  infrequently  in  our 

serve  Fund  Life  Assoc.  100  Ga.  681,  "  Cumberland  Valley  Mutual  Pro- 

28  S.  E.  498,  27  Ins.  L.  J.  338.  teetion  Co.  v.  Schell,  29  Pa.  St.  31. 

10  Miller  v.  Hillsborough  Mutual  ^^  City  Fire  Ins.  Co.  v.  Carrugi,  41 
Fire  Assur.  Assoc.  42  N.  J.  Eq.  459,  Ga.  660. 

462,  7  Ail.  895.  ^^  Supreme     Lodge     of     Sons     & 

11  Mund  v.  Rehaume,  51  Colo.  129,  Dauohters  of  Protection  v.  Under- 
Ann.  Cas.  1913A,  1243,  117  Pae.  wood,  3  Neb.  (unonie.)  798,  92  N. 
159.  W.  1051.     Compare  Grand  Lodge  of 

12  Railway  Passenger  &  Freight  Brotherhood  of  Railroad  Trainmen  v. 
Conduetoi-s  Mut.  Aid  &  Benev.  Assoc.  Dalv,  54  Ohio  L.  Bull.  391. 

V.  Robin.son,  147  111.  138,  35  N.  E.  i' Purdy  v.  Bankers  Life  A;^^oc. 
168,  23  Ins.  L.  J.  79.  104  Mo.  App.  91,  74  S.  W.  486. 

1^  Covenant  Mutual  Life  Assoc,  v.        i^  Polish  Roman  Catholic  Union  of 
Kentner,  188  111.  431,  441,  58  N.  E.   America  v.  Warczak,  182  111.  27,  55 
966.      See    Elliott    v.    Monroe    Citv   N.  E.  64,  aff'g  82  111.  App.  351.    • 
Safety  Fund  Life  Ins.   Co.   76  Mo. 
App. '562,  1  Mo.  App.  Rep.  523. 

494 


CONSTRUCTION  §  189 

courts  as  to  the  point  whether  or  not  the  amendment  of  the  by-laws 
or  subsequent  enactment  of  new  laws  or  modifications  of  existing 
ones  affects  the  contract  so  as  to  enter  into  the  terms  of  it  and  be- 
come a  part  of  it,  or  not.  AVe  believe,  however,  that  such  amend- 
ments or  new  laws  cannot  operate  retroactively  or  infringe  upon 
or  divest  the  insured  of  rights  which  are  already  determined  or 
ascertained  by  his  contract.  But  the  a.ssured  may,  however,  under 
the  terms  of  his  contract  or  by  agreement  or  ratification,  be  bound 
by  such  subsequent  amendments,  modifications,  or  new  laws,^'  for 
parties  may  undoubtedly  so  contract  as  to  make  subsequently  en- 
acted by-laws  operate  retrospectively  and  become  a  part  of  the  con- 
tract.^" So  where  a  certificate  in  a  mutual  benefit  society  is  to  be 
paid  "in  an  amount  to  be  computed  according  to  the  laws"  of  the 
society,  and  such  laws  provide  that  the  provisions  therein  relative 
to  the  payment  of  such  certificates  may  be  changed  at  any  time,  a 
member  who  has  procured  such  a  certificate  will  be  bound  by  any 
change  which  is  made  therein  between  the  time  of  procuring  the 
certificate  and  the  time  of  its  payment.^  If  a  by-law  is  adopted 
after  the  issuance  of  a  benefit  certificate  prescribing  only  a  new 
form  of  certificate  it  relates  to  future  contracts  and  has  no  retro- 
active effect.^  So  a  resolution  of  a  mutual  insurance  society  chang- 
ing the  form  of  its  policies  and  including  the  class  issued  to  insured 
does  not  operate  retrospectively  so  as  to  include  the  previously  issued 
policy  to  insured  unless  he  complies.^ 

It  is  held,  however,  that  it  is  incident  to  the  very  nature  and 
purpose  of  beneficial  and  like  insurance  associations  that  they 
should  have  power  to  modify  and  change  their  by-laws  so  as  to 

^^  See        Supreme        Commanderv  ^°  Covenant  Mutual  Life  Assoc,  v. 

Knights  of  the  Golden  Rule  v.  Ains-  Tuttle,  87  111.  App.  309. 

worth,  71  Ala.  436,  449,  46  Am.  Rep.  A    contract    may   be   so   expressly 

332;  Hass  v.  Mutual  Relief  Assoc,  of  conflitioned,  that  subsequently  enact- 

Petaluma,  118  Cal.  6,  49  Pac.  1056,  ed    by-laws    become   a   part   thereof. 

26    Ins.    L.     J.    992;     Coughlin     v.  Reynolds  v.   Supreme   Conclave  Im- 

Knights  of  Columbus,  79  Conn.  218,  proved    Order    of    Hepta.sophs,    18 

64  Atl.  223,  36  Ins.  L.  J.  44;  Poult-  Lancaster  L.  Rev.  125. 

ney  v.   Bachman,   62   How.  Pr.    (N.  ^  Bowie  v.  Grand  Lodge  of  the  Le- 

Y.)  466;  Bacon  on  Benefit  Soc.  and  cion  of  West,  99  Cal.  392,  34  Pae. 

Life   Ins.    (ed.   1888)    .sees.    185-88;  103. 

Id.  (3d  ed.)  sees.  185-188a;  §§  377-  2  Modern  Woodmen  of  America  v. 

380  herein.  Bauersfield,    62    Kan.    340,    62    Pae. 

As  to  right  to  amend  by-laws,  see  1012. 

note  1  L.R.A.(N.S.)   1065,  et  seq.  ^  gexton  v.  National  Life  Ins.  Co. 

That    secret    order    has    right    to  40    Colo.    60,    12    L.R.A.(N.S.)    504 

amend  hy-laivs   and   rules  -wliere  no  (annotated    on    retroactive    effect    of 

limitation  in  its  power,  see  Lawson  v.  resolution  or  by-law  of  mutual  insur- 

Ilewell,  118  Cal.  613,  49  L.R.A.  400  ance  company  changing  period  dur- 

note,  50  Pac.  763.  ing  which  policy   may  be  contested 

495 


§  189  JOYCE  ON  INSURANCE 

graduate  claims  upon  them  under  their  contracts  in  such  manner 
as  experience  and  necessity  may  require.  Tliey  may  regukite  the 
manner  in  which  they  shall  most  reasonably  carry  out  the  pur- 
poses for  which  they  are  associated,  although  they  cannot  pervert 
the  objects  of  their  organization.  It  is  also  held  that  a  society  may 
limit  the  amount  of  recovery  for  sick  benefits  by  a  subsequently  en- 
acted by-law,  in  view  of  the  above  principles,  and  that  such  a  by- 
law does  not  impair  vested  rights.  The  court,  however,  in  this 
particular  case  modified  the  statements  by  the  fact  that  when  the 
certificate  was  taken  out  there  was  existing  a  special  provision  for 
altering  or  changing  the  by-laws.*  In  an  Illinois  case  it  is  de- 
clared by  the  court  that :  ''The  power  to  enact  by-laws  for  the  gov- 
ernment of  a  corporate  body  is  an  incident  to  the  existence  of  a 
body  corporate  and  is  inherent  in  it.  The  power  to  make  such 
changes  as  may  be  deemed  advisable  is  a  continuous  one.  Where 
the  contract  contains  an  express  provision  reserving  the  right  to 
amend  or  change  by-laws  it  cannot  be  doubted  that  the  society  ha.s 
the  right  so  to  do,  and  where,  in  a  certificate  of  membership,  it  is 
provided  that  members  shall  be  bound  by  the  rules  and  regulations 
now  governing  the  council  and  fund  or  that  may  thereafter  be  en- 
acted for  such  government,  and  those  conditions  are  assented  to 
and  the  member  accepts  the  certificate  under  the  conditions  pro- 
vided therein,  it  is  a  sufficient  reservation  of  the  right  in  the  society 
to  amend  or  change  its  by-laws."  ^ 

for  suicide),  90  Pae.  58,  36  Ins.  L.  J.  the  members  shall  comply  in  the  fu- 

861.  ture  with  the  laws,  rule.s  and  regula- 

*  Fugure  v.  Mutual  Society  of  St.  tions  now  governing'  the  council  and 

Joseph,    46    Vt.    362,    369,    §§    377,  fund  or  those  that  may  hereafter  be 

479  herein.  enacted,  which   are  made  a  part  of 

Member  is  presumed  to  have  con-  the  contract.    It  was  further  express- 

templated  such  by-laws  as  are  passed  ly  provided  in  the  certificate:     'These 

for  the  purpose  of  regulating  busi-  conditions   being   expressly   assented 

ness  and  general  affairs  of  associa-  to  and  complied  with,  the  Supreroe 

tion.     Covenant  Mutual  Life  Assoc.  Council  of  the  Royal  League  hereby 

V.  Kentner,  188  111.  431,  440,  58  N.  promises    and    binds   itself   to    pay,' 

E.  966.  etc.     And  attached  to  the  certificate 

A  benefit  association  has  power  to  wa.s  the  provision,  'I  accept  this  cer- 
pass  such  by-laws  as  will  enable  it  tificate  on  the  conditions  named  here- 
to accomplish  the  design  of  its  ex-  in,'  Avhich  was  signed  by  the  benefi- 
istence,  and  so  regulate  its  business  ciary  member.")  This  case  is  cited 
and  affairs  in  general  and  the  mem-  or  quoted  in  Murphy  v.  Nowak,  223 
ber  is  presumed  to  have  contemplat-  111.  301,  314,  7  KR.A.CN.S.)  393 
ed  such  by-laws.  Covenant  Mutual  note,  79  N.  E.  112;  Scow  v.  Supreme 
Life  Assoc,  v.  Kentner,  188  111.  431,  Council  of  the  Roval  League,  223 
440,  58  N.  E.  906.  111.   32,  36,  39   N.  E.  42;   Covenant 

^  Fullenwider  v.  Royal  League,  180  Mutual  Life  Assoc,  v.  Kentner,  188 

111.  621,  625,  72  Am.   St.  Rep.  239,  111.  431,  441,  58  N.  E.  9G0;  IVIoersch- 

54  N.  E.  485  (the  certificate  of  mem-  baecher  v.   Supreme  Council   of  tlio- 

bership   in  this  ease  provided  "that  Royal  League,  188  111.  1,  13,  59  N. 

496 


CONSTRUCTION  §  189a 

§  189a.  Same  subject. — It  is  decided  that  the  fact  that  amend- 
ments wcic  made  to  the  articles  of  incorporation  do  not  estop  the 
insured  from  denying  that  they  were  part  of  the  contract  where  they 
were  not  made  known  to  him  at  the  time  of  taking  out  the  policy.® 
It  is  also  held  that  a  new  article  of  incorporation  adopted  subse- 
quently to  the  issue  of  a  certificate  does  not  make  it  a  part  of  the 
contract  so  as  to  destroy  a  right  which  the  insured-  previously  had 
under  his  policy;  '  but  it  is  otherwise  where  the  insured  agrees  to  be 
governed  b}'  changes  which  may  afterward  be  made,  and  receives 
a  copy  of  the  new  by-law,  and  does  not  object  thereto  and  continues 
his  membership.*  Although  future  by-laws  of  an  insurance  society 
or  association  may  by  agreement  be  made  a  part  of  the  policy  or 
certificate  issued  by  such  association  or  society  still  by-laws  subver- 
sive of  statutory  rights  cannot  enter  into  and  form  a  part  of  such  a 
general  agreement  and  a  by-law  which  seeks  to  deprive  the  policy 
liolder  of  a  substantial  statutory  right  is  invalid  and  not  binding 
under  such  an  agreement.^  And  where  insured  never  intended  to 
place  it  within  the  association's  power  to  break  his  contract  or  render 
it  valueless  by  subsequent  stipulations  or  regulations  without  his 
consent  such  changes  are  not  authorized.  A  mere  general  consent 
that  the  constitution  and  by-laws  may  be  amended  is  insufficient. 
Whatever  changes  a  mutual  association  may  be  empowered  to  make 
nmst  not  be  destructive  of  vested  rights.^" 

Where  the  general  law  of  the  state  and  the  by-laws  gives  power  to 
repeal,  alter,  or  amend  by-laws,  both  the  statute  and  by-laws  be- 
come part  of  the  contract,  and  the  amendment  of  the  by-laws  is  not 
a  breach  of  contract. ^^    If  the  statute  provides  for  or  permits  certain 

E.   17;   Baldwin    v.   Beglev,   185   111.  society    by   mi.srepresentations    as   to 

180,  190,  5(J  N.  E.  1065:  Tlieorell  v.  laws  of  the  order)  121  Am.  St.  Rep. 

Supreme    Court   of   Honor,   115   111.  .304,  83  N.  E.  127. 

App.  313,  317;  Blasingame  v.  Royal  '  Hobbs    v.    Iowa    Mutual    Benoflt 

Circle,  111  111.  App.  202,  205;  Reyn-  Assoc.  82  Iowa,  107,  47  N.  W.  983, 

olds  V.  Supreme  Council  of  the  Roy-  11  L.R.A.  299,  20  Jns.  L.  J.  434.    See 

al  Arcanum,  192   Mass.  150^  156,  7  also   Stewart  v.   Mutual   Fire  Insur- 

L.R.A. (N.S.)    1154   note.    7    Am.    &  auce   Assoc.   64   Miss.   499.      See   §§ 

En?.  Ann.   Ca.s.  776,  78  N.  E.  129.  379,  380  lierein. 

See  §  379  herein.  *  Bo^ard.'^  v.  Farmers'  IVfutual  Ins. 

On  the  right  of  mutual  benefit  .so-  Co.  79  Mich.  440,  44  N.  W.  856.    See 

ciotv  to  increase  rates,  see  notes  in  7  i^^  377-380  herein. 

I..R.A.(N.S.)     1154,    and    31    L.R.A.  ^  Eaton  v.  International  Travelers' 

(N.S.)    417.      On    rioht    to    decrease  Assoc   (1911)   —  Tex.  Civ.  App.  — , 

benefits,  31   L.R.A. (N.S.)    423.  136  S.  W.  817. 

*  Day  V.  Mill  Owners'  Fire  Ins.  Co.  ^°  Strauss  v.  Mutual  Reserve  Fund 

75  Iowa,  694,  38  N.  W.  113.     Com-  Life  Assoc.  128  N.  Car.  465,  83  Am. 

pare     Renes     v.      Supreme     Lodge  St.  Rep.  699  and  note,  54  L.R.A.  605, 

Knights  &  Ladies  oC  Honor,  231  IlL  3!)    S.    E.   55.   30   Ins.  L.   J.   818. 

134,    14     L.K.A.(N.S.)     540     (anno-  ^^  Stoln-  v.  San  Francisco  Mu.sical 

tated  on   e.stoppel  of  mutual  benefit  Fund  Soc.  82  Cal.  557,  22  Pac.  1125 j 
Joyce  Ins.  VoL  I.— 32.            497 


190 


JOYCE  ON  INSURANCE 


changes  in  the  by-laws  all  members  will  be  bound  by  by-laws  regu- 
larly made  or  amended  even  in  the  absence  of  an  express  stipula- 
tion in  the  application  or  certificate.^^ 

Where  nothing  in  an  association's  constitution  authorizes  an 
amendment  binding  a  member  to  any  change  in  the  contract  with- 
out his  assent,  an  amendment  of  the  articles  of  incorporation  and 
by-laws  does  not  affect  certificates  issued  prior  thereto  as  such 
amended  articles  cannot  be  treated  as  retroactive  in  their  operation, 
especially  where  the  amended  articles  do  not  purport  to  change  ex- 
isting contracts  or  to  authorize  any  such  change  by  the  adoption  of 
by-laws ;  nor  does  mere  silence  as  to  the  effect  of  such  amendments 
Avarrant  the  inference  that  any  change  wrought  will  extend  or  limit 
a  pre-existing  obligation  created  by  the  issuance  of  certificates  of 
membership. ^^  Nor  will  a  by-law  be  retroactive  where  there  is  noth- 
ing therein  evidencing  such  an  intent,"  and  such  intent  must  clear- 
ly appear.^* 

§  190.  Application  and  by-laws:  when  part  of  contract:  statutory 
provisions. — In  many  of  the  states  there  are  statutory  provisions  re- 
quiring the  annexation  of  the  application  to  the  policy  or  its  in- 
corporation therein  or  indorsement  thereon,  or  that  copies  of  the 
application  and  by-laws  shall  be  contained  in  or  attached  to  the  pol- 
icies or  referred  to  therein. ^^    So  the  application  must  be  incorpor- 


Sargent  v.  Supreme  Lodge  Knights 
of  Honor,  158  Mass.  557,  33  N.  E. 
650,  22  Ins.  L.  J.  545.     See  §  379. 

^2  Reynolds  v.  Supreme  Council  of 
the  Royal  Arcanum,  192  Mass.  150, 
7  L.R.A.(N.S.)  1154  note,  7  Am.  & 
Eng.  Ann.  Cas.  776,  78  N.  E.  129. 

^3  Carnes  v.  Iowa  Traveling  Men's 
Assoc.  106  Iowa,  281,  68  Am.  St. 
Rep.  306,  28  Ins.  L.  J.  345.  See  § 
379  herein. 

i^Pittinger  v.  Pittinger,  28  Colo. 
308,  89  Am.  St.  Rep.  193  and  note, 
64  Pac.  195. 

1^  Haley  v.  Supreme  Court  of 
Honor,  139  111.  App.  478. 

1®  California. — Civ.  Code,  sec.  2605. 

Connecticut. — ^Gen.  Stat.  1888,  sec. 
2826. 

District  of  Columbia. — Civ.  Code, 
sec.  657,  32  Stat,  at  L.  534,  c.  1329. 

Georgia. — Civ.  Code  1910,  sec. 
2471,  acts  1906,  p.  107,  No.  466. 
See  Torbert  v.  Cherokee  Ins.  Co. 
141  Ga.  773,  82  S.  E.  134;  Southern 
Life  Ins.  Co.  v.  Logan,  9  Ga.  App. 
503,  71  S.  E.  742;  Southern  Life  Ins. 


498 


Co.  V.  Hill,  8  Ga.  App.  857,  70  S. 
E.  186. 

Illinois.— Rev.  Stat.  1908,  p.  1248, 
sec.  208n  (3)  c.  273,  sec.  209. 

Iowa. — Ann.  Code  1897,  sees.  1741, 
1819,  1826,  Suppl.  1907,  sees.  1741, 
1819,  1826;  McClain's  Stat.  1888, 
sec.  1733. 

Kansas. — Gen.  Stat.  1889,  vol.  1, 
sec.  3437. 

Kentucky. — Stat.  sec.  679,  Rus- 
sell's Stat.  sec.  4400,  Ky.  Stat.  see. 
656.  See  Masonic  Life  Assoc,  of 
Western  N.  Y.  v.  Robinson,  149  Ky. 
80,  41  L.R.A.(N.S.)  505n,  147  S.  W. 
882;  Providence  Savings  Life  Assur. 
Soc.  V.  Bever,  23  Ky.  L.  Rep.  2460, 
67  S.  W.  827;  Rice  v.  Rice's  Admr. 
23  Ky.  L.  Rep.  635,  63  S.  W.  586; 
Provident  Savings  Life  Assur.  Soc. 
V.  Purvear's  Admr.  22  Kv.  L.  Rep. 
980,  59  S.  W.  15  (construing  Ky. 
Stat.  sees.  656  and  679  together) ; 
Manhattan  Life  Ins.  Co.  v.  Myers,  22 
Ky.  L.  Rep.  875,  59  S.  W.  30. 

.l/fl/Hc— Laws  1907,  c.  30,  p.  28; 
c.  187,  p.  204;  Rev.  Stat.  1883,  c. 
49,  sec.  24. 


CONSTRUCTION 


§  190 


ated  in  the  policy  to  be  a  part  thereof."  And  the  statute  must  be 
complied  with  otherwise  the  apjDlication  and  all  testimony  relating 
thereto  Avill  be  excluded.^*  So  an  application  which  is  not  made  a 
part  of  the  policy  or  shown  by  it  in  any  way  cannot  be  considered. ^^ 
And  statements  made  by  the  applicant  in  a  writing  a  copy  of  which 
is  not  endorsed  on  or  attached  to  the  policy  are  rightly  excluded 
from  evidence.^" 

A  demurrer  will  lie  to  a  plea  of  misrepresentations  when  such 
act  has  not  been  complied  with ;  ^  and  under  such  act  an  affidavit  of 
defense  is  defective  if  it  fails  to  allege  that  the  application  was  so 
annexed.^  So  the  application  may  be  stricken  from  the  complaint 
when  referred  to  in  but  not  attached  to  the  policy  as  it  is  not  a  part 
of  the  contract.^ 


Massachusetts. — Rev.  Laws,  e.  118, 
see.  73,  acts  &  res.  1907,  c.  576,  sec. 
73,  p.  894;  act  1890,  c.  421,  sec.  21; 
acts  1887,  c.  2l4,  see.  59. 

Mich  i  gun. — Pub.  acts  1907,  No. 
187,  subdiv.  4,  sec.  1  (3  How.  Stat. 
[2cl  ed.]  see.  8312)  ;  Pul).  acts  No.  380 
(3  How.  Stat.  [2d  ed.]  sec.  8310 
see.  1. 

Minnesota.— Laws  1907,  o.  220, 
Rev.  Laws  Suppl.  1909,  sees.  1695-2 
to  1695-12  Rev.  Laws  1905,  see.  1616. 

Mississiijpi.— Code  1906,  sec.  2675. 

Missouri. — Rev.  Stat.  1890,  sec. 
7929. 

Ohio.— Bates  Ann.  Stat.  1906,  sec. 
3623;  Giauque's  Rev.  Stat.  1890,  6tb 
ed.  sec.  3623.  See  Andrews  v.  Na- 
tional Life  Ins.  Co.  7  Obio  Dec.  (5 
Ohio  Leg.  N.  1898)  307. 

Oklahoma. — Rev.  Stat.  1903,  see. 
3200,  Stat.  1890,  sec.  3155. 

Pennsylvania. — 1  Bright.  Purd. 
Dig.  12th  ed.  p.  ICli,  see.  62,  act 
May  11,  1881,  P.  L.  20. 

Texas.— Rev.  Civ.  Stat.  1911,  art. 
4951,  Suppl.  1903,  to  Sayles  Civ. 
Stat.  see.  3096  eo.  See  Lone  Star 
Lodge,  No.  1,935,  Knights  &  Ladies 
of  Honor  v.  Cole  (1911)  —  Tex.  Civ. 
App.  — ,  131  S.  W.  1180;  Metro- 
politan Life  Ins  Co.  v.  Gibbs,  34  Tex. 
Civ.  App.  131,  78  S.  W.  398. 

Wisconsin. — Laws  1905,  c.  51.  ]i. 
108,  1  Sanb.  &  Berr.  Ann.  Stat.  1889, 
sec.  1945  a. 

Law  governing  as  to  necessity  of 
attaching  application  or  copy  thereof 
to  policy,  see  notes  in  63  L.R.A.  867, 


868;  23  L.R.A.  (N.S.)  982,  and  52 
L.R.A. (N.S.)   285. 

On  what  must  be  attached  in  order 
to  satisfy  requirement  that  "applica- 
tion" be  attached  to  policv,  see  note  in 
18  L.R.A. (N.S.)  1190. 

^^  Bush  V.  Indiana  &  Iowa  Live 
Stock  Ins.  Co.  74  W.  Va.  244,  81  S. 
E.  984. 

18  Fidelity  Title  &  Trust  Co.  v. 
Illinois  Life  Ins.  Co.  213  Pa.  415,  63 
Atl.  51,  act  May  11,  1881  (P.  L.  20). 

The  application  is  not  admissible 
where  not  attached.  Mahon  v. 
Pacific  Mutual  Life  Ins.  Co.  144  Pa. 
St.  409,  22  Atl.  876;  Pickett  v.  Pa- 
cific jMutual  Life  Ins.  Co.  144  Pa.  St. 
79,  22  Atl.  871,  13  L.R.A.  661. 

The  application  for  insurance  con- 
stitutes no  part  of  the  policy  or  of 
contract  between  the  parties,  and  is 
therefore  not  receivable  in  evidence, 
unless  a  copy  is  attached  to  the  ])olicy 
as  required  by  statute,  Pennsvlvania 
act  of  Mav  11,  1881.  Imperial  Fire 
Ins.  Co.  V.  Dunham,  117  Pa.  St.  460, 
2  Am.  St.  Rep.  686,  12  Atl.  668. 

1^  Breedon  v.  Western  &  Southern 
Life  Ins,  Co.  148  Kv.  488,  146  S.  W. 
1104. 

2°  Wheeloek  v.  Home  Life  Ins.  Co, 
115  Minn.  177,  131  N.  W.  1081, 
Laws  1907,  c.  220;  Rev.  Laws,  sees. 
1695-2  to  1695-12. 

1  Cook  V.  Federal  Life  Assoc,  74 
Iowa,  746,  35  N.  W.  500. 

2  Metropolitan  Life  Ins.  Co.  v, 
Jenkins,  —  Pa.  —,  10  Atl.  474, 

^  Western  &  Southern  Life  Ins,  Co, 


499 


§  190a  JOYCE  ON  INSURANCE 

If  however  a  copy  of  the  application  is  attached  to  poUcy  and 
filed  with  the  petition  il  oannot  l)e  excluded  as  evidence.*  And  if 
the  existence  of  by-laws  is  expressly  recognized  in  the  certificate  so 
that  they  become  a  part  of  the  contract  the  insured  is  bound  even 
though  such  by-laws  are  not  posted  in  the  company's  office  for  pub- 
lic inspection  as  required  by  statute.* 

Where  the  application  is  not  admissible  its  contents  cannot  he 
shown  by  parol  evidence.®  And  it  is  error  to  admit  in  evidence  only 
a  part  of  the  contract  where  what  purports  to  be  a  copy  of  the  appli- 
cation appears  on  the  back  of  the  policy  in  writing  and  printing  and 
the  policy  states  that  a  copy  of  the  application  is  annexed  and  also 
makes  the  statements  in  the  application  warranties  and  a  part  there- 
of."^ 

Again,  if  the  statute,  in  addition  to  the  requirement  that  a  copy 
of  the  application  be  attached  to  the  policy,  also  provides  that  each 
application  shall  have  printed  thereon  in  boldfaced  type  the  words : 
each  applicant  ''is  entitled  to  be  furnished  with  a  copy  of  this  ap- 
plication attached  to  any  policy  issued  thereon,"  the  omission  of 
these  words  is  not  fatal  as  the  intention  of  the  legislature  is  held 
merely  to  have  been  to  inform  the  as.-^ured  that  he  was  entitled  to 
have  a  copy  of  the  application  attached  to  his  policy,  and  that  when 
this  was  done  the  application  formed  a  part  of  the  contract.' 

It  is  held  in  England  that  a  deed-poll  containing  an  insurance 
against  fire  may  refer  to  conditions  in  the  printed  proposals  with- 
out stamp,  seal,  or  signature.^ 

§  190a.  Standard  policy:  what  is  part  of  contract:  application,  by- 
laws, etc. :  special  provisions. — If  a  statute  expressly  makes  the  pol- 
icy and  deposit  note  one  contract  and  the  note,  which  is  also  re- 
ferred to  in  the  policy,  refers  to  and  makes  the  by-laws  a  part  there- 
of, said  by-laws  thereby  become  a  part  of  the  contract  even  though 
a  standard  form  of  policy  is  prescribed.^"  Under  a  statute  providing 
a  standard  form  of  fire  policy  and  requiring  a  true  copy  of  any  ap- 
plication etc.  to  be  attached  to  or  indorsed  upon  the  policy  an  agree- 

V.  Davis,  141  Kv.  3.-)8, 1.12  S.  W.  410,  Co.  152  111.  App.  179,  38  Nat.  Corp. 

40  Ins.  L.  J.  248.  Rep.  710. 

*  Supreme      Lodge      Knights      of  *  Moore    v.    Northwestern    Mutual 

Pvtliias  V.   Bradlev,  33  Ky.^  L.  Rep.  Life  Ins.  Co.  192  Mass.  468,  7  Am. 

4i3,  109  S.  W.  li78.  &   Eng.   Annot.   Cas.   656,   78  N.  E. 

5  Fee  v.  National  Masonic  Ace.  488,  3.')  Ins.  L.  J.  769 ;  Rev.  Stat. 
Assoc.  110  Iowa.  271,  81  N.  W.  483,  Mass.  c.  118,  sec.  73. 

29  Ins.  L.  J.  635,  Code  Iowa,  1873.  ^Rutledge  v.  Burrell,  1  H.  Black, 

see.  1076.  255. 

6  Southern  States  :\rutual  Life  Ins.  ^°  Russell  v.  Oxford  County  Pa- 
Co  V  Herlihy,  138  Kv.  .359,  128  S.  trons  of  Hushandrv  Mutual  Fire  Ins. 
W.'  91.            ■                ■  Co.  107  Me.  362,  78  Atl.  459. 

■^  Kellv   v.   Metropolitan   Life   Ins. 

500 


CONSTRUCTION  §  190b 

ment  or  condition  is  binding;  when  it  is  within  the  express  wording 
of  the  policy  and  the  ai)plication  therefor  signed  and  attached  to 
tlie  poh"cy.^^  By-laws  are  not  a  part  of  tlie  contract  where  they  :ire 
not  annexed  to  or  printed  upon  a  standard  form  of  policy  which  re- 
quires special  provisions  or  stipulations,  not  inserted  and  which  re- 
quire mention  in  effecting  insurance,  to  be  legibly  written  or  print- 
ed and  permanently  and  securely  attached  to  the  policy  and  signed 
separately  by  the  comjjany  or  agent.^^ 

§  190b.  What  is  part  of  contract:  contract  to  be  plainly  expressed 
in  policy:  policy  to  contain  entire  contract:  statutes. — Under  the 
Alabama  statute  no  life  nor  any  other  insurance  company,  nor  any 
agent  thereof,  shall  make  any  contract  of  insurance,  or  agreement 
as  to  policy  contract,  other  tban  is  plainly  expressed  in  the  policy 
written  thereon. ^^  And  this  provision  is  complied  with  by  attach- 
ing the  application  to  the  policy,  with  a  stipulation  that  the  appli- 
cation is  a  part  thereof  and  the  two  together  constitute  one  contract 
to  be  construed  as  such.^*  And  it  is  further  held  that  the  policy. 
including  documents  adopted  by  reference  and  attached  constitute 
the  sole  expositor  of  the  contract  although  the  court  said  that  par- 
ties are  still  disagreed  as  to  the  meaning  and  effect  of  the  statute.^* 
The  statute  also  excludes  all  anterior  or  contemporaneous  agree- 
ments not  plainly  expressed  in  the  policy,  also  conditions  in  the  ap- 
plication when  it  is  not  attached  to  the  policy  nor  incorporated  by 
IH'oper  reference. ^^    The  Kentucky  statute  requiring  the  contract  to 

"  Straker  v.  Plienix  Ins.   Co.  101  neuille,  156  Ala.  392,  47   So.  72,  .37 

Wis.  413,  77  N.  W.  752,  28  Ins.  L.  J.  Ins.    L.    .L    892.       The    court,    per 

14.3,  under  Sand.  &  Ber.  Ann.  Stat.  Anderson,  .1.,  said :     The  languase  of 

1898,  sec.  1945a.  the  statute  "is  dear    and    unambiirn- 

^2  Gleason    v.    Canterbury    ^lutual  ous.     It  means  what  it  says  and  says 

Fire  Ins.  Co.  73  N.  H.  583,  64  Atl.  what  it  means.     To  hold  that  Ihe  in- 

187,  35  Ins.  L.  J.  932.     See    as    to  sured   is    boinid   by   any   anterior   or 

special  rciiulations;  standard  policy,  contemporaneous      ajrreements,      not 

Nielsen   v.   ^Merchants'     Mutual     Ins.  i)lainly     expresj^ed     in     the     policy, 

Assoc.  26  S.  Dak.  405,  40  Ins.  L.  J.  wonhl   strike   down   l)oth     the    spirit 

65,  128  N.  ^Y.  491;  §  176f  herein.  and  letter  of  the  statute.     Certainly 

Mutual  co!ni)anies  or  a.'^sociations:  ihe  partie.s  could,   in   the   absence  ot 

"Special     ]-eanlations"     as     part     of  the  statute,   make   the   application    a 

policy,  see  §   17()f  herein.  part  of  the  contract  by  proper  refer- 

^' Code  1907,  sec.  4579.  ence  thereto,  and  without  settinp:  out 

What    lite    policy    must    contain,  said  asirecnient  in  the  policy;  but  to 

See  §  177  herein.  h-old  that  they  can  do  so  in  the  very 

^*  Satterfield     v.     Fidelity    ^Mutual  face    of    this    statute    would    be    to 

Life  Ins.   Co.   171   Ala.  429,  55    So.  emasculate   it.     It  was    intended    to 

200.  prevent  the  very  conditions  set  up  in 

"  Fmi)ire  Life  Ins.  Co.  v.  Gee,  171  the  defendant's  special  pleas,  and  to 

Ala.  435,  40  Ins.  L.  J.  1384,  55  So.  relieve   the   insured   from   any   state- 

166.  ments  or  a<iTeements  not  plainly  ex- 

^^Manlmtlap  Lii^'  Ins.  Co.  v.  Ver-  pressed  in  the  policy.     The  trial  court 

501 


190c 


JOYCE  ON  INSURANCE 


be  plainly  exprc?;sed  in  the  policy  is  construed  as  having  the  same 
meaning  as  the  statute  of  that  state  requiring  the  application  to  be 
attached  to  the  policy. ^'^  In  Missouri,  where  a  policy  is  one  of  as- 
sessment insurance  it  is  not  within  the  intent  of  a  statute  which  ap- 
plies only  to  old  time  jDolicies  and  prohibits  life  insurance  companies 
from  making  any  contract  of  insurance  or  agreement  as  to  such 
contract  other  than  as  plainly  expressed  in  the  policy  issued  there- 
on.^^  In  Massachusetts,  where  the  statute  provides  that  a  life  policy 
and  application  shall  constitute  the  entire  contract  the  words  "the 
application  is  attached  hereto"  must  be  added  to  a  policy  provision 
''this  instrument  contains  the  entire  contract."  ^'  Under  a  New 
York  decision  where  a  policy  of  life  insurance  states  that  the  con- 
sideration therefor  is  the  application  of  the  assured,  which  is  made 
a  part  of  the  contract  and  a  copy  of  the  application  is  annexed  to 
the  policy  and  the  statute  requires  that  every  policy  of  life  insurance 
shall  contain  the  entire  contract  and  that  nothing  shall  be  incorpor- 
ated therein  by  reference  to  other  writings  not  indorsed  upon  or 
attached  to  the  policy,  the  word  ''consideration"  therein  is  not  lim- 
ited to  its  technical  definition  of  '"some  right,  interest,  profit,  or 
benefit  accruing  to  the  one  party,  or  some  forbearance,  detriment, 
loss,  or  responsibility,  given,  sufl:'ered,  or  undertaken  by  the  other," 
but  rather  is  used  in  the  sense  of  "inducing  cause."  ^° 

§  190c.  State  has  power  to  enact:  such  statutes  constitutional. — 
It  is  clearly  within  the  power  of  the  state  to  enact  such  statutes  and 
to  require  that  the  entire  contract  between  the  parties  and  all  con- 


did  not  err    in    sustaining    the    de-  Laws,  cliai).   28    (Laws  ]909,  c.  33) 

murrers  to  tlie  defendant's  pleas."  see.  58  N.  Y.  Ins.  Law,  Consol.  Laws, 

"Provident    Shavings    Life    Assur.  c.   28    (Laws  1909,    c.    33)     sec.    58 

See.   V.   Purvear's   Adinr.   22  Ky.  L.  (tirst  appeared  in  Laws  190G,  e.  326), 

Rep.  980,  59  S.  W.  15.  provides  that  every  policy  of  life  in- 

^^  Easter  v.  Yeomen.  172  Mo.  App.  suranee  shall  contain  the  entire  eon- 

292,  157  S.  W.  992,  Rev.  Stat.  1909,  tract  between  the  parties,  and  nolh- 

sec.    6934    (enacted    Laws    1907,    p.  ing  shall  be  incorporated  therein  by 

316).  reference    to    any    constitution,    by- 

^^  iEtna  Life  Ins.  Co.  v.  Hardison  laws,  rules,  application  or  other  writ- 

( Travelers'   Life   Lis.   Co.   v.   Hardi-  ings    unless    the    same    are    indorsed 

son)    199   Mass.   181,   85   N.   E.   407,  ui>on  or  attached  to  the  policy  when 

37   Ins.   L.   J.   818.     See    also    New  issued,  etc. 

York    Life    Ins.    Co.     v.     Hardison  Policy  to  contain  "entire  contract." 

(Mutual    Benefit    Life    Ins.    Co.    v.  N.  Y.  Consol.  Laws,  c.  28  (Ins.  Law) 

Hardison)    199   Mass.   190,  12/    Am.  sec.  58  construed,  in  connection  with 

St.  Rep.  478,  85  N.  E.  410,  37  Ins.  nonattachment    of   medical    examina- 

L.  .1.  848.     See  §  177  herein.  tion  to  policv,  in  Becker  v.  Colonial 

20  Becker  v.  Colonial  Life  Ins.  Co.  Life  Ins.  Co.  138  N.  Y.  Supp.  491, 

138  N.  Y.  Supp.  491,  153  App.  Div.  153  App.  Div.  382,  aff'g  133  N.  Y. 

382.    aff'g    133    N.    Y.    Supp.    481,  Supp.  481,  75  Misc.  213. 
75    Misc.     213,    Ins.    Law,     Consol. 

502 


CONSTRLX'TION  §§  190d,  190e 

ditions  and  stipulations  by  which  the  policy  may  be  avoided  shall 
he  embodied  in  or  attached  to  the  policy  delivered  to  insured  and 
this  is  the  manifest  intent  of  statutes  requiring  a  copy  of  the  appli- 
cation to  be  attached  or  of  like  statutes.^  So  an  act  requiring  that 
the  application  be  annexed  to  or  copied  into  the  policy  has  been  held 
constitutional.  Such  act  does  not  impair  the  obligation  of  con- 
t.racts.2 

§  190d.  Purpose  or  intent  of  such  statutes. — Statutes  of  this  char- 
acter are  clearly  intended  to  protect  the  policy-holder  by  requiring 
the  insurer  to  place  in  his  hands  written  evidence  of  the  entire  con- 
tract between  them,^  or  in  other  words  by  requiring  all  the  terms, 
conditions  and  representations  to  be  incorporated  or  embodied  in 
the  policy.*  It  is  held  in  Pennsylvania  that  the  intent  of  the  stat- 
ute, making  applications  for  insurance  and  by-laws  of  companies 
inadmissible  in  evidence  unless  a  copy  thereof  is  attached  to  the 
policy,  was  to  produce  a  uniform  rule  of  procedure  and  to  apply 
to  all  insurance  companies  incorporated  by  the  laws  of  the  state,  as 
well  as  to  all  other  corporations  insuring  within  the  state. ^ 

§  190e.  Construction  of  such  statutes,  the  policy  and  application 
or  contract. — Tlie  court  slumld  construe  such  statutes  so  as  to  give 
them  force  and  effect  so  as  best  to  accomplish  the  legislative  intent.^ 
And  all  defenses  based  on  the  application  when  a  copy  thereof  is 
not  attached  will  be  ineffective  and  the  policy  should  be  treated, 
construed  and  enforced  as  if  no  written  application  had  been  made 
or  as  if  no  such  paper  existed.'^  If  both  the  application  and  the  pol- 
icy make  the  former  a  part  of  the  contract  and  it  is  also  made  in  the 
policy  a  part  of  the  consideration  both  should  be  construed  together 
in  determining  the  parties'  rights.* 

While  a  policy  or  contract  for  credit  insurance  refers  to  the  ap- 
plication as  a  part  of  it  but  does  not  in  terms  refer  to  the  form  of 
the  policy  to  be  issued  for  an  explanation  or  delinition  of  its  terms 
the  policy  cannot  be  resorted  to  in  construing  the  application.^ 

^  Rauen  v.  Prudential  Ins.  Co.  of  ^  Kiltaning  Ins.  Co.  v.  Hebb,  138 

America,  129  Iowa,  725,  106  N.  W.  Pa.  St.  174,  21  I'itts.  L.  J.  N.  S.  153, 

198,  35  Ins.  L.  J.  288.  27  Week.  N.   C.   97,  48   Phila.   Leo. 

2  New  Era  Life  Assoc,  v.  Musser,  jns.  35,  20  Ins.  L.  J.  92,  20  Atl.  837. 

120  Pa.  St.  384,  14  Atl.  155.  g  n  r.      i     f  i  t  n        e 

1  T>                 1-.      1     ,•  1   T  n        f  ''Kauen  v.  Prudential  Ins.  Co.  of 

'' Rauen  v.  Prudentiat  In.s.  Lo.  or  ,            _  _      „p  „    ,„ 

A        •        ion  T           r-cr    inft  XT    wr  Amenca,  129  Jowa,   (25,  lOb  W.   VV. 

America,  129  Iowa,   i2'o,  10b  IN.  V\ .  '                    '         ' 

198.  35  Ins.  L.  J.  288.  ^^^'  *^''  ^^^-  ^-  '^^  -^^• 

*Kirkpatrick     v.     London     Guar-  ''Rauen  v.  Prudential  Ins.  Co.  of 

antee  &  Accident  Co.  139  Iowa,  370,  America,  129  Iowa,  725,  lOG  N.  W. 

19  L.R.A.(N.S.)    102    (annotated  on  i9ii,  35  Ins.  L.  -T.  288. 

failure  to  attach  copy  ui:  application  g  j^^^   ^^     Prudential   Life   Ins.   Co. 

to  policy  as  attecting  riglit  of  insurer  .^^.^  ^,^^^           ^_  ^^^^^^,^.  ^  ^        ^^^_ 

to    rely    on    representations    or    war-  ' 

rantie^-  incorporated  in  the  policy  it-  Cai,.  236,  89  ^.  t..  o.J. 

self)  115  N.  W.  1107.  ^  L.  Black  &  Co.  v.  I^ndon  Guar- 

503 


§§  190t-190h  JOYCE  OX  INSURANCE 

§  190f.  Such  statutes  govern  only  relative  rights  of  parties. — The 
statute  is  intended  only  to  govern  the  relative  rights  of,  or  the  con- 
tractual rehitions  hetween  the  insurer  and  policy-holder,  so  that 
where  the  proceeds  of  the  insurance  are  claimed  by  different  per- 
sons the  application  may  be  admissible  even  though  it  is  not  at- 
tached to  the  policy.^**  But  while  the  fact  that  a  true  copy  of  the 
application  is  not  attached  may  preclude  the  company  from  using 
it,  in  pleading  or  evidence,  still  an  othcer  or  incorporator  is  not  so 
precluded  where  it  is  sought  to  hold  him  personally  liable  on  a  death 
claim. ^^ 

§  190g.  Retroactive  effect  of  such  statutory  requirements. — 
Where  a  certiticate  was  issued  before  the  enactment  of  the  statute  a 
by-law  subsequently  enacted  but  not  attached  to  the  policy  is  in- 
admissible in  evidence.^^  But  the  requirement  that  that  part  of  the 
constitution  referred  to  must  be  attached  is  not  retroactive  especial- 
ly where  the  statute  only  covers  policies  or  certificates  "hereafter 
issued."  ^^ 

§  190h.  Necessity  of  true,  correct,  or  entire  copy  of  application. — 
The  attached  copy  of  the  application  must  be  a  true  copy,^*  as  an 
incomplete  copy  of  the  application  is  not  within  the  intent  of  the 
statute,"  and  a  copy  of  the  entire  application  even  though  sul^di- 
vided,  or  on  different  pages  must  be  attached  under  the  Pennsylva- 
nia statute. ^^  So  where  a  copy  of  the  entire  application  must  be 
attached  to  the  policy  an  omission  of  a  part  of  the  application  even 
though  supplementary  operates  to  exclude  the  whole. ^"^  But  it  is 
not  necessary  that  the  attached  copy  of  the  application  should  be  a 
facsimile,  although  it  must  show  by  comparison,  without  resorting 
to  construction,  that  it  is  so  exact  and  accurate  as  to  be  a  "true 
copy,"  "  and  if  the  copy  varies  from  the  original  application  so  that 

antee  &  Accident  Co.  144  N.  Y.  Supp.  ^^  Corson  v.   Anchor  Mutual  Fire 

424,  159  App.  Div.  186.  Ins.    Co.   113   Iowa,   641,   85   N.  W. 

lORnowles  v.  KnoAvles,  205  Mass.  goG;    Manhattan    Life    Ins.    Co.    v. 

290,  91  N.  E    213.     Compare  Cotter  j^^^       -^^T  Fed.  281,  62  C.  C.  A.  5l3 

''^  ^w  "?  ^"^  "o.  aP"';*  ?o     fv  P.;    (under   Mass.   acts   1894,   p.   718,   c. 
ed  Workmen,  23  Mont.  82,  3t   Pac    1  ^_  •     i         i    mi 

..-rj  '  ;j22,   sec.    lo)    certiorari   denied   194 

'"'li  Moore  v.  Fraternal  Ace.  Assoc.  U.  S.  633,  48  L.  ed.  1159,  24  Sup.  Ct. 

103  Iowa,  424,  72  N.   W.   645,  acts  857;   Albro  v.   Manhattan   Life   Ins. 

18th  Gen.  Assemb.  c.  211,  sec.  2.  Co.  119  Fed.  629. 

12  Hunziker  v.  Supreme  Lodge  ,,  ^^^^^.^  ^.  g^^^^  ^^^^^^^  ^ife  Ins. 
Knmhts  of  Pythias,  11/  Ky.  41b,  JD  loo  xi  -m  At  wM,r  v  r  ^i^'x 
Kv.'  L.  Rep.  1510,  78  S.  W.  201.  Co.  183  Pa.  o6o,  41  ^  kly.  N.  C.  353, 

13  Grand  Lodge  A.  O.  U.  W.  of  Ky.  39  Atl.  o2. 

V.  Denzer,  129  Kv.  202,  33  Ky.  L.  "Fisher  v.   Fidelity   Mutual   Life 

Rep.  643,  110  S.  W.  882,  37  Ins.  L.  ^g^o,.    ^gg  Pa.  1,  29  Pitts.  L.  J.  N. 

'b  726.  <^    163^  41  Atl.  457,  Pa.  act  May  11, 

1*  Metropolitan    Life    Ins.    Co.    v.  igg^  (p   j     oq  ) 

•Moore,  117  Kv.  651,  25  Ky.  L.  Rep.  v    •    -  -   ;• 

1613    79  S    W    '^19  ^^  Johnson  v.  Des  Moines  Lite  Ins. 

504 


CONSTRUCTION  §§  190i,  190j 

its  real  moaning  depends  u]Kjn  reference  to  anotlier  paper  it  is  not 
a  true  or  correct  copy.^^  The  signature  of  the  applicant  as  it  was  in 
the  original  must  also  appear  as  the  use  of  the  word  ''signed/'  of  it- 
self alone  is  insufficient  to  constitute  a  "true  copy."  2°  A  photo- 
graphic copy  of  the  application  attached,  which  comparison  with 
the  original  shows  to  be  a  correct  one,  even  though  such  copy  is 
greatly  reduced  in  reproduction,  is  a  sufficient  compliance  with  the 
statute.^  If  the  description  of  the  property  differs  the  copied  appli- 
cation is  not  a  correct  copy.^  And  where  a  copy  of  tlie  application 
annexed  to  the  policy  does  not  correctly  state  the  place  to  which 
notice  of  premiums  shall  be  addressed,  and  omits  some  of  the  state- 
ments of  the  assured  referring  to  his  past  afflictions  and  all  of  the 
examiner's  report,  the  insurer  must  be  deemed  to  have  violated  a 
statute  requiring  a  copy  of  the  application  to  be  annexed  to  every 
policy.^ 

In  case  of  a  variance  between  the  original  application  for  a  policy 
of  life  insurance,  which  is  made  a  part  of  the  contract,  and  a  copy 
of  the  application  appended  to  the  policy,  but  not  referred  to  in 
the  body  thereof,  the  original  application  must  control.* 

It  will,  however,  be  presumed,  in  the  absence  of  evidence  to  the 
contrary  tliat  the  copy  of  the  apj)licatinn  is  a  true  copy.* 

§  190i.  Such  statutes  do  not  apply  to  oral  contracts. — The 
Pennsylvania  statute  is  limited  in  every  particular  to  written  pol- 
icies and  does  not  apply  to  oral  contracts.^ 

§  190j.  Copy  of  application  for  renewal  or  reinstatement  to  be  an- 
nexed, etc. — A  copy  of  an  application  for  renewal  or  reinstatement 
of  a  policy  must  be  annexed  to  it,  to  enable  the  insurer  to  rely  on 
false  statements  therein.'^ 

Co.  105  Iowa,  273,  MeCIain's  Code,  Life  Assur.  A.ssn.  97  Iowa,  22(),  59 

sec.  1733.  Am.  St.  Rep.  411,  32  L.R.A.  473,  6G 

i^Greiner  v.    Safety   Mutual   Fire  N.  W.  157. 
Ins.  Co.  25  Lancaster  L.  Rev.  338.  *  Metropolitan  L.  Ins.  Co.  v.  Dim- 

20  Seller  v.  Economic    Life    Assoc,  ick,  69  N.  .).  L.  384,  55  Atl.  291,  ()2 

105  Iowa,  87,  43  L.R.A.  5.37,  8  Am.  &  L.R.A.  774. 

Eng.  Corp.  Cas.  N.  S.  601,  74  N.  W.        ^  Hollcran  v.  Life  Assur.    Co.    of 

941,  acts  18th  Gen.  Assenib.  c.  211,  America,  18  Pa.  Super.  Ct.  573. 
sec.  2.  6  Benner  v.   Fire  Assoc,   of  Phila. 

^  Arter    v.    Nortlnvestern     Mutual  229  Pa.  75,  140  Am.  St.  Rep.  706,  78 

Life  Ins.  Co.  130  Fed.  768,  65  C.  C.  Atl.   44,   40   Ins.   L.   J.   84,  Pa.   act 

A.  156,  33   Tns.   L.   .).   852,   Pa.   act  Mav  11,  1881  (P.  L.  20). 
May  11,  1881  (P.  L.  20).  'Goodwin    v.     Provident     Savinsrs 

^Greiner,    to    use,    etc.   v.   Safety  Life  Assur.   Soc.  97  Iowa,    226,    32 

Mutual  Fire  Jus.  Co.  24  Lancaster  L.  L.R.A.  473,  59  Am.  St.  Rep.  411,  66 

Rev.  16L  N.  W.  157. 

^  Goodwin    v.    Provident    Savings 

505 


$§  190k,  1901 


JOYCE  ON  INSURANCE 


§  190k.  Mere  reference  to  application  insufficient  under  such  stat- 
utes.— It  is  not  suliicient  to  merely  refer  in  the  policy  to  the  appli- 
cation nor  to  adopt  the  same  in  terms  where  the  statute  requires 
that  a  copy  thereof  be  attached  to  the  policy,'  and  the  application, 
if  not  attached,  is  properly  excluded  in  evidence,  though  the  policy 
provides  that  it  is  to  be  a  part  thereof,^  so  the  fact  that  the  applica- 
tion Avas  referred  to  by  the  policy  and  made  a  part  of  the  contract 
does  not  of  itself  alone  constitute  a  compliance  with  the  contract.^" 
A  statement  unsigned,  although  annexed  and  entitled  ''copy  of  ap- 
plication/' is  not  admissible  in  evidence,"  and  a  statement  written 
at  the  end  of  a  policy  entitled  "copy  of  application,"  not  containing 
any  signature,  is  not  a  part  of  the  policy,  nor  are  any  of  its  recitals 
binding  on  the  insured. ^^  Again,  a  reference  to  the  application  in 
certain  paragraphs  relating  to  occupation  and  suicide  is  not  suf- 
ficient to  make  it  a  part  of  the  policy.''^  And  even  though  the  cer- 
tificate declares  that  it  is  subject  to  the  by-laAvs  of  the  order,  this  is 
not  a  sufficient  compliance  with  the  statute  such  by-laws  not  being- 
made  a  part  of  the  certihcate.^*  So  a  special  time  limitation  in  the 
constitution  of  the  corporation  cannot  be  pleaded  in  bar  of  an  action 
where  it  does  not  appear  in  the  certificate,  and  no  copy  of  the  con- 
stitution or  by-laws  is  attached  although  they  are  ''made  a  part  of 
this  certificate."  ^^ 

§  1901.  Right  of  insurer  to  provide  forms  of  application  under  such 
statutes. — Where  a  statute  provides  that  an  application  unless  at- 
tached to  the  policy  cannot  be  treated  as  a  part  of  the  contract  or 
received  in  evidence  in  any  controversy  between  the  parties  to  or 
interested  in  such  policy,  an  insurance  company  has  the  right  to 
provide  a  form  of  application  for  its  business,  to  require  that  it  be 
used  by  its  agents  and  those  desiring  insurance  of  it.  and  that  a  sep- 
arate application  be  made  and  signed  for  each  policy. ^^ 


*  Bowyer  v.  Continental  Casualty 
Co.  72  W.  Va.  333,  78  S.  E.  1000, 
Code  1906,  c.  34,  as  am'd  by  acts 
1907,  c.  77,  sees.  15,  62,  69. 

^  Imperial  Fire  Ins.  Co.  v.  Dun- 
ham, 117  Pa.  St.  460,  2  Am.  St.  Rep. 
680,  12  Atl.  668,  under  act  May  11, 
1881;  Provident  Savings  Life  Assur. 
Soc.  V.  Puryear'.s  Admr.  22  Ky.  L. 
Rep.  980,  59  S.  W.  15. 

^^  Rauen  v.  Prudential  Ins.  Co.  of 
America,  129  Iowa,  725,  106  N.  W. 
198,  35  Ins.  L.  J.  288. 

^^  Susquehanna  Mutual  Ins.  Co.  v. 
Hallock,  22  Wklv.  Notes  Cas.  151, 
14  Atl.  167. 


506 


12  Under  act  Pa.  May  11,  1881; 
Susquelianna  Mutual  Fire  Ins.  Co. 
v.  Hallock,  22  W.  N.  C.  151,  14  Atl. 
167;  Dunbar  v.  Phoenix  Ins.  Co.  72 
Wis.  492,  40  N.  W.  386. 

1^  Mutual  Life  Ins.  Co.  v.  Morgan, 
39  Okla.  205,  135  Pae.  279. 

1*  Mooney  y.  Ancient  Order  United 
Workmen.  Grand  Lodge  of  Ky.  114 
Ky.  950,  24  Ky.  L.  Rep.  1787,  72 
S.  W.  288. 

1^  Corley  y.  Travelers  Protective 
Assoc.  105  Fed.  854,  46  C.  C.  A.  278, 
under  Ky.  Stat.  sec.  679. 

1^  Provident  Savings  Life  Assur. 
Soc.  y.  Elliott,  29  Ky.^L.  Rep.  552,  93 


CONSTRUCTION  §  i90m 

§  190m.  What  is  and  is  not  part  of  contract:  statutes. — An  ap- 
plication is  held  to  be  a.  part  of  the  contract  even  though  it  is  not 
referred  to  in  the  certificate,  wliere  each  of  them  provided  that  the 
applicant  should  be  bound  by  the  by-laws  etc.  of  the  order  and  the 
application  was  signed  as  required  by  the  by-laws. ^"^  So  a  statutory 
requirement  of  attachment  of  an  application  for  insurance  to  the 
policy  is  satisfied  if  the  subdivision  of  a  document  designated,  as  a 
whole,  ''proposal  for  insurance,"  which  is  entitled  "application,"  is 
so  attached,  where  all  material  portions  of  the  contract  are  incorpor- 
ated in  such  application ;  and  the  fact  that  the  name  of  the  benefi- 
ciary appears  only  in  the  proposal,  and  is  not  attached  to  the  policy, 
is  immaterial,  since  it  in  no  way  affects  any  essential  element  of  the 
contract  upon  which  the  right  of  the  insurer  to  avoid  it  depends.^* 
So  an  agreement,  written  on  the  face  of  the  policy  making  the  mu- 
tual agreements,  benefits  and  privileges  stated  on  subsequent  pages 
a  part  of  the  contract  as  fully  as  if  recited  at  length  over  the  signa- 
tures affixed  includes  everything  on  subsequent  pages  following  the 
signatures  of  the  ofiicers,  especially  so  where  the  policy  provides 
that  the  contract  is  issued  in  consideration  of  the  statements  and 
agreements  made  on  the  application  and  made  a  part  of  the  l)olicy, 
and  the  application  is  also  thereby  made  a  part  of  the  policy  unless 
it  is  within  an  exception  in  the  statute  requiring  that  a  copy  of  the 
application  accompany  the  policy  or  contract  unless  there  is  a  clause 
making  the  policy  indisputable.^^  x4.gain,  conditions  or  agreements 
which  modify  or  impair  the  effect  of  an  insurance  contract  must 
when  required  by  statute  be  set  out  in  full  on  the  policy  and  this 
applies  to  a  fidelity  guarantee  agTeement,  although  the  application 
of  insured  is  not  excluded  as  a  part  of  the  contract  under  the  stat- 
ute.^" But  unless  the  statute  is  complied  with  the  by-laws  are  not 
a  part  of  the  contract. even  though  delivered  contemporaneously 
with  the  certificate.^  Nor  are  the  by-laws  a  part  of  the  contract, 
though  attached  to  the  poHcy,  when  unsigned  by  the  company's  of- 
ficers as  provided  by  statute.^    And  where  neither  the  insurer's  by- 

S.  W.  650,  35  Ins.  L.    J.    713 ;    Kv.  ^^  Grell  v.  Sam  Houston  Life  Ins. 

Stat.   1903,  sec.   G79,   Russell's   Stal.  Co.    (1913)    —   Tex.    Civ.   App.   — , 

see.  4,400.  157  S.  W.  757,  Tex.  Rev.  Civ.  Stat. 

1"' Williams  v.  Supreme  Council  of  1911,  sec.  4951. 

Catholic   Mutual    Benetit   A.ssoc.    152  ^o  pjoi,,    Loan    &    Savings    C«.    v. 

Mich.  1, 131  N.  W.  1081.  London  Guarantee  &  Ace.  Co.  (Can. 

As  to  wliat  should  be  attached  to  11.  C.  J.)   24  Canadian  Law  J.  354; 

policy,     see    note     18     L.R.A.(N.S.)  Ins.   act  R.   S.   O.  1897,  c.   'iO.'!,   sec. 

1190."  144  (1)  see.  la. 

^^Lano-deau      v.      John      Hancock  ^  P)ankers     Fraternal      Tlnion       v. 

Mutual  Life  Ins.   Co.  194  ]\Iass.  56,  Donahue,  33  Ky.   L.   Rep.   196,   109 

18  L.R.A.(N.S.)    1190  annot.  80  N.  S.  W.  878. 

E.  452,  36  Ins.  L.  J.  432.  ^  Capitol  Ins.  Co.  v.  Pleasanton,  48 

507 


§  I9(>u  JOYCE  ON  INSURANCE 

laws  nor  the  application  of  the  insured  is  att<iclied  to  bi.>^  policy  of 
accident  insurance,  as  required  by  statute,  they  are  not  admissible 
in  evidence  in  aid  of  the  policy.^  So  a  preliminary  statement  of  the 
company's  agent  signed  only  by  him  and  containing  only  informa- 
tion of  a  general  nature  useful  to  the  company,  but  which  is  not  re- 
ferred to  in  the  policy  is  no  part  of  the  contract  where  the  statute 
requires  a  copy  of  the  application  made  by  the  insured  to  be  de- 
livered with  the  policy.*  Again  neither  a  proposal  for  insurance, 
for  the  applicant  to  fill  out  and  sign,  nor  a  memorandum  for  the 
solicitor  to  sign  as  a  part  of  the  application  is  within  the  statute  re- 
quiring a  correct  copy  thereof  to  be  attached  to  the  policy.^ 

§  19bn.  Same  subject:  medical  examination, — An  insurer  cannot 
avail  itself  of  any  defense  ba.>^ed  on  matters  contained  in  the  medical 
examination  which  is  part  of  the  application  of  which  no  copy  is 
attached  to  the  policy,®  for  where  the  medical  examiner's  report  is 
a  part  of  the  application  it  is  within  the  requirements  of  the  stat- 
ute.' and  if  the  medical  examination  is  a  part  of  the  application  and 
intended  to  accompany  it  it  may  properly  be  excluded  where  the  ap- 
plication is  not  attached.^  A  supplementary  application  or  state- 
ment made  to  the  medical  examiner  as  supplemental  to  and  part 
of  the  application  is  also  within  the  statute  even  though  a  copy  of 
the  original  application  is  endorsed  upon  the  policy .^  It  is  held, 
however,  that  it  is  not  necessary  to  include  the  medical  examiners 
report  in  a  copy  of  the  a])])lication  required  to  be  attached  to  or  in- 
dorsed upon  the  iwlicy.^° 

The  medical  examination,  even  though  a  copy  is  not  attached,  is 
competent  evidence  in  case  of  fraud. ^^ 

Kan.  397,  29  Pae.  578 ;  Capitol  Ins.  '  Morris  v^  State  .Mutual  Life  Ins. 

Co.  V.  Bank  of  Blue  Mound,  48  Kan.  Co.  183  Pa.  563,  41  Wkly.  N.  C.  3;)3, 

393.  29  Pae.  576.  39  All.  52. 

3  Pickett  V.  Pacific  Mut.  L.  Ins.  Co.  8  Soutliern  States  IVrutual  Life  Ins. 

144  Pa.  79,  27  Am.  St.  Rep.  618,  13  Co.  v.  llcrlihv,  138  Ky.  359,  128  So. 

L.R.A.  661,  22  Atl.  871.  91. 

^C.iinitli  V.  Metropolitan  Life  Ins.  ()„   meflical   examiner  as  agrent  of 

(;o.   3()   App.  D.   C.  8,  38  >Yasli.  L.  insurer  or  of  insured,  see  note  in  41 

Rep.  758   (Civ.  Code,  D.  C.  see.  65 r  L.R.A. (N.S.)  506. 

[32  Stat,  at  L.  534.  c.  1329])   citing  9  Fisher    v.    Fidelity    :\rutual    Life 

Metropolitan  Life  Ins.  Co.  v.  Ilawk-  j^^^    ^^    ^gg  p^^    2,  2!)  Pitts.  L.  J.  N. 

ins.  31  App.  D.  C.  493,  14    Am.    &  (.     "-^gg^   ^^   ^^j    4^7    ^^^^^^^,Y  Pa.   act 

KuiT.  Ann.  Cas.  1092.  ^ja^.  n^  jggi    (p,  l.  2O)    requiring 

SBonville  v.  John  Hancock  Mutual  ;     ^^^.  ^^^^^,^  application. 

Life_  Ins.  Co.  200  Mass.  19.,  80  N.  E.  ' „  ^^^^^^^^^^^  ^.   ^^^  ^^^^^^^^  ^ife  Ins. 

"eRauen  v.  Prudential  Ins.  Co.  of  Co     105   Iowa,   273,   75   N.   W.   101, 

A  100  T    ,.„    7Q'.    ^[^a  V    W  McClam's  Code,  sec.  1<33. 

America,  129  Iowa,  72.),  iUb  i\.    \\  .  t  ■..       a 

198     35    Ins.    L.    J.    288.      E.vnmine        "  Hews  v.  Equitable    Lite    Assur. 

NoAhwestern     Life     Assur.     Co.     v.  Soc.  143  Fed.  850,  74  C.  C.  A,  611, 

Tietze,  16  Colo.   App.  205,   64   Pae.  35  Ins.  L.  J.  202,  Pa.  act  May  11, 

773  1881  (Pub.  L.  20). 

508 


•CONSTRUCTION  §§  l!)0o,  lOOp 

§  190o,  Foreign  contracts:  effect  of  statutes. — Tn  Massacliusclts 
the  statute  applies  only  to  policies  issued  there  and  not  to  conlraets 
issued  or  made  in  other  states  even  though  upon  the  lives  of  j)er- 
sons  doniiciled  in  Massachusetts.^^  In  Wisconsin  the  statute  jjro- 
viding  that  all  fire  insurance  corporations,  except  mutual  com- 
panies, in  cities  and  villa.<2,es,  shall.  u])on  issuing  a  policy,  attach  to 
it  a  copy  of  any  application  which  by  the  terms  of  the  policy  is 
made  a  part  thereof,  does  not  except  from  its  operation  mutual  com- 
panies organized  outside  the  state,  but  only  those  organized  under 
the  laws  of  Wisconsiii.^^ 

§  190p.  What  companies  or  associations  are  within  such  statutes. 
— The  ( Jeorgia  statute  requiring  a  copy  of  the  a])plicati()n  by-law  or 
rule  etc.  to  be  attached  applies  to  fraternal  associations  as  well  as  to 
other  insurance  corporations.^*  In  Iowa  the  statute  applies  to  all 
ca.ses  and  a  society  or  fraternal  association  must  attach  a  copy  of  the 
application  to  each  certificate.^*  Mutual  fire  companies  are  also 
within  the  terms  of  that  statute  ^^  nor  is  such  act  super.^eded  by  an 
act  regulating  mutual  benefit  societies.^'  In  Kentucky  a  fraternal 
society  which  is  under  the  supervision  of  a  supreme  council  and  se- 
cures members  through  the  lodge  system  exclusively  and  pays  no 
commissions,  nor  employs  any  agents  except  in  the  organization 
and  supervision  of  the  work  of  the  local  council  is  exempt  from  the 
operation  of  the  Kentucky  statute  requiring  the  application,  consti- 
tution, by-laws,  or  other  rules  of  the  corporation  or  society  to  be 
contained  in  or  attached  to  the  contract  of  insurance,  before  they 
can  be  received  in  evidence.^^     But  it  is  decided  in  a  later  case  in 

^2  Johnson  v.  INIutual  Life  Tns.  Co.  279.    On  laws  or  judi^nient.s  of  courts 

180  Mass.  407,  63  Ij.R.A.  833,  02  N.  of  state  in  wliicli  insurant-e  f'omj)any 

E.   733,   31     Ins.     L.     J.     340.      See  is   inforporated   as   bindin<4'  in   otiier 

Rauen     v.     Prudential    Ins.    Co.    of  states,  see  note  in  L.R.A.IOIOA,  770. 

America,  129  Iowa,  725,  lOG  N.  W.  ^^  Heralds  of  Liberty  v.  Bowen,  8 

798,  3.5  Ins.  L.  J.  288.    Tlie  Pennsyl-  Ga.  App.  325,  68  S.  E.  1008. 

vania  Stat,  of  May  lltli,  1881  (Pub.  ^^  Mullen      (Lee,     Intervenor)      v. 

L.     20)     covers     policies    issued    by  Woodmen  of  the  World,    144    Iowa, 

forei£?n     companies     doing     business  228,   122   N.    W.    90.3;    Stork   v.    Su- 

tlierein.     See  Kittaning    Ins.    Co.    v.  jireme  Lodge  Knights  of  Pythias  of 

Hebb,  138  Pa.  St.  174,  21  I'itts.  L.  J.  the  World,  113  Iowa,  724,  84  N.  W. 

N.   S.   153,   27   Wkly.   N.   C.   97,  48  721   (acts  18th  Gen.  Assemb.  c.  211. 

Phila.  Leg.  Int.  35,  20  Ins.  L.  J.  92,  sec.  2).     Examine  Grimes  v.  North- 

20    Atl.    837,    noted    under    i;    190d  western  Legion   of  Honor,  97   Iowa, 

herein.     See  §  194   (b)   herein.  315,  ;527,  64  N.  W.  806,  ()6  N.  W.  18.]. 

^' Waukau  Milling  Co.  v.  Citizens'  ^^  Corson  v.  Iowa  iMntual  P^'ire  Ins. 

Mutual   Fire   Ins.    Co.   130   Wis.   47,  Assoc.  115  Iowa,  485,  88  N.  W.  1086. 

118   Am.   St.   Rep.   998,  109   N.   W.  17  ^^.(^^onnell  v.  Iowa   Mutual  Aid 

937.  Assn.  79  Iowa,  757,  760,  43  N.  W. 

On  conflict  of  laws  as  to  construe-  188. 

tion  of  insurance  policv,  see  notes  in  ^*  Yeomen  of  America  v.  Rott,  145 

63  L.R.A.  856,  and  52'L.R.A.(N.S.)  Ky.  604,  140  S.  W.  1018,  Ky.  Stat. 

509 


§   1!)()(1  JOYCE  ON  IXSlJx'AXCK 

that  state  that  by-laws  must  be  incorporated  m  or  attaclied  to  policy 
where  the  society  is  one  not  excepted  from  the  operation  of  the  stat- 
ute.^^  It  is  also  held  in  an  earlier  case  there  that  the  statute  applies 
also  to  assessment  co-operative  companies  in  the  lodge  plah.^"  Be- 
nevolent fraternal  associations  are  not  included  in  the  Minnesota 
statute.^  It  is  held  in  a  Pennsylvania  case  that  the  by-laws  may  be 
put  in  evidence  by  the  insurer,  notwithstanding  they  are  not  at- 
tached to  the  policy  as  required  by  statute,  since  the  statute  does  not 
apply  to  orders  doing  business  through  lodges.^  And  a  beneficial 
association  incorporated  as  such  under  a  statute  providing  therefor 
is  not  within  the  statute.^  But  it  is  also  decided  in  that  state  that 
an  association  which  is  in  effect  an  insurance  company  must  com- 
ply with  the  statute  requiring  a  copy  of  the  constitution  and  by-laws 
to  be  attached  to  the  policy.^  In  Wisconsin  the  statute  does  not 
exempt  from  its  operation  mutual  companies  organized  outside  the 
state  but  only  those  organized  under  the  laws  of  that  state. ^ 

Accident  insurance  is  not  within  the  Pennsylvania  act  of  1881.^ 
And  it  is  held  in  Iowa  that  mutual  accident  companies  need  not 
attach  a  copy  of  the  by-laws  to  the  certiticate.''' 

A  live  stock  policy  of  insurance  is  within  the  West  Virginia  stat- 
ute requiring  the  application  to  be  attached  to  or  incorporated  in  the 
policy  in  order  to  become  a  part  of  the  contract.^ 

§  190q.  Failure  to  comply  with  such  statutes  does  not  preclude  de- 
fenses based  upon  policy  alone. — The  omission  to  indorse  or  attach 

see.  679,  by  express  terms  provisions  ^  Weisenbrodt  v.  Mutual  Beneficial 

do  "not  apply  to  secret  or  fraternal  Assoc,   of   America,   36   Pa.    Co.   Ct. 

societias,  lodges  or  councils,  -which  are  Rep.  570. 

under  the  supervision  of  a  grand  or  *  Fahey  v.  Empire  Life  Ins.  Co.  5 

supreme   body,  and  secure  members  Lack.  Leg.  News,  377,  Pa.  act  May 

through  the  lodge  system  exclusively,  11,  1881  (P.  L.  20). 

and  pay  no  commission  nor  employ  ^Waukau  MilUng   Co.  v.   Citizens' 

any  agents,  except  in  the  organiza-  Mutual   Fire   Ins.   Co.   130   Wis.  47, 

tion  and  supervision  of  the  work  of  118  Am.    St.   Rep.   998,  109   N.   W. 

local  subordinate  lodges  or  councils."  937. 

i^Home  Protective  Assoc,  v.  Wil-  ^National  Accident  Soc.  v.  Dolph, 

liams,  150   Ky.  134,  150   S.  W.   11,  94  Fed.  748,  38  C.  C.  A.  1,  act  May 

rev'd  151  Ky.  146,  151  S.  W.  361,  Ky.  11,  1881   (P.  L.  20) ;  Standard  Life 

St.  see.  679.  Russell's  Stat.  sec.  4400.  &   Accident   Ins.   Co.   v.    Carroll,   86 

20  Supreme    Commandery    of    the  Fed.  567,  30  C.  C.  A.  253,  58  U.  S. 

United  Order  of  the  Golden  Cross  of  App.  76,  41  L.R.A.  194,  distg.  Pickett 

the  World  v.  Hughes,  114  Ky.  175,  v.  Pacifie  Mutual  Life  Ins.  Co.  144 

24  Ky.  L.  Rep.  984,  70  S.  W.  405.  P_a.   St.  79,   13  L.R.A.   661,  22  Atl. 

^Loudon    V.    Modern    Brotherhood  871. 

of   America,   107   Minn.   12,   119   N.  'Fitzgerald   v.   Metropolitan   Ace. 

W.  425,  Rev.  Laws  1905.  .sec.  1616.  Assoc.  106  Iowa,  457,  76  N.  W.  809, 

2  Donlevy  v.  Supreme  Lodse  Shield  acts   18th  Gen.  Assemb.   c.  211,  sec. 

of  Honor,  11   Pa.   Co.   Ct.^477;   49  2. 

Leo-   Intel!    145  ^  Bush    v.    Indiana    &    Ohio    Live 

510 


CONSTRUCTION  §  190r 

a  copy  of  the  application  does  not,  however,^  invalidate  the  policy, 
but  only  goes  to  the  pleading  and  proof  of  the  representations.^" 
So  where  by  statute  neither  the  application  nor  by-laws  constitute 
a  part  of  the  contract  except  so  far  as  they  are  incorporated  in  the 
policy  the  policy  alone  constitutes  the  contract,  and  where  not  so 
incorporated  the  description  or  location  in  the  application  of  the 
property  insured  does  not  limit  that  stated  in  the  policy  and  this  is 
so  even  though  the  policy  refers  to  the  application  as  a  part  thereof, 
but  no  copy  of  it  is  attached  to  or  incorporated  therein."  And 
where  there  is  no  reference  whatever  to  the  application  and  no  re- 
liance thereon  or  assertion  of  rights  thereunder  by  the  insurer  it 
is  not  precluded  from  defenses  based  only  upon  the  policy  itself.^^ 
So  in  an  action  to  recover  on  a  life  insurance  policy,,  the  beneficiary 
may  olfer  such  policy  in  evidence  without  the  application  therefor, 
as  the  policy  constitutes  the  contract  upon  which  the  suit  is  brought, 
when  the  application  is  no  part  of  the  policy  and  is  in  the  possession 
of  the  defendant.^^  And  the  policy  itself  is  admissible  in  evidence 
even  though  the  application  attached  is  not  a  correct  copy.^*  Again, 
an  insurance  company  is  not  precluded  from  relying  on  a  breach  by 
the  insured  of  conditions  and  warranties  inserted  in  the  policy  by 
failure  to  attach  to  it  a  copy  of  the  application,  which  is  not  referred 
to  in  the  policy,  although  they  are  similar  to  those  contained  in  the 
application,  under  a  statute  providing  that  omission  to  attach  a  copy 
of  the  application  to  the  policy  will  preclude  the  company  from  al- 
leging or  proving  any  such  application  or  representations,  or  falsity 
thereof  or  any  parts  thereof,  in  an  action  on  the  policy,  but  permits 
the  insured  to  plead  or  prove  the  application  or  representation  at  his 
pleasure  to  show  waiver  by  the  insurer. ^^ 

§  190r.  Application  as  part  of  contract:  statutes:  fraud  as  de- 
fense :  misrepresentations. — ^In  Georgia  the  insurer  is  not  precluded 
from  showing  fraudulent  misrepresentations  in  procuring  the  pol- 
icy notwithstanding  the  statute  requires  a  copy  of  the  application 
to  be  attached  in  order  to  constitute  a  part  of  the  contract.^^    The 

Stock  Ins.  Co.  74  W.  Va.  244,  81  S.  122  N.  C.  92,  65  Am.  St.  Rep.  693,  30 

E.   984.  S.  E.  327,  28  Ins.  L.  J.  723. 

» Under   Iowa    act,    Miller's    Code,        ^^  Ellis   v.   Metropolitan   Life   Ins. 

1888,  p.  398.  Co.  228  Pa.  230,  77  All.  400. 

1°  McConnell  v.  Iowa  Mutual  Aid        ^^  Kirkpatrick  v.   London  Guaran- 

Assn.  79  Iowa,  7o7,  43  N.  AV.  188.  tee  &  Accident  Co.  139  Iowa,  370,  19 

"Coleman  v.  Retail  Lumberman's  L.R.A.(N.S.)      102      (annotated     on 

Ins.  Assoc.  77  Minn.  31,  79    N.    W.  faUuve  to  attach  copy  of  application 

588,  28  Ins.  L.  J.  650,  Laws  1895,  c.  to  policy  as  affecting  right  of  insurer 

175,  sec.  52.  to  rely  on  representations  or  warran- 

12  Kirkpatrick  v.  London  Guar-  ties  incorporated  in  the  policy  itself) 
antee  &  Ace.  Co.  ]39  Iowa  370.  19  115  N.  W.  1107,  Code  Iowa,  see.  1741. 
L.R.A.  (N.S.)  102n,  115  N.  W.  1107.  See  §  503  herein. 

13  Albert  v.  Mutual  Life  Ins.   Co.        ^^  Southern  Life  Ins.  Co.  v.  I^gan, 

511 


§  190s 


JOYCE  ON  INSURANCE 


Minnesota  statute  requiring  a  copy  of  the  application  to  be  indorsed 
on  or  attached  to  the  policy  covers  ''all  statements  made  by  the  in- 
sured ...  in  the  absence  of  fraud"  and  this  is  construed  to  mean 
not  statements  made  in  the  absence  of  fraud  but  the  ordinary  and 
usual  statements  in  the  signed  application  whether  made  in  the  ab- 
sence of  fraud  or  not.^'^  In  another  case  in  that  state  it  is  held  that 
although  an  api)lication  is  not  admissible  in  evidence  as  a  part  of 
the  contract  when  a  copy  thereof  is  not  attached  to  nor  incorporated 
in  the  policy  yet  it  may  be  competent  evidence  on  the  issue  of  fraud 
or  to  show  false  representations  inducing  the  issue  of  the  policy." 
The  Pennsylvania  statute  does  not  apply  where  the  policy  Avas  ob- 
tained by  fraud.^^  In  Michigan  fraud  in  applicant's  statements  are 
held  to  constitute  no  defense  where  the  application  is  not  indorsed 
upon  nor  attached  to  the  policy  when  issued.^"  And  it  is  so  held  in 
lowa.^^  Under  a  New  York  decision  although  fraud  vitiates  a  con- 
tract yet  when  applied  to  a  life  insurance  contract  the  matters  re- 
lied upon  as  constituting  fraud  must  not  only  have  been  fali^e  with- 
in the  knowledge  of  the  party  against  whom  the  fraud  is  alleged 
but  in  addition  must  have  been  material  and  have  been  relied  upon 
as  an  inducement  to  the  contract.^ 

§  190s.  Conspiracy  a  defense  though  application  not  attacked. — 
Conspiracy  in  making  the  application,  in  being  examined,  and  in 
procuring  the  insurance,  may  be  shown  even  though  the  applica- 
tion is  not  attacked.^ 


9  Ga.  App.  503,  71  S.  E.  742;  Soutli- 
ern  Life  Ins.  Co.  v.  Hill,  8  Ga.  App. 
857,  70  S.  E.  186 ;  Jolin.son  v.  Ameri- 
can Mutual  Life  Ins.  Co.  134  Ga.  800, 
08  S.  E.  731. 

•  Effect  of  fraud  as  to  materiality  of 
fact;  representations,  see  §§  1896, 
1897  herein. 

^■^  Wheelock  v.  Home  Life  Ins.  Co. 
115  Minn.  177,  131  N.  W.  1081. 
Laws  1907.  c.  220,  Rev.  Laws  Suppl. 
1909,  sees.  1695-2  to  1695-12. 

^^  Coleman  v.  Retail  Lumberman's 
Ins.  Assoc.  77  Minn.  31,  79  N.  W. 
588,  28  Ins.  L.  J.  650,  Laws  1895, 
c.  175,  sec.  52. 

1^  Hews  V.  Equitable  Life  Assur. 
Soc.  143  Fed.  850,  74  C.  C.  A.  611, 
.35  Ins.  L.  J.  202.  Pa.  act  Mav  11th 
1881    (Pub.  L.  20). 

20  New  York  Life  Ins.  Co.  v.  Ham- 
burger, 174  Mich.  254,  140  N.  W. 
510,  Pub.  acts  1907,  No.  187,  subd. 


4,  sec.  1  (3  How.  Stat.  [2d  ed.]  see. 
8312)  &  Pub.  acts  No.  180  (3  How. 
Stat.  [2d  ed.]  sec.  8310)  sec.  1. 

2^  Parker  v.  Des  Moines  Life  Assoc. 
108  Iowa,  117,  78  N.  W.  826.  Ex- 
amine Kirkpatrick  v.  London  Guar- 
antee &  Accident  Co.  139  Iowa,  370, 
19  L.R.A.(N.S.)  102  (annot.)  115  N. 
W.  1107. 

^  Becker  v.  Colonial  Life  Ins.  Co. 
138  N.  Y.  Supp.  491,  153  App.  Div. 
382,  aff'g  133  N.  Y.  Supp.  481,  75 
Misc.  213.  The  court  considers  the 
following  cases  and  declares  that  they 
are  not  in  point  viz:  Empire  Life 
Ins.  Co.  v.  Gee,  171  Ala.  435,  55  So. 
166,  40  Ins.  L.  J.  1384;  Johnson  v. 
American  National  Life  Ins.  Co.  134 
Ga.  800,  68  N.  E.  731;  Soutlicrn  Life 
Ins.  Co.  V.  Hill,  8  Ga.  App.  857,  70 

5.  E.  186 ;  Holden  v.  Prudential  Ins. 
Co.  191  Mass.  153,  77  N.  E.  309. 

2  Southern  States  Mutual  Life  Ins. 


512 


CONSTRUCTION  §§  190t-191 

§  190t.  Waiver  of  statutory  rights  by  insurer  or  insured. — An 

insurer  which  issues  a  policy  to  which  no  copy  of  the  application  is 
attached  thereby  expresses  its  purpose  to  waive  or  relinquish  its 
right  to  have  the  application  considered  as  any  part  of  the  contract.' 
If  the  statute  permits  the  insured  to  plead  or  prove  the  application 
or  representation  even  though  such  application  is  not  attached  to 
nor  indorsed  upon  the  policy,  the  purpose  thereof  is  to  show  a  waiver 
by  the  insurer  of  a  breach  of  conditions  or  warranties,  but  insured 
cannot  show  oral  or  written  representations  not  attached  to  or  in- 
corporated in  the  contract  in  order  to  defeat  the  contract.*  But  it  is 
held  that  insured  may  not  waive  compliance  with  the  statute.* 

§  190u.  When  question  whether  copy  of  application  annexed  to  or 
indorsed  on  policy  is  for  jury. — The  question  whether  a  copy  of  the 
application  was  annexed  to  the  policy  is  for  the  jury,  and  requests 
to  charge  may  be  refused  where  each  assumes  as  correct  that  the  ap- 
plication was  annexed,  or  in  other  words  assumes  the  existence  of  a 
fact  upon  which  the  jury  is  to  pass.^ 

§  191.  When  other  papers  are  and  are  not  part  of  policy. — Other 
papers  may  become  a  part  of  the  policy  by  being  annexed  thereto 
or  subjoined,  or  by  being  referred  to  therein  in  plain  terms  as  a  part 
thereof,'''  but  the  intent  to  incorporate  such  other  papers  should  be 
plainly  manifest  and  not  dependent  upon  implication.*    So  docu- 

Co.  V.  Herlihy,  138  Ky.  359,  128  S.  tents    consisting'   almost    entirely    of 

W.  91.  oral    evidence,    no    policy    nor    any 

'Rauen  v.  Prudential  Ins.  Co.  of  claimed  copy  being  offered,  and  de- 
America,  129  Iowa,  72.'),  106  N.  W.  fendant  introduced  copies  claimed  to 
198,  35  Ins.  L.  J.  ,288;  New  York  be  true  copies  but  they  were  con- 
Life  Ins.  Co.  V.  Hamburger,  174  ceded  to  be  such.  These  copies  con- 
Mich.  254,  140  N.  W.  510.  tained  each  a  reference  to  the  appli- 

*Kirpatrick  v.  London   Guarantee  cation   "as   a  part   of  this  contract" 

&   Accident    Co.   139   Iowa,   370,   19  and  had  annexed  to  it  a  copy  of  the 

L.R.A.(N.S.)  102n,  115  N.  W.  1107.  application. 

5  Mullen  V.  Woodmen  of  the  World,       "^  See   Carson   v.   Jersey   City  Ins. 

144  Iowa,  228,  122  N.  W.  903;  Iowa  Co..  43  N.  J.  L.  303  (14  Vroom.  300) 

Code  1897,  sec.  182(5.    See  also  Sover-  39  Am.  Rep.  584;  Sheldon  v.  Hart- 

eign     Camp     of    Woodmen    of    the  ford  Fire  Ins.  Co.  22  Conn.  235,  58 

World  V.  Salmon  (1909)  —  Ky.  — ,  Am.  Dec.  420.     As  to  mutual  bene- 

120    S.    W.    358.      That    person    has  tit  societies  and  other  pai)er.s,  see  Ba- 

right   to   waive    statutory    provision,  con  on  Benefit  Soc.  &  Life  Ins.  (3d 

See  Mutual  Life  Ins.  Co.  v.  Burden,  ed.)  sees.  181,  184. 
9  Ga.  App.  797,  72  S.  E.  295.  8  Moore  v.  State  Ins.  Co.  72  Iowa, 

^  Mon jeau    v.     Metropolitan     Life  414,  34  N.  W.  183 ;  Weed  v.  Schenec- 

Tns.  Co.  208  Mass.  1,  94  N.  E.  302,  tady  Ins.  Co.  7  Lans.   (N.  Y.)   452; 

40  Ins.  L.  J.  917,  under  Mass.  Rev.  Buri-itt  v.    Snraloaa   Countv   iMutual 

Laws,  c.  118,  .sec.  73.     In  this  ca.se  Fire  Ins.  Co.  5  liill  (N.  Y.)  188,  40 

evidence   was    offered   to    show    that  Am.    Dec.    345,    ]ier    Bronson,    J.; 

tlie  i)olicies  were  lost  and  plaintiff  put  Merchants  Tiis.  Co.  v.  Dwyei",  1  Tex. 

in  secondary  evidence  of   their  con-  Unrep.  Cas.  445. 
Joyce  Ins.  Vol.  I.— 33.             513 


§  191  JOYCE  ON  INSURANCE 

menis  adopted  by  reference  and  attached  to  the  policy  constitute 
the  contract.^  So  a  mortgage  slip  making  the  loss  payable  to  the 
mortgagee  may  be  attached  to  the  policy  and  become  a  part  of  the 
contract ;  ^°  and  a  paper  written  in  lead  pencil  and  signed  by  the 
insured  may  be  a  part  of  the  policy  when  it  is  referred  to  therein 
by  number.^^  A  separate  paper  may  by  distinct  and  clear  reference 
be  expressly  made  a  part  of  the  contract,  but  a  simple  reference  is 
not  sufficient. ^2  And  where  a  policy  is  delivered  and  there  is  pinned 
thereon  a  smaller  sheet  of  paper  partly  printed  and  partly  written 
and  not  signed,  it  is  held  that  the  two  papers  thus  delivered  consti- 
tute the  contract  and  differences  between  the  two  papers  in  texture, 
color  or  quality  are  entitled  to  slight  weight  in  determining  wheth- 
er the  contract  is  contained  in  both  or  one  only.^^ 

The  whole  of  a  survey  may  be  incorporated  by  proper  reference.^* 
But  where  conditions  in  a  policy  of  insurance,  relating  to  misrepre- 
sentations or  concealments  as  to  the  situation  or  occupancy  of  the 
property  insured  therein,  are  in  a  clause  which  refers  to  an  applica- 
tion, plan,  sur\ey^  or  description,  and  assumes  to  make  such  paper 
a  part  of  the  policy  and  a  warranty  by  the  insured,  but  the  record 
fails  to  disclose  the  existence  of  any  such  paper,  the  clause  which 
refers  to  it,  and  attempts  to  describe  its  place  and  effect  as  a  part  of 
the  contract,  and  to  determine  the  consequences  of  misstatements 
or  omissions  therein,  must  be  regarded  as  inapplicable  to  the  facts 
in  the  case,  and  therefore  nugatory.^^  If  drawings  and  specifica- 
tions of  the  architect  are  identified  by  the  signature  of  the  parties 
and  are  made  a  part  of  the  contract  and  there  is  no  question  as  to 
their  identity,  and  they  are  adopted  by  all  the  parties  under  a  bond 
for  the  due  performance  of  a  building  contract,  the  failure  to  sign 
them  is  immaterial  as  the  formality  of  signing  is  waived  by  the  con- 

^  Empire  Life  In?.  Co.  v.  Gee,  171  ^^  Hartford  Protection  Ins.  Co.  v. 

Ala.  43.5,  5.5  So.  166,  under  Ala.  Code  Harmer.  2  Ohio  St.  4.52,  59  Am.  Deo. 

1907,  sec.  4579.  684.     See  Anderson  v.  Fitzgerald,  4 

10  Westchester    Fire    Ins.    Co.    v.  H.  L.  Cas.  474. 

Coverdale,  48  Kan.  446,  29  Pac.  682,  "  Timlin  v.  Equitable  Life  Assur. 

21  Ins.  L.  J.  530.     See  §  196  herein.  Soc.  141  Wis.  276,  124  N.  W.  253. 

As  to  provision  that  conditions  of  This  case  is  criticized  as  a  radical 
insurance  as  to  mortsagee  be  written  departure  from  the  rule  in  39  Ins.  L. 
upon  policv  or  attached  thereto,  and  J.  295,  302-306.  Compare  Co-oper- 
as "Union  Mortgage  Clause,"  see  ative  Ins.  Assoc,  v.  Ray,  —  Tex.  Civ. 
Brecht  v.  Law  I^nion  &  Crown  Ins.  App.  — ,  138  S.  W.  1122. 
Co.  160  Fed.  899,  87  C.  C.  A.  351,  18  ^^  Sheldon  v.  Hartford  Fire  Ins. 
L.R.A.(N.S.)  197  (annotated  on  ef-  Co.  22  Conn.  235,  58  Am.  Dee.  420. 
feet  of  breach  of  policy  of  insurance  ^^  Alleraannia  Fire  Ins.  Co.  v.  Peck, 
by  mortgagor  on  rights  of  mortgagee)  133  111.  220,  23  Am.  St.  Rep.  610,  24 
37  Ins.  L.  J.  621.  N.  E.  538. 

"  Citv  Ins.  Co.  v.  Bricker,  91  Pa. 


St.  488. 


514 


M 


CONSTRUCTION  §  191 

duct  of  the  parties.^*  Again,  a  receipt  for  the  hu.^hand's  notes  given 
in  paNinent  of  a  premium  for  a  policy  insuring  liis  Avife's  interest 
in  his  life,  is  a  part  of  the  contract.'^'^  So  an  ad  interim  receipt  may 
be  a  part." 

Again,  a  separate  paper  may  by  express  stipulation  be  made  part 
of  a  policy,  but  where  from  the  manner  of  referring  to  it  it  would 
seem  that  the  insurers  were  satisfied  to  look  to  it  only  for  the  pur- 
pose of  estimating  the  risk,  it  is  not  a  part  of  the  policy.^''  So  an 
agreement  for  deduction  from  the  amount  of  the  premium  for  serv- 
ices rendered  which  is  a  separate  contract  cannot  be  considered  as 
a  part  of  the  policy  or  introduced  in  evidence  in  an  action  to  recover 
on  the  policy .2"  In  Bize  v.  Fletcher,^  it  appeared  that  at  the  time 
the  insurers  underwrote  the  policy  a  slip  of  paper  was  wafered  to  it 
describing  the  state,  of  the  ship  as  to  repairs  and  strength,  and  it 
also  mentioned  several  particulars  as  to  her  intended  voyage,  and 
Lord  Mansfield  held  that  this  was  not  a  part  of  the  policy  so  as  to 
make  the  statements  other  than  re)jresentations.  It  was  said  of  this 
in  a  New  York  case  ^  that  it  would  be  impossible  to  sustain  the  de- 
cision if  the  slip  so  wafered  had  expressly  declared  itself  to  be  con- 
ditions. In  this  last  case  the  policy  was  printed  on  one-half  the 
sheet  and  the  ''conditions  of  insurance"  on  the  other,  and  it  was 
held  that  the  conditions  were  part  of  the  policy,  and  that  there  was 
no  need  of  an  express  reference  thereto  in  the  policy;  that  the  jux- 
taposition of  the  papers  was  prima  facie  evidence  of  the  parties'  in- 
tention, which  might  be  rebutted,  however,  by  parol  evidence,  as 
by  showing  that  the  two  were  thus  connected  by  mistake.'  Again, 
it  is  held  that  a  paper  detached  from  the  policy  containing  instruc- 
tions relative  to  the  force  with  which  the  ship  was  to  sail,  and  which 
was  shown  to  the  underwriter  at  the  time  of  subscribing,  did  not 
thereby  become  a  part  thereof  *  and  a  diagram  on  the  back  of  an 
application  Avhich  is  not  itself  properly  made  a  part,  there  being  no 
evidence  that  the  insured  ever  saw  or  knew  of  the  diagram,  it  having 

"^tna  Indemnity  Co.  v.  Waters,  Loui-sville  v.  Bowling  (1908)  —  Ky. 

110  Mrl.  673,  73  Atl.  712.  —   114  S.  W.  327. 

"  Baker  v.  Union  Mutual  Life  Ins.        ^  1  Doug.  284,  291 ;  13,  n.  4. 
Co.  6  Abb.  Pr.  N.  S.    (N.  Y.)   144,       2  Roberts  y^  Chenango  Coimty  Mu- 

37  How.  Pr.  (N.  Y.)  126.  hinl  Tns.  Co.  3  Hill  (N.  Y.)  501,  503. 

"Goodwin   v.' Lancashire   Fire   &       ^  Same  point  in  M unlock  v.   Che- 
Life  Ins.  Co.  16  L.  C.  Jur.  298.  nango  County  Mutual  Ins.  Co.  2  N. 

"  Snvder    v.    Farmers'    Insurance  Y.    210,    220.      See    also    Duncan    v. 

and  Loan  Co.  13  Wend.  (N.  Y.)  92,  Sun  Fire  Ins.  Co.  6  Wend.  (N.  Y.) 

aff'd  16  Wend.   (N.  Y.)  481,  30  Am.  488,  22  Am.  Dec.  539. 
Dec.  118.  *  Pawson  v.  Watson,  2  Cowp.  785, 

2»  Commonwealth  Life  Ins.  Co.  of  13  Eng.  Rul.  Cas.  540. 

515 


§§  191a,  lUlb 


JOYCE  ON  INSURANCE 


been  made  by  the  agent,^  and  a  letter  written  after  the  application 
was  rejected  in  regard  to  insurable  interest,  and  held  not  to  be  a 
part  of  the  policy  thereafter  issued,  nor  of  the  application,^  nor  are 
proofs  of  loss  a  part.' 

§  191a.  Receipt  books,  manuals,  and  schedules  as  part  of  con- 
tract.— A  receipt  book  under  the  head  of  extracts  from  the  rules, 
regulations,  etc.,  therein  printed,  when  accepted  by  the  insured  be- 
comes a  part  of  the  contract.*  A  "manual,"  however,  giving  defi- 
nitions of  terms  and  classifications  of  risks  in  accident  insurance  is 
not  a  part  of  the  policy  when  not  mentioned  or  referred  to  therein. 
To  become  a  part  of  the  policy  it  should  have  been  embodied  in  the 
face  of  the  contract  and  made  a  part  thereof  in  plain  unmistakable 
terms.^  But  even  though  a  "manual  of  occupation"  may  not  l)e  a 
part  of  an  accident  policy  still  it  is  held  that  it  may  l>e  looked  to 
for  the  purposes  agreed  upon  by  the  parties,  or  as  a  means  of  ascer- 
taining the  amount  of  indemnity.^" 

In  an  action  brought  to  indenmify  against  loss  by  giving  credit 
the  application  bond  and  a  schedule  consisting  of  several  distinctly 
lettered  paragraphs  relating  to  customers  and  conditions,  and  to 
which  the  bond  refers  constitute  the  contract  of  in.surance  between 
the  parties. ^^ 

§  191b.  Riders  or  slips  as  part  of  contract:  standard  policy. — It 
is  well  settled  that  a  rider  attaclied  to  the  policy  is  a  part  of  the  con- 
tract,^2  iQ  ti^e  same  extent  and  witJi  like  eftect  as  i!  embodied  there- 


5  Vilas  V.  New  York  Cent.  Ins 
72  N.  Y.  590,  28  Am.  Rep.  186. 


^  Mace  v.  Providence 
soc.  101  N.  C.  122,  7  S 


Life  Ins.  As- 
E.  647.  See 
Menk  v.  Home  Ins.  Co.  76  Cal.  51, 
9  Am.  St.  Rep.  158;  Allemannia  Fire 
Ins.  Co.  v.  Peck,  133  111.  220,  23  Am. 
St.  Rep.  610,  24  N.  E.  538. 

■^McMaster  v.  President  &  Direct- 
ors  of  In.surance  Co.  of  North  Amor. 
55  N.  Y.  222,  14  Am.  Rep.  239. 

*  Rowe  V.  United  States  Induslrial 
Life  Ins.  Co.  90   S.  Car 
E.  1018. 

3  Miller  v.  Missouri  State  Life  Ins. 
Co.  168  Mo.  App.  330,  153  S.  W. 
1080. 

10  McCarthy  v.  Pacific  IMutual  Life 
Ins.  Co.  178  111.  App.  502,  holding 
also  that  the  Rev.  Stat.  see.  208n, 
clause  3,  making  a  copy  of  the  appli- 
cation endorsed  upon  or  attached  to 
a  life  policy  with  tlie  policy  the  cn- 


Ca  tire  contract  and  sec.  209,  c.  73,  R. 
S.  requiring  accident  policies  to  state 
on  their  face  the  agreement  with  the 
person  receiving  the  same  do  not  ap- 
ply. 

11  Lexington  Grocery  Co.  v.  Phila- 
delphia Casualtv  Co.  157  N.  Car.  116, 
72  S.  E.  870.  'The  application  pro- 
vided that :  "Experience  shall  be  the 
basis  for  credit  under  as  on  Schedule 
A,"  (the  above-mentioned  schedule) 
with  a  specified  account  limit  and  it 

168,  72  S.  was  expressly  stipulated  that  Sched- 
ule A  should  describe  the  class  of 
customers  to  be  covered  by  the  bond. 

12  Sr-liarles  v.  N.  Hubbard  Jr.  &  Co. 
131  N.  Y.  Supp.  848,  74  :\Iisc.  72. 

As  to  effect  of  riders  or  slips  at- 
tached to  policies,  see  note  30  L.R.A. 
036-642. 

As  to  slips  conlaining  "Union 
Mart  page  Clause"  and  l-)ro^■ision  that 
conditions  as  to  mortgagee  be  written 


516 


CONSTRUCTION  §  191b 

in.'^'  Ant]  a  rider  of  it'^elf  supersedes  the  policy,  especially  so  where 
the  obvious  intention  of  the  rider  is  to  substitute  all  its  conditions, 
exceptions  and  provisos  for  those  of  the  policy.^*  Again  a  credit 
insurance  policy  may,  by  a  rider,  be  made  to  relate  back  or  to  an- 
tedate the  policy  as  to  outstanding  accounts.^*  So  a  rider  attached 
to  a  marine  policy  subsequent  to  its  issuance  giving  permission  to 
navigate  in  other  waters  than  allowed  by  the  terms  of  the  policy 
becomes  a  part  of  the  contract,^^  and  a  written  notice  of  a  contract 
of  transfer  of  insured's  policy  by  the  company  in  which  his  policy 
was  originally  issued  to  another  company,  duly  executed  and  sent 
to  insured  with  written  directions  to  him  to  attach  it,  as  a  rider;  to 
the  policy  in  his  possession,  when  so  attached  becomes  a  part  of  the 
policy  and  with  it  constitutes  the  contract.^' 

A  rider  or  slip  attached  to  a  standard  policy  making  it  payable 
to  the  mortgagee  as  his  interest  may  appear  and  also  providing  for 
a  pro  rata  liability  of  the  company  in  case  of  other  insurance  is  a 
part  under  a  statute  authorizing  slips  or  riders  to  be  attached  to 
standard  policies  modifying  the  provisions  in  the  body  of  the  pol- 
icy." So  a  clause  in  a  rider  attached  to  a  policy  in  the  standard 
form,  which  provides  that :  ''It  is  a  part  of  the  consideration  of  this 
policy,  and  the  basis  upon  which  the  rate  of  premium  is  fixed,  that 
the  insured  shall  maintain  insurance  on  the  property  described  by 
this  policy,  to  the  extent  of  at  least  eighty  per  cent  of  the  actual 
cash  value  thereof;  and  failing  so  to  do,  the  insured  shall  be  an  in- 
surer to  the  extent  of  such  deficit,  and  to  that  extent  shall  bear  his, 
her  or  their  proportion  of  any  loss  that  may  happen  to  said  prop- 
erty," is  a  part  of  the  contract,  and  is  a  provision  "adding  to  or  mod- 
ifying those  contained"'  in  the  standard  form.^^  And,  under  a  New 
York  decision,  where  the  statute  specifies  in  certain  exceptions  the 
nature  of  the  clauses  which  may  be  added  without  being  deemed  a 

upon  policy  or  attached  thereto,  see  ^^  Mark  v.  Home  Ins.  Co.'  52  Fed. 

note  18  L.R.A.(N.S.)   197,  to  Breoht  170,  afif'd  64  Fed.  804,  13  C.  C.  A. 

V.  Law  Union  &  Crown  Ins.  Co.  160  157. 

Fed.  899,  87  C.  C.  A.  351,  37  Ins.  L.  "  Mutual  Reserve  Life  Ins.  Co.  v. 

J.  621.  Ross,  42   Ind.   App.   621,   86   N.   E. 

^^  Farmers'    Bank    v.    Manchester  506. 

Assurance  Co.  106  Mo.  App.  114,  80  "  Hardy  v.  Lancashire  Ins.  Co.  166 

S.  W.  299.  Mass.  210,  44  N.  E.  209,  33  L.R.A. 

i*New  York  &  Porto  Rico  Steam-  241,  55  Am.  St.  Rep.  395,  see  Brecht 

ship  Co.  V.  ^tna  Ins.  Co.  (U.  S.  C.  v.  Law  Union  &  Crown  Ins.  Co.  160 

C.)  192  Fed.  212,  aff'd  204  Fed.  255,  Fed.  899,  87  C.  C.  A.  351,  18  L.R.A. 

as  to   construction,  see   §§   223,   224  (N.S.)   157,  and  note  197,  37  Ins.  L. 

heroin.  J.  621. 

^^  Philadelphia     Casualty     Co.     v.  ^^  Quinn   v.  Fire  Assoc,   of  Phila. 

Canon  &  Byers  Millinery  Co.  133  Ky.  180  Mass.  560,  62  N.  E.  980. 
745,  118  S.  W.  1004. 

517 


§  191b  JOYCE  ON  INSURANCE 

departure  from  the  statutory  form  and  amono;  such  exceptions  pro- 
vides that  printed  or  written  forms  of  description  and  specifications 
or  schedules  of  the  property  covered  by  any  particuhir  policy,  and 
any  other  matter  necessary  to  clearly  express  all  the  facts  and  con- 
ditions of  insurance  or  any  particular'  risk  not  inconsistent  with  or 
a  waiver  of  any  of  the  conditions  or  provisions  of  the  standard  pol- 
icy, a  rider  is  within  the  exception  where  it  states  that  it  is  issued 
upon  the  understanding  and  warranty  by  assured  that  another  cer- 
tain company  has  a  policy  in  force  insuring  the  identical  property 
in  identically  the  same  proportions  and  at  no  higher  rate  of  pre- 
mium.2°  Under  the  Maine  standard  policy  law^^  a  company  may 
write  upon  the  margin  or  across  the  face  of  a  policy,  or  write,  or 
print  in  type  not  smaller  than  long  primer,  upon  separate  slips 
or  riders  attached  thereto,  provisions  adding  to  or  modifying 
those  contained  in  the  standard  form,  and  it  is  held  that  the 
statute  does  not  require  a  separate  slip  or  rider  for  each  provision 
modified  or  added  to  but  that  the  word  "separate"  means  something 
separate  from,  or  not  physically  a  part  of  the  policy,  but  something 
originally  distinct,  apart  from  the  policy,  but  to  be  attached  thereto ; 
and  the  statute  permits  the  inclusion  of  more  than  one  provision  on 
the  same  rider.^  So  in  that  state  a  stipulation  as  to  vacancy  of  the 
premises  may  be  modified  by  a  slip  or  rider  attached  to  the  standard 
policy.^ 

The  policy  and  rider  comprise  the  contract  and  effect  will  be 
given  to  the  "rider"  attached  to  a  policy  of  fire  insurance  on  a  steam 
cotton-gin,  where  the  rider  is  inserted  in  and  made  a  part  of  the 
entire  policy  for  the  purpose  of  adapting  its  provisions  to  this  par- 
ticular kind  of  property,  especially  with  reference  to  the  method 
and  conditions  of  its  operation;  where  there  is  nothing  uncertain 
or  restrictive  in  its  terms,  and  it  contains  the  provision,  "attached 
to  and  made  a  part  of  this  policy ;  "  and  where  there  is,  at  the  end 
of  the  entire  policy,  a  stipulation  that  it  is  "made  and  accepted  un- 
der the  foregoing  stipulations  and  conditions,  together  with  such 
other  provisions,  agreements,  and  conditions  as  may  be  indorsed 
hereto."  ^  Although  the  Minnesota  statutes  prescribe  the  form  of 
fire  policies  and  changes  and  additions  are  forbidden  except  as  spe- 
cifically permitted,  and  although  the  policy  must  contain  a  com- 

20  Seharles  V.  N.  Hubbard  Jr.  &  Co.  481,  2  L.R.A.(N.S.)  517  (annotated 
131  N.  Y.  Supp.  848,  74  Misc.  72.       on  when  insured  property  is  vacant 

21  Rev.  Stat.  e.  49,  sec.  4.  or  unoccupied)    62  Atl.  289,  35  Ins. 

1  Rolfe    V.    Androscoggin    Mutual   L.  J.  81,  Rev.  Stat.  c.  49,  sec.  4. 
Fire  Ins.  Co.  106  Me.  345,  78  Atl.       ^  Lancaster   v.    Southern   Ins.    Co. 
879.  153  N.  Car.  285,  138  Am.  St.  Rep. 

2  Knowlton  v.  Patrons'  Androscog-  665,  69  S.  E.  214,  39  Ins.  L.  J.  1748. 
gin   Mutual   Fire   Ins.    Co.   100   Me. 

518 


II 


CONSTRUCTION  §  192 

plete  description  of  the  property  insured,  and  while  a  "clear  space" 
clause  attached  as  a  rider  is  not  authorized  with  respect  to  the  war- 
ranty therein,  still,  as  the  statute  authorizes  printing  on  the  policy 
forms  of  description  and  specification  of  the  property  reference  may 
be  had  to  said  '"space  clause"  for  a  description  and  identification 
thereof  as  limiting  the  general  descriptive  language  of  the  policy.* 
§  192.  Whether  prospectus  or  pamphlet  part  of  policy. — Whetlier 
a  prospectus  or  pamphlet  is  a  part  of  the  policy  is  a  question  in 
which  there  is  a  conflict  between  the  cases  wherein  this  issue  has 
l)een  distinctly  before  the  courts.    It  would  seem  that  in  many  Eng- 
lish decisions,  where  there  has  been  an  equitable  replication,^  the 
courts  have  been  inclined  to  hold  that  the  prospectus  or  pamphlet 
is  a  part  of  the  contract,  especially  if  it  appears  that  the  representa- 
tions therein  were  an  inducement  to  the  assured  to  enter  into  the 
contract.^    The  rule  in  this  country  is  not  settled.    If  the  prospectus 
or  pamplilet  is  expressly,  by  reference  or  otherwise,  made  a  part  of 
the  policy,  then  such  should  be  the  effect,  but  in  case  it  is  not  so 
made  a  part  of  the  policy,  then  the  question  is  not  so  easily  deter- 
mined.    If  the  question  were  to  be  decided  upon  equitable  princi- 
ples, then  such  prospectus  or  pamphlet,  where  the  representations 
therein  were  made  a  special  inducement  to  the  assured  to  enter  into 
the  contract,  and  were  relied  upon  by  him,  might  be  considered  a 
part  of  the  policy  on  the  ground  of  estoppel,  or  perhaps,  if  on  no 
other,  of  mistake,  in  that  the  policy  did  not  contain  all  the  terms 
of  the  agreement.    But  we  believe  tliat  inasmuch  as  it  is  within  the 
f)0\ver  of  the  parties  to  the  contract  to  expressly  make  such  prospec- 
tus or  pamphlet  a  part  of  the  policy  by  reference  or  otherwise,  that 
the  neglect  so  to  do  ought  not  to  give  the  right  after  delivery  and 
acceptance  thereof  to  vary  or  enlarge  or  disannul  the  provisions  of 
a  written  contract  which  the  pai-ties  have  solemnly  consummated, 
and  which  they  are  bound  to  know  merges  all  prior  negotiations. 
This  rule  is  subject,  however,  to  such  exceptions  as  may  exist  in  cases 
of  clear  estoppel  or  mistake,  and  we  believe  that  the  best  considered 
cases  and  authorities  make  this  question  to  depend  upon  the  same 
general  principles  that  underlie  references  to  other  papers,   and 
which  require  some  evidence  in  the  policy  itself  of  a  purpose  or  in- 
tent to  make  such  a  prospectus  or  pamphlet  a  part  of  the  contract, 
or  clear  evidence  of  an  estoppel  or  mistake.    Otherwise,  serious  ques- 

*  Wild  Rice  Lumber  Co.  v.  Royal  ^  See  Wood  v.  Dwarris,  11  Exeh. 
Ins.  Co.  99  Minn.  190,  108  N.  "W.  (Hurl.  &  G.)  493;  Salvia  v.  James,  6 
871,  3.5  Ins.  L.  J.  824.  East,  571. 

*  Under  the  Common  Law  Pro- 
cedure Act.  1854,  17  &  18  Viet.  c. 
125,  sees.  83-86. 

519 


§  193  JOYCE  ON  INSURANCE 

tions  might  arise  in  construing  a  written  contract  of  insurance.  The 
presumption  that  a  policy  contains  the  real  terms  of  the  contract 
is  a  presumption  against  the  existence  of  such  prospectus  or  pamph- 
let when  it  is  not  incorporated  in  the  policy  hy  reference  or  other- 
wise.' And  subject  to  the  above  exceptions  to  permit  such  presump- 
tion to  be  overcome  by  proof  that  it  was  intended  to  make  such 
papers  a  part  of  the  policy,  would  be  to  open  the  doors  to  the  admis- 
sion of  parol  evidence,  establishing  a  different  contract  entirely  from 
that  evidenced  by  the  policy  which  has  been  deliberately  executed, 
delivered,  and  accepted. 

§  193.  Same  subject:  the  cases. — In  a  New  York  case*  it  is  held 
that  a  prospectus  issued  by  a  life  insurance  company  and  delivered 
to  the  insured  by  the  company's  agent,  importing  that  the  company 
was  careful  to  prevent  forfeitures,  and  which  is  not  referred  to  in, 
nor  in  any  manner  annexed  to,  the  policy,  is  not  part  of  the  con- 
tract, and  is  inadmissible  to  control  the  express  terms  of  the  policy, 
providing  that  it  should  determine  upon  failure  to  pay  the  pre- 
mium. This  case,  however,  came  subsequently  before  the  same 
court  ^  on  a  motion  for  reargument,  based  upon  the  ground  that 
the  attention  of  the  court  on  the  prior  hearing  was  not  called  to  sev- 
eral decisions  in  England,  where  a  contrary  ruling  had  been  adopted 
upon  this  point.  The  cases  referred  to  were  Wood  v.  Dwarris,^" 
Wheelton  v.  Hardisty,^^  and  Collett  v.  Morrison, ^^  and  the  court 
says  these  cases  ''do  certainly  hold  that  the  prospectus  might  equit- 
ably be  regarded  as  forming  a  part  of  and  controlling  the  terms  of 
the  policy.  It  is  not  improbable  that  an  examination  of  these  cases 
would  have  led  this  court  to  a  different  conclusion,"  but  the  ca«e 
was  not  reopened,  however.  In  the  case  of  Wood  v.  Dwarris  ^^  the 
prospectus  issued  by  the  company  represented  that  all  policies  ef- 
fected by  it  should  be  indisputable,  except  in  cases  of  fraud,  and  it 
appeared  that  the  prospectus  was  issued  prior  to  the  issuance  of  the 
policy,  and  the  statements  therein  were  relied  upon  by  the  insured 
as  a  basis  of  the  contract,  and  that  when  he  went  to  the  office  of  the 
company  it  professed  to  grant  him  assurance  on  those  terms.  These 
facts  were  held  to  preclude  the  company  from  defending  on  grounds 
which  w^ould  leave  out  of  consideration  the  prospectus,^*  and  it  was 
said  ^^  that  it  would  no  doubt  have  been  competent  for  the  company 

'^  See  Opinion  of  Earl,  J.,  in  Wheel-       "  92  Eng.  C.  L.  231. 
ton  V.  Hardisty,  8  El.  &  B.  232.  12  9  ija^.p^  152,  173. 

8  Ruse  V.  Mutual  Benefit  Life  Ins.        ^m  Ex.  (Hurl.  &  G.)  493. 

Co.  23  N.  Y.  516,  519,  overruling  s.       1*  See  opinion  of  Baron  Alderson 
e.  26  Barb.  556.  in  this  case. 

9  24  N.  Y.  653.  "  By  Martin,  B. 

10  11  Ex.  493. 

520 


CONSTRUCTION  §  193 

to  have  granted  a  policy  upon  terms  which  would  have  excluded  the 
prospectus.  In  the  case  of  Wheelton  v.  Hardisty  ^^  the  facts  were 
similar,  although  it  did  not  appear  that  the  prospectus  was  ever  in 
fact  seen  by  the  plaintiff,  or  that  its  statements  were  an  inducement 
to  him  to  enter  into  the  contract,  and  it  was  held,  reversing  the  judg- 
ment of  the  Queen's  Bench,  that  the  plaintiff  was  not  entitled  to  a 
verdict,  and  that  if  a  certain  statement  contained  in  a  proposal  as  to 
health  was  intended  to  be  the  basis  of  the  contract,  it  should  have 
been  inserted  therein.  It  was  further  held  that  the  prospectus  was 
not  a  part  of  the  contract,  nor  made  so  by  a  mere  reference  hereto.^'' 
The  case  of  Collett  v.  Morrison  ^^  merely  decided  that  if  on  a  pro- 
posal and  agreement  for  a  life  insurance  a  policy  be  drawn  up  at  the 
insurance  office  in  a  form  which  differs  from  the  terms  of  the  agree- 
ment and  varies  the  rights  of  the  parties  assured,  equity  will  inter- 
fere and  deal  with, the  case  on  the  footing  of  the  agreement  and  not 
that  of  the  policy.  It  is  held,  however,  in  a  New  York  case  ^^  that 
the  terms  of  the  policy  cannot  be  affected  by  a  statement  in  the  com- 
pany's pamphlets  that  it  would  allow  ''thirty  days'  grace  ... 
on  all  payments"  subsequent  to  the  first.  So  in  Tennessee  ^°  a  pro- 
spectus of  the  company  is  not  a  part  of  the  contract,  and  is  not  made 
so  by  a  statement  on  the  back  of  the  policy  that  it  may  be  had  gratis 
on  application.  So  in  Georgia  ^  a  pamphlet  promulgated  as  con- 
taining the  terms  and  conditions  upon  which  insurance  would  be 
granted,  and  which  was  not  referred  to  in  the  policy,  was  held  not 
a  part  of  the  policy  and  inadmissible  in  evidence  to  vary  its  terms, 
but  that  if  referred  to  it  might  have  been  part  of  the  policy.^  But 
in  that  state  a  circular  issued  by  a  fraternal  order  and  submitted  to 
the  insured  to  obtain  her  application  for  insurance  which  set  forth 
the  amount  of  protection  or  benefits  and  the  terms  of  membership, 
should  be  considered  to  explain  any  ambiguities  or  inconsistencies 
in  the  language  embraced  in  the  contract,  even  though  said  circu- 

1^  8  El.  &  B.  285,  92  Eng.  C.  L.  Fowler  v.  Metropolitan  Life  Ins.  Co. 

231.  41  Hun  (N.  Y.)  357. 

"  This  ease  was  decided  in  1858,  ^o  Knickerbocker  Ins.  Co.  v.  Heid- 

the    Collett    case    in    1851,    and    the  el,  8  Lea  (Tenn.)  488. 

Wood  -case  in  1856.  ^  Mutual  Benefit  Life  Ins.   Co.  v. 

18  9  Hare,  162.  Ruse,  8  Ga.  534. 

1^  Fowler  v.  Metropolitan  Life  Ins.  ^  See  1  Parsons'  Marine  Ins.   (ed. 

Co.  116  N.  Y.  389,  26  N.  Y,  St.  Rep.  18G8)  p.  124,  Bliss  on  Life  Ins.  sec. 

770;  5  L.R.A.  805,  22  N.  E.  576;  dis-  400;  1  Duer  on  Ins.  lect.  1,  see.  22, 

tinguishing   Ruse  v.   Mutual   Benefit  ed.  1845,  p.  76,  for  general  rule  as  to 

Life  Ins.  Co.  23  N.  Y.  516,  24  N.  Y.  other  papers.    But  see  Rohrschneider 

653;    and   Howell   v.    Knickerbocker  v.  Knickerbocker  Life  Ins.  Co.  76  N. 

Life  Ins.  Co.  44  N.  Y.  276,  reversing  Y.  216,  32  Am.  Rep.  290,  8  Ins.  L. 

521 


§  194  JOYCE  OX  INSURANCE 

lar  was  not  by  the  terms  of  the  contract  made  a  part  thereof.'  And 
in  a  Kentucky  case  *  a  prospectus  or  pamphlet  issued  by  the  com- 
pany and  shown  to  the  assured  at  the  time  he  took  out  the  poHcy 
provided  that  he  should  be  entitled  to  a  paid-up  policy  after  the  pay- 
ment of  a  certain  number  of  annual  premiums,  and  also  represented 
that  the  policy  was  nonforfeitable.  The  policy  itself  provided  for 
forfeiture  for  nonpayment  of  the  premiums  at  the  time  when  due, 
and  that  the  right  to  a  paid-up  policy  should  be  forfeited  unless  the 
original  contract  Avas  surrendered  within  thirty  days  after  default 
in  payment  of  the  premiums,  and  the  terms  of  the  prospectus  were 
held  to  govern  the  rights  of  the  insured  under  the  contract.  So  un- 
der a  Connecticut  decision  a  canvassing  pamphlet  used  as  an  ex- 
planation of  the  plan  of  insurance  and  entitled  "Key  to  the  Re- 
serve Dividend  Plan/'  must  be  read  in  connection  with  the  terms  of 
the  policy,  although  it  is  not  the  policy,  and  when  its  language  may 
be  construed  as  consistent  with  those  terms  a  different  and  incon- 
sistent construction  cannot  be  given.*  In  an  Iowa  case  a  circular 
which  may  have  induced  the  contract  but  which  is  not  referred  to 
or  made  a  part  of  the  certificate  and  which  is  not  identified  as  com- 
ing from  the  insurer,  nor  does  it  appear  that  the  insured  ever  saw 
or  relied  upon  it  before  becoming  a  member  of  the  society,  cannot 
be  made  a  basis  of  recovery  and  should  be  stricken  from  the  plead- 
ings.® 

§  194.  Whether  common  or  statutory  law  part  of  contract:  city 
ordinances  or  local  laws. — A  contract  of  insurance  is  presumed  to 
have  been  made  in  reference  to  common  and  statutorj^  laws,  so  far 
as  applicable,  which  are  in  force  at  the  time  of  contracting.  Such 
laws  enter  into  and  form  a  part  of  every  such  contract  as  much  as 
if  incorporated  therein.'     This  rule  also  applies  to  certificates  in 

J.  392;  Continental  Life  Ins.  Co.  v.  gartner  v.  Charter  Oak  Life  Ins.  Co. 

Hamilton,  41  Ohio  St.  274;  Walsh  v.  32  I^ed.  314. 

'.Etna  Life  Ins.  Co.  30  Iowa,  133,  6        7///»o/.s-.— Freund    v.    Freiind,    218 

Am.    Rep.    664;    Clemmett    v.    New  III.  189,  109  Am.  St.  Rep.  283,  75  N. 

York  Life  Ins.  Co.  76  Va.  355.  E.  925,  35  Ins.  L.  J.  23. 

^  Hall    V.    Royal   Fraternal   Union,        Mifisouri. — Christian    v.    Conneeti- 

130  Ga.  820,  61  So.  977.  cnt  IVIutual  Life  Ins.  Co.  143  Mo.  460, 

*  Southern  Mutual  Life  Ins.  Co.  v.  45  S.  W.  268,  27  Ins.  L.  J.  968 ; 
Montague,  84  Kv.  653,  4  Am.  St.  WausehafiC  v.  Masonic  Mutual  Benefit 
Rep.  218,  2  S.  W.  443.  Soc.  41  Mo.  App.  211  (where  section 

*  Fuller  V.  Metropolitan  Life  Ins.  5981  of  the  Revised  Statutes  of  Mis- 
Co.  70  Conn.  647,  41  Atl.  4.  souri,  1879,  is  construed  and  held  to 

®  Sleight   V.    Supreme    Council    of   become  a  part  of  the  contract). 
Mystic  Toilers,  121  Iowa,  724,  96  N.        Texas. — Germania  Life  Ins.  Co.  v. 
W.  1100.  Peetz,  —  Tex.  Civ.  App.  — ,  47  S. 

'^United  Sfatei^.—FTy    v.    Charter   W.  687,  690. 
Oak  Life  Ins.  Co.  31  Fed.  197;  Wein-        rirginia.Smith      &      Marsh      v. 

522 


CONSTRUCTION 


§  194 


mutual  benefit  societies,  associations  and  the  like.'  Emerigon  says :  ' 
''In  eases  of  doubt  the  parties  are  presumed  to  have  intended  to  form 
their  agreements  according  to  the  rules  established  by  the  law,  which 
is  nothing  else  than  the  universal  will  of  the  community."  ^° 

7/  a  standard  'policy  statute  expressly  provides  that  it  shall  be  a 
part  of  every  contract  of  insurance  such  enactment  controls." 

Where  the  construction  of  a  statute  or  of  the  Constitution  becomes 
settled  by  judicial  construction,  such  construction,  so  far  as  contract 
rights  acquired  under  the  statute  are  concerned,  becomes  a  part  of 
the  statute  itself,  and  necessarily,  therefore,  a  part  of  the  obligation 
of  the  con  tract. ^2  So  the  construction  given  by  courts  in  judicial 
decisions  and  the  ordinances  of  commercial  countries,  so  far  as  these 
latter  may  be  applied  or  have  been  adopted  by  our  own  courts,  are 
presumed  to  have  entered  into  the  consideration  of  the  parties  when 
making  the  contract  and  to  have  become  a  pai't  thereof." 

Northern  Neck  Mutual  Fire  Assoc,  principles  of  justice  and  equity  that 
112  Va.  192,  38  L.R.A.(N.S.)  1016  abide  in  the  written  reason  of  the 
(annotated  on  applicability  to  exist-  law:"  Id.  "The  obligation  of  a  con- 
ing contracts  of  statute  avoiding  con-  tract  consists  in  its  binding  force  on 
tract  ual  stipulations  limiting  time  for  the  party  who  makes  it.  This  de- 
action)  70  S.  E.  482,  40  Ins.  L.  J.  pends  on  the  laws  in  existence  where 
1018.  it  is  made;  these  are  neces-sarily  re- 

Wisconsm. — Breakstone  v.  Apple-  ferred  to  in  all  contracts,  and  form- 
ton  Mutual  Fire  Ins.  Co.  149  Wis.  ing  a  part  of  them,  as  the  measure 
303,  135  N.  W.  833 ;  O.shkosh  Gas  of  tlie  obligation  to  perform  them  by 
Light  Co.  V.  Germania  Fire  Ins.  Co.  the  one  party  and  the  right  acquired 
71  Wis.  454,  5  Am.  St.  Rep.  233,  37  by  the  other."  McCracken  v.  Hay- 
N.  W.  810.  ward,  2  How.  (43  U.  S.)  608,  612,  11 

Laws   in   existence   are   necessarily    L.  ed.  397,  per  Mr.  Justice  Baldwin, 
referred  to  in  all  contracts  made  un-        "  Franklin  v.  New  Hampshire  Fire 
der    such    laws.      Sliarp    v.    Niagara   Ins.  Co.  70  N.  H.  251,  47  Atl.  91,  30 
Fire  Ins.  Co.  164  Mo.  App.  475,  147   Ins.  L.  J.  73;  Laws  1879,  c.  13,  Pub. 
S.  W.  154.  Stat.  1901,  e.  170,  sec.  18.    See  Hew- 

'  Union  Fraternal  League  v.  Walt-  ins  v.  London  Assur.  Corp.  (12 
on,  109  Ga.  1,  77  Am.  St.  Rep.  350,  cases)  184  Mass.  177,  08  N.  E.  62 
46  L.R.A.  424,  34  S.  E.  31/;  Kaem-  considered  under  §  206b  herein, 
merer  v.  Kaemmerer,  231  111.  154,  88  ^^  Douglass  v.  County  of  Pike,  101 
N.  E.  133;  Freund  v.  Freund,  218  U.  S.  677.  25  L.  ed.  698;  Louisiana 
HI.  189,  109  Am.  St.  Rep.  283,  75  N.  v.  Pilsbury,  105  U.  S.  278,  294,  26  L. 
E.  925,  35  Ins.  L.  J.  23.  ed.  1090.     See  Knights  Templars'  & 

^  Emerigon  on  Ins.  (Meredith's  ed.  Masons'  Life  Ins.  Co.  v.  Jarman,  187 
1850)  49,  555,  c.  2,  sec.  7.  U.  S.  197,  47  L.  ed.  139,  23  Sup.  Ct. 

^*' Verba  conventionum  secundum  108,  32  Ins.  L.  J.  57,  aff'g  104  Fed. 
ju.s  commune  debent  intelligi.  Nam  638,  44  C.  C.  A.  93,  30  Ins.  L.  J.  230; 
jus  commune  informat  conventiones  Lowenstein  v.  Fidelity  &  Casualty 
easque  interpretatur.  Et  si  conventio  Co.  88  Fed.  474,  28  Ins.  L.  J.  52, 
est  ambigua  redigilurad  intellectum  aff'd  Fidelity  &  Casualty  Co.  v. 
jur  communi.  Nam  qui  contrahit  Lowenstein,  97  Fed.  17,  38  C.  C.  A. 
praesumitur  habere  mentem  quae  con-  29,  46  L.R.A.  450. 
gruit  legis  dispositioni:  Id.  The  ^^  Tgimton  Copper  Co.  v.  Mer- 
contract  is  "regulated  bv  the  general    chants'  Ins.  Co.  22  Pick.  (39  Mass.) 

523 


194 


JOYCE  ON  INSURANCE 


So  every  contract  of  marine  insurance  is  also  presumed  to  have 
been  made  in  view  of  convmerckil  treaties  in  force  between  this  and 
other  maritime  countries,  which  treaties  are  part  of  the  private  law 
of  the  countries  parties  thereto/*  for  no  risk  can  be  the  subject  of 
a  valid  marine  insurance  if  the  course  of  trade  or  voyage  contravene 
either  the  laws  of  the  land  or  the  laws  of  nations}^ 

(a)  The  parties  are  presumed  to  have  knowledge  of  a  city  ordi- 
nance or  local  laws  affecting  the  property  and  risk,^^  for  city  or- 
dinances which  are  within  the  police  power  and  in  the  interests  of 
the  public  welfare  become  an  integTal  part  of  fire  insurance  con- 
tracts upon  property  within  the  fire  limits  to  which  they  apply." 

(b)  It  is  said  in  a  Virginia  case  by  the  court  that  a  statute  relating 
to  foreign  insurance  companies,  and  providing- that  they  must  have 
a  citizen  as  a  resident  therein,  and  must  act  through  him,  must  be 


111.      See   1   Marshall   on   Ins.    (ed.  court,   per   Brown,   J,,    said:      "The 

1810)  19,  et.  seq.  question  is  a  new  one  in  this  State, 

^*  1  Amould  on   Marine  Ins.    (ed.  ^^^  ^^  examination  of  the  books  dis- 

1850)    716,  s.  p.  714   (8th  ed;  Hart  t-loses  very  few  adjudged  cases  on  the 

and   Simey)    sec.  746,  p.   907;   Lord  subject    in   other    States.      We   have 


Stowell  in  The  Emson,  2  Rob.  Adm 
Rep.  6. 

^^  1  Arnould  on   Marine  Ins.    (ed 


found    only    the    following:      Ham- 

buj'g-Bremen   Fire  Ins.   Co.  v.   Garl- 

ington,  66  Tex.  103,  18  S.  W.  337; 

1850)    701,  s.   p.   698;    Id.    (8th   ed.    Brady  v.   Northwestern  Ins.   Co.  11 

Hart  and   Simey)    sec.   734,   p.   896,    t  {?'-/T^'«Sf7^ '''  ^"'i    P       .S"' 
where  it  is  said  "By  the  third  section   l?^-  \  ^-  S^^,  6  Eng.  Rul.  Cas  597; 

Ju'e  Association  v.  Rosenthal,  108 
Pa.  St.  474,  1  Atl.  303;  Monteleone 
V.  Royal  Ins.  Co.  47  La.  Ann.  1563, 


of  the  marine  insurance  act  it  is  de- 
clared that,  subject  to  the  provisions 

of  the  act,  'everv  lawful  marine  ad-  ^^  t  i^  a    r-o<   -,c,  o      ^^r.     m 

venture  m^y  be  the  subject  of  a  con-  f^^  L.R.A    .84  18  So.  4/2     These  au- 

tract  of  marine  insurance.'     The  for-  ^^^.^'^^^^^  ^^^  ^^^'^  the  rule  that  such 

ty-tirst  section  declares  that  'there  is  ordinances   are   a   part    of   the   con- 

an  implied  warranty  that  the  adven-  ^rac't  of  insurance,  and  tha    the  m- 

ture  insured  is  a  lawful  one,  and  that,  f.^"'^^'  %  ^^^"^^  ^\^ovehy      This  is  in 

so  far  as  the  assured  can  control  the  ^"^^  ^'^^'^  ^^lie  genera    doctrine  that 

matter,  the  adventure  shall  be  caiTied  ^t^^^  ^-^^^  ^^'  "'"''^T    T""""  \^f^^''^ 

out  in  a  lawful  manner.'    No  species  ^^^^.f,.  ^^    sun-ounded    by    statutory 

^■p  -r^^^^^^^.f-cT  ^^  ;v,f^,.^cf  «f  •..;r.i^  ^„  „  limitations    and    requirements,    they 


of  property  or  interest  at  risk  on  a 
sea  venture  can  be  the  subject  of  a 
valid  contract  of  marine  insurance, 
if  the  course  of  trade,  or  the  voyage, 
in  the  prosecution  of  which  it  is  so 
exposed  to  risk,  be  in  contravention 
either  of  the  laws  or  the  war  policy 
of  the  country  of  the  insurer." 

^^  Bradv  v.  Northwestern  Ins.  Co. 
11  Mich.  425. 


are  presumed  to  enter  into  their  en- 
gagements with  reference  to  such 
statute,  and  the  same  enters  into  and 
becomes  a  part  of  the  contract. 
There  would  seem  to  be  no  logical 
reason  why  this  general  rule  should 
not  apply  to  a  case  of  this  kind. 
The  parties  are  presumed  to  know  of 
the    ordinances.      They    directly   and 


materially  affect  their  rights  in  case 
"Larkin   v.   Glens  Falls  Ins.   Co.    of  a  loss  under  the  policy,  and  should 
80  Minn.  527,  81  Am.  St.  Rep.  286,   <i-overn  a.nd  control  in  the  adjustment 
83  N.  W.  409,  29  Ins.  L.  J.  833.   The   and  settlement  of  such  loss." 

524 


CONSTRUCTION  §  194 

read  as  a  constituent  part  of  the  contract."  And  this  question  arose 
in  connection  with  that  at  issue  in  the  case  as  to  whether  the  non- 
payment of  premium  when  prevented  by  war  avoided  the  contract. 
And  it  is  held  that  it  is  not  within  the  power  of  an  insurance  com- 
pany incorporated  in  a  foreign  state  to  make  such  provision  in  its 
contracts  as  to  overthrow  the  laws  of  another  state  in  which  it  is  per- 
mitted by  its  laws  to  transact  business.^^  It  is  also  decided  that  the 
statutes  of  a  state  in  which  a  contract  of  insurance  is  made  are  as 
much  a  part  of  it  as  if  incorporated  in  it.^°  And  in  Illinois  the  provi- 
sions of  a  statute  in  force  in  a  state  where  a  life  insurance  policy  is 
issued  become  a  part  thereof  as  if  embodied  in  the  policy  itself.^  So 
the  statute  of  another  state  must,  it  is  decided,  be  considered  as  a  part 
of  a  contract  of  life  insurance  when  the  policy  is  issued  by  a  corpora- 
tion organized  under  its  laws.^  And  statutes  which  provide  for  con- 
struction of  policies  by  the  laws  of  a  foreign  state  are  held  to  be  part 
of  the  contract.'  So  under  a  Missouri  decision  if  a  policy  is  executed 
in  one  state  the  statute  in  force  respecting  its  subject  matter  becomes 
as  much  a  part  of  the  contract  as  if  copied  therein  although  tlie 
policy  is  issued,  by  a  foreign  corporation,  in  another  state  and  ex- 
pressly provides  that  it  shall  be  construed  according  to  the  law^s  of 
that  state.* 

(c)  As  to  prospective  or  retroactive  statutes,  or  in  case  of  repeal  or 
amendment  of  statutes  it  may  be  stated  that  a  certificate  issued  prior 
to  the  enactment  of  a  statute  is  not  within  its  provisions,^  and  if  a 
statute  is  repealed  before  the  right  given  thereby  becomes  vested  by 
the  policy,  the  right  falls  with  the  repeal.^  And  it  is  lield  that 
general  statutory  provisions  inconsistent  wdth  a  charter  granted  sub- 
sequently thereto  are  of  no  effect.'''     And  a  statutory  requirement  as 

^*  IManhattan     Life     Ins.     Co.     v.  *  Cravens  v.   New  York  Life  lus. 

Wadsworth,  20  Gi'utt.  (Ya.)  614,623.  Co.  148  Mo.  583,  71  Am.    St.    Rep. 

19  Fletcher  v.  New  York  Life  Ins.  628,  .53  L.R.A.  305,  50  S.  W.  519, 
Co.  4  MoCrary  (U.  S.  C.  C.)  440,  13  affd  178  U.  S.  389,  44  L.- ed.  1116,  20 
Fed.  526,  528.'  Sujip.   Ct.  762.     Cited  in   Sraoot  v. 

20  Union  Central  Life  Ins.  Co.  v.  Bankers'  Life  Assoc.  138  Mo.  App. 
Pollard,  94  Va.  146,  64  Am.  St.  Re[).  ^38,  120  S.  W.  719. 

715,   36   L.R.A.   271,   26   S.   E.   421.  ^  j^|,^,]j,py  y^  ^Yestern    Mutual    Aid 

See  §  190o  herein.  Soc.  81   Iowa,  734,  50    N.    W.    29; 

^Freund  v.   Freund,   218  111.  189,  Laws  21  St.  Gen.  A.ssm.  Iowa,  c.  65, 

109  Am.  St.  Rep.  283,  75  N.  E.  925,  sec.  7. 

35  Ins.  L.  J.  23.  ^  Prvce   v.   Security    Ins.    Co.    29 

^Nielson    v.    Provident    Sav.    Life  Wis.    270,    274.      Compare    Knij^hts 

Assur.  Soc.  139  Cal.  332,  96  Am.  St.  Templars'  &  IMasons'  Life  Ins.  Co.  v. 

Rep.  146,  73  Pac.  168.     See  also  Nail  .larman,  187  U.  S.  197,  47  L.  ed.  139, 

V.  Provident  Savin-s  Life  Assurance  '-•"   Sup.  .Ct.   108,  32   Ins.  L.   J.   57, 

Soc.  —  Tenn.  Ch.  App.  — ,  54  S.  W.  alf'g:  104  Fed.  638,  44  C.  C.  93,  30 

109.  Ins.  L.  J.  230. 

3  New  York  Life  Ins.  Co.  v.  Orlopp,  '  New   York   County   INfutual   Fire 

25  Tex.  Civ.  App.  284,  61  S.  W.  33(i.  Ins.  Co.  v.  York,  48  Me.  75. 

525 


§  194  JOYCE  ON  INSCKAKCE 

to  notice  in  certain  cases  notwithstanding  a  stipulation  to  the  con- 
trary in  the  policy  does  not  become  a  part  of  the  contract  by  a 
policy  issued  while  the  statute  is  in  force  so  as  to  be  operative  after 
the  statute  is  rei^ealed,  but  the  repeal  simply  permits  the  enforce- 
ment of  the  contract  according  to  its  own  terms  and  conditions.* 
If  a  general  statute  is  already  a  part  of  an  existing  contract,  a  sub- 
sequent enactment,  with  certain  exemptions  as  to  policias  there- 
after issued,  does  not  apply,  but  an  amendment  thereto  repealing 
such  exemptions  brings  the  policy  within  the  original  statute  where 
the  assured  does  not  die  until  after  the  date  of  the  last  statute.^ 
And  a  statute  regulating  assessments  by  mutual  fire  insurance  com- 
panies, in  force  at  the  date  of  the  policy,  becomes  a  part  thereof 
even  though  when  the  company  was  organized  the  statute  was  dif- 
ferent and  the  then  existing  statute  was  embodied  in  the  articles  of 
organization  and  is  endorsed  upon  the  policy:  and  wherever  the 
law  and  the  language  of  the  policy  differ  the  law  is  paramount.^" 
Again  it  is  declared  that  while  a  contract  is  presumed  to  be  made 
with  reference  to  existing  laws,  still  it  is  well  established  that  those 
laws  may  be  altered,  amended  or  repealed  without  affecting  tlie 
binding  force  of  the  contract,  so  long  as  a  sufiicient  remedy  is  left 
for  its  enforcement.  And  it  is  held  in  this  connection  that  as  the 
legislature  has  power  to  shorten  a  period  of  limitation  where  a  rea- 
sonable time  is  left  within  which  to  invoke  a  remedy  or  to  pro- 
long such  period  where  the  right  to  plead  it  has  not  accrued,  a 
statute  which  extends  the  time  within  which  suit  or  action  may  be 
brought  upon  a  policy  after  loss  is  not  wholly  prospective  in  its 
operation  but  applies  to  policies  theretofore  issued,  where  there  is 
nothing  to  indicate  a  purpose  on  the  part  of  the  legislature  to  limit 
the  operation  of  the  statute  to  policies  thereafter  to  be  issued." 
But  it  is  held  in  Iowa  that  a  statute  which  relates  to  the  remedy, 
as  where  a  time  limitation  for  suing  is  fixed  by  statute,  is  not  a  part 
of  a  contract  issued  when  such  statute  was  in  force,  where  such  en- 

^Kosenplanter   v.    Provident    Sav-    Five  Ins.  Co.  149  Wis.  303,  135  N, 

ings  Life  Assnr.  Soc.  96  Fed.  721,  37  ^^-83.,    .  ,r      ,       .t      , 
^    /-.     A     -nn    Ao  T  Ti  K     A-o  ^^  Smith  &  31arsh  V.  Northern  iS'eek 

C.  C.  A.  a66,  46  L.K.A.  4<3.  at  j^     1  t^-        \  tio  at-^    too    -iq 

'  ,  Mutual  r  ire  Assoc.  112  Va.  19.:,  oo 

9  Knights     Templars'     &     Masons^  L.R.A.(N.S.)  1016  and  note,  70  S.  E. 

Life  Indemnity  Co.  v.  Jarman,  18  /  482,  40  Ins.  L.  J.  1018. 
U.  S.  197,  47  L.  ed.  139,  23  Sup,  Ct.       As  to  rights  of  ]iarties   not    being 

108,  32  Ins.  L.  J.  57,  case  affirming  f^^riged    by    amemlment-nonfortei- 

„     ^   ,    „ ..  ^    ^     .     ^^    n^  T  ture  statute,  see  Lhristensen  v.  >iew 

104  Fed.  638,  44  C.  C.  A.  93,  30  Ins.  York  Life  I^s.  Co.  160  Mo.  App.  486, 

L.  J.  230.  141  s.  W.  6:  Rev.  St.  1899,  sec.  7897, 

^°  Breakstone  y.  Appleton  Mutual  am'd  Laws  1903,  p.  208. 

526 


CONSTRUCTION  §  194 

actment  was  repealed  reducing  the  time."  And  a  contract  of  fire 
insurance,  stipulating  as  to  the  time  within  which  suit  may  be 
])rought  after  loss,  is  not  affected  by  a  subsequent  statute  relating  to 
the  time  for  commencing  actions  on  policies  of  insurance,^' 

(d)  As  to  mutual  companies,  benefit  societies  and  the  like  the 
provisions  of  a  statute  authorizing  the  organization  of  mutual  in- 
surance companies  are  a  part  of  the  contract.^*  And  if  the  general 
law  of  the  state  provides  that  the  by-laws  of  an  incorporated  so- 
ciety may  be  changed;  it  enters  into  and  forms  a  part  of  the  con- 
tract.^* So  in  another  case  in  the  United  States  Supreme  Court  ^^ 
it  is  held  that  the  rights  and  benefits  given  to  the  beneficiary  by 
statute  are  a  part  of  the  contract.  So  where  the  statute  specifies  the 
classes  of  beneficiaries  that  may  be  named  and  there  is  an  extract 
therefrom  in  the  book  of  a  fraternal  benefit  society  containing  its 
constitution  and  by-laws,  the  statute  becomes  part  of  the  laws  of  the 
society  and  forms  a  part  of  every  contract  of  insurance  it  makes." 
Again  where  mutual  insurance  companies  are  required  by  statute 
to  execute  a  bond  for  the  payment  of  all  claims  such  bonds  will,  a« 
to  the  rights  of  principal  and  surety,  be  construed  as  though  the 
statute  were  written  therein. ^^  But  a  statute  providing  for  the  crea- 
tion of  an  emergency  fund  by  assessment  insurance  associations  does 
not  become  a  part  of  existing  contracts,  so  as  to  entitle  their  benefi- 
ciaries to  the  benefit  thereof,  unlass  the  affirmative  acts  contemplated 
by  the  legislature  for  the  adoption  of  the  statute  by  existing  com- 
panies are  performed,  although  the  constitution  and  by-laws  of  the 
M.ssociation  are  changed  to  permit  of  creation  of  the  fund,  and  the 
fund  is  actually  accumulated.^^ 

(e)  If  the  facts  involved  in  an  insurance  total  loss  bring  the  case 

"Jones  V.  German  Ins.    Co.    110  777.     Other  points  in  this  case  were 

Iowa,  75,  46  L.R.A.  860,  81  N.  W.  (1)    That  the   honefieiary  in    a    life 

188,  29  Ins.  L.  J.  60.  policy  had   a  vested  interest  in   the 

"  Sample  v.  London  &  T^anca-shire  pohr-y  and  the  money  to  become  due 

Fire  Ins.  Co.  46  S.  Car.  491,  57  Am.  tliereunder,  (2)   That  a  married  man 

St.  Rep.  701,  47  L.R.A.  696,  24  S.  might  rightfully  apply  a  part  of  his 

E.  334.  earnings    to    insure    lii.'^   life    for    the 

^*  Farmers'  ^Mutual  Ins.  Co.  v.  Kin-  benefit  of  his  wife  and  children,  Avhere 
ney,  64  Neb.  808,  90  N.  W.  926 ;  J.  P.  no  fraudulent  intent  to  hinder  or  de- 
Lamb  &  Co.  V.  Merchants'  National  fraud  creditors  ajipegrs.  See  chap- 
Mutual  Fire  Ins.  Co.  18  N.  Dak.  253,  ters  on  beneficiaries  herein. 
119  N.  W.  1048;  Montgomery  v.  "Supreme  Colony  United  Order, 
Whitbeck,  12  N.  Dak.  385,^96  N.  W.  Pilgrim  Falliei-s  v.  Towne,  87  Conn. 
327,  32  Ins.  L.  J.  983.  644,  89  Atl.  204. 

15  Stohr  V.  San   Francisco   Musical  ^^  Crawford  v.  Ozark  Ins.   Co.  97 

Fund  Soc.  82  Cal.  557,  22  Pac  1125.  Ark.  549,  134  S.  W.  951. 

18  Central  Bank  of  Washington  V.  "Crawford        v.        Northwestern 

Hume,  128  U.  S.  195,  206,  32  L.  ed.  Traveling  Men's  Assoc.  226  111.  57,  10 

370,  9  Sup.  Ct.  41,  16  Wash.  L.  Rep.  L.R.A. (N.S.)  264,  80  N.  E.  736. 

527 


§  194  JOYCE  ON  INSURANCE 

within  regulations  prescribed  by  statute,  such  statute  enters  into 
and  forms  part  of  the  contract  of  insurance  as  completely  as  if  writ- 
ten into  it.^° 

So  a  valued  policy  statute  is  integrated  into  and  made  part  of  the 
policy;  it  supervenes  all  policies  issued  under  it  and  writes  out  of 
them  all  stipulations  in  conflict  therewith.^  And  where  the  statute 
provided  that  in  ca.se  the  property  was  wholly  destroyed  by  fire  the 
amount  written  in  the  policy  should  "be  taken  conclusively  to  be  the 
true  value  of  the  property  w^hen  insured,"  and  determine  the  meas- 
ure of  damages,  and  the  terms  of  the  policy  provided  a  different  rule, 
it  was  decided  that  the  provisions  of  the  statute  could  not  be  thus 
changed  by  a  stipulation  contra  in  the  policy ,2  and  it  is  so  held  in 
Texas,^  for  a  policy  stipulation  as  to  liability  in  case  of  total  loss  by 
fire  is  of  no  validity  when  repugnant  to  the  statutory  provision  on 
that  point.'*  Where  concurrent  policies  of  insurance  on  property 
afterward  destroyed  were  written  with  the  consent  of  the  respective 
companies,  the  aggregate  amount  of  such  insurance  written  in  the 
policies  is  the  value  of  property  as  stipulated  in  each  policy,  and 
must  be  regarded  as  conclusive  not  only  as  to  the  true  value  of  the 
property  when  insured,  but  also  as  to  the  true  amount  of  loss  and 
measure  of  damages  when  destroyed,  under  the  provisions  of  the 
Wisconsin  statute,  which  must  be  regarded  as  a  part  of  the  contract 
of  insurance.* 

(f )  As  to  representations  and  warranties:    In  a  case  which  arose 

20  Havens   v.    Germania   Fire    Ins.  bon   County  Court,  24  Ky.  L.  Rep. 

Co.  123  Mo.  403,  45  Am.    St.    Rep.  1850,  72  S.  W.  739. 
570,  26  L.R.A.  107,  27  S.  VV.  718.  See  also  New  Orleans  Real  Estate 

1  Western  Assurance  Co.  v.  Phelps,  Mortgage  &  Securities  Co.  v.  Teu- 
77  J\liss.  625,  27  So.  745,  29  Ins.  L.  tonia  Ins.  Co.  128  La.  45,  54  So.  466, 
J.  506.  40   Ins.  L.   J.   999 ;   Havens  v.   Ger- 

A  valued  policy  law  is  to  be  treat-  mania  Fir_e  Ins.  Co.  123  Mo.  403,  26 

ed  as  if  incorporated  in  the  policy.  L.R.A.  lOv,  27  S.  W.  718,  45  Am.  St. 

Sharp  v.  Niagara  Fire  Ins.  Co.  164  Rep.    570;    Hiekei-son    v.    Germama 

Mo.  App.  475;  147  S.  W.  154.  Ins.  Co.  96  Tenn.  193,  32  L.R.A.  1/2, 

2  Reilly  v.  Franklin  Ins.  Co.  43  33  S.  W.  1041 ;  Dugger  v.  Mechanics' 
Wis.  449,  28  Am.  Rep.  552;  Oshkosh  &  Traders'  Ins.  Co.  95  Tenn.  245,  28 
Gaslight  Co.  v.  Germania  Fire  Ins.  L.R.A.  796,  32  S.  W.  5.  Milwaukee 
Co.  7]  Wis.  454,  5  Am.  St.  Rep.  233,  Mechanics'  Ins.  Co.  v.  Russell,  65 
37  N.  W.  819;  1  Sanborn  &  B.  Ann.  Ohio  St.  230,  56  L.R.A.  159,  62  N. 
Stat.  1889,  sec.  1943.  See  Wall  v.  E.  338;  Queen  Ins.  Co.  v.  Leslie,  47 
Equitable  Life  Assurance  Soc.  32  Ohio  St.  409,  9  L.R.A.  45,  24  N.  E. 
Fed.  273,  140  U.  S.  226,  35  L.  ed.  1072.  Compare  Burkett  v.  Georgia 
497,  11  Sup.  Ct.  822.  Home  Ins.  Co.  105  Tenn.  548,  58  S. 

3  Queen  Ins.   Co.   v.  Jefferson  lee  W.  848. 

Co.  64  Tex.  578;  Tex.  Rev.  Stat.  sec.        *  Qshkosh   Gas   Light   Co.  v.   Ger- 
2971.  mania  F.  I.  Co.  71  Wis.  454,  5  Am. 

*  Hartford  Fire  Ins.  Co.  v.  Bour-    St.  Rep.  233,  37  N.  W.  819. 

528 


CONSTRUCTION  §  194 

in  Kentucky^  it  was  held  that  a  provision  in  a  statute  ''tliat  all 
stulciiicuts  and  descriptions  in  any  application  for  a  policy  of  in- 
surance -hall  be  deemed  and  held  rej)resentations  and  not  warran- 
ties, nor  shall  any  misrepresentation,  unless  material  or  fraudulent, 
prevent  a  recovery  on  the  policy,"  was  but  declaratory  of  the  law 
then  existing  in  that  state.  It  was  further  declared  by  the  court 
that  the  very  purpose  of  the  statute  was  to  bring  such  representations 
and  warranties  within  its  provisions,  and  to  prevent  the  insured 
from  losing  his  indeumity  upon  either  a  representation  or  warranty 
that  was  not  fraudulent  or  material  to  the  risk,  and  when  parties 
have  entered  into  an  insurance  contract  since  the  adoption  of  this 
statute  they  must  be  held  as  contracting  with  reference  to  the  statu- 
tory provision.  So  much  of  the  opinion  in  the  case  of  tlie  Farmers' 
and  Drovers'  Insurance  Company  v.  Curry '^  which  hehl  a  contrary 
view  was  declared  overruled.  This  latter  case  held  that  when  the 
parties  undertake  in  the  policy  to  declare  the  meaning  and  effect  of 
its  stipulations,  they  have  the  right  to  do  so,  and  cannot  be  con- 
trolled by  statute.^  Under  a  Pennsylvania  statute,^  which  declared 
that  any  statement  in  an  application  for  a  life  policy,  though  in- 
correct, should  not,  if  made  in  good  faith,  avoid  the  policy  or  be  a 
ground  of  defense,  it  was  held  that  this  was  binding,  though  the  in- 
sured in  his  application  warranted  all  statements  therein  to  be  true, 
and  that  if  untrue  the  policy  should  be  void  notwithstanding  any 
statute  or  law  to  the  contrary." 

(g)  As  to  stipulations  in  the  policy  contrary  to  statvAory  require- 
ments: Emerigon,"  in  considering  the  question  whether  one  might 
stipulate  agreements  contrary  to  the  Ordonnance,^^  which  provided 
in  terms  what  the  policy  should  contain,  but  also  provided  in  ad- 
dition that  it  might  contain  all  other  covenants  the  parties  should 
choose  to  agree  upon,  states  the  rule  to  be  substantially  this:  that  it 
might  be  varied  from  in  all  point^'<  not  expressly  prohibited  and 
which  did  not  concern  the  es.sence  of  the  contract  nor  good  morals 

^Germania  Ins.  Co.  v.  Rudwig-,  80  Mutual  Life  Assn.  151  Pa.  St.  17,  24 

Ky.  223,  under  Ky.  Gen.  Stat.  1887,  Atl.    10(i4.      Examine    as    to    reprc- 

P-  308.  mentations    and    warranties,    §§    1882 

.     '13  Bu.sh  (Ky.)  312,  26  Am.  Rep.  et  seq.,  and  1942  et  seq.  herein. 

194.  K.iamiiie    Geiniania     Ins.     Co.     v. 

*  See  Barre  Boot  Co.    v.    Mulford  Rudwig,  80  Ivy.  223.     See  MeElroy 

Mutual   Fire   Ins.    Co.    7   Allen    (89  v.  Continental  Ins.  Co.  48  Kan.  200, 

Mass.)      42;      Chamberlain    v.    New  29  Pac.  478.  where  it  was  held  that 

Hampshire   Fire  Ins.   Co.  55  N.  H.  the  statute  of  limitations  in  the  state 

249.  ^[d     not     conflict    with    that    in    the 

'Act  Pa.  June  23,  1885.  policy. 

"Barro     Boot     Co.     v.     Mulford        iM-luicriiion  on  Ins.  (Meredith's  ed. 

Mutual    Fire    Ins.   Co.  7  Allen    (89  1850)  48. 

Mass.)     42;     Hermany     v.     Fidelity        ^^  Be  la  Marine,  art.  3.  des  iissur. 
Joyce  Ins.  Vol.  I. — 34.  529 


§  194  JOYCE  ON  INSURANCE 

nor  public  policy.  It  is  also  declared  by  a  well-known  writer  ^^  that 
"the  right  of  the  parties  by  a  positive  stipulation  and  within  certain 
limits  to  vary  or  prevent  the  application  of  any  of  the  rules  of  law 
by  which  their  rights  and  liabilities  under  the  contract  are  defined 
and  governed,  is  undoubted/'  It  will  be  observed  that  ^Ir.  Duer's 
statement,  if  it  be  held  to  be  the  law,  is  so  far  qualified  by  the  words 
"within  certain  limits,"  that  it  offers  a  wide  field  for  controversy  and 
construction.  Whether  the  parties  may  evade  the  positive  require- 
ments of  a  statute  in  its  nature  mandatory,  or  which  contain  provi- 
sions in  the  nature  of  conditions  precedent  to  acquiring  certain 
rights,  is  one  thing;  whether  they  may  waive  requirements  calcu- 
lated to  benefit  one  of  the  parties  is  another  matter,  and  whether 
the}^  may  waive  positive  prohibitions  presents  still  another  question. 
Emerigon's  rule  above  stated  is  reasonable,  beyond  that,  and  rulings 
that  parties  cannot  by  agreement  evade  the  operation  of  laws  which 
contain  requirements  in  the  nature  of  conditions  precedent  to  ac- 
quiring certain  rights,  the  decisions  are  not  clearly  in  harmony,  with 
the  exception  perhaps  that  courts  seem  inclined,  as  a  rule,  to  favor 
that  construction  which  shall  benefit  the  assured ;  ^*  and  the  genei'al 
rule  also  seems  to  be  that  no  contract  can  change  laws  in  existence, 
and  stipulations  in  a  policy  must  yield  to  the  statute.^*  So  policy 
conditions  repugnant  to  the  statute  are  not  binding  as  they  are  in- 
valid.^^  And  stipulations  in  the  policy  which  are  not  in  conformity 
with  statutory  requirements  ai'e  not  binding  ^'  for  statutes  are  para- 
mount to  repugnant  or  conflicting  contracts  or  stipulations  therein.^* 
And  clauses  of  a  policy  which  are  inconsistent  with  statutory  re- 
quirements and  which  materially  change  the  scheme  of  the  contract 
as  outlined  by  such  statutory  requirements  and  prohibitions  are  un- 
authorized and  invalid.^®     And  departure  from  the  exact  form  of 

13  1  Duer  on  Ins.   (ed.  1845)   271.  1907,  No.  187,  see.  1,  subdvs.  1  and 

i*See  §  1916  herein.  2.      The   court,   per  Blair,   J.,   said: 

1^  Sharj)  V.  Niagara  Fire  Ins.  Co.  "As  we  have  heretofore  held,  'the  re- 

164  Mb.  App.  475,,  147  S.  W.  154.  quirement     that     certain     provisions 

1^  Merchants'  Ins.  Co.  v.  Stephens,  shall  be  and  certain  others  shall  not 

22  Ivy.  L.  Rep.  999,  59  So.  511.  be  incorporated  in  the  policy  requires 

1"^  Equitable  Life  Assurance  Soc.  v.  us  to  say  that  no  provisions  should 

Wilson,  110  Va.  571,  3  Va.  App.  943,  be  inserted  which  have  the  effect  of 

66   S.  E.  836.     See  also  Burruss  v.  avoiding   or  nullifying  the  required 

National  Life  Assoc.  96  Va.  543,  1  provisions,'  and  'no    provision    may 

Va.  Sup.  Ct.  Rep.  57,  32  S.  E.  49.  rightfully  be  used  which  shall,  with 

18  Marston     v.     Kennebec    Mutual  or  without  action  of  the  policyholder, 

Life  Ins.  Co.  89  Me.  266,  56  Am.  St.  materially  change  or  avoid  the  stat- 

Rep.  412,  36  Atl.  389.  ute  scheme  of  the  contract.'     Mutual 

^  Franklin  Life  Ins.  Co.   v.    Com-  Benefit    Life    Ins.    Co.    v.    Commis- 

missioner    of    Insurance,    159    Mich,  sioner  of  Insurance,  151  Mich.  610, 

636,  124  N.  W.  522,  16  Det.  L.  N.  115  N.  W.  707.     Prior  to  the  enact- 

994,    39    Ins.    L.    J.    468,  pub.  acts  ment  of  the  statute,  it  was  optional 

530 


CONSTRUCTION  §  194 

life  policy  required  by  statute  which  are  not  beyond  doubt,  as  ad- 
vantageous to  the  insured  and  as  desirable  as  the  prescribed  provi- 
sion, and  which  are  not  in  accordance  with  public  policy  are  in- 
valid.^" So  an  application  which  is  not  made  a  part  of  the  policy  in 
the  manner  provided  by  statute  is  not  a  part  thereof,  although  the 
policy  so  provides.^  And  a  separate  agreement  contrary  to  a  stat- 
ute prohibiting  discriminating  between  policy  holders  is  void.^ 

While  a  nonforfeiture  statute  is  part  of  the  contract,^  still  where 
the  statute  provides  for  nonforfeiture,  after  payment  of  two  full  an- 
nual premiums,  and  also  provides  for  temporary  insurance,  this  can- 
not be  changed  by  a  stipulation  in  the  policy  requiring  the  payment 
of  three  full  annual  premiums  before  insured  can  claim  temporary 
insurance,  such  stipulation  being  void.* 

And  a  statutory  provision  in  the  nature  of  a  statutory  limitation 
of  actions  on  insurance  policies  cannot  be  eliminated  from  a  policy 
by  providing  therein  that  the  contract  is  wholly  embraced  in  its 
terms  and  that  of  the  application.^  So  a  time  limitation  for  suing 
in  a  policy  contrary  to  the  express  prohibition  of  the  statute  as  to 
such  stipulations  is  not  enforceable.^     But  a  statute  prescribing  a 

with  the  parties  what  provisions  the  Compare  Citizens  Life  Ins.  Co.  v. 
contract  should  contain  upon  the  McCIure,  138  Ky.  138,  27  L.K.A. 
subject  of  payment.  Since  the  pass-  (N.S.)  1026,  127  S.  W.  749,  con- 
age  of  the  act  it  has  ceased  to  be  aidered  liereafter  in  this  section, 
optional  with  the  parties  and  au-  ■*  Wall  v.  Equitable  Life  Assurance 
thorities  construing-  the  contract  inde-  Soe.  32  Fed.  273,  140  U.  S.  226,  35 
pendent  of  the  statute  ajre  not  con-  L.  ed.  497,  11  Sup.  Ct.  822,  Rev.  Stat, 
elusive.  .  .  .  The  question  of  Mo.  sec.  5983.  But  see  Caffery  v. 
waiver  has  no  application  to  the  case.  John  Hancock  Mutual  Life  Ins.  Co. 
The  respondent's  inquiry  is  limited  (U.  S.  C.  C.)  27  Fed.  25. 
to  a  consideration  of  the  question  *  Vose  v.  Hawkeye  Ins.  Co.  76 
whether  the  policy  forms  submitted  Iowa,  548,  41  N.  W.  300;  Acts  18th 
are  in  compliance  with  the  statute."  Gen.   Assembly   Iowa,   1880,   c.   211, 

^°  New  York  Life  Ins.  Co.  v.  Hard-  sec.  3.     Same  effect,  Taylor  v.  Mer- 

ison,  199  Mass.  190,  127  Am.  St.  Rep.  chants'  &  Bankers'  Ins.  Co.  83  Iowa, 

478,  85  N.  E.  410,  37  Ins.  L.  J.  848.  402,  49  N.    W.    994;    same    statute^ 

See    also,    ^tna    Life    Ins.    Co.    v.  Marden  v.  Hotel  Owners'  Ins.  Co.  85 

Ilardison      (Travelers     Ins.     Co.     v.  Iowa,  584,  52  N.  W.  509. 

Hardison)   199  Mass.  181,  85  N.  E.  ^  Qejj(.j.al    Accident    Fire    &    Life 

407,  37  Ins.  L.  J.  818.  Assur.  Co.  v.  Walker,  99  Miss.  404, 

^Imperial   Fire   Ins.   Co.  v.   Dun-  55  So.  51,  40  Ins.L.  J.  1504. 

ham,  117  Pa.  St.  460,  2  Am.  St.  Rep.  ^.s  to  time  limilation  in  standard 

686,   12   Atl.   668;   act   Pa.   Mav   11  fire  policy,  see  Bellinger  v.  German 

1881.      See   §§    186-187a,   190,  "lOOa  Ins.   Co.  100  N.  Y.   Supp.  424,  113 

herein.  A  pp.  Div.  917. 

^  Commonwealth   Life   Ins.    Co.   v.  As  to  the  right  of  the  legislature 

Bowling  (1908)  —  Ky.  — ,  114  S.  W.  to  shorten  or  prolong  the  period  of 

327.  limitation   for  suing,    see    Smith    & 

^  Christensen  v.  New  York  Life  Ins.  Marsh  v.  Northern  Neck  Mutual  Fire 

Co.  160  Mo.  App.  486,  141   S.  W.  6.  Assoc.  112  Va.  192,  38  L.R.A.(N.S.) 

531 


§  194  JOYCE  ON  INSURANCE 

period  in  which  relief  can  be  obtained  from  contracts  secured  hy 
fraud  has  no  effect  upon  an  incontestable  clause  in  a  life  insurance 
policy,  although  such  clause  makes  the  policy  incontestable  in  a 
much  shorter  time  than  the  statute  allows  for  obtaining  relief  from 
a  fraudulent  contract.'  And  conditions  annexed  to  the  policy  con- 
cerning notice  and  proof  of  loss  may  control  a  statutory  provision, 
as  we  have  already  sccn.^ 

Under  a  California  decision  the  parties  to  a  contract  of  rent  in- 
svrance  may  stipulate  for  a  method  of  ascertaining  and  computing 
the  loss  notMathstanding  the  statute  provides  that  the  sole  object  of 
insurance  is  indemnity.^ 

(h)  Express  statutory  provisions  making  void  policy  stipulations 
contra.  If  by  the  terms  of  a  statute  any  stipulation  in  a  policy  con- 
trary to  its  provisions  shall  be  void  it  imposes  a  condition  upon  every 
policy  thereafter  issued  notwithstanding  any  stipulation  in  the  pol- 
icy to  the  contrary.  It  is  an  independent  and  binding  obligation 
overriding  and  nullifying  any  stipulation  of  the  parties.^"  And 
stipulations  in  conflict  with  a  standard  policy  statute  are  void  where 
the  enactment  expressly  so  provides.^^  But  a  statutory  requirement 
that  every  contract  of  life  insurance  shall  contain  a  certain  provi- 
sion under  penalty  of  having  the  insurer's  license  withdrawn  does 
not  become  a  part  of  a  policy  which  does  not  contain  such  a  provi- 
sion. ^^ 

(i)  As  to  ivaiver:  There  cannot  be  any  waiver  of  statutory  pro- 
visions requiring  a  standard  form  of  fire  policy  where  the  statute 
expressly  precludes  waiver  being  set  up  by  the  company. ^^  Nor,  it 
is  held,  can  the  benefits  of  a  statute  be  waived  and  renounced  by  the 
policy-holders  of  a  purely  mutual  fire  insurance  company  so  as  to 

1016  and  note,  70  S.  E.  482,  40  Ins.  Fed.  638,  44  C.  C.  A.  93,  30  Ins.  L. 

L.   J.   1018;    Jones   v.    German    Ins.  J.  230. 

Co.  110  Iowa,  75,  46  L.R.A.  860,  81        ^^  Franklin  v.  New  Hampshire  Fire 

N.  W.  188,  29  Ins.  -L.  J.  60.     Con-  Ins.   Co.  70  N.  H.  251,  4/    Atl.  91, 

sidered  ante  under  this  section.  ^0  Ins.  L.  J    73;  Laws  18^9    c.  13, 

7  n-,.-         »    T  vp      T.,c     n^     ,r     M«     P»b-  Stat.  1901,  e.  liO,  sec.  18.     bee 
^Citizens'    Lire    Ins.    Co.    v.    Me-  /-.     .     i  a,i   <.  „i 

/-11  -too  T      10Q    OT  T  T?  A  /XT  a  \    Jnso    Cileason  v.    C  anterhary    Mutual 

Clure,  138  Ky.  138,  2/  L.n.A.(iN.b.)    „.       ,        /->      '70  at    tt    ro^    ra   Afi 
1  nor  1 97  <4  w  7W  Fire  Ins.  Co.  73  N.  H.  o83,  64  Atl. 

8  1^    7        ^■-         in  T>  r  +•   187,  35  Ins.  L.  J.  932. 

.      ^^'^To  ^'''^''Zi  ^''-    ""•  ''  Equitable    Life    Assur.    Soc.    v. 

Ins.  Co.  98  Mass.  420.  Bal)bitt,   11    Ariz.    116,    13    L.R.A. 

9  Whitney  Estate  Co.  v.  North^ern  ^j^^j  -^Q^g  (annotated  on  efHeet  of 
As.sur.  Co.  155  Cal.  521,  23  L.R.A.  statute  providin"-  for  application  of 
(N.S.)  123,  18  Am.  &  Eng.  Ann.  Cas.  reserve  to  the  purchase  of  extended 
512,  101  Pac.  911.  or  paid-up  insurance),  89  Pac.  531. 

1°  Knights  Templars'  &  Masons'  gee  also  Straube  v.  Pacific  Mutual 
Life  Indemnity  Co.  y.  Jarman,  187  Life  Ins.  Co.  123  Cal.  677,  56  Pac. 
U.  S.  197,  47  L.  ed.  139,  23  Sup.  Ct.   546. 

108,  32  Ins.  L.  J.  57,  case  affirms  104       "LYanklin  v.  New  Hampshire  Fire 

532 


CONSTRIJCTION  §§  194a,  195 

prevent  tlie  statute  from  operating  npon  its  contracts.^*  It  is  also 
<lecidecl  that  there  cannot  be  a  waiver  of  statutory  provisions  requir- 
ing poh'cies  to  be  construed  by  the  laws  of  a  foreign  state.^*  But  a 
statutory  provision  may  be  waived, by  a  stipulation  contra  in  the 
policy  where  such  w^aiver  is  not  against  public  policy  and  public 
policy  favors  the  stipulation.^® 

§  194a.  Same  subject:  what  statutes  are  and  are  not  part  of  con- 
tract: miscellaneous  cases. — A  statute  authorizing  reinsurance  or 
the  taking  over  of  another  company's  risks  become  a  part  of  the 
contract.^'  And  a  statute  which  permits  only  the  Attorney  General 
to  apply  for  the  appointment  of  a  receiver  constitutes  a  part  of 
every  contract  of  the  state  insurance  company  and  even  to  policy- 
holders who  are  citizens  of  foreign  states."  So  a  statute  requiring 
notice  through  the  mails  of  annual  premiums  due  is  part  of  the 
contract.^^  A  statute  does  not;  however,  apply  where  the  policy 
was  never  issued  and  a  receipt  for  the  first  premium  and  the  appli- 
cation constitute  the  only  evidence  of  a  contract,  and  the  acceptance 
of  the  application  does  not  aid  a  recovery  where  the  insured  was  not 
in  sound  health  when  the  policy  was  issued  and  one  of  the  condi- 
tions was  that  he  should  be  in  sound  health  at  the  date  of  issuance 
and  delivery  of  the  policy.^" 

§  195.  Indorsements:  marginal  references:  when  part  of  policy: 
when  not. — Where  an  indorsement  is  made  upon  the  policy,  it  must 
appear  that  the  parties  intended  that  it  should  be  considered  a  i)art 
thereof.^  An  indorsement  is  construed  as  a  part  of  the  policy  when 
expressly  referred  to  therein,  and  when  so  referred  to  it  makes  no 
difference  that  it  is  upon  the  back  of  the  policy,^  and  the  words  and 
figures  may  be  written  transversely.'  So  words  and  figures  written 
in  the  margin  are  generally  a  part  of  the  policy.*    A  memorandum 

Ins.  Co.  70  N.  H.  2")1,  47  Atl.  91,  30  Credit   Indemnity   Co.   v.    Carrollton 

Ins.  L.  J.  73;  Laws  1879,  c.  13,  Pub.  Furniture  Mfg.  Co.  95  Fed.  Ill,  3(i 

Stat.  1901,  c.  170,  .^e<-.  18.  C.  C.  A.  G71. 

^*Word   V.    Soutliern    Mutual   Ins.  ^^  Nail   v.   Provident    Saving-s  Life 

Co.  112  Ga.  585,  37  S.  K.  897.  Assurance   Soe.  —  Tenn.   Ch.  App. 

15  New    York    Life     In.s.     Co.     v.  —  54  S.  W.  109. 

Orlopp,  25   Tex.   Civ.  App.  284,  61  20  (;()„^„ion\veaUli  Life  Ins.  Co.  v. 

S.  W.  336.  Davis,  136  Ky.  339.  124  S.  W.  345. 

1®  Mutual  Life  Ins.  Co.  v.  Burden,  ^  Planlcrs'  Mutual  Ins.  Co.  v.  Row- 

9  Ga.  App.  797,  72  S.  F.  295.  land,  66  Md.  236,  240,  7  Atl.  257. 

"Federal  Life  Ins.  Co.  v.  Risinger,  ^  St.  Clair  County  Benevolent  Soe. 

46  Tnd.  App.  146.  v.    Fietsam,    97    111.    474;    Harris    v. 

"Brown  v.  Equitable  Life  As.sur.  Eagle  Fire  Ins.  Co.  5  Johns.  (N.  Y.) 

•  Soo.  142  Fed.  835,   S.  C.   Equitable  368.     See  §  19()  herein. 

:  jLife  Assoc,  v.  Brown,  213  U.  S.  25,  ^  X(>„y(^,^  y    Bertbon,  Doug.  12,  n. 

*  53  L.  ed.  682,  29  Sup.  Ct.  404.  But  *  McLaughlin  v.  Atlantic  Ins.  Co. 
lompare  as  to  policies  issued  to  citi-  57  Me.  170;  Pierce  v.  Charter  Oak 
zens    of     forciun     states,     American  Life  In.s.  Co.  138  Mass.  151;  DeHalin 

533 


§  lOoa 


JOYCE  ON  INSURANCE 


written  on  the  margin  prior  to  its  execution  and  delivery  enters 
into  the  construction  of  the  instrument,  and  is  a  part  thereof,*  and 
all  intendments  are  in  favor  of  construing  a  policy  as  nonforfeitable 
where  so  defined  in  its  margin.^  So  words  and  printed  figures  on 
the  margin  relating  to  payment  of  premiums  are  part  of  the  pol- 
icy.' The  same  is  true  of  a  description  of  goods  in  the  margin,* 
and  the  marginal  words  ''against  actual  total  loss"  may  limit  the 
liability.^  It  is  held,  however,  that  the  fact  that  the  indorsement  is 
written  on  the  policy  does  not  necessarily  make  it  a  part  thereof.^" 
So  where  a  fire  policy  was  indorsed  with  a  proviso  that  when  an 
alteration  in  the  property  was  intended  to  be  made  that  certain 
steps  should  be  taken  to  determine  whether  the  risk  would  be  there- 
l>y  increased,  it  was  held  that  such  indorsement  did  not  form  a  part 
of  the  policy  unless  referred  to  therein  as  such.^^ 

§  195a.  Same  subject. — Agreements,  benefits  and  privileges  stat- 
ed on  subsequent  pages  are  made  a  part  of  the  contract  as  fully  m 
if  recited  at  length  over  the  signatures  affixed  where  such  an  ex- 
press agreement  appears  upon  the  face  of  a  life  policy.^^  And  if  a 
life  insurance  policy  appears  on  one  sheet  of  paper  embracing  foui 
pages,  the  first  containing  the  main  contract,  the  next  certain  print- 
ed conditions  and  agreements,  the  next  the  application  and  certain 
acknowledgments  and  agreements  of  the  applicant,  and  the  last  the 
usual  indorsement  indicating  that  the  folded  paper  contains  a  pol- 
icy on  the  life  of  the  insured,  the  policy  consists  of  the  whole  docu- 
ment, and  an  offer  to  submit  it  in  evidence  carries  everything  on 


V.  Hartley,  1  Term  Rep.  34:5,  14  En^.  Mutual  Benefit  Life  Assoc.  118  N.  Y. 
Rul.  Cas.  171;  Cochran  v.  Retberg,  237,  6  L.R.A.  731.  23  N.  E.  186,  16 
3  Esp.  121.  Am.  St.  Rep.  749,  43  Hun  (N.  Y.) 

5  I'atch  V.  Piiopnix  :Mutual  Life  In.s.    61. 

Co.  44  Vt.  487.  _See  Emer.son  v.  Mur-  The  clause  "camphene  cannot  be 
ray,  4  N.  H.  171,  17  Am.  Dec.  407.  used  in  buiklino"  is  part :  Mead  v. 
For  case  where  memorandum  not  a  North  Western  Ins.  Co.  7  N.  Y.  530. 
part,  see  ^McQuittv  v.  Continental  i°  Stone  v.  United  States  Casualtv 
Life  Ins.  Co.  1.5  K.  I.  573,  10  Atl.  Co.  34  N.  J.  L.  371 ;  Caraher  v.  Roval 
635.  .  Ins.  Co.  63  Hun   (N.  Y.)   82,  17  N. 

6  Cowles   V.   Continental   Life   Ins.    Y.  Supp.  858,  44  N.  Y.  St.  Rep.  141. 
Co.  63  N.  H.  .300.  "Planters'     Mutual     In.s.     Co.    v. 

7  Pierce  v.   Charter  Oak  Life  Ins.   Rowland,  66  Md.  236,  240,  7  Atl.  257; 
Co.  138  Mass.  151.  Mullaney  v.  National  Fire  &  ]\Iarine 

8  Guerlain    v.    Columbian   Ins.    Co.    Ins.  Co.  118  Mass.  393.     See  further 
7  Johns.   (N.  Y.)   527.  as  to  when  indorsement  and  maro-inal 

^  P)urt  V.  Brewers'  &  Malsters'  Ins.   reference  not  a  part,  Kinsslev  v.  New 
Co.  78  N.  Y.  400.  9  Hun  (N.  Y.)  383.    England  Mutual  Fire  Ins^  Co".  8  Cusli. 

That    indorsements    and    marginal    (62  Mass.)  393. 
references  are  part  of  the  policy,  see       ^^  Grell  v.  Sam  Houston  Life  In.s. 
also,  Alabama  Gold  Life  Ins.  Co.  v.    Co.  (1913)  —  Tex.  Civ.  App.  — ,  157 
Thomas,    74    Ala.    578;    Wright    v.    S.  W.  756. 

534 


CONSTRUCTION  §  196 

the  four  pages,  rendering  it  unnecessary  to  thereafter  offer  spec- 
ially the  copy  of  the  application  for  the  policy  in  order  to  get  it  be- 
fore the  court.^^  Again,  where  it  is  obviously  so  intended  an  in- 
dorsement upon  a  previously  issued  policy  may  operate  as  equiva- 
lent to  an  erttirely  new  and  distinct  policy  containing  all  the  stipu- 
lations of  the  indorsed  upon  contract  save  those  the  adoption  of 
which  the  indorsement  negatives,  either  expressly  or  by  necessary 
implication.^*  And  where  the  form  used  for  a  policy  of  reinsurance 
was  one  primarily  intended  for  the  insurance  of  property  by  its 
owners  and  only  one  of  the  printed  conditions  was  applicable  such 
form  may  be  made  applicable  in  part  by  a  slip  pasted  upon  the  face 
of  the  policy.^*  And  where  by  express  language  the  indorsement 
on  a  certificate  provides  that  it  with  the  application  shall  constitute 
the  complete  and  only  contract  they  will  be  construed  together  as 
one  instrument. ^^ 

§  196.  Indorsements  continued:  conditions  annexed  to  policy,  etc.: 
when  and  when  not  part  of  same. — Conditions,  although  on  anoth- 
er paper,  may  be  made  a  part  of  the  policy  by  reference  when  an- 
nexed thereto,^'''  and  where  the  conditions  are  annexed  to  and  de- 
livered with  a  policy,  they  are  prima  facie  a  part  thereof,  although 
not  referred  to  in  the  policy.^^  So  the  proposals  and  conditions  at- 
tached to  a  policy  form  part  of  the  contract,  the  same  as  if  written 
in  the  body  of  it.^^  And  an  iron  safe  clause  slip  attached  to  the 
policy  and  referred  to  in  a  descriptive  attached  slip  as  subject  there- 
to constitutes  a  part  of  the  policy .^^  So,  also,  where  a  policy  of  in- 
surance is  made  "as  per  form  attached,"  it  is  held  that  the  provi- 
sions of  the  attached  form  nmst  prevail  over  the  inconsistent  pro- 
visions stated  in  the  body  of  the  policy.^  And  a  partly  printed 
partly  wa-itten  unsigned  paper  with  a  marginal  note  which  is  pin- 
ned to,  delivered  and  accepted  with  the  policy  is  held  a  part  of  the 
contract  even  though  said  paper  is  different  in  texture,  color  and 
quality  and  notwithstanding  the  policy  provisi<jn  that  the  contract 

"Grevening    v.    Washington    Life  iSMurdock    v.    Chenango    Mutual 

Ins.   Co.   112   La.   879,  104  Am.   St.  In.^.  Co.  2  N.    Y.    (2    Const.)    210; 

Rep.  474,  36  So.  790.  Hyatt   v.    Wait,    37    Barb.    (N.    Y.) 

^*  Corporation    of    London    Assur-  29. 

anec  v.  Paterson,  106  Ga.  538.  32  S.  ^^  Duncan  v.   Sun  Fire  Ins.  Co.  6 

E.  650,  28  Ins.  L.  J.  38.3.            '  Wend.    (N.    Y.)    488,    22    Am.    Dec. 

"  Royal  Ins.  Co.  v.  Vanderbilt  Ins.  539.     Esaniine  Jefferson  Ins.  Co.  v. 

Co.  102  Tenn.  264,  52  S.  W.  168,  28  Cothoal^7  Wend.  (N.  Y.)  72,  22  Am. 

In.=5.  L.  J.  910.  Dec.  56/. 

16  Covenant  Mutual  Life  Assoc,  v.  20  (-jty     Drug     Store    v.     Scottish 

Tultle,  87  111.  App.  309.  I^nion   &  National    Ins.   Co.  —  Tex. 

1''^  Jenninos     v.     Chenango   Mutual  Civ.  App.  — ,  44  S.  W.  21. 

Ins.  Co.  2  Denio  (N.  Y.)  75.  ^  St.  Paul  Fire  &  Marine  Ins.  Co. 

Riders  or  .s7/>s  as  part  of  contract:  v.  Kidd,  55  Fed.  23S,  5  C.  C.  A.  88, 

standard   policif,   see   §    191b   herein.  14  U.  S.  App.  201,  22  lus.  L.  J.  457. 

535 


§  196  JOYCE  OX  INSURANCE 

is  completely  set  forth  tlierein  together  with  the  application  there- 
for and  that  none  of  its  terms  can  be  modified  except  by  an  agree- 
ment in  writing  properly  signed.*^  Where,  however,  the  insured 
accepts  a  policy  with  conditions  printed  on  the  other  half  of  the 
sheet  with  the  policy  or  any  sheet  physically  attached,  the  intent 
that  the  two  shall  be  taken  togetlier  is  presumed,  although  they 
are  not  referred  to,  but  it  may  be  shown  that  they  were  annexed  by 
mistake.^ 

(a)  Conditions  and  stipulations  when  indorsed  upon  the  back 
of  a  policy,  when  properly  referred  to  in  the  body  of  the  instru- 
ment, became  a  part  of  the  contract  the  same  as  if  recited  therein 
but  they  are  not  a  part  of  the  contract  and  must  be  ignored  in  con- 
struing it  if  no  sufficient  reference  to  such  indorsed  conditions  and 
stipulations  is  made  upon  the  face  of  the  policy.*  And  the  refer- 
ence must  be  made  expressly  to  the  matters  indorsed  on  the  back 
of  the  policy  or  certificate.  A  general  reference  on  the  face  of  the 
contract  to  all  the  conditions  therein  named  is  insufhcient.^  If  tlie 
insured  agrees  on  the  face  of  the  policy  that  the  insurance  shall  be 
''subject  to  all  the  conditions  indorsed  hereon"  such  conditions  are 
binding  upon  him  as  a  part  of  his  contract.^  So  conditions  printed 
on  the  back  and  referred  to  in  the  body  of  the  policy  as  follows: 
"In  conformity  with  the  annexed  conditions,'"'  are  part  of  the  con- 
tract, even  tliough  they  are  unsigned^  And  where  the  policy  pro- 
vides that  it  is  issued  "on  the  special  conditions  stated  on  the  back 
of  this  policy,  which  are  hereby  accepted  by  the  assured  as  part  of 
this  contract,"  the  insured  is  bound  by  the  conditions  so  referred 
to.*  Again,  indorsements  on  the  back  of  a  policy  form  a  constit- 
uent part  of  the  contract  where  they  supply  certain  essentials 
necessary  to  complete  said  contract  which  essentials  do  not  appear 
upon  the  fact  thereof  and  both  the  face  and  back  of  the  policy 
will  constitute   the   contract,   where  such   indorsements   are  duly 

2  Timlin  v.  Equitable  Life  Assur.  Assoc  60  ^Ya.'^ll.  253,  Ann.  Cas. 
Soc.  of  the  IT.  S.  141  WL'^.  -!70,  124  19123,  762,  110  Pac  1005,  quotin(j  a 
N.  W.  253,  39  Ins.  L.  J.  295  <n:f/c/se<:/  similar  rule  from  Planters'  .Mutual 
in  note  Id.  302-306.  See  also  For-  Ins.  Co.  v.  Rowland,  iHi  Md.  2;)6,  240, 
man  v.  Mutual  Life  Ins.  Co.   (1917)  7  All.  257. 

—  Kv.  — ,  —  S.  W.  — ,  49  Ins.  L.        ^Page    v.    Knights    &    Ladies    of 

J.  139,  and  note  154.     Compwe  Co-  America  (1900)  —  Tenn.  Ch.  — ,  61 

operative  Ins.  Assoc,  of  San  Ancelo  S.  W.  1068.     See  §  196  herein. 
v.   Rav,  —  Tex.   Civ.   App.  — ,  138        ^  Brown  v.  United  States  Casualty 

S.  W.'H22.  Co.  (U.  S.  C.  C.)  88  Fed.  .38.  27  Ins. 

3  Crigler  v.  Standard  Fire  Ins.  Co.  L.  J.  951,  dismissed  90  Fed.  829. 

49  Mo.  App.  11;  Roberts  v.  Chenanijo        "'^  Kensinston     National     Bank     v. 
lyiutual  Ins.  Co.  3  Hill  (N.  Y.)  501:    Yorkes,  86  Pa.  St.  227. 
See    Murdofk    v.    Chenanao    Mutual        »  Porter  v.  United  States  Life  Ins. 
Ins.  Co.  2  N.  Y.  (2  ComstJ  210.  Co.  160  Ma.ss.  183,  35  N.  E.  678. 

*  Burbank  v.  Pioneer  Mutual  Ins. 

536 


COXSTRUCTION  §  1!)7 

piancd.^  And  an  indorsement  on  the  back  of  a  policy  uitli  tlie 
president",-;  and  secretary's  name  printed  under  such  indorsement 
makes  the  wliole  policy  the  contract  of  the  insurer  Avhere  the  presi- 
dent has  also  signed  his  name  on  the  face  of  the  policy.^"  The 
indorsement  on  the  back  of  a  certificate  of  membership  and  policy 
must  be  construed  together  with  the  face  of  the  certificate.^^  But 
an  indorsement  printed  on  the  back  of  a  policy  designating  its 
nature  is  no  part  thereof  and  insured  cannot  be  held  to  have  relied 
upon  it  rather  than  on  the  terms  of  the  instrument.^*^  And  the 
insured  cannot  generally  be  held  bound  by  conditions  which  are 
printed  on  the  back  in  small  type  where  they  have  not  been  called 
to  his  attention,  for  usually  the  policy  is  transmitted  to  the  insured 
after  the  agent  and  the  insured  have  contracted,  after  the  premium 
has  been  paid,  and  under  circumstances  which  put  it  out  of  the 
power  of  the  insured  to  object  to  such  provisions  inserted  in  it  as 
Avere  not  in  his  mind  or  in  the  oral  understanding  Avhich  was  had 
when  he  paid  the  premium." 

§  197.  Whether  premium  note  part  of  policy. — ^^The  premium 
note,  together  with  the  application  and  policy,  are  generally  parts 
of  the  same  transaction,  and  are  to  be  construed  together  in  de- 
termining the  rights  of  the  parties/^  especially  so  in  case  of  ambi- 
guity.^^ It  is  also  held  that  a  promissory  note  given  for  a 
premium  is  a  part  of  the  contract,  and  therefore  inadmissible 
to  change  the  terms  of  the  policy  in  relation  to  forfeiture." 
So  a  condition  in  a  note  of  forfeiture  for  nonpayment  of 
premium  is  held  to  be  nugatory  where  the  policy  contains  no 
such  provision  and  no  condition  that  it  should  not  take  eflect 
until  the  premium  is  paid;  but  is  executed  on  the  theory  that  the 

'  Bushnell  v.  Farmers'  Mutual  Ins.  part  of  the  policy.     In  this  ease  the 

Co.   81   Mo.   App.   523.      See   §    212  copies  contained  in  the  complaint  did 

herein.  not    contain    tliis    indorsement,    and 

^°  Equitable  Life  As.surance  Soe.  of  Avhen  the  policies  were  offered  in  evi- 

U.  S.  V.  Menth,  145  Ky.  IGO,  140  S.  dence     defendant     objected     on     the 

AV.  157,  nioditied  145  Ky.  746,  141  S.  ground  of  not  beinij  annexed  to  or 

W.  .37,  An  not.   Cas.  19136,  661  and  contained  in  tlie  comphiint.    Warwick 

note  663,  as  to  sufficiency  of  printed  v.    Scott,    4    Camp.    62;    Hygum    v. 

signature  within  statute  of  frauds.  Mtna  Ins.  Co.  11  Iowa,  21. 

^^  Smoot  V.  Banlvcrs'    Life    A.ssoc.  "  Bassell  v.  American  Fire  Ins.  Co. 

138  Mo.  App.  438.  120  S.  W.  719.  2   Hughes    (U.   S.   C.   C.)    531,   5;{6, 

12  Hill   V.    Travelers'   Ins.    Co.    146  Fed.  Cas.  1004. 

Iowa  133,  28  L.R.A.(N.S.)   742  and  i*  Schultz  v.  Hawkeve  Ins.  Co.  42 

note,  124  N.  W.  898.  Iowa,  2.39;  American  Ins.  Co.  v.  Slov. 

Ferrer  v.  Home  Mutual  Ins.  Co.  47  41   Midi.  385,  1  N.  W.  877. 

Cal.  416,  hold.s  that  an  indorsement  ^^  Kimbro  v.   Continental  Ins.  Co. 

on  the  back  of  the  policy  of  the  name  101  Tenn.  245,  47  S.  W.  213. 

and    place    of   bu.siness    of   tlie    com-  ^^  New   England    Mutual   Life  Ins. 

pany  by  which  it  is  issued  forms  no  Co.  v.  Hasbrook,  32  Ind.  447. 

537 


§§  197a,  198  JOYCE  ON  INSURxiNCE 

note  is  accej)tcd  as  payment  of  the  premium,  and  that  the  policy 
is  to  take  etteet  upon  the  acceptance  of  the  note  and  the  delivery 
of  the  policy.^"'  Where  the  note  is  not  accepted  as  ahsolute  pay- 
ment it  is  inadmissible  to  contradict  the  terms  of  the  policy."  It  is 
also  held  that  the  premium  note  is  so  far  a  collateral  instrument 
that  the  courts  will  not  permit  it  to  be  construed  so  as  to  defeat 
the  manifest  intent  of  the  parties  expressed  in  the  policy,  as  in  a 
case  where  the  terms  of  the  note  in  relation  to  forfeiture  are  incon- 
sistent therewith."  Other  cases  hold  that  the  premium  note  and 
the  policy  issued  by  a  mutual  company  are  independent  contracts.^" 

§  197a.  Same  subject:  statutory  provisions:  standard  policy. — 
A  statute  may  operate  to  preclude  certain  defenses  where  a  copy 
of  the  premium  note  is  not  endorsed  upon  or  attached  to  the  pol- 
icy .^^  And  where  the  statute  expressly  provides  that  the  policy 
and  deposit  note  given  therefor  are  one  contract,^  a  premium  note 
given  on  a  mutual  fire  policy  forms  a  part  of  the  contract  of  in- 
surance, even  though  it  is  neither  copied  in  full  into  the  policy, 
nor  written  upon  its  margin,  nor  across  its  face,  nor  attached  to 
it  by  slip  or  rider,  according  to  the  statute  relating  to  the  form  and 
use  of  the  standard  policy.^ 

§  198.  Usage:  how  far  a  part  of  policy. — It  has  been  constantly 
adjudicated  that  all  usages  which  are  so  well  established  and  so 
well  known  as  that  parties  engaged  in  the  trade  to  which  the  usage 
relates  are  presumed  to  have  contracted  in  reference  thereto,  be- 
come as  much  a  part  of  the  policy  as  if  written  therein  in  tcrms.^ 

1'^  Dwelling  House  Ins.  Co.  v.  Har-  "policy  and  note  shall  be  treated  as 

die,  37  Kan.  674,  16  Pae.  92.  parts  of  the  same  contract." 

18  Continental  Ins.  Co.  v.  Dorman,        ^  Russell  v.  Oxford  County  Patrons 

I'^o  Ind   189   25  N.  E.  213.  of  Husbandry  Mulual  Fire  Ins.  Co. 

~19  Fithian  V.  Northwestern  Life  Ins.  107   Me.    362,   78   Atl.   459.     ''If   it 

Co.  4  Mo.  App.  386.  uiay  have  been  a  debatable  question 

2°  American   Ins.   Co.  v.   Gallahan,  whether  this  provision  (which  is  now 

75  Ind.   168;   New   England   Mutual  sec  30,  c.  49)  declaring  that  a  policy 

Fire  Ins.  Co.  v.  Butler,  34  Me.  431;  and  deposit  note  are  one  contract  was 

Shaw   V.   Republic   Life  Ins.   Co.  67  so  far  inconsistent  with  the  provisions 

P.arb.   (N.  Y.)  586.  of  the  statute   of  1895,   establishing 

21  Summers  v.  Des  Moines  Ins.  Co.  and  requiring  the  use  of  a  standard 

116  Iowa,  503,  88  N.  W.  326,  Iowa  form   of  insurance   policy,   as  to  be 

Code  sec.  1741,  nonpayment  of  note  repealed   thereby,  that   question  was 

l)recluded  as  defense.  "  See  also  Du-  entirely  eliminated  by  the  revision  of 

buque   Fire  &    Marine    Ins.     Co.    v.  the  statutes  in  1903  whereby  sec.  30 

Oster,  74  111.  App.   139,  Iowa  Stat,  was  enacted  equally  with   the   other 

Gen.  sec.  1733,  of  18th  Gen.  A.ssemb.  provisions   of   c.  49,  relating  to  the 

(^rcClain's  Iowa  Code,  sec.  2),  c.  211,  form  and  use  of  the  standard  policy." 

claim  of  forfeiture  not  a  defense.  Id.  per  King,  J. 

iMe     Rev.     Stat.    c.   49,   sec.   30.       3  Colorado  Ins.   Co.  v.   Catlett,  12 

Under  original  act  Laws  1868  c.  194  Wheat.  (25  U.  S.)  383,  6  L.  ed.  664; 

538 


CO.^STRUCTION 


§  198 


But  such  inference  is  repelled  where  the  express  terms  of  the  pol- 
icy itself  by  iin])licution  shows  on  its  face  an  intent  to  contract 
without  reference  to  usage,*  for  the  parties  may  undoubtedly  make 
whatever  contract  they  please  in  this  respect.^  An  express  contract 
is  always  admissible  to  supersede  or  vary  or  control  usage  or  cils- 
tom,  for  the  latter  may  always  be  waived  at  the  will  of  the  parties.^ 
Insurers,  says  the  Connecticut  supreme  court,  ''are  presumed  to 
act  and  contract  in  reference  to  known  and  general  usage,  and  to 
submit  to  it,  and  such  general  usage  may  be  well  enough  said  to 
become  a  part  of  all  their  contracts."  '  So  Lord  ISIansfield  declares 
that  "every  man  who  contracts  under  a  usage  does  it  as  if  the  point 
of  usage  were  inserted  in  the  contract  in  terms."  '     The  established 


Renner    v.    Bank    of    Columbia.    9  '  Crosby  v.  Fiteh,  12  Cona.  422,  31 

Wheat.  (22  U.  S.)  581,  6  L.  ed.  166;  Am.  Dec.  745. 

Gracie  v.  Marine  Ins.  Co.  8  Craneh  *  Mason  v.  Skurray,  U.  P.  Case,  per 
(12  U.  S.)  75,  .3  L.  ed.  492;  Lord  Mansfield,  cited  in  1  Marshall 
Rogers  v.  Mechanics'  Ins.  Co.  1  on  Ins.  (ed.  1810)  226.  "Such  usages 
Story  (U.  S.  C.  C.)  60.3,  607,  form  part  of  the  law-merchant, 
608,'  Fed.  Cas.  12,016;  Martin  and  to  incorporate  them  with  the 
V.  Delaware  Ins.  Co.  2  Wash.  (U.  S.  policy  is  merely  to  admit  the  addi- 
C.  C.)  254,  Fed.  Cas.  9161;  Trott  v.  tion  of  known  terms  not  inconsistent 
Wood,  1  Gall.  (U.  S.  C.  C.)  443,  Fed.  with  the  tenor  of  the  instrument  and 
Ca.s.  14,190;  Union  Ins.  Co.  V.  Ameri-  well  understood  by  the  contracting 
can  Fire  Ins.  Co.  107  Cal.  327,  28  parties:"  1  Arnould  on  Ins.  fPer- 
L.R.A.  692,  40  Pac.  431,  48  Am.  St.  kins'  ed.)  71;  s.  p.  72;  Id.  p.  66,  sec. 
Rep.  140;  Taunton  Copper  Co.  v.  42;  Id.  65  side  p.  66.  "Whatever  is 
Merchants'  Ins.  Co.  22  Pick.  (39  usually  done  is  presumed  to  be  fore- 
Mass.)  Ill;  Stevens  v.  Reeves,  9  seen  and  to  be  in  the  contemplation 
Pick  (26  Mass.)  198;  Brough  v.  of  the  parti 's  in  making  the  contract, 
Wliitmore,  4  Term  Rej).  206,  per  But-  and  is,  therefore,  understood  to  be  re- 
ler,  J.  See  Savage  v.  Salem  Mills  Co.  ferred  to  by  every  policy,  and  to  make 
48  Oreg.  1,  10  Araer.  &  Eng.  Ann.  a  part  of  it  much  as  if  it  were  ex- 
Cas.  1065,  85  Pac.  69;  McClusky  v.  press:"  1  Marshall  on  Ins.  (ed.  1810) 
Klosterman  20  Oreg.  108,  10  L.R.A.  186,  c/^/wr/ Pellv  v.  Roval  Exch.  Assur. 
785,  25  Pac.  366.  Co.  1  Burr.  348,  14  "Eng.  Rul.  Cas. 
Usage;  incorporation  of;  construe-  ;;o.  "While  the  usage  is  established, 
tion,  see  Earl  of  Halsbury's  Laws  of  j^  becomes  part  of  the  contract,  and 
England,  pp.  .344  et  seq.  ],aj,  ^^g  g^^e  eft"(>ct  upon  the  construe- 
As  _to  con.struction  etc.;  usage,  see  ^-^^^  ^^  ^^^  p^ji^^  .^^  i^  it  ^^j.^  .,,1^^^ 

^^a"?/;-?^  iV"'^'"-    -r.     ,      P    ^T   ,      1  ed  bv  express  words :"     1  Duer  on  Ins 

*  Mobile    Marine    Dock    &    Mutual  ■'       ^ 


Ins.  Co.  V.  McMillan.  27  Ala.  77,  and 
see  cases  cited  in  last  note.  Varde- 
man  v.  Penn  Mutual  Life  Ins.  Co. 
125  Ga.  117,  54  S.  E.  66,  5  Amer.  & 
Eng.  Annot.  Cas.  221. 


press  woras :  ■  j.  uuer  on  ins. 
(ed.  1845)  p.  195,  sees.  42,  43,  et 
seq.  p.  271.  The  introduction  of  a 
clause  referring  to  usage  is  super- 
fluous, "since  the  contract  itself  by 
legal   construction,   and   without  any 


5  Parsons     on     Marine     Ins.     (ed.   express  provision,  fully  provides  for 
1868)  p.  88.     See  §  245  herein.  all  that  can  be  effected  by  a  general 

6  The  Schooner  Ree.'^ide,  2  Sum.  (U.    clause  of  this  de^scription :"     1  Phil- 

S.  C.  C.)  567,  570,  Fed.  Cas.  11,657,   lips  on  Ids.  sec.  36. 

per  Story,  J. 

539 


§  198  JOYCE  ON  INSURANCE 

usage  as  to  the  course  of  a  voyage  constitutes  a  part  of  the  policy 
as  much  so  as  if  expressed  therein  in  ternis.^  So  "what  is  usually 
done  by  such  a  ship  with  such  a  cargo  in  such  a  voyage  is  under- 
stood to  be  referred  to  by  every  policy,  and  to  make  a  part  of  it 
as  much  as  if  it  were  expressed."  ^°  In  this  case  the  usage  was 
to  store  rigging  in  a  particular  manner  universal  with  all  Pvuropean 
ships  for  many  years;  so  a  general  usage  among  shipowners  and 
underwriters  in  relation  to  the  settlement  of  average  loss,  if  known 
to  the  parties,  becomes  part  of  the  contract,  and  binds  them.^^  In 
marine  insurances  ''every  policy,  then,  in  the  absence  of  any  ex- 
press stipulation  to  the  contrar}^,  is  generally  read  as  though  it 
contained  on  the  face  of  it  an  exemption  in  terms  against  liability"' 
for  goods  carried  on  deck  contrary  to  the  usage  of  trade  in  like 
cases,^^  and  a  usage  of  a  mutual  benefit  association  that  a  ques- 
tion whether  a  member  was  a  Mason  in  good  standing  should  be 
decided  by  Masonic  tribunals,  is  held  to  be  as  conclusively  a  part 
of  the  contract  of  insurance  as  though  it  provided  so  in  terms.^^ 
Mr.  Duer,  in  considering  how  far  an  illegal  usage  enters  into  and 
becomes  a  part  of  the  contract  of  insurance,  says  "an  illeg.'l  usage 
does  not  become  a  part  of  the  contract  merely  by  the  consent  of  the 
insurers  to  assume  its  risk,  but  it  does  become  a  part  of  the  contract 
where  the  effect  of  the  policy  is  to  sanction  and  encourage  a  prac- 
tice which  the  law  condemns,  and  in  such  cases  the  insurance  is 
doubtless  void."  ^* 

^Bnlkelev  v.  Protection  Ins.  Co.  2  Eagle   Ins.    Co.   4  Pick.    (21   Mass.) 

Paine    (U.*^S.   C.   C.)    82,  Fed.   Cas.  429,  and  other  cases;  Id.    (Maclacb- 

2,118;    Eyre   v.    Marine    Ins.    Co.    5  lan's  ed.  1887)  281,  282).     See  Earl 

■\Vatts  &  S.   (Pa.)   116:   Salvador  v.  of  Halsbury's  Laws  of  England,  pp. 

Hopkins,    :>    Burr.    1707,    1714,    per  344  et  seq. 

Lord  Mansfield;  1  Arnould  on  Marine  ^^  Connolly  v.  Masonic  Mutual  Ben- 
Ins,  (ed.  1868)  69,  360,  side  pp.  70,  efit  Assn.  r)8  Conn.  552,  557,  18  Am. 
.354.  St.  Kep.  296,  20  Atl.  671,  9  L.R.A. 

1"  Pellv  v.  Roval  Exch.  Assur.  Co.  428. 

1  Burr.  "341,  .350,  14  Eng.  Rul.  Cas.  1*1  Duer  on  Insurance  (ed.  1845) 
30,  per  Lord  Man.sfic4d.  ^  274.    See  Hopper  v.  Sage,  112  N.  Y. 

"  Sanderson  v.  Columbia  Ins.  Co.    530,  8  Am.   St.  R^-p.  771,  20  N.  E. 

2  Cranch  {U.  S.  C.  C)  218.  350;  Columbus  &  H.  Coal  &  Iron  Co. 
12  1  Arnould  on  Marine  Ins.  (Per-    v.  Tucker,  48  Ohio  St.  41,  12  L.R.A. 

kins'  ed.)  1850,  68,  69   (cltiitg  Taun-    577,  29  Am.  St.  Rep.  528,  26  N.  E. 
ton  Cop.  Co.  V.  Merchants'  Ins.  Co.    630.     See  §  252  herein. 
22  Pick.  (39  Mass.)  108;  Wolcott  v. 

540 


CHAPTER   VIII. 
CONSTRUCTION  OF  POLICY. 

§  205.     Construction   generally. 

§  205a.  Recitals:  when  not  conclusive. 

§  206,     Whether  same  rules  govern  marine,  fire,  and  life  policies. 

§  206a.  Rule  as  to  standard  policy. 

§  206b.   Where   standard   policy   statute   declares   policy    binding   though 
not  in  form  prescribed. 

§  206c.  Rule  as  to  guaranty  or  fidelity,  contract,  credit  guaranty,  title, 
and  employers'  liability  insurance. 

§  207.     Construction:  mutual  companies:  benefit  societies. 

§  208.     Policies  construed  like  other  written  contracts. 

§  209.     Construction :  intention  of  parties  governs. 

§  209a.  Same  subject:  cases  generally. 

§  209b.  Same  subject:  construction  of  warranties. 

§  209c.  Same  subject:  application,  proposal,  policy,  et»J. 

§  209d.  Contemporaneous   agreements. 

§  210.     Construction:  reference  must  be  had  to  nature  of  risk  and  sub. 
ject-matter. 

§  211.     Construction  must  be  reasonable. 

§  212.     Contract  should  be  given  effect  if  possible. 

§  213.     Construction;  rejection  of  words  and  clauses. 

§  214.     General  and  special  clauses. 

§  214a.  General  provisions  not  referred  to  in  separate,  independent  para- 
graph nor  limited  by  prior  clause:  accident  policy. 

§  215.     Construction  will   1)C  given  to  uphold  the  law. 

§  216.     Words  are  to  be  construed  in  ordinary  and  popular  sense. 

§  217.     Construction:  technical,  etc.,  words. 

§  218.     Addition  of  words  by  construction. 

§  219.     Courts  cannot  extend  or  enlarge  by  construction. 

§  220.     Forfeitures  and  exceptions  not  favored  by  construction. 

§  220a.  Same  subject:  benefit  certificates. 

§  220b.  Same  subject:  guaranty  or  fidelity  insurance:  employers'  liability 

policy. 
§  221.     Construction  should  be  liberal  in  favor  of  assured  and  for  benefit 

of  trade. 
§  221a.  Same  subject. 

541 


§  203  JOYCE  OX  IXSUKANCE 

§  221b.  Same  subject :  kinds  of  insurance  to  which  rule  applicable. 

§  222.     Same  subject :  the  rule  contra  proferentem. 

§  222a.  Same  subject. 

§  222b.  Same  subject:   employers'  liability  policy. 

§  222c.  Same  subject :  accident  policy  under  workmen's  compensation  act. 

§  222d.  Same  subject :  reinsurance. 

§  222e.  Rule  as  to  standard  policy. 

§  223.     The  written  controls  the  printed  part  of  policy. 

§  224.     Same  subject:  eases. 

§  225.     Construction:  lex  loci  contractus. 

§  226.     Same  subject :  eases. 

§  227.     Same  subject :  exceptions  to  the  rule. 

§  228.     Same  subject :  mutual  benefit,  etc.,  societies. 

§  229.     When  place  where  policy  is  countersigned  is  place  of  contract. 

§  230.     When  place  of  delivery  is  place  of  contract. 

§  231.     When  place  of  acceptance  and  mailing  is  place  of  contract. 

§  231a.  Lex  loci:  situation  of  insured  property. 

§  231b.  Lex  loci :  fidelity'  or  guaranty  insurance. 

§  231e.  Lex  loci :  contracts  by  unauthorized  companies  or  agents. 

§  231d.  Lex  loci:  contract  stipulations. 

§  231e.  Lex  loci :  statutory  provisions. 

*5  231f.  Lex  loci :  public  policy- :  comity. 

§  231g.  Lex  loci:  rights  of  beneticiaries  or  claimants. 

§  231h.  Lex  loci :  adjustment  of  claim  on  forfeited  policy. 

§  231i.    Lex  loci :  reinstatement,  extension  or  revival  of  policy. 

§  231j.    Lex  loci :  policy  pledged  for  loan :  collateral  note :  capital-stock 

note. 
§  232.     Lex  loci :  assignment. 
§  232a.  Lex  loci:  substituted  policy. 

§  205.  Construction  generally. — Inasmuch  as  all  prior  negotia- 
tions are  assumed  to  be  merged  in  the  written  contract,  the  policy 
itself,  in  the  absence  of  fraud,  duress,  or  mistake  must  be  looked 
to  to  ascertain  the  meaning  and  intent  of  the  parties,^  and 
the  policy  will  be  construed  as  a  whole  ^  and  where  the  con- 
tract is  clear,  precise,  and  unambiguous  in  its  terms,  and  the 
sense  is  manifest  and  leads  to  nothing  absurd,  there  is  no  need  of 

iHigdnson  v.  Dall,  13  Mass.  96.  16  L.R.A.(N.S.)  1166;  13  Id.  2«3;  11 

See  §  181  herein.  Id.  340;  7  Id.  217;  5  Id.  790. 

See  Miller  v.  Interstate  Indemnity        ^  ^g^tna  Life  Ins.  Co.    v.    Bowling 

Co.  6  Lackawanna  Leg.  N.  62 ;  Slaw-  Green  Gaslight  Co.  150  Ky.  732,  150 

son  v.  Equitable  Fire  Ins.  Co.  82  S.  S.    W.    994,  43   L.R.A.(N.S.)    1128 

C.  51,   62   S.   E.   782.     Construction  note, 
generallv;  parol  evidence.     See  notes 

542 


CONSTRUCTION  OF  POLICY 


§  205 


a  resort  to  rules  of  construction,^  and  extrinsic  evidence  is  then  in- 
admissible to  vary  or  control  its  terms.*  Nor  can  a  contract  differ- 
ent from  that  made  by  the  written  agi*eement  be  read  into  it  to  give 
it  a  more  extensive  meaning  than  that  expressed,*  and  the  parties 
in  such  cases  should  be  held  to  their  agreement,^  for  where  there  is 
no  uncertainty  in  the  meaning  of  an  insurance  contract  and  it  is 
legal  and  not  against  public  policy  it  is  the  duty  of  the  court  to  en- 
force the  contract  as  made ; '  and  words  and  phrases  are  to  be  con- 
strued according  to  their  context.'  So  the  words  used  and  their 
relation  each  to  the  other  determines  their  construction  regardless 
of  the  punctuation.^  If  the  policy  be  ambiguous,  extrinsic  evidence 
is  admissible  not  to  contradict  or  change  the  contract,  but  to  develop 
and  explain  its  true  meaning.^"    Resort  may  then  be  had  to  the  facts 


3Emerigon  on  Ins.  (Meredith's  ed.  Okla.  286,  109  Pac.  535,  39  Ins.  L. 

1850)  c.  ii.  see.  7,  p.  49.  J.  1258,  1264.    See  §  185  herein. 

See  also  the  followinj:^  cases:  *  Knpfersmith    v.    Delaware    Ins. 

United  States.— Mc^^ixmey  v.  Gen-  Co.  80  N.  J.  L.  441,  34  L.R.A.(N.S.) 

eral  Accident  Fire  &  Life  Assur.  Co.  503    (annotated   on    admissibility   of 

211  Fed.  951;  Holm&s  v.  Phoenix  Ins.  extrinsic  evidence  to  extend  scope  of 

Co.  98  Fed.  240,  39  C.  C.  A.  45,  47  mortgagee   elau.se)    80    Atl.    561,   40 

L.R.A.  308;  Kiesel  &  Co.  v.  Sun  In-  Ins.  L.  J.  1938. 

.suranee  Office  of  London,  88  Fed.  243,  ^  Laventhal  v.  Fidelity  &  Casualty 

(iO  U.  S.  App.  10,  31  C.  C.  A.  578.  Co.  9  Cal.  App.  275,  98  Pac.  1075. 

Calif ornia.-^See  Laventhal   v,   Fi-  '  Cileck  v.  New  York  Life  Ins.  Co. 

delity  &   Casualty  Co.  9   Cal.  App.  95  Neb.  274,  145  N.  W.  693  {citing 


275,  98  Pac.  1075. 


Imperial     Fire     Ins.     Co.     v.     Coos 


Illinois. — Crandall    v.    Continental    County,  151  U.  S.  452,  14  Sup.  Ct. 


Casualty  Co.  179  111.  App.  330. 

Indiana. — Union  Life  Ins.  Co.  v. 
Jameson,  31  Ind.  App.  28,  67  N.  E. 
199. 


379,  38  L.  ed.  231;  Swartz  v.  Siegel, 
117  Fed.  13,  54  C.  C.  A.  399 ;  Dwight 
v.  Germania  Life  Ins.  Co.  103  N.^Y. 
341,  57  Am.  Rep.  729,  8  N.  E.  651)  ; 


Iowa. — Quinn    v.    Prudential    Ins.    Rye  v.  New  York  Life  Ins.   Co.  88 


Co.  116  Iowa,  522,  90  N.  W.  349. 
New  York. — Houlihan  v.  Preferred 


Neb.  707,  130  N.  W.  434,  40  Ins.  L. 
J.   910.      See  also   Jefferson  v.   New 


Accident  Ins.  Co.  196  N.  Y.  337,  25  York  Life  Ins.  Co.  151  Ky.  609,  152 

L.R.A.(N.S.)  1261,  89  N.  E.  927.  S.   W.   780    (contract  should   be  en- 

Texas. — Royal  Ins.  Co.  v.  Texas  &  forced  as  written)  ;  Royal  Ins.  Co.  y. 

G.  Ry.   Co.  53   Tex.   Ciy.  App.  154,  Texas  &  G.  A.  Ry.  Co"!  53  Tex.  Ciy. 

115  S.  W.  117.  App.  154,  115  S.  W.  117. 

Wisconsin. — Thui'ston  v.  Burnett  &       '  Hunter  v.  United  States  Fidelity 

Beaver-Dam    Farmers    Mutual    Fire  &  Guaranty  Co.  129  Tenn.  572,  167 

Ins.  Co.  98  Wis.  476,  41  L.R.A.  316,  S.  W.  692. 
74  N.  W.  1021.  ^  Holmes  v.  Phenix  Ins.  Co.  98  Fed. 

*  Dewees  v.  Manhattan  Ins.  Co.  35  240,  3!)  CCA.  45,  47  L.R.A.  308. 
N.  J.  L.  366.    See  also  Baltimore  Fire       1°  Finney  v.  Bedford  C.  Ins.  Co.  8 

Ins.   Co.   v.   Loney,   20   Md.   20,   36;  Met.  (49  Mass.)  348,  41  Am.  Dec.  51.5. 

Burnham  y.  Boston  Marine  Ins.  Co.  See  also  Sayles  v.  Northwestern  Ins. 

139  Mass.  399, 1  N.  E.  837;  Mumford  Co.  2  Curt.   (U.  S.  C  C)  610,  Fed. 

V.   Ilallett,   1    Johns.    (N.    Y.)    433;  Cas.  No.  12,422;    St.    Paul    Fire    & 

Capital   Fire  Ins.   Co.   v.  Carroll,  26  :\rarine  Ins.  Co.  v.  Balfour,  168  Fed. 

543 


§  205 


JOYCE  ON  INSURANCE 


and  circumstances  attendant  at  the  time  the  insurance  was  effected 
to  aid  the  interpretation,"  So  conversations  between  the  parties 
had  at  such  time  is  held  competent. ^^ 

Where  parties  have  by  certain  acts  of  their  own  placed  a  construc- 
tion upon  doubtful  terms  of  a  contract,  this  construction  will  be 
adopted  by  the  courts  as  against  them.^^ 


212,  47  C.  C.  A.  498;  Messeng'er  v.  but  to  state  any  distinction  satb^fae- 

(iernian  American  Ins.  Co.  47  Colo,  tory  to  my  own  mind  upon  which  the 

448,  107  Pac.  (543;  Tesson  v.  Atlantic  propriety  of  a(hnitting  the  evidence 

Mutual  Ins.  Co.  40  Mo.  33,  93  Am.  can  be  founded."     1  Duer  on  Insur- 

Dec.    293.  ance  (ed.  1845)  308. 

^^  United  States. — Fuller  v.  Metro-        "An  inquiry  is  often  made  into  the 

politan  Life  Ins.   Co.  37  Fed.  163;  history  of  a  clause  in  a  policy  and  the 

Manger  v.  Holvoke  Ins.  Co.  1  Holmes  pnrjiosc  for  which  it  was  introduced. 

(U.  "S.  C.  C.)  '287,  Fed.  Cas.  No.  9,-  But  although  thi.s  may  a  fiord  .some  aid 

305,  per  Shipley,  J.  in    arriving    at    its    uu^aning,    yet    it 

Maine. — Bickford  v.  Aetna  Ins.  Co.  cannot  control  the  construction  of  its 

101  Me.  124,  (J.J  Atl.  .552.  language."     1   Parsons  on   Ins.    (ed. 

Minne>ioia. — Frost's   Detroit   Lum-  1868)    129,   citing   Hugg  v.   Augusta 

her  &  Wooden  Ware  Works  v.  Mil-  Ins.  &  Banking  Co.  7  How.    (48  U. 

lers  &  Mfg's  Mut.  Ins.  Co.  37  .Minn.  S.)  595,  12  L.  ed.  834;  Kettle  v.  Al- 

300,  5  Am.  Rep.  846,  34  N.  W.  35.  liance  Ins.  Co.  10  Gray   (76  Mass.) 

Missotiri. — Renshaw     v.     INlissouri  344;   Heebner   v.   Eagle  Ins.   Co.   10 

State  Mutual  Ins.  Co.  103  Mo.  595,  Gray    (76  Mass.)    131,  69  Am.  Dec. 

23  Am.  St.  Rep.  904,  15  S.  W.  945.  308. 

New  York. — Reynolds  v.  Connneree  ^^  Brooklyn  Life  Ins*.  Co.  v.  Dutch- 
Fire  Ins.  Co.  47  N.  Y,  597,  per  er,  95  U.  S.  269,  24  L.  ed.  410.  See 
Church,  C.  J.  Missouri  State  Life  Ins.  Co.  v.  Ilill, 

0/,Zrt//oma.— Capital  Fire  Ins.   Co.  109  Ark.  17,  159  S.  W.  31;  Mutual 

V.    Carroll,    26    Okla.    286,    109    Pac.  Reserve  Fund  Life  Assoc,  v.  Taylor, 

535,  39  Ins.  L.  J.  12.58,  1264.  99  Va.  208,  3  Va.  Sup.  Ct.  131,  3/ 

Pemhstflrania. — Philadelphia     Tool  S.  E.  854. 
Co.   v.   British-American    Assur.    Co.        See  also  as  to  the  general  rule  in 

132  Pa.  St.  236,  19  Am.  St.  Rep.  596,  such  cases : 

W  Atl.  77;    Kauffman    Brothers    v.        Colorado. — Lovell  v.  Go.ss,  45  Colo. 

Western   Ins.    Co.   21    Lancaster    L.  304,  132  Am.  St.  Rep.  184,  101  Pac. 

Rev.  252.     See  §  210  herein.  72. 

12  Gray  v.  Harper,  1  Storv  (C.  C.)        y=7or/rf«.— Webster  v.  Clark,  34  Fla. 

574,  Fed.  Cas.  No.  5,716.  637,  27  L.R.A.  126.  16  So.  601. 

"Whether  parol  evidence  of  the  hidiana. — Union  Trust  Co.  v.  Rich- 
declarations  and  conversations  of  the  mond  City  Rd.  Co.  154  Ind.  291,  48 
parties  at  the  time  tlieir  contract  was  L.R.A.  41,  55  N.  E.  745;  Yincennes 
made  may  be  received  in  order  to  \.  Citizen's  Ga.slight  &  C.  Co.  132 
show  in  what  sense  general  words  Ind.  114,  16  L.R.A.  485,  31  N.  E. 
were  in  fact  used  by  them,  or  to  de-  573. 

lermine    particular   words    to    a   dis-        Nebraska. — Gorder  v.  Pankonin,  83 

tinct  and  particular  sense,  is  a  ques-  Neb.  204,  131  Am.  St.  Rep.  629,  119 

tion  that  I  have  purposely  omitted  to  N.  W.  449. 

discuss  in  the  text.     The  authorities        Pennsylvania. — Sternberg  v.  Brock, 

are  conflicting,  and  I  hav6  found  my-  225  Pa.  279,  133  Am.  St.  Rep.  837, 

self  not  only  unable  to  reconcile  them,  74  Atl.  166. 

544 


CONSTRUCTION  OF  POLICY.  §§  205a,  20G 

§  205a.  Recitals:  when  not  conclusive. — Recitals  in  policies  of 
int-iirance  which  are  not  contractual  elements  thereof  are  not  con- 
clu.sive  on  the  parties  thereto.^* 

§  206.  Whether  same  rules  govern  marine,  fire,  and  life  policies. 
—The  rules  of  marine  insurance  apply  to  the  interpretation  of  pol- 
icies on  vessels  expressly  employed  in  inland  navigation  when  not 
inapplicahle  from  the  particular  subject  matter.  In  a  New  Hamp- 
shire case  1^  it  is  declared  that  "great  strictness  has  always  been  held 
in  contracts  of  marine  insurance.  ...  I  apprehend  that  from 
this  strictness  existing  in  the  law  of  marine  insurance  have  been 
drawn  the  rigid  rules  laid  down  by  many  tribunals  upon  fire  in- 
surance policies,  and  that  the  authorities  in  cases  of  marine  insur- 
ance have  been  followed  in  actions  upon  policies  against  fire  without 
perhaps  sufiiciently  adverting  to  the  difference  that  exists  in  the 
knowledge  of  facts  upon  which  the  respective  contracts  are  founded. 
Kent  says  that  the  strictness  and  nicety  required  in  the  contract 
of  marine  insurance  do  not  so  strongly  apply  to  insurance  against 
fire,  for  the  risk  is  generally  assumed  upon  actual  examination  of 
the  subject  by  skillful  agents  on  the  part  of  insurance  offices.^®  The 
severity  of  these  rules  has  caused  courts  in  manv  instances  to  en-, 
deavor  to  avoid  their  effect."  "  It  is  said  that  insurance  on  lives  is 
governed  by  the  same  legal  rules  which  control  other  contracts,^^ 
and  that  it  is  to  be  construed  by  the  terms  in  which  it  is  couched. ^^ 
But  in  a  New  York  case  it  is  held  that  in  respect  to  life  policies  the 
rule  in  regard  to  the  construction  of  the  statements  of  the  assured 
in  the  application  is  different  from  that  which  prevails  in  constru- 
ing statements  in  applications  for  marine  and  fire  policies.  In  ap- 
plications of  the  former  class  the  statements  of  the  insured  concern- 
ing his  health  or  vital  organs  are  not  understood  or  intended  as 
warranties;  because  the  applicant  may  not  know  enough  of  the 
human  system  to  be  aware  of  the  existence  of  some  affection  of  a 
vital  organ,  and  because  the  insurers  are  supposed  to  rely  upon  the 
opinions  of  their  own  medical  advisers.^"     The  question,  however, 

"  Commonwealth  Mutual  Fire  Ins.  Life  Ins.  Co.  13  N.  Y.  31,  39,  64  Am 

Co.  V.  Hayden,  60  Neb.  636,  83  Am.  Dec.  52fl. 
St.  Rep.  545.  83  N.  W.  922.  i^  Connecticut  Mutual  Life  In.s.  Co. 

^5  Campbell  v.  Merchants'  &  Farm-  v.  Pvle,  44  Ohio  St.  19,  4  N.  E.  465, 

ers  ]\hit.  Fire  Ins.  Co.  37  N.  H.  43,  58   Am.   Rep.   781;   Law   v.   London 

72  Am.  Dee.  324,  per  Eastman,  J.  Tndispulable  Life  Pol.  Co.  1  Jur.  N. 

"  3     Kent's     Commentaries,     373.  S.  178,  1  Kav  &  .1.  2231,  24  L.  J   Ch 

See  17  Earl  of  Halsbury's  Laws  of  196.  3  Eq.  Rep.  338. 
England,  pp.  342,  527.  20  jjom   v.   Amicable  Mutual  Life 

"Caldwell  v.  St.  Louis  Ins.  Co.  1  Ins.  Co.  64  Barb.  (N.  Y.)  81.     As  to 

ir'^""'  ^'^'  representations    and    warranties,   see 

St.    John    V.    American    Mutual  §§  1882  et  seq.,  1942  et  seq.  herein. 
Joyce  Ins.  Vol.  I. — 35.             545 


§  20Ga  JOYCE  OX  INSURANCE 

of  concealment  in  marine  and  other  risks  is  important.''^  In  a 
United  States  Supreme  Court  case^  it  is  declared  that  "policies  of  life 
insurance  are  governed  in  some  respects  by  different  rules  of  con- 
struction from  those  applied  by  the  courts  in  cases  of  policies  against 
marine  risks  or  policies  against  loss  by  fire,"  which  are  contracts 
of  indemnity,  while  "life  insurance  is  not  necessarily  one  merely 
of  indemnity  for  a  pecuniary  loss,"  and  we  apprehend  that  this  is 
true  whether  life  insurance  be  considered  a  contract  of  indemnity 
or  only  a  contract  for  the  payment  of  a  fixed  sum.  So  the  court 
declares  in  an  Alabama  case  that  "a  contract  of  life  insurance  is 
simpler  in  form  in  the  relative  rights  and  duties  of  the  insurer  and 
the  assured,  and  differs  in  many  respects  from  marine  or  from  fire 
insurance,  and  yet  the  general  principles  applicable  to  marine  or 
fire  insurance  are  applied,  so  far  as  consistent  with  the  nature  and 
obligations  of  the  contract,  to  the  contract  of  life  insurance."  ^  But 
in  a  Georgia  case,  the  court  saj'S:  "All  provisions  of  our  code  in 
reference  to  fire  insurance,  wherever  applicable  are  equally  the  law 
of  life  insurance."  ^  It  is  said  by  the  court  in  Chartrand  v.  Brace,* 
that  "a  policy  of  life  insurance  is  in  the  nature  of  a  testament,  and 
although  not  a  testament,  in  construing  it  the  courts  will,  so  far 
as  possible,  treat  it  as  a  will."'^  And  the  question  involved  might 
arise  in  the  construction  of  wills.  So,  under  a  North  Carolina  de- 
cision rules  for  interpreting  the  will  of  a  testator  may  guide,  as  far 
as  they  are  applicable,  in  ascertaining  the  legal  effect  of  the  clause 
in  a  life  policy  designating  the  beneficiaries.  The  difference  in  the 
cases  consists  in  the  fact  that  the  interest  vests  under  the  policy  at 
once  upon  its  issue,  but  does  not  vest  under  the  will  until  the  death 
of  the  testator.®  It  is  held  in  Jolly  v.  Baltimore  Equitable  Society  ^ 
that  in  the  construction  of  policies  of  fire  insurance  the  same  strict- 
ness is  not  to  be  observed  as  in  the  construction  of  policies  of  marine 
insurance.* 

§  206a.  Rule  as  to  standard  policy.** — Although  a  standard  form 

21  See  §  1844  herein.  ^  cititjg  Bolton  v.  Bolton,  73  Me. 

1  Phcenix  Mutual  Life  Ins.  Co.  v.  299.     See  §§  309,  738  herein. 
Bailey,  13  Wall.  (80  U.  S.)  616,  619,  ^  Hooker  v.  Su^o,  102  N.  C.  115, 
20  L.  ed.  501.  11  Am.  St.  Rep.  717,  3  L.R.A.  217, 

2  Supreme  Commandery  Kniahts  of  8  S.  E.  919.     See  §  738  herein. 

the  Golden  Rule  V.  Ainsworth,  71  Ala.  '1  Har.  &  G.   (Md.)   295,  18  Am. 

436,  446,  46  Am.  Rep.  332.  Dec.  288. 

^  Massachusetts  Benefit  Life  Assoc.  *  As  to  construction  of  marine  and 

V.  Robinson,  104  Ga.  256,  42  L.R.A.  fire   policies,   see   17   Earl   of   Hals- 

261,  30  S.  E.  910,  27  Ins.  L.  J.  1003,  burv's    Laws   of   England,    pp.    342, 

1014;  Civ.  Code  sec.  2117.  527. 

4 16    Colo.    19,    26    Pac.    152,    12  »» See  §  222d  herein. 
L.R.A.  209,  25  Am.  St.  Rep.  235,  32 
Cent.  L.  J.  410. 

546 


CONSTRUCTION  OF  POLICY 


§  2p6a 


of  policy  is  prescribed  by  statute,  nevertheless  upon  its  acceptance  by 
the  parties  it  becomes  a  voluntary  contract  between  them  which  de- 
rives its  force  and  efficacy  from  their  consent.  It  constitutes  their 
contract,^  and  it  must  be  construed  by  the  same  rules  as  similar 
contracts  voluntarilv  entered  into.^°  And  the  fact  that  the  legis- 
lature  has  prescribed  a  standard  form  of  policy  affords  no  reason 
for  giving  to  a  clause  any  different  construction  from  that  theretofore 
given  by  the  courts  to  all  similar  contracts  made  without  legislative 
sanction. ^^  So  where  the  terms  employed  in  a  standard  policy  have 
been  in  previous  use  in  insurance  contracts  and  have  had  a  judicial 
construction,  it  will  be  assumed  that  said  terms  were  used  in  the 
standard  forms  in  the  sense  in  which  they  were  previously  used  and 
defined. ^^  It  is  determined,  however,  in  Wisconsin  that  its  standard 
policy  is  to  be  treated  and  construed  as  a  statutory  law,  as  well  as 
a  contract. ^^  A  distinction  also  seems,  impliedly  at  least,  to  be  made 
under  a  Minnesota  decision  by  the  court  in  these  words:  "The  rule 
of  construction  applicable  to  a  contract  of  insurance  in  cases  where, 
as  in  this  one,  the  Legislature  has  not  prescribed  a  standard  policy 
is  settled  to  the  effect"  etc.,  applying  the  rules  of  construction  in  case 
of  ambiguity,  etc.^* 


^Dnnton  v.  "Westchester  Fire  Ins.  Maisel   v.   Fire   Assoc,   of  Phila.   69 

Co.  104  Me.  372,  71  Atl.  1037,  38  N.  Y.  Supp.  181,  59  App.  Div.  461; 

Ins.  L.  J.  600,  20  L.R.A.(N.S.)  1058  Gazzara  v.  German  Union  Fire  Ins. 

{citing  Reed  v.  Washington  Ins.  Co.  Co.  155  N.  Car.  330,  Ann.  Cas.  1913E, 

138  Mass.  572).     See  also  Leisen  v.  282  note,  71   S.   E.  434;   Horton  v. 

St.  Paul  Fire  &  Marine  Ins.  Co.  20  Life  Ins.  Co.  of  Va.  (Horton  v.  Home 

N.   Dak.   316,   30   L.R.A.(N.S.)    530,  Ins.  Co.)    122  N.   Car.  498,  65  Am. 

127   N.   W.   837);    Shawnee   Mutual  St.  Rep.  717,  29  S.  E.  944;  Leisen  v. 

Fire   Ins.    Co.   v.    School   Board,   44  St.  Paul  Fire  &  Marine  Ins.  Co.  20 

Okla.  3,  143  Pae.  194.  N.   Dak.  316,  30  L.R.A.(N.S.)    539, 

10  Kollitz  V.  Equitable  Mutual  Fire  127  N.  W.  8:57. 

Ins.  Co.  92  Minn.  234,  99  N.  W.  892,  "  Dunton  v.  Westchester  Fire  Ins. 

33  Ins.  L.  J.  755.  Co.   104   IMe.   372,   20   L.R.A.(N.S.) 

See  also  the  following  ea.sos  where  1058,  71  Atl.  1037,  38  Ins.  L.  J.  600. 

this  principle  has  been  applied:  See  §  222a  herein. 

Chiche.ster  v.  New  Hamp.shire  Fire  ^^  John  Davis  &  Co.  v.  Insurance 

Tns.  Co.  74  Conn.  510,  51  Atl.  545;  Co.  of  North  America,  115  :\lich.  382, 

Cutler  V.  Roval  Ins.  Co.  70  Conn.  566,  73  N.  W.  393,  27  Ins.  L.  J.  184. 

41  L.R.A.  159,  40  Atl.  529:  Soroput  ^3  temple  v.  Niagara  Fire  Ins.  Co.- 

V.  London  &  Liverpool  &  Globe  Ins.  109  Wis.  372,  85  N.  W.  361,  30  Ins. 

Co.  155  N.  Y.  349,  49  N.  E.  935,  28  L.  J.  549. 

Ins.  L.  J.  59.  rev'g  85  Hun,  31.  32  Standard   policy;    as   to   constn;c- 

N.  Y.  Supp.  594;  Matthews  V.  Ameri-  tion   favorable   to   insured    and   rule 

can  Central  Ins.  Co.  154  N.  Y.  449,  contra  proferentum,  see  §  222d  here- 

456,  31  L.R.A.  433.  61  Am.  St.  Rop.  in. 

627,  48  N.  E.  751 ;  Nelson  v.  Traders  ^^  Hormel  &  Co.  v.  American  Bond- 
Ins.  Co.  83  N.  Y.  Supp.  220,  86  App.  ing  Co.  of  Bnltiraore,  112  Minn.  288, 
Div.  66:  Staire  v.  Home  Ins.  Co.  78  3.3  L.R.A. (N.S.)  513,  128  N.  W.  12, 
N.  Y.  Supp.  555,  76  App.  Div.  509:  40  Ins.  L.  J.  137. 

547 


§§  206b,  206c  JOYCE  ON  INSURANCE 

§  206b.  WJiere  standard  policy  statute  declares  policy  binding 
though  not  in  form  prescribed. — If  a  policy  is  issued  not  in  con- 
formity with  the  statutory  standard  form  and  the  statute  declares 
that  such  policies  shall  nevertheless  be  binding  but  does  not  pro- 
vide any  rule  of  interpretation  of  such  a  policy  issued  contrary  to 
law,  no  statute  is  incorporated  into  it  and  it  will  be  construed  as  it 
reads. ^^  In  the  decision  supporting  the  above  point  the  court  de- 
clares that  an  Ohio  case,^^  and  like  decisions  are  not  applicable  as 
they  hold  that  where  a  statute  provides  a  certain  rule  for  the  inter- 
pretation of  a  policy  the  statute  must  be  regarded  as  incorporated 
in  a  policy  issued  when  the  law  was  in  force  and  being  so  incorpor- 
ated must  prevail  over  such  cases  as  are  inconsistent  with  it. 

§  206c.  Rule  as  to  guaranty  or  fidelity,  contract,  credit  guaranty, 
title,  and  employers'  liability  insurance.^®^ — The  rule  as  to  Guar- 
anty or  Fidelity  Insurance  is  that  indemnity  bonds,  which  are 
not  ordinary  obligations  given  by  a  surety,  but  which  insure 
the  fidelity  or  integrity  of  an  employee  and  which  are  issued 
by  a  paid  surety  or  for  a  money  consideration  are  in  the  nature 
of  or  in  effect  a  contract  of  insurance,  and  are  to  be  construed 
by  the  same  general  rules  which'  govern  ordinary  insurance  con- 
tracts. In  a  Wisconsin  case  the  court,  per  Barnes,  J.,  says:  "The 
bond  in  question  was  an  indemnity  contract  entered  into  by 
the  defendant  for  a  money  consideration.  It  has  all  the  essential 
features  of  an  insurance  contract,  and  should  be  subject  to  the  same 
rules  of  construction  applicable  to  such  contracts."  ^'  In  a  Minne- 
sota case  the  court,  per  Start,  C.  J.,  says:  ''In  considering  the  ques- 
tion whether  the  surety  was  entitled  to  a  directed  verdict  for  any 
of  the  reasons  here  urged,  we  must  keep  in  view  the  character  of  con- 
tracts of  suretyship  of  corporations  organized  for  the  purpose  of 
engaging,  for  profit,  in  the  business  of  guaranteeing  the  fidelity  or 
contracts  of  a  third  party,  and  the  rules  of  construction  applicable 
to  their  contracts.  While  such  contracts  in  form  resemble  those  of 
suretyship,  they  are  in  effect  contracts  of  insurance,  to  which  the 
rules  of  construction  peculiar  to  contracts  of  suretyship  proper  do 
not  apply,  but  to  which  the  rules  governing  ordinary  insurance 
contracts  are  applicable.''  ^«  In  a  Federal  Supreme  Court  ca.se  the 
construction  given  to  the  bond  in  suit  was  based  upon  ''a  well-es- 

"  Hewins  v.  London  Assur.  Corp.  v.   American   Bonding   Co.  146  Wis. 

(12  cases)   184  Mass.  177,  68  N.  E.  573,  40  L.R.A.(N.S.)    661  and  note, 

69  131  N.  W.  994,  40  Ins.  L.  J.  ISOo. 

"is  Oueen  In^.  Co.  v.  Leslie,  47  Ohio        "  Hormel  &  Co.  v.  American  Bond- 

St.  409,  9  L.R.A.  45,  24  N.  E.  1072.  ing  Co.  112  Minn.  288,  293,  33  L.R.A. 

16a  See  §§  221b,  222a  herein.  (N.S.)    513   (annotated  on  character 

"United  American  Fire   Ins.   Co.  of  and  rules  governing  contracts  by 

r.AQ 


CONSTRUCTION  OF  POLICY  §  206c 

tablislicd  rule  in  the  law  of  insurance."  ^^  So  in  another  case  in 
the  Federal  Circuit  Court  of  Appeals  such  policies  are  declared  to 
be  policies  of  insurance  and  that  they  arc  to  be  treated  as  such.^° 
In  a  Colorado  case  the  court,  per  Campbell,  J.,  declares  tliat: 
''Learned  counsel  for  both  parties  are  in  accord  that  this  instru- 
ment, for  a  breach  of  whose  conditions  the  action  was  brought, 
though  denominated  a  bond  is,  in  legal  effect,  analogous  to  a  policy 
of  insurance.  Speaking  generally,  the  same  rules  of  interpretation 
and  construction,  therefore,  that  apply  to  fire  and  life  policies  ai'e 
applicable  to  it."  ^  So  in  a  Washington  case  it  is  declared  that : 
"While  this  class  of  suretyship  is  comparatively  new,  a  distinction 
has  been  clearly  announced  by  the  courts,  and  that  this  character 
of  suretyship  is  governed  by  rules  governing  insurance  contracts. 
.  .  .  This  class  of  insurance  cannot  be  distinguished  in  principle 
from  what  is  called  guaranty  insurance,  where  the  guaranty  com- 
pany guarantees  the  honesty  and  efficiency  of  employees.  .  . 
'Bonds  of  this  character  are,  in  their  nature,  insurance  contracts, 
to  indemnify  the  employer  against  the  dishonesty  of  employees. 
They  are  issued  for  profit,  and  the  same  rules  of  construction  must 
apply  thereto  as  apply  to  other  insurance  contracts.'  "  ^  So  under 
an  Illinois  decision  a  bond  guaranteeing  fidelity  o^  a  bank  employee 
is  an  insurance  contract  and  as  such  is  subject  to  same  rules  of 
construction  ap]>licable  to  insurance  policies  generally  and  not  the 
rules  applied  to  ordinary  sureties  for  accommodations  and  the  gen- 
eral principles  applicable  to  other  classes  of  insurance  are  also  ap- 
plicable.^ The  above-stated  principles  have  also  governed  in  numer- 
ous other  cases  of  this  class  of  guaranty  insurance.* 

corporations    engaged    for    profit    in  Pac.  989,  a  ca.se  of    guaranty    bond 

business   of  guarantying  the   tidelity  for  fidelity  of  employee, 

or  contracts  of  other  persons),  128  N.  ^United    Stales   Fidelity   &   Guar- 

W.  12,  40  Ins.  L.  J.  137.  anty  Co.  v.  First  Nat.  Bank,  233  111. 

13  American   Surety   Co.  v.  Pauly,  "*^^'    ^^    N.    E.    670,    quoting    from 

170  U.  S.  133,  42  L.  ed.  977,  18  Sup.  People  v.  Rose,  174  111.  310,  313,  44 

Ct.  552,  29  Ins.  L.  J.  3.  L.R-A-  124,  51  N.  E.  240. 

2°Tebbetts    V.    Mercantile     Credit   ^  *  h^'a''^ '^^''^''•Tr^''i'''ffc^''-  ''^ 

Guarantee  Co.  73  Fed.  95,  19  C.  C.   S°  v /'r'^^rP '    in^'^T  i?'''or''?.' 
^  992  Bank  &  trust  Co.  80  Fed.  760.  20  C. 

Ta   '     •         or        r    rr      .   ^       ^'-  -^-  1^^'  reliearing  denied,  82  Fed. 
1  America,!    Bonding  &   Trust   Co.   545,  rev'd  173  U.   S.  582,  43  L.  ed. 

1':  ^"''H'     T    ^"f?-  ^'  ^''  ^^''-  ^^-'   ^'^18,  19  Sup.  Ct.  551;  Jackson  v.  Fi- 
60  Ins.  L.  J.  642.  ,l^.li(^  &   Casualty   Co.   75  Fed.   35!), 

^Cowles  V.  United  States  Fidelity  41  U.  S.  App.  552,  21  C.  C.  A.  .394. 
&  Guaranty  Co.  32  Wasli.  120,  124-  J[r/caj?sa.s.— Title  Guarantv  &  Sure- 
120,  98  Am.  St.  Rep.  838,  72  Pac.  tv  Co.  v.  Bank  of  Fulton,'  89  Ark. 
1032,  per  Dunbar,  J.,  citinff  and  471,  33  L.R.A.(N.S.)  676,  117  S.  W. 
quothin  from  Remington  v.  Fidelity  537,  38  Ins.  L.  .J.  722;  United  States 
&  Deposit  Co.  2i  Wash.  429,  435,  67    Fidelity  &  Guaranty  Co.  y.  Bank  of 

549 


§  206c 


JOYCE  ON  INSURANCE 


So  in  a  suit  upon  a  contractors  or  sureties  bond  the  same  rule  of 
interpretation  has  been  applied  as  in  insurance  contracts.^ 

So  under  a  New  York  decision  a  case  of  credit  insurance  was 
treated  as  a  policy  of  insurance  and  the  same  rule  of  construction, 
in  the  case  of  ambiguity  or  uncertainty  as  to  the  meaning  of  con- 
ditions, was  applied  as  in  ordinary  insurance  contracts.^ 

Again  the  same  rules  governing  the  construction  of  other  policies 
apply  to  title  insurance.' 

An  employers'  liability  bond  or  policy  is  also  subject  to  like  rules 


Batesville,  87  Ark.  348,  112  S.  W. 
957;  American  Bonding-  Co.  v.  Mor- 
row, 80  Ark.  49,  96  S.  W.  613. 

Georgia. — John  Churcii  Co.  v. 
^'Etna  Indemnity  Co.  13  Ga.  App. 
826,  80  S.  E.  1093. 

Indiana. — American  Surety  Co.  of 
N.  Y.  V.  Pangburn,  182  Ind.'llO,  105 
N.  E.  769. 

Kentucky. — Fidelity  &  Deposit  Co. 
of  Md.  V.  Cliampion  Ice  ]Manufactur- 
ing-  &  Cold  Storage  Co.  133  Ky.  74, 
117  S.  W.  393;  Champion  Ice  Manu- 
facturing &  Cold  Storage  Co.  v. 
American  Bonding  &  Trust  Co.  115 
Ivy.  863,  103  Am.  St.  Rep.  3-36,  75 
S.  W.  197. 

Maryland — Union  Central  Life  Ins. 
Co.  V.  United  States  Fidelity  &  Guar- 
anty Co.  99  Md.  423,  105  Am.  St. 
Rep.  313,  58  Atl.  413,  .33  Ins.  L.  J. 
808,  per  McSherry,  C.  J. 

Missouri. — Fairbanks  Canning  Co. 
V.  London  Guaranty  &  Accident  Co. 
154  Mo.  App.  327^  133  S.  W.  064; 
Long  Brothers  Grocery  Co.  v.  United 
States  Fidelity  &  Guaranty  Co.  130 
Mo.  App.  421,  110  S.  W.  29:  Roark 
y.  City  Trust,  Safe  Deposit  &  Surety 
Co.  130  Mo.  App.  401,  110  S.  W.  1. 

North  Carolina. — Bank  of  Tarboro 
y.  Fidelity  &  Depo.sit  Co.  128  N.  Car". 
366,  83  Am.  St.  Rep.  682,  38  S.  E. 
908. 

Ohio. — Rankin  v.  United  States 
Fidelity  &  Guaranty  Co.  86  Ohio  St. 
267,  99  N.  E.  314. 

Oklahoma. — Guthrie  National  Bank 
V.  Fidelity  &  Deposit  Co.  of  Md.,  17 
Okla.  397,  79  Pac.  102. 

South  Carolina. — Walker  v.  Holt/- 
claw,  57  S.  C.  459,  35  S.  E.  754,  a 
case,  however,  of  a    statutory    bond 


550 


which  recited  the  requireznents  of  the 
law,  but  also  contained  other  con- 
ditions inserted  for  the  benefit  of 
defentlants.  The  court  said :  "Upon 
the  hearing  of  the  case  it  was  argued 
that  a  surety  is  a  favorite  of  the  law, 
and  it  should  be  strictly  construed  in 
his  favor.  While  this  is  true  as  a 
general  rule,  it  has  no  application  to 
a  case  like  this,  where  the  surety  re- 
ceives compensation  and  the  surety- 
ship is  in  the  line  of  its  regular  busi- 
ness." Tlie  surety  was  a  banking  and 
trust  company. 

South  Dakota.— Yarmevs  &  Merch- 
ants Slate  Bank  of  Yerdon  v.  United 
States  Fidelity  &  Guaranty  Co.  28  S. 
Dak.  315,  36  L.R.A.(N.S.)  1152,  133 
X.  W.  247. 

Tennessee. — Hunter  y.  United 
States  Fidelity  &  Guaranty  Co.  129 
Tenn.  572.  167  S.  W.  692;  Louisville 
&  Nashville  Rd.  Co.  v.  United  States 
Fidelity  &  Guaranty  Co.  125  Tenn. 
408.  148  S.  W.  671. 

Wisconsin. — United  American  Fire 
Ins.  Co.  v.  American  Bonding  Co.  of 
Baltimore,  146  Wis.  573,  40  L.R.A. 
(N.S.)  661  note,  131  N.  W.  994. 

^  ^Ana  Indemnity  Co.  v.  Waters, 
110  Md.  673,  73  Atl.  712:  Fitzger 
Brewing  Co.  v.  American  Bonding 
Co.  of  Baltimore,  115  ^linn.  78,  131 
N.  W.  1067. 

^  People  y.  Mercantile  Credit  Guar- 
antee Co.  166  N.  Y.  416.  60  N.  E.  24, 
30  Ins.  L.  J.  642.  See  also  Mercantile 
Credit  &  Guaranty  Co.  v.  Littleford 
Bros.  18  Cir.  Ct.  Rep.  (42  AVklv.  L. 
Bull.)  889. 

'Trenton  Potteries  Co.  v.  Title 
Guarantee  &  Trust  Co.  64  N.  Y. 
Supp.  116,  50  App.  Div.  490. 


CONSTRUCTION  OF  POLICY 


§  207 


of  construction  as  insurance  contracts,^  and  this  applies  to  a  policy 
taken  out  under  the  WorlcTnen's  Compensation  Act  of  England  of 
1906,  against  accidents  to  employees.^ 

§  207.  Construction:  mutual  companies:  benefit  societies. — It 
is  a  general  rule  that  contracts  of  insurance  with  a  mutual  company 
or  benefit  etc.,  society  or  association  are  construed  in  most  respects 
like  other  policies,^"  although  it  is  said  that  "the  business  of  in- 
surance [igainst  fire  has  been  greatly  increased  by  the  incorporation 
and  establishment  of  mutual  companies,  and  the  mode  of  transact- 
ing business,  as  well  as  the  property  insured,  differe  very  essentially 
from  that  of  marine  insurance.  The  method  of  doing  busin&ss  in 
these  com]ianies  also  varies  materially  in  some  respects  from  that 
wliich  prevails  in  stock  companies,  as  they  are  usually  termed.  And 
where  courts  now  for  the  first  time  to  lay  down,  without  regard 
to  authorit}^,  the  rules  of  law  that  should  govern  contracts  made 
between  mutual  companies  and  their  members,  I  apprehend  that 
in  many  jurisdictions  they  would  differ  essentially  from  the  rules 
which  at  present  prevail."  ^^    But  the  interpretation  can  be  no  dif- 


^  United  States. — iEtna  Indemnity       Indi-ana. — Elkhart      Mutual      Aid, 
Co.  V.  J.  R.  Crowe  Coal    &    Mining    Benevolent  &  Relief  Assn.  v.  Hough- 


Co.  154  Fed.  .545,  83  C.  C.  A.  4.31. 

Illinois. — London  Guarantee  &  Ac- 
cident Ins.  Co.  V.  Morris,  156  111. 
App.  533. 

Missouri. — Clears    Mining    Co.    v. 


ton,  103  Tud.  280,  2  N.  E.  763,  53  Am. 
Rej).  514;  Wilk-utts  v.  Xorthwestern 
xMutual  Life  Ins.  Co.  81  Ind.  300. 

loun. — Matthes  v.  Imperial  Acci- 
dent As-soc.  110  Iowa,  222,  81  N.  W. 


]\rarvland  Casualty  Co.  162  Mo.  App.  484,  29  Ins.  L.  J.  622. 

178.  101,  144  S.  W.   883:    Fairbanks  7ieH/McA;«/.— Metropolitan     Plate 

Canning  Co.  v.  London  Guarantee  &  Glass  &  Casualty  Tns.  Co.  v.  Ilawes, 

Accident  Co.  154  Mo.  App.  327,  133  150  Ky.  .52,    42    L.R.A.(N.S.)     700, 

S.  W.  664.  149  S.  W.  1110   (principle  applied). 

North  Carolina. — Henderson  Light-  Maine. — Xew  England  Mutual  Fire 

ing  &  Power  Co.  v.  ^larvland  Casu-  Ins.  Co.  v.  Butler,  34  Me.  451. 

altv   Co.   153  N.   C.   275;  30   L.R.A.  Missouri.SmaW      v.      Court      of 


(N.S.)  1105  and  note,  69  S.  E.  234. 

Ohio. — Travelers  Ins.  Co.  v. 
Meyers,  62  Ohio  St.  529,  49  L.R.A. 
760,  57  N.  E.  458,  29  Ins.  L.  J.  894. 

9  Bradley  &  Essex  &  Suffolk  Acci- 
dent Indemnity  Soc,  In  re,  81  L.  J. 


Honor,  136  ^VIo.  App.  434,  117  S.  W. 
116. 

Neic  Jersey. — Golden  StaiT  Fra- 
ternitv  v.  Martin,  29  N.  J.  L.  207,  35 
Atl.  908. 

Oregon. — Independent     Order     of 


K.  B.  523,   [1912]   1  K.  B.  415,  105  Forester  v.  Kelilier,  36  Greg.  501,  59 

L.  T.  919.  28  T.  L.  R.  175,  [1912]  W.  Pae.  324,  1109,  60  Pac.  563,  78  Am. 

C.  Rep.  6.    See  §  222b  herein.  St.   Rep.  785. 

On  what  constitutes  insurance,  see  Texas.- — Ilavwood  v.  Grand  Lodge 

extensive    note    in    47    L.R.A. (N.S.)  of  Texa.s  K.  of  P.  —  Tex.  Civ.  App. 

290:  on  construction  of  bond  or  poli-  —,  138  S.  W.  1194. 

cy    indemnifying    employer    against  See    Bacon's    Benefit    Societies    & 

loss  from  negligence  of  employee,  see  Life  Ins.  sec.  180. 

note  in  31  L.R.A. (N.S.)  775.  On  whetlier  a  Ix'nefit  association  is 

^°  Georgia. — Warwick   v.    Supi^eme  an   insurance   companv,   see   note    in 

Conclave  K  of  D.  107  Ga.  115,  32  S.  38  L.R.A.  33. 

E.  951.  "  Campbell  v.  :\Icrchant.s'  &  Farm- 

551 


§  207  JOYCE  ON  INSURANCE 

ferent  in  the  policies  or  certificates  in  such  companies  than  in  other 
insurance  contracts,  Avhere  tl:ie  words  are  used  for  a  definite  pur- 
pose, and  relate  to  clearly  defined  transactions,  as  that  a  policy  shall 
be  void  if  the  insured  die  in  known  violation  of  any  law.^^  If  the 
language  of  such  contracts  be  plain,  unambiguous,  and  well  under- 
stood to  have  a  fixed  meaning,  either  generally  or  as  technical  terms 
of  law,  that  meaning  will  be  given  the  same  as  in  case  of  other  con- 
tracts of  insurance, ^^  and  the  courts  will  adjudicate  the  rights  of 
members  in  reference  to  certificates  in  such  companies  upon  the 
same  principles  as  apply  to  insurance  companies.^*  So  the  policy, 
the  conditions  annexed  thereto,  the  charter,  and  by-laws  of  the  com- 
pany must  be  all  construed  together  in  cases  of  discrepancy,^*  and 
the  by-laws,  it  is  held,  must  receive  the  interpretation  put  upon  the 
contracts  of  which  they  are  a  part.^^ 

The  contract,  and  constitution  relating  to  it,  should  be  construed 
according  to  the  plain  and  obvious  meaning  of  their  provisions,  and 
with  a  view  to  accomplish  the  purpose  for  which  the  association  is 
maintained  and  persons  become  members  thereof."  And  the  in- 
tent may  be  gathered  from  the  language  of  the  certificate  read  in 
the  light  of  the  surrounding  circumstances  under  which  it  was  is- 
sued, including  the  subject-matter  to  which  the  words  relate  and 
such  matters  as  are  incident  thereto. ^^  It  is  also  held  that  the  chart- 
er and  by-laws  must  be  liberally  construed  to  eft'ectuate  the  purposes 
contemplated,^^  although  other  courts  have  adhered  to  a  different 
rule  limiting  the  company  or  society  strictly  to  the  exercise  of  those 

ers  Mut.  Fire  Ins.  Co.  37  N.  H.  44,  425,  34  L.R.A.(N.S.)  126,  134  S.  W. 

per  Eastman,  J.  928,  40  Ins.  L.  J.  737. 

12  Cluff  V.  Mutual  Benefit  Life  Ins.  ^^  JMullen  v.  Reed,  64  Conn.  240,  42 

Co.  99  Mass.  317.  Am.  St.  Rep.  174,  24  L.R.A.  664,  29 

1^  Wiggin  V,  Knights  of  Pj'thias,  31  Atl.  4/8:  Daniel  v.  Modern  Woodmen 

Fed.  122.  of  America,  53  Tex.  Civ.  App.  570. 

1^  Goodman  v.  Jedidjah  Lodge,  67  118  S.  W.  311. 

Md.  117.    See  Cliartrand  v.  Brace,  16  ^^  Indiana.  —  Supreme      Lodge 

Col.  19,  26  Pae.  152,  32  Cent.  L.  J.  Knights  of  Pythias  v.   Schmidt,  98 

420  Ind.  3/4. 

iSHvatt  V.  Wait,  37  Barb.  (N.  Y.)  ,    Massaclmsetts.-^l^ey  v.  Odd  Fel- 

29.     See  cases  in  i^s^  175,  176,  18-5-88  i^T  7  N   E    844 

herein.     See  also  Condon  v.  Mutual        A.  i  i  '      '     w^     a  *       *u 

„  T-      -i  T -c     K  on  ^t  ^   nn         Oklahoma. —  u  oodmen       or       the 

Reserve  F"nd  Life  Assoc.  89  Md.  99,  ^-^,^^j^j  ^^  Gilliland,  11  Okla.  384,  67 
44  L.R.A.  149,  31  Chic.  Leg.  News,  p^^  ^g- 

273,  42  Atl.  944:  Golden  Star  Fra-  p'enn^yUa nm.— Ma^eely  x.l^m^hXs. 
ternity  v.  Martin,  29  N.  .1.  L.  20/,  3o  of  Birmingham,  115  Pa.  St.  305,  7 
Atl.  908.  Cent.  Rep.  633,  9  Atl.  41,  43. 

16  Wiggins  V.  Knights  of  Pythias,       Tl'/s(;o»s/:».— Ballon  v.  Gile,  50  Wis. 
31  Fed.  122.     See  §  381  herein.  614,  7  N.  W.  561 ;  Erdman  v.  Mutual 

1''  Bi'otherhood  of  Locomotive  Fire-   Ins.   Co.   of  the  Order  of  Herman's 
men  &  Enginemen  v.  Aday,  97  Ark.    Sons,  44  Wis.  376.  See  §  381  herein. 

552 


CONSTRUCTION  OP  POLICY  §  207 

powers  conferred  by  their  charter.^"  But  it  is  held  that  a  stipulation 
in  the  policy  repugnant  to  a  provision  in  the  act  of  incorporation 
controls  the  latter/  and  the  same  is  held  to  be  true  where  by-laws 
are  inconsistent  wdth  the  provisions  of  the  policy,  the  company 
having  power  under  its  charter  to  issue  such  a  policy.^  And  a  con- 
dition in  a  certificate  controls  a  different  one  in  a  by-law^  where  the 
charter  provides  for  such  a  condition  in  either  the  certificate  or  by- 
laws.^ 80  where  certain  limitations  upon  liability  are  provided  for 
by  the  certificate  and  the  application  such  conditions  prevail  over 
by-laws  which  do  not  contain  such  limitations.'* 

Conditions  of  a  by-laW'  or  constitution  may  be  such  as  to  require 
a  strict  construction  even  to  the  extent  of  a  strained  interpretation 
to  avoid  them,^  and  provisions  for  forfeiture  will  be  strictly  con- 
strued so  as  to  prevent  their  enforcement  where  there  are  repug- 
nant conditions  and  such  as  are  in  favor  of  assured  will  be  given 
effect.6 

The  practice  and  opinion  of  the  officers  of  such  companies  as  to 
the  meaning  of  words  used  in  the  rules,  regulations,  and  by-laws 
cannot  change  by  construction  the  plain  terms  of  the  policy  or  af- 
fect the  rights  of  the  parties,'  although  the  acts  of  assured  and  such 
officers  will,  it  is  held,  be  considered.*  • 

So  the  customs  and  usages  adopted  by  the  society  are  inadmis.sible 
to  supersede  the  regularly  adopted  by-laws  and  thus  change  the 
contract.^  So  the  interpretation  which  the  ofhcers  of  a  benefit  as- 
.sociation  which  have  been  accustomed  to  give  to  certain  words  in 
certificates,  but  which  have  never  been  promulgated  as  a  rule  of  the 

2°  Supreme     Lodge     Knights      of  fit  society,  or  insurance  company,  see 

Honor  V.  Nairn,  60  ]\Iich.  44,  26  N.  note  in  47  L.R.A.  681. 

W.  826;  National  Mut.  Aid  A.ssn.  v.  ^  Bj.q^|,pj.|jqq(J   q£   Railroad    Train- 

Gonser,  43  Ohio  St.  1,  1  N.  E.  11;  men  v.  Newton,  79  111.  App.  oOO. 

and  see  Bacon's  Benefit  Societies  and  ^  Havwood    v.     Grand    Lodge    of 

Life  Ins.  sees.  170,  244,  245.  Texas  K.  P.  —  Tex.   Civ.  App.  — , 

1  Howard    v.    Franklin    Marine    &  138  S.  W.  1194.     See  §  220a  herein. 
Fire  Ins.  Co.  9  How.  Pr.  (N.  Y.)  45.  '  Wiggin  v.  Knights  of  Pythias,  31 
See  Bacon's  Mutual  Benefit  Societies  Fed.   122;   Manson   v.   Grand   Lodge 
and  Life  Ins.  sec.  178.  Ancient  Order  Pnited  Workmen,  30 

2  Davidson  v.  Old  People's  Mutual  Minn.  509,  ]6  N.  \V.  395.     See  ?lso 
Benefit  Soc'  39  Minn.  303,  1  L.R.A.  Morey  v.  Monk,  142  A  hi.  175,  38  So 
482,  39  N.  W.  803.     But  see  Bacon's  265.  " 

Mutual  Benefit  Societies  and  Life  Ins.  ^  Havnes  v.  Masonic  Benefit  Assoc, 

sec.  178.  08    Ark.    421,    136  S.  W.  ]87.     See 

3  Failev  v.   Fee,   83    Md.    83,    32  Mutual  Reserve  Fund  Life  Assoc,  v. 
L.R.A.  311,  34  Atl.  839.  Tavlor,  99  Va.  208,  3  Va.   Sup.  Ct. 

^I\rcCov  v.   Norfliwestern    Mutual    Rep.  131,  37  S.  E.  854.     See  §  309 
Relief  A.ssoc.  92  Wis.  577,  47  L.R.A.    herein. 
681,  66  N.  W.  697.  9  District  Grand  Lodge  v.  Cohn,  20 

On    conflict    between    by-laws    and   111.  App.  335;  Davidson  v.  Knights 
certificate,  or  policy,  of  mutual  bene-    of  Pythias,  22  Mo.  App.  263. 

553 


§  208  JOYCE  ON  INSURANCE 

association,  is  immaterial  even  tliough  certain  acts  had,  without 
notice  to  the  members  been  based  upon  this  custom.^" 

§  208.  Policies  construed  like  other  written  contracts. — Generally 
stated,  policies  of  insurance  are  subject  to  the  rules  of  construction 
which  are  applicable  to  other  contracts."  So  Nelson,  J.,  declares  that 
"there  is  no  more  reason  for  claiming  a  strict  literal  compliance  with 
its  terms  than  in  ordinary  contracts."  ^^    The  clause  in  a  policy  of  in- 

1"  Supreme    Council    Catholie    Be-    132  Am.  St.  Rep.  428n,    22    L.R.A. 
nevolent   Legion  v.   Grove,  176   Ind.    (N.S.)  964,  38  Ins.  L.  J.  895,  73  Atl. 
356,  36  L.R.A.(N.S.)   913,  96  N.  E.    187. 
159.  Massachusetts. — Hio-ginson  v.  Dall, 

"  United  States.— Uverpool,  Lon-  13  Mass.  96,  98. 
don  &  Globe  Ins.  Co.  v.  Kearnev.  180  Missouri. — Rensbaw  v.  Missouri 
U.  S.  132,  45  L.  ed.  460,  21  Sup.  Ct.  State  Mutual  Fire  &  Marine  Ins.  Co. 
326,  aTg  94  Fed.  314,  36  C.  C.  A.  103  IVIo.  595,  23  Am.  St.  Rep.  904,  15 
265;  Maryland  Casualty  Co.  V.  Finch,  S.  W.  945;  Hoover  v.  Mercantile 
147  Fed.  388,  77  C.  C.  A.  556:  Dela-  Town  Mutual  Ins.  Co.  93  Mo.  App. 
ware  Ins.  Co.  of  Phila.  v.  Greer,  120  111,  69  S.  W.  42. 
Fed.  916,  57  C.  C.  A.  188,  61  L.R.A.  Neio  Hampshire.  — Johnson  v. 
137 ;  Crane  v.  Citv  Ins.  Co.  3  Fed.  Maryland  Casualty  Co.  73  N.  H.  259, 
558.  Ill  Am.  St.  Rep.^  609,  60  Atl.  1009. 

California. — Pacific  Heatino-  Venti-  Neic  ror/i.^Pindar  v.  Resolute 
lator  Co.  y.  Williamsbursjh  City  Fire  Fire  Ins.  Co.  47  N.  Y.  114,  per  Rap- 
In.s.  Co.  158  Cal.  367,  111  Pac.  4;  pallo.  J.:  St.  John  v.  American 
Scliroeder  v.  Imperial  Fire  Ins.  Co.  IMutual  Life  Ins.  Co.  13  N.  Y.  31,  39, 
132  Cal.  18,  54  Am.  St.  Rep.  17,  63  64  Am.  Dee.  529;  Goix  v.  Low,  in 
Pac.  1074;  Wells,  Fargo  Co.  v.  Paci-  Johns.  Cas.  (N.  Y.)  341,  per  Kent, 
tic  Ins.  Co.  44  Cal.  39/  ;  Laventhal  v.  J.;  Lamb  v.  Prudential  Ins.  Co.  48 
Fidelity  &  Casualty  Co.  9  Cal.  App.  N.  Y.  Supp.  123,  22  App.  Div.  552. 
275,  98  Pac.  1075.  0/j/o.— Travelers'  Ins.  Co.  v.  Mvers, 

Delaicare.— Continental     Ins.     Co.    62    Ohio    St.  529,  49  L.R.A.  760,  57 
v.  Rosenberg,  7  Pen.   (Del.)  174,  74   N.  E.  458,  29  Ins.  L.  J.  894. 
Atl.  1073.  Oregon.— Weidert  v.  State  Ins.  Co. 

Illinois.— AviTOTa,  Fire  Ins.   Co.  v.   19  Oreg.  261,  20  Am.  St.  Re]i.  809.  19 
■  Eddy,  49  111.  ,106.  Ins.  L.  J.  740,  24  Pa*.  242. 

Indiana. — Ohio  Farmers  Ins.  Co.  v.  Pennsijlvanio.  —  McCaffrey  v. 
Vogel,  166  Ind.  239,  117  Am.  St.  Knights' &  Ladies  of  Columbia,  213 
Rep.  382,  76  N.  E.  977.  Pa.  St.  609,  63  Atl.  189. 

loua. — Dahms  &  Sons  Co.  v.  Ger-  South  Dakota. — Ferguson  v.  North- 
man Fire  In.-.  Co.  153  Iowa,  168.  40  em  Assurance  Co.  of  London,  26  S. 
Ins.^  L.  J.  2133,  132  N.  W.  870.  Dak.  346,  128  N.  W.  125. 

Kentuchij. — See  ^^tna  Ins.  Co.  v.  TFrts7(/»j^ion.— Hocking  v.  British 
Bowlino-  Green  Gaslight  Co.  150  Kv.  America  Assur.  Co.  62  Wash.  73,  36 
732,  43  L.R.A.(N.S.)  1128n,  150  S.  L.R.A.(N.S.)  1155n,  113  Pac.  259. 
W.  994;  Spring  Garden  Ins.  Co.  v.  Wisconsin. — French  v.  Fidelity  & 
Imperial  Tobacco  Co.  132  Kv.  7,  136  Casualty  Co.  135  Wis.  259,  17  L.R.A. 
Am.  St.  Rep.  164,  20  L.R.A. (N.S.)  (N.S.)  1011.  115  N.  W.  869. 
277,  38  Ins.  L.  J.  446,  116  S,  W.  234.       England.— ^ohert&on  v.  French,  4 

Maryland. — xliltna    Indemnity    Co.   East  L35,  14  Eng.  Rul.   Cas.  1,  per 
V.  Waters,  110  Md.  673,  73  Atl.  712   Lord   Ellenborough. 
(contract      insurance);     McEvov     v.        ^^ 'j^j-jgy  y    North  American  Fire 
Security  Fire  Ins.  Co.  110  Md."  275,   Ins.    Co.  "25    Wend.    (N.    Y.)    376. 

554 


CONSTRUCTION  OF  POLICY  §  209 

surance  requiring  the  certificate  of  a  magistrate  as  to  the  character 
of  the  assured  and  the  amount  of  the  loss  is  to  be  construed  as  Uber- 
ally  as  ordinary  conlracts,^^  though  a  policy  of  insurance  may  be 
avoided  by  representations  and  concealments,  which  would  not  be 
allowed  to  aflect  the  force  of  any  other  contract,  if  they  materially 
afl'ect  the  risk,  yet  with  regard  to  its  other  incidents,  it  is  subject 
to  the  same  rules  of  construction  as  other  contracts.  Thus,  it  is 
no  defense  to  an  action  on  a  premium  note  that  false  representations 
were  made  when  such  representations  were  plainly  contradictory  to 
the  terms  of  the  note  itself.^* 

§  209.  Construction:  intention  of  parties  governs. — The  cases 
are  numerous  which  hold  that  the  first  object  of  construction  is  to 
ascertain  the  intention  or  meaning  of  the  parties,  and  to  interpret 
the  contract  accordingly."     It  is  said  by  Denman,  C.  J.,^^  that  the 

Examine   IMcEvoy   v.    Security   Fire       Maryland. — Maryland   Ins.   Co.   v. 
Ins.  Co.  of  Biiltimore,  110  Md.  275,    Bossiere,    9    Gill    &    J.    {"Sid.)    121; 
73  Atl.  157,  38  Ins.  L.  J.  895,  132    Patapsco  Iny.  Co.  v.  Bi.scoe,  7  Gill  & 
Am.  St.  Rep.  428,    22    L.R.A.(N.S.)    J.   (Md.)  293,  28  Am.  Dec.  219. 
964.     See  §§  220-222  herein.  New    Hampshire. — Ander.«on        v. 

13  Tiirley  v.  North  American  Fire  Mina  Life  Ins.  Co.  75  N.  H.  375,  74 
Ins.  Co.  25  Wend.  (N.  Y.)   375.  Atl.  ,1051,  28  L.R.A.(N.S.)   730   (an- 

"  Farmers'  ^Mutual  Fire  Ins.  Co.  nolated  on  liability  for  indenniity 
V.  ]\Iarshall,  29  Vt.  23.  aijainst  total  disability  which  results 

15  Emeris'on  on  Ins.  (Meredith's  ed.  from  an  injury  for  which  an  inde- 
1850)  c.  ii.  see.  7,  p.  49.  "The  instru-  pendent  indemnity  is  provided); 
ment  avails  nothing  beyond  the  in-  John.-^un  v.  .Maryland  Casualty  Co. 
teutiou  of  the  parties':  "  Id.  c.  i.  73  N.  H.  259,  11  Am.  St.  Rep.  GOO, 
see.  5,  \^.  17.  60  Atl.  1009. 

See  also  the  followina:  cases:  Neic   York. — Schumacher  v.  Great 

United  States. — ^Mau'^er  v.  Holvoke  F^a-stern  Casualty  &  Indemnity  Co. 
Ins.  Co.  1  Holmes  (U.S.  C.  C.)  287,  197  N.  Y.  58,  27  L.R.A.(N.S.)  480, 
289,  Fed.  Cas.  No.  9,305.  and  note,  90  N.  E.  3.53,  39  Iiu'^.  L.  J. 

J. r/.;aHsa.s.— Fidelity  »&  Casualty  Co.  428  (intent  and  purpose  of  separate 
V.  Meyer,  106  Ark.  9i,  152  S.  W."^  995,  independent  parapTaph  c^overns)  ; 
44L.R.A.(N.S.)  493.  Paul  v.  Travelers'  Ins.  Co.  112  N.  Y. 

California.— Rauk'in  v.  Amazon  472,  8  xVm.  St.  Rep.  756,  3  L.R.A. 
Ins.  Co.  89  Cal.  203,  23  Am.  St.  443,  20  N.  E.  347;  ^larco  v.  Liver- 
Kep.  460,  26  Pac  872;  WelLs,  Fargo  pool  &  London  Ins.  Co.  35  N.  Y.  664; 
Co.  v.  Pacitic  Ins.  Co.  44  Cal.  397,  Ripley  v.  iEtna  Ins.  Co.  30  N.  Y. 
406.  136,  86  Am.  Dec.  362. 

Colorado. — INIessenger  v.  German-  North  Carolina. — Livingston  Groc- 
American  Ins.  Co.  47  Colo.  448,  107  cry  Co.  v.  Philadelphia  Casualty  Co. 
Pac.  643 ;  German-American  Ins.  Co.  157  N.  Car.  116,  72  S.  E.  870; 
V.  Messenger,  25  Colo.  App.  153,  136  Henderson  Lighting  &  Power  Co.  v. 
Pac.  478.^  ]\!arvland  Casualty  Co.  153   N.   Car. 

Georgia.— North  British  &  Mercan-  275,"  30  L.R.A.(N.S.)  1105,  69  S.  E. 
tile  Ins.  Co.  v.  Tye,  1  Ga.  App.  380,  224;  Bray  y.  Virginia  Fire  &  IMarine 
58  S.  E.  110.  Ins.  Co.  'l39  N.   Car.  390,  51  S.  E. 

Maine. — Blinn   y.   Dresden  IMutual    922. 
Fire  Ins.  Co.  85  Me.  389,  27  Atl.  263.        0/i/o.— Rankin    v.    United     States 

555 


§  209 


JOYCE  ON  INSURANCE 


question  is  "not  what  was  the  intention  of  the  parties,  but  what  is 
the  meaning  of  the  words  they  have  used."  ^"^  In  this  ease  the  parties 
had  failed,  by  apt  and  proper  words,  to  express  their  intention,  and 
the  contract  was  construed  in  accordance  with  the  meaning  of  the 
terms  employed.  In  connection  with  this  case  we  suggest  that,  if 
the  words  used  are  clear  and  precise,  it  is  not  an  unreasonable  pre- 
sumption that  the  parties  intended  that  meaning  which  the  words 
used  fairly  express,  even  though  the  parties  may  have  actually  in- 
tended otherwise,  and  if  the  meaning  of  the  words  is  obscure,  it  is 
but  just  that  other  aids  should  be  resorted  to  to  ascertain  what  mean- 
ing the  parties  intended  to  convey  by  the  words  they  have  used.^' 
The  general  rule  is,  that  the  intent  is  to  be  obtained  first  from  the 
language  of  the  entire  policy  in  connection  with  the  risk  or  subject 
matter.^^ 


Fidelity  &  Guaranty  Co.  86  Ohio  St.  him     .     .     .     ;  the  just  construction 

267,  94  N.  E.  314;  Travelei*s'  Ins.  Co.  of  an  instrument  should  tend  only  to 

V.  iMvers,  62  Ohio  St.  529,  49  L.R.A.  discover  the  meaning  of  its  author  or 

760,  57  N.  E.  458,  29  Ins.  L.  J.  894.  authors" :     Emerig-on    on    Insurance 

Oregon. — Mutual  Benefit  Lite  Ins.  (Meredith's  ed.   1850)    c.  II.  see.  7, 

Co.  V.  Cummings,  66  Oreg.  272,  133  p.  49.     This  learned  writer  also  de- 

Pae.  1169 ;  Weidert  v.  State  Ins.  Co.  clares  that  "the  Avords  of  the  contract 

19  Oreg.  261,  20  Am.  St.  Rep.  109,  are  to  be  taken  together  with  the  in- 

24  Pac.  242.  tention   of  the  parties.     Verba   con- 

Washington. — Port  Blakely  MUl  traetus  assecurationes  et  mentem  con- 
Co.  V.  Springfield  Fire  &  Marine  Ins.  trahentium  esse  attendenda,"  Id.  c.  i. 
Co.  59  Wash.  501,  140  Am.  St.  Rep.  sec.  5,  p.  17. 

863,  28  L.R.A. (N.S.)    596  and  note,  ^^  Colorado.— Messenger     v.     Ger- 

an     effect     of    temporary    condition  man-American  Ins.  Co.  47  Colo.  448, 

which  ceased  before  loss,  under  gen-  ]07  Pac.  643;  German-American  Ins. 

eral    provision    against    increase    of  Co.  v.  Messenger,  25  Colo.  App.  153, 

risk,  or  specific  provision  against  cer-  3  36  Pac.  478 ;  Goodrich   v.    Treat,   3 

tain  conditions.    110  Pac.  36.  Colo.  408. 

England. — Parkhurst      v.       Smith,  loica. — McCluer  v.  Girard  Fire  & 

Willes,  332,  per  Willis,  C.  .1.  j\rarine  Ins.  Co.  43  Iowa,  349,  22  Am. 

See  citations  under  third  next  fol-  Rep.  249. 

lowing  note,  also  17  Earl    of    Hals-  Kentucky. — Spring     Garden     Ins. 

bury's    Laws    of    England,   pp.   342  Co.  v.  Imperial  Tobacco  Co.  132  Kv. 

(marine)  527  (fire).  7,  136  Am.  St.  Rep.  164,  20  L.R.A. 

i6Rickman  v.  Carstars,  5  Barn.  &  (N.S.)   177,  116  S.  W.  234,  38  Ins. 

Adol.  651,  663.  L.  J.  277. 

^"^  See,  also,  Holmes  v.  Charlestown  Maine. — Blinn   v.  Dresden  Mutual 

Mutual  Fire  Ins.  Co.    10    Met.     (51  Fire  Ins.  Co.  85  Me.  389,  27  Atl.  263; 

Milss.)   211;  43  Am.  Dec.  428;  J.  I.  INloore  v.  Protection  Ins.  Co.  29  Me. 

Kellv  Co.  V.  St.  Paul  Fire  &  :^Iarine  97,  48  Am.  Dec.  514. 

Ins.  "Co.  56  Fla.  456.  47  So.  742,  38  New    TorA-.— Foot   v.    ^I^tna   Life 

Ins.  L.  J.  215,  236.  Ins.  Co.  61  N.  Y.    571 ;    Savage    v. 

^^  Emerigon  says:      "If  the  partv  Howard   Ins.    Co.   44  How.   Pr.    (N. 

who  could  and  should  have  explained  Y.)  40.  51,  52  N.  Y.  502,  504,  11  Am. 

himself  clearly  and  precisely  has  not  Rep.  741. 

done  so,  it  is  so  much  the  worse  for  North    Carolina — Lexington   Groc- 

556 


II 


CONSTRUCTION  OF  POLICY  §  209 

Policies  of  insurance  are  to  be  considered  with  reference  to  the 
intentions  of  the  parties,  to  be  ascertained  from  the  terms  and  con- 
ditions placed  therein.^"  If  the  language  used  by  the  parties  in 
writing,  the  contract  is  plain  and  susceptible  of  but  one  meaning, 
and  the  transaction  is  free  from  fraud  or  mistake,  that  language  will 
control ;  ^  but  if  the  language  is  ambiguous  and  obscure,  and  does 
not  in  itself  discover  the  intent,  then  resort  may  be  had  to  usage  or 
to  the  surrounding  circumstances  existing  at  the  time  the  contract 
was  made.^    And  the  rule  applies  to  mutual  benefit  certificates.^ 

Again,  a  policy  should  be  given  effect  according  to  the  sense  in 
which  the  parties  mutually  understood  it  when  it  was  made,*  and 
such  mutual  intention  controls  as  it  existed  at  the  time  of  contract- 
ing so  far  as  it  may  be  ascertained  *  and  is  lawful.^     And  such  mu- 

ery  Co.  v.  Philadelphia  Casualty  Co.  Indiana. — Northern  Assur.   Co.  of 

157  N.  C.  116,  72  S.  E.  870.  London  v.  Carpenter,  52  Tnd.  App. 

O/i/o.— Gorman    Fire    Ins.    Co.    v.  432,  94  N.  E.  779,  40  Ins.  L.  J.  1218. 

Roost,  55  Oliio  St.  581,  60    Am.    St.  Maine. — Bickford  v.  u5]tna  Ins.  Co. 

Rep.  711,  36  L.R.A.  236,  45  N.  E.  101  Me.  124,  63  Atl.  552. 

1097.  Michigan. — Hoose  v.  Prescott  In.s. 

Oregon.— Weidert  v.  State  Ins.  Co.  Co.  84  Mich.  309,  11  L.R.A.  340,  47 

19  Or.  261,  19  Ins.  L.  J.  740,  24  Pae.  N.  W.  587. 

242.                                    .  Missouri. — Renshaw     v.     Missouri 

Pennsylvania. — Snyder  v.  Groff,  8  State  Mutual  Fire  &  IVIarine  Ins.  Co. 

Pa.  Dist.  R.  291,  56  Le,?.  Intel.  237.  103  :\Io.  595,  23  Am.  St.  Rep.  904,  15 

Tea^s.— Roval  Ins.  Co.  v.  Texas  &  S.  W.  945 ;  Pietri  v.  Sequent,  96  Mo. 

G.  R.  Co.  53  Tex.  Civ.  App.  154,  115  App.  258,  69  S.  W.  1055. 

S.  W.  117.  New     Hampshire. — Andei'son       v. 

Wisconsin. — French   v.   Fidelity  &  ^^i^tna  Life  Ins.  Co.  75  N.  H.  375,  74 

Casualty  Co.  135  Wis.  259,  17  L.R.A.  Atl.  1051,  28  L.R.A. (N.S.)    730n. 

(N.S.)  1011,  115  N.  W.  869.  Oklahoma.— Capitai  Fire  Ins.  Co. 

See  §§  205,  210  herein.  v.  Carroll,  26  Okla.  286,  109  Pac.  535, 

20  Continental  Ins.  Co.  v.  Kyle,  124  39  Ins.  L.  J.  1258,  1264. 

Ind.  132,  19   Am.    St.    Rep.    77,    9  See  §§  205,  210  herein. 

L.R.A.  81,  24  N.  E.  727.  The  intention  of  the  parlies  must 

^  Warren   y.   Postal  Life   Ins.    Co.  primarily  be  sought    in    the   contract 

148  N.  Y.  Supp.  1024,  163  App.  Div.  itself    even    though    extraneous     evi- 

638.  dence    is    permissible.      Czerweny    v. 

2  Savage   y.   Howard    Ins.    Co.   44  National   Fire  Ins.  Co.    139    N.'   Y. 

How.  Pr.   (N.  Y.)   40,  51,  52  N.  Y.  Snpp.  345. 

502,  504,  11  Am.  Rep.  741;  Marco  v.  3  Mullen  y.  Reed.  64  Conn.  240,  42 

^u"r?7\  ^"^-m^"^-   "i''    ^-    ^T.  ^^^,'    Am.  St.  Rep.  174,  24  L.R.A.  664,  29 
Philadelphia    Tool    Co      v.     Bri hsh    ^^j    ^^g     j^^^-^j  ^.    ^,j^^^^^   ^.^^^_ 

American  Assur.  Co.  132  Pa.  St.  236,  „         n   \        ■        ko  rp        n-       a 

24;  25  Week.  Not.  Cas.  370,  19  Atl!  ?lf"  ^^V^™w   o'n      iT'.init'^^- 

77,  19  Am.  St.  Rep.  596.  ^^^'  ^^^  ^-  ^-  ^^^-    ^^^  §  ^07  here- 

See  also  the  following  cases:  ^'^4,r  ^      ,  t^     •/-     -ir         it/. 

Co/oraf?o.— Messenger   v.    German-  McCarthy  y.  Pacific  Mutual  Life 

American  Ins.  Co.  47  Colo.  448,  107  l»s.  Co.  178  111.  App.  502. 
Pac.  648;  German  American  Ins.  Co.       ^  McCaffrey  v.  Knights  &  Ladies  of 

y.  Messenger,  25  Colo.  App.  153,  136  Columbia,  213  Pa.  609,  63   Atl.   189; 

Pac.  478.  Miller  v.  St.  Paul  Fire  &  Marine  Ins. 

557 


§  209 


JOYCE  ON  INSURANCE 


tual  intention  is  to  be  deduced,  if  possible,  from  the  language  of 
the  contract  alone.'  And  it  governs  if  it  can  be  reasonably  deduced 
from  the  terms  of  the  contract.*  And  it  is  held  that  in  the  absence 
of  a  plea  and  showing  of  fraud  or  mistake  the  intention  of  the  par- 
ties must  be  gathered  not  from  what  they  said  or  did  or  thought 
they  intended  but  from  the  contract  itself.^ 

This  intent  should  not  be  contrary  to  legal  principles  or  rules  of 
law,^°  and  it  should  be  looked  to  rather  than  to  any  grammatical 
accuracy  in  the  use  of  language.^^  and  is  rather  to  be  regarded  than 
the  strict  literal  sense  of  the  words. ^^  Where  the  language  evidences 
that  the  assured  intended  to  do  or  omit  an  act  material  to  the  risk, 
it  will  be  so  construed,  and  the  assured  must  reserve  the  right  to 
change  his  intention  by  explicit  language.^^  Mr.  Parsons  ^*  in- 
quires, Which  intent  governs  where  there  is  reason  to  believe  that 
one  of  the  parties  intended  one  thing  and  the  other  another  thing? 
It  would  seem,  however,  that  the  intent  ought  to  be  a  concurrent 
one,  that  is,  not  the  intent  alone  of  either  the  insurer  or  insured, 
but  one  upon  which  the  minds  of  the  parties  met.^*  So  it  is  said 
that  there  is  no  principle  of  law  'Svhich  allows  the  understanding 
of  one  of  the  pai'ties  to  determine  the  meaning  of  the  contract."^* 


Co.  26  S.  Dak.  454,  128  N.  W.  609,  lev  v.  Nashville  Ins.  Co.  3  La.  Ann. 

40  Ins.  L.  J.  80,  Civ.  Code.  sec.  1245.  708,  48  Am.  Dec.  465. 

6  Miller  V.  St.  Paul  Fire  &  IMarine  ^^  Qj-oss  v.  Sbutliffe,  2  Bay  (S.  C.) 

Ins.  Co.  26  S.  Dak.  454,  128  N.  W.  220,  1  Am.  Dec.  645;  Evre  v.  Marine 

()09,  40  Ins.  L.  J.  80,  see.  1245  Civ.  Ins.  Co.  6  Whart.   (Pa.)  249,  254. 

Code.  ^^  Bilbrough     v.     Metropolis     Ins. 

'Sehroeder  v.   Imperial   Fire   Ins..  Co.  5  Duer  (N.  Y.)  587. 

Co.  132  Cal.  18,  84  Am.  St.  Rep.  17,  1*1  Parsons  on  Ins.  (ed.  1868)  75. 

63  Pac.  1074;  Miller  v.  St.  Paul  Fire  ^^  See  1  Duer  on  Ins.    (ed.  1845) 

&  Marine  Ins.  Co.  26  S.  Dak.  454,  128  159, 160;  Holmes  v.  Charlestown  Mut. 

N.   W.  609,  40  Ins.  L.    J.    80,    Civ.  Fire   Ins.    Co.    10    Met.    (51    Mass.) 

Code,  sees.  1247,  1248.  211,   216,   43  Am.   Dec.   428,  where 

8  MeEvoy  v.  Security  Fire  Ins.  Co.  the  court  refused  to  apply  insurance 

of  Baltimore,  110  Md.  275,  132  Am.  to   certain   chattels,   althoug-h   it   ap- 

St.  Rep.  428n.  22  L.R.A.(N.S.)  964n,  peared  that  the  insured  intended  to 

38  Ins.  L.  J.  895.  cover  them. 

■ '  Prussian    National    In.s.    Co.    v.  ^^  Monts^omery    v.    Firemen's    Ins. 

Ten-ell,  142  Ky.  732,  135  S.  W.  416,  Co.  16  B.^IMon.   (Ky.)  427)  441,  per 

40  Ins.  L.  J.  944.  Mai-shall,   C.   J.;    Stone    v.    Granite 

i»  Patapsco   Ins.    Co.  v.   Biscoe.   7  State  Fire  Ins.  Co.  69  N.  H.  438,  45 

Gill  &  J.  (Md.)  293,  28  Am.  Dec.  219;  Atl.    235,    29    Ins.    L.    J.    250.     See 

Parkhurst  v.  Smith,  Willes,  327,  per  Equitable  Loan  &   Security    Co.    v. 

Wille-s,  C.  J.     See  as  to  general  rule  Waring,  117  Ga.  599,  62  L.R.A.  93, 

in  other  contracts,  Equitable  Loan  &  44    S.    E.    320;     Supreme     Council 

Security  Co.  v.  Waring,  117  Ga.  599,  Catholic  Benevolent  Legion  y.  Grove, 

62  L.R.A.  93,  44  S.  E.'  320.  176  Ind.  356.  36  L.R.A.(N.S.)   913, 

11  Palmer   y.    Warren    Ins.    Co.    1  90  N.  E,  1059  (mutual  benefit  eertiti- 

Story   (U.  S.  C.  C.)   360,  365,  Fed.  cate). 
Cas.  No.  10,698,  per  Story,  J. ;  Brad- 

558 


I 


CONSTRUCTION  OF  POLICY  §  209a 

But  this  may  be  qualified,  as  where  one  party  acquiesces  in  such  un- 
derstanding and  complies  with  the  other's  demands  based  thereon. ^"^ 
And  a  policy  should  also  be  interpreted  as  the  assured  understood 
it  and  the  company  intended  he  should  understand  it,  if  all  parts 
of  the  contract,  taken  together,  admit  of  such  construction.^^  But 
the  construction  to  be  given  to  an  insurance  policy  will  not  be  con- 
trolled by  the  fact  that  in  correspondence  relating  to  the  loss  the 
insured  apparently  sought  to  bring  it  within  the  policy  as  interpret- 
ed by  the  insurer. ^^ 

But  when  a  person  accepts  insurance  upon  terms  so  written  in  the 
policy  by  the  insurer,  either  intentionallj'^  or  otherwise,  as  to  be 
calculated  to  deceive,  and  in  such  ambi.guous  language  that  it  is 
possible  to  construe  them  in  more  than  one  way,  a  construction  in 
favor  of  the  understanding  of  the  insured  at  the  time  the  policy  was 
taken  should  be  sustained.^" 

§  209a.  Same  subject:  cases  generally. — If  the  applicant  is  a 
foreigner,  with  an  imperfect  knowledge  of  the  language,  that  cir- 
cumstance should  be  considered  in  determining  the  meaning  of  the 
words  he  has  used.^ 

If  all  the  conditions  of  fact  expressly  provided  for  have  failed  and 
the  contract  is  silent  as  to  anything  further,  regard  must  be  had  to 
the  fundamental  intent  and  effect  of  the  contract.  And  where  a 
primary  intent  exists  the  secondary  question  may  depend  upon  the 
circumstances,  such  as  who  is  the  beneficiary.^ 

The  intention  of  the  parties  procuring  a  life  insurance  determines 
its  character.  Hence,  if  one  should  take  out  such  a  policy  to  him- 
self, and  at  once  assign  it  to  a  person  having  no  insurable  interest 
in  his  life,  the  courts  would  unhesitatingly  declare  in  accordance 
with  the  facts,  reading  the  policy  and  the  assignment  together,  as 
forming  part  of  one  transaction,  for  the  purpose  of  frustrating  a 
wagering  policy.^ 

Adjudications,  construing  the  same  clause,  made  prior  to  the  is- 
suance of  the  policy  by  the  courts  of  last  resort  in  several  states  will 
be  presumed  to  have  been  the  construction  intended  to  be  adopted 

"  Mutual  Reserve  Fund  Life  Assoc.  Assur.  .Co.  106  Mich.  47,  30  L.R.A. 

V.  Tavlor,  99  Va.  208,  3  Va.  Sup.  Ct.  636,  63  N.  W.  899. 

R.  IHl,  37  S    E.  854.  20  jq^pHi^  v_  Western  Life  Indemni- 

18  EMv  V.  Phoenix  Mut.  Life  Ins.  tv  Co.  207  N.  Y.  300,  100  N.  E.  1119, 

Co.  65  N.  H.  27,  23  Am.  St.  Rep.  17,  niVg  129  N.  Y.  Supp.  1126,  145  App. 

18  Atl.  89.  Div.  908. 

As    to    construction    placed    upon  ^  Knickerbocker   Life   Ins.    Co.    v, 

contract  bv  the    parties    themselves.  Trefz,  104  U.  S.  197,  26  L.  ed.  708. 

See  Missouri   State  Life  Ins.  Co.  v.  2  Smitli   v.  Metroiiolitan   I>ife  ]ns. 

Hill,  109  Avk.  17,159  S.W.  31;  also  Co.    222    Pa.    226,    20    L.U.A.(N.S.) 

§  205  herein.  928.  123  Am.  St.  Rep.  799,  71  Atl.  11. 

13  Jackson     v.     British     American  '  Steinbaek  v.  Diepenbrock,  158  N. 

559 


§§  209b,  209c 


JOYCE  ON  INSURANCE 


by  the  parties,  otherwise  the  language  of  the  policy  should  have 
been  modified  to  make  the  contrary  intent  clear.'* 

§  209b.  Same  subject:  construction  of  warranties. — The  inten- 
tion of  the  parties  must  control  in  the  construction  of  the  warranties 
contained  in  a  policy  of  insurance,  as  the  same  is  shown  by  the  sit- 
uation of  the  parties,  the  condition  of  the  thing  insured,  and  what 
was  said  or  done  at  the  time  the  insurance  was  eftected.^  But  it  is 
held  that  in  contracts  of  insurance  the  rules  of  construction  require 
that  reference  should  be  had  to  the  real  intention  of  the  "parties, 
except  in  cases  relating  to  warranties;  also  that  the  whole  contract 
be  considered,  and  when  one  clause  stands  with  others,  its  sense 
may  be  gathered  from  those  which  immediately  precede  and  follow 
it.« 

§  209c.  Same  subject:  application,  proposal,  policy,  etc. — In  ca.se 
of  ambiguity  the  application,  policy  and  premium  note  may  be  con- 
sidered together  to  ascertain  the  meaning.'  And  the  application  as 
well  as  the  terms  of  the  policy  itself  and  facts  known  to  the  insur- 
er's agent  may  be  considered  in  ascertaining  the  intent  of  the  pai'- 
ties.'  But  a  stipulation  in  the  policy  may  be  paramount  to  one  in 
the  application.^  Although  in  case  of  conflict  between  the  provi- 
sions of  a  policy  and  statements  contained  in  the  application  the 
former,  it  is  held,  controls,^"  still  where  the  proposal  is  "considered 
as  incorporated"  in  the  policy,  the  court  will,  on  construction  of  tbe 
two  documents  read  together,  give  effect  to  the  proposal  as  overrid- 
ing the  policy  where  they  differ,  for  where  a  party  receives  a  printed 
form  of  proposal,  it  is  reasonable  to  assume  that  he  reads  and  relies 
upon  it  and  that  he  will  receive  in  exchange  for  the  form  requn-ed  a 
policy  which  such  party  is  entitled  to  assume,  and  does  assume  in 
most  cases,  without  careful  reading  of  the  document,  to  accord  with 
the  proposal  form.^^    But  questions  and  answers  in  the  application 


Y.  24,  70  Am.  St.  Rep.  424,  44  L.R.A, 
417,  52  N.  E.  662. 

*  Fidelity  &  Casualty  Co.  v.  Lowen- 
stein,  97  Fed.  17,  38  C.  C.  A.  29,  46 
L.R.A.  450,  29  Ins.  L.  J.  Ill,  aff'g 
Lowenstein  y.  Fidelity  &  Casualty 
Co.  88  Fed.  474,  28  Ins.  L.  J.  52. 

^  House  v.  Prescott  Ins.  Co.  84 
Mich.  309,  11  L.R.A.  340,  47  N.  W, 
587.      See    §   1950   herein. 

^  Straus  V.  Imperial  Fire  Ins.  Co. 
94  Mo.  182,  4  Am.  St.  Rep.  368,  6 
S.  W.  698. 

'  Kimbro   v.   Continental   Ins.   Co 
101  Tenn.  245,  47  S.  W.  413. 

8  Merchants'  Mutual  Fire  Ins.  Co. 


560 


V.  Harris,  51  Colo.  95,  116  Pac.  143, 
40  Ins.  L.  J.  1733. 

9  ]\Iutual  Life  Ins.  Co.  v.  Hill,  193 
U.  S.  551,  24  Sup.  Ct.  538,  48  L.  ed. 
788,  rev'g  118  Fed.  708,  55  C.  C.  A. 
536. 

1°  Goodwin  y.  Proyident  Sayings 
Life  Assur.  Assoc.  97  Iowa,  226,  59 
Am.  St.  Rep.  411,  32  L.R.A.  473,  66 
N.  W.  157.     See  §  1935  herein. 

"  Bradley  &  Essex  &  Suffolk  Acci- 
dent Indemnity  Soc,  In  re,  81  L.  J.  K. 

B.  523,  530,  [1912]  1  K.  B.  415,  165 
L.  T.  919,  28  T.  L.  R.  175,  [1912]  W. 

C.  Rep.  6,  per  Faxwell,  L.  J.,  applied 
in  this  case  to  a  policy  taken  out,  un- 


II 


CONSTRUCTION  OF  POLICY 


§§  209d,  210 


should  be  construed  together  to  determine  the  meaning.^^  Again, 
compHcated  and  ambiguous  conditions  and  quahfications  of  appli- 
cations and  policies  may  involve  the  construction  of  the  terms  ac- 
tually employed,  so  as  to  effectuate  their  purpose  to  protect  both 
insurer  and  insured  from  fraud. ^^ 

§  209d.  Contemporaneous  agreements. — Where  two  contracts 
though  separate  in  furm  are  both  applied  for  and  agreed  upon  at 
the  same  time  as  one  transaction  they  must  be  considered  together 
for  the  purpose  of  determining  the  character  of  the  transaction  and 
the  intention  of  the  parties,  and  both  instruments  should  be  given 
effect  when  reasonably  possible.^* 

§  210.  Construction:  reference  must  be  had  to  nature  of  risk 
and  subject-matter. — The  language  of  a  policy  must  be  construed 
with  reference  to  the  subject  matter  and  the  nature  of  the  property 
to  which  it  is  applied,  and  with  a  view  to  the  objects  and  intentions 
of  the  parties  as  the  same  may  be  gathered  from  the  whole  instru- 
ment.^*   And  the  existing  law  relating  to  the  subject-matter  must 


der     the     workmen's     compensation  95  Miun.  133,  5  Amer.  &  Eng.  Ann. 

act,  1906,  of  England,  against  aeci-  Cas.  148,  103  N.  W.  902. 

dents  to  employees.  Missouri. — Jennings   v.    Todd,   118 

12  Coliins    V.'  Catholic     Order     of  Mo.  296,  40  Am.  St.  Rep.  373,  24  S. 
Foresters,  43  Ind.  App.  549,  88  N.  W.  148. 

E.  87.     See  §  222  herein.                   •  ^'ew  YorJc. — Palmer  v.  Palmer,  150 

13  Rupert    v.    Snpreme    Court     of  N.  Y.  139,  55  Am.  St.  Rep.  653,  44 
United  Order  of  Foresters,  94  Minn.  N.  E.  966. 

293,  102  N.  W.  715,  34  Ins.  L.  J.  324.  Oregon.— BrndiMdt  v.   Cooke,  27 

i*Urwan  v.  Northwestern  National  Oreg.  194,  50  Am.  St.  Rep.  701.  40 

Life  ins.  Co.  125  Wis.  349,  103  N.  Pac.  1;  Weber  v.  Rothschild,  15  Oreg. 

W.  1102,  34  Ins.  L.  J.  727;  Farmers'  385,   3   Am.    St.    Rep.   162,   15   Pac. 

Alliance  Ins.  Co.  v.  Atchison  Topeka  650. 

&  Santa  Fe  Ry.  Co.  (Same  v.  Hanks)  Fir/j'/wia.— Portsmouth   Cotton   Oil 

83  Kan.  96,  ilO  Pac.  99.  Refining  Co.   v.   Oliver  Refining  Co. 

In  support  of  the  general  rule,  see  109  Va.  513,  132  Am.  St.  Rep.  924, 

also  the  following  cases :  G4  S.  E.  ;)6. 

California.— Geiz   Bros.   &    Co.   v.  Wisconsin.— T\\ov^    v.    Mindeman, 

Federal  Salt  Co.  147  Cal.    115,    109  ^-^  ^X''';  \"^?'.  ^^V^t^-J*^-,?^^'- ^^^''^' 

Am.    St.    Rep.    114,    81    Pac.    416;  ^8  f^-.V"  l^G,  101  N  W  41.. 

Downing    v.    Rademacher,    133    Cal.  p'^^^'^V^fV'?'!    f'  ^n 

220,  85  Am.  St.  Rep.  160,  81  Pac.  gjV    n    r^  i    '    n    '     \       r     i^ 

.,„'                               ^           '  424;  De  Grarf  v.  Queen  Ins.  Co.  38 

,],.     .       p,  .           rn      ,  .   Q     •  Minn.  501,  8  Am.   St.  Rep.  685,  38 

7«mot5.— Chicago  Trust  &  Savings  ^r_  ^y.  696:  Ripley  v.  iEtna  Ins.  Co. 

Bank  v.   Chicago  Title  &  Trust  Co.  30  n.  Y.  136,  86  Am.  Dee.  362.     See 

190  111.  404,  83  Am.  St.  Rep.  138,  60  17  ^^^1  of  Ilalsbury's  Laws  of  Eng- 

N.  E.  586.  Innd,  p.-  342. 

Michigan. — Sutton  v.  Beckwith,  68  See  also  the  following  cases : 

Midi.  303,  13  Am.  St.  Rep.  344,  36  Umted  Slates.— 2FAnix.  Ins.   Co.  v. 

N.  W.  79.  Boon,  95  U.   S.   117,   24  L.  ed.   395 

Minnesota. — Myrick      v.      Purcell,  (considered  in  note  to  §  211  herein) 
Joyce  Ins.  Vol.  1—36.             561 


§  210  JOYCE  ON  INSURANCE 

be  presumed  to  have  been  considered  by  the  parties. ^^  An  accident 
policy  must  be  construed  with  reference  to  the  subject  to  which  it 
is  applied,"  and  the  general  purpose  and  situation  of  the  parties.^* 

The  subject-matter,  the  risk  and  the  various  provisions  of  an 
automobile  accident  policy  should  be  construed  together  to  ascer- 
tain the  controlling  thought  as  to  indemnity,  and  the  thing  con- 
tracted for.^^ 

In  case  of  a  policy  upon  livestock  it  has  been  said  that  ''such 
policies  must  be  presumed  to  have  been  made  with  reference 
to  the  purposes  for  which  such  property  is  ordinarily  used,  as 
well  as  the  manner  in  which  it  is  usually  kept.^°  It  may  be  add- 
ed as  within  this  rule  that  the  terms  and  conditions  of  a  policy 
should  be  construed,  if  possible,  so  as  to  give  them  a  meaning  rea- 
sonably applical)le  to  the  kind  of  insurance  upon  the  particular 
species  of  property  insured,  having  in  view  the  purposes  for  which 
it  is  ordinarily  used,  and  the  manner  in  which  it  is  usually  kept.^ 
So  the  known  cliaracter  of  insured's  business  must  be  considered, 
as  where  a  policy  is  issued  to  a  railroad  transfer  company  engaged 
in  handling  foreign  cars  or  cars  of  other  railroads,  leased  and  for 
which  assured  was  liable.'^  So  Avhere  the  insurance  is  against  loss 
from  accidental  damage  to  or  destruction  of  property  except  by  fire 

CalifornM.—Ranlet   v.    Northwest-  L.  J.  419,  per  Craig,  J.;  Rockford 

ern  National  Ins.   Co.  157  Cal.  213,  Ins.  Co.  v.  Nelson,  65  111.  420. 

107  Pac.  292,  39  Ins.  L.  J.  742.  ^^  Anderson  v.  ^l^tna  Life  Ins.  Co. 

CoZojwFo.— Messenger  v.    German-  75  N.  H.  375,  28  L.R.A.(N.S.)  730n, 

American  Ins.  Co.  47  Colo.  448,  107  74  Atl.  1051. 

Pac.  642;  German-American  Ins.  Co.  ^^  Patterson   v.   Standard   Accident 

V.  Messenger,  25  Colo.  App.  153,  136  Ins.  Co.  178  j\Iich.  288,    144   N.    W. 

Pac.  478.  491,  51  L.R.A.(N.S.)    583n    (on   in- 

Minnesota. — Frost's  Detroit   Lum-  surance  covering  automobiles,  or  in- 

ber  &  Wooden  Ware  Works  v.  Mil-  demnifying    against    injury,    or    lia- 

ler's    &    Manufacturers    Mutual    Ins.  bility  for  injury  caused  thereby,  see 

Co.   37  Minn.  300,  5  Am.   St.   Rep.  notes    in    44    L.R.A.(N.S.)     70;    51 

346,  34  N.  W.  35.  KR.A.(N.S.)  583;  and  L.R.A.1915E, 

Missouri. — Renshaw     v.     Missouri   "^'^J'.  .       __  „       ,        o.   -r.     i  -n- 
State  Mutual  Fire  &  Marine  Ins.  Co.    ^  ^o  C^^mg  Holbrook  v.  St   Paul  Fire 

103  Mo.  595,  23  Am.  St.  Rep.  904,  15   ^  ^.^Yi'"'    S''       i,  n  i.        !«    AU 
Q    ^v    QAc  Bovight  V.  Sprinsrneld  lire    &    Ma- 

ai    •         r^       1  T       r.  rr  P    line  Insurauce  Co.  34  Minn.  352,  25 

Texas.— Royal  Ins.  Co,  v.  lexas  &    ^  ^y  ygg 

G.  Ry.   Co.  53  Tex.  Civ.  App.  154,  On  anmjal  insurance  see  note  in  44 

715S.  W.  117.  L.R.A.(N.S.)  569. 

16  Brooks  v.  Metropolitan  Life  Ins.  i  j)^   CTrnfl  v.    Queen   Ins.   Co.   38 

Co.  70  N.  J.  L.  36,  56  Atl.  168.     See  Minn.  501.  8  Am.  St.  Rep.  685,  38 

§§  194,  194a  herein.  N.  W.  696,  per  Mitchell,  J. 

"  Ilealev  v.  INIutual  Accident  Assn.  2  ]>iienix  Ins.  Co.  v.  Belt  Rv.   Co. 

133  111.  556,  9  L.R.A.  .371,  25  N.  E.  82  111.  App.  265,  afi"d  182  lU.  33,  54 

52,  23  Am.   St.   Rep.  637,  31   Cent.  N.  E.  1046. 

562 


CONSTRUCTION  OF  POLICY  §  210 

or  liglitiiing,  the  character  of  the  property,  such  as  a  mill,  etc.,  and 
tliat  which  is  obvious' in  regard  to  it  including  the  natural  perils  to 
which  it  is  exposed,  and  wliicli  tlie  insurer  is  presumed  to  know, 
will  all  be  considered.'  80  the  evident  objects  to  be  accomplished 
by  the  insurance,  the  nature  of  the  property  or  business,  the  con- 
ditions, uses,  and  methods  rea.sonably  applicable  in  view  thereof  and 
of  which  the  insurer  will  be  presumed  to  have  knowledge,  are  all 
important  factors  in  construing  the  contract.'*  And  not  only  the 
evident  objects  of  the  contract  should  be  considered  but  reference 
must  also  be  had  to  the  benefits  to  be  secured  and  the  perils  or  risks 
sought  to  be  avoided.^  Again,  in  considering  the  prohibitions  and 
conditions  in  a  policy  of  insurance,  the  parties  must  be  presumed 
to  have  intended,  the  one  to  insure,  and  the  other  to  obtain  insur- 
ance on,  the  subject  matter  of  insurance  as  it  necessarily  was  at  the 
time,  and  must  continue  to  be  during  the  life  of  the  policy.^  Con- 
struction should  also  be  liberal,  having  in  view  in  the  case  of  marine 
policies,  the  nature  of  the  voyage,  and  the  intent  of  the  parties.' 
And  the  risks  excluded  as  well  as  those  included  are  factors  in  con- 
struing a  policy  on  goods  insured  against  loss  by  fire,  derailment 
of  trains  and  perils  of  the  sea.^  So  a  provision  in  the  policy  against 
loss  by  fire  avoiding  the  policy  if  the  property  becomes  encumbered 
has  been  held  not  to  include  encumbrance  by  judgment,  although 
within  the  terms  used.^  And  in  determining  whether  a  bond  to  be- 
come effective  as  a  lien  was  a  "chattel  mortgage"  encumbrance,  the 
circumstances  surrounding  the  execution  of  the  instrument,  the 
situation  of  the  parties  to  it  and  what  was  done  under  it,  and  also 
the  general  object  or  purpose  of  the  entire  insurance  contract  and 
the  lawful  conditions  prescribed  were  considered  and  it  was  deter- 
mined that  the  fact  that  the  instrument  was  in  the  usual  form  and 
was  called  a  ''chattel  mortgage"  was  not  conclusive."     Again,  the 

^  Hey  V.  Guarantors'  Liability  In-  ^  Fraim  v.  National  Fire  Ins.  Co. 

demnity  Co.  181  Pa.  2J0,  49  ^Vkiy.  N.  170   Pa.    St.   151,   50   Am.    St.   Rep. 

C.  423,  28  Pitts.  L.  J.  N.  S.  21,  37  753,  32  Atl.  613. 

Atl.  402,  26  Ins.  L.  .J.  1012,  59  Am.  '  Colunibinn  tiis.  Co.  v.  Catlett,  12 

St.  Rep.  644.  Wheat.  (25  U.  S.)  383,  386,  6  L.  ed. 

Underwriter     presumed     to    know  6()4,  per  Story,  J. 

causes  whicli  occasion  luitural  perils;  ^  Stone  v.  Insurance  Co.  of  Norlh 

concealment,  see  §  1806  herein.  America,  56  Wash.  427,  105  Pac.  856. 

*Kaufi"man  Bros.  v.  Western  Ins.  ^  Haley    v.    Homestead    Fire    Ins. 

Co.    21    Lancaster    Law    Rev.    2.52;  Co.  80  N.  Y.  21,  36  Am.  Rep.  570. 

Kauft'man  Bros.  v.  Standard  Fire  Ins.  "  Raulet  v.  Northwestern  National 

Co.  21  Lancaster  Law  Rev.  249.  Ins.  Co.  157  CaL  213,  107  Pac.  292, 

5  Port  Bhikelv  Mill  Co.  v.  Spring'-  39  Ins.  L.  J.  742. 
field  Fire  &  Marine  Ins.  Co.  59  Wash. 
501,  140  Am.  St.  Rep.  863,  28  L.R.A. 
(N.S.)  59.3n,110  Pac.  36. 

563 


§  211 


JOYCE  ON  INSURANCE 


court  declares  in  a  New  York  case  that  ''this  policy,  Hke  any  other 
contract  between  parties,  is  to  be  construed  not  merely  by  the  letter, 
but  by  the  spirit.  We  must  read  it  in  connection  with  the  whole 
subject  matter  to  which  it  relates,  and  give  to  language  its  ordinary 
and  natural  meaning.  If,  then,  the  intention  of  the  parties  becomes 
manifest,  such  intention  must  prevail."  ^^ 

§  211.  Construction  must  be  reasonable. — The  construction  of 
policies  of  insurance  must  not  be  that  which  would  lead  to  an  ab- 
surdity, but  must  be  reasonable  with  reference  to  the  risk  and  sub- 
ject-matter, and  purposes  of  the  entire  contract,^^  so  as  not  to  defeat 
the  intention  of  parties,^^  and  if  one  interpretation  of  a  contract,  of 
insurance  capable  of  two  interpretations  would  lead  to  an  absurd 


"  Paul  V.  Travelers'  Ins.   Co.  112    39  L.R.A.  433,  61  Am.  St.  Rep.  G27. 
N.  Y.  472,  477,  3  L.R.A.  443,  8  Am.    48  N.  E.  751,  27  Ins.  L.  J.  193 ;  Tiir- 


.St.  Rep.  758,  761,  20  N.  E.  347. 

^^  California. — Raulet  v.  North- 
western National  Ins.  Co.  157  Cal. 
213, 107  Pac.  292,  39  Ins.  L.  J.  742. 

Colorado. — Messenger  v.  German- 
American  Ins.  Co.  47  Colo.  448,  107 


lev  V.  North  America  Fire  Ins.  Co. 
25  Wend.  (N.  Y.)  374. 

Ohio. — Travelers'  Ins.  Co.  v.  Mvers, 
62  Ohio  St.  529.  49  L.R.A.  760,  57  N. 
E.  458. 

Pennsylvania. — Eyre      v.      Marine 


Pac.  643;  Barclay  v.  London  Guar-    Ins.  Co.  5  Watts  &  S.  (Pa.)  117. 


antee  &  Accident  Co.  Ltd.  46  Colo. 
558,  105  Pac.  865. 

Indiana. — Indiana  Life  EndoAv- 
ment  Co.  v.  Reed,  54  Ind.  App.  450, 
103  N.  E.  77. 


Tennessee. — Insurance  Co.  v.  Ben- 
nett, 90  Tenn.  256,  25  Am.  St.  Rep. 
085,  16  S.  W.  723. 

Vermont. — Crosbv  v.  Vermont 
Accident  Ins.  Co.  84  Vt.  510,  80  Atl. 


Mariiland.—Minii    Indemnitv    Co.  817,   40    Ins.   L.    J.   2036;    Duran   v 

V.  Waters,  110  Md.  673,  73  All.  712.  Standard  Life  &  Accident  Ins.  Co.  63 

Missouri.  —  Tesson      v.      Atlantic  Yt.   43/,   25   Am.    St.   Rep.    773,   13 

:\tutual  Ins.  Co.  40  Mo.  33,  93  Am.  L.R.A.  637,  22  Atl.  530. 

Dec.    293;    Miller   v.    Missouri    State  Washington. — Hockins:    v.    British 

Life  Ins.  Co.  168  Mo.  App!  330,  153  America  Assur.  Co.  62  Wash.  73,  36 

S.    W.    1080;   Banta  V.   Continental  L.R.A. (N.S.)    1155 ,  note,    113    Pac. 

Casi;alty  Co.  134  Mo.  App.  222,  113  259. 

S,  W.  1140.  Policies  of  insurance  must  receive 

Nehrasla. — Woodmen's       Accident  a    reasonable    interpretation,    conso- 

Assoc.  V.  Byers  (Pratt.)  62  Neb.  673,  nant   witli   the   apparent   object   and 

55  L.R.A.  291n,  89  Am.  St.  Rep.  777,  plain  intent  of  the  parties :  and,  to 

87    N.    W.    546,  31  Ins.  L.  J.  183;  nnden-^tand  them  as  the   parties  un- 

Sprinofield  Fire  &  Marine  Ins.   Co.  derstood  tliem,  the  nature  of  the  con- 

V.  McLimans,  28  Neb.  846,  45  N.  W.  tract,  the  objects  to  be  attained,  and 

171.  all   the   circumstances   must   be   con- 

New     Hampshire. — Anderson       v.  sidered.     ^Etua  Ins.  Co.  v.  Boon,  95 

.^tna  Life  Ins.  Co.  75  N.  H.  375,  28  U.  S.  117,  24  L.  ed.  395,  cited  in  Kel- 

L.R.A.(N.S.)   730n,  74  Atl.  1051.  ley  v.  Mutual  Life  Ins.  Co.  75  Fed. 

Netv     Jersey. — Melick     v.     Metro-  639. 

politan  Life  Ins.  Co.  84  N.  J.  L.  437,  "  Travelers  Ins.  Co.  v.  Myers,  62 

87  Atl.  75.  Ohio  St.  529,  49  L.R.A.  760,  .57  N. 

Neiv    YorJx. — Matthews   v.    Ameri-  E.   458;   West   v.   Citizens'   Ins.   Co. 

can  Central  Ins.  Co.  154  N.  Y.  449,  27  Ohio  St.  1,  22  Am.  Rep.  294. 

564 


CONSTRUCTION  OF  POLICY 


§  212 


conclusion,  looking  to  the  other  provisions  of  the  contract  and  its 
general  scope  and  object,  such  interpretation  must  be  abandoned  and 
that  adopted  which  will  be  more  consistent  with  reason  and  prob- 
ability.^* And  stipulations  as  to  what  insured  must  do  after  loss  or 
which  relate  merely  to  the  procedure  after  loss  are  to  be  reasonably 
and  not  rigidly  construed.^^  And  when  a  reasonable  construction 
can  be  had  without  recourse  to  extrinsic  evidence,  such  evidence  is 
inadmissible.^^ 

§  212.  Contract  should  be  given  effect  if  possible. — The  whole 
policy  with  all  its  provisions,  words  and  parts  should  be  construed 
together  as  one  entire  contract,^""  and  such  meaning  should  be  given 
thereto  as  to  carry  out  and  effectuate  to  the  fullest  extent  the  inten- 
tion of  the  parties;  no  portion  should  receive  such  a  construction 
as  will  defeat  the  obvious  intent,^^  and  the  construction  should  be 
liberal  rather  than  critical  or  technical/^  for  technical  constructions 


14  L'Engle  v.  Scottish  Union  &  Na-  Co.  16  Or.  283,  18  Pae.  466,  Cases 
tional  Fire  Ins.  Co.  48  Fla.  82,  111    under  §§  185-188  herein. 

Am.  St.  Rep.  70,  37  So.  462,  67  18  Crane  v.  City  Ins.  Co.  3  Fed. 
L.R.A.  581.  558;   McEvoy  v.   Security  Fire  Ins. 

15  Paltrovitch  v.  Plioeiiix  Ins.  Co.  Co.  110  Md.  275,  132  Am.  St.  Rep. 
143  N.  Y.  73,  25  L.R.A.  198.  37  N.  E.  428  note,  22  L.R.A.(N.S.)  964  note, 
639;  Will  &  Banmer  Co.  v.  Rochester  73  Atl.  157,  38  Ins.  L.  J.  895;  Cap- 
German  Ins.  Co.  125  N.  Y.  Supp.  ital  Fire  Ins.  Co.  v.  Carioll,  26  Okla. 
606,  140  App.  Div.  691.  286,  109  Pae.  535. 

1^  Baltimore  Fire  Ins.  Co.  v.  Lo-  ^^  United  States. — Palmer  v.  War- 
ney,  20  Md.  20,  36.  ren  Ins.  Co.  1  Story   (U.  S.  C.  C.) 

1'  United  States. — Employers  Lia-    360,  365,  per  Story,  J. ;  Crane  v.  City 
bility  Assur.   Corp.  Ltd.   of  London    Ins.  Co.  3  Fed.  558. 
V.  Morrow,  143  Fed.  750,  74  C.  C.  A.        Alabama. — Alabama      Gold      Life 
640.  Ins.   Co.   v.   Johnston,   80   Ala.   467, 

Florida.— UEngle       v.        Scottish    2  So.  125,  60  Am.  Rep.  112. 
Union  &  National  Ins.  Co.  48  Fla.  82,        Georgia. — Royal    Union    Life   Ins. 
67  L.R.A.  581,  111  Am.  St.  Rep.  70,    Co.  v.  McLcndon,  4  Ga.  620,  62  So. 
37  So.  462.  101. 

Georgia. — Royal  Union  Life  Ins.  Maryland. — Ri^rgin  v.  Patapsco 
Co.  V.  MeLendoii,  4  Ga.  App.  620,  62  Ins.  Co.  7  Har.  &  J.  (Md.)  279,  16 
S.  E.  101.  Am.  Dec.  302;  Alleore  v.  iNfaryland 

K ent itch f.— Spring  Garden  Ins.  Ins.  Co.  2  Gill  &  J^  (Md.)  136,  20 
Co.  V.  Imperial  Tobacco  Co.  132  Ky.    Am.  Dec.  424. 

7,  20  L.R.A. (N.S.)  277,  136  Am.  St.  Neic  Yor/.-.— Sersrent  v.  Liverpool 
Rep.  164,  116  S.  W.  234,  38  Ins.  L.  J.  &  London  &  Globe  Ins.  Co.  155  N.  Y. 
446.  349,  49  N.  E.  935,  28  Ins.  L.  J.  59, 

Mifffioiiri. — Stran.s  v.  Imperial  Fire  rev'g-  85  Hun,  31,  32  N.  Y.  Supp. 
Ins.  Co.  94  Mo.  182.  4  Am.  St.  Rep.  594;  Matthews  v.  American  Central 
368,  6  S.  W.  698.  Ins.   Co.  154  N.  Y.  449,  39  L.R.A. 

07mo.— German  Fire  Ins.  Co.  v.  433,  61  Am.  St.  Rep.  627,  48  N.  E. 
Roost,  55  Ohio  St.  581,  36  L.R.A.  751,  27  Ins.  L.  J.  193;  Paul  v.  Trav- 
236,  45  N.  E.  1097.  elers  Ins.  Co.  112  N.  Y.  472,  479,  8 

Orer/on.— Chrisman    v.    State    Ins.    Am.  St.  Rep.  758,  762. 

565 


§  212 


JOYCE  ON  INSURANCE 


are  not  favored.^"  The  contract  should  be  given  effect  if  possible, 
rather  than  made  void,  for  only  a  stern  legal  necessity  will  warrant 
a  constiiietion  that  would  nullify  the  policy  ^  or  defeat  a  recovery  if 
the  contract  is  susceptible  of  a  meaning  which  will  permit  one,  and 
this  also  applies  to  a  benefit  certificate.^  Doubtful  clauses  should 
not  be  considered  separately,  and  discrepancies  must,  if  possible,  l)e 
reconciled.  Resort  may  be  had  to  otlier  [)arts  to  ascertain  the  mean- 
ing and  intent  of  the  parties.^  And  in  case  of  repugnant  clauses  the 
evident  purpose  of  the  parties  to  the  contract  should  not  be  defeated 


South  Dakota. — McNamara  v.  Da-  Citv  Ins.  Co.  43  N.  J.  L.  (14  Vroom) 

kota  Fire   &   ]\Iarine  Ins.    Co.   1    S.  300,  39  Am.  Rep.  ."384,  586. 

Dak.  342,  47  N.  W.  288.  New     YorA-.— Darrow     v.     Faniih- 

2P  Miller    V.    Mutual    Benefit    Life  Fund  Society,  116  N.  Y.  537,  15  Am. 

Ins.  Co.  31  Iowa,  226,  7  Am.  Rep.  122,  St.   Rep.  430,   6   L.R.A.  495,   22  N. 

per  the  Court;  Union  Mutual  Ins.  Co.  E.   1093;    Baley   v.    Homestead   Fire 

V.  Wilkinson,  13  Wall.  (80  U.  S.)  222,  Ins.  Co.  80  N.  Y.  21,  36  Am.  Rep. 

20  L.  ed.  617;  Sergent  v.  Liverpool  570. 

&  London  &  Globe  Ins,  Co.  155  N.  Pennsylvania. — Burkhard  v.  Trav- 

Y.  349,  49  N.  E.  935,  28  Ins.  L.  J.  elers'    Ins.    Co.  102  Pa.  St.  262,  48 

59,  rev'g-  85  Hun,  31,  32  N.  Y.  Supp.  Am.    Rep.    205;    Evans    v.    Phrenix 

594;  Porter  v.  Casualty  Co.  of  Amer-  Mut.   Relief   Assur.    (Pa.   1892),  49 

ca,  70  Misc.   246,  126  N.  Y.   Supp.  Leg.    Intell.    15,    9    Lancaster    Law 

669.  Rev.  59;  Stacey  v.  Franklin  Fire  Ins. 

.      ^  Indiana.— M{n&  Life  Ins.  Co.  v.  Co.  2  Watts  &  S.  (Pa.)  506. 

Fitzgerald,    165   Ind.   317,   112   Am.  Washington.— Vori     Blakely    Mill 

St.    Rep.    232,    1    L.R.A.  (N.S.)    422  Co.  v.  Springfield  Fire  &  Marine  Ins. 

note,  6  Am.  &  Eng.  Ann.  Cas.  551,  Co.  59  Wash.  501,  140  Am.  St.  Rep. 

75  N.  E.  262;  Indiana  Life  Endow-  863,  28  L.R.A. (N.S.)   593  note,  110 

ment  Co.  v.  Reed,  54  Ind.  App.  450,  Pa<^.  36;  McNamara  v.  Dakota  Fire 

103  N.  E.  77;  Franklin  Life  Ins.  Co.  ^  Marine  Ins.  Co.  1  S.  Dak.  342,  47 

V  Wallace   93  Ind   7  ^-  ^-   -^^ '   Brink  v.  Merchants'  & 

"  Kentucky.— ^Y^rm^  Ins.  Co.  v.  Im'-  Mechanics'  Tns.^Co.  49  Vt.  442. 

perial   Tobacco   Co.  132   Ky.  7,  136  "  '  "       " '"" 


2  Brotherhood  of  Locomotive  Fire- 


A        Of-    r>         1^1  '  on  T  T?' A   /■XT  a  ^  "ic^^  &  Enginemen  v.  Aday,  97  Ark. 

Am.   St.  Rep.   164,  20  L.R.A. (N.S.)  ,.,-    o.  t  t?  \   /xr  c  \  lor    io/i  o    w 

077    11R   ci    w    OQ4    qa   Tn«    T      T  ^2.',  34  L.R.A. (N.S.)  126,  134  S.  W. 

2^7,   116   b.   W.   ..34,  o8   Ins.   L.   J.  ^^s,  40  Ins.  L.  J.  737.     See  §§  207, 

'^''1    2'^2  herein 

yinryUnd.— fh^mK     Ins      Co.     y.        z\  ^^^^^  ^^  Insurance   (ed.  1845) 

Tomlinson,  12o  Md    84,  21  Am.   St.  ^^^  ^^^    -^q      "Indeterminate  form.s 

Rep.  203,  211 ;  McEvoy  v.  Security  ^f  expression     ...     are  to  be  un- 

Fire  Ins.  Co.  110  Md.  275,  132  Am.  derstood    in    a    sense   subservient   to 

St.  Rep.  428  note,  22  L.R.A. (N.S.)  the    general    purposes    of    the    con- 

964  note,  73  Atl.  157,  38  Ins.  L.  J.  tract.^'     Hoffman  v.  iEtna  Fire  Ins. 

895.  Co.  32  N.  Y.  413,  88  Am.  Dec.  337; 

Missouri. — Mitchell       v,       German  Cutler   v.    Roval   Ins.    Co.   70    Conn. 

Commercial    Accident    Co.    179    Mo.  566,    41    L.R.A.    159,    40    Atl.    529; 

App.  1,  161  S.  W.  32;  Roseberry  v,  Crosby  v.  Vermont  Accident  Ins.  Co. 

American  Benevolent  Assoc.  142  Mo.  84  Vt".  510,  80  Atl.  817,  40  Ins.  L.  J. 

App.  552,  121  S.  W.  785.  2036  (should  be  interpreted  by  con- 

Nexo    Jersey. — Carson    v.     Jersey  text). 

"566 


CONSTRUCTION  OF  POLICY  §  213 

by  construction.'*  And  clauses  should  not  he  construed  as  repug- 
nant unless  irreconcilable  with  any  reasonable  interpretation  which 
incorporates  them  as  forming  a  harmonious  plan  for  insurance  of 
the  nature  contemplated  by  the  parties;  and  the  construction  must, 
if  possible,  give  force  and  effect  to  each  clause.^  The  premium  may 
be  resorted  to  to  discover  the  amount  intended  to  be  insured,^  for 
the  intent  is  to  be  gathered  from  the  surrounding  clauses  and  from 
all  parts  of  the  instrument,  and  the  words  should  be  taken  in  that 
sense  to  which  the  appai'ent  object  and  intention  of  the  parties  limit 

them.' 

Where  a  policy  agreed  to  indemnify  a  contractor  against  loss  from 
liability  for  damages  on  account  of  bodily  injuries,  fatal  or  other- 
wise, accidentally  suffered  to  any  employee  or  employees  and  an 
agreement  attached  to  the.  policy  extended  it  to  cover  the  liability 
of  assured  to  the  public  only  for  personal  injuries,  only  caused  by 
assured  or  his  workmen  the  two  clauses  must  be  construed  together 
as  an  agreement  to  indemnify  the  assured  against  loss  from  liability 
for  damages  on  account  of  accidental  injuries  to  employees  and  in- 
juries to  the  public  caused  by  assured  or  their  employees.* 

§  213.  Construction:  rejection  of  words  and  clauses. — Every 
word  and  every  sentence  should  be  given  effect,  and  no  part  be  in- 
effectual or  rejected  as  superflnous,  in  order  that  the  whole  contract 
may  stand  together,^  no  provision  is  to  be  wholly  disregarded  be- 
cause it  is  inconsistent  with  other  provisions,  unless  no  other  rea- 
sonable construction  is  possible;  i°  and' if  the  words  are  susceptible 
of  a  rational  and  intelligible  meaning  which  is  consistent  with  the 
object  and  pmposes  evidenced  by  the  entire  policy,  no  part  should 
be  rejected  as  inoperative,^^  so  it  is  said  in  an  Iowa  case:  ''While 
we  are  authorized  to  construe  the  policy  we  are  not  at  liberty  to 
strike  out  absolutely  a  carefully  inserted  and  detailed  provision 
thereof."  ^^      Again,  if  it  can  be  avoided,  no  clause  should  be  de- 

*  Employer's   Liability   Ins.    Corp.    Hudson  River  Ins.  Co.  15  How.  Pr. 
Ltd.  of  London  v.  Morrow,  143  Fed.    (N.  Y.)  288.     ■ 
750,  74  C.  C.  A.  640.  *  Creem  v.  Fidelity  &  Casualty  Co. 

^  Ferguson  v.  Union   IVIutual  Life    12G  N.  Y.  Supp.  ^.l.j,  141  App.  Div. 
Ins.  Co.  187  Mass.  8,  72  N.  E.  358,   493. 
34  Ins   L   J.  53,  54.  ^  Chrisman  v.  State  Ins.  Co.  16  Or. 

6  Port  v.  Phoenix  Ins.  Co.  10  Johns.    284,  18  Pac.  466. 
(N.  Y  )  79,  84.  ^°  German    Fire  Ins.  Co.  v.  Roost, 

'Paul  V.  Travelers'  In.'^.  Co.  112  N.  55  Ohio  St.  581,  60  Am.  St.  Rep.  711, 
Y.  472,  479,  8  Am.  St.  Rep.  758,  762,  36  L.K.A.  236,  45  N.  E.  1097,  26  Ins. 
per  the  Court,  citing  Yeaton  v.  Fry,   L.  J.  699. 

5  Cranch  (9  U.  S.)  335,  3  L.  ed.  117;        "  Stetliner  v.   Granite  Ins.   Co.  5 
Hotfraan  v.  ^tna  Fire  Ins.  Co.  32  N.   Duer  (N.  Y.)  594,  597. 
Y.  405,  88  Am.  Dec.  337;  Wliite  v.       ^^  pai,mg  &   gons  Co.  v.   German 


56 


§  214 


JOYCE  ON  INSURANCE 


clared  nugatory,^^  for  a  construction  should  be  given  that  will  carry 
into  effect,  if  possible,  all  the  provisions  of  the  policy,^*  and  each 
elause.^^  Again,  the  policy  should  also  be  interpreted  by  the  con- 
text, so  as,  if  possible,  to  give  a  sensible  meaning  and  effect  to  all 
its  provisions ;  and  so  as  to  avoid  rendering  portions  of  it  contradic- 
tory and  inoperative,  by  giving  effect  to  some  clauses  to  the  exclu- 
sion of  others.-'^  But  although  clauses  apparently  repugnant  must 
be  reconciled  if  it  can  be  done  by  any  reasonable  construction,  yet 
a  proviso  utterly  repugnant  to  the  body  of  the  contract  and  irrecon- 
cilable with  it  will  be  rejected.^''' 

Where  printed  and  written  portions  of  the  policy  are  contradic- 
tory, the  printed  will  be  rejected.^*  And  the  last  of  two  repugnant 
irreconcilable  clauses  will  be  rejected  and  the  first  will  stand,  espe- 
cially so  where  a  different  construction  would  defeat  the  evident  pur- 
pose of  the  contract.^^  AVords  in  the  policy  will  not  be  so  construed 
as  to  lead  to  unreasonable  results.^"  Portions  of  the  description 
which  are  false  will  be  disregarded  if  enough  remains  to  identify 
the  property.'^ 

§  214.  General  and  special  clauses. — The  general  clauses,  says 
Emerigon,  are  to  be  interpreted,  generally,  as  they  are  written.^ 


Fire  Ins.  Co.  153  Iowa,  168,  132  N.  "  Heruandez  v.  Sun  Mut.  Ins.  Co. 
W.  870,  40  Ind.  L.  J.  2133,  2138,  6  Blatchf.  (U.  S.  C.  C.)  317,  Fed. 
quoting  from  Insurance  Co.  v.  Ayers,  Cas.  No.  6415.  See  §  223  herein. 
88  Tenn.  728,  13  S.  W.  1000.  On  typewritten  matter  as  written 
^^  Mutual  Life  Ins.  Co.  v.  New,  125  or  as  printed  matter  within  rule  that 
La.  41,  27  L.R.A.(N.S.)  431,  130  Am.  written  shall  prevail  over  printed 
St.  R^p.  326,  51  So.  61,  Civ.  Code  provisions  in  case  of  conflict,  see  note 
Art.  1951.  See  as  to  general  prin-  in  L.R.A.1915D,  1084. 
ciple.  State  (ex  rel.  Davis)  v.  Mor-  ^^  Employer's  Liability  Ins.  Corp. 
tensen,  69  Neb.  376,  5  Am.  &  Eng.  Ltd.  of  London  v.  Morrow,  143  Fed. 
Ann.  Cas.  291,  95  N.  W.  831.  750,  74  C.  C.  A.  640;  Bean  v.  yEtna 
1*  Springfield  Fire  &  Marine  Ins.  Life  Ins.  Co.  Ill  Tenn.  186,  78  S. 
Co.  V.  Mciimans,  28  Neb.  846,  45  N.  W.  104;  Wisconsin  Marine  &  Fire 
W.  171;  Spring  Garden  Ins.  Co.  v.  Ins.  Co.  Bank  v.  Wilkin,  95  Wis.  Ill, 
Imperial  Tobacco  Co.  132  Ky.  7,  136  60  Am.  St.  Rep.  86,  69  N.  W.  354. 
Am.  St.  Rep.  164,  20  L.R.A.(N.S.)  See  also  as  to  general  rule  Vickers 
277,  116  S.  W.  234, '  38  Ins.  L.  J.  v.  Electrozone  Commercial  Co.  67  N. 
446.  J.  L.  665,  52  Atl.  467 ;  Brady  v.  Caro- 
ls Ferguson  v.  Union  Mutual  Life  lina  Steel  Bridge  &  Construction  Co. 
Ins.  Co.  187  Mass.  S,  72  N.  E.  358,  34  76  S.  Car.  297,^56  S.  E.  964. 
Ins.  L.  J.  53,  54,  considered  under  ^°  Ogden  v.  Columbia  Ins.  Co.  10 
§  212  herein.  Johns.'  (N.  Y.)  273. 

^^  Crosby  v.  Vermont  Accident  Ins.  ^  Hatch  v.  New  Zealand  Ins.  Co.  67 

Co.  84  Vt.  510,  80  Atl.  817,  40  Ins.  Cal.  122,  7  Pac.  411. 

L.  J.  2036.  2  "The   contracting   parties   are  to 

^"^  Jones  V.  Pennsylvania  Casualty  impute  to   themselves   the  inconven- 

Co.   140   N.   Car.   262,   111   Am.    St.  ienee  of  not  having  affixed  anv  in- 

Rep.   843,   52    S.   E.   578,   5   L.R.A.  structions.      These   rules   are   taught 

(N.S.)  932  note.  us  by  all  our  doctors."    Emerigon  on 

568 


CONSTRUCTION  OF  POLICY  §  214a 

But  general  words,  says  Lord  Bacon,^  "not  express  and  precise,  shall 
be  restrained  unto  the  fitness  of  the  matter  and  the  person,"  and 
general  words  may  be  aptly  restrained  according  to  the  subject-mat- 
ter or  person  to  which  they  relate.*  If  both  clauses  are  general  one 
does  not  control  the  other.^  But  it  is  also  held  in  construing  a  like 
clause  (incontestable)  that  it  controls.^  A  special  clause  in  a  policy 
which  creates  an  exception  to  a  general  clause  governs  the  latter,'^ 
and  a  special  stipulation  in  a  certificate  will  control  a  general  stip- 
ulation therein.^  So  the  meaning  of  general  words,  phrases  and  stip- 
ulations will  be  restricted  when  it  is  evident  from  the  special  or  par- 
ticular provisions  of  the  contract  that  they  were  not  intended  to 
have  the  broad  signification  of  which  they  are  fairly  susceptible.^ 
But  a  special  provision  will  override  a  general  provision  only  where 
the  two  are  irreconcilable  and  cannot  stand  together,  for  if  both 
can  be  given  reasonable  effect  they  will  be  retained.^"  The  clauses 
are  to  be  taken  literally  when  clear  in  themselves,^^  but  the  literal 
application  of  words  may  be  controlled  by  other  pai'ts  of  the  pol- 
icy. ^^ 

§  214a.  General  provisions  not  referred  to  in  separate,  independ- 
ent paragraph  nor  limited  by  prior  clause:  accident  policy. — If  a 
clause  in  an  accident  policy  is  not  expressly  connected  by  words  of 
limitation  with  those  which  precede  it,  but  is  a  separate,  independ- 
ent paragraph  and  does  not  include  words  in  any  way  expressly  or 
impliedly  relating  to  the  prior  general  provisions,  it  has  been  in- 

Insurance   (Meredith's  ed.  1850)   48,  ''Bowman   v.    Pacific   Ins.    Co.   27 

49.  Mo.   152;   Mitchell  Furniture  Co.  v. 

"The  general  clauses  are  to  be  con-  Imperial  Fire  Ins.  Co.  17  Mo.  App. 

strued  as  they  are  written,  and  be-  627.      See    17    Earl    of    Halsbury's 

cause  it  depends  on  the  parties  either  Laws  of  England,  p.  528. 

not  to  stipulate  them  or  to  modify  Exception    of   loss   from   specified 

them."       Emerigon     on     Insurance,  cause  followed  by  qualifying  clause, 

(Meredith's  ed,  1850)   e.  xii.  sec.  45,  see  §  2(J75  herein. 

p.  513.  ^  Northwestern  Mutual  Ins.  Co.  v. 

3p>acon's.Law  Max.  Reg.  10.  Hazelett,  105  Ind.  212,  55  Am.  Rep. 

*  Sawver  v.  Dodge  County  Mutual  192,  4  N.  E.  582. 

Ins.  Co."^37  Wis.  503.  ^  Sun   Insurance   Office  v.   Varble, 

5  Mutual  Life  Ins.  Co.  v.  New,  125  103  Ky.  758,  41  L.R.A.  792,  27  Ins. 

La.   41,   136   Am.    St.   Rep.   926,   27  L.  J.  798,  46  S.  W.  486. 

L.R.A.(N.S.)  431,  51  So.  61   (ineon-  i°  German  Fire  Ins.  Co.  v.  Roost, 

testable  clause).  55  Ohio  St.  581,  36  L.R.A.  236,  60 

«  MassacJiusetts  Benefit  Life  Assoc,  Am.  St.  Rep.  711,  45  N.  E.  1097,  26 

V.  Robinson,  104  Ga.  256,  42  L.R.A.  Ins.  L.  J.  699. 

261   30  S.  E.  910   27  Ins.  L.  J.  1023.  ^^  "In   contractu  assecurationls  in- 

See'  also  Goodwin  v.  Provident  Sav-  spiei   debit   in   tantum,   quod   cortum 

ings  Life  Assur.  Soc.  97  Iowa,  226,  32  est    inter    contrahentes."      Emerigon 

L.R.A.    473     66    N.    W.    157.      This  on  Insurance  (Meredith's  ed.  1850)  c. 

question  of'  ineontestabie   clauses  is,  ii.  see.  7,  p.  49;  c.  i.  sec.  2,  p.  16. 

however,  considered  elsewhere  herein.  ^^  Grant  v.  Delacour,  1  Taunt.  466. 

569 


§§  215,  216  JOYCE  ON  INSURANCE 

dependently  construed  a^  embracing  loss  of  life  from  causes  specified 
therein,  though  not  within  the  prior  statement  covering  loss  from 
general  and  sj)ecified  injuries.^^ 

§  215.  Construction  will  be  given  to  uphold  the  law. — When  a 
law  is  susceptible  of  two  constructions,  the  one  which  will  give  effect 
to  the  law,  rather  than  the  one  which  would  render  the  law  uncon- 
stitutional, must  be  adopted.^*  So  it  is  declared  that  the  law  does 
not  presume  that  the  parties  to  a  contract  intend  by  it  to  accom- 
plish an  illegal  object;  but  it  rather  presumes  that  they  intended 
to  accomplish  a  legal  purpose.^*  And  it  is  held  that  a  statute  con- 
trols where  the  terms  of  the  policy  conflict  therewith. ^^ 

§  216.  Words  are  to  be  construed  in  ordinary  and  popular  sense. — 
Words  are  to  be  construed  in  their  plain,  ordinary,  usual,  and  pop- 
ular sense,  unless  they  have  been  given  a  contrary,  legal  construc- 
tion, or  have  acquired  a  distinct  commercial  meaning  by  usage,  or 
are  peculiar  to  some  art,  trade,  or  science,  and  have  thereby  acquired 
a  technical  meaning,  or  unless  it  is  apparent  from  the  context  that 
a  distinct  and  particular  meaning  was  intended;  "  and  this  applies 

"  Schumacher    v.     Great    Eastern  C.  C.  A.  566,  s.  c.  203  U.  S.  592,  51 

Casualty  &  Indemnity  Co.  197  N.  Y.  L.  ed.  331,  27   Sup.   Ct.  780 ;   Dela- 

58,  27  L.R.A.(N.S.)   480   (annotated  ware  Ins.  Co.  v.  Green,  120  Fed.  916, 

on  whether  general  requirement  as  to  921,  57  C.  C.  A.  188,  193,  61  L.K.A. 

external,      violent,      and      accidental  137,    140;    Liverpool    &    London^  & 

means  applies  to  a  separate  provision  Globe  Ins.  Co.  v.  Kearney,  94  Fed. 

as  to  liability  in  ease  of  death  or  in-  314,  319,  36  C.  C.  A.  265,  2/0;  Mc- 

iurv   from   certain   specified   causes)  Glother    v.    Provident    Mutual   Acci- 

!)0  N.  E.  353,  39  Ins.  L.  J.  428  note,  dent  Co.  89  Fed.  685,  689,  ;;2  C.  C. 

1*  New  Orleans  v.  Salamander  Co.  A.  318,  322,  60  U.  S.  App.  705 ;  Fred. 

25  La    Ann    650.  J.  Kiesel  v.  Sun  Ins.  Ottice,  88  Fed. 

15  Pa^e  V.  Metropolitan  Life  Ins.  243,  60  U.  S.  App.  10,  31  C.  C.  A. 
Co.  98  Ark.  340,  135  S.  W.  911,  40  518,  s.  c.  171  U.  S.  688,  43  L.  ed. 
Ins.  L.  J.  1144,  per  Hart,  J.  1170,  19  Sup.  Ct.  885. 

16  Fletcher  v.  New  York  Life  Ins.  Arkansas. — IMonons'ahela  Ins.  Co. 
Co.  4  McCrary  (U.  S.  C.  C.)  440,  13  v.  Batson,  111  Ark.  144,  163  S.  W. 
Fed.  526,  528 ;  Wall  v.  Equitable  Life  512. 

Assur.    Soc.    32    Fed.    273,   aff'd   140  District  of  Columbia.— MitdieW  v. 

U.  S.  226,  35  L.  ed.  497,  11  Sup.  Ct.  Potomac  Ins.  Co.  16  App.  D.  C.  270. 

822;  Marsden  v.  Hotel  Owners'  Ins.  Georgia. — Melson    v.    Phenix    Ins. 

Co.  85  Iowa,  584,  52  N.  W.  509;  Tay-  Co.  97  Ga.  722,  727,  25  S.  E.  189: 

lor  V.  Merchants'  &  Bankers  Ins.  Co.  Hartford  Fire  Ins.  Co.  v.  Wimbish, 

83  Iowa,  402,  49  N.  W.  994;  Fideli-  12  Ga.  App.  712,  78  S.  E.  265. 

tv  ^lutual  Life  Assn.  v.  Fichlin,  74  Illinois. — Peoria     Marine     &    Fire 

Md.  172,  23  Atl.  197.    But  see  §§  194,  Ins.  Co.  v.  Whitehill,  25  111.  466. 

194(jr)_194a  herein.  Indiana. — .^-Etna   Life   Ins.    Co.   v. 

"  United     States.— Imperial     Fire  Fitzo-erald,    165    Ind.    317,    112    Am. 

Ins.  Co.  V.  Coos  Countv,  151  U.  S.  St.   Rep.   232,   6  Am.   &   Eng.   Ann. 

452,  14  Sup.  Ct.  379,  38  L.  ed.  231;  Cas.  551,  1  L.R.A.(N.S.)    422  note, 

Maryland   Ca.'^naltv   Co.  v.   Finch,  8  75  N.  E.  262. 

L.R.A.(N.S.)   308,'  147  Fed.  388,  77  7ou^a.— Verse     v.      Jersey     Plate 

570 


CONSTRUCTION  OF  POLICY 


216 


to  the  laws  of  a  fraternal  or  mutual  benefit  society,"  also  to  an 
accident  ))olicy/'  and  to  an  automobile  fire  policy.^"  The  rule  is  in 
accordance  with  all  the  authorities.  So  Enierigon  says:  ''The  true 
meaning  of  an  expression  in  its  ordinary  use  is  the  idea  that  people 
are  accustomed  to  attach  to  it."  ^  And  Lord  Ellenborough  declares 
that  the  policy  "is  to  be  construed  according  to  its  sense  and  mean- 
ing as  collected,  in  the  first  place,  from  the  terms  used  in  it,  which 
terms  are  themselves  to  be  understood  in  their  plain,  ordinary,  and 
popular  sense,  unless  they  have  generally,  in  respect  to  the  subject 
matter,  as  by  the  known  usage  of  trade  or  the  like,  acquired  a  pecu- 
liar sense  distinct  from  the  popular  sense  of  the  same  words,  or  un- 
less the  context  evidently  points  out  that  they  must  in  the  particular 
instance,  and  in  order  to  efiectuate  the  immediate  intention  of  the 
parties  to  that  contract,  be  understood  in  some  other  special  and 
peculiar  sense."  ^  !So  Chancellor  Walworth  declares  that  '"a  policy 
of  insurance,  like  any  other  contract,  is  to  be  construed  by  the  pop- 
ular understanding  or  the  plain  and  ordinary  sense  of  the  terms 


Glass  Co.  119  Iowa,  555,  97  Am.  St. 
Rep.  330,  93  N.  W.  5G9,  GO  L.R.A. 
838. 

Kansas.  —  Fire  Ai^soeiation  of 
Phila.  V.  Taylor,  76  Kan.  392,  91 
Pae.  1070. 

Maine. — Rumford  Falls  Paper  Co. 
V.  Fidelity  &  Casualty  Co.  92  Me. 
574,  586,  43  All.  503. 

Mar>jland. — Mutual  Life  Ins.  Co. 
of  N.  Y.  V.  Murray,  111  Md.  GOO,  75 
Atl.  348. 

Massachusetts.  - —  Whitniarsh  v. 
Conway  Ins.  Co.  16  Gray  (82  iMass.) 
359,  77  Am.  Dee.  414. 

Minnesota.- — Bader  v.  New  Am- 
sterdam Gas  Co.  102  Minn.  186,  120 
Am.  St.  Rep.  613,  112  N.  W.  1065. 

Missouri.— Renshaw  v.  Missouri 
State  Mutual  Fire  &  Marine  Ins.  Co. 
103  Mo.  595,  23  Am.  St.  Rep.  904, 
153  S.  W.  945;  Hoover  v.  Morean- 
tile  Town  Mutual  Fire  Ins.  Co.  93 
Mo.  App.  Ill,  118,  69  S.  W.  42. 

New  Hampshire. — Thorp  v.  Aetna 
Ins.  Co.  75  N.  H.  251,  72  Atl.  690, 
38  Ins.  L.  J.  800;  Stone  v.  Granite 
State  Fire  Ins.  Co.  69  N.  II.  438,  45 
Atl.  235,  29  Ins.  L.  J.  250. 

New  York.  —  DeLonguemere  v. 
New  York  Fire  Ins.  Co.  10  Johns. 
(N.  Y.)  120. 

5 


Effect  must  be  given  to  an  insur- 
ance contract  according  to  the  fair 
meaning  of  the  words  used.  Travel- 
ers' Ins.  Co.  V.  McConkey,  127  U.  S. 
661,  8  Sup.  Cf.  1360.  Cited  in  Mutu- 
al Life  Ins.  Co.  v.  Kellv,  32  L.  ed. 
308,  114  Fed.  268,  281,  52  C.  C.  A. 
154,  164. 

Language  is  to  be  given  its  usual 
and  ordinary  meaning  where  there  is 
nothing  to  indicate  a  contrary  intent. 
McCartliv  V.  Pacitic  Mutual  Life  Ins. 
Co.  178  111.  App.  502. 

iSMund  V.  Reliaume,  51  Colo.  129, 
Ann.  Cas.  1913A,  1243,  117  Pac.  159; 
Beile  v.  Travelers'  Protective  As.soc. 
of  America,  155  i\Io.  App.  629,  135 
S.  W.  497.     See  §  381  herein. 

1^  Houlihan  v.  Preferred  Accident 
Ins.  Co.  196  N.  Y.  337,  25  L.R.A. 
(N.  S.)  1261,  89  N.  E.  927. 

20  Preston  v.  Aetna  Ins.  Co.  193  N. 
Y:  142,  19  L.R.A.(N.S.)  133,  85  N. 
E.  1006. 

^  Emerigon  on  Insurance  (Mere- 
dith's ed.  1850)  c.  ii.  sec.  7,  p.  50. 
And  tliis  presumption  cannot  be  over- 
come but  by  a  stronger  presumption 
contra.     Id. 

2  Roliertson  v.  French,  4  East,  135, 
14  Eng.  Rul.  Cas.  1,  per  Lord  Ellen- 
borough. 
71 


§  217  JOYCE  ON  INSURANCE 

employed,  unless  those  terms  have  received  a  legal  construction  or 
have  acquired  a  technical  meaning  in  reference  to  the  subject  matter 
of  the  contract."  ^  So  answers  to  questions  must  be  taken  in  the 
popular  sense  of  the  language  used,*  and  the  Avords  "jewelry  and 
clothing,  being  stock  in  trade,"  will  be  construed  in  their  ordinary 
and  popular  sense,  and  as  not  including  musical  and  surgical  in- 
struments, etc.,  in  the  absence  of  evidence  that  a  particular  meaninf^ 
has  attached  to  the  words  by  usage.* 

But  the  settled  construction  given  by  the  commercial  world  to 
stipulations  in  an  insurance  policy,  will,  though  differing  from  the 
natural  import  of  the  words,  be  sanctioned  by  the  courts.^ 

§  217.  Construction:  technical,  etc.,  words. — Where  a  word  has 
acquired  by  usage  in  trade  or  commerce  a  meaning  peculiar  there- 
to, or  is  a  w^ord  of  technical  "^  application,  as  where  used  in  some  art, 
trade,  or  science,  or  where  it  appears  from  the  context  that  words 
are  used  in  a  particular  sense  to  compass  the  intent  of  the  parties, 
such  meaning  may  be  shown  by  proper  evidence,  and  the  exact  tech- 
nical and  commercial  meaning  or  particular  meaning  will  govern  ;  * 
and  "technical  terms  or  terms  proper  to  the  arts  and  sciences  are 
ordinarily  to  be  understood  according  to  the  detinition  given  them 
by  masters  in  the  art."  ^  So  Avhere  technical  terms  have  a  well  recog- 
nized legal  meaning  they  should  be  understood  in  their  technical 
and  legal  sense,  where  there  is  no  context  in  the  contract  nor  any 
statute  or  provision  in  the  charter  of  the  insurer  to  indicate  that 
such  words  are  used  in  a  broader  sense."    Illustrations  under  this 

^Dow  V.  Wliitten,  8  Wend.  (N.  ^  Whitmarsh  v.  Conwav  Ins.  Co. 
Y.)  160,  167,  per  Chancellor  Wal-  16  Gray  (82  Mass.)  359,  77  Am. 
worth.  (See  criticism  1  Duer  on  In-  Dee.  414;  Rose  v.  Franklin  Life  Ins. 
suranee  [ed.  1845]  229,  et  seq.)  See  Co.  153  Mo.  App.  90,  132  S.  W.  013, 
also  17  Earl  of  Halsburv's  Laws  of  40  Ins.  L.  J.  180;  Fowler  v.  iEtna 
Enirland,  pp.  342.  et  seq. "527.  Fire  Ins.  Co.  7  Wend.   (N.  Y.)  270; 

*  Ripley  v.  ^Etna  Ins.  Co.  30  N.  Y.  Hone  v.  Mutual  Safety  Ins.  Co.  1 
136,  86  Am.  Dec.  362.  Sand.    (N.    Y.)    137,    2    N.    Y.    (2 

SRafel  V.  Nashville  Marine  &  Fire  Comst.)  235,  per  Sandford,  J.;  Rob- 
Ins.  Co.  7  La.  Ann.  244.  ertson  v.  Money,  1  Ry.  &  M.  75;  1 

^Maryland  Ins.  Co.  v.  Woods,  6  Phillips  on  Insurance  (3d  ed.)  sec. 
Cranc-h  "(10  U.  S.)  29,  3  L.  ed.  143,  143,  et  seq.;  Bacon's  Benefit  Societies 
cited  in  General  Mutual  Ins.  Co.  v.  and  Life  Insurance  (1st  ed.)  sees. 
Sherwood,  14  How.  (55  U.  S.)  352,  256,  264;  17  Earl  of  Halsbury's  Laws 
362,  14  L.  ed.  452,  456 ;  Ocean  Steam-  of  England  p.  342,  et  seq. 
ship  Co.  V.  2¥^\r\a.  Ins.  Co.  121  Fed.  ^  Emigeron  on  Insurance  (Mere- 
882,  884;  Hernandez  v.  Sun  Mutual  dilli's  ed.  1850)  c.  ii.  see.  7,  p.  50. 
Ins.  Co.  6  Blatchf.  (C.  C.)  317,  325,  1°  Pa^e  v.  Metropolitan  Life  Ins. 
Fed.  Cas.  No.  6,415;  Pride  v.  Provi-  Co.  98  Ark.  340,  135  S.  W.  911.  40 
dence-Washington  Ins.  Co.  6  Pa.  Ins.  L.  J.  1144  (''leffal  repre.senta- 
Dist.  R.  227,  231.  lives.")     See  §§  786,^793  herein. 

■^  See  §§  246-255  herein. 

572 


.  COXSTRUCTIOX  OF  POLICY 


§§  218,  219 


rule  will  be  found  throughout  this  work  under  the  several  heads  to 
which  they  properly  belong. 

§  218.  Addition  of  words  by  construction. — In  the  case  of  Davis 
V.  Boardman  ^^  the  words  ''or  either  of  them"  were  inserted  by  con- 
struction after  the  word  "cargo"  in  the  clause  "should  this  vessel 
and  cargo  be  insured  in  England  in  time  to  attach,"  etc.,  the  court 
saying  that  it  was  not  unusual  "to  find  'and'  used  for  'or'  and  'or' 
for  'and.'  "  ^^  But  in  a  California  case  it  is  held  that  the  court  could 
not  interpolate  the  word  ■"intentionally"  before  a  clause  in  an  acci- 
dent policy  and  so  extend  the  insurers  liability.^' 

§  219.  Courts  cannot  extend  or  enlarge  by  construction. — If  the 
terms  of  the  contract  are  express,  "the  court  cannot  extend  or  enlarge 
the  contract  by  implication  so  as  to  embrace  an  object  distinct  from 
that  originally  contemplated.^^  In  insurance  contracts  the  insurer 
undertakes  to  guarantee  the  insured  against  loss  or  damage  upon  the 
exact  terms  and  conditions  specified  in  the  agreement,  and  upon  no 
other,  and  therefore,  courts  cannot  change  the  contract  nor  make 
a  new  one  for  the  parties.  It  is  their  duty  to  enforce  and  carry  out 
the  one  already  made  "  and  nothing  ought  to  be  imported  into  the 
contract  by  construction  contrary  to  its  express  terms. -^^  So  a  benefit 
certificate  payable  to  certain  children  cannot  be  enlarged  by  con- 
struction so  as  to  include  a  posthumous  child  by  a  second  marriage 


"  12  Mass.  80. 

^^  See  United  Life  Fire  &  Marine 
Ins.  Co.  V.  Foote,  22  Ohio  St.  340, 
10  Am.  Rep.  735.  The  words  "by 
tire"  were  added  by  construction. 
Contra.  Commercial  Insurance  Co.  v. 
Robinson,  64  111.  26.3,  16  Am.  Rep. 
557. 

13  Blunt  V.  Fidelity  &  Casualty  Co. 
145  Cal.  268,  104  Am.  St.  Rep.  34, 
78  Pae.  729,  67  L.R.A.  793. 

1*  "It  is  never  allowed  to  stretch 
the  contract  from  one  case  to  an- 
other, nor  to  make  it  embrace  an  ob- 
ject really  distinct  from  that  orioi- 
nally  contemplated."  Emorigon  on 
Insurance  (Meredith's  ed.  1850)  c.  i. 
sec.  7,  p.  16;  Waxahachie  Baidc  v. 
Lanca.sliire  Ins.  Co.  62  Tex.  461. 

i^Glendale  Woolen  Mfo-.  Co.  v. 
Protection  Ins.  Co.  21  Conn.  19,  30, 
31,  54  Am.  Dec.  309,  per  Ellswortli, 
J.  See  Blunt  v.  Fidelitv  &  Casualtv 
Co.  145  Cal.  268,  104  Am.  St.  Rep. 
34,  67  L.R.A.  793,  78  Pac.  729. 

Construction  must  not  make  a  new 


contract  for  the  parties.  Schuerman 
V.  Dwelling-House  Ins.  Co.  161  111. 
437,  52  Am.  St.  Rep.  377,  43  N.  E. 
1093. 

A  polie^v,  and  the  conditions  there- 
in, fix  the  relation  between  the  par- 
ties thereto  and  furnish  the  measure 
of  their  respective  rights  and  liabili- 
ties. Courts  cannot  go  outside  of 
such  agreement  of  tlie  ])arties  to  de- 
termine their  mutual  or  reciprocal 
obligations.  Dover  Glass  Co.  v. 
American  Fire  Ins.  Co.  1  Marv. 
(Del.)  32,  65  Am.  St.  Rep.  264. 

When  a  contract  of  insurance  is 
unambio'uous  in  its  terms,  it  will  be 
ent'oiced,  for  courts  will  not  con- 
strue plain  language  so  as  to  make 
a  contract  to  endirace  tliat  wliich  it 
wa.s  intended  not  to  include.  British 
America  Assurance  Co.  v.  IMiller,  91 
Tex.  414,  66  Am.  St.  Rep.  901,  39 
L.R.A.  545,  44  S.  W.  60. 

iMIutual  Life  Ins.  Co.  of  X.  Y. 
V.  Murrav,  111  :\rd.  600,  75  Atl.  348. 


373 


§  220  JOYCE  ON  INSURANCE 

contracted  after  tlie  insured  became  a  member  of  the  society,^"'  nor 
will  conditions  limiting  the  iusm-er's  liability  be  extended  to  include 
cases  not  reasonably  and  clearly  within  the  words,"  nor  will  a  con- 
struction be  given  which  would  enlarge  or  diminish  the  risk  to  an 
unreasonable  extent,^^  nor  can  the  court  apply  the  insurance  to  chat- 
tels not  insured,  even  though  the  policy  holder  intended  to  insure 
them. 2" 

§  220.  Forfeitures  and  exceptions  not  favored  by  construction. — 
"Where  the  intent  of  conditions  or  stipulations  involving  disabilities 
or  forfeitures  is  doubtful,  they  should  be  construed  against  the  party 
for  whose  benefit  they  were  imposed,  and  forfeitures  should,  if  pos- 
sible, be  avoided,  and  the  contract  sustained;  ^  for  the  right  to  in- 

"  Spry  V.  AVilliams,  82  Iowa,  61,  Michael,  167  Ind.  659,  74  N.  E.  964, 

47  N.  W.  890,  10  L.R.A.  863.  79  N.  E.  905,  8  L.R.A.(N.S.)   708; 

18  Rann  v.  Home  Ins.  Co.  59  N.  Y.  Metropolitan  Life  Ins.  Co.  v.  John- 
387.  son.  49  Ind.  App.  233,  94  N.  E.  785; 

19  Evre  V.  Marine  Ins.  Co.  6  Whart.  Northern  Assnr.  Co.  v.  Carpenter, 
(Pa.)  "247.  52  Ind.  App.  432,  94  N.  E.  779,  40 

20  Holmes  V.    Charlestown   Mutual  In|;L.  J    1218  .,     t. 
Fire  Ins.  Co.  10  Met.  (51  Mass.)  211,  ^  Ae»«MC%.-Mutual     Benefit     Life 

43  Am.  Dec.  428.  ?'\i^°on "   ^r'''  .^^       ''•    n    \    ] 

1  XT    •     1  r,.  .         TT    i.  -n        r  S.    W.    20.      See    American    Central 

'■Inited  States. — Yeaton  v.  rrv,  5  -r,,^    ^^   „   Ti^o,.o,Mn    i«  tz^t  T    Ttan 

/-.        1     /n  T^    o  \   oor^    o  T       1    ITT  l^s.  Co.  V.  Meaverin,  is  Jvy.  Lt.  tiep. 

Cranch  (9  L.  S.)  335,  3  L.  ed.  11^;  jgg    r^-^  q.    ^y    (^22 

Cotton  v.  FideUty  &  Casualty  Co.  41  jfi,:i,i^n.^L^^-pool     London     & 

^^^-  ^^^-  Globe  Ins.  Co.  v.  Verdier,  33  Mich. 

Alabama.— Qneen      Ins.      Co.      v.  133,  35  Mich.  395. 

Young,  86  Ala.  424,  11  Am.  St.  Rep.  Minnesota.-'BTids:es    v.     National 

51,   5   So.   116;   Burnett  v.   Eufaula  Union,  73  Minn.  486,  77  N.  W.  411, 

Ins.  Co.  46  Ala.  11,  7  Am.  Rep.  581;  ^vV  76  N.  W.  270,  409. 

Alabama  Gold  Life  Ins.  Co.  v.  Johns-  Xebra.ska. —Haas   v.    Mutual   Life 

ton,  80  Ala.  467,  2  So.  125,  128,  per  ^^g     Qq     §4    Neb.    682,    26    L.R.A. 

the  Court,  60  Am.  Rep.  112.  (X.S.)    747    (annotated   on   effect  of 

Arkansas. — Maloney    v.    INIarvland  failure  to  pay  periodical  premium  on 

Casualty  Co.   113  Ark.   174,  167   S.  jmlicy  of  life  insurance  to  terminate 

W.   845;   Arkansa.s  Fire  Ins.   Co.  v.  the  same,  in  the  absence  of  a  provi- 

WiLson,  67  Ark.  533,  48  L.R.A.  510,  sion  for  i'orfeiture)   121  N.  W.  996. 

77  Am.  St.  Rep.  129,  55  S.  AY.  933.  New  Jersey.— Snvdev  v.  Dwcllina:- 

Georr/w.—New  York  Life  Ins.  Co.  House  Ins.  Co.  59  N.  J.  L.  544,  56 

V.   Babcock,   104   Ga.   67,   42  L.R.A.  Am.  St.  Rep.  625,  37  Atl.  1022. 

88,  69  Am.   St.  Rep.  134,  30   S.  E.  Neiv     TorA:.— Paul     v.     Travelers' 

273;  Clav  v.  Plioenix  Ins.  Co.  97  Ga.  Ins.   Co.  112  N.  Y.  472,  8  Am.   St. 

44.  25  S.'  E.  417.  Rep.   756,   3  L.R.A.   443,   20   N.   E. 

Illinois. — Commercial  Union  Assur.  347     (conditions     construed     strictly 

Co.  V.  Scammon.  126  111.  355.  9  Am.  against  those  for  whose  benefit  they 

St.    Rep.    607,   18    N.    E.    562;    Wil-  are  reserved)  ;  Livingston  v.  Stickless, 

liamson   v.    Warfield,   Pratt,   Howell  7  Hill    (N.  Y.)    2.53;  Fitzpatrick  v. 

Co.  130  111.  App.  168;   Crete  Farm-  Kuiehts    of    Columbus,    128    N.    Y. 

ers'  Alutual  Twp.  Ins.  Co.  v.  Miller,  Supp.  366,  143  App.  Div.  540;  Haves 

70  111.  App.  599.  V.  New  York  Life  Ins.  Co.  68  Misc. 

Indianu.— Glens  Falls  Ins.   Co.  v.  558,  124  N.  Y.  Supp.  792. 

574 


CONSTRUCTION  OF  POLICY 


§  220 


sist  upon  forfeitures  is  stricti  juris,  and  courts  will  not  favor  forfei- 
tures b}'  literal  intendments  and  enlarged  conslructions,^  nor  will 
they  declare  forfeitures  by  implication,^  as  they  ai-e  not  favored  in 


Pennsylvania. — Evans  v.  Phoenix 
Mut.  Assn.  (Pa.  1892),  49  Leg.  In- 
tcll.  15. 

South  Dakota. — Bolte  &  Janseu  v. 
Equitable  Fire  Assoc.  23  S.  Dak.  240, 
121  N.  W.  773,  38  Jns.  L.  J.  386; 
McNamara  v.  Dakota  Fire  &  Marine 
Ins.  Co.  1  S.  Dak.  342,  47  N.  W. 
288. 

'Texas. — Home  Mutual  Ins.  Co.  v. 
Tompkies,  &  Co.  30  Tex.  Civ.  App. 
404,  71  S.  W.  812. 

Virginia. — Mutual  Ins.  Soe.  v. 
Scottish  Union  &  :\Iutual  Ins.  Co.  84 
Va.  lie,  10  Am.  St.  Rep.  119,  4  S. 
E.  178. 

Wisconsin. — Siemers  v.  Meeme 
Mutual  Home  Protection  Ins.  Co. 
143  Wis.  114,  126  N.  W.  669 ;  French 
V.  Fidelitv  &  Casualtv  Co.  135  Wis. 
2.59,  17  L.R.A.(N.S.j  1011,  115  N. 
W.  869. 

Con.struction  of  policy  is  strictly 
against  insurer  and  must  always  be 
in  favor  of  upholding  the  contract, 
and  no  construction  working  a  for- 
feiture will  be  given  if  any  other  is 
permissible  from  the  language  used. 
Darrow  v.  Family  Fund  Soe.  116  N. 
Y.  537, 15  Am.  St.  Rep.  430,  6  L.R.A. 
495,  22  N.  E.  1093. 

That  construction  of  an  insurance 
contract  should  be  adopted  which 
will  prevent  a  forfeiture,  where  it  is 
susceptible  of  two  constructions,  one 
of  which  will  work  a  forfeiture  and 
the  other  will  not.  Ilihner  v.  West- 
ern Travelers'  Accident  Assoc.  86 
Neb.  285,  27  L.R.A.  319,  125  N.  W. 
535;  ITamann  v.,  Nebraska  Under- 
writers Ins.  Co.  82  Neb.  429,  118  N. 
W.  65. 

^  Aurora  Fire  Ins.  Co.  v.  Eddy,  55 
111.  213. 

See  also  the  followng  cases : 

Georgia. — ("lav  v.  I^im'nix  Ins.  Co. 
97  Ga.'44,  25  S'.  E.  417. 

Illinois. — Hardest  y  v.  Forest  City 
Ins.  Co.  77  111.  App."  413,  ali'd  Forest 

5 


Citv  Ins.  Co.  V.  Hardesty,  182  Dl. 
39,^55  N.  E.  139. 

Indiana. — Metropolitan  Life  Ins. 
Co.  V.  Johnson,  49  Ind.  App.  233,  94 
N.  E.  785;  Iowa  Life  Ins.  Co.  v. 
Ilauchton,  46  Ind.  App.  467,  87  N. 
E.  702. 

Kansas. — Home  Ins.  Co.  v.  Fever- 
abend,  7  Kan.  App.  231,  52  Pac. 
899. 

Louisiaim-. — Fitzpatrick  v.  Mutual 
Benevolent  Life  Ins.  Co.  25  La.  Ann. 
443. 

Nehra.sla.- — Haa.s  v.  INIutual  Life 
Ins.  Co.  84  Neb.  682,  26  L.R.A. (N.S.) 
747  note,  121  N.  W.  996 ;  Hamanu  v. 
Nebra-^ka  Undenvriters'  Ins.  Co.  82 
Neb.  429,  118  N.  W.  65;  Connecti- 
cut Fire  Ins.  Co.  v.  Jearv.  60  Neb. 
338,  51  L.R.A.  698  note, '83  N.  W. 
78. 

New  York.—lj.  Black  &  Co.  v. 
London  Guarantee  &  Accident  Co. 
144  N.  Y.  Supp.  424,  159  App.  Div. 
186. 

South  Dakota.— Eolie,  &  Jansen  v. 
Equitable  Fire  Assoc.  23  S.  Dak.  240, 
121  N.  W.  773,  38  -Ins.  L.  J.  886. 

Tennessee. — McNutt  v.  Virginia 
Fire  &  Marine  Ins.  Co.  —  Tcnn.  Ch. 
— ,  45  S.  W.  61. 

Texas. — Mutual  Life  Ins.  Co.  v. 
Ford,  —  Tex.  Civ.  App.  — ,  130  S. 
W.  769. 

Virginia. — Georgia  Home  Ins.  Co. 
v.  Bartlett,  91  Ya.  305,  30  Am.  St. 
Rep.  832,  21  S.  E.  476. 

Wisconsin. — Paget  v.  United  States 
Casualty  Co.  158  Wis.  278,  148  N. 
W.  878. 

2  Connecticut  Fire  Ins.  Co.  v.  Colo- 
I'ado  Leasing,  Mining  &  Milling  Co. 
50  Colo.  424,  116  Pac.  154,  40  Ins. 
L.  J.  1717. 

Courts  have  always  limited  pro- 
visions for  forfeiture  strictly  to  the 
exact  import  of  the  words  used  and 
there  is  equally  strong  reason,  where 
the  literal  meaning  of  such  a  pro- 
75 


§  220  JOYCE  ON  INSURANCE 

the  law.*     And  especially  are  forfeitures  not  favored  in  the  law 


vision  is  broader  than  its  reason,  for 
restricting-  its  operation  to  the  mis- 
fhief  sought  to  be  guarded  against. 
Where  the  reason  and  the  letter  of  a 
flause  do  not  coincide,  it  is  the  uni- 
versal rule  of  construction  to  limit 
the  latter  by  the  former.  Henton  v. 
Farmers'  &  Merchants'  Ins.  Co.  1 
Neb.  (unoffie.)  425,  95  N.  W.  670, 
32  Ins.  L.  J.  838,  per  Pound,  C. 

^Alabama. — Queen  Ins.  Co.  v. 
Young,  86  Ala.  424,  11  Am.  St.  Rep. 
51,  5  So.  116. 

California.  —  Welch  v.  British 
American  Assur.  Co.  148  Cal.  223, 
113  Am.  St.  Rep.  223,  82  Pac.  964. 

Colorado. — Connecticut  Fire  Ins. 
Co.  V.  Colorado,  Leasing  ^Mining  & 
Milling  Co.  50  Colo.  424,  116  Pac. 
154,  40  Ins.  L.  J.  1717. 

Indiana. — American  Central  Life 
Ins.  Co.  V.  Rosenstein,  46  Ind.  App. 
537,  92  N.  E.  380. 

Missouri.  —  IMathews  v.  Modern 
Woodmen  of  America,  236  Mo.  326, 
139  S.  W.  151;  Rosebeny  v.  Ameri- 
can Benevolent  Assoc.  142  Mo.  App. 
552,  121  S.  W.  785. 

Nehra^ska. — Ilamann  v.  Nebraska 
Undei-writers'  Ins.  Co.  82  Neb.  429, 
118  N.  W.  65;  Henton  v.  Farmers'  & 
Merchants'  Ins.  Co.  1  Neb.  (UnofiBc.) 
425,  95  N.  W.  670,  32  Ins.  L.  J.  838 ; 
Connecticut  Fire  Ins.  Co.  v.  Jearv, 
60  Neb.  338,  51  L.R.A.  698,  83  N. 
W.  78;  Farmers'  &  Merchants'  Ins. 
Co.  V.  Newman,  58  Neb.  504,  78  N. 
W.  933. 

Neiv  Jersey. — Melick  v.  Metropoli- 
tan Life  Ins."  Co.  84  N.  J.  L.  437,  87 
Atl.  75;  Hampton  v.  Hartford  Fire 
Ins.  Co.  65  N.  J.  L.  265,  52  L.R.A. 
344,  47  Atl.  433,  30  Ins.  L.  J.  141. 

Texas. — Western  Assur.  Co.  v. 
Hillver-Deutsch-Jarratt  Co.  —  Tex. 
Civ.' App.  — ,  167  S.  W.  816;  Hart- 
ford Fire  Ins.  Co.  v.  Walker,  — 
Tex.  Civ.  App.  — ,  153  S.  \Y.  398; 
Mutual  Life  Ins.  Co.  v.  Ford,  — 
Tex.  Civ.  App.  — ,  130  S.  W.  769; 
Norwich    L^nion    Fire    Ins.    Soc,    v. 

5 


Cheanev  Bros.  —  Tex.  Civ.  App.  — , 
]28  S.V.  1163. 

r/r^?»/a.— Stratton  v.  New  York 
Life  Ins.  Co.  115  Va.  257,  78  S.  E. 
636. 

Forfeitures  do  not  readily  find  fav- 
or in  the  law,  and  courts  are  reluc- 
tant to  declare  and  enforce  them  if, 
by  reaiionable  interpretation,  it  can 
be  avoided.  Coleman  v.  New  Orleans 
Ins.  Co.  49  Oliio  St.  310,  16  L.R.A. 
174,  34  Am.  St.  Rep.  565,  31  N.  E. 
279. 

Since  forfeitures  are  not  favored 
in  the  law,  courts  should  be  liberal  in 
construing-  the  transaction,  so  as  to 
avoid  a  forfeiture.  Knickerbocker 
Life  Ins.  Co.  v.  Norton,  96  U.  S. 
234,  24  L.  ed.  689. 

Cited  in  United  States. — New  York 
Life  Ins.  Co.  v.  Eggleston,  96  U.  S. 
572,  577,  24  L.  ed.  841,  843 ;  Foley  v. 
Grand  Hotel  Co.  121  Fed.  509,  512, 
57  C.  C.  A.  629,  632;  Mutual  Re- 
serve Fund  Life  Assoc,  v.  Cleveland 
Woolen  Mills,  82  Fed.  508,  516,  27 
C.  C.  A.  212,  220,  54  U.  S.  App. 
290;  Mc.Master  v.  New  York  Life 
Ins.  Co.  78  Fed.  36';  Small  v.  West- 
chester Fire  Ins.  Co.  51  Fed.  791; 
Pendleton  v.  Knickerbocker  Life  Ins. 
Co.  7  Fed.  173;  Seamens  v.  North- 
western Mutual  Life  Ins.  Co.  1  Mc- 
Crary,  511,  3  Fed.  327. 

Arkansas. — Little  Rock  Granite 
Co.  v.  Shall,  59  Ark.  405,  409,  27  S. 
W.  562. 

Illinois. — Railway  Passenger  & 
Freight  Conductors  Mutual  Aid  & 
Benefit  Assoc,  v.  Tucker,  157  111.  194, 
200,  46  Am.  St.  Rep.  796,  42  N.  E. 
398. 

Indiana. — Germania  Fire  Ins.  Co. 
v.  Pitcher,  160  Ind.  392,  395,  64  N. 
E.  921,  32  Ins.  L.  J.  69,  71;  Peele 
V.  Provident  Fund  Soc.  147  Ind.  543, 
553,  44  N.  E.  661. 

lotva. — Hollis  V.  State  Ins.  Co.  65 
Iowa,  454,  459,  21  N.  AY.  774. 

Louisiana. — Maclin  v.  New  Eng- 
76 


CONSTRUCTION  OF  POLICY 


§  220 


where  they  are  induced  by  the  conduct  of  the  agent  representing 
the  insurer.^ 

In  a  Delaware  decision  the  rule  stated  is  that  conditions  of  for- 
feiture in  a  policy  are  not  favored,  and  these  and  like  conditions 
are  always  construed  strictly,  so  that  a  party  cUiiniing  a  forfeiture 
by  reason  of  a  violation  thereof  is  not  permitted  to  deprive  the  other 
party  of  the  benefits  of  the  right  of  indemnity  for  which  he  con- 
tracted if  there  is  any  doubt  or  uncertainty  as  to  the  terms  of  such 
conditions,  the  extent  of  their  application,  or  the  acts  which  con- 
stitute the  alleged  breach.^  So  it  is  held  in  a  Federal  Supreme  Court 
case  that  on  the  question  purely  of  forfeiture  the  rule  is  that  if  a 
p'olicy  contains  provisions  that  are  inconsistent,  or  which  is  so 
framed  as  to  be  fairly  open  to  construction,  the  view  should  be  adopt- 
ed, if  possible,  which  will  sustain  rather  than  forfeit  the  contract.' 


land   Mutual    Life    Ins.    Co.    33    La.  Car.  315,  70  Am.   St.  Rep.  592,  32 

Ann.  803.  S.  E.  728. 

Missouri. — McMahon    v.    Supreme  ^  Dover    Glass    Co.    v.     American 

Tent   Knights   of   ^laooabees   ot   the  Fire  Ins.  Co.  1  Marv.   (Del.)   32,  65 

World,  151  Mo.  522,  542,  52  S.  W.  Am.  St.  Rep.  264. 

384;  Fink  v.  Lancashire  Ins.  Co.  66  Forfeitures  are   not  favored;   and 

Mo.  App.  515.  in  contracts  of  insurance  a  eonstruc- 

New      Hampshire. — Appletoii      v.  tion  resulting'  in  a  loss  of  the  indem- 

Phenix  Mutual  Life  Ins.  Co.  59  N.  H.  nity  for  which  the  insured  has  con- 

541,  545,  47  Am.  Rep.  220.  tracted    will   not   be   adopted,   except 

New  York. — Kiernan  v.  Dutchess  to  give  effect  to  the  obvious  inten- 
County  Mutual  Ins.  Co.  150  N.  Y.  tion  of  the  parties,  and  the  plain  re- 
190,  194,  44  N.  E.  698;  Toplitz  v.  quirements  of  the  contract.  Wood- 
Bauer,  55  N.  Y.  Supp.  29,  34  App.  men's  Accident  Assoc,  v.  Byers 
Div.  526,  533.  (Pratt)  62  Neb.  673,  89  Am.  St.  Rep. 

South   Carolina.— VsiX^on  v.   Com-  777,  55  L.R.A.  291,  87  N.  W.  546,  31 

raercial  Union  Assur.  Co.  51  S.  Car.  Ins.  L.  J.  183;  Mellen  v.  United  States 

540,  547,  64  Am.  St.  Rep.  700,  29  S.  Health   &   Accident   Ins.   Co.   83  Vt. 

E.  24.5.  242,  75  Atl.  273. 

South  Dakota. — Enos  v.   St.   Paul  '  United      States. — ]y[cMaster       v. 

Fire  &  Marine  Ins.  Co.  4  S.  Dak.  639,  New  York  Life  Ins.   Co.   183  U.   S. 

656,  46  Am.  St.  Rep.  796,  57  N.  W.  25,  46  L.  ed.  64,  22  Sup.  Ct.  10,  31 

919.  Ins.   L.   J.   555,    cited    in    Hunt    v. 

Tennessee. — American  Central  Ins.  Springfield   Fire  &   IMarine   Ins.    Co. 

Co.  v.  McCrea,  8  Lea.  513,  526,  41  196  U.   S.  47,  49.  49  L.  ed.  382,  25 

Am.  Rep.  647.  Sup.  Ct.  179;  Lefler    v.    New    York 

Tcra*.— Mullen     v.     Mutual     Life  Life  Ins.  Co.  143  Fed.  814,  819,  74 

Ins.  Co.  89  Tex.  259,  202,  34  S.  W.  C.  C.  A.  488,  493;   Atlas  Reduction 

605.  Co.    V.    New    Zedand     Ins.     Co.     9 

F/rr7m?«.— Ea.slev  v.  Valley  Mutu-  L.R.A. (N.S.)  433,  138  Fed.  497,  512, 

al  Life  AS.SOC.  91  Va.  161,  169,  21  S.  71  C.  C.  A.  21,  36;  Mutual  Reserve 

E.  235.  Life   Ins.   Co.    of   N.   Y.   v.    Dobler, 

5  Eagle  Fire  Ins.  Co.  v.  Lewallen,  137  Fed.  550,  554,  70  C.  C.  A.  134, 

56  Fla.  246,  47  So.  947,  .38  Ins.  L.  138. 

J.   320,  343.     See  also   Kendrick   v.  Florida. — L'Engle       v.        Scottish 

Mutual  Benefit  Life  Ins.  Co.  124  N.  Union  &  National  Fire  Ins.  Co.  48 
Joyce  Ins.  Vol.  I. — 37.            577 


220 


JOYCE  ON  INSURANCE 


And  it  is  declared  in  a  New  Jersey  case  that:  "The  court  will  never 
seek  for  a  construction  of  a  forfeiture  clause  in  a  policy  which  will 
sustain  it,  if  one  which  will  defeat  it  is  reasonably  deducible  from 
the  terms  or  words  used  to  express  it."  '  But  the  court  cannot  go 
beyond  a  fair  construction  of  language  of  the  contract  in  order  to 
avoid  a  forfeiture.^ 

And  it  is  also  decided  that  insurance  policies  should  not  be  con- 
strued to  work  a  forfeiture  of  either  party's  rights,  or  to  defeat  the 
object  of  the  contract  unless  it  plainly  appears  that  such  was  the 
intention  of  both  contracting  parties,  and  that  the  effect  of 
the  language  was  well  understood  by  them  when  the  contract  was 
entered  into.^° 

It  is  also  held  that  as  a  forfeiture  is  not  favored,  it  will  not  be  en- 
forced unless  specifically  and  definitely  provided  for  in  the  contract ; 
and  waiver  thereof  will  be  treated  as  unconditional,  unless  it  clear- 
ly appears  that  it  was  otherwise  understood  by  the  parties.^^  And 
the  courts,  not  favoring  forfeitures,  are  usually  inclined  to  take  hold 
of  any  circumstances  which  indicate  an  election  to  waive  a  forfei- 
ture.^^ It  is  also  declared  that  where  a  waiver  prevents  a  forfeiture, 
the  law  ordinarily  permits  a  liberal  construction  to  be  placed  on  the 
acts  of  the  party  waiving  with  the  view  of  bringing  about  a  waiver 
of  such  forfeiture.  ^^ 


Fla.  82,  92,  67  L.R.A.  581,  586,  lU 
Am.  St.  Rep.  70,  77,  37  So.  462. 

Indiana. — Northern  Assur.  Co.  v. 
Carpenter,  52  Ind.  App.  432,  94  N. 
E.  779,  40  Ins.  L.  J.  1218,  1221. 

Nebraska. — German  Ins.  Co.  v. 
Shader,  68  Neb.  1,  9,  60  L.R.A.  918, 
922,  93  N.  W.  972. 

Oregon.  —  Stinchcombe  v.  New 
York  Life  Ins.  Co.  46  Oreg.  316,  80 
Pae.  213. 

8  Hampton  v.  Hartford  Fire  Ins. 
Co.  65  N.  J.  L.  265,  52  L.R.A.  344, 
47  Atl.  433,  per  Fort,  J.  Quoted  in 
Johnson  v.  Grand  Lodge  Ancient 
Order  United  Workmen,  Si  N.  J.  L. 
511,  79  Atl.  333,  40  Ins.  L.  J.  924. 

^  Behling  v.  Northwestern  Nation- 
al Life  Ins.  Co.  117  Wis.  24,  93  N. 
W.  800;  Globe  &  Rutgers  Fire  Ins. 
Co.  of  N.  Y.  V.  David  Moffatt  Co. 
154  Fed.  13,  83  C.  C.  A.  91. 

^^  Port  Blakely  Mill  Co.  v.  Spring- 
field Fire  &  Marine  Ins.  Co.  59 
Wash.  501,  140  Am!  St.  Rep.  863,  28 
L.R.A.(N.S.)  596n,  110  Pac.  36,  56 


578 


Wash.  681,  28  LJl.A.  (N.S.)  593, 
106  Pac.  194. 

^^  Murray  v.  Home  Benefit  Life 
Assoc.  90  Cal.  402,  25  Am.  St.  Rep. 
133;  Roseberry  v.  American  Benovel- 
ent  Assoc.  142  Mo.  App.  552,  121  S. 
W.  785.  Compare  Brignae  v. 
Pacific  Mutual  Life  Ins.  Co.  112  La. 
574,  36  So.  595,  66  L.R.A.  322; 
Smoot  V.  Bankers  Life  Assoc.  138 
Mo.  App.  438,  120  S.  W.  719. 

^2  Queen  Ins.  Co.  v.  Young,  86 
Ala.  424,  11  Am.  St,  Rep.  51,  5  So. 
116,  quoted  from  in  Gennania  Fire 
Ins.  Co.  V.  Pitcher,  160  Ind.  392,  64 
N.  E.  921,  34  Ins.  L.  J.  69;  Arnold 
V.  Empire  Mutual  Annuity  &  Life 
Ins.  Co.  3  Ga.  App.  685, '60  S.  E. 
470;  American  Central  Life  Ins. 
Co.  V.  Rosenstein,  45  Ind.  App.  537, 
92  N.  E.  380;  Montano  v.  Missanel- 
lese  Society  of  Mutual  Aid,  72  Misc. 
515,  130  N.  Y.  Supp.  455. 

13  Loftis  V.  Pacific  Mutual  Life  Ins. 
Co.  38  Utah,  532,  114  Pac.  134,  40 
Ins.  L.  J.  1048, 1058,  per  Friek,  C.  J. 


CONSTRUCTION  OF  POLICY  §  220 

Provisos  and  exceptions  are  to  be  strictly  construed  against  the 
insurer.^*  So  exceptions  of  certain  specified  risks  are  construed 
strictly  against  the  insurer, ^^ 

Words  of  limitation  in  the  nature  of  an  exception  will  be  con- 
strued against  the  party  preferring  them,^^  and  a  prohibition  against 

^'^  California. — Pacific    Heating    &  U.  S.  App.  214;  Koons  v.  La  Fou- 

Ventilating     Co.     v,     Williamsburgh  ciere    Compagnie    D'Assuranees,    71 

City  Fire  Ins.  Co.  158  Cal.  367,  111  Fed.    978,    983;    Northwest    Trans- 

Pac.  4,  39  Ins.  L.    J.    1706;    Pacific  portation  Co.  v.  Boston  Marine  Ins. 

Union    Club    v.    Commercial    Union  Co.  41  Fed.  793,  801;    Pearl,    The» 

Assur.  Co.  12  Cal,    App.    503,    107  Fed.    Cas,    No.    10,874;    Palmer    v, 

Pac.  728.  Warren  Ins.  Co.  1  Story,   360,   364, 

Colorado. — Travelers    Ins.    Co.    v.  Fed.  Cas.  No.  10,698;  Hernandez  v. 

Murray,  16  Colo.  296,  25    Am.    St.  Sun  Mutual  Ins.  Co.  6  Blatchf.  317, 

Rep.  267,  25  Pac.  74.  325,  Fed.  Cas.  No.  6,415. 

Georgia. — Thornton    v.    Travelers'  Indiwna. — Grant  v.  Lexington  Fire 

Ins.   Co.   116   Ga.  121,   94   Am.    St.  Life  &  Marine  Ins.  Co.  5  Ind.  23,  61 

Rep.  99,  42  S.  E.  287;  Empire  Life  Am.  Dee.  74, 

Ins.    Co.   V.    Einstein,   12   Ga.   App.  Missouri. — Laker    v.    Roval    Fra- 

380,  77  S.  E.  209.  temity  Union,  95  Mo.  App.  353,  368. 

Kentucky. — Farmers' Mutual  Equity  New  York. — Paul  v.  Travelers'  Ins. 

Ins.    Soc.    V.    Smith,    158    Ky.    459,  Co.  112  N.  Y..  472,  479,  3  L.R.A.  443, 

L.R.A.1915B,  844,  165  S.  W.  675.  446,  8  Am.  St.  Rep.  758,  20  N.  E. 

Pennsylvania.  —  Montgomery       v.  347 ;  Hoffman  v.  ^-Etna  Fire  Ins.  Co. 

Southern  Mutual  Ins.  Co.  242  Pa.  86,  32  N.  Y.  405,  414,  88  Am.  Dec.  337; 

51  L.RA.(N.S.)  518,  86  Atl.  924.  Hood  v.  Manhattan  Fire  Ins.  Co.  11 

Vermont. — Duran      v.       Standard  N.  Y.  532,  541;  Wright  v.  Williams, 

Life  &  Accident  Ins.  Co.  63  Vt.  437,  20  Hun,  320,  323. 

25  Am.  St.  Rep.  773,  13  L.R.A.  637,  O/wo.— Webster  v.  Dwelling  House 

22  Atl.  530.  Ins.     Co.    53    Ohio    St.    558,    564, 

Frr,7n?/fl.— Fidelity  &  Casualty  Co.  30  L.R.A.  719,  720,  53  Am.  St.  Rep. 

V.  Chambers,  93  Va.  138,  40  L.R.A.  658,  42  N.  E.  546. 

432,  24  S.  E.  896.  Terras.— Warren      v.      Springfield 

West     Virginia. — Beard      v.      In-  Fire  &  Marine  Ins.  Co.  13  Tex.  Civ. 

demnity  Ins.  Co.  65  W.  Va.  283,  64  App.  466,  469,  35  S.  W.  810. 

S.  E.  119.  Virginia. — United     States    Mutual 

An  exception  of  uncertain  import  Accident  Assoc,  v.  Newman,  84  Va. 

must    be    construed    most    strongly  52,  59,  3  S.  E.  805. 

against  the  insurer.     Furry  v.  Gen-  Wisconsin. — Wakefield    v.     Orient 

eral  Accident  Assoc.  80  Vt.  526,  130  Ins.  Co.  50  Wis.  532,  536,  7  N.  W. 

Am.  St.  Rep.  1012,  15  L.R.A.  (N.S.)  647;  Blumer  v.  Phoenix  Ins.  Co.  45 

206   (annotated  on  scope  and  eti'ect  Wis.  633,  641. 

of  provisions  in  policies  of  insurance  ^®  Schroeder  v.  Stock  &  Mut.  Ins. 

forbidding  use  of  intoxicating  liquor)  Co.  46  Mo.  174;  Bullen  v.  Denning, 

68  Atl.  655.  5  Bam.  &  C.  842 ;  Palmer  v.  Warren 

i^Yeaton  v.  Fry,  5  Cranch  (9  U.  Ins.  Co.  1  Story   (C.  C.)   360,  Fed. 

S.)   335,  3  L.  ed.  117,  cited  in  Unit-  Cas.  No.  10,698,  per  Story,  J.;  Don- 

ed    States    Ocean    Steamship    Co.    v.  nel  v.  Columbian  Ins.  Co.  2  Sum  (C. 

.Etna  Ins.   Co.  121  Fed.  882,  884;  C.)  366,  380,  381,  Fed.  Cas.  No.  3987; 

Canton  Ins.  Office  v.  Woodside,  90  Earl    of    Cardigan    v.    Armitage,    2 

Fed.  301,  305,  33  C.  C.  A.  63,  68,  61  Barn.  &  C.  197. 

579 


§  220a  JOYCE  ON  INSURANCE 

the  transfer  of  a  policy  will  be  construed  strictly.^''  So  conditions 
in  a  policy  of  insurance  which  create  restrictions  on  the  remedy  of 
the  insured  thereon,  as  that  he  shall  sue  within  a  certain  time,  are 
to  be  strictly  construed. ^^ 

The  rule,  however,  which  calls  for  a  strict  construction  against 
the  insurer  so  as  to  avoid  a  forfeiture  where  there  are  words  of  ex- 
ception or  limitation  in  a  policy  is  qualified  by  the  rule  that  effect 
nmst  be  given  to  language  which  has  a  plain  meaning  and  is  not 
inconsistent  with  other  clauses  or  provisions  of  the  contract. ^^  And 
an  exception  containing  a  plain,  simple  and  unambiguous  provision 
pointing  clearly  to  a  just  and  practicable  criterion  is  not  to  be  so 
construed  as  to  deprive  the  insurer  of  the  protection  for  which  it 
stipulates.^" 

§  220a.  Same  subject:  benefit  certificates. — The  rule  of  strict 
construction  against  the  insurer  of  conditions  for  forfeiture  and 
that  forfeitures  are  not  favored  in  law  applies  also  to  benefit  certifi- 
cates.^ So  forfeitures  in  beneficiary  certificates  dealing  with  prop- 
erty rights  are  not  favored,  and  constructions  of  written  instruments 
of  that  character  against  such  result  will  be  preferred,  if  the  instru- 
ment will  bear  it,  rather  than  the  adoption  of  an  interpretation 
giving  the  opposite  effect.  A  destructive  result  should  not  be  adopt- 
ed, wliere  it  is  possible  otherwise  to  glean  from  the  order's  own 
terms,  preferred  in  avoidance  of  it,  and  where  its  by-laws  may  rea- 

"  Griffey  v.  New  York  Cent.  Ins.  Barton,  46  Ind.  App.  160,  92  N.  E. 

Co.  oO  Hun   (N.  Y.)   299,  100  N.  Y.  64;  Supreme  Tent  Knights  of  Macca- 

417,  53  Am.  Kep.  202,  3  N.  E.  309.  bees   of  the   Wortd   v.   Etliridge,  43 

"State   Ins.   Co.   v.  Maael^ens,  38  Ind.  App.  475,  87  N.  E.  1049;  Gun- 

N.  J.  L.  564.  ther     v.     New     Orleans    Cotton    Ex- 

^3  Gilchrist  Transportation  Co.  v.  chano-e  Mutual  Aid  Assoc.  40  La. 
Phoenix  Ins.  Co.  170  Fed.  279,  95  Ann.  776,  2  L.R.A.  118,  8  Am.  St. 
C.  C.  A.  475.  See  Globe  &  Rutgers  Rep.  554,  5  So.  65;  Mathews  v. 
Fire  Ins.  Co.  of  N.  Y.  v.  David  Modern  Woodmen  of  America,  236 
Moffat  Co.  154  Fed.  13,  83  C.  C.  A.  Mo.  326,  139  S.  W.  151;  Burchard 
91;  Rye  v.  New  York  Life  Ins.  Co.  v.  Western  Commercial  Travelers' 
88  Neb.  707,  130  N.  W.  434,  40  Ins.  Assoc.  139  Mo.  App.  606,  123  S.  W. 
L.  J.  910  (contract  to  be  enforced  as  973;  Montano  v.  Missanellese  So- 
made).  Examine  Travelers'  Ins.  Co.  ciety  of  Mutual  Aid,  72  Misc.  515, 
v.  Thornton,  119  Ga.  455,  46  S.  E.  130'  N.  Y.  Supp.  4.55;  Fitzpatrick 
678.  v.  Knights  of  Columbus,  128  N.  Y. 

Contract  to  be  enforced  as  made,  Supp.     366,     143     App.    Div.    540; 

see  §  205  herein.  Woodmen  of  the  World  v.  Gilliland, 

20  Furrv  v.  General    Accident    Ins.  11  Okla.  384,  67  Pac.  485 ;  Haywood 

Co.    80    Vt.     526,   15   L.R.A. (N.S.)  v.    Grand   Lodge   of   Texas   Knights 

206n,  130  Am.  St.  Rep.  1012,  68  Atl.  of  Pvtliias,  —  Tex.  Civ.  App.  — ,  138 

655.  S.  W.  1194;  Daniel  v.  Modem  Wood- 

^  Brotherhood    of    Painters,    Deco-  men  of  America,  53  Tex.  Civ.  App. 

rators  &  Paperhangers  of  America  v.  570,  118  S.  W.  211. 

580 


CONSTRUCTION  OF  POLICY 


§§  220b,  221 


sonably  be  read  so  as  to  preserve  property  rights.^  But  where  on 
the  back  of  tlie  certificate  and  made  a  part  thereof,  and  in  fine  type 
under  the  head  of  "Privileges  and  Requirements,"  and  not  found 
under  a  separate  paragraph  but  put  between  matters  entirely  foreign 
to  it,  are  restrictions  or  limitations  of  liability  which  are  inconsistent 
with  the  terms  of  the  contract  appearing  on  the  face  of  the  policy, 
and  with  the  application,  constitution  and  by-laws  which  are  made 
a  part  of  the  contract  the  latter  prevail  over  the  said  limitations.' 

§  220b.  Same  subject:  guaranty  or  fidelity  insurance:  employ- 
ers' liability  policy. — The  rule  that  construction  will  Ijc  most 
strongly  against  forfeiture  of  the  indemnity  applies  to  a  fidelity  in- 
surance bond  when  it  is  capable  of  two  constructions  and  is  essen- 
tially an  insurance  contract.*  An  employers  liability  or  indemnity 
policy  is  also  within  the  rule.* 

§  221.  Construction  should  be  liberal  in  favor  of  assured  and 
for  benefit  of  trade. — It  has  long  been  determined  with  an  almost 
unwavering  unanimity  that  insurance  contracts,  when  suscejitible 
of  more  than  one  interpretation,  shall  be  construed  in  favor  of  the 
5Lssured.  This  rule  is  imperative  and  undoubted,  since  to  hold 
otherwise,  without  an  absolute  necessity  therefor,  would  tend  to  sub- 
vert the  very  object  and  purposes  of  insurance,  which  is  that  of  in- 
demnity to  the  assured  in  case  of  loss,  or  the  payment  of  money  on 
the  happening  of  a  contingency,  and  this  indenmity  should  be  ef- 
fectuated rather  than  defeated.^     And  this  is  true  of  certificates  in 


^  Johnson  v.  Grand  Lodge  Ancient 
Order  United  Workmen,  81  N.  J.  L. 
511,  79  Atl.  333,  40  Ins.  L.  J.  924. 

'  Hall  v.  Royal  Fraternal  X^nion, 
130  Ga.  820,  61  So.  977. 

«Bank  of  Tarboro  v.  Fidelity  & 
Deposit  Co.  128  N.  Car.  36(),  38  S. 
E.  908,  83  Am.  St.  Rep.  682 ;  United 
American  Fire  Ins.  Co.  v.  American 
Bonding  Co.  146  Wis.  573,  40  L.R.A. 
(N.S.)  661,  131  N.  W.  994,  40  Ins. 
.L.  J.  1805.     See  §  206c  herein. 

*  Home  Mixture  Guano  Co.  v. 
Ocean  Accident  &  Guaranty  Corp. 
Ltd.  (U.  S.  C.  C.)  176  Fed.  600. 

*  Vniled  Stales. — Ilapan  v.  Scot- 
tish Union  &  National  ln.>^.  Co.  186 
U.  S.  423,  46  L.  ed.  1229,  22  Sup. 
Ct.  862;  Liverpool  &  London  & 
Globe  Ins.  Co.  v.  Kearney,  ]80  U.  S. 
132,  45  L.  ed.  460,  21  Sup.  Ct.  326, 
case  aOirms  94  Fed.  314,  36  CCA. 
265;  London  Assnr.  Co.  v.  Com- 
panliia  de  Moagens  do  Barreiro,  167 


581 


U.  S.  149,  42  L.  ed.  113,  17  Sup.  Ct. 
785;  Imperial  Fire  Ins.  Co.  v.  Coos 
County,  151  U.  S.  452,  28  L.  ed.  231, 
14  Sup.  Ct.  379;  Tliompson  v.  Phenix 
Ins.  Co.  136  U.  S.  287,  34  L.  ed.  408, 
10  Sup.  Ct.  1019;  Travelers'  Ins.  Co. 
\.  McConkey,  127  U.  S.  661,  32  L. 
ed.  308,  8  Sup.  Ct.  1360;  :\Ioulor  v. 
American  Life  Ins.  Co.  Ill  U.  S.  335, 
28  L.  ed.  447,  4  Sup.  Ct.  466;  Grace 
V.  American  (\'ntral  Ins.  Co.  109  U. 
S.  278,  27  L.  ed.  932,  3  Sup.  Ct.  207; 
Phfpnix  Ins.  Co.  v.  Slausjhter,  12 
Wall.  (79  U.  S.)  404,  20  L.  ed.  444; 
O'Brien  v.  North  River  Ins.  Co.  of 
N.  Y.  212  Fed.  102,  —  CCA.—; 
Maryland  Casualty  Co.  v.  Finch,  8 
L.R.A.(N.S.)  308,  147  Fed.  388,  77 
C  C  A.  566,  s.  c.  203  U.  S.  592, 
51  L.  ed.  331,  27  Sup.  Ct.  780; 
McClain  v.  Providence  Savings  Life 
Assur.  Co.  110  Fed.  80,  49  C.  C  A. 
31,  s.  c.  184  U.  S.  699,  46  L.  ed. 
765,    23     Sup.    Ct.    938;     American 


§  221  JOYCE  ON  INSURANCE 

Steamsliip    Co.    Ltd.    v.    Indemnity  Ltd.    46    Colo.    558,   105  Pac.   865; 

Mutual  Marine  Ins.  Co.  Ltd.   (U.  S.  German  Ins.  Co.  v.  llaydeii,  21  Colo. 

D.  C.)  108  Fed.  421,  aff'd  118  Fed.  124,  52  Am.  St.  Rep."  206,  40  Pac. 

1014,  56  C.  C.  A.  56;   Cannon  Ins.  453;   Travelers'  Ins.   Co.  v.  Murray, 

Office,  Ltd.  V.  Woodside,  90  Fed.  301,  16  Colo.  296,  25  Am.  St.  Rep.  267, 

33  C.  C.  A.  63,  61  U.  S.  App.  214,  25   Pac.   74;   Lampkin   v.   Travelers' 

28  Ins.  L.  J.  269;  Kiesel  v.  Sun  In-  Ins.  Co.  11  Colo.  App.  249,  52  Pac. 

surance   Office    of   London,   88   Fed.  1040;   Strauss  v.  Phenix  Ins.  Co.  9 

243,  60  U.  S.  App.  10,  31  C.  C.  A.  Colo.  App.  386,  48  Pac.  822. 

518,  s.   c.  171  U.   S.   688,  43  L.   ed.  District     of    Columbia.— ^SUys    v. 

1170,  19  Sup.  Ct.  885.     See  Guaran-  New   Amsterdam     Casualty    Cu.    40 

tee  Co.  V.  Mechanics'  Savings  Bank  App.    D.    C.    249,   46   L.R.A.(N.S.) 

&  Trust  Co.  80  Fed.  766,  47  U.  S.  1108. 

App.  91,  26   C.  C.  A.  146,  82  Fed.  Florida.— UEngle       v.       Scottish 

545,  27  C.  C.  A.  373,  s.  c.  173  U.  S.  Union   &  National  Ins.   Co.  48  Fla. 

585,  43  L.  ed.  818,  19  Sup.  Ct.  551.  82,  92,  67  L.R..A._581,  586,  111  Am. 

Alabama. — Pennsylvania  Fire  Ins.  St.  Rep.  70,  7/,  3i  So.  462. 

Co.  V.  Draper,  187  Ala.  103,  65  So.  Georgia. — McEachern  v.  New  York 

923;   Queen   Ins.    Co.   v.   Young,   86  Life   Ins.   Co.   15  Ga.  App.   222,  82 

Ala.  424,  11  Am.  St.  Rep.  51,  5  So.  S.  E.  820;  Mutual  Life  Ins.  Co.  v. 

116;  Alabama  Gold  Life  Ins.  Co.  v.  Burden,  9   Ga.  App.  797,  72  S.  E. 

Johnson,  80  Ala.  467,  2  So.  128,  per  295;   North  American  Accident  Ins. 

the  Court,  60  Am.  Rep.  112.  Co.  v.  Watson,  6  Ga.  App.  193,  64 

Arkansas. — Malonev    v.    Maryland  S.  E.  693;  Arnold  v.  Empire  Mutual 

Casualty  Co.   113  Ark.  174;  167   S.  Annuity  &  Life  Ins.  Co.  3  Ga.  App. 

W.    845;    Monongahela   Ins.    Co.    v.  685,  60  So.  470;  jMissouri  State  Life 

Batson,  111  Ark.  144,  163  S.  W.  512.  Ins.     Co.    v.   Lovelace,   1   Ga.   App. 

California.— AnAeTsow    v.    Mutual  446,  58  S.  E.  93. 

Life  Ins.  Co.  of  N.  Y.  164  Cal.  712,  ////^ois.— Monahan      v.      Fidelity 

130    Pac.    720;    Pacific    Heating    &  Life  Ins.  Co.  242  111.  488,  134  Am. 

Ventilating  Co.  v.  Williamsburg  Citv  St.  Rep.  337,  90  N.  E.  213;  Peterson 

Fire  Ins.  Co.  of  Brooklvn,  158  Cal  v.  Manhattan  Life  Ins.  Co.  244  111. 

367,  111  Pac.  4,  39  Ins.  L.  J.  1706:  329,  91  N.   E.  466;   State.  National 

Pacific    Union    Club    v.    Commercial  Bank  of  Sprinsfield  v.  United  States 

Union  Assur.  Co.  12  Cal.  App.  503,  Life  Ins.  Co.  238  111.  148,  87  N.  E. 

107  Pac.  728;  Raulet  v.  Northwest-  396;  Forest  City  Ins.  Co.  v.  Hard- 

ern  National  Ins.  Co.  157  Cal.  213,  estv,  182  111.  39,  55  N.  E.    139,    74 

107  Pac.  292,  39    Ins.    L.    J.    742;  Am.  St.  Rep.  161,  aff'g  Hardesty  v. 

Welch  V.  British  American  Ins.  Co.  Forest    Citv   Ins.    Co.    77   111.    App. 

148  Cal.  223,  113  Am.  St.  Rep.  223,  413;  Sehuermann  v.  Dwelling-House 

82   Pac.   964:   Berliner  v.   Traveler.s'  Ins.    Co.    161    lU.    437,   52    Am.    St. 

Ins.    Co.   121    Cal.   458,    41    L.R.A.  Rep.  377,  43  N.  E.  1093;  Healev  v. 

467,   66   Am.    St.   Rep.   49,   53   Pac.  Mutual  Ace.  Assn.  133  111.  556,  561, 

918;    National   Bank   v.   Union   Ins.  25  N.  E.  52,  23  Am.   St.  Rep.  637, 

Co.  88  Cal.  497,  22  Am.  St.  Rep.  324,  638,  9  L.R.A.  371:  Western  Tube  Co. 

26   Pac.    509;    Wells,    Fargo    Co.   v.  v.    .^tna    Indemnitv    Co.    181    111. 

Pacific  Ins.  Co.  44  Cal.  397;  Brickell  App.  502;  Coen  v.  Denver  Township 

V.  Atlas  Ins.  Co.  Ltd.  10  Cal.  App.  Mutual  Fire  Ins.   Co.  155  111.  App. 

17,  101  Pac.  16.  332;  Provident  Savings  Life  Assur. 

Colorado. — Connecticut    Fire    Ins.  Soc.  v.  Marshall,  125  111.  App.  101; 

Co.  V.  Colorado    Leasing,    Mining    &  Smitli   v.   Bankers'   Life   Assoc.   123 

Milling  Co.  50   Colo.  424,  116  Pac.  HI.  App.  392;    Szymkus    v.    Eureka 

154,  40  Ins.  L.  J.  1717 ;  Barclay  v.  Fire  &  IMarine  Ins.  Co.  114  111.  App. 

London    Guarantee   &   Accident    Co.  401;   Northwestern   Life   Assur.    Co. 

582 


CONSTRUCTION  OF  POLICY 


§  221 


V   Schulz,  94  111.  App.  156;  Niagara  Glinchey  v.  Fidelity  &  Casualty  Co. 

Fire  Ins.  Co.  v.  D.  Heenan  &  Co.  81  80   Me.   251,  14  Atl.  13,  6  Am.   St. 

111.  App.  678;   Getman  v.  Guardian  Rep.  190. 

Fire  Ins.  Co.  46  111.  App.  489.  Mwyland.  —  McEvoy  v.  Security 

Indiana. — American     Surety     Co.  Fire  Ins.  Co.  110  Md.  275,  22  L.R.A. 

of  N.  Y.  V.  Pan-boi-n,  182  Ind.  116,  (N.S.)  942n,  132  Am.  St.  Rep.  428n, 

105  N.  E,  769 ;  Northwestern  Mutual  73  Atl.  157,  38  Ins.  L.  J.  895. 

Life  Ins.   Co.   v.  Hazelett,  105   Ind.  Massachusetts.— EWioii    v.    Hamil- 

212,  55  Am.  Rep.  192,  4  N.  E.  582;  ton  Ins.  Co.  13  Gray  (79  Mass.)  139. 

Grant  v.  Lexington  Fire,  Life  &  Ma-  Michigan.— Turner    v.    Fidelity    & 

rine  Ins.  Co.  5  Ind.  23,  61  Am.  Dec.  Casualty  Ins.  Co.  of  N.  Y.  112  Mich. 

74:  Indiana  Life  Endowment  Co.  v.  425,  38  L.R.A.  529,  67  Am.  St.  Rep. 

Reed,  54  Ind.  App.  450,  103  N.  E.  426,  70  N.  W.  898 ;  Utter  v.  Travel- 

77;  Ohio  Farmers  Ins.  Co.  v.  Glaze,  ei-s'  Ins.  Co.  65  Mich.  545,  8  Am.  St. 

55  Ind.  App.  147,  101  N.  E.  734;  Rep.  913,  32  N.  W.  812. 

Metropolitan  Life  Ins.  Co.  v.  John-  Minnesota. — Zeitler     v.     National 

son,  49  Ind.  App.  233,  94  N.  E.  785;  Casualty  Co.  124  Minn.  478,  145  N. 

Iowa  Life  Ins.  Co.  v.  Haughton,  46  W.  395;  Minneapolis  Threshing  Ma- 

Ind.  App.  467,  87  N.  E.  762.     See  chine   Co.   v.   Firemen's  Ins.   Co.   57 

also  Germania  Fire  Ins.  Co.  v.  Deck-  Minn.  35,  23  L.R.A.  576,  47  Am.  .St. 

hard,  3  Ind.  App.  361,  28  N.  E.  868.  Rep.    572,    58  N.  W.  819 ;  Pettit  v. 

Iowa.— Allen     v.     Travelers'    Pro-  State  Ins.  Co.  41  Minn.  299,  43  N. 

tective  Assoc,  of  America,  163  Iowa,  W.  378;  DeGraff  v.  Queen  Ins.  Co. 

217,  48   L.R.A. (N.S.)    600,    143    N.  38  Minn.  501,  38  N.  W.  696,  8  Am. 

W.  574;  Lavton   v.   Interstate   Busi-  St.- Rep.  685. 

ness  Mens  Assoc.  158  Iowa,  356,  139  Mississippi. — Shivers    v.    Fanners 

N     W.    463;     Krell    v.     Chickasaw  Mutual  Fire  Ins.  Co.  99  Miss.  744, 

Farmers  Mutual  Fire  Ins.    Co.    127  55  So.  965,  40  Ins.  L.  J.  1706,  1708. 

Iowa,  748,  104  N.  W.  364;  Vorse  v.  Missouri.   —   Wertbeimer  -  Swarts 

.Jersey  Plate  Glass  Ins.  Co.  119  Iowa,  Shoe  Co.  v.  United  States  Casualty 

55,  60  L.R.A.  838,  97  Am.  St.  Rep.  Co.  172  Mo.  135,  61  L.R.A.  766,  95 

330,  93  N.  W.  569.  Am.  St.  Rep.  500,   72    S.    W.    635; 

Kansas.— Fire       Association       of  Renshaw  v.  Missouri    State    Mutual 

Phila.    V.    Taylor,   76   Kan.    392,   91  j^i^.^  ^  Marine  Ins.  Co.  103  Mo.  595, 

Pac.  1070.  23  Am.  St.  Rep.  904,  15  S.  W.  945; 

JfCT?^MC%.— Pacific     Mutual     Lite  ^enturv    Realty    Co.    v.    Frankfort 

?'\?^;-^^.^'?i^'  H;       V    1     Marine  Accident  &  Plate  Glass  Ins. 

S.  W   1136;  Jef  rson^v.  ^'^J^  ^ork  ^^^  ^^^  App. -144, 161  S.  W.  624, 

ili'  ^^'\  ?.?•  ^f  ?^-  ^f;  If  %Z-    630,  631;  Mitchell  v.  German  Com- 
780;  Fidelity  &  Casualty  Co.  ot  JN.  '  •  ,    »     -i     x.  /-.      t  r-n  tvt       a 

Y.  ;.  Hart,"l42  Kv.  25,  133  S.  W.  TiTi  c   w  o'f  P' u^ ' \  ^  f/^' 

996:  ^tna  Life  Ins.  Co.  v.  Bethal,  1' 1^1  ^  W  o2;  Stark  v^  John  Han- 

140  Ky.  609,  131  S.  W.  523;  Spring  cock  Mutual  Life  Ins.  Co.  1^6  Mo. 

Garden  Ins.  Co.  v.  Imperial  Tobacco  App.   574,   159   S.  W.   7o8;    Stix  v. 

Co.  132  Ky.  7,  136  Am.  St.  Rep.  164,  Travelei-s'  Indemnity  Co.  of  Hfd.  17o 

116  S.  W.*234,  20  L.R.A.(N.S.)  277,  Mo.  App.  1y1,  157  S.  W.  870;  Rose- 

38  Ins    L.  J.    446;    Mutual    Benefit  berry,  v.  American  Benevolent  Assoc. 

Life  Ins.  Co.  v.  Dunn,  106  Ky.  591,  142  Mo.  App.  552,  121  S.  W.  785; 

51  S.  W.  20.  Cunningham    v.    U;iion    Casualty    & 

Louisiana.— Mntnal  Life   Ins.    Co.  Surety  Co.  82  Mo.  App.  607. 

V.  New,  125  La.  41,  27  L.R.A. (N.S.)  MoH/cr»«.— McAuley    v.     Ca.sualtv 


431. 136  Am.  St.  Rep.  326,  51  So.  61 

Maine. — Bickford     v.     ^tna     Ins 

Co.  101  Me.  124,  63  Atl.  552;  Mc- 


Co.  of  America,  39  Mont.  185,  102 
Pac.  586. 

Nebraska. — Haas    v.    Mutual   Life 


583 


§  221  JOYCE  ON  INSURANCE 

Ins.  Co.  84  Neb.  682,  121  N.  W.  996,  Co.  of  North  Ameriea,  25  Okla.  92, 

26  L.R.A.(N.S.)   747n.  138  Am.  St.  Rep.  906,  105  Pac.  354. 

New  Jersey. — Bohle.s  v.  Prudential  Oregon.  —  Stinchcombe     v.     New 

Ins.  Co.  of  Amerit-a,  84  N.  J.  L.  315,  York  Life  Ins.  Co.  46  Oreg.  316,  80 

86  Atl.  438,  aft'g  83  N.  J.  L.  240,  83  Pac.  213. 

Atl.    904;    Brooks    v.    Metropolitan  Pennsylvania.  —  Central       Market 

Life  Ins.  Co.  70  N.  J.  L.  36,  56  Atl.  Street   Co.  v.  North  British  &  Mer- 

168;  Snyder  v.  Dwelling-House  Ins.  cantile  Ins.  Co.  245  Pa.  272,  91  Atl. 

Co.  59  N.  J.  L.  544,  56  Am.  St.  Rep.  662;  Francis  v.  Prudential  Ins.  Co. 

625,  37  Atl.  1022.  of  America,  243  Pa.  380,  90  Atl.  205; 

New  York. — Michael  v.  Prussian  Binsell  v.  Royal  Ins.  Co.  240  Pa.  412, 
National  Ins.  Co.  171  N.  Y.  25,  63  N.  87  Atl.  955;  Western  &  Atlantic 
E.  810;  Kratzenstein  v.  Western  Pipe  Lines  v.  Home  Ins.  Co.  145  Pa. 
Assur.  Co.  116  N.  Y.  54,  22  N.  E.  St.  346,  27  Am.  St.  Rep.  703,  22 
221,  5  L.R.A.  799;  Paul  v.  Travel-  Atl.  665,  21  Ins.  L.  J.  24,  48  Leg. 
ers  Ins.  Co.  112  N.  Y.  472,  3  L.R.A.  Intell.  440;  Philadelphia  Tool  Co.  v. 
443,  8  Am.  St.  Rep.  756,  20  N.  E.  British  American  Assur.  Co.  132  Pa. 
347 ;  Foot  v.  ^tna  Fire  Ins.  Co.  61  St.  236,  19  Am.  St.  Rep.  596,  19  Atl. 
N.  Y.  571,  aff'g  4  Daly  (N.  Y.)  285;  77;  Teutonia  Fire  Ins.  Co.  v.  Mund, 
Hoffman  v.  .^tna  Fire  Ins.  Co.  32  102  Pa.  St.  89;  Franklin  Fire  Ins. 
N.  ■  Y.  405,  88  Am.  Dec.  337,  339 ;  Co.  v.  Brock,  57  Pa.  St.  74. 
Hood  V.  Manhattan  Fire  Ins.  Co.  11  South  Carolina.  —  Henderson  v. 
N.  Y.  (1  Kern.)  532,  per  Parker,  J.;  Abbeville  &  Greenwood  Mutual  In.s. 
Rocker  v.  Great  Western  Ins.  Co.  4  Assoc.  96  S.  Car.  430,  81  S.  E.  171; 
Abb.  App.  Dec.  76 :  Marvin  v.  Stone,  Bennettsville  &  Cheraw  Rv.  Co.  v. 
2  Cow.  (N.  Y.)  781,  806;  Gallagher  Glens  Falls  Ins.  Co.  96  S.' Car.  44, 
V.  Fidelity  &  Casualty  Co.  of  N.  Y.  79  S.  E.  717;  Rawl  v.  American  Cen- 
163  App.  Div.  556,  148  N.  Y.  Supp.  tral  Ins.  Co.  94  S.  Car.  299,  45 
1016;  Darling  v.  Protective  Assur.  L.R.A. (N.S.)  463n,  77  S.  E.  1037. 
Soe.  71  Misc.  113,  127  N.  Y.  Supp.  ^Quth  Dakota.—  Farmers'  &  Mer- 
486 ;  Porter  v.  Casualty  Co.  of  chants'  State  Bank  of  Verdon  v.  Unit- 
America,  126  N.  Y.  Supp.  669,  70  ed  States  Fidelity  &  Guaranty  Co.  28 
Misc.  246;  Lite  v.  Firemens'  Ins.  Co.  g.  Dak.  315,  138  N.  W.  247,  36 
104  N.  Y.  Supp.  434,  119  App.  Div.  L.R.A. (N.S.)  1152;  Bolte  y.  Equita- 
410.  ble  Fire  Assoc.  23  S.  Dak.  240,  121 

North    Carolina.— KmoU     v.     In-  n.  W.  773,  38  Ins.  L.  J.  886. 

!J^,Tlt>^/'^'^ -l"f-  ?""-   ^'''^-   ^^l  Tennessee.-Vaci^it     Mutual     Life 

IM,  6/  S.  E    ;374;  Jones  v.  Pennsyl-  j^^    ^^   ^.    cf^ib^.^iti     ii5  Tenn.  471, 

vama  Casualty  Co.  140  N.  Car.  262,  ^^.,  ^       g     ^        gg^   g^  g   ^   .3^4 

V\  ^""a-  ^^- J^f'^Q.^^'  S^  ^-  ^-  v-^'  T^xa*^-Indiana  &  0.  Live  Stock 

5  L.RA.(N.S)    932n;   Bray  y    Vir-  j^^    ^.^    ^    Keiningham     (1913)    - 

ginia  lire  &  Marine  Ins.  Co.  139  N.  r^^^    ^-^^    ^         _    -^^^  g    ^^.    334 

Car    390    51  S.  E    922;  Kfndnck  v.  j^^^.^,  j^^^    ^^^  ^    ^^^^^^  ^  ^   ^    Co. 

Mutual  Benefit  Lifc^Ins^  Co.  124  N  53-^^^.   ^iv.  App.  154,115  S.  W.  117. 

Car.  31o,   /O  Am.   St.   Rep.  o92,  32  o       j     j 

S.  E.  728.     Compare  Powell  v.  North  Vermont.— Buran      v.       Standard 

State   Mutual   Life   Ins.   Co.  153   N.  Life  &  Accident  Ins.  Co.  63  Vt.  43^, 

Car.  124,  09  S.  E.  12.                  "  13  L.R.A.  637,  25  Am.  St.  Rep.  773, 

Oklahoma.  —  Standard       Accident  -~  ■^^^-  '"^'^O. 

Ins.  Co.  v.  Hite,  "37  Okla.    305,    132  Firr/jw/fl.— Fidelity      &      Casualty 

Pac.     333.     46     L.R.A. (N.S.)     986;  Co.    v.    Chambers,    93    Va.    138.    40 

Capital  Fire  Ins.  Co.  v.  Carroll,  26  L.R.A.  432n,  24  S.  E.  896;  Georgia 

Okla.  286,  109  Pac.  535,  39  Ins.  L.  Home   Ins.    Co.    v.   Bartlett,   91   Va. 

J.  1258,  1264;  Taylor    v.    Insurance  305,  50'Am.  St.  Rep.  832,  21  S.  E. 

584 


CONSTRUCTION  OF  POLICY  §  221 

mutual  benefit  etc.,  societies  or  associations.'    So  the  questions  and 


476;  Mutual  Assurance  Soc.  v.  Scot- 
tish Union  &  National  In.s.  Co.  84  Va. 


language 


116,  10  Am.  St.  Rep.  119,  4  S.  E. 

ifs. 

Washington. — Montana  Stables  v. 
Union  Assur.  Soc.  of  London,  53 
Wash.  274,  101  Pac.  882. 

West  Virginia. — Tucker  v.  Coloni- 
al Fire  Ins.  Co.  58  W.  Va.  30,  51 
S.  E.  86:  Logan  v.  Provident  Sav- 
ings Life  Assur.  Soc.  57  W.  Va.  384, 
50  S.  E.  529;  Cleavenger  v.  Franklin 
Fire  Ins.  Co.  47  W.  Va.  595,  35  S.  E. 
998,  29  Ins.  L.  J.  528,  540. 

M'isconsin. — Kresge  v.  Maryland 
Ca.sualty  Co.  154  Wis.  627,  143  N.  W. 
668 ;  Andrews  v.  United  States  Casu- 
alty Co.  154  Wis.  82,  142  N.  W.  487; 
Siemers  v.  Meeme  Mutual  Home 
Protection  Ins.  Co.  143  Wis.  114,  126 
N.  W.  669;  Patterson  v.  Natural 
Premium  Mutual  Life  Ins.  Co.  100 
Wis.  118,  42  L.R.A.  253,  69  Am.  St. 
Rep.  899,  75  N.  W.  980. 

England. — Doe  v.  Dixon,  9  East, 
15. 

"It  is  an  accepted  canon  of  inter- 
pretation that  if  there  is  any  uncer- 
tainty as  to  whether  given  words 
were  used  in  an  enlarged  or  restrict- 
ed sense,  that  construction  should  be 
adopted  which  is  most  beiiehcial  to 
the  covenantee."  Pa.ul  v.  Travelers' 
Ins.  Co.  112  N.  Y.  472,  479,  20  N.  E. 
347,  3  L.R.A.  443,  8  Am.  St.  Rep. 
758,  762. 

Insurance  policies  must  be  liberal- 
ly construed  in  favor  of  the  assured, 
so  as  not  to  defeat,  without  a  plai-n 
Jieee&sity,  his  claim  for  indemnity, 
and  where  words  used  may,  without 
violence,  be  given  two  interpreta- 
tions, that  which  will  sustain  the 
claim  and  cover  the  loss  should  be 
adopted.  Goodwin  v.  Provident  Sav- 
ings Life  Assn.  97  Iowa,  226,  59  Am. 
St.  Rep.  411,  32  L.R.A.  473,  66  N. 
W.  157;  American  Accident  Co.  v. 
Reigert,  94  Kv.  547,  21  L.R.A.  651, 
42  Am.  St.  Rep.  374,  23  S.  W.  191. 

If  there  is  doubt  or  uncertainty  as 
to  the  meaning  of  terms  employed  in 


a  policy  of  insurance,  the 
must  be  liberally  construed  in  favor 
of  the  insured,  so  as  not  to  defeat, 
without  a  plain  necessity,  his  claim 
to  indemnity,  which,  m  effecting  the 
insurance  it  was  his  object  to  secure. 
Travelers'  Ins.  Co.  v.  Dunlap,  160 
111.  642,  52  Am.  St.  Rep.  355,  43  N. 
E.  765. 

When  an  injury  approximately 
proceeds  from  a  cause  whicli  falls 
within  the  limits  of  a  policy  accord- 
ing to  the  ordinary  interpretation  of 
the  force  of  words,  that  interpre- 
tation is  to  be  preferred,  rather  than 
one  which  defeats  the  protection  of 
the  assured  in  a  large  class  of  cases. 
.Etna  Life  Ins.  Co.  v.  Fitzgerald, 
165  Ind.  317,  112  Am.  St.  Rep.  232, 
1  L.R.A. (N.S.)  422n,  6  Amer.  &  Eng. 
Ann.  Cas.  551,  75  N.  E.  262. 

A  liberal  construction  of  an  insur- 
ance policy,  if  it  is  a  reasonable  one 
and  will  prevent  injustice,  should  be 
adopted  when  a  literal  construction 
would  lead  to  manifest  injustice. 
Matthews  v.  American  Central  Ins. 
Co.  154  N.  Y.  449,  39  L.R.A.  433,  61 
Am.  St.  Rep.  627,  48  N.  E.  751,  27 
Ins.  L.  J.  193.  Case  modifies  41  N. 
Y.  Supp.  304,  9  Ap]).  Div.  339. 

"^  California. — O'Connor  v.  Grand 
Lodge  Ancient  Order  United  Work- 
men of  Cal.  146  Cal.  484,  80  Pac. 
688. 

Georgia. — Hall  v.  Royal  Fraternal 
Union,  130  Ga.  820,  61  S.  E.  977; 
Warwick  v.  Supreme  Conclave  K,  of 
D.  107  Ga.  115,  32  S.  E.  951. 

Ulinnis--\\o\i\\  Circle  v.  Acliter- 
rath,  204  111.  549,  98  Am.  St.  Rep. 
224,  68  N.  E.  492,  63  L.R.A.  452; 
Semour  v.  Mutual  Protective  League, 
155  111.  App.  21;  Marren  v.  North 
American  Union,  145  111.  Apj).  375; 
Mutual  Protective  League  v.  McKee, 
122  111.  App.  376,  aff'd  223  111.  364, 
79  N.  E.  25;  Supreme  Lodge,  Order 
of  Mutual  Protectio)!  v.  Meister,  105 
111.  App.  471,  aff'd  68  N.  E.  454. 

Indiana. — Supreme  Lodge  Knights 
of  Honor  v.   Abbott,   82   Ind.   1,  6; 


585 


§  221  JOYCE  ON  INSURANCE 

answers  in  an  application,  which  is  attached  to  the  certificate  and 
expressly  made  a  part  of  the  contract,  are  to  be  construed  most 
strongly  against  insurer.^  Since  indemnity  is  the  ultimate  object 
of  insurance,^  the  construction  should  also  be  in  favor  of  indemnity 
and  likewise  for  the  benefit  of  trade ;  ^°  for  in  case  of  doubtful  con- 
Brotherhood  of  Painters,  Decorators  35  Ins.  L.  J.  582;  Keatley  v.  Grand 
&  Paperhangers  of  America  v.  Bar-  Fraternity,  2  Boyee's  (25  Del.)  267, 
ton,  45  Ind.  App.  160,  92  N.  E.  64;  78  Atl.  874.  See  Sargent  v.  Modern 
Supreme  Tent  Knights  of  the  Macca-  Brotherhood  of  America,  148  Iowa, 
bees  of  the  World  v.  Ethridge,  43  600,  127  N.  W.  52. 
Ind.  App.  475,  87  N.  E.  1049.  ^  Manger  v.  Holyoke  Fire  Ins.  Co. 

Iowa.— Binder    v.     National    Ma-  1  Holmes    (U.   S.   C.   C.)    287,  Fed. 

sonic  Accident  Assoc.  127  Iowa,  25,  Cas.  No.  9305;   Fire  Association  of 

102  N.  W.  190;  Peterson  v.  Modern  Philadelphia  v.  Taylor,  76  Kan.  392, 

Brotherhood  of  America,  125  Iowa.  91  Pac.  1070. 

562,  67  L.R.A.  631,  101  N.  W.  289;  1°  Dow  v.  Hope  Ins.  Co.  HaU  (N. 

Matthes  v.  Imperial  Accident  Assoc.  Y.)   166,  174. 

110  Iowa,  222,  81  N.  W.  484,  29  Ins.  See  also  the  following  eases : 

L.  J.  622.  Colorado. — .Jennings     v.     Brother- 

Kentucky.  —  Metropolitan       Plate  hood  Accident  Co.  44  Colo.  130,  130 

Glass  &  Casualty  Ins.  Co.  v.  Howes,  Am.  St.  Rep.  109,  96  Pac.  982. 

150  Ky.  52,  42   L.R.A.(N.S.)    700n,  Florida.— V Angle       v.       Scottish 

149  S.  W.  1110.  Union  &  National  Ins.   Co.  48  Fla. 

Missouri. — Mathews      v.      Modern  82,  67  L.R.A.  581,  111  Am.  St.  Rep. 

Woodmen  of  America,  236  Mo.  326,  70,  37  So.  462. 

139  S.  W.  151;  Beile    v.    Travelers'  /ZZ/no/s.— Forest   City   Ins.    Co.   v. 

Protective  Assoc,    of    America,    155  Hardesty,   182   111.    39,    74   Am.    St. 

Mo.  App.  629,  135  S.  W.  497.  Rep.     161,     55     N.     E.     139,    aff'g 

Nebraska. — Soehner       v.       Grand  Hardesty  v.  Forest  City  Ins.  Co.  77 

Lodge  of  Order  of  Sons  of  Herman,  111.    App.   413;    Schroeder   v.    Trade 

74  Neb.  399,  104  N.  W.  871.  Ins.  Co.  109  111.  157;  Zeigler  v.  Clin- 

New  York. — Fitzpatrick  v.  Knights  ton  Mutual  Fire  Ins.  Co.  84  111.  App. 

of  Columbus,  128  N.  Y.  Supp.  366,  442;  Railway  OfHcials  &  Employee's 

143  App.  Div.  540.  Accident    Assoc,    v.    Coady,    80    111. 

North  Dakota. — Clemens  v.  Royal  App.  563. 

Neighbors  of  America,    14    N.    Dak.  Iowa. — McCluer  v.  Girard  Fire  & 

116,  103  N.  W.  402.  Marine  Ins.  Co.  43  Iowa,  349,  22  Am. 

Oklahoma. — AYoodmen      of      the  Rep.  249. 

World  V.  Gilliland,  11  Okla.  384.  67  Kansas. — Fire       Association       of 

Pac.  485.                                           '  Philadelphia  v.  Tavlor,  76  Kan.  392. 

Texas.— Roth    v.    Travelers'    Pro-  91  Pac.  1070. 

tective  Assoc.  102  Tex.  241,  132  Am.  Kentucky. — Spring     Garden     Ins. 

St.  Rep.  871.  115  S.  W.    31 ;    Hay-  Co.  v.  Imperial  Tobacco  Co.  132  Kv. 

wood    V.     Grand    Lodge    of    Texas  7,  20  L.R.A. (N.S.)    277,  116  S.  W. 

Knights  -  of    Pvthias,    —    Tex.    Civ.  234.  38  Ins.  L.  J.  446. 

App.  — ,  138  S.  W.  1194;  Daniel  v.  Nebraska.— Plv^nix     Ins.     Co.    v. 

Modern    Woodmen    of   America,    53  Barnd,  10  Neb.  89,  20  N.  W.  105. 

Tex.  Civ.  App.  570,  118  S.  W.  211.  Pennsylvania. — Grandin    v.    Roch- 

Vermont. — Brock    v.    Brotherhood  ester  Ins.  Co.  107  Pa.  St.  26;  Teu- 

Accident  Co.  75  Vt.  249,  54  Atl.  176.  tonia  Ins.  Co.  v.  Mund,  102  Pa.  St. 

^  Modem  Woodmen  of  America  v.  89. 
Wilson,  76  Neb.  344,  107  N.  W.  568, 

586 


CONSTRUCTION  OF  POLICY 


§  221 


struction  insurance  is  held  to  be  a  contract  uberrimae  fidei.^^  And 
every  presumption  in  favor  of  good  faith  will  be  indulged  in  in  con- 
struing policy  clauses.^^  So  it  is  held  that  policies  of  insurance  cre- 
ate reciprocal  rights  and  obligations  which  require  the  utmost  good 
faith  in  both  parties/^  and  "the  strictum  jus  or  apex  juris  is  not  to 
be  laid  hold  on.'"'  ^*  The  fact  that  contracts  were  drawn  up  gener- 
ally in  a  loose  and  inartificial  manner  gave  a  reason  for  the  rule 
that  policies  are  to  be  construed  liberally.^^  It  was  early  stated, 
however,  by  Emerigon,  in  considering  whether  the  contract  was  one 
stricti  juris  or  bonae  fidei,^^  that  "so  far  as  the  nature  of  the  contract 
will  allow,  the  chance  of  the  insurer  and  of  the  insured  must  be  the 
same,"  and  the  courts  frequently  show  a  disposition  to  somewhat 
modify  the  rule  of  liberal  construction,^''  and  to  do  in  these  con- 
tracts, OS  in  others,  equal  justice  between  the  parties  as  far  as  the 
nature  of  the  contract  renders  it  possible.^^  There  are  numerous 
cases,  however,  where  a  rule  which  contemplates  less  than  a  liberal 


Vermont. — Brink  v.  Merchants'  & 
Mechanics  Ins.  Co.  49  Vt.  442. 

West  Virginia. — Miller  v.  Citizens 
Fire,  Marine  &  Life  Ins.  Co.  12  W. 
Va.  116,  29  Am.  Rep.  452. 

England. — Pelly  v.  Royal  Exch. 
Assur.  Co.  1  Burr.  341,  349,  14  Eng-. 
Rul.  Cas.  30;  Bond  v.  Gonzales,  2 
Salk.  445,  per  Lee,  C.  J. 

^^  Coram  v.  Sweeting,  2  Saund. 
550,  note;  Wolff  v.  Horncastle,  1 
Bos.  &  P.  316,  322,  13  Eng.  Rul.  Cas. 
2(j5.  ''Iste  contractus  assecurationi 
est  bonaa  fidei  .  .  .  et  practican- 
dus  non  est  cum  juris  apicibus  et 
rigoribns" :  Eraerigon  on  Insurance, 
(Meredith's  ed.  1850)  c.  i.  sec.  5,  p. 
17,  citing  Casaregis,  disc.  1,  n.  2. 

^2  Northern  Assur.  Co.  v.  Carpen- 
ter, 52  Ind.  App.  432,  94  N.  E.  779, 
40  Ins.  L.  J.  1218. 

^3  Natchez  Ins.  Co.  v.  Stanton,  2 
Smedes  &  M.  (Miss.)  340,  375,  41 
Am.  Dec.  592. 

"Pelly  V.  Roval  Exch.  Assur.  Co. 
1  Burr.  "341,  349,  14  Eng.  Rul.  Cas. 
30,  per  Lord  Mansfield,  adopting 
opinion  of  Lee,  C.  J. 

15  ''Policies  of  insurance  are  gen- 
erally drawn  up  in  loose  and  inarti- 
ficial language,  and  indeed  in  the 
language  of  common  life,  and  there- 
fore  are   always    construed    liberal - 

58 


ly :  "  Palmer  v.  Warren  Ins.  Co.  1 
Storv  (C.  C.)  360,  365,  Fed.  Cas.  No. 
10,658. 

^^  Emerigon  on  Insurance  (Mere- 
dith's ed.  1850)  c.  i.  sec.  5,  p.  18. 

^^  See  §  221  herein.  See  McEvory 
V.  Security  Fii-e  Ins.  Co.  110  Md. 
275,  22  L.R.A.(N.S.)  942n,  132  Am. 
St.  Rep.  428n,  73  Atl.  157,  38  Ins. 
L.  J.  895,  898,  per  Pearce,  J.,  who 
declares  that  in  Maryland  the  rigor 
of  the  prevailing  rule  to  construe 
all  insurance  policies  strictly  against 
the  company  has  been  relaxed  to  a 
certain  extent. 

18  Phoenix  Ins.  Co.  v.  Slaughter,  12 
Wall.  (79  U.  S.)  404;  Merchants' 
Ins.  Co.  V.  Davenport,  17  Gratt. 
(Va.)  138,  "We  should,  however, 
have  great  doubts  whether  this  rule 
of  liberal  construction  has  been  in- 
variably followed.  It  has  certainly 
been  modified  and  restrained  in 
recent  cases  by  a  disposition  to  treat 
these  contracts  like  all  other  con- 
tract, in  such  a  way  as  shall  do  equal 
justice  to  all  interested."  1  Parsons 
on  iNIai-ine  Insurance,  ed.  1868,  67,  68, 
citing  several  cases  criticising  Mr. 
Oner's  statement  (1  Duer  on  Insur- 
ance [ed.  1845]  212)  that  a  liberal 
construction  had  been  invariably  fol- 
lowed. 


§  221a  JOYCE  ON  INSURANCE 

construction  in  favor  of  tlie  iiiniired  and  of  indemnit}^  would  result 
in  gross  injustice  to  the  insured. ^^ 

Although  a  construction  as  favorable  to  the  insured  as  reasonably 
may  be,  must  be  given  to  a  policy  of  insurance,  still  it  should  be 
onh^  a  natural  and  logical  construction,  not  a  strained  or  sophistical 
one.^"  And  the  rule  that  all  ambiguities,  obscurities,  and  uncer- 
tainties in  a  jtolicy  of  fire  insurance  are  to  be  resolved  most  favor- 
ably to  the  assured  has  no  application  whatever  to  plain  language 
used  in  such  connection  as  to  leave  no  room  to  say  reasonably  that 
the  parties  might  have  intended  either  of  two  meanings.^    . 

§  221a.  Same  subject. — That  part  of  a  policy  which  relates  to 
preliminary  proofs  of  loss  should  be  construed  liberally  in  favor  of 
assured.^  And  in  construing  conditions  of  a  policy,  to  be  complied 
with  subsequent  to  an  event  resulting  in  loss  or  injury  for  which 
indemnity  is  claimed,  with  respect  to  the  giving  of  notice  of  the  loss 
or  injury,  and  preliminary  proofs  thereof,  a  more  liberal  construc- 
tion will  be  given  in  favor  of  the  beneficiary  than  when  the  condi- 
tions are  to  be  complied  with  prior  to  loss  or  injury,  for  the  pur- 
pose of  continuing  the  policy  in  force  and  effect.^  So  it  is  declared 
that  it  is  well  settled  that  when  liability  has  become  fixed  by  the 
capital  fact  of  loss  within  the  range  of  the  responsibility  assumed  in 
the  contract,  courts  are  reluctant  to  deprive  assured  of  the  benefit  of 
that  liability  by  any  narrow  or  technical  construction  of  the  condi- 

^9  See   §   248  herein ;   Anderson   v.  Am.  St.  Rep.  206,  40  Pao.  453 ;  Union 

Eitzgerald,   4   H.   L.   Cas.   484,   507;  Life   Ins.    Co.    v.   Jameson,   31    Ind. 

17  Jur.  995,  24  Eng.  L.  &  E.  1,  per  App.   28,   67   N.   E.   199;    Dahms   & 

Lord  St.  Leonards.     "Many  early  ad-  Sons  Co.  v.  German  Fire  Ins.  Co.  153 

judications  may  be  found,  and  not  a  Iowa,  168,  132  N.  W.  870,  40  Ins.  L. 

few  recent  ones  also,  in  which  con-  J.  2133,  2138. 

tracts  of  insurance,  and  especially  of  The  rule  that  an  insurance  policy 
life  insurance,  have  been  construed  in  is  to  be  construed  in  favor  of  the  in- 
such  a  manner  as  to  operate  with  sured  does  not  a]3iilv  when  there  is 
great  harshness  and  injustice  to  poli-  no  ambiguity  in  the  policy,  no  in- 
ey  holders."  Alabama  Gold  Life  consistent  or  conflicting  })rovisionR, 
Ins.  Co.  V.  Johnson,  80  Ala.  467,  .59  and  nothing  requiring  construction 
Am.  Rep.  816,  2  So.  125.  And  see  or  interpretation.  Holmes  v.  Phenix 
remarks  on  this  point  in  Bacon's  Ins.  Co.  39  C.  C.  A.  45,  98  Fed.  240, 
Benefit  Societies  and  Life  Insurance,  47  L.R.A.  308. 
(1st  ed.)  sec.  192.  2  i^^a^.j-ell  v.  Farmers'  &  Merchants 

20Bader  v.  New  Amsterdam  Ca.su-  Ins.  Co.  84  Ntb.  72,  120  N.  W.  929, 

alty  Co.  102  Minn.  186,  120  Am.  St.  38  Ins.  L.  J.   685;   Dakiii   v.  Queen 

Rep.  613,  112  N.  W.  1065.  City  Fire  Ins.  Co.  59  Greg.  269,  117 

1  Thurston    v.    Barnett    &    Beaver  Pac.  419,  40  Ins.  L.  J.  1892.     See  § 

Dam   Farmers'  IMutual  Fire  Ins.  Co.  3275. 

98  Wis.  470,  41  L.R.A.  316,  74  N.  W.  3  W.oodmeiis     Accident     Assoc,     v. 

131 ;  Brickell  v.  Atlas  A.ssur.  Co.  Ltd.  Byers  (Pratt)  62  Neb.  673,  55  L.R.A. 

10  Cal.  App.  17,  101  Pac.  16 ;  German  291,  87  N.  W.  546. 
Ins.  Co.  V.  Havden,  21  Colo.  124,  52 

588 


CONSTRUCTION  OF  POLICY 


§  221b 


tions  and  stipulations  which  prescribe  the  formal  requisites  by 
means  of  which  this  accrued  right  is  to  be  made  available  for  his 
indemnitication.*  And  this  applies  to  formalities  for  ascertaining 
or  adjusting  a  marine  loss.^  So  a  demand  in  writing  for  appraisers 
will  when  ambiguous  be  construed  strongly  against  the  insurer.^ 

§  221b.  Same  subject:  kinds  of  insurance  to  which  rule  appli- 
cable.^''— The  rule  above  given  that  construction  should  be  liberal 
in  favor  of  assured  when  the  contract  is  reasonably  susceptible  of 
two  constructions  applies  to  accident  policies; '  automobile  policies;  * 
employers  liability  or  indemnity  insurance  contracts;^  tornado  in- 


surance against  loss  of  live  stock ;  ^°  fidelity  or  guaranty  insurance ; 


11 


*  Serg'ent  v.  London  &  Liverpool  & 
Globe  Ins.  Co.  155  N.  Y.  349,  49  N. 
E.  935,  28  Ins.  L.  .1.  59,  ease  revers- 
es 85  Hun,  31,  32  N.  Y.  Supp.  594. 

5  Porter  v.  Traders  Ins.  Co.  164 
N.  Y.  504,  52  L.R.A.  424,  58  N.  E. 
641,  53  N.  Y.   Supp.  1112. 

®  Grand  Rapids  Fire  Ins.  Co.  v. 
Finn,  60  Ohio  St.  513,  42  Oliio  L.  ,1. 
213,  42  Wkly.  L.  Bull.  213,  71  Am. 
St.  Rep.  736,  54  N.  W.  545,  50  L.R.A. 
555. 

fia  See  also  §§  206c,  222a  herein. 

'  United  States. — Sudduth  v.  Trav- 
elers Ins.  Co.  (U.  S.  C.  C.)  106  Fed. 
822. 

Georgia. — Thornton  v.  Travelers' 
Ins.  Co.  116  Ga.  121,  94  Am.  St.  Rep. 
99,  42  S.  E.  287. 

Illinois. — National  Ma.sonie  Acci- 
dent Assoc,  v.  Gced,  95  111.  App.  43. 

North  Carolina.  —  Rayburn  v. 
Pennsylvania  Casualty  Co.  138  N. 
Car.  379,  107  Am.  St.  Rep.  548,  50 
S.  E.  762. 

Pennsjilvania. — Gavnia  v.  United 
States  Health  &  Accident  Ins.  Co. 
63  Leg.  Intell.  288,  15  Dist.  Rep. 
432. 

West  Virginia. — Beard  v.  Indemni- 
ty Co.  65  W.  Va.  283,  64  S.  E.  119. 

Wisconsin. — French  y.  Fidelity  & 
Casualty  Co.  135  Wis.  259,  17  L.R.A. 
(N.S.)  "lOll,  115  N.  W.  869. 

An  accident  policy  should  be  in- 
terpreted so  as  to  e.Ktend  its  protec- 
tion over  as  wide  a  field  of  acciden- 
tal injury  as  is  consistent  with  its 
language,  but  it.s  natural  meaning 
must  not  be  violated.    Banta  v.  Con- 


589 


tinental  Casualty  Co.  134  Mo.  App. 
222,  113  S.  W.  1140,  39  Ins.  L.  J. 
243.  See  Beile  v.  Travelers  Pro- 
tective Assoc,  of  America,  155  Mo. 
App.  629,  135  S.  W.  497,  40  Ins.  L. 
.1.  1028,  1037  (accident  policy  issued 
by  mutual  benefit  society)  ;  Moest  v. 
Continental  Casualty  Co.  104  N.  Y. 
Supp.  553,  55  Misc.  128. 

^  Dougherty  v.  Insurance  Co.  of 
North  America,  38  Pa.  Colinty  Ct. 
Rep.  119. 

^  Home  Mixture  Guano  Co.  v. 
Ocean  Accident  &  Guarantee  Co.  Ltd. 
of  London,  176  Fed.  600;  United 
Zinc  Cos.  V.  General  Accident  Assur. 
Corp.  Ltd.  of  Perth,  144  Mo.  App. 
3a0,  128  S.  W.  836,  39  Ins.  L.  J. 
1177;  Mears  Mining  Co.  y.  Maryland 
Casualty  Co.  162  Mo.  App.  178,  191, 
144  S.  W.  883;  Henderson  Ligliting 
&  Power  Co.  v.  Maryland  Casualty 
Co.  153  N.  Car.  275,  30  L.R.A. (N.S.') 
1105  note,  69  S.  E.  234;  Fenton  v. 
Fidelity  &  Casualty  Co.  36  Oreg. 
283,  48  L.R.A.  770,  56  Pac.  1006. 
See  §  220b  herein. 

^°  Jordan  v.  Iowa  Mutual  Tornado 
Ins.  Co.  of  Des  Moines,  151  Iowa,  73, 
Ann.  Cas.  1913A,  266,  130  N.  W. 
177. 

^^  United  States. — American  Sure- 
ty Co.  V.  Pauly,  170  U.  S.  133,  42  L. 
cd.  977,  18  Sup.  Ct.  552. 

Arkansas. — Title  Guaranty  &  Sure- 
tv  Co.  v.  Bank  of  Fulton,'  89  Ark. 
471,  33  L.R.A.  (N.S.)  676,  117  S. 
W.  537,  38  Ins.  L.  J.  722;  American 
Bonding  Co.  v.  Morrow,  80  Ark.  49, 
117  Am.  St.  R«p.  72,  —  S.  W.  — . 


§  222  JOYCE  ON  IXSUKANCE 

contract  guaranty  insurance;  ^^  and  a  Lloyds  policy. ^^ 

A  contract  indemnifying  a  merchant  against  a  credit  loss  should 
also  be  construed  most  strongly  against  the  insurer.  Ambiguities 
should  be  reconciled  if  possible  by  gathering  the  intent  of  the  par- 
ties to  the  whole  instrument  and  if  the  particular  clause  requiring 
interpretation  cannot  be  thus  brought  into  harmony  with  the  rest 
of  the  contract  touching  the  precise  loss  which  the  policy  covers, 
that  meaning  is  to  be  given  to  it  which  is  most  favorable  to  in- 
sured.^* 

§  222.  Same  subject :  the  rule  contra  proferentem. — It  is  a  settled 
rule  of  construction  that  in  cases  of  doubt  policies  of  assurance 
shall  be  construed  strictly  against  the  insurer  in  accordance  with 
the  rule  "verba  fortius  accipiuntur  contra  proferentem."  So  of  two 
interpretations  equally  reasonable  that  construction  most  favorable 
to  the  assured  must  be  adopted,  for  the  language  is  that  of  the  in- 
surers/^ and  if  the  terms  of  the  policy  are  such  that  reasonable  and 

Colorado.— Amei'idaxi.    Bonding    &  ing  Co.  of  Bait.  112  Minn.  288,  33 

Trust  Co.  of  Bait.  v.  Burke,  36  Colo.  L.R.A.(N.S.)   513  and  note,  128  N. 

99,  55  Pac.  692,  35  Ins.  L.  J.  642.  W.  12,  40  Ins.  L.  J.  137. 

Georgia. — See  Moorefield  v.  Fideli-       ^^  Imperial  Shale  Brick  Co.  v.  Jew- 

ty  Mutual  Life  Ins.  Co.  135  Ga.  186,  ett,  169  N.  Y.  143,  62  N.  E.  167. 
69  S.  E.  119.  ^^  Lexington  Grocery  Co.  v.  Phila- 

IntZiaH a.— American  Surety  Co.  of  delphia  Casualty  Co.  157  N.  Car.  116, 

N.  Y.  V.  Pangburn,  180  Ind.  116,  105  72  S.  E.  870,  citing  Mercantile  Cred- 

N.  E.  768.  it  Guarantee  Co.  of  N.  Y.  v.  Wood, 

Kentucky.— Cham\)\on   Ice   Manu-  68  Fed.  529,  15  C.  C.  A.  563.     See 

facturing    &    Cold    Storage    Co.    v.  also   Mercantile    Credit   &   Guaranty 

American  Bonding  &  Trust  Co.  115  Co.    v.    Littleford    Bros.    (Ohio)    18 

Ky.  863,  103  Am.  St.  Rep.  356,  75  Cir.   Ct.   Rep.    (42  Wkly.  L.  Bull.) 

S.  W.  197.  889.     Compare  Philadelphia  Casual- 

Missouri. — Long  Bros.  Grocery  Co.  ty  Co.  v.  Cannon  &  Byers  MiUinery 

V.  United  States  Fidelity  &  Guaranty  Co.  133  Ky.  745,  118  S.  W.  1004. 
Co.  130  Mo.  App.  421,  110  S.  W.  29.       ^^  Vnited  States.— Royal  Ins.  Co.  v. 

North  Carolina.— Bank  of  Tarboro  Martin,  192  U.  S.  149,  48  L.  ed.  385, 

V.  Fidelity  &  Deposit  Co.  126  N.  Car.  24   Sup.    Ct.   347.      (If   such   inter- 

366,  83  Am.  St.  Rep.  682,  38  S.  E.  pretation    is    not    inconsistent    with 

908.  the  words  used.     Cited  in  Lefler  v. 

Tennessee. — Hunter       v.       United  New  York  Life  Ins.  Co.  143  Fed.  814, 

States  Fidelity  &  Guaranty  Co.  129  819,  74  C.  C.  A.  488,  493 ;  Atlas  Re- 

Tenn.  572,  167  S.  W.  692.  duction  Co.  v.  New  Zealand  Ins.  Co. 

Texas.— Qvimn  v.  Zuber,  52  Tex.  9  L.R.A.(N.S.)    433,  138  Fed.  497, 

Civ.  App.  288,  113  S.  W.  961.  512,  71  C.  C.  A.  21,  36) ;  Accident 

Washington. — Remington  v.  Fidel-  Ins.  Co.  v.   Crandal,  120  U.  S.  527, 

ity  &  Deposit  Co.  of  Md.  27  Wash.  30  L.  ed.  740,  7  Sup.  Ct.  685;  Grace 

429,  67  Pac.  989.  v.  American  Central  Ins.  Co.  109  U. 

Wisconsin.  — Vnited         American  S.  278,  27  L.  ed.  932,  3  Sup.  Ct.  207; 

Fire  Ins.   Co.  v.  American  Bonding  Phcenix    Ins.    Co.    v.    Slaughter,    12 

Co.  of  Bait.  146  Wis.  57.3,  40  L.R.A.  Wall.  (79  U.  S.)  404,  20  L.  ed.  444; 

(N.S.)   661,  131  N.  W.  994.  Orient  Mutual  Ins.  Co.  v.  Wright,  1 

i2Hormel  &  Co.  v.  American  Bond-  Wall.  (68  U.  S.)  456,  17  L.  ed.  505; 

590 


CONSTRUCTION  OF  POLICY  §  222 
intelligent  men  would  honestly  differ  as  to  its  meaning,  it  will  be 

Palatine  Ins.  Co.  v.  Ewing,  92  Fed.  Fire  Ins.  Co.  110  Md.  275,  132  Am. 

Ill,  114,  34  C.  C.  A.  236,  239;  Fi-  St.  Rep.  428  note,  22  L.R.A.(N.S.) 

delity  Mutual  Life  Ins.  Co.  v.  Miller,  942,  note,  73  Atl.  157,  38  Ins.  L.  J. 

92  Fed.  63,  73,  34  C.  C.  A.  211,  220,  895,  898. 

63  U.  S.  App.  717 ;  McMaster  v.  New  Louisiana. — Weil    v.     New     York 

York  Life  Ins.  Co.  (U.  S.  C.  C.)  90  Life  Ins.  Co.  47  La.  Ann.  1416,  17 

Fed.  40,  28  Ins.  L.  J.  960,  99  Fed.  So.  853. 

856,  878,  40  C.  C.  A.  119,  131  s.  c.  Minnesota.— Olson,  v.  St.  Paul  Fire 

183  U.  S.  25,  46  L.  ed.  64,  22  Sup.  &  Marine  Ins.  Co.  35  Minn.  432,  29 

Ct.  10,  31  Ins.  L.  J.  555;  Liverpool  N.  W.  125,  59  Am.   St.  Rep.   333; 

London  &  Globe  Ins.  Co.  v.  McNeill,  Broadwater  v.  Lion  Fire  Ins.  Co.  34 

89  Fed.  131,  137,  32  C.  C.  A.  173,  Minn.  466,  26  N.  W.  455;  Chandler 

180,  59  U.  S.  App.  499;  Wallace  v.  v.  St.  Paul  Fire  &  Marine  Ins.  Co. 

German  American  Ins.   Co.  41  Fed.  21  Minn.  85,  18  Am.  Rep.  385. 

742;   Teutonia  Ins.   Co.  v.  Boylston  Mississippi. — Shivers    v.    Farmers 

Mut.  Ins.  Co.  20  Fed.  148;  Catlin  v.  Mutual  Fii-e  Ins.  Co.  99  Miss.  744, 

Springfield  Ins.  Co.  1  Sum.  (C.  C.)  55  So.  965,  40  Ins.  L.  J.  1706. 

440.  Missouri. — Burnett     v.     American 

BelcAoare. — Continental  Ins.  Co.  v.  Casualty  Ins.  Co.  63  Mo.  App.  343. 

Rosenberg,  7   Penn.    (Del.)    174,  74  Nebraska. — Connecticut    Fire    Ins. 

Atl.  1073,  39  Ins.  L.  J.  392.  Co.  v.  Jeary,  60  Neb.  338,  51  L.R.A. 

Georgia.— Mutual  Life  Ins.  Co.  v.  698,  83  N.  W.  78. 

Durden,  9   Ga.   App.   797,  72   S.   E.  New  York. — Matthews  v.  American 

295.     See  Royal  Union  Life  Ins.  Co.  Central  Ins.  Co.  154  N.  Y.  449,  39 

V.  McLendon,  4  Ga.  App.  620,  62  S.  L.R.A.  443,  61  Am.  St.  Rep.  627,  48 

E.  101.  N.  E.  751,  27  Ins.  L.  J.  193,  195, 

Illinois. — Healey  v.  Mutual  Aeci-  per  Van,  J.;  Darrow  v.  Family  Fund 

dent  Assoc.   133   111.   556,   9  L.R.A.  Soc.  116  N.  Y.  537,  27  N.  Y.  474,  15 

371,  23  Am.  St.  Rep.  637,  25  N.  E.  Am.  St.  Rep.  430,  6  L.R.A.  495,  22 

52;  American  Cent.  Ins.  Co.  v.  Roth-  N.  E.  1093;  Paul  v.  Travelers'  Ins. 

child,  82  111.  166 ;  Travelers'  Preferred  Co.  112  N.  Y.  479,  8  Am.  St.  Rep. 

Aeci.   Ins.   v.   Kelsey,   46   lU.   App.  758,  762,  3  L.R.A.  443,  20  N.  E.  347 ; 

371.  Allen  v.  St.  Louis  Ins.  Co.  85  N.  Y. 

Indiana. — Hay  v.  Meridian  Life  &  473;  Foot  v.  ^tna  Life  Ins.  Co.  61 

Trust  Co.  57  Ind.  App.  536,  101  N.  N.  Y.  571,  575,  4  Daly,  285;  Hoffman 

E.   651,   105   N.    E.   919 ;    Northern  v.  iEtna  Ins.  Co.  32  N.  Y.  405,  88  Am. 

Assurance    Co.    of    London    v.    Car-  Dec.  337;  Christy  v.  American  Tem- 

penter.  52  Ind.  App.  432,  94  N.  E.  perance   Life    Ins.    Assoc.    68   Misc. 

779,  40  Ins.  L.  J.  1218,  1222.  178,  123  N.  Y.  Supp.  740. 

Kansas. — Citizens    State   Bank   of  North  Carolina. — Higson  v.  North 

Chautauqua  v.  Shawnee  Fire  Ins.  Co.  River  Ins.  Co.  152  N.  Car.  206,  67 

91   Kan.   18,  49   L.R.A.  (N.S.)    972,  S.  E.  509. 

137  Pac.  78.  Ohio. — Farmers  National  Bank  v. 

Kentucky. — Montgomery    v.    Fire-  Delaware  Ins.   Co.  83  Ohio  St.  309, 

men's  Ins.  Co.  16  B.  Mon.'(Ky.)  427.  94  N.  E.  834,  40  Ins.  L.  J.  1248, 1258. 

Maine. — Wright     v.      Fraternities  Pennsylvania. — Philadelphia     Tool 

Health   &   Accident   Assoc.   107   Me.  Co.  v.  Britisli   American  Assur.   Co. 

418,   32   L.R.A. (N.S.)    461,   78   Atl.  132  Pa.    St.   236,  19  Am.   St.   Rep. 

475,  40  Ins.  L.  J.  551,  553,  554;  Bart-  596,  25  Week.  Not.  Cas.  370;  White 

lett  V.'  Union  Insurance  Co.  46  Me.  v.  Smith,  33  Pa.  St.  186,  75  Am.  Dec. 

500.  589 ;  Westem  Co.  v.  Cropper,  32  Pa. 

Maryland. — McEvoy    v.     Security  St.  351,  75  Am.  Dec.  561;  Alemania 

591 


§  222  JOYCE  ON  INSURANCE 

construed  against  the  insurer;  ^^  and  this  is  so  of  equivocal  expres- 
sions which  would  narrow  the  range  of  the  insurer's  obligations," 
and  the  rule  ai)pHes  to  clauses  restrictive  of  the  company's  liability 
in  an  accident  policy/*  and  to  accident  policies  generally,^^  and  to 
exceptions,^"  and  to  conditions  and  provisions  whicli  would  narrow 
the  range  and  limit  the  force  of  the  principal  obligation  or  lessen 
the  indemnity.^  And  where  a  clause  in  a  policy  of  reinsurance 
provided:  "This  insurance  to  be  on  the  excess  which  the  T.  In- 
surance Company  may  have  on  all  their  policies  on  cotton,  sugar, 
and  molasses  and  cotton  seed,  issued  at  their  office  in  New  Orleans, 
or  at  their  Shreveport  agency,  as  follows,  viz.,  on  the  excess  of  ten 
thousand  dollars  on  boats  from  places  on  the  Mississippi  river,  but 
said  excess  not  to  exceed  five  thousand  dollars  by  any  one  boat,"  it 
was  decided  that  the  words  "on  boats"  indicated  that  more  than 

Fire   Ins.    Co.   v.   Pittsburg   Exposi-  solved  against  liim.     No  word  in  the 

tiou   Soc.  —  Pa.  — ,  11  Atl.  572,  4  policy  should  be  disregarded,  no  am- 

Pa.  (L.  ed.)  718,  10  Cent.  R«p.  292;  biguity  sliould  be  resolved  in  favor 

Primrose  v.  Casualty  Cos.  of  Ameri-  of  the  company.     New  York  &  Porto 

ca,  67  Leg.  Intell.  308,  37  Pa.  Co.  Ct.  Rico  Steamship  Co.  v.  Aetna  Ins.  Co. 

Rep.  441.  (U.  S.  D.  C.)  192  Fed.  212. 

Texas. — Dorroh-Kellv      Mercantile  ^®  Kratzenstein  v.  Western  Assur. 

Co.  V.  Orient  Lns.  Co.  "l04  Tex.  199,  Co.  ll(j  N.  Y.  54,  26  N.  Y.  453,  456, 

335  S.  W.  1165,  40  Ins.  L.  J.  1211,  5  L.R.A.  799,  22  N.  E.  221. 

1214;  Mutual  Life  Ins.  Co.  v.  Ford,  ^'''Commercial    Ins.    Co.    v.   Robin- 

—  Tex.  Civ.  Api).  ^,  130  S.  W.  769;  son,  64  111.  265,  16  Am.  I^e]).  557. 

London  &  Lancaster  Fire  Ins.  Co.  v.  ^^  United   States  Mut.   Acci.  Assn. 

Davis,   37    Tex.    Civ.    App.    348,    84  v.  Newman,  84  Va.  52,  3  S.  E.  805. 

S.  W.  260.  i^Burkheiser   v.    Mutual    Accident 

Rhode  Island.— Wilson  v.  Conway  Assoc.  61  Fed.  816,  10  C.  C.  A.  94, 

Fire  Ins.   Co.  4  R.  I.  141.  18  U.  S.  App.  704,  26  L.R.A.  112; 

Vermont. — Brink  v.  Merchants'  &  Fidelity    &    Casualty    Co.    v.    Mever, 

Mechanics  Ins.  Co.  49  Vt.  442.  106   Ark.   91,   44  L.R.A.  (N.S.)    493, 

Ffr^rm/a..— Stratton's       Admr.      v.  152    S.    W.    995;    In'histrial    Mutual 

New  York  Life  Ins.  Co.  115  Va.  257,  Indemnity  Co.  v.  Hawkins,  94  Ark. 

78  S.  E.  636.  417,  29  L.R.A.(N.S.)  635,  127  S.  W. 

Washington. — Burbank  v.  Pioneer  457;    Wilkinson    v.    Aetna    Life   Ins. 

Mutual  Ins.  Assoc.  60  Wash.  253,  110  Co.    240    111.    205,    25    L.R.A.(N.S.) 

Pac.    1005,    Ann.    Cas.    1912B,    762;  1256,  88  N.  E.  550;   Schumacher  v. 

Port  Blakely  Mill  Co.  v.  Springfield  Great  Eastern  Casualty  &  Indemnity 

Fire  &  Marine  Ins.  Co.  59  Wa^h".  501,  Co.  197  N.   Y.  58,  27  L.R.A.(N.S.) 

28  L.R.A. (N.S.)    596  note,  140  Am.  480  note,  90  N.  E.  353,  39  Ins.  L.  J. 

St.   Rep.  863,  110  Pac.  36.  428,  432.     See  §  221b  herein. 

West  Virginia. — Bryan  v.  Peabody  2°  Grant  v.  Lexington  Fire,  Life  & 

Ins.  Co.  8  W.  Va.  605.                      '  Marine  Ins.   Co.  5 'ind.  23,  61  Am. 

England. — Fowkes    y.    Manchester  Dec.  74.     See  §  220  herein. 

&  London  Life  Assur.  &  Loan  Assoc,  ^  Hoffman  v.  ^Fltna  Fire  Ins.  Co. 

3  Best  &  S.  917.  32  N.  Y.  405,  88  Am.  Dec.  337;  Au- 

The  policy  being  prepared  by  the  rora  Fii'e  Ins.   Co.  v.  Eddy,  49  111. 

underwriter   under  the  canon  contra  106. 
proferentum,    any    ambiguity    is   re- 

592 


CONSTRUCTION  OF  POLICY  §  222 

the  freiftht  was  included.^  So  the  clause  in  a  policy  requiring  no- 
tice of  loss  and  a  particular  account  of  the  same  will  be  construed 
liberally  against  the  insurer.^  But  it  is  said  by  Lord  Bacon  *  that 
"this  rule  contra  proferentem  is  the  last  to  be  resorted  to,  and  is 
never  to  be  relied  upon,  but  where  all  other  rules  of  exposition 
fail ;  "  and  it  is  held  in  a  New  York  case  ^  that  the  rule  that  an 
insurance  contract  is  to  be  construed  most  strongly  against  the  in- 
surer is  to  be  resorted  to  only  where  the  language  or  some  of  the 
terms  of  the  contract  remain  of  doubtful  import  after  the  use  of 
such  other  helps  in  construction  as  are  proper.  Story,  J.,  recog- 
nizes the  rule  in  Palmer  v.  Warren  Insurance  Company,^  where 
he  holds  that  a  clause  in  the  nature  of  an  exception,  if  supposed  to 
be  ambiguous,  must  be  construed  most  strongly  against  the  insurer. 
So  Lord  Lyndhurst,  in  Blackett  v.  Royal  Exchange  Assurance 
Company,'^  says :  "The  rule  of  construction  as  to  exceptions  is  that 
they  are  to  be  taken  most  strongly  against  the  party  for  whose 
benefit  they  are  introduced.  The  words  in  which  they  are  ex- 
pressed are  considered  as  his  words;  and  if  he  do  not  use  Avords 
clearly  to  express  his  meaning,  he  is  the  person  who  ought  to  be 
the  sufferer."  Mr.  Duer  ^  distinguishes  in  the  application  of  this 
rule  between  words  introduced  "for  the  benefit  of  the  insurers"  and 
the  "words  of  the  insurer,"  and  says:  "If  the  words  of  a  clause  are 
to  be  construed  strictly  against  the  pai'ty  for  whose  benefit  it  is  in- 
troduced, the  main  provisions  of  the  policy  must  be  construed 
strictly  against  the  assured  .  .  .  and  his  indemnitv  reduced 
to  the  narrowest  possible  limits."  ^  In  another  case,  Story,  J.,^" 
speaks  of  this  rule  as  "a  mere  technical  rule  of  construction."  But 
that  this  expression  should  be  regarded  as  obiter  accords  clearly 
with  the  opinion  of  Mr.  Duer.^^  Mr.  Parsons  ^^  thinks  that  the 
rule  contra  proferentem  has  been  "preased  quite  too  far  in  favor 
of  the  insured,"  since  insurance  contracts  are  the  result  of  nego- 
tiations and  an  agreement,  and  that  "it  is  difficult  to  see  how  the 
words  can  be  regarded  as  any  more  the  words  of  the  insurer  than 

2  Teutonia    Ins.    Co.    v.    Boylston  '  2  Crorap.  &  J.  244,  250,  14  Eng. 

Mut.  Ins.  Co.  20  Fed.  148.  Rnl.  Cas.  179. 

^  McLaughlin  V.  Washington  Coun-  *1  Duer  on  Ins.    (ed.   1845)    214. 

ly  Mut.  Ins.  Co.  23  Wend.  (N.  Y.)  See  also  Id.  209-11. 

524;   Barker  v.   Phoenix   Ins.    Co.   8  ^Citing  Yoaton  v.  Fry,  5  Cranch 

Johns.  (N.  Y.)  307,  5  Am.  Dec.  339.  (9  U.  S.)  335,  3  L.  ed.  117. 

See  §  221a  herein.  i°  Donnell  v.  Columbia  Ins.  Co.  2 

*  Bacon's  Max.  Reg.  3.  Sum.  (C.  C.)  3G6,  381,  Fed.  Cas.  No. 

^  Foot  V.  ^tna  Life  Ins.  Co.  61  N.  3,987. 

Y.  571.  11 1  Duer  on  Ins.  (ed.  1845)  214. 

^1  Story   (C.  C.)   360,  Fed.  Cas.  ^^  1  Parsons  on  Ins.  (ed.  1868)  69 

No.   10,698.  etseq. 
Joyce  Ins.  Vol.  I.— -38.             593 


§  222  JOYCE  ON  INSURANCE 

of  the  assured."  Considered  from  a  strictly  legal  standpoint  this 
is  true,  for  the  contract  of  insurance,  when  consummated,  is  sup- 
posed to  be  one  upon  the  terms  of  which  the  minds  of  the  parties 
have  met  or  concurred,  and  the  insured  is  on  general  principles 
presumed  to  know  the  contents  of  a  policy  which  he  has  accepted, 
and  should  therefore  be  bound  by  its  terms.^^  But  an  examination 
of  the  cases  discovers  that  the  rule  of  construction  against  the  in- 
surer obtains,  because  the  applications  and  policies  are  framed  by 
insurers  in  their  interest,  and  the  insured  is  in  a  measure  bound 
to  accept  them.  The  terms  of  these  contracts  are  seldom,  if  ever, 
the  result  of  negotiations  in  the  same  sense  that  other  contracts 
are.  Very  strong  t^rms  have  been  used  at  various  times  against 
the  practice  of  many  insurance  companies  to  issue  applications  and 
policies  which  "are  illegible  and  unintelligible  to  the  generality  of 
mankind,"  ^*  and  the  abuses  which  have  arisen  in  consequence  and 
the  injustice  resulting  to  the  insured  have  been  the  occasion  for 
legislative  interposition  in  many  states,  and  a  rule  of  liberal  inter- 
pretation in  favor  of  indemnity  and  the  assured  and  against  the 
insurer  has  been  followed  as  far  as  possible.  Thus  it  is  said  by 
the  court  in  Brink  v.  Merchants'  &  Mechanics'  Insurance  Com- 
pany ^*  that  "it  is  a  fundamental  rule  in  the  law  of  insurance  that 
the  policy  shall  be  construed  most  strongly  against  the  insurer  and 
liberally  in  favor  of  the  insured.  .  .  .  They  use  their  own 
language,  and  surround  and  barricade  their  liability  under  it  with 
such  defenses  as  they  choose  to  adopt.  .  .  .  There  is  obvious 
reason  for  the  rule  of  liberal  construction  in  favor  of  the  man 
whose  legal  rights  are  to  be  extracted  from  such  a  labyrinth  of 
mysticism."  And  in  an  Iowa  case  ^^  the  court  declares:  "It  is  quit« 
time  that  the  technical  constructions  which  have  pertained,  with 
reference  to  contracts  of  this  kind  blocking  the  pathway  to  justice 
and  leading  to  decisions  opposed  to  the  general  sense  of  mankind, 
should  be  abandoned."  To  the  same  effect,  although  expressed  in 
much  stronger  terms,  are  the  words  of  Doe,  C.  J.,  in  Rockingham 

13  Moore  v.  State  Ins.  Co.  72  Iowa,  Carpenter,  52  Ind.  App.  432,  94  N.  E. 
414,  34  N.  W.  183 ;  Brown  v.  Massa-  779,  40  Ins.  L.  J.  1218,  1222,  quoting 
chusetts  Mut.  Life  Ins.  Co.  59  N.  H.  from  Glens  Falls  Ins.  Co.  v.  Michael, 
298,  47  Am.  Rep.  205;  Hawkins  v.  167  Ind.  659,  8  L.R.A.(N.S.)  708,  74 
Rockfort  Ins.  Co.  70  Wis.  1,  35  N.  W.  N.  E.  964,  79  N.  E.  905,  see  also 
34,  per  Cassody,  J.;  Herbst  v.  Lowe,  Wright  v.  Fraternities  Health  &  Ac- 
OS  Wis.  321,  26  N.  W.  751 ;  Morrison  cident  Assoc.  107  Me.  418,  32  L.R.A. 
V.  Phelps,  44  Wis.  410.  (N.S.)  461,  78  Atl.  475,  40  Ins.  L.  J. 

1*  De  Lancey  v.  Rockingham  Mut.  551,  554,  per  King,  J. 

Fire  Ins.  Co.  52  N.  H.  581,  per  Doe,  i^  49  yt.  457. 

C.  J.     See  opinion  of  Adams,  J.  iri  ^^  Miller  v.  Mutual  Benefit  Life  Ins. 

Northern  Assurance  Co.  of  London  V.  Co.  31  Iowa,  226;  7  Am.  Rep.  122. 

594 


CONSTRUCTION  OF  POLICY  §  222a 

V.  Mutual  Fire  Iiisunuice  Company,"  who  refers  to  the  policies 
prepared  by  the  companies  and  to  the  numerous  conditions  against 
forfeiture,  and  says;  ''These  provisions  were  of  such  bulk  and 
character  that  they  would  not  be  understood  by  men  in  general, 
even  if  subjected  to  a  careful  and  laborious  study."  ^^  So  in  the 
case  of  warranties,  which  we  shall  consider  hereafter,^^  the  courts 
will  not  favor  them  by  construction ;  ^"  and  in  this  connection  it 
is  said  by  the  court  in  another  case  ^  that  "the  rapid  gTowth  of  the 
business  of  life  insurance  in  the  past  quarter  of  a  century,  with  the 
tendency  of  insurers  to  exact  incretisingiy  rigid  and  technical  con- 
structions, and  the  evils  resulting  from  an  abuse  of  the  whole  sys- 
tem, justify,  if  they  do  not  necessitate,  a  departure  from  the  rigid- 
ity of  our  earlier  jurisprudence  on  this  subject  of  wai'ranties."  And 
in  the  same  case  the  court  also  declares  that  "all  the  conditions  of 
the  contract  and  the  obligations  imposed"'  will  be  construed  "liber- 
ally in  favor  of  the  assured  and  against  the  insurer." 

§  222a.  Same  subject.^" — The  rule  contra  proferentem,  above 
given,  applies  to  a  life  policy  renewal  receipt  and  a  printed  clause 
on  the  back  thereof  written  on  forms  prepared  by  the  insurer.'^  The 
rule  also  applies  to  answers  in  an  application  to  questions  prepared 
by  insurer ;  ^  a  policy  providing  for  payment  of  a  weekly  indem- 
nity;* a  burglary  insurance  contract;*  employers  liability  or 
indemnity    insurance    contracts;®    fidelity    or    guaranty    insur- 

"  52  N.  H.  581,  587.  Jn^.  Co.  116  N.  Y.  Supp.  617.     See 

^^  And  see  also  Kausal  v.  Minneso-  §  221  herein, 

la  Farmeis'  Mut.  Fire  Ins.  Assn.  31  *  Porter  v.  Casualty  Co.  of  Amori- 

Minn.  17,  21,  47  Am.  Rep.  776,  16  N.  ca,   126  N.  Y.   Supp"^.   669,  70   Misc. 

W.  430.  246. 

^^  See  c.  45,  §§  1942  et  seq.  herein.  *Ro.senthal   v.   American   Bonding 

See  also  §  20nb  herein.  Co.   of  Bait.  124  N.  Y.   Supp.   !)05, 

^^  Vivar  v.  Supreme  Lodge  Knights  ea.se  rev'd  128  N.  Y.  Supp.  553,  143 

of  Pythias,  52  N.  J.  L.  455,  20  AtL  36.  App.  Div.  362,  which  was  rev'd  207 

Examine  McClain  v.  Provident  Sav-  N.  Y.  1()2,  100  N.  E.  716. 

ings  Life  Assur.  Soc.  110  Fed.  80,  49  ®  London    Guarantee    &    Accident 

C.  C.  A.  31,  s.  c.  184  U.  S.  699,  46  Ins.    Co.    v.    Morris,    156   111.    App. 

L.  ed.  765,  23  Sup.  Ct.  938;  O'Con-  533;  Fairbanks  Canning  Co.  v.  Lon- 

nor  v.   Grand  Lodge  Ancient  Order  don    Guarajitv   &   Accident    Co.   154 

United  Workmen,  146   Cal.  484,  80  Mo.   App.   327,  133   S.  W.   664,  40 

Pac.  688.  ]ns.  L.  J.  583,  585,  586.     The  court, 

^Alabama  Gold  Life  Ins.  Co.  v.  per  Ellison,  J.,  said:  "The  eon- 
Johnson,  80  Ala.  467,  472,  60  Am.  tract,  .  .  .  i?  not  alone  wiUi 
Rep.  112,  2  So.  128.  Nelson    Morris   &    Co.,   but   is    with 

^^  See    also    §§    206c,    220b,    221b  others  mentioned  in  the  schedule,  in 

herein.  which     plaintiff's     name     is     found. 

^^^]tna  Life  Ins.  Co.  v.  Smith,  88  Plaintiff  is  tliercbv  named  as  one  of 

Fed.  440,  31  C.  C.  A.  575,  28  Ins.  L.  the  contracting  parties.     But  even  if 

J.  36.  it  should  be  conceded  that  there  was 

^  Diamond    v.    Metropolitan    Life  some  ambiguity  as  to  whether  plain- 
^                                                             595 


§§  222b,  222c  JOYCE  OX  INSURANCE 

ance,"^  and  ceilificates  in  mutual  benefit,  etc.,  societies  or  associa- 
tions.^ 

§  222b.  Same  subject:  employers'  liability  policy. — The  rule 
that  the  insurer  is  responsible  for  the  language  used  in  the  policy, 
and  that  the  meaning  most  favorable  to  insured  must  be  accepted 
applies  to  an  employers'  liability  policy.^ 

§  222c.  Same  subject:  accident  policy  under  workmen's  com- 
pensation act. — Where  a  policy  is  taken  out,  under  the  Workmen's 
Compensation  Act  of  England  of  1906,  against  accidents  to  em- 
ployees, it  ought,  in  case  of  ambiguity,  to  be  construed  against  the 
society  issuing  the  policy  and  in  favor  of  the  claimant.  Condi- 
tions precedent  to  the  "insurers  liability  to  pay  should  be  made 
especially  clear  both  in  the  proposal  form  and  in  the  policy  based 
thereon,  for  such  conditions  have  the  same  effect  as  forfeiture 
clauses,  and  may  inflict  loss  and  injury  to  assured  and  those  claim- 
ing under  him  out  of  all  proportion  to  any  damage  that  could  pos- 
sibly accrue  to  the  company  from  nonobservance  or  nonperform- 
ance of  the  conditions.  It  is  therefore  established  that  the  doctrine 
that  policies  are  to  be  construed  contra  proferentes  applies  strongly 
to  the  insurer.^" 

tiff  was  contracted  with  direct,  or  Ins.  Co.  v.  American  Bonding  Co. 
only  through  Nelson  Morris  &  Co.  146  Wis.  573,  131  N.  W.  994,  40 
we,  under  a  familiar  rule  of  construe-  Ins.  L.  J.  1805,  1811,  40  L.R.A. 
tion  of  contract,  should  resolve  the  (N.S.)  661  note, 
doubt  against  the  defendant  for  the  ^  Brotherhood  of  Locomotive  Fire- 
reason  that  it  prepared  the  policy  men  &  Enginemen  v.  Aday,  97  Ark. 
and  selected  the  words  used  to  ex-  425,  34  L.R.A. (N.S.)  126,  134  S.  W. 
press  its  meaning."  928,   40   Ins.   L.   J.   737 ;    Graves  v. 

'  United  Stales. — American  Surety  Knights  of  the  Maccabees  of  the 
Co.  V.  Pauly,  170  U.  S.  133,  160  (2  World.  112  N.  Y.  Supp.  948,  128 
cases)  42  L.  ed.  977,  18  Sup.  Ct.  App.  Div.  660,  case  rev'd  199  N.  Y. 
552,  construction  against  surety  com-  397,  92  N.  E.  792,  although  the  gen- 
pany  when  capable  of  two  construe-  eral  rule  was  not  denied,  it  was  held 
tions,  since  bond  prepared  by  insur-  not  applicable.  See  §§  207,  221 
ance    company:       law    well    .'Settled,   herein. 

cited  in  United  States  Fidelity  &  ^  Gary  Brick  Co.  v.  Fidelity  &  Cas- 
Guarantv  Co.  v.  First  National  Bank,  ualty  Go.  of  N.  Y.  147  N.  Y.  Supp. 
233  111.  475,  84  N.  E.  670)  ;  Guaran-  414,  162  App.  Div.  873. 
tee  Co.  of  North  America  v.  INIer-  ^^  Bradley  &  E.ssex  &  Suffolk  Acci- 
chants  Savings  Bank  &  Trust  Go.  80  dent  Indemnitv  Soc.  In  re,  81  L.  J. 
Fed.  766,  26  C.  C.  A.  146.  K.  B.  523,  530,  [1912]  1  K.  B.  415, 

(?eor(7««.— Moorefield  v.  Fidelity  165  L.  T.  919,  28  T.  L.  R.  175,  [1912] 
Mutual"  Life  Ins.  Go.  135  Ga.  186,  W.  G.  Rep.  6,  per  Farwell  L.  J.  pro- 
69  S.  E.  119.  viso  here  was  for  keeping  wages  book. 

Missouri. — Roark  v.  City  Trust  In  this  case  it  was  said:  "It  is  the 
Safe  Deposit  &  Suretv  Co.  130  Mo.  nniversal  practice  for  the  companies 
App.  401,  110  S.  W.  i.  to  prepare  both  the  forms  of  pro- 

Texas. —GviiVm  v.  Zuber,  52  Tex.  posal  and  the  form  of  policy.  Both 
Civ.   App.   288,   113   S.   W.   901.  are  issued  by  them  on  printed  forms 

Wisconsin.— United  American  Fire   kept  ready  for  use.     It  is  their  duty 

596 


CONSTRUCTION  OF  POLICY  §§  222<3,  222e 

§  222d.  Same  subject:  reinsurance, — The  rule  that  all  doubts  are 
to  be  resolved  liberally  in  favor  of  insured  since  the  insurer  pre- 
pared the  policy  applies  to  a  reinsurance  contract."  In  a  peculiar 
case  of  reinsurance  decided  in  New  York  the  terms  of  insurance, 
including  the  description  of  the  risk,  were  wholly  prepared  by  the 
original  insurer  and  the  policy  was  issued  by  the  reinsurer,  without 
seeing  the  original  policies,  in  the  exact  language  which  the  rein- 
sured had  so  used,  and  it  was  held  that  the  responsibility  for  any 
ambiguity  should  be  borne  by  the  reinsured,  and  that  the  rule  that 
as  insurance  policies  are  unilateral  contracts  prepared  by  the  in- 
surers they  are  responsible  for  any  ambiguity  in  the  language  used, 
all  doubt  is  resolved  against  them  because  they  created  it,  applied 
with  the  same  force  to  the  reinsurance  contract. ^^ 

§  222e.  Rule  as  to  standard  policy.^'^^ — Tlj^  rule  that  doubtful 
terms  are  to  receive  a  construction  favorable  to  the  insured  has 
not  been  changed  by  the  adoption  of  a  standard  form  for  a 
fire  insurance  policy.'^^  And  this  rule  has  apparently  been  im- 
pliedly conceded  tn  numerous  decisions  involving  the  constmc- 
tion  of  standard  policies.  In  a  New  York  case  it  is  said,  and 
so  held,  that  "the  policy,  though  of  the  stimdard  form  was  pre- 
pared by  insurers,  who  are  presumed  to  have  had  their  own  interests 
primarily  in  view;  and  hence,  when  the  meaning  is  doubtful,  it 
should  be  construed  most  favorably  to  insured  who  had  nothing 
to  do  with  the  preparation  thereof."  ^*     But  under  a  New  Jerse}'^ 

to  make  the  policy  accord  with  and   strongly  to  the  company.     Ethering- 
not  exceed  the  proposal,  and  to  ex-   ton  &  Lancashire  &  Yorkshire  Acci- 
press  both  in  clear  and  nnambiguous    dent  Insurance  Co.,  In  re,  [1900]   78 
terms,  lest— as  Lord  Justice  Fletcher   L.  .J.  K.  B.  (584,  [1909]  1  K.  B.  591." 
Moulton,  quoting  Lord  St.  Leonards,        u  rederal    Life   Ins.    Co.   v.   Kerr, 
says  m  Joell  v.  Law  Union  &  Crown    173  Ind.  613,  89  N.  E.  398,  91  N.  E. 
Insurance  Co.,  [1908]  77  L.  J.  K.  B.   230,  atfg    (1908)    —  Ind.   App.  — , 
1108,  1120,  [1908]  2  K.  B.  803,  886,   85  N.  E.  796,  82  N.  E.  943. 
-provisions   should   be   intro.luced       12  Lo,^,!^^      Assurance      Corp.      v. 
into   policies  which   Sinless  they   are    Thompson,  170  N.  Y.  94,  62  N.  E. 
fully  explained   to   the   parties,   will    ^yg^^    3^  j^^^   l.  J.  351. 
Jeacl  a  vast  number  or  persons  to  sup-       lo    o        i      e 
pose  that  they  have  made  a  provision  '^^^  ''^'^^  §  -^^'''^  ^^i'^^"- 

lor  their  families  by  an  insurance  on  ^^  Gazzam  v.  German  Union  Fire 
their  lives,  and  by'  payment  of  per-  Tns.  Co.  155  N.  C.  330,  Ann.  Cas. 
haps  a  A'ery  consideralile  portion  of  19L3E,  282  note,  71  S.  E.  434.  See 
their  income,  when  in  point  of  fact  T)ahms  &  Sons  Co.  v.  German  Fire 
from  the  very  commencement,  the  ^^^-  Co.  153  Iowa,  168,  132  N.  W. 
policy  was  not  worth  the  paper  upon  ^''^^  40  Ins.  L.  J.  2133,  2138,  point 
which  it  was  written.'     .     .     .     Ac-    [2]- 

cordingly  it  has  been  established  that  ^^  Matthews  v.  American  Central 
the  doctrine  that  policies  are  to  be  Ins.  Co.  154  N.  Y.  449,  39  L.K.A. 
construed  contra  proferentes  applies    433,  61  Am.  St.  Rep.  627,  48  N    E 

597 


§  223  JOYCE  ON  INSUKAXCE 

decision  wlien  a  policy  of  fire  insurance,  is  written  in  a  standard 
form  approved  by  governmental  authority,  the  maxim  verba 
chartarum  fortius  accipiuntur  contra  profcrentum,  hm  no  special 
applicability.^^  In  a  Wisconsin  case  it  is  held  that  although  it  has 
l>een  ruled  many  times  that  policies  of  insurance  are  to  be  liberally 
construed  in  fa\or  of  the  insured  because  the  insurer  has  prepared 
the  contract  still  the  reason  for  such  construction  would  seem  not 
to  apply  in  case  of  a  contract  prescribed  by  statute,  at  least  so  far 
as  the  statute  covered  such  details.^^  But  the  court,  per  Timlin,  J., 
qualifies  this  holding  to  this  extent:  "But  another  and  more  funda- 
mental rule  of  construction,  applying  alike  to  statutes  and  con- 
tracts, is  that  the  waiting  must  in  cases  of  ambiguity  be  considered 
valid  and  efficient  to  work  out  the  ascertained  object  of  the  writer; 
i.  e.,  in  favor  of  indemnity  to  the  insured  rather  than  useless  or 
nugatory.  .  ,  .  But  this  does  not  mean  that  clear  expressiK)ns 
should  be  distorted,  or  that  language  should  not  be  given  its  or- 
dinary meaning."" 

§  223.  The  written  controls  the  printed  part  of  policy. — Insurance 
policies  are  reduced  to  a  j^rinted  form,  conforming  to  a  prescribed 
formula,  since  many,  if  not  most,  of  the  clauses  have  obtained  a 
settled  judicial  construction,^''^  and  because  they  embrace  general 
provisions  applicable  not  only  to  one  case,  but  to  most  cases  of  a 
certain  class,  and  these  printed  forms  contain  blanks  in  which  may 
be  written  such  covenants  and  specific  provisions  as  are  agreed  upon, 
which  are  consistent  with  the  nature  of  the  contract  and  the  prin- 
oiijles  which  govern  it,  and  with  such  statutory  requirements  as 
may  exist;  ^^  these  specific  written  agreements  become,  therefore, 
the  immediate  and  chosen  language  of  the  parties  themselves,^* 

751,  27  Ins.  L.  J.  193,  195,  per  Van,        ^8  Harper  v.  New  York  Citv  Ins. 

J.,  case  modifies  41  X.  Y.  Supp.  301,  Co.  22  N.  Y.  441,  per  Selden,  .7.    "In 

9  App.  Div.  339.  most     maritime     places     they     have 

^^  Mifk  v.  Royal  Exchange  Assur.  printed   forms   of   policies   of   insur- 

87  N.  J.  L.   607,    (1914)    52  L.R.A.  ance,  in  the  blanks  of  which  are  writ- 

(N.    S.)    1074,   91   Atl.   102.      Citing  ten   the   special   covenants   on   which 

Nelson  v.  Traders  Ins.  Co.  181  N.  Y.  the  parties  choose  to  agree."     Emeri- 

472,  74  N.  E.  421.  gon  on  Insur.   (Meredith's  ed.  1850) 

^^  Rosenthal    v.    Tn.«:urance    Co.    of  32,  c.  ii.  see.  3;  1  Diier  on  Insnr.  (ed. 

North  America,  158  Wis.  550,  L.R.A.  1845)    G4,  sees.   6,  7.     "The  printed 

1915B,  361, 149  N.  W.  155.  words  are  a  general  formula,  adapted 

^'  The  greater  part  of  the  printed  equally  to  tlieir  case  and  that  of  all 
language  of  policies  of  assurance,  be-  other  contracting  partie.s  upon  simi- 
ing  invariable  and  uniform,  has  ac-  lar  occasions  and  subjects."  Robert- 
quired  from  use  and  practice  a  son  v.  French,  4  East,  136,  14  Eng. 
known  and  definite  meaning.  Rob-  Rul.  Cas.  1,  per  Lord  Ellenborough. 
ertson  v.  French,  4  East,  136,  14  ^*  "The  written  words  are  the  iiii- 
Eng.  Rul.  Cas.  1,  per  Lord  Ellen-  mediate  language  and  terms  selected 
borough.  bv  the  parties  themselves  for  the  ex- 

598' 


CONSTRUCTION  OF  POLICY  §  223 

and  for  this  reason  it  is  said  that  they  are  to  be  more  strictly  con- 
strued tlian  the  printed  ones.^°  These  written  clauses  should  be 
construed  togetlier  with  the  printed  ones,  and  reconciled  with  them, 
if  possible,  in  case  of  apparent  contradiction,  so  as  to  give  effect  to 
every  part  of  the  contract,^  and  if  there  is  no  contradiction  between 
the  two,  the  printed  clauses  will  be  given  the  full  effect  of  their 
terms.^  But  if  the  printed  and  written  clauses  are  repugnant  to 
each  other,  and  cannot  be  reconciled,  then  inasmuch  as  the  parties 
have  stipulated  in  writing,  this  express  adoption  of  a  chosen  form 
of  words  to  convey  their  meaning  will  control,  and  upon  this  point 
that  the  written  clauses  will  be  given  effect  over  the  printed  ones, 
the  decisions  are  unanimous.' 

pression  of  their  meanin?-"     Robert-   Sun  Mut.  Ins.  Co.  6  Blatchf.  (C.  C.) 

son  v.  French,  4  East,  136,  14  Eng.    317,  Fed.  ('as.  No.  6,41.'). 

Rul.  Cas.  1,  per  Lord  Ellenborougli.       Alabanm. — Tubb    v.    Liverpool    & 

2°1  Amould  on  Ins.  (Perkins'  ed,  London  &  Globe  In.^.  Co.  106  Ala. 
81)  sec.  47  rule  vi.  651,  17  So.  61"). 

^  Goss  V.  Citizens'  Ins.  Co.  18  La.  Arkansas. — Phoenix  Ins.  Co.  v. 
Ann.  97,  101;  Howes  v.  Union  Ins.  Flemino-,  65  Ark.  rA,  39  L.R.A.  789, 
Co.  16  La.  Ann.  235;  Goieoechea  v.  44  S.  W.  464,  27  Ins.  L.  J.  584. 
Louisiana  Ins.  Co.  6  Mart.  N.  S.  California. — Yoch  v.  Home  Mutu- 
(La.)  51,  17  Am.  Dee.  175;  Stokes  al  Ins.  Co.  Ill  Cal.  503,  34  L.R.A. 
V.  Cox,  1  Hurl.  &  N.  533 ;  2  Parsons  857,  44  Pac.  189. 
on  Contracts  (5th  ed)  516.  Georgia. — Maril      v.      Connecticut 

2  "Bat  Avhere  tliere  is  no  contra-  Fire  Ins.  Co.  95  Ga.  604,  30  L.R.A. 
diction  between  the  two  (written  and  835,  28  S.  E.  463. 
printed  clauses),  the  printed  clauses  .  Louisiana. — Goieoechea  v.  Louis- 
must  stand  and  have  the  full  effect  of  iana  State  Ins.  Co.  6  Mart.  N.  S. 
their  terms,  because  they  have  been  (La.)  51,  55,  17  Am.  Dec.  175,  per 
adopted  by  the  parties."     Emeri^on   Porter. 

on  Ins.  (Meredith's  ed.)  33,  c.  ii.  sec.  Maryland. — Fire  Ins.  Assoc,  v. 
3.  See  Mumford  v.  Hallett,  1  Johns  Merchants  &  Miners  Traiisp.  Co.  66 
(N.  Y.)  433.  Md.   339,  59   Am.   Rep.   332,   7   Atl. 

^United  States.— Thomas  v.  Ta^-  905;  Shertzer  v.  Mutual  Fire  Ins. 
£rart,  209  U.  S.  385,  52  L.  ed.  845,  Co.  46  Md.  506;  Frederick  County 
28  Sup.  Ct.  519;  Hainan  v.  Scotti.sh  Mut.  Fire  Ins.  Co.  v.  Doford,  38  Md. 
Union  &  National  Ins.  Co.   98  Fed.  404. 

129,  29  Ins.  L.  J.  666,  rev'd  102  Fed.  Massachusetts.  —  Whitmarsh  v. 
919,  920,  43  C.  C.  A.  55,  which  is  Conwav  Fire  Ins.  Co.  16  Gray 
rev'd  186  U.  S.  423,  46  L.  ed.  1229,  (82  Mass.)  359,  77  Am.  Rep.  414. 
22  Sup.  Ct.  862;  Canton  Ins.  Oflice  Michirjan. — Minnock  v.  Eureka 
Ltd.  V.  Woodside,  90  Fed.  301,  33  Fire  &  Marine  Ins.  Co.  90  Mich.  236, 
C.  C.  A.  63,  61  U.  S.  App.  214,  28  51  N.  W.  367;  Niagara  Ins.  Co:  v. 
Ins.  L.  J.  269;  Gunther  v.  Liverpool,  DeGraff,  12  Mich.  124.  Compare 
London  &  Globe  Ins.  Co.  34  Fed.  501,  Vandervolgen  v.  Manchester  Fire 
atf'd  134  U.  S.  110,  33  L.  ed.  857,  10  Assur.  Co.  123  Mich.  291,  82  N.  W. 
Sup.  Ct.  448;  Plinskly  v.  Germania  46,  29  Ins.  L.  J.  639. 
Ins.  Co.  32  Fed.  47;  Coster  v.  Phoe-  Minnesota. — Russell  v.  ]V[auufac- 
nix  Ins.  Co.  2  Wash.  (C.  C.)  51,  turers'  &  Buildei-s  Fire  Ins.  Assn.  50 
Fed.   Cas.  No.   3,264;   Hernandez  v. 

599 


§  224 


JOYCE  ON  INSURANCE 


J 


The  rule,  however,  that  written  parts  control  the  printed  parts, 
in  case  of  inconsistent  stipulations,  is  subject  to  the  rule  that  words 
of  exceptions  if  doubtful  are  to  be  construed  most  strongly  against 
the  party  for  whose  benefit  they  are  intended  and  in  favor  of  in- 
demnity.* 

§  224.  Same  subject:  cases. — A  special  indorsement  exempting 
from  liability  for  partial  loss  controls,^  but  where  the  language  of 
the  printed  form  provided  that  the  policy  should  be  controlled  by 
indorsements  of  special  risks,  and  the  written  part  omitted  the 
word  ''carriage"  contained  in  the  printed  part,  such  omission  was 
held  not  to  limit  the  policy.^  Where  the  terms  of  limitation  and 
description  of  the  risk  are  written  in,  such  clauses  will  control 
printed  clauses  which  should  have  been  stricken  out,  but  which  are 
left  in,  according  to  the  usual  custom.'  And  the  phrase  "against 
actual  total  loss  only,"  written  across  the  margin  of  a  policy,  will 
control  the  printed  language  therein.*  So  a  written  memorandum 
as  to  the  manner  of  settling  losses  controls.^     So  where  the  risk  as- 


Miun.   409,  52  N.   W:  906;   Phcenis 
Ins.  Co.  V.  Taylor,  5  Minn.  492. 

Missouri. — Archer  v.  Merchants'  & 
Manufacturers'  Ins.  Co.  43  :\Io.  434: 
Burnham  v.  Roval  Ins.  Co.  79  Mo. 
App.  394,  1  mJ.  App.  Rep.  308,  27 
Ins.  L.  J.  928. 

New  York. — Hall  v.  Insurance  Co. 
of  North  America,  58  N.  Y.  292,  17 
Am.  Rep.  255;  Reynolds  v.  Com- 
merce Ins.  Co.  47  N.  Y.  597;  Bene- 
dict V.  Ocean  Fire  Ins.  Co.  31  N.  Y. 
389;  Harper  v.  Albany  IMut.  Fire 
Ins.  Co.  17  N.  Y.  194:  Bargett  v. 
Orient  Mut.  Ins.  Co.  3  Bosw.  (N. 
Y.)  385;  Nielson  v.  Commercial  Ins. 
Co.  3  Duer  (N.  Y.)  455. 

North  Carolina. — Johnston  v.  Nia- 
gara Fire  Ins.  Co.  118  N.  Car.  643, 
24  S.  E.  424. 

Ohio. — Farmers  National  Bank  v. 
Delaware  Ins.  Co.  83  Ohio  St.  309, 
04  N.  E.  834,  40  Ins.  L.  J.  1248, 
1254,  56  Ohio  Law  Bull.  99. 

Pennsylvania. — West  Branch  Lum- 
berman's Exchange  v.  American  Cen- 
tral Ins.  Co.  183  Pa.  366,  42  Wklv. 
N.  C.  6,  38  Atl.  1081,  27  Ins.  L.  J. 
305;  Haws  v.  St.  Paul  Fire  &  Ma- 
rine Ins.  Co.  130  Pa.  113.  2  L.R.A. 
52,  15  Atl.  915,  18  Atl.  621. 

Vermont. — Mascott    v.    First    Na- 


600 


tional  Fire  Ins.  Co.  69  Vt.  116,  37 
Atl.  255;  ]\fa.scott  v.  Granite  State 
Fire  Ins.  Co.  68  Vt.  253,  35  Atl.  75. 

Engkind. — Bell  v.  Hobson,  16  East, 
240;  Robeiison  v.  French,  4  Ea.st, 
130,  14  Eug.  Rul.  Cas.  1. 

"It  is  permitted  to  derogate  from 
the  printed  clauses,  and  one  is  judged 
to  derogate  from  them  from  the  fact 
alone  that  the  written  clauses  are  re- 
pugnant to  them.''  Emerigon  on 
Ins.  (Meredith's  ed.  1850)  33,  c.  ii. 
sec.  3.  See  3  Kent's  Commentaries 
(6th  ed.  26)  17  Eari  of  Halsbury's 
Laws  of  England,  pp.  342,  527,  see 
§  2671  herein. 

*  Canton  Insurance  Office  Ltd.  v. 
Woodside,  90  Fed.  301,  33  C.  C.  A. 
63,  61  U.  S.  App.  214,  28  Ins.  L.  J. 
269,  275.     See  §  220  herein. 

5  Chadsey  v.  Guion,  97  N.  Y.  333. 

^  Kratzenstein  v.  Western  As.sur. 
Co.  116  N.  Y.  54,  22  N.  E.  221,  5 
L.R.A.  799,  revei-sing  21  Jones  &  S. 
(53  N.  Y.  Sup.  Ct.)  505. 

'  Dudgeon  v.  Pembrook,  2  L.  R. 
App.  C.  284,  14  Eng.  Rul.  Cas.  105. 

*  Burt  V.  Brewers'  &  Malsters'  Ins. 
Co.  9  Hun  (16  N.  Y.  Sup.  Ct.)  383. 

^  Husg  V.  Augusta  Ins.  &  Bank- 
ing Co.^  Taney  (C.  C.)  159,  Fed.  Cas. 
No.  6,838. 


CONSTRUCTION  OF  POLICY  §  225 

sumed  by  the  written  agreement  is  irreconcilable  with  the  printed 
terms,  the  former  governs.^"  And  the  written  words  "port  risk  in 
the  port  of  New  York"  control  the  printed  part,  and  limit  and 
define  the  risk."  And  the  insurance  will  not  be  limited  to  the 
interest  of  the  insured,  a  carrier,  where  other  and  written  parts  dis- 
cover a  contrary  intention. ^^  ^he  written  portion  of  a  fire  insur- 
ance policy  insuring  benzine  as  part  of  a  stock  of  merchandise  over- 
rides the  printed  portion  of  the  policy  forbidding  it  to  be  kept.^^ 
A  written  special  description  of  the  subject-matter  must  control  the 
printed  clauses  whenever  they  are  inconsistent,  and  if  the  written 
portion  covers  property  to  be  used  in  a  particular  business,  the  keep- 
ing of  an  article  necessarily  used  in  such  business  does  not  avoid 
the  policy,  although  it  is  expressly  prohibited  in  the  printed  condi- 
tions, especially  so  where  the  protection  of  an  established  and  cur- 
rent business,  expressly  permitted  in  the  written  portion  of  the  con- 
tract, is  really  the  object  of  the  insurance.^*  A  receipt  for  part 
payment  of  the  premium  on  an  insurance  policy,  which  is  wholly 
in  writing,  must  control  the  printed  terms  of  an  application  which 
conflict  with  it,  when  the  delivery  of  the  application  and  the  giving 
of  the  receipt  are  to  be  regarded  as  contemporaneous  acts.^*  Other 
cases  illustrating  this  proposition  are  noted  elsewhere.^^ 

§  225.  Construction:  lex  loci  contractus. — Although  there  are 
conflicting  decisions,  yet  the  general  rule  is  that  contracts  of  in- 
surance are  governed,  in  matters  of  construction  affecting  their 
validity  and  the  rights  of  the  parties,  by  the  law  and  usages  of  the 
place  where  the  contract  is  made,"  unless  it  appears  that  the  parties 

1°  Nicolet  V.   Insurance   Co.   3   La.  ^^  See    cases    under    §    223.      See 

36G,  23  Am.  Dec.  4.i8.  chapters  45,  49,  50,  53,  58,  lierein. 

"  Nelson  v.  Sun  i\lut.  Ins.  Co.  71  ^"^  Mutual  Life  Ins.  Co.  v.  Hill,  103 

N.  Y.  453.  U.  S.  551,  48  L.  ed.  788,  24  Sup.  Ct. 

12  Fire  Ins.  Assn.  v.  IMerchants'  &  538,  s.  c.  (mem.)  188  U.  S.  742,  47 
Miners'  Tran.sp.  Co.  06  Md.  339,  7  L.  ed.  678,  23  Sup.  Ct.  856,  s.  c.  118 
Atl.  905.  Fed.  708,  55  C.  C.  A.  536;   Mutual 

13  Phoenix  Ins.  Co.  v.  Flemming,  65  Life  Ins.  Co.  v.  Cohen,  179  U.  S. 
Ark.  54,  67  Am.  St.  Rep.  900,  39  262,  45  L.  ed.  181,  21  Sup.  Ct.  106, 
L.R.A.  789,  44  S.  W.  464,  27  Ins.  L.  s.  c.  38  C.  C.  A.  696.  See  Mutual 
J.  584.  Compare  Vandervolgen  v.  Life  Ins.  Co.  v.  Hill,  178  U.  S.  347, 
Manchei^ter  Fire  Assur.  Co.  123  20  Sup.  Ct.  914,  44  L.  ed.  1097,  rev'g 
Mich.  291,  82  N.  W.  46,  29  Ins.  L.  J.  97  Fed.  263,  28  C.  C.  A.  159,  49 
639.  L.R.A.  127)  ;   Mutual  Life  Ins.  Co. 

1*  Faust    V.    American    Fire    Ins.  v.  Phinnev,  178  U.  S.  327,  44  L.  ed. 

Co.  91  Wis.  158,  30  L.R.A.  783,  64  1088,  20  Sup.  Ct.  327;  Liverpool  & 

N.  W.  883,  51  Am.  St.  Rep.  876.  Great  Western  Steam  Co.  v.  Plienix 

15  Cole  V.  Union  Central  Life  Ins.  Ins.  Co.  129  U.  S.  397,  32  L.  ed.  788, 

Co.  22  Wash.  26,  47  L.R.A.  201,  60  9  Sup.  Ct.  469;  Roval  Union  Mutual 

Pac.  68.  Life  Ins.  Co.  v.  Wynn  (U.  S.  C.  C.) 

601 


§  225  JOYCE  ON  INSURANCE 

had  the  law  of  another  place  in  contemplation,  or  had  so  expressly 
ytipulated/^  in  which  case  the  law  of  the  state  agreed  upon  as 
governing  controls  the  nature,  validity,  interpretation,  and  efi'ect 

177  Fed.  289,  aff'd  (mem.)  185  Fed.  Assoc,  v.  Harris,  94  Tex.  25,  57  S. 

1007,    107    C.    C.    A.    664;    Cudahy  W.  635,  86  Am.  St.  Rep.  813. 

Packing-     Co.     v.    New    Amsterdam  But    see    Griswold    v.    Union    Ins. 

Casualty  Co.  (U.  S.  C.  C.)  132  Fed.  Co.  3  Blatelif.  (C.  C.)  231,  Fed.  Cas. 

623 ;     Carrollton     Furniture    Manu-  No.  5,840.     On  where  contract  of  in- 

faeturing  Co.  v.  American  Credit  In-  surauce  is  deemed  to  have  been  made, 

demnity  Co.  115  Fed.  77,  aff'd  124  gee    notes    in    63    L.R.A.     SU, 


*^7  C    C    A*  404'!  '  '   cution,    the    interpretation     and    the 

"  Arkanscui~Vrl.rMm  Life  Ins.  Co.    ^^lidity  of  a  contract  are  determined 

V.  Galligan,  71  Ark.  295,  100  Am.  St.  ^^  ^^'^  ^^^  «Vlf  ^^"""^f.  "^^^""^    ^^^ 

Rep   79   73  S    W   10''  contract  is  made.      Scudder  v.  Union 

Connecticut.— ilxxWln   v.   Reed,   64   National  Bank,  91  U.  S.  406,  23  L. 

Conn.   240,  24  L.R.A.   664,   42   Am.  ^^-     -^^'    «^*^'^^    ^"    Thompson    v. 

St.  Rep.  174,  29  Atl.  478.  Traders'  Ins".  Co.  169  .Mo.  12,  68  S. 

Georgia. — Massachusetts        Benefit  ^^-  ^^^^  31  Ins.  L.  J.  823,  831. 

Life  Assoc,  v.  Robinson,  104  Ga.  256,  ^^  Mutual  Life  Ins.  Co.  v.  Hill,  193 

42  L.R.A.  261,  30  S.  E.  918.  U.  S.  551,  48  L.  ed.  788,  24  Sup.  Ct. 

Zoit^a.— Summitt   v.   United    States  -^88,  s.  c.   (mem.)   188  U.  S.  742,  47 

Life  Ins.  Co.  123  Iowa,  681.  99  N.  L-   t'd.    678,   23   Sup.    Ct.   856,   s.   c. 

W.  563,  33  Ins.  L.  J.  620;  Belknap  118  Fed.  708,  55  C.  C.  A.  536;  Neder- 

v.  Johnson,  114  Iowa,  265,  86  N.  W.  land  Life  Ins.   Co.  Ltd.  v.  Meinert, 

267.  127     Fed.     651,    62    C.    C.    A.    37, 

Kentucki/.- — Clarev  v.  Union   Cen-  certiorari  granted  194  U.  S.  633,  48 

tral  Life  ins.   Co.  143  Ky.   540,  33  L.  ed.  1159,  24  Sup.  Ct.  861,  rev'd 

L.R.A.  N.  S.  881,  136   8.  W.  1014,  on  another  point,  199  U.  S.  171,  50 

40  Ins.  L.  J.  1403,  1405.  L.   ed.  139,  26   Sup.   Ct.   15;   Liver- 

Maine. — Bailey  v.   Hope   Ins.    Co.  pool  &  Great  Western  Steam  Co.  v. 

56  Me.  474.  Phenix   Ins.   Co.  129   U.   S.  397,  32 

M?"sso»n'.— Thompson    v.    Traders'  L.  ed.  788,  9  Sup.  Ct.  469;  Eagle  v, 

Ins.  Co.  of  Chicago,  169  Mo.  12,  68  New  York  Life  Ins.  Co.  48  lud.  App. 

S.  W.  889.  284,  91  N.  E.  814;  Born  v.  Home  Ins. 

New  Hampshire.— Seeley  v.  Man-  Co.  120  Iowa,  299,  94  N.  W.  849,  32 

hattan  Life  Jns.  Co.  72  N.  H.  49,  55  Ins.  L.  J.  737   (unless  it    be    shown 

Atl.  425,  32  Ins.  L.  J.  972;  Peny  v.  that   it   was     the    intention    of    the 

Dwelling  House  Ins.   Co.   67   N.   H.  parties  that  it  should  be  performed 

291,   68   Am.   St.   Rep.   668,  33   Atl.  at    some    other    place    it    will    ordi- 

731.  narily  be  governed  by  the  law  of  the 

New    York. — Boston    Manufactur-  place  where  it  was  executed)  ;   Bel- 

ers'   j\rutual  Fire  Ins.   Co.  41   Misc.  knap  v.  Johnson,  114  Iowa,  265,  86 

479,  85  N.  Y.  Snpp.  44.  N.  W.  267;  Johnson    v.    New    York 

Tennessee. — Roberts     v.     Winton,  Life   Ins.   Co.    109     Iowa,    708,    50 

100  Tenn.  484,  41  L.B.A.  275,  45  S.  L.R.A.  99,   78  N.  W.   905:   Fidelity 

W.  673.  Mutual    Life    Assoc,    v.'   Harris,    94 

Texas.— Fidelity       Mutual       Life  Tex.  25,  86  Am.  St.  Rep.  813,  57  S. 

602 


CONSTRUCTION  OF  POLICY  §  225 

of  the  coiitracl.^^  The  place  where  the  contract  is  made  is  that 
where  the  linal  act  is  performed  which  is  necessary  to  its  completion 
and  to  make  it  binding  upon  both  parties,  for  if  anything  remains 
to  be  and  is  done  in  another  state  to  give  validity  to  the  policy,  that 
state  is  the  place  of  contract.^" 

Other  cases  hold,  however,  that  generally  the  rights  of  parties 
are  governed  by  the  laws  of  the  place  where  the  contract  is  to  be 
performed,  and  not  where  made,  since  it  will  be  presumed  that 
the  contract  was  entered  into  with  reference  to  the  laws  of  the 

W.  635;  Union  Central  Life  Ins.  Co.  Fh-e  Ins.  Co.  45  W.  Va.  237,  31  S. 

V.  Pollard,  94  Va.  146,  26  8.  E.  421,  E.  969,  28  Ins.  L.  J.  125. 

64  Am.  St.  Rep.  715,  36  L.R.A.  271.        See  Bliss  on  Life  Ins.   (ed.  1872) 

As  to  stipulations  and  illustrative  sees.  370-73;  1  Parson.s  on  Ins.   (ed. 

cases,  see  §  231d  herein.  1868)    132-35;   1  Duer  on  Ins.   (ed. 

19  Union   Central  Life  Ins.   Co.  v.  1845)  262.    "For  that  which  is  of  the 

Pollard,  94  Va.  146,  26  S.  E.  421,  64  substance   of   the   decision   reference 

Am.  St.  Rep.  715,  36  L.R.A.  271.  must  be  had,  as  a  general  rule,  to  the 

2°  United    Stales. — Equitable    Life  laws  of  the  place  where  the  contract 

Assurance   Soc.  v.   Clements,  140  U.  was    made.      Ex     consuetudine     ejus 

S.   226,  35  L.   ed.  497,  11   Sup.   Ct.  regionis    in    qua    negotium    gostuui 

822;  Cox  V.  United  States,  6  Pet.  (31  est:''     Elmerigon  on  Ins.  (Meredith's 

U.  S.)   172,  8  L.  ed.  359;    Globe    &  ed.    1850)    98:      "A    foreigner    who 

Rutgers   Fire   Ins.    Co.   of   N.   Y.   v.  contracts  within  the  territory  of  any 

"David  Moffat  Co.  154  Fed.  13,  83  C.  state  is  bound  as  a  subject,  for  the 

C.  A.  91;    Northwestern    Mut.    Life  time  being,  of  that  state  to  submit 

Ins.   Co.  V.   Elliott,  7   Saw.    (C.   C.)  himself  to  the  laws  of  the  country, 

17,  5  Fed.  225.  .     .     .     and    reciprocally    he    is    en- 

Illinois. — Burchard  v.   Dunbar,  82  titled  to  invoke  the  laws  and  privi- 

111.  450,  25  Am.  Rep.  334.  leges  of  this  .same  country  in  the  mat- 

loma. — Pomeroy  v.  Manhattan  ter  of  any  contracts  he  may  have 
Life  Ins.  Co.  40  111.  398;  Born  v.  entered  into  tliere.  It  is  the  same 
Home  Ins.  Co.  120  Iowa,  299,  94  N.  witli  in.surauces  made  in  France,  for 
W.  849,  32  Ins.  L.  J.  737  (the  place  account  of  a  foreigner,  for  every- 
where the  agreement  is  finally  con-  thing  connected  with  tlie  decision  of 
summated  becomes  the  place  of  con-  the  .substantial  right  of  the  case  de- 
tract), pends  on  the  laws  of  the  place  of  the 

Kentuckjf. — Ford  v.  Buckeye  State  contract.  .  .  .  But  for  decision 
Ins.  Co.  6  Bush  (Ky.)  133,  99  Am.  of  tiie  substance  of  the  cau.se,  re- 
Dec.  663.  course  must  be  had  to  the  laws  of  the 

Massachusetts. — Heebner  v.    Eagle  place    of    contract:"      Id.    lOL      See 

Ins.    Co.   10   Gray    (76   Mass.)    131;  note,    99     Am.    Dec.     671;     Bacon's 

Kennebec  V.  Augusta  Ins.  Co.  6  Gray  Benefit  Societies  and  Life  Ins.    (ed. 

(72  Mass.)  208.  1888)  see.  175;  Richards  on  Ins.  (ed. 

New  Jersey. — Northampton  IVFutual  1892)   p.  54,  sec.  44;  1  May  on  Ins. 

Live  Stock  Ins.  Co.  v.  Tuttle,  40  N.  (Parsons'   ed.)    sees.   66,   66a..     "The 

J.  L.  476.  law  of  the  country  where    the    con- 

New  York. — Western  v.  Genesee  tract  arose  must  govern  the  con- 
Mutual  Ins.  Co.  12  N.  Y.  (2  Kern.)  tract:"  Male  v.  Roberts,  3  Esp.  I(i3, 
258.  per  Lord  Eldon:     "The  law  of  the 

Wisconsin. — Galloway  v.  Standard  place  where  the  contract  is  made  is 

603 


§  235  JOYCE  ON  INSURANCE 

latter.*  So  it  is  held  in  Massachusetts  that  the  place  of  perform- 
ance will  ordinarily  be  deemed  to  be  the  place  of  contract  unless  the 
parties  intend  otherwise.^  Unless  there  is  something  ''in  the  cir- 
cumstances to  show  that  the  parties  had  specially  in  view  the  law 
of  the  place  where  the  contract  is  made,  this  law  will  govern,  al- 
though the  contract  is  to  be  performed  elsewhere."  '  In  constru- 
ing contracts,  made  and  to  be  performed  in  another  state,  the  law 
of  the  state  where  the  contract  is  made  and  to  be  performed  con- 
trols ;  but  this  law,  like  any  other  fact,  must  be  proven.* 

to  govern  as  the  nature,  validity,  the  laAvs  of  Texa.s,  the  lesral  effect  of 
and  construction  of  such  contract :''  the  contract  must  be  determined  ae- 
Eeimsdyk  v.  Kane,  1  Gall.  (U.  S.  cording  to  the  law  of  the  state  of 
C.  C.)  374,  Fed.  Cas.  No.  16,871,  per  Missouri."  Seiders  v.  Merchants' 
Story,  J.  "A  contract  must  be  gov-  Life  Assoc,  of  the  U.  S.  93  Tex.  194, 
erned  by  the  law  of  the  country  54  S.  W.  753,  "29  Ins.  L.  J.  97,  per 
where  it  is  made:"  May  on  Ins.  Brown,  J.,  rev'g  —  Tex.  Civ.  App. 
(Parsons'  ed.)    66a.  — ,  51  S.  W.  547.     See  also  Metro- 

^  Hyde  v.  Goodnow,  3  N.  Y.  (3  politan  Life  Ins.  Co.  v.  Bradley,  — 
Com-st.)  266,  per  the  Court.  Tex.  Civ.  App.  — ,  79  S.  W.  367. 

Matters  connected  with  the  per-  ^  Ruse  v.  Mutual  Benefit  Life  Ins. 
formance  of  a  contract  "are  regu-  Co.  26  Barb.  (N.  Y.)  556,  23  N.  Y. 
lated  by  the  law  prevailing  at  the  516,  521,  24  N.  Y.  653.  Same  policy 
place  of  performance."  Scudder  v.  was  basis  of  action  in  Mutual  Benefit 
Union  National  Bank,  91  U.  S.  406,  Life  Ins.  Co.  v.  Ruse,  8  Ga.  534.  , 
23  L.  ed.  245,  quoted  in  Thompson  *  Clarev  v.  Union  Centi'al  Life  Ins. 
v.  Traders'  Ins.  Co.  169  Mo.  12,  68  Co.  143  ^Kv.  540,  33  L.R.A.(N.S.) 
S.  W.  889.  31  Ins.  L.  J.  823,  831.       881,  136  S.  W.  1014,  40  Ins.  L.  J. 

2  Bottouilev  V.  ISfetropolitan  Life  1403.  The  court,  per  Lassing,  J,, 
Ins.  Co.  170  Mass.  274,  49  N.  E.  438,  said:  "In  Ford  v.  Buckeye  State 
27  Ins.  L.  J.  557,  citing  London  Ins.  Co.  6  Bush  (Ky.)  133,  99  Am. 
Assurance  v.  Companhia  De  j\Ioagens  Dec.  663,  this  court  held  that  where 
De  BaiTeiro,  167  U.  S.  149,  17  Sup.  a  conti-act,  made  in  Indiana,  was  not 
Ct.  785,  42  L.  ed.  113;  Coghlan  v.  enforceable  under  the  laws  of  that 
South  Carolina  R.  Co.  142  U.  S.  101,  state  it  would  not  be  enforced  in 
12  Sup.  Ct.  150,  36  L.  ed.  951:  Hall  this  state.  And  in  Jameson  v. 
v.  Cordell,  142  U.  S.  116,  12  Sup.  Ct.  Gregory's  Ex'r  4  Mete.  (Ky.)  363, 
154,  35  L.  ed.  956 ;  Dicey's  Conflict  of  it  was  held  that  the  legality  of  a 
Laws,  568,  572;  Story's  Conflict  of  contract  must  be  decided  by  the 
Laws,  sec.  280.  laws   of  the  state  in    which    it    was 

"Conceding  that  the  contract  of  made.  In  Archer  v.  National  Ins. 
insurance  was  made  in  Texas,  it  is  Co.  2  Bush  (Ky.)  226,  it  was  held 
made  payable  at  the  home  office  in  that  the  validity  and  legality  of  a 
the  state  of  Missouri  and  all  premi-  contract  executed  in  Indiana  must 
ums  are  likewise  made  payable  there,  be  determined  by  the  laws  of  that 
It  does  not  provide  for  any  act  to  be  state.  In  Young  v.  Han-is,  14  B. 
done  elsewhere  by  the  company.  A  Mon.  (Ky.)  556,  61  Am.  Dee.  170, 
tender  of  the  money  at  the  home  this  court,  through  Chief  Justice 
office  would  have  been  valid.  Unless  Marshall,  said:  'The  general  princi- 
there  be  something  in  the  circi;m-  pie  determining  the  law  by  which  a 
stances  which  indicate  that  the  contract  is  to  be  construed  is  that, 
parties  contracted  with   reference   to    unless    the    place    appointed  for  its 

604 


CONSTRUCTION  OF  POLICY 


§  226 


It  has  also  been  held  that  the  legal  construction  and  effect  of  a 
policy  of  insurance  made  by  a  company  incorporated  in  a  sister 
state  are  governed  by  the  law  of  that  state,^  and  that  the  law  of 
the  place  where  a  mutual  benefit  association  is  formed  and  does 
business  determines  the  liability  of  members.^  So  it  is-  held  in  a 
mutual  benefit  association  case  that  the  contract  is  governed  by  the 
statutes  of  the  state  of  the  domicil  of  the  corporation.'  And  it  is 
also  held  that  the  contracts  of  a  corporation,  though  made  without 
the  state  by  which  it  was  created,  are  controlled  by  the  laws  of  the 
state  in  which  created.^ 

§  226.  Same  subject:  cases. — Under  a  "Wisconsin  statute^  a  pro- 
\dsion  that  the  omission  to  attach  to  or  indorse  upon  an  insurance 
policy  "a  true  copy'"  of  the  application  of  the  assured  shall  preclude 
the  insurance  company  from  afterward  relying  thereon,  applies  to 
a  foreign  corporation  insuring  property  situated  in  the  state,  though 
the  contract  of  insurance  is  made  without  the  state.^° 

A  policy  issued  within  the  state  by  the  agent  of  a  foreign  insur- 
ance company,  not  naming  the  place  of  payment  of  loss,  is  payable 
within  the  state. ^^  The  contract  is  governed  also  by  the  laws  of  the 
state  where  the  agent  having  the  power  to  make  the  contract  acts.^^ 


payment  be  different  from  that  in 
which  it  is  made,  it  is  to  be  governed 
by  the  law  of  the  place  where  it  is 
made,  which  i.s  the  lex  loci  con- 
tractus.' In  Western  Union  Tele- 
graph Co.  V.  Eubanks  &  Russell,  100 
Kv.  591,  38  S.  W.  1068,  36  L.R.A. 
711,  66  Am.  St.  Rep.  361,  18  Ky. 
L.  Rep.  995,  it  is  said  that  'the  gen- 
eral rule  is  that  the  laws  of  the  place 
where  the  contract  is  to  be  pei"- 
formed  governs,  subject,  of  course, 
to  the  rule  that  a  contract  which  is 
void  by  the  law  of  the  place  where 
made  is  void  everywhere.'  And  in 
Hyatt  V.  Bank  of  Kentucky,  8  Bush 
(Ky.)  193,  it  was  held,  where  a  note 
was  executed  in  Louisiana,  that  as  be- 
tween the  maker  of  the  note  and 
the  payee,  its  legal  effect  must  be  de- 
termined by  the  law  of  that  state." 

See  also  Napier  v.  Bankers'  Life 
Ins.  Co.  100  N.  Y.  Supp.  1072,  51 
Misc.  283;  Peckham,  In  re,  29  R.  T. 
250,  132  Am.  St.  Rep.  813,  69  Atl. 
1002;  National  Trust  Co.  v.  Hughes, 
14  Manitoba  R.  41. 

^  St.  John  V.  American  Mut.  Life 


Ins.  Co.  2  Duer  (N.  Y.)  419,  13  N. 
Y.  31,  64  Am.  Dec.  529.  See  note 
104  Am.  St.  Rep.  483-484. 

6  Cutler  V.  Thomas,  25  Vt.  73. 
See  Knights  of  Honor  v.  Nairn,  60 
Mich.  44,  26  N.  W.  826. 

■^  In  re  Globe  Mut.  Benefit  Assn. 
63  Hun  (N.  Y.)  264,  43  N.  Y.  756, 
17  N.  Y.  Supp.  852. 

8  Fidelity  Mut.  Life  Assn.  v.  Fick- 
lin,  74  Md.  172,  20  Ins.  L.  J.  534, 
21  Atl.  680. 

On  conflict  of  laws  as  to  contracts 
of  insurance,  see  notes  in  63  L.R.A. 
833;  23  L.R.A. (N.S.)  968;  and  52 
L.R.A. (N.S.)  279.  On  laws  or  judg- 
ments of  courts  of  state  in  which  in- 
surance company  is  incorporated  as 
bindinsi-  in  other  states,  see  note  in 
L.R.A.'l916A,  770. 

9  Wis.   Rev.    Stat.   sec.   1945a. 

10  Stanhilber  v.  Mut.  Mill  Ins.  Co. 
76  Wis.  285,  45  N.  W.  221. 

"Moshassuck  Felt  ^Mill  v.  Bland- 
ing,  17  R.  1.  95,  20  Ins.  L.  J.  475,  21 
Atl.  538. 

12  Albion  Life  Ins.  Co.  v.  :Mills 
(Aop.  Cas.).  3  Wils.  &  S.  218,  233. 


605 


§  226  JOYCE  ON  INSURANCE 

So  where  an  insurance  company,  organized  under  the  laws  of 
A^ermont,  was  transacting  business  in  the  state  of  New  York,  and 
had  a  general  agent  in  the  city  of  New  York,  to  whom  a  person 
acting  as  agent  for  a  resident  of  New  Jersey  made  application  for 
insurance,  and  a  policy  was  is.«ued  in  pursuance  of  such  applica- 
tion by  the  general  agent  in  New  York,  it  was  held  that  the  contract 
was  executed  in  New  York  and  subject  to  the  laws  of  that  state  as 
to  forfeiture  for  nonpayment  of  preniiums.^^  The  law  of  the  place 
where  the  premium  note  is  made  and  given  to  the  agent  governs 
its  construction.^*  But  it  is  not  necessary  that  a  foreign  insurance 
company  issuing  policies,  duly  signed  by  their  president  and  secre- 
tary and  accepted  by  the  insured  in  the  state  of  Massachusetts, 
where  the  premium  note  is  given,  should  have  a  general  agent 
within  that  state,  in  compliance  with  its  general  statutes,  in  order 
to  have  the  policy  interpreted  according  to  the  laws  of  that  state,^* 
and  it  is  held  that  where  a  state  law  requires  an  agent  to  be  ap- 
pointed therein  on  whom  process  can  be  served,  the  contracts  made 
by  the  agent  are  to  be  governed  by  the  law  of  the  state  where  the 
agent  acts.^® 

The  Massachusetts  statute  relating  to  the  forfeiture  of  life  policies 
applies  to  foreign  insurance  companies  doing  business  in  Massa- 
chusetts, Avithout  regard  to  the  question  whether  the  contract  of 
insurance  is  made  there  or  in  the  state  where  the  company  is  in- 
corporated.^''^ It  is  decided  in  a  Michigan  case  that  the  ''circum- 
stance that  the  liability  to  pay  is  made  to  depend"  iipon  a  risk  upon 
real  property  there  does  not  make  the  contract  a  ]\Iichigan  contract, 
or  in  any  legal  sense  make  that  ''state  the  place  of  performance  by 
the  insurance  company,  and  the  further  circumstances  that  the 
contractee  was  a  Michigan  corporation  did  not  impress  upon  the 
contract  the  quality  of  locality  so  as  to  cause"  the  laws  of  JNIichigan, 
as  to  business  done  there  by  agents  of  foreign  companies,  to  affect 
it  in  point  of  law.^^  An  open  policy  of  insurance  containing  all  the 
conditions  governing  the  shipment  of  such  goods  as  ai'e  specially 
insured  under  the  policy,  and  reserving  to  the  insurer  the  right  of 
accepting  or  rejecting  each  special  subject  of  insurance,  will,  it  is 
held,  be  considered  as  a  contract  made  at  the  domicil  of  the  com- 

13  Hicks  V.  National  Life  Ins.  Co.  ^"^  Holmes  v.  Charter  Oak  Life  Ins. 

60  Fed.  690,  9  C.  C.  A.  215.  Co.  131  Mass.  64. 

1*  Thornton    v.    Western    Reserve  "  Clay  Fire  &  Marine  Ins.  Co.  v. 

Farmers'  Ins.  Co.  31  Pa.  St.  529.  Huron  Salt  &  Lumber  Mfg.  Co.  31 

1*  Thwing   V.    Great   Western   Ins.  Mich.  316. 

Co.  Ill  ]\Ia.ss.  93.  Lex     loci;     situation     of     insured 

16  Manhattan     Life     Ins.     Co.     v.  property.    See  §  231a  herein. 
Warwick,  20  Gratt.    (Va.)    614. 

606 


CONSTRUCTION  OF  POLICY  §  226 

pany.^^  And  where  business  is  transacted  in  a  state  by  a  foreign 
insurance  company  without  any  provision  in  its  policies  that  the 
laws  of  the  state  of  its  incorporation  shall  govern,  the  contract  is  not 
subject  to  the  provisions  of  the  foreign  state  statut€;^° 

Where  the  policy  was  issued  and  dated  in  Maine,  the  laws  of  that 
state  were  held  to  govern  its  construction,  though  the  policy  was 
sent  to  another  state. ^  And  where  an  application  was  made  in 
Minnesota,  forwarded  to  New  York,  issued  and  delivered  in  the 
former  state,  and  insured  died  in  Iowa  it  was  held  that  it  should 
be  construed  and  enforced  as  a  Minnesota  contract.^  Where  an 
accident  policy  sued  on  was  applied  for  by  insured  in  Ohio  and 
issued  by  an  Illinois  company  and  insured  sustained  an  accident  in 
Kentucky,  it  was  held  that  the  contract  sued  on,  not  being  a  Ken- 
tucky contract,  was  not  affected  by  the  provisions  of  its  statutes.^ 
Policies  executed  in  Ontario  are  Ontario  contracts.*  In  another 
case  where  the  contract  was  held  to  have  been  made  in  Glasgow,  the 
agent  there  accepted  the  risk,  and  delivered  the  insured  a  memo- 
randum stating  the  sum  and  the  property  insured,  and  promised 
that  the  policy  would  be  made  out  in  London  and  delivered  to  the 
insured  or  to  his  order.^ 

A  policy  issued  in  a  state  by  a  foreign  corporation  is  governed 
by  the  law  of  that  state.^ 

Where  the  contract  was  to  be  performed  in  New  Jersey,  it  was' 
held  that  the  statute  of  limitations  operating  as  a  bar  there  would 
control  in  another  state.'  A  marine  insurance  policy  is  held  to 
be  governed  by  the  law  of  the  place  of  performance,  and  if  such  a 
contract  is  made  payable  at  a  certain  place,  it  is  governed  by  the 
law  of  that  place.'  And  although  the  application  for  life  insur- 
ance was  made  in  person  by  a  citizen  of  Ma.ssachusetts  to  the  insurer 
at  its  home  oflice  in  New  York,  yet  where  the  company  forwarded 
its  bond  policies  to  the  applicant  in  Massachusetts  for  his  approval 

"  State  V.  Williams,  46  La.  Ann.  ^  Pattison  v.  Mills,  2  Bligh,  N.  S. 

922,  15  So.  2flU,  23  Ins.  L.  J.  508.  510,  1  Dow.  &  C.  342. 

2° Rye  v.  New  York  Life  Ins.  Co.  ^  Wliiltaker  v.  Mutual  Life  Ins  Co. 

88  Neb.  707,  130  N.  W.  434,  40  Ins.  133  Mo.  App.   664,  114  S.  W.  53; 

L.  J   910  Roberts  v.  Winton,  100  Tenn.  484,  41 

1  Bailey  v.  Hope  Ins.  Co.  56  Me.  L.R.A.  275,  45  S.  W.  673. 

474.  '  Spratley  v.  .Mutual  Benefit  Life 

2Rauen  v.  Prudential  Ins.  Co.  of  Ins.  Co.  11  Busb   (Ky.)  443,  7  Chi. 

America,  129  Iowa,  725,  106  N.  W.  Lesr.  News,  51. 

198,  35  Ins.  L.  J.  288.  «  Progresso    Steamship    Co.   v.   St. 

^  Pritcliett     V.     Continental    Casu-  Paul  Fire  &  Marine  Ins.  Co.  146  Cal. 

altv  Co.  117  Kv.  923,  25  Ky.  L.  Rep.  279,  79  Pac.  967. 
2064,  80  S.  W.  181. 

*  Clarke  v.  Union  Fire  Ins.  Co.  6 
Ont.  Rep.  223. 

607 


§  226  JOYCE  ON  INSURANCE 

and  acceptance  leaving  the  final  acts  of  approval,  acceptance  and 
payment  to  be  performed  in  Massachusetts  the  contract  was  com- 
pleted in  and  was  a  Massachusetts  contract.^  Under  an  Arkansas 
decision  a  policy  of  life  insurance,  by  its  terms  to  be  performed  in 
another  state,  is  governed  by  the  statute  of  that  state  providing  that 
no  misrepresentation  made  in  obtaining  or  securing  a  policy  of  life 
insurance  shall  be  deemed  material,  or  render  the  policy  void,  un- 
less the  matter  misrepresented  shall  have  actually  contributed  to 
the  contingency  or  event  on  which  the  policy  is  to  become  due  and 
payable.^"  Under  the  statutes  of  Massachusetts  a  provision  that  no 
misrepresentation  made  in  the  negotiation  of  a  contract  of  insur- 
ance, by  the  insured,  shall  be  deemed  material  or  defeat  the  policy, 
unless  made  with  the  actual  intent  to  deceive,  or  unless  the  matter 
represented  or  warranted  increased  the  risk,  applies  to  a  policy 
written  in  Massachusetts  by  a  Massachusetts  company  and  sued  up- 
on in  the  courts  of  Rhode  Island.^^  Where  the  insurer  was  created 
by  the  laws  of  Pennsylvania  it  was  held  that  its  contracts  were  to 
be  construed  by  the  laws  of  that  state  which  governed  its  enforce- 
ment, the  contract  having  been  there  signed  by  the  company's  of- 
ficers and  the  promise  being  to  pay  after  acceptance  of  due  and  sat- 
isfactory proof  of  loss  at  its  office  there.^^  And  where  a  certificate 
is  executed,  issued  and  payable  at  the  home  office  of  the  associa- 
tion that  is  the  place  of  contract  even  though  issued  to  a  ra«ident 
of  another  state  who  continued  to  reside  there  until  his  death. ^^ 

If  a  policy  insuring  mail  packages  during  their  transportation 
through  specified  countries  is  issued  to  a  bank  located  in  a  country 
not  specified  in  the  policy,  but  the  transportation  by  mail  is  initiat- 
ed in  one  of  such  countries,  the  portion  of  the  contract  prescribing 
the  manner  of  packing  and  sealing  the  property  is  governed  by  the 
law  of  the  country  where  the  bank  is  located.  The  application  for 
the  policy  was  mailed  from  such  foreign  country  to  which  the  exe- 
cuted policy  was  mailed,  said  bank  being  there  located  and  the 
policy  was  construed  as  contemplating  such  place  of  business  as 
the  place  of  the  preparation  of  the  mail  packages.^* 

9  Provident    Saviiiii--    Life    Assur.  ^^  Fidelity    Mutual    Life   Ins.    Co. 

8oe.  of  N.  Y.  V.  Hadlev,    102    Fed.  v.  MeDaniel,  25   Ind.   App.  608,  57 

856,  43  C.   C.  A.  25,  29  Ins.  L.  J.  N.    E.    645. 

998,  certiorari  denied  179  U.  S.  686,  13  Burns  v.  Bums,  95  N.  Y.  Supp. 

45  L.  ed.  386,  21  Sup.  Ct.  919.  797,  109  App.  Div.  98. 

1°  Franklin  Life  Ins.  Co.  v.  Galli-  i*  Banco    de    Sonera    v.    Bankers 

ean.  71  Ark.  295,  100  Am.  Dec.  73,  Mutual  Casualty  Co.  124  Iowa,  576, 

73  S.  W.  102.                                    •  104  Am.  St.  Rep.  367,  95  N.  W.  232. 

^^  Leonard  v.  State  Mutual  Life 
Assur.  Co.  27  R.  I.  121,  114  Am.  St. 
Rep.  30,  61  Atl.  52. 

608 


COXSTRUCTIOX  OF  POLICY  §§  227,  228 

§  227.  Same  subject:  exceptions  to  the  rule. — An  exception  to  the 
rule  that  the  contract  of  insurance  is  governed  by  the  law  of  the 
place  where  made  exists  in  case  the  usage  of  trade  in  one  state  af- 
fects the  construction  of  a  policy  made  in  another.^^  So  the  ques- 
tion of  seaworthiness  is  determined  by  the  usage  or  custom  of  ix)rt 
where  the  vessel  belongs,  rather  than  that  of  the  place  where  the 
contract  is  made,^^  and  if  the  usages  of  such  port  are  adopted  by  the 
policy,  they  control  its  construction ;  ^^  but  rights  of  parties  under 
a  contract  of  affreightment  are  governed  by  the  law  of  the  place 
where  the  contract  is  made,  and  not  by  that  of  the  place  of  the 
ship's  flag.^* 

§  228.  Same  subject:  mutual  benefit,  etc.,  societies. — Tn  case  of 
mutual  benefit  societies  it  is  held  that  the  right  to  designate  a  bene- 
ficiary is  governed  by  the  law  of  the  place  of  contract  giving  such 
power, ^^  and  in  another  case  the  application  was  made  in  Michigan, 
and  the  by-laws  provided  that  it  must  be  approved  in  Indiana,  and 
that  the  membership  fee  should  be  paid  before  the  contract  became 
binding,  and  the  certificate  also  provided  that  the  contract  should 
be  considered  made  in  Indiana,  and  should  be  governed  by  its  laws, 
and  it  was  held  that  the  laws  of  that  state  controlled.^"  So  the  state 
where  the  certificate  is  accepted  by  the  insured,  where  such  accept- 
ance is  dated,  and  where  insured  resides  is  the  place  of  contract, 
even  though  the  certificate  is  signed  by  the  association's  officers  in 
another  state.^  And  a  certificate  is  to  be  governed  by  the  law  of 
the  place  where  the  contract  is  consummated,  as  where  it  is  issued 
in  one  state  to  a  resident  of  another  state  and  is  not  to  be  binding 
until  acceptance  by  insured  and  the  acceptance  is  executed  in  the 
state  of  residence  of  the  insured.^  And  a  contract  of  insurance  in 
a  benefit  association  should  be  construed  and  interpreted  according 
to  the  laws  of  the  state  where  the  contract  was  made  and  w^as  to 
be  performed.^     So  where  a  policy  of  insurance,  issued  by  a  bene- 

^^  See  1  Duer  'on  Ins.    (ed.  1845)  Supreme  Knights  of  Honor  v.  Nairn, 

262,  263.  60  Mich.  44,  26  N.  W.  826. 

16  The  Titania,  19  Fed.  101 ;   Tid-  20  Yoorhees  v.  People's  Mut.  Bene- 

marsh  v.  Washington  Fire  &  Marine  fit  Soc.  91  Mich.  469,  51  N.  W.  1109. 

Ins.  Co.  4  Mason   (C.  C.)   439,  442  ^  Mever       v.        Supreme       Lodge 

Fed.  Cas.  No.  14,024.                           ■  Knights   of  Pythias,  178   N.   Y.   63, 

"Union   Bank  v.  Union  Ins.   Co.  64  L.R.A.  839,  70  N.  E.  111. 

Dud.   (S.  C.)   171.  2  Mover  V.  Supremo  Lodge  Knights 

18  China  Mut.  Ins.   Co.    v.    Force,  of  Pvthia.s,  178  N.  Y.  63,^64  L.H.A. 

142  N.  Y.  90,  58  N.  Y.  St.  R.  400,  40  840,  70  N.  E.  Ill,  .33  Ins.  L.  .1.  446, 

Am.    St.    Rep.    570,    citing    Dyke    v.  aff'd     Supremo     Lodge     Knights    of 

Erie  R.  R.  Co.  45  N.  Y.  113;  Faulk-  Pytliias,  198  U.   S.  508,    49    L.    ed. 

ner  v.  Hart,  82  N.  Y.  413.  li46,  25  Sup.  Ct.  754. 

1"  American    Legion    of    Honor    v.  ^  Mullen  v.  Reed,  64  Conn.  240,  42 

Perry,  140  Mass.  580,  5  N.  E.  634;  Am.  St.  Rep.  174,  24  L.R.A.  664,  29 
Joyce  Ins.  Vol.  I.— 39.              609 


§  229  JOYCE  ON  INSURANCE 

fit  society  chartered  in  one  state,  is  delivered  to  the  insured  by  tlie 
society's  agent  in  another  state,  and  the  assessments  and  duas  are  to 
be  paid  to  it,  and  the  claim  of  the  beneficiary  is  to  be  paid  by  such 
agent,  the  contract  is  made  and  to  be  performed  in  the  latter  state, 
and  the  rights  of  the  parties  are  to  be  determined  by  the  law  of 
such  state.*  If  at  the  time  of  making  the  application  and  the  is- 
suance and  delivery  of  the  certificate  the  association  and  insured 
were  both  residents  of  the  same  state  that  state's  laws  govern  the 
contract.*  So  the  laws  of  the  state  where  the  certificate  was  execut- 
ed and  which  was  the  then  place  of  residence  of  insured  and  the 
domicil  of  insurer  govern  the  contract.^  And  if  the  contract  is 
made,  is  to  be  performed,  and  is  actually  performed  in  a  certain 
state  the  laws  of  that  state  govern.'  Altliough  a  benefit  a.ssociation 
is  organized  under  the  laws  of  a  certain  state  still  if  the  subordinate 
lodge  of  another  state  accepts  a  member  there,  and  all  the  formali- 
ties of  an  application,  examination,  payment  of  dues  and  assess- 
ments are  there  performed,  the  contract  is  governed  by  the  laws  of 
such  state.*  It  is  decided  that  the  laws  bf  the  home  state  of  a 
foreign  fraternal  benefit  association  may  be  looked  to  to  determine 
the  efi^ect  of  its  contracts.^  And  a  stipulation  making  the  insurer's 
home  office  its  place  of  contract  is  obligatory  unless  the  agreement 
conflicts  with  the  law  of  the  state  where  made  or  impairs  the  obli- 
gations of  a  contract.^"  If  an  association  is  transacting  business, 
within  the  intent  of  a  statute,  in  a  state,  and  solicits  members  and 
issues  policies  therein  its  laws  govern  contracts  so  made  whether 
or  not  it  has  applied'  for  the  privilege  of  doing  business  there  as  re- 
quired by  statute.^^ 

§  229.  When  place  where  policy  is  countersigned  is  place  of  con- 
tract.— AVhere  the  policy  is  not  to  be  valid  till  countersigned  by  the 
agent,  it  will  be  construed  according  to  the  law  of  the  place  where 

\tl.  478.     See  also  McCue  v.  Nortb-  ^  Franklin  Life  Ins.  Co.  v.  Morrell, 

western  Mutual  Life    Ins.    Co.    167  84  Ark.  511,  106  S.  W.  680. 

Fed.  435,  92  C.  C.  A.  71,  s.  c.  181  '  Kavaiiaugh   v.    Supreme   Council 

Fed.     1022;     Expressman's     Mutual  of  Roval  League,  158  Mo.  App.  2.34, 

Benefit   Assoc,   v.    Hurlock,   91    Md.  138  S.  W.  359. 

585,  80   Am.   St.   Rep.   470,  46  Atl.  *  Coverdale     v.     Royal     Arcanum, 

937,  29  Ins.  L.  J.  934;  see  Green  v.  193  111.  91,  61  N.  E.  915. 

Supreme  Council  of  Roval  Arcanum,  ^  Vallerov  v.  Knights  of  Columbus, 

124  N.  Y.  Supp.  398,  rev'd  129  N.  Y.  135  31o.  App.  574,  116  S.  W.  1130. 

Supp.  791,  144  App.  Div.  76.  ^°  Polk  v.   Mutual    Reserve    Fund 

*  Expressman's  Mut.  Ben.  Assn.  v.  Life  Asso.   137   Fed.   273,   s.  c.   165 

Hurlock,  91   Md.   585,  80    Am.    St.  Fed.  1006. 

Rep.  470,  46  Atl.  957.  ^^  Corley   v.    Travelers'    Protective 

5  Roberts  v.  Modern  Woodmen  of  Assoc.   105   Fed.    854,   46    C.    C.   A. 

America,  133  Mo.  App.  207,  113  S.  278. 
W.  726. 

610 


CONSTRUCTION  OF  POLICY 


230 


such  act  is  performed  and  tlie  policy  delivered,^^  although  the  pol- 
icy is  dated  in  another  state  and  signed  by  the  president  and  sec- 
retary there."  A  Canadian  insurance  company  with  a  branch 
oflfice  at  Baltimore  insured  a  resident  of  Washington,  D.  C.  The 
policy  provided  tjiat  it  was  not  to  be  valid  until  countersigned  by 
the  authorized  agent  at  Washington,  D.  C.  The  agent  there  coun- 
tersigned and  deUvered  the  policy,  and  it  wa.«  signed  by  the  agent 
at  Baltimore,  at  which  place  it  also  purported  to  be  dated  and  to 
be  signed  by  two  directors  of  the  company  and  by  the  attorney,  and 
to  bear  the  company's  seal.  It  was  held  that  this  was  not  a  Mary- 
land contract.^* 

§  230.  When  place  of  delivery  is  place  of  contract. — Although  the 
contract  is  made  and  dated  in  one  state,  but  is  to  be  binding  only  on 
delivery,  the  laws  of  the  state  where  the  insured  is  a  resident  and 
where  it  is  delivered  to  him,  govern  the  contract.^^  And,  as  a  gen- 
eral rule,  the  delivery  of  the  policy  to  the  insured  in  the  state  in 
which  he  resides,  and  the  payment  by  him  of  his  first  premium  in 
that  state,  renders  the  contract  subject  to  the  laws  of  such  state.^^ 


•  12  United  States. — Northwestern 
Mutual  Life  Ins.  Co.  v.  Elliott.  9 
Saw.  (C.  C.)  17,  23  Fed.  462.  See 
Smith  V.  Mutual  Life  Ins.  Co.  5  Fed. 
582. 

California. — Curtiss  v.  ^T:C(iia  Life 
Ins.  Co.  90  Cal.  245,  25  Am.  St.  Rep. 
114,  27  Pac.  211. 

Illinois. — Pomerov  v.  Manhattan 
Life  Ins.  Co  40  111"  398;  Moore  v. 
Charter  Oak  Life  Ins.  Co.  8  Ins.  L. 
J.  78. 

Keiitucliy. — St.  Louis  IMutual  Life 
Ins.  Co.  V.  Kennedy,  6  Bush  (Ky.) 
450. 

Louisiana. — Hardie  v.  St.  Louis 
Mutual  Life  Ins.  Co.  20  La.  Ann. 
242. 

Nebraska. — See  Antes  v.  State  Ins. 
Co.  61  Neb.  55,  84  N.  W.  412.    . 

Pennst/lvanift. — Hardiinan  v.  Fire 
Assofialion  of  Phila.  212  Pa.  383,  61 
Atl.  990. 

South  Carolina. — Curnow  v.  Phoe- 
nix Ins.  Co.  37  S.  C.  400,  34  Am.  St. 
Rep.  766,  16  S.  E.  132. 

West  Virginia. — S.  M.  Smith  Ins. 
Aj!:enev  v.  Ilaniilton  Fire  Ins.  Co.  69 
W.  Va.  129,  71  S.  E.  194;  Galloway 
V.  Standard  Fire  Ins.  Co.  45  W.  Va. 
237,  31  S.  E.  969,  28  Ins.  L.  J.  126. 


Wisconsin. — In  re  Breituno's  Es- 
tate, 78  Wis.  33,  46  N.  W.  891. 

"  Daniels  v.  Hudson  River  Fire 
Ins.  Co.  12  Cush.  (66  Mass.)  422,  59 
Am.  Dec.  192;  Heebner  v.  Easle  Ins. 
Co.  10  Gray  (76  Mass.)  131,  69  Am. 
Dec.  308.  See  Friedland  v.  Common- 
wealth Fire  Ins.  Co.  143  App.  Div. 
570,  128  N.  Y.  Supp.  705. 

1*  Cromwell  v.  Roval  Canadian 
Ins.  Co.  49  Md.  366,^33  Am.  Rep. 
258. 

^^  Knights  Templars'  &  Masons' 
Life  Indemnity  Co.  v.  Berry,  50  Fed. 


511, 
353; 


1  C.  C.  A.  561,  4  U.  S.  App. 
Wall  v.  Equitable  Assurance 
Soc.  32  Fed.  273,  afTd  140  U.  S.  226, 
35  L.  ed.  497,  11  Sup.  Ct.  822; 
Meagher  v.  .^tna  Ins.  Co.  20  U.  C. 
Q.  B.  607;  Hvde  v.  Goodnow,  3 
(^omst.  (N.  Y.)  2()6.  See  Watt  v. 
Gideon,  8  Pa.  Dist.  Ct.  Rep.  395. 

As  to  contract  stipulations  vary- 
ing rule  as  to  place  of  delivery 
being  place  of  contract,  see  §  231d 
herein. 

1^  Equitable  Life  Assur.  Soc.  v. 
Winning,  7  C.  C.  App.  (U.  S.)  359, 
58  Fed.  541,  23  Ins.  L.  J.  81 :  Reliance 
Mut.  Ins.  Co.  V.  Sawyer,  160  Mass. 
414,  36  N.  E.  59.     See  also  Fidelity 


Gil 


§  230 


JOYCE  ON  INSURANCE 


So  a  policy  which  is  not  to  take  effect  until  it  is  delivered,  after 
payment  of  the  first  premium,  is  a  contract  of  the  state  where  de- 
livery takes  place,  and  to  be  governed  by  its  laws;  and  it  is  imma- 
terial that  premiums  are  to  be  paid  and  the  policy  liquidated  at  the 
office  of  the  insurer  in  another  state.^'''  And  the  rule  applies  where 
it  is  sent  to  the  agent  in  anotlier  state  to  be  there  delivered  on  re- 
ceipt of  the  premium. ^^  So  where  an  application  for  insurance  is 
made  in  one  state  to  an  agent  therein,  and  forwarded  by  him  to 
the  insurer  in  another  state,  where  the  policy  is  executed,  and  sent 
to  such  agent  and  by  him  delivered  to  the  insured  in  the  former 
state,  the  contract  must  be  regarded  as  made  in  the  state  where  de- 
livered, and  as  subject  to  its  laws.^^  Where  by  the  express  terms  of 
the  charter  of  an  insurance  company  a  contract  of  life  insurance 
does  not  become  binding  until  delivery  to  assured,  and  the  applica- 
tion is  made  and  the  policy  delivered  to  the  resident  agent  of  the 
company  in  Missouri,  it  is  incepted  and  completed  in  that  state. 
and  is  to  be  construed  by  the  laws  thereof,  even  though  issued  by  a 
corporation  in  Illinois.^"  If  an  application  for  a  life  insurance  pol- 
icy in  favor  of  a  named  beneficiary  is  made  in  one  state  to  the  dulv 
authorized  agent  of  the  company  located  there,  who  forwards  it  to 
the  home  office  in  another  state,  where  it  is  accepted,  but  the  policy 
returned  contains  additional  beneficiaries,  and  was  not  to  be  deliv- 
ered until  the  first  premium  was  paid,  the  contract  of  insurance  was 
not  made  until  the  policy  as  clianged  was  delivered  to  the  applicant 
and  the  premiums  paid,  and  it  is  deemed  a  contract  made  in  the 
former  state,  and  the  rights  of  the  parties  are  to  be  determined  by 
the  law  of  such  state. ^  So  the  state  where  the  application  and 
medical  examination  are  made,  the  premium  paid  and  policy  de- 


Mutnal  Life  Ins.  Co.  v.  Jefferds,  53 
L.R.A.  193,  107  Fed.  402,  46  C.  C.  A. 
377;  Harriiiolon  v.  Home  Life  Ins. 
Co.  128  Cal.^531,  aS  Pac.  180:  ]\Lu- 
tual  Life  Ins.  Co.  v.  Mullen,  107  Md. 
4:)7,  69  Atl.  385;  Ilorton  v.  New  York 
Life  Ins.  Co.  151  .Mo.  607,  52  S.  W. 
356,  28  Ins.  L.  J.  816. 

^'^  INIetropolitan  Life  Ins.  Co.  v. 
Bradlev,  98  Tex.  230,  08  L.R.A.  509, 
82  S.  W.  1031. 

i^McElrov  V.  Metropolitan  Life 
Ins.  Co.  84  Neb.  866,  23  L.R.A. 
(N.S.)  968,  122  N.  W.  27;  Antes  v. 
State  Ins.  Co.  61  Neb.  55,  84  N.  W. 
412;  Ford  v.  Buckeve  State  Ins. 
Co.  6  Bush  (Ky.)  133,  99  Am.  Dec. 
663;  Tiiwinq-  v.  Great  Western  Ins. 
Co.  Ill   jMass.  93;   In  re  Breitung's 

612 


Estate,  78  Wis.  33,  46  N.  W.  891. 
See  also  Greveni"'  v.  Wa.shington 
Life  Ins.  Co.  112^La.  879,  104  Am. 
St.  Rep.  474,  36  So.  790. 

19  PeiTv  v.  Dwelling  House  Ins. 
Co.  67  N.  H.  291,  68  ^Am.  St.  Rep. 
668,  33  Atl.  731. 

^^  Knights  Templars  &  IMasons' 
Life  Indemnity  Co.  v.  Berrv,  50  Fed. 
511,  1  C.  C.  A.  561,  4  ^3.  S.  App. 
353,  affirming  46  Fed.  4;]9 ;  Mutual 
Benefit  Life  Ins.  Co.  v.  Robison,  54 
Fed.  580,  584;  Hieks  v.  National 
Life  Lis.  Co.  60  Fed.  690,  9  C.  C.  A. 
(U.  S.)  215. 

^  Millard  v.  Bravton,  177  Mass. 
533,  83  Am.  St.  Rep.  294,  52  L.R.A. 
117,  59  N.  E.  436. 


CONSTRUCTION  OF  POLICY  §  231 

livered  is  the  place  of  contract.^  If.  however,  the  first  payment  of 
premium  is  forwarded  with  the  application  for  insurance,  a  pro- 
vision in  the  policy  that  it  "shall  not  be  binding  until  delivery  dur- 
ing the  lifetime  and  good  health  of  the  applicant,  and  until  the  first 
payment  due  thereon  has  been  paid,"'  does  not  suspend  the  contract 
until  delivered  to  the  insured  and  make  th§  place  of  delivery  that 
of  the  contract,  especially  when  the  policy  is  forwarded  to  the  agent 
for  unconditional  delivery.^  But  delivery  does  not  necessarily  de- 
termine the  place  of  contract  since  a  claim  thereunder,  under  a 
policy  of  indenmity  insurance,  may  be  governed  by  the  law  of  an- 
other state  where  the  policy  is  signed  and  is  payable.'*  And  where 
the  policy  is  issued  in  a  certain  state  and  the  premiums  and  the 
amount  to  be  paid  under  the  policy  are  there  payable  it  is  a  con- 
tract of  that  state  even  though  the  delivery  is  made  in  another 
state.^  Again,  where  the  agent  in  Edinburgh  received  a  policy 
and  delivered  it  there,  and  received  the  premium,  the  policy  being 
executed  in  London,  it  Avas  held  that  the  laws  of  England  gov- 
erned.® So  in  another  case  the  agent  in  Canada  of  an  insurance 
comi^any,  incorporated  in  New  York,  received  and  forwarded  to 
the  secretar}^  of  the  company  in  New  York  a  proposal  for  insur- 
ance upon  property  in  Canada,  the  proposal  was  accepted,  and  the 
deposit  and  premium  note  left  with  the  secretary,  who  issued  the 
policy  and  sent  it  to  the  agent  in  Canada,  by  whom  it  was  delivered 
to  the  insured,  and  it  was  decided  that  it  was  a  New  York  contract.' 
§  231.  When  place  of  acceptance  and  mailing  is  place  of  contract. 
— The  place  of  acceptance  of  the  proposal  for  insurance  may  be- 
come the  place  of  contract,  by  mailing  from  there  such  acceptance, 
and  the  law  of  that  place  will  then  govern  the  contract.^     If  an 

2  Kelley  v.  Mutual  Life  Ins.  Co.  ^  United  States. — Giddings  v. 
109  Fed.  56,  30  Ins.  L.  J.  904,  rev'd  Northwestern  Mutual  Life  Ins.  Co. 
114  Fed.   268,  52   C.   C.  A.  154,   31    102  F.  S.  108,  26  L.  ed.  92. 

Ins.  L.  J.  497   (s.  e.  114  Fed.  276),  Indiana. — Swing   v,    IMarion   Pulp 

but  on  other  points  as  the  Iowa  stat-  Co.  47  Ind.  App.  199,  93  N.  E.  1004, 

ute,  which  state  was  the  place  of  eon-  40    Ins.    L.    J.  807;   Equitable  Life 

tract,  was  the  basis  of  the  decision.  Assur.  Soc.  of  U.  S.  v.  Perkins,  41 

3  Fidelity    ]\Iutual    Life    Assn.    v.  Ind.  App.  183,  80  N.  E.  682. 
Harris,  94  Tex.  25,  86  Am.  St.  Rep.  Iowa.— Twiile      v.       Iowa      State 
813,  57  S.  W.  635.  Traveling    Men's    Assoc.    132    Iowa, 

*Cudahy     Packing     Co.     v.     New  652,  7  L.R.A.(N.S.)  223,  104  N.  W. 

Amsterdam   Packing   Co.    (U.   S.   C.  1131. 

C.)  132  Fed.  623.  Kentucky.— Fovii  v.  Buckeye  State 

5  Equitable    Life    Assur.     Soc.    v.  Ins.  Co.  6  Bush.   (Ky.)  133,  139,  99 

Fromnihold,  75  111.  App.  43.  Am.  Dec.  663. 

®  Parkeu  v.  Royal  Exch.  Assur.  Co.  Maine. — Bailey  v.  Hope    Ins,    Co. 

18  Scot.  Jur.  147.                       *  56  Me.  474. 

'  Western  V.  Genesee  Mut.  Ins.  Co.  Massachunetts.    —    Commonwealth 

12  N.  Y.  (2  Kern.)  258.  Mutual  Fire  Ins.    Co.    v.    Fairbank 

613 


§  231a  JOYCE  ON  INSURANCE 

application  is  made  out  by  an  insurer  in  Pennsylvania  and  sent  by 
mail  to  an  applicant  in  Wisconsin,  who,  in  that  state,  fills  out  and 
signs  the  application  and  forwards  it  to  the  insurer's  ofTice  in 
Pennsylvania,  and  directs  a  policy  to  issue,  and  the  insurer  there- 
upon issues  its  policy  in  the  latter  state  and  mails  it  to  the  insured 
in  the  former,  who  then  signs  the  note,  reciting  that  it  is  for  the 
balance  of  the  first  premium  and  is  payable  in  Pennsylvania,  the 
contract  of  insurance  is  a  PennsA'lvania  contract.^  It  is  held,  how- 
ever, that  where  the  application  was  accepted  in  New  York  and 
mailed  to  Missouri,  the  law  of  Missouri  governed  the  contract.^" 
But  in  another  case  it  was  held  that  a  policy  of  insurance  executed 
in  New  York  by  a  New  York  corporation  doing  business  in  Mis- 
souri, upon  an  application  signed  in  Missouri  by  a  resident  of  Mis- 
souri, the  application  being  made  part  of  the  contract,  which  de- 
clared that  it  should  not  take  effect  until  the  first  premium  should 
have  been  actually  paid,  etc.,  and  which  was  delivered  and  the 
first  premium  paid  in  IMissouri,  was,  in  the  absence  of  evidence  of 
the  company's  acceptance  of  the  application  in  New  York,  or  of  its 
transmission  directly  by  mail  to  the  insured,  a  Missouri  contract, 
and  governed  by  the  laws  of  that  state. ^^ 

§  231a.  Lex  loci:  situation  of  insured  property. — If  a  contract 
with  a  foreign  insurance  company  is  made  in  another  state  in  which 
it  is  valid,  but  in  direct  violation  of  the  laws  of  the  state  in  which 
the  property  is  situated  and  in  which  the  insured  resides,  it  will 
not  be  enforced  in  the  latter  state.^^  In  South  Ca^rolina  it  is  de- 
cided that  when  an  insurance  company  having  its  home  office  in 
one  state  issues  a  policy  upon  property  situated  in  another  state  to 
a  resident  thereof,  and  through  its  authorized  agent  therein,  as  pro- 
vided by  the  policy,  the  contract  of  insiu-ance  is  deemed  to  have 

Canning  Co.  173  Mass.  161,  53  N.  E.  aff'd  (Mem.)  134  App.  Div.  995,  119 

373;     Commonwealtli     Mutual     Fire  N.  Y.  Supp.  1127. 

Ins.  Co.  V.  Wni.  Knabe  &  Co.  Mfg.  West     Virginia.  —  Galloway      v. 

Co.  171  Mass.  265,  50  N.  E.  516.  Standard  Fire   his.   Co.  45  W.  Va. 

New  Jerse?/.— Nortliampton  Mutu-  237,  31  S.  E.  969,  28  Ins.  L.  J.  125. 

al  Life  Ins.  'Co.  v.  Tuttle,  40  N.  J.  ^  Presbyterian    Ministers'    Fund   v. 

L.  476;  Commercial  Ins.  Co.  v.  Hal-  Thomas,  126  Wis.  281,  110  Am.  St. 

lock,  27  N.  J.  L.  (3  Dutch.)   645,  72  Rep.  919,  105  N.  W.  801. 

Am    Dec    379.  ^°  Wall    v.    Equitable    Life    Assur. 

New  rorfc.— Stone    v.    Penn   Yan,  Co.  32  Fed.  273,  atFd  140  U.  S.  226, 

Keuka  Park  &  Branchport  Ry.  197  35  L.  ed.  497,  11  Sup.  Ct.  822. 

N.  Y.  279,  90  N.   E.   843,  134  Am.  ^^  Equitable     Life     Ins.     Soc.     v. 

St.  Rep.  879,  39  Ins.  L.  J.  527,  aff'g  Clements,  140  U.  S.  226,  11  Sup.  Ct. 

109  N.  Y.  Supi).  374,  125  App.  Div.  822,  38  L.  ed.  497. 

94;  Hyde  v.  Goodnow,  3  N.  Y.  269;  ^^  g^-i^g  v.  Munson,  191  Pa.  582, 

Hammond   v.    International  Rv.    Co.  71  Am.  St.  Rep.  772,  58  L.R.A.  223, 

116  N.  Y.  Supp.  854,  63  Misc.  437,  43  Atl.  342. 

614 


CONSTRUCTION  OF  POLICY  §  231b 

been  made  in  the  state  where  the  property  is  situated;  and  after 
lo:«  thereunder,  and  proof  of  such  loss,  coupled  with  a  refusal  to 
pay,  the  insured  or  his  assignee  may  bring  an  action  to  recover 
on  the  policy  in  the  latter  state. ^^  Under  an  Iowa  decision  if  an 
insurance  corporation  organized  and  doing  business  in  that  state 
solicits  insurance  in  another,  and  tliere  receives  an  application,  and 
a  premium  note  which  is  dated  at  its  home  office  in  the  former 
state,  to  which  the  note  and  the  application  are  sent,  and  from 
which  a  policy  issues,  the  contract  is  deemed  to  be  made  there,  and 
is  controlled  by  the  laws  of  said  state,  and  not  by  the  laws  of  the 
state  in  which  the  property  insured  is  situated.^*  It  is  also  held  in 
that  state  that  where  a  policy  of  insurance  is  issued  on  property 
in  one  state  by  a  company  in  another  state,  and  it  does  not  appear 
where  it  was  delivered  or  payable,  or  where  the  contract  was  made 
or  the  premium  paid,  it  may  be  inferred  that  the  contract  was  made 
in  either  state,  as  readily  as  in  the  other. ^*  Under  a  Missouri  de- 
cision the  local  law  governs  a  policy  of  insurance  on  real  property 
delivered  to  the  owner  in  the  state  where  the  property  is  situated, 
although  the  policy  was  issued  by  a  foreign  corporation.^^  But  it 
is  also  held  in  that  state  that  a  statute  imposing  a  penalty  for  vex- 
atious delay  in  paying  a  loss  does  not  relate  to  the  remedy,  but  is 
a  matter  connected  with  the  performance  of  a  contract  and  has  no 
application  to  an  action  on  a  policy  brought  in  Missouri,  where 
the  property  insured  was  located  and  destroyed  in  Kansas  where 
the  contract  was  made  and  was  to  be  performed,  and  the  cause  of 
action  accrued  and  became  complete  there. ^'^  It  is  decided  in  Wis- 
consin that  its  statutory  provision  conclusively  establishing  the 
value  of  insured  real  property,  when  wholly  destroyed,  at  tlie 
amount  of  insurance  written  in  the  policy,  applies  to  contracts  made 
in  other  states  as  well  as  in  Wisconsin,  where  the  real  property  is 
situated  in  that  state.^^ 

§  231b.  Lex  loci:  fidelity  or  guaranty  insurance. — A  policy  insur- 
ing against  fraud  or  dishonesty  of  an  agent  amounting  to  embezzle- 
ment or  larceny  is  a  contract  of  the  state  where  it  was  made  and  de- 
livered to  insured,  a  resident  thereof,  and  is  governed  by  its  laws 

"  Curnow  V.  Phoenix  Ins.  Co.  37  382,  35  L.R.A.  227,  58  Am.  St.  Rep. 

S.  C.  4()(),  34  Am.  St.  Rep.  706,  16  638,  38   S.  W.  85,  aiTM  Orient   Tns. 

S.  E.  132.  Co.  V.  Dagg.s,  172  U.  S.  557,  43  L. 

1*  Harden   v.    Hotel    Owners'    Ins.  ed.  552,  19  Sup.  Ct.  287. 
Co.  85  Iowa,  584,  39  Am.  St.  Rep.        i' Tliomp.^on   v.   Traders'   Ins.   Co. 

316,  52  N.  W.  509.  169  iMo.  12,  68  S.  W.  889,  31  Ins.  L. 

^^  Pennypacker  v.  Capital  Ins.  Co.  J.  823. 
80  Iowa,  56,  20  Am.  St.  Rep.  395,  8        ^^  s,.vk    v.    INIillers'    National    Ins. 

L.R.A.  236,  45  N.  W.  408.  Co.  7-t  Wis.  67,  3  L.R.A.  523,  41  N. 

*6  Daggs  V.  Orient  Ins.  Co.  136  Mo.  W.  443 ;  Wis.  Rev.  Stat.  sec.  1943. 

615 


§  231c  JOYCE  ON  INSURANCE 

and  not  by  the  laws  of  another  state  where  the  larceny  was  com- 
mitted.-'^ 
§  231c.  Lex  loci:  contracts  by  unauthorized  companies  or  agents. 

— Where  the  secretary  of  an  insurance  company  solicited  and  ob- 
tained the  application  of  a  resident  of  Nebraska,  in  which  place  the 
company  was  not  authorized  to  transact  business,  and  the  applica- 
tion and  the  premium  note  were  signed,  the  latter  made  payable 
at  the  home  office,  in  Iowa,  whence  the  policy  issued,  the  contraci 
was  held  to  be  governed  by  Iowa  laws.^°  Under  a  Texas  decision 
contracts  of  insurance  upon  applications  taken  in  one  state  by  an 
agent  without  authority  to  conclude  the  contract  or  bind  the  com- 
pany, and  forwarded  to  the  domicil  of  the  company,  and  there 
accepted  and  the  policy  issued,  are  ordinarily  to  be  treated  as  hav- 
ing been  made  at  such  domicil  and  to  be  performed  there ;  ^  and 
such  contracts  are  not  invalid  by  reason  of  the  unauthorized  acts  of 
the  agent  in  obtaining  the  insurance.^  It  is  held  in  Arkansas  that 
an  application  for  insurance  sent  by  mail  to  another  state,  where 
they  are  passed  upon  and  accepted,  and  in  which  policies  are  dated 
and  signed  and  then  mailed  to  the  insured,  are  governed  by  the 
laws  of  that  state,  so  as  to  be  unaffected  by  statutes  at  the  residence 
of  the  insured  prohibiting  insurance  by  unauthorized  foreign  com- 
panies.^ In  a  Vermont  case  a  receiver  of  a  mutual  fire  insurance 
company  of  Massachusetts  sought  to  recover  an  assessment.  The 
company  was  not  authorized  to  do  business  in  Vermont.  The 
agent  had  so  informed  the  assured  and  stated  that  he  should  have 
to  act  as  insured's  agent  in  the  matter.  The  application  was  mailed 
to  the  company,  accepted  by  it,  and  the  policy  mailed  to  the  agent 
with  a  request  to  collect  the  premium  and  the  policy  was  delivered. 
It  was  held  that  the  contract  was  a  Massachusetts  one  and  enforce- 
able under  Vermont  laws  permitting  residents  to  insure  at  unau- 
thorized companies'  home  offices.'*  It  is  decided  in  Wisconsin  that 
the  office  of  the  insurer  is  the  place  of  contract,  where  it,  in  response 
to  the  request  of  a  broker  not  its  agent,  mails  a  policy,  blank  appli- 

^^  Matthews  &  Co.  v.  Employers'  al  Fire  Ins.  Co.  v.  Fairbank  Can- 
Liability  Assurance  Corp.  Ltd.  Ill  ning  Co.  173  Mass.  161,  53  N.  E.  373. 
N.  Y.  Supp.  76,  127  App.  Div.  195,  2  Commonwealth  Mutaal  Fire  Ins. 
aff'd   (Mem.)  195  N.  Y.  593.  Co.   v.   Fairbanks    Canning   Co.   173 

20Mj^j,(]en    V.    Hotel-Owners'    Ins.  Mass.  161,  53  N.  E.  373. 

Co.  85  Iowa,  584,  39  Am.  St.  Rep.  ^  state    Mutual    Fire    Ins.    Co.    v. 

316,  52  N.  W.  509.     See  also  Eureka  Brinkley    Stave   &   Heading   Co.    61 

Ins.  Co.  V.  Parks,  1  Cin.  S.  C.  R.  574;  Ark.  1,  54  Am.  St.    Rep.    191,    29 

Hvde  V.  Goodnow,  3  N.  Y.  266.  L.R.A.  712,  31  S.  W.  157. 

1  Fidelitv  Mut.  Life  Assn.  v.  Har-  ■*  Baker  v.  Spaulding,  71  Vt.  1C9, 

ris,  94  Tex.  25,  86  Am.  St.  Rep.  813,  42  Atl.  982. 
57  S.  W.  635;  Commonwealth  Mutu- 

616 


CONSTRUCTION  OF  POLICY  §  231d 

cation,  and  premium  note  to  the  property  owner  in  another  stat€, 
for  him  to  fill  the  blanks  and  return  the  application  and  note  for 
the  approval  of  the  insurer.*  Under  an  Indiana  decision  a  con- 
tract made  by  an  agent  of  a  foreign  company,  not  authorized  to  do 
business  in  that  state,  with  a  resident  thereof  was  an  Indiana  con- 
tract and  governed  by  its  laws  but  the  corporation  had  been  dis- 
solved and  ousted  from  doing  any  further  business  as  a  corpora- 
tion in  its  home  state,  although  the  court  said  that  if  it  were  a  going 
concern  its  action  for  assessments  would  have  been  suspended  until 
compliance  by  it  with  the  Indiana  statute  governing  the  right  of 
such  companies  to  do  business.^ 

§  23 Id.  Lex  loci:  contract  stipulations. — If  a  policy  provides  that 
the  place  of  contract  shall  be  that  of  the  state  Avherein  it  is  made 
it  will  be  construed  in  accordance  with  the  laws  of  that  state.'     And 
where  it  is  stipulated  that  the  policy  shall  be  construed  and  gov- 
erned by  the  laws  of  a  foreign  state  such  statutes  as  are  applicable 
will  be  deemed  a  part  of  the  written  contract,  nor  can  such  statu- 
tory provisions  be  waived.^     So,  an  insurance  policy  which  was 
signed  in  New  York  and  by  which  it  is  agreed  that  all  premiums 
and  losses  shall  be  paid  in  that  state,  and  that  it  shall  be  construed 
as  having  been  made  therein,  is  a  contract  thereof,  though  the  as- 
sured to  whom  it  was  issued  resides  in  another  state.^     And  a  stat- 
ute for  the  regulation  of  insurance  contracts,  providing  that  no 
answer  in  an  application  shall  bar  a  recovery  unless  wilfully  false, 
fraudulently  made,  material,  and  one  which  induced  the  companv 
to  issue  the  policy,  will  govern  a  policy  issued  by  a  corporation  of 
that  state  on  property  in  another  state  when  it  is  expressly  made 
subject  to  the  laws  of  the  former  state.^"     And  the  rights  of  citi- 
zens will  be  protected  under  the  laws  of  the  state  stipulated  as  the 
place  of  contract."     Again,  if  insurance  is  solicited  in  another 

*  Seamans  v.  Knapp  Stout  &  Co.  ^  Goodwin  v.  Provident  Savings 
89  Wis.  171,  46  Am.  St.  Kep.  825,  Life  Assn.  97  Iowa,  226,  59  Am.  St. 
27  L.R.A.  362,  61  N.  W.  757.  Rep.  411,  32  L.R.A.  473,  66  N.  W. 

^  Swing-  V.  Wellington,  44  Ind.  157.  See  IMutual  Life  Ins.  Co.  v. 
App.  455,  89  N.  E.  514,  38  Ins.  L.  Dingley,  100  Fed.  408,  40  C.  C.  A. 
J.  1237.  459,  49  L.R.A.  132,  rev'd  184  U.  S. 

'  Russell  v.  Grigsby,  168  Fed.  577,   695,  46  L.  ed.  763,  22  Sup.  Ct.  937. 
04  C.  C.  A.  61,  case  rev'd  upon  ques-        ^°  Union   Central   Life  Ins.   Co.  v. 
tion  of  insurable  interest  in  Grigsby   Pollard,  94  Va.  146,  54  Am.  St.  Rep. 
v.  Russell,  222  U.   S.  149,  56  L.  ed.    715,  36  L.R.A.  271,  26  S.  E.  421. 
133,  32  Sup.  Ct.  58,  41  Ins.  L.  J.  301,        ^^  Missouri   State  Life  Ins.   Co.  v. 
36  L.R.A.  (N.S.)   642.  Lo,    aee,  1  Ga.  App.  446,  58  S.  E. 

8  New  York  Life  Ins.    Co.    v.    Or-   93. 
lopp,  25  Tex.  Civ.  App.  284,  61  S. 
W.  336. 

617 


§  231d  JOYCE  ON  INSURANCE 

state  by  a  broker,  aiul  the  property  owner  there  consents  to 
take  insurance  in  companies  acceptable  to  such  broker,  who 
thereupon  requests  an  insurance  corporation  of  Wisconsin  to 
write  such  insurance,  and  it,  at  its  office  in  Wisconsin  fills  out  an 
application  for  the  insurance,  and  prepares  a  premium  note  to  be 
signed  by  the  property  owner,  and  transmits  the  note  and  applica- 
tion to  him,  and  at  the  same  time  fills  out  a  policy  of  insurance, 
all  these  papers  being  dated  at  the  home  office,  and  stipulating  that 
the  contract  of  insurance  shall  be  governed  by  the  laws  of  Wis- 
consin, and  the  papers  are  then  sent  to  the  brokers,  and  by  them 
mailed  to  the  property  owner,  who,  on  his  part,  then  answers  the 
questions  contained  in  the  contract,  signs  the  premium  note,  ac- 
cepts the  policy,  transmits  the  application  and  note  and'  a  cash 
premium  to  theb  brokers,  who  in  turn  send  them  to  the  insurer  in 
Wisconsin  the  contract  of  insurance  is  not  completed  until  the  note 
and  application  are  accepted  by  the  insurer,  and  hence  must  be 
deemed  to  have  been  made  in  Wisconsin,^^  But  even  though  it  is 
stipulated  that  the  contract  shall  be  construed  according  to  the  laws 
of  a  certain  state,  the  court  will  not  take  judicial  knowledge  of  them 
but  they  must  be  proved.^^  If,  however,  parties  agree  that  a  policy 
shall  be  construed  by  the  laws  of  a  certain  state  it  will  be  presumed 
that  they  know  the  law  of  that  state. ^*  But  under  a  Ma,'isachusetts 
decision,  if  a  foreign  company  through  its  resident  agent  issues  a 
policy  to  a  resident  of  Massachusetts  stipulating  by  an  indorsement 
on  the  back  of  the  policy  that  it  shall  be  construed  by  the  laws  of 
another  state,  it  is  a  Massachusetts  contract  and  within  a  statutory 
provision  of  that  state.^^  And  in  Missouri  an  insurance  policy  is 
governed  by  the  law  of  the  state  in  which  it  is  actually  delivered 
to  the  insured  and  the  premium  paid  hj  him  to  the  insurer's  agent, 
although  it  was  issued  by  a  foreign  corporation  in  another  state,  and 
expressly  provides  that  it  shall  be  construed  according  to  the  laws 
of  that  state,  where  it  also  provides  that  it  shall  not  be  in  force  until 
actual  payment  of  the  premium. ^^ 

*^  Seaman.s  v.  Knapp-Stout  &  Co.  ^^  Cravens  v.  New  York  Life  Ins. 

89  Wis.  171,  46  Am.  St.  Rep.  825,  Co.  148  Mo.   583,  71   Am.   St.   Rep. 

27  L.R.A.  362,  61  N.  W.  757.  628,  53  L.R.A.  305,  50   S.   W.  519, 

13  New     Yorlv     Life    Ins.     Co.    v.  affd   New   York    Life    Ins.    Co.    v. 

Smitli,  139  Ala.  303,  35  So.  1004.  Cravens,   178   U.    S.   389,   44   L.   ed. 

1*  Mutual  Life  Ins.  Co.  v.  Phinney,  1116,  20  Sup.  Ct.  762.     See  Horton 

178  U.  S.  327,  44  L.  ed.  1088,  20  Sup.  v.  New  York  Life  Ins.  Co.  151  Mo. 

Ct.  906,  29  Ins.  L.  J.  910,  s.  c.  76  604,  52  S.  W.  356,  28  Ins.  L.  J.  816; 

Fed.  617,  22  C.  C.  A.  425.  Pietri  v.  Seguenot,  96  Mo.  App.  258, 

i^Dolan  v.  Mulnal  Reserve  Fund  .69  S.  W.  1055;   Sumner  v.  Fidelity 

Life  Assoc.  173  Mass.  197,  53  N.  E.  Mutual  Aid  Assoc.  84  Mo.  App.  605. 
398,  Rev.  Stat.  1894,  c.  522,  sec.  73. 

618 


CONSTRUCTION  OF  POLICY  §  231e 

It  is  held  that  even  though  the  application  provides  that  the  pol- 
icy is  to  be  construed  by  the  laws  of  a  certain  state,  still  a  statute  of 
such  state,  not  specially  referred  to  in  the  contract,  may  be  limited 
by  an  express  stipulation  in  the  policy."  Under  a  North  Carolina 
decision  a  provision  that  "this  contract  shall  be  governed  by,  sub- 
ject to  and  construed  only  according  to  the  laws  of  the  State  of  New 
York,  the  place  of  this  contract  being  expressly  agreed  to  be  the 
home  office  of  said  association  in  the  city  of  New  York"  is  void  so 
far  as  its  enforcement  in  the  courts  of  another  state  is  concerned.^* 

If  there  is  no  contract  stipulation  as  to  the  place  of  contract  or 
as  to  the  law  b}^  which  the  policy  is  to  be  construed  then  the  ques- 
tion is  one  of  general  and  not  of  local  law.^' 

§  231e.  Lex  loci;  statutory  provisions. — A  state  statute  which 
provides  that  contracts  for  insurance  shall  be  deemed  to  have  been 
made  in  the  state  and  subject  to  its  laws  where  the  application  for 
the  policy  is  taken  within  the  state  is  constitutional  and  does  not 
abridge  the  privileges  or  immunities  of  citizens.^"  Under  a  North 
Carolina  decision  a  statute,  which  makes  insurance  contracts,  the 
application  for  which  is  taken  there,  a  contract  of  that  state,  applies 
to  a  foreign  company  where  the  application  for  insurance  is  there 
taken,  no  matter  what  the  form  of  the  contract  may  be.^  In  Mis- 
sissippi a  statute  that  "all  contracts  of  insurance  on  property,  lives 
or  interests  in  this  state  shall  be  deemed  to  be  made  therein"  is  the 
law  of  that  state,  and  no  contract  of  the  parties  can  change  it.  Hence 
a  contract  of  life  insurance  entered  into  between  a  resident  of  Mis- 
sissippi and  a  corporation  of  another  state  is  to  be  construed  under 
the  laws  of  the  former  commonwealth.^  Although  one  section  of  i 
statute  provides  that  all  life  insurance  contracts  in  the  state  shall  be 

"Mutual  Life  Ins.  Co.  v.  Hill,  133,  32  Sup.  Ct.  58,  36  L.R.A.(N.S.) 
193  U.  S.  551,  24  Sup.  Ct.  538,  48  L.  642,  41  Ii.s.  L.  J.  301. 
ed.  788,  s.  c.  55  C.  C.  A.  536,  118  ^o  gt^te  Life  Ins.  Co.  of  Indian- 
Fed.  708.  See  Mutual  Life  Ins.  Co.  apolis  v.  Westoott.  166  Ala.  192,  52 
V.  Cohen,  179  U.  S.  262,  45  L.  ed.  So.  .344,  Ala.  Code  1907,  sec.  4583. 
181,  21  Sup.  Ct.  106,  s.  c.  97  Fed.  ^  Commonwealth  Mutual  Fire  Ins. 
985,  38  C.  C.  A.  696.  See  §§  194,  Co.  v.  Edwards,  124  N.  Car.  116,  32 
194a,  1324  herein.  S.  E.  404;  Ilorton  v.  Home  Ins.  Co. 

"Blackwell     v.     Mutual     Reserve  ^22  N.   Car.   498,  65   Am.   St.   Rep. 


19  Rus.sell  V.  Grigsby,  168  Fed.  577.  Miazza,  93  Miss.  18,  136  Am.  St. 
94  C.  C.  A.  61,  case  rev'd  upon  ques-  Rop.  5.34,  46  So.  817;  Miss.  Laws 
tion  of  insurable  interest  in  Grigsby  1902,  p.  66,  c.  59,  sec.  14.  See  §§ 
V.  Russell,  222  U.  S.  149,  56  L.  ed.   194,  194a  herein. 

619 


§  231f  JOYCE  ON  INSURANCE 

deemed  to  be  made  therein  it  should  be  construed  with  other  sec- 
tions as  to  poHcies  ''issued  in"  the  state  and  does  not  apply  to  a 
contract  made  in  a  foreign  state  between  a  company  therein  and  a 
person  residing  in  the  first  state. ^ 

§  23 If.  Lex  loci:  public  policy:  comity, — In  a  Federal  supremo 
court  case  it  appeared  that  a  New  York  mutual  life  insurance  com- 
pany issued  and  delivered  in  Missouri  to  a  resident  of  that  state  a 
nonforfeiting  limited  tontine  policy  providing  for  a  specified  paid 
up  policy  in  case  of  lapse  for  nonpayment  of  premium.  It  was 
also  stipulated  that  the  policy  should  be  construed  according  to 
New  York  laws  and  that  that  state  should  be  the  place  of  contract. 
The  Missouri  statute  provided  against  forfeiture  for  nonpayment 
of  premium,  but  subject  to  specified  rules  of  commutation.  It  was 
contended  that  a  policy  of  mutual  life  insurance  was  an  interstate 
contract,  and  the  parties  might  choose  its  ''applicatory  law,"  also 
that  contracting  for  New  York  law  to  the  exclusion  of  Mis.souri 
law  was  in  no  wise  prejudicial  to  the  interests  of  the  state  of  Mis- 
souri, or  violative  of  its  public  policy.  The  court,  per  Mr.  Justico 
McKenna,  said:  "But  the  interests  of  the  state  must  be  deemed  to 
be  expressed  in  its  laws.  The  public  policy  of  the  state  must  be 
deemed  to  be  authoritatively  declared  by  its  courts.  Their  evidence 
we  cannot  oppose  b}'  speculations  or  views  of  our  own.  Nor  can 
such  interests  and  policy  be  changed  by  the  contract  of  parties. 
Against  them  no  intention  will  be  inferred  or  be  permitted  to  be 
enforced."  The  contract  was  held  to  be  subject  to  Missouri  laws.^ 
And  where  a  contract  was  made  in  ^Massachusetts  between  a  foreign 
corporation  admitted  to  do  business  therein,  and  a  resident  of  that 
state  with  a  delivery  of  the  policy  and  a  payment  of  premium  all 
taking  place  therein,  it  is  governed  by  the  statutes  of  that  state  from 
motives  of  public  policy,  notwithstanding  a  policy  provision  that 
the  contract  should  be  governed  by  the  law  of  a  foreign  state,  for, 
altliough,  as  a  general  principle,  parties  may  agree  to  the  law  of  a 
state  or  country  foreign  to  the  place  of  contract,  still  this  has  no 
application  where  the  result  would  be  to  accomplish  some  evasion 
of  statutory  provisions  declaring  a  rule  of  public  policy  with  ref- 
erence to  contracts  made  within  the  jurisdiction  where  the  legis- 
lation is  enacted,  although  there  are  some  exceptions  to  the  rule.* 

3  Johnson  v.  Mutual  Life  Tns.  Co.  628,  5.3  L.R.A.  505,  50   S.  W.  519. 

of  N.  Y.  180  Mass.  407,  63  L.R.A.  Ccnisidered  with  approval  in  Nation- 

838.  62  N.  E.  733.  al  :\Iutual  Building-    &    Loan    Assoc. 

^New  Y^irk  Life  Ins.  Co.  v.  Crav-  v.  Brahan,  193  U.   S.  635,  647-649, 

ens,  178  U.  S.  389,  44  L.  ed.  1116.  20  48  L.  ed.  829.  24  Sup.  Ct.  532. 
Sup.  Ct.  762,  29  Ins.  L.  J.  876,  affV       5  .^i^j.^  ,.   Manhattan  Life  Ins.  Co. 

Cravens  v.  New  York  Life  Ins.  Co.  119  Fed,  629,  aff'd  127  Fed.  281,  62 

148    Mo.    583,    71    Am.     St.    Rep.  C,  C,  A.  ^213,  certiorari  denied,  194- 

620 


COXSTRUCTIOX  OF  POLICY  §  231? 


o 


But  in  another  case  the  pohey  was  issued  by  an  Ohio  corporation 
and  delivered  in  AVisconsin  to  a  then  resident  of  tlie  latter  state 
upon  an  apphcation  forwarded  therefrom.  Insured  resided  in  Ken- 
tucky at  the  time  of  his  death.  It  was  decided  that  it  was  wholly 
immaterial  whether  the  contract  was  to  be  construed  and  governed 
by  the  laws  of  Wisconsin  where  it  was  made  or  by  the  laws  of  Ohio 
where  it  was  to  be  performed,  that  it  must  be  construed  by  the  laws 
of  one  of  those  states,  and  that  a  condition  barring  recovery  being 
\alid  in  both  states  it  would  be  recognized  as  valid  in  Kentucky, 
even  though  contrary  to  its  public  policy.®  When  a  contract  of 
life  insurance  is  made  by  a  Pennsylvania  corporation  witli  a  resi- 
dent of  Wisconsin  which  is  forbidden  \)y  the  laws  of  the  latter  state, 
its  courts  will  not  enforce  such  a  contract  on  the  ground  of  comity. 
.Hence,  an  action  cannot  be  maintained  in  those  courts  on  a  note 
given  for  the  lirst  premium  of  such  insurance.' 

§  23 Ig.  Lex  loci:  rights  of  beneficiaries  or  claimants. — In  a 
Connecticut  case  the  words,  "heirs  at  law,"  in  a  benelit  certificate 
made  in  Massachusetts  by  inhabitants  of  that  state,  must  be  con- 
strued in  another  state  as  they  would  be  in  Massachusetts.*  Under 
a  Massachusetts  decision  the  rights  of  claimants  under  a  life  insur- 
ance policy  are  to  be  determined  by  the  law  of  the  state  in  which 
the  applicant  resided,  made  his  application,  and  received  the  policy, 
although  the  application  was  sent  by  an  agent  to  the  home  office  of 
the  company  in  another  state,  where  it  was  accepted  and  the  policy 
returned  to  the  agent,  and  there  was  a  stipulation  that  the  premiums 
and  the  sum  insured  were  to  be  paid  in  that  state.^  In  Tennessee 
the  law  of  a  state  in  which  a  contract  of  life  insurance  is  made  by 
a  resident  thereof  will  control  as  to  the  rights  of  his  creditors  and 
beneficiaries,  instead  of  the  law  of  another  state  in  which  the  bene- 
ficiaries reside,  or  of  another  state  in  which  the  insurance  com- 
pany is  located  and  the  policy  payable.^"  Under  a  New  York  de- 
cision the  contract  contained  in  a  mutual  benefit  certificate,  which 
requires  the  beneficiary  to  sign  an  acceptance  of  its  provisions,  is 

U.  S.  633,  48  L.  ed.  1159,  24  Sup.  Ct.  Am.  St.  Rep.  174,  24  L.R.A.  664,  20 

857,  32  Ins.  L.  J.  400.  Atl.     478.       See     §§     783-786,     789 

^  Claroy    v.    Union    C-ntral     Life  861  lierein. 

Ins.  Co.  143  Ky.  540,  33  L.R.A.  (N.  » Millard   v.    Bravton,    177    Mass. 

S.)   881,  136  S.  W.  1014,  40  Ins.  L.  533,  83  Am.  St.  Rep.  294,  52  L.R.A. 

J.  1403.  117,  59  N.  E.  436. 

■^Presbyterian    Ministers    Fund    v.  i°  Roberts   v.   Winton,    100     Tenn. 

Thomas,  126  Wis.  281,  110  Am.  St.  484,  41  L.R.A.  275,  45  S.  W.  673. 

Rep.  919,  105  N.  W.  801.  As  to  creditor's  rights,  see  §§  858- 

8  Mullen  V.  Reed,  64  Conn.  240,  42  861  herein. 

621 


§§  231h-231j  •     JOYCE  ON  INSURANCE 

made  where  the  contract  is  consummated  by  such  acceptance,  and 
subject  to  the  laws  there  in  force. ^^ 

§  23 Ih.  Lex  loci:  adjustment  of  claim  on  forfeited  policy. — The 
right  to  contract  for  the  adjustment  of  a  claim  on  an  insurance 
policy  forfeited  for  nonpayment  of  premiums,  according  to  the 
laws  of  the  insurer's  domicil,  although  the  insurance  is  upon  the 
life  of  a  person  residing  in  another  state  where  the  contract  is  made, 
is  accorded  by  a  statute  of  the  latter  state  providing  for  such  adjust- 
mc  but  making  its  provisions  inapplicable  to  policies  issued  by 
foreign  companies  authorized  to  do  business  in  the  state  where  the 
laws  of  their  domicil  provide  for  continued  insurance  upon  such 
forfeiture.  And  leaving  it  optional  with  insured  as  to  the  kind  of 
policy  he  will  take  in  the  adjustment  of  a  claim  upon  a  policy  for- 
feited for  nonpayment  of  premium  does  not  prevent  the  applica- 
tion of  a  proviso  of  the  local  statute  making  inapplicable  its  pro- 
visions as  to  such  adjustment,  where  the  laws  of  the  state  of  the 
insurer's  domicil,  in  respect  to  which  the  parties  have  agreed  the 
contract  shall  be  construed,  provide  for  the  methods  of  adjustment 
which  the  local  statute  requires  to  make  its  provisions  inapplicable. ^^ 

§  23 li.  Lex  loci:  reinstatement,  extension  or  revival  of  policy. — 
Executing  in  one  state  a  reinstatement  of  a  policy  made  in  another 
state  will  not  destroy  the  character  of  the  policy  as  a  conti'act  of 
the  state  where  it  was  originally  executed. ^^  Under  a  Missouri  de- 
cision life  policies  issued^by  foreign  companies,  which  do  not  take 
effect  until  they  are  delivered  to  the  insured  and  the  premium  col- 
lected from  him  in  the  state,  are  subject  to  the  statute  of  that  state, 
providing  for  extension  of  the  policy  for  the  full  sum  for  such  time 
as  three  fourths  of  the  net  revenue  Avill  pay  for,  in  case  of  default 
after  two  full  annual  premiums  have  been  paid,  notwithstanding 
provisions  for  forfeitures  in  the  policies.^* 

§  23 Ij.  Lex  loci:  policy  pledged  for  loan:  collateral  note:  capital 
stock  note. — Although  a  policy  is  a  contract  of  one  state,  yet  where 
the  policy  is  pledged  as  collateral  security  for  a  loan  and  the  appli- 
cation therefor  was  submitted  to  the  home  office  of  the  insurer  in 
another  state,  the  collateral  note  signed  in  the  first  state,  but  was 

^'^  ]\royer       v.       Supreme       Lodge  As   to   reinstatement   extension   or 

Kniaht.s  ol  Pvthias,  178  N.  Y.  63,  64  revival  of  policy,  see  §§  1121,  1276, 

L.RiA.  830,  70  N.  E.  111.  1277,  1472  herein. 

12  Nichols  V.  Mutual  Life  Ins.  Co.  i*  Cravens  v.  New  York  Life  Ins. 
176  ]\ro.  3.35,  62  L.K.A.  657,  75  S.  Co.  148  Mo.  583,  71  Am.  St.  Rep. 
W.   664.  62S,  53  L.R.A.  305,  50  S.  W.  519. 

13  Goodwin  V.  Provident  Savings  Mo.  Rev.  Stat.  18/9,  sees.  5983,  5985. 
Life  Assur.   Soc.  97  Iowa,    226,    59 

Am.  St.  Rep.  411,  32  L.R.A.  473,  6<j 
N.  W.  157. 

622 


CONSTRUCTIOX  OF  POLICY  §  232 

dated  in  tlie  latter  state  and  made  payable  there  and  the  loan  was 
jnc()nij)lcte  until  approved  and  accepted  by  insurer  at  its  home 
oflice.  the  collateral  note  is  a  contract  of  the  state  where  it  was  ac- 
cepted and  a})i)roved.  and  the  parties  rights  are  to  be  determined 
by  reference  thereto  where  the  law  of  the  foreign  state  in  such  mat- 
ters is  before  the  court,  although  in  the  absence  of  proof  it  will  be 
presumed  to  be  the  same  as  the  law  of  the  forraer.^^  \Miere  a  note 
secured  by  a  policy  on  the  life  of  its  nniker  wa.<  signed  in  one  state 
but  wa.s  sent  together  with  the  policy  to  the  maker's  wife  in  another 
state  to  be  endorsed  by  her,  which  was  done  and  the  papers  returned 
by  mail,  and  no  place  of  payment  was  fixed  in  the  note  and  the 
wife  had  no  personal  transactions  with  the  payee,  it  was  decided 
that  the  wife's  contract  was  that  of  the  latter  state. ^^  The  validity 
of  a  cajntal  stock  note,  given  to  a  mutvial  fire  insurance  company,  is 
determined  by  the  laws  of  the  state  wherein  it  is  executed  and  made 
payable.^' 

§  232.  Lex  loci:  assignment. — It  is  held  that  the  validity  of  an 
a.ssignment  of  a  policy  of  insurance  is  governed  by  the  law  of  the 
place  of  contract.^^  In  this  connection  it  may  be  stated  that  the 
contract  between  assured  and  the  insurer,  and  an  assignment  there- 
of constitute  separate  distinct  contracts.^^  It  is  also  held  that  even 
though  it  is  stipulated  that  a  certain  state  shall  be  the  place  of  con- 
tract, still  the  validity  of  an  assignment  made  in  another  state  is 
governed  by  the  laws  of  the  latter  state.^"  But  it  is  decided  that 
where  a  policy  was  issued  under  the  laws  of  New  York  relating  to 
insurances  on  lives  for  the  benefit  of  married  women,  the  contract 
being  made  in  that  state  and  assigned  by  the  wife  to  secure  her 
husband's  debt,  and  the  assignment  was  executed  in  New  York 
and  sent  bv  mail  to  Marvland,  to  a  creditor  there,  the  validitv  of 
the  assignment  must  be  determined  by  the  laws  of  New  York,  the 

15  Tennent  V.  Union    Central    Life  858;   23   L.R.A.(N.S.)    978;    and   52 

Ins.   Co.  133  Mo.  App.  345,  112   S.  L.R.A.(N.S.)  281,  on  conflict  of  laws 

W.  754.  as  to  assignment  of  policy. 

i«  TroencUe    v.    Hifflevman   (1908)        ^^  Succession    of    ^Miller    v.    Man- 

_  Kv.  — ,  113  S.  W.  812.  hattaii  Life  Ins.  Co.  110  La.  052,  34 

"Equitable     Mutual      Fire      Ins.  So.    723,    32    Ins.    L.  J.  865;  Mau- 

Corp's  Receiver  v.  Murray,  131  Ky.  liattan  Life  Ins.  Co.  v.  Cohen  (1911) 

740,  115  S.  W.  816.  —  Tex.  Civ.  App.  — ,  L3n  S.  W.  51, 

"Pratt  v.  Globe    Mut.    Life    Ins.  40   Ins.   L.   J.   1685.      See   §§   2304, 

Co.  3  Tenn.  Cas.  174,  17  S.  W.  353;  2308  herein. 

Succession    of    Miller  v.  Manhattan        ^o  K„.ssell  v.  Grigsbv,  168  Fed.  577, 

Life  Ins.  Co.  110  La.  652,  34  So.  723,  94  C.  C.  A.  61,  case  rev'd  Grigsby  v. 

32  Ins.  L.  J.  865;    Manhattan    Life  Russell,  222  U.  S.  149,  56  L.  ed.  133, 

Ins.    Co.   v.    Cohen    (1911)    —   Tex.  ^2  Sup.  Ct.  58,  36  L.R.A.(N.S.)  642, 

Civ.  App.  — ,  139  S.  W.  51,  40  Ins.  41  Ins.  L.  301,  upon  point  of  insur- 

L.  J.  1685.     See  notes  in  63  L.R.A.  able  interest. 

623 


§  232a  JOYCE  OX  INSURANCE 

action  being  brought  there.^  The  laws  of  Maryland  govern  the 
rights  of  parties  in  that  state  under  an  assignment  of  a  life  policy 
issued  by  a  New  York  corporation  to  a  citizen  of  Maryland  on  an 
application  made  to  an  agent  of  the  company  in  Baltimore.  So 
where  a  policy  of  insurance  was  applied  for  in  INlaryland  by  a  resi- 
dent thereof,  and  the  corporation  issuing  the  policy  was  a  resident 
of  another  state,  and  an  assignment  was  subsequently  made  by  a 
citizen  of  the  first-named  state,  anv  controversy  afterward  arising; 
between  the  assignee  and  the  heirs  or  personal  representatives  of  the 
assignor  will  be  controlled  by  the  laws  of  the  state  in  which  the 
policy  was  applied  for,  and  which  the  assignee  and  the  representa- 
tives of  the  assignor  are  residents,  rather  than  by  the  laws  of  the 
state  whose  corporation  issued  the  policy.^ 

§  232a.  Lex  loci:  substituted  policy. — If  a  substituted  policy  is 
issued  by  a  society  of  one  state  to  a  citizen  of  another  and  the 
change  is  made  at  the  home  office  of  the  society,  the  contract  is 
governed  by  the  laws  of  the  state  where  sucii  change  is  made,  and 
is  not  affected  by  the  laws  of  the  foreign  state  subsequently  enacted 
even  though  the  insurer  has  become  amenable  thereto.^ 

1  Barry  v.  Equitable    Life    Assur.  82  Fed.  508,  27  C.  C.  A.  212,  54  U. 

Soc.  59  N.  Y.  587.  S.  App.  290. 

Assignment     by     ivife     in     State  ^  Robinson  v.  Hurst,  78    Md.    59, 

foreign  to  that  in  ivhich  insurer  was  20  L.R.A.  761,  44  Am.  St.  Rep.  266, 

organized    and    conducted    business.  26  Atl.  956. 

See     Mutual     Reserve     Fund     Life  ^  Belknap  v.  Johnson,    114    Iowa, 

Assoc.  V.   Cleveland    Woolen    Mills,  265,  86  N.  W.  267. 

624 


CHAPTER  IX. 

CONSTRUCTION— USAaB. 

§  237.  Usage  generally. 

§  238.  Usage  part  of  the  common  law. 

§  239.  Presumption  as  to  knowledge  of  usage. 

§  240.  Usage  must  be  general. 

§  241.  Usage  must  be  well  established  and  notorious. 

§  242.  Usage  may  be  of  recent  origin. 

§  243.  Usage  must  be  reasonable. 

§  244.  Usage  must  be  uniform. 

§  245.  Parties  may  by  express  contract  include  or  waive  usage. 

§  246.  Usage  admissible  where  contract  ambiguous  or  obscure. 

§  247.  Usage  inadmissible  to  contradict  or  substantially  vary  the  plain 

terms  of  the  policy. 
§  248.  Same  subject:  cases  and  authorities. 
§  249.  Whether  usage  controls  the  plain  and  legal  import  of  words  of 

the  policy. 
§  250.  Same  subject:  opinions  and  cases. 
§  251.  Same  subject :  conclusion. 
§  252.  Usage  cannot  legalize  an  illegal  act. 

§  253.  General  usage  may  be  controlled  by  evidence  of  a  different  usage, 
§  254.  Usage  controls  implied  limitations. 

§  255.  Usage  of  another  similar  trade  or  place  or  of  another  company. 
§  256.  Evidence  of  usage:  liberal  construction. 
§  257.  What  is  sufficient  evidence  of  usage. 
§  258.  Evidence  of  usage,  when  admissible :  eases. 
§  259.  Evidence  of  usage,  when  inadmissible:  cases. 

§  237.  Usage  generally. — Evidence  of  general  usage  was  former- 
ly admitted  to  determine  the  construction  of  policies  of  insurance 
for  the  reason  that  they  were  so  loosely  drawn,  and  because  the 
contract  depended  so  greatly  upon  eonnnercial  usage,  and  there 
were  so  few  adjudications  or  rules  of  positive  law  to  aid  in  its  in- 
terpretation. So  Lord  Mansfield  had  recourse  in  a  large  measure 
to  the  usage  of  merchants  and  commercial  law  in  ascertaining  those 
principles  which  underlie  his  decisions  in  Ccases  of  insurance,  and 
which  have  now  to  so  large  an  extent  become  of  controlling  force 
Joyce  Ins.  Vol.  I. — 40.  625 


§  238 


JOYCE  ON  INSUKAXCE 


in  the  construc-tion  of  insurance  contracts.*  JUillcr,  J.,  in  ]?roii!Li;h 
V.  Whitmore,*  says  that  insurance  ^'is  founded  on  usage,  and  must 
be  governed  and  construed  by  usage,"'  and  Mr.  Duer  ^  a^sserts  that 
the  true  purpose  of  a  usage  is  "to  discover  in  order  to  effectuate  the 
intentions  of  the  parties,"  and  usage  is  received  to  ascertain  the 
sense  of  the  parties  with  reference  to  such  usage.' 

§  238.  Usage  part  of  the  common  law. — In  England,  where  so 
few  positive  laws  have  heen  enacted,  and  where  the  first  act  con- 
cerning insurances  was  not  passed  until  1601^*  the  practice  of  in- 
suring was  dependent  ui3on  the  common  law,  of  which  the  law  of 
merchants  was  considered  a  branch,  and  also  upon  the  general  prin- 
ciples and  usages  of  trade.^  It  is  declared  in  an  English  case  ^® 
that  ''the  custom  of  merchants  or  law  of  merchants  is  the  law  of 
the  kingdom,  and  is  part  of  the  common  law."  These  customs  ac- 
quire the  force  of  law,  because  as  they  must  be  ancient,  uniform, 
and  reasonable,  they  must  have  been  generally  received,  known, 
and  approved. ^^ 


*  See  §  I.,  preliminary  chapter.  Re-  man,  20  Oreg.  108,  10  L.R.A.  785,  25 

marks   of   Lord   Kenyon   in   Brough  Pac.  366. 

V.  Wbitmore,  4  Tenn  Rep.  208,  that  Distinction     between     custom     and 

Lombard  St.  had  given  a  construction  usage,   see  Byrd   v.   Beall,   150   Ala. 

to  policies  of  insurance,  and  that  the  122,   124  Am.    St,   Rep.    60,   43   So. 

practice    of   merchants    and     under-  749;    Wilmington    City    Ry.    Co.    v. 

writers      had      rendered     them     in-  White,   6   Pen.    (Del.)    363,   6(i   Atl. 

lelligible.  1009.      Examine    Kent    v.    Town    of 

^  4  Term  Rep.  210.  Patterson,  141  N.  Y.  Supp.  932,  80 

n  Duer  on  Ins.  (ed.  1845)  253.  ^8^43^Eliz   c   12 

■^Renner  v.  Bank  of  Columbia,  9  9  See  §  I.,  preliminary  chapter;  1 

Wheat.  (22  U.  S.)  oSl,  6  L.  ed.  166,  ]\rarshall  on  Ins.   (ed.  1810)   21. 

per    the    court.      See    Destrehan  v.  lo  gdie  v.  East  India  Co.  2  Burr. 

Louisiana    Cypress    Lumber    Co.    45  i226    4  Eno-.  Rul.  Cas.  344. 

La.  Ann.  920,  13  So.  230,  40  Am.  St.  ^n  McGregor  v.  Insurance  Co.  of  Pa. 

Rep.  265.  1  Wash.  (U.  S.  C.  C.)  39,  Fed.  Cas. 

When  custom  or  usage  is  presumed  No.  8811,  per  Washington,  J.    See  § 

to    enter   into    intention    of    parties.  1  herein.    "The  wliole  business  of  in- 

See  London  Assur.  Corp.  v.  Thomp-  surance  and   all  the  instruments   by 

son,  170  N.  Y.  94,  62  N.  E.  1066,  31  which  it  is  carried  on,  and  all  their 

Ins.  L.  J.  351,  354.  language  and  provisions,  rest  on  the 

Usage  as  part  of  contract.  See  usage  of  merchants;  and  neariy  all 
Union  Ins.  Co.  v.  American  Fire  Ins.  the  law  of  insurance  is  but  the  usage 
Co.  107  Cal.  327,  48  Am.  St.  Rep.  of  merchants,  adopted  and  sanc- 
140,  40  Pac.  431,  28  L.R.A.  692;  tioned  by  courts."  1  Parsons  on  Ma- 
Connelly  V.  Masonic  Mutual  Benefit  rine  Ins.  (ed.  1868)  82.  "With  re- 
Assoc.  58  Conn.  552,  9  L.R.A.  428,  speet  to  usage,  it  is  a  sort  of  natural 
20  Atl.  671,  18  Am.  St.  Rep.  296n;  law  formed  out  of  our  habits,  our 
Savage  v.  Salem  Mills  Co.  48  Oreg.  interests,  and  the  universal  consent 
1,  10  Am.  &  Eng.  Ann.  Cas.  1065,  of  all  mankind.  In  all  maritime  mat- 
85  Pac.   69;   IMacCulsky  v.   Kloster-  ters  it  is  regarded  as  the  surest  iu- 

626 


CONSTRUCTION— USAGE 


§  239 


§  239.  Presumption  as  to  knowledge  of  usage. — ^Underwriter?  are 
bound  to  inform  themselves  and  to  know  the  general  usages  of  tlie 
trade  in  which  they  insure/^  for  it  is  presumed  that  the  custom  of 
merchants  is  known  to  them,^^  and  the  insurer  and  insured  must 
be  supposed  to  be  fully  apprised  and  conusant  of  a  notorious  usage, 
as  to  a  course  of  a  voyage,  and  to  know  the  nature  and  peculiar  cir- 
cumstances of  that  branch  of  trade  to  which  the  policy  relates,  and 
that  whether  it  is  recently  established  or  not.^*  The  insurers  are 
also  presumed  to  know  the  customs  of  the  place  where  they  do  busi- 
ness, and  are  assumed  in  law  to  know  them.^^  It  is  also  presumed 
that  a  person  dealing  in  a  particular  market  has  knowledge  of  its 
customs  in  relation  to  his  transactions  therein. ^^  So  they  are  pre- 
sumed to  be  acquainted  with  the  nature  and  peculiar  circumstances 
of  the  branch  of  trade  to  which  the  risk  relates.^'^    So  in  a  policy 


terpreter  of  the  law.    ...    In  ques-   Ga.  408,  12  S.  E.  678,  22  Am.  St. 
lions  of  insurance  established  usages    Rep.  471. 


must  in  all  eases  be  adhered  to,  and 
in  doubtful  eases  they  are  the  saf- 
est srnide  one  can  follow."  1  Mar- 
sliall  on  Tns.  (ed.  1810)  707a. 

^2  Noble  V.  Ken  noway,  2  Doug.  pt. 
2,  3d  ed.  513,  per  Lord  Mansfield. 
See  also  the  following  cases: 
Manilnnd. — Maryland     &     Phoenix 
Ins.   Co.   V.   Bathhurst,  5   Gill   &   J. 
(Md.)  ITiO. 


Illinois. — Union  Stock  Yards  & 
Transit  Co.  v.  Mallory,  Son  &  Zim- 
merman Co.  157  111.  554,  48  Am.  St. 
Rep.  341,  41  N.  E.  888;  First  Na- 
tional Bank  v.  Fiske,  133  Pa.  St.  241, 
7  L.R.A.  209,  19  Am.  St.  Rep.  635, 
19  Atl.  554. 

Minnesota. — Baxter  v.  Sherman, 
73  I\Iinn.  434,  72  Am.  St.  Rep.  631, 
76  N.  W.  211. 

Virginia. — Bowles  v.  Rice,  107  Va. 


New  York. — London  Assur.  Corp. 

V.  Thompsdii,  170  N.  Y.  94,  62  N.  E.  51,  57  S.  E.  575. 

in()(),  ;51  Ins.  L.  J.  351,  354;  Wall  v.  ^3  McGregor    v.    Insurance    Co.    1 

HoM'ard   Ins.   Co.  14  Barb.    (N.  Y.)  Wash.    (C.    C.)    39,   Fed.    Cas.    No. 

383;  Cook  v.  Loew,  69  N.  Y.  Supp.  8811,  per  Washington,  J.    See,  gen- 

614,  31  Misc.  276.  orally,  Austrian  v.  Springer,  34  Mich. 

rennsijlvania. — Norris     v.     Insur-  343,  34  Am.  St.  Rep.  350. 

ance  Co.'  of  North  America,  3  Yeates  i*  Salvador    v.    Hopkins,    3    Burr. 

(Pa.)  84,  2  Am.  Dec.  360.  1707,    1714;    Wadsworth    v.    Pacific 

South  Carolina.— Cox,  Maitland  &  Ins.  Co.  4  Wend.  (N.  Y.)  33. 

Co.  V.  Charleston  Fire  &  Marine  Ins.  ^^  Ilavtshorne     v.     Union     Mutual 

Co.  3  Rich,  (S.  C.)  331,  45  Am.  Dec,  Ins.  Co.  36  N.  Y.  172. 

771.  iMVilliam    R.    Smith    &    Son    v. 

Enplan(l—?^n]vixAov  v.  Hopkins,  3  Bloom,  159  Iowa,  502,  141  N.  W.  32, 

Burr,  1707,  1712,  1714;  Vallance  v.  citing  Cotham  v.  Ellis,  107  111.  413; 

Dewar,  1  Camp.  503.  Bailey  v.  Bcnsley,  87  111.  556;  Long 

See  1  Ducr  on  Tns.  (ed.  1845)  196.  v.  Armsley  Co.  43  Mo.  App.  25,  Jones 

;     As  to  general  rule,  see  also:  on  Ev.   (pocket  ed.)  sec.  57. 

United    States. — New    Roads    Oil-  ^'  Grant  v.  Lexington  Fire  Life  & 

mill  &  Manufacturing  Co.  v.  Kline,  Marine  Ins.   Co.  5  Ind.  23,  61  Am. 

Wilson  &  Co.  154  Fed.  296,  83  C.  C.  Dec.  74.     See  also  Capital  Fire  Ins. 

A.  1.  Co.  V.  Kaufman,  91  Ark.  310,  121  S. 

Georgia.— B.or&n   v.    Strachan,   86  W.  289,  38  Ins.  L.  J.  1058. 
''                                                                 627 


§  239  JOYCE  ON  INSURANCE 

on  a  foreign  vessel  the  underwriter  must  be  taken  to  have  knowl- 
edge of  the  common  usages  of  trade  in  such  country  as  to  equip- 
ment.s  of  vessels  of  that  class  for  the  voyage  on  which  she  was  des- 
tined.^^  Mr.  Marshall  ^^  asserts  that  Britsh  underwriters  cannot  be 
presumed  to  be  conusant  of  the  usages  of  the  particular  trade  under- 
taken by  ships  of  foreign  nations  in  foreign  trade,  but  that  the 
usage  must  have  been  made  known  to  them  to  be  binding.^"  Mr. 
Duer,  however,^  criticises  this  assertion  as  impolitic  and  unsupport- 
ed, but  it  is  said  by  McLean,  J.,  in  Hazard's  Administrator  v.  New 
England  Marine  Insurance  Company ,2  that  "the  underwriters  are 
presumed  to  know  the  usages  of  foreign  ports  to  which  insured 
vessels  are  destined,  also  the  usages  of  trade  and  the  political  con- 
ditions of  foreign  nations."  Where  the  usage  is  of  such  a  character 
tliat  the  presumption  exists  that  the  insurer  has  knowledge  thereof, 
the  applicant  is  not  bound  to  communicate  such  usage  to  him.^  But 
usage  in  a  particular  place  or  of  a  particular  class  of  persons  can- 
not be  binding  on  other  persons  unless  they  are  acquainted  wiili 
that  usage  and  adopt  it.*    Under  an  Alabama  decision,  there  is  no 

^8  Tidmarsh  v.  Washington  Fire  &  back,  15  How.  (56  U.  S.)  539,  14  L. 

Marine  Ins.   Co.  4  Mason   (U.  S.  C.  ed.  805;  Trott  v.  Wood,  1  Gall.  (U. 

C.)   439,  442,  Fed.   Cas.  No.  14,024,  S.  C.  C.)  443,  Fed.  Cas.  No.  14,190; 

per  Storv,  J.  Rogers  v.  Mechanics'  Ins.  Co.  1  Story 

Implied     obligations     varied     hij  (U.  S.  C.  C.)  G03,  Fed.  Cas.  No.  12,- 

agreement  or  usage,  see  marine  ins.  016.. 

act   1906    (6   Edw.   VII.   c.   41)    sec.  Connecticut. — Crosby  v.  Fitch,  12 

87;    Butterworth's    Twentieth    Cent.  Conn.  422,  31  Am.  Dec.  745. 

Stats.    (1900-1909)    p.  423;   Chitty's  /oa'rt.— Sherwood    v.    Home    Sav- 

Stats.  Eng.   (1902-1907)  p.  905.  ings  Bank,  131  Iowa,  528,  109  N.  W. 

19  1   Marshall   on   Ins.    (ed.    1810)  9. 

075  Louisiuna. — Herman     v.     Western 

^^  Citing  Larabie  v.  Wilson,  Doug.  Marine  &   Fire  Ins.   Co.   7  La.    (13 

271;  digested,  Id.  192,  et  .seq.;  also  La.  O.  S.  516)   32.5. 

in   1   Duer  on  Ins.    (ed.   1845)    243,  Maine.— Lenah  v.  Perkins,  17  Me. 

et  seq.  462,  35  Am.  Dec.  268. 

11  Duer  on  Ins.  (ed.  1845)  199.  Maryland.— M?iSon      v.      Franklin 

2  8  Pet.   (33  U.  S.)  557,  582,  8  L.  In.s.  Co.  12  Gill  &  J.  (Md.)  468. 

ed.  1043.  Massachusetts. — Howard    v.    Great 

3Cox,  Maitland  &  Co.  v.  Charles-  Western  Ins.  Co.  109  Mass.  384;  Lee 

ton  Fire  &  Marine  Ins.  Co.  3  Rich,  v.  Dorchester  Mut.  Fire  Ins.  Co.  105 

(S.  C.)   331,  45  Am.  Dec.  771;  Dan-  Mass.  298;  Taylor  v.  ^tna  Life  Ins. 

iels  V.  Hudson  River  Fire  Ins.  Co.  12  Co.  13  Gray  (79  Mass.)  434. 

Cush.   (66  Mass.)   416,  59  Am.  Dee.  Neiv    York.— WeWs   v.    Bailey,   49 

192;    Planche   v.    Fletcher,   1   Doug.  N.  Y.  464;   Cook  v.  Loew,  34  Misc. 

251;   Kingston   v.   Knibbs,  1   Camp.  276,  69  N.  Y.  Supp.  614. 

508n,  per  Lord  Ellenborough.  Ohio. — Hartford  Prot.  Ins.  Co.  v. 

*  Bartlett  v.  Pentland,  10  Barn.  &  Harmer,  2  Ohio  St.  452,  59  Am.  Dec. 

C.  760,  770,  per  Lord  Tenterden.  684. 

See  also  the  following  cases:  Pennsylvania. — Eyre     v.      Marine 

United   States.— Adsivas    v.    Otter-  Ins.  Co.  5  Watts  &  S.  (Pa.)  116. 

628 


CONSTRUCTION— USAGE  §  240 

presumption  of  knowledge  on  the  part  of  an  insurer  doing  a  gen- 
eral business  throughout  the  United  States  of  a  custom  or  usage 
which  is  peculiar  to  a  city  in  a  state  foreign  to  its  domicil,  so  as  to 
make  the  custom  an  element  of  its  contracts  relating  to  property 
in  such  city  without  proof  that  it  had  such  knowledge.^ 

§  240,  Usage  must  be  general. — Tn  order  that  a  usage  should  be 
admitted  in  evidence  in  the  construction  of  the  terms  of  a  policy, 
it  must  poss&'^s  certain  necessary  properties  or  essentials,  one  of 
which  is,  that  it  should  be  general,^  that  is,  general  to  the  whole 
mercantile  world,'  or  in  regard  to  the  trade  to  which  it  has  refer- 

EngJand. — Stewart  v.  Aberdeen,  4  /^/moj's.— Cleveland,  Cincinnati, 
Mees  &  W.  211;  Gabay  v.  Llovd,  3  Chicago  &  St.  Louis  Rv.  Co.  v.  .Jen- 
Barn.  &  C.  793;  Scott  v.  Irving,  1  kins,  174  III.  398,  62  L.R.A.  922,  51 
Barn.  &  Adol.  605.  N.  E.  811,  66  Am.  Rep.  296;  Whipple 

In  general,  if  a  custom  is  local,  a  v.  Tuckei',  123  111.  App.  223. 
person  who  re.sides  in  a  foreign  land,       Kentucky. — Shaw     v.     Tngraham- 

and  ha.s  never  been  to  the  particular  Day     Lumber     Co.     152     Ky-     329, 

locality  before,  is  not  bound   unless  L.R.A.1915D,  145,  153  S.  W.'231. 
he    has    knowledge    of    the    custom:        New    York. — Hatch    v.    Luckman, 

Iloian  V.   Straclian,  86   Ga.  408,  22  140  N.  Y.  Supp.  1123,  155  App.  Div. 

Am.  St.  Rep.  471,  12  S.  E.  678.  765,  aff'g  118  N.  Y.   Supp.   689,   64 

^  German  American  Ins.  Co.  v.  Misc.  508. 
Commercial  Fire  Ins.  Co.  95  Ala.  '1  Arnould  on  Marine  Ins.  (Per- 
469,  16  L.R.A.  291,  11  So.  117.  Ex-  kins'  ed.  1850)  71.  See  Id.  (9th  ed. 
amine  National  Fire  Ins.  Co.  v.  Han-  Hart  &  Simey)  sees.  55  et  seq.,  pp. 
berg,  215  111.  378,  74  N.  E.  377;  74  et  seq.,  sec.  505,  p.  666;  sec.  507, 
Traders  Ins.  Co.  v.  Dobbin.';  &  Ewing,  p.  668;  sec.  1273,  p.  1591.  See  gen- 
114  Tenn.  227,  86  S.  W.  323.  Com-  crally  on  this  point,  Southwe.stern 
pare  Capital  Fire  Ins.  Co.  v.  Kauf-  Freight  &  Cotton  Press  Co.  v.  Stan- 
man,  91  Ark.  310,  121  S.  W.  389,  ard,^44  ]\Io.  71,  100  Am.  Dec.  255; 
38  Ins.  L.  J.  1058.  Columbus   Coal   Ins.   Co.   v.   Tucker, 

6  See  Trott  v.  Wood,  1  Gall.  (U.  S.  48  Ohio  St.  41,  12  L.R.A.  577,  29 
C.  C.)  443,  Fed.  Cas.  No.  14,190,  per  Am.  St.  Rep.  534,  per  Spear,  J. 
Story,  J.;  Stnrges  v.  Buckley,  32  In  examining  for  the  the  first  time 
Conn.  20;  Crosby  v.  Fitch,  12  Conn,  any  question  under  a  policy  of  insur- 
410,  31  Am.  Dec.  745,  750,  per  anco,  the  practical  construction  of  the 
Church,  J.;  Leach  v.  Perkin.s,  17  Me.  contract  by  nicrcliant.s  and  under- 
462,  35  Am.  Dee.  268;  Lockney  v.  writers,  not  through  any  partial  or 
Police  Beneficiary  Assoc.  217  Pa.  local  usages,  but  by  the  general  con- 
568,  66  All.  844;  Missouri  Pacific  R.  sent  of  the  mercantile  world,  is  of 
R.  Co.  v.  Fagan,  72  Tex.  127,  2  gi-eat  weight,  though  not  neces.sarily 
L.R.A.  75,  13  Am.  St.  Rep.  776;  decisive.  General  Mutual  Ins.  Co.  v. 
Gabay  v.  Lloyd,  3  Barn.  &  C.  793;  Sheiwood,  14  How.  (.55  U.  S.)  .351, 
and  see  case.s  cited  in  last  note.  See  14  L.  ed.  452.  Cited  in  Ocean  Steam- 
also    generally:  ship  Co.  v.  .'Etna  Ins.  Co.  121  Fed. 

Alabama. —  Bvrd  v.  Beall,  150  Ala.  884;  Anderson  v.  i\lunsou,  104  Fed. 

122, 124  Am.  St.  Rep.  60,  43  So.  749.  917;  Barnstable,  The,  84  Fed.   900; 

Arkansas. — City  Electric  Street  IMoores  v.  Louisville  Underwriters, 
Rd.  Co.  V.  First  National  Exchange  14  Fed.  232;  Pride  v.  Providence- 
Bank,  (!2  Ark.  33,  31  L.R.A.  535,  34  Washington  Ins.  Co.  6  Pa.  Dist.  R." 
S.  W.  89,  54  Am.  St.  Rep.  282.  231. 

629 


§  240  JOYCE  ON  INSURANCE 

ence.  Thus^  a  universal  custom  of  a  particular  trade,  which  has 
been  invariably  or  uniformly  followed  for  many  years,  is  admis- 
sible  in  evidence-  to  determine  the  actual  contract.*  A  usage  can- 
not be  said  to  be  general  which  has  obtained  only  in  a  few  instances, 
for  such  a  usage  cannot  be  regarded,^  nor  can  a  usage  be  general 
w^hich  is  known  only  to  a  few,  for  such  limited  knowledge  doas  not 
establish  a  usage. ^°  Mr.  Duer  ^^  gives  much  consideration  to  the 
meaning  of  the  word  ''general"  in  this  connection, ^^  and  limits  its 
application  to  those  cases  in  which  the  knowledge  of  the  parties  and 
their  intention  to  adopt  the  usage  are  inferred  merely  from  the 
fact  of  its  existence,  but  says  that  when  their  knowledge  or  inten- 
tions depend  upon  other  direct  or  circumstantial  evidence,  their 
contract  may  be  governed  by  usage,  local  or  partial,  as  in  case  of 
usage  between  the  parties  or  a  local  usage  of  trade  practised  by  the 
insurers. ^^  It  is  said  by  Story,  J.,  in  Rogers  v.  Mechanics'  Insur- 
ance Company  ^*  that  "the  usage  or  custom  of  a  particular  port  in 
a  particular  trade  is  not  such  a  custom  as  the  law  contemplates  to 
limit  or  control  or  qualify  the  language  of  contracts  of  insurance. 
It  must  be  some  known  general  usage  or  custom  in  the  trade,  ap- 
plicable and  applied  to  all  the  ports  of  the  state  where  it  exists,  and 
from  its  character  and  extent  so  notorious  that  all  such  contracts 
of  insurance  in  that  trade  must  be  presumed  to  be  entered  into  by 
the  parties  in  reference  to  it  as  a  part  of  the  policy."  But  a  local 
or  particular  custom  may  be  general  in  the  sense  that  an  insurance 
company,  by  a  long-continued  and  invariable  and  known  course 
of  dealing,  have  established  a  binding  usage.^^    So  a  usage  at  Lloyds 

SRenner  v.  Bank  of  Columbia,  9  C.)    149,   150,   Fed.    Cas.   3003,   per 

Wheat.  (22  U.  S.)  581,  6  L.  ed.  166:  Wa-shinston,  J. 

.see  Leac4i  v.  Perkins,  17  Me.  462,  3.3     .  ii  1  Duer  on  Ins.   (ed.  1845)   258, 

Am.  Dee.  268;  Goodenow  v.  Tyler,  <  et  .scq. 

Mas-s.  336,  5  Am.  Dec.  22 ;  Cogore-shall        ^^ ''Tlie   word   '2:eneral,"'   be   says, 

v.   American   Ins.    Co.   3  AVend.    (N.  '*is  u.sed  in  various  senses.     It  is  used 

Y. )  283.    In  general,  knowledge  of  a  in  reference  to  places  as  well  as  per- 

usage   need   not  be   shown  by   direct  sons.     In  tlie  first  sense  it  is  opposed 

evidence,   but  may  be  inferred  from  to  'local,'  in  the  second   to  'partial.' 

circumstances  or  implied  from  its  no-  In    another    sense    it    embraces    the 

toriety.    Barry  v.  Hannibal  &  St.  .lo-  wliole  of  the  subjects  to  which  it  re- 

seph's  Rv.   Co.   98   Mo.   62,  14   Am.  late.s,  and  is  ojDposed  to  'special'  or 

St.  Rep.  '610,  11  S.  W.  308.  'particular,'  "   etc.     1    Duer   on   Ins. 

9  Cutter   V.   Powell,   6    Term   Rep.  (ed.  1845)   259,  see.  55. 
324,   6  Eng.   Rul.   Cas.   627;   Crosbv        ^^1  Duer  on  Ins.   (ed.  1845)   263, 

V.  Fitch,  12  Conn.  422,  31  Am.  Dee.  see.  55. 

745,  749;  Kocher  v.  Supreme  Coun-       i«  1  Story  (U.  S.  C.  C.)  607,  Fed. 

oil    Catholic    Benevolent    Leg'ion,    65  Cas.  No.  12,016. 
N.  J.  L.  649,  52  L.R.A.  861,  86  Am.        is  Baxter  v.  Massasoit  Ins.  Co.  13 

St.  Rep.  687,  48  Atl.  544.  Allen    (95   Mass.)    320;   DcForest   v. 

lOCollings  v.  Hope,  3  Wash.    (C.  Fulton  Fire  Ins.  Co.  1  Hall  (N.  Y.) 

630 


CONSTRUCTION— USAGE  §  241 

may  be  general  and  binding  upon  those  in  the  habit  of  underwrit- 
ing there.^^ 

§  241.  Usage  must  be  well  established  and  notorious. — The  usage 
should  be  well  e.<tabli.<hed ;  that  is,  so  well  settled  tliat  persons  en- 
gaged in  a  trade  must  be  considered  as  contracting  in  reference 
thereto,^'^  and  it  must  be  so  well  known  in  general  among  those 
engaged  in  the  business  or  trade  to  which  it  belongs  as  to  be  received 


'&"& 


as  a  matter  of  course. ^^  If  it  be  a  particular  usage,  it  must  be  "of 
univei-sal  notoriety  in  the  trade  in  which,  and  of  the  place  at  which, 
the  insurance  is  effected."  ^^ 

84;  Union  Cent.  Life  Ins.  Co.  v.  Pott-  577,  29  Am.  St.  Rep.  534,  per  Spear, 

ker,  33   Ohio   St.  439,  31   Am.  Rep.  J. 

555;  Helme  v.  Pliiladelpliia  Life  lu.s.  Pennsijlmnia. — Loekney   v.    Police 

Co.   61   Pa.    St.   107,   100   Am.   Dec.  Benetleiary   Assoc.   217   Pa.   568,   66 

ti21.  Atl.   844;    Dempsey   v.   Dobson,   184 

16  Gabay  v.  Lloyd,   3   Barn.   &   C.  Pa.  St.  588,  40  L.R.A.  550,  63  Am. 

793.  St.  R«p.  809. 

^"^  United  States. — Trott  v.  Wood,  1  Texas. — Missouri    Pacific    R.     Co. 

Gall.  (C.  C.)  443,  Fed.  Ca.s.  No.  14,-  v.  Fagan,  72  Tex.  127,  2  L.R.A.  75, 

190  per  Stoiy,  J.  13  Am.  St.  Rep.  776. 

Alabama. — Mobile  J.  &  K.  R.  Co.  Wisconsin. — Lemke   v.    Hage,   142 

V.  Bay  Shore  Lumber  Co.  165  Ala.  Wi.s.  178,  135  Am.  St.  Rep.  1066,  125 

610,   138   Am.    St.   Rep.   84,   51    So.  N.  W.  440. 

956;  Byrd  v.  Beall,  150  Ala.  122,  124  18  Ros-ers  v.  Mechanics'  Ins.  Co.  1 

Am.  St.  Rep.  60,  43  So.  749.  g^orv    (C.    C.)    603,   607,   608.   Fed. 

Arkansas.— City  Electric  Street  R.  Cas.'^No.  12,0i6,  per  Story,  J.;  Col- 
s'A^^''4*  ^fr^  A  '^-q^^lT  s'w  li^S^  '-'  Hope,  3  Wash.  (C.  C.)  149, 
Sn  ^"i  -A^^'  II  ^/'^oeo  '  150,  Fed.  Cas.  No.  3003,  per  Wash- 
89    54  Am.  St.  Rep.  282.  ^         j      ^^^^             ^.    In.surance 

Ilhnois -Clevel^nd^        Cincinnat  ,  -       '             Wa.sh.  (C.  C.)  39,  Fed. 

Chicago  &  St.  Louis  Ry.  Co.  V.  J enk-  -ijt    ,  •      ,         t 

in.s,  174  111.  398,  62  L.R.A.  922,  51  ^^^-  ^f-  8811,  per  W  ashmgtou,  J.; 

N.  E.  811,  66  Am.  St.  Rep.  296.  J?"""*"" /•    ^°^''"^'','^"  J"'- ,^t  f 

7v>»/?«c/t-7/.— Rochester  German  Ins.  Sum.    (U.   S.   C.   C.)    Sn,  3/8,  J^ed. 

Co.  V.  Peaslee  Gaulbert  Co.  27  Kv.  Cas.  No.  3987,  per  Story,  J.;  Steele 

L.  Rep.  756,  87  S.  W.  1115.  v.  McTyer's  Admr.  31  Ala.  667,  70 

.¥afwe.— Cobb  v.  Lime  Rock  Fire  Am.  Dec.  516,  and  note  523;  Macy  v. 

&  Marine  Ins.   Co.  58  Me.  328,  per  Whaling  Ins.  Co.  9  Mete.  (50  Mass.) 

Appleton,  C.  J.  363,  per  Shaw,  C.  J. ;  Winsor  v.  Dil- 

Marv?«w(7.— Baltimore  Base  Ball  &  laway,  4  Met,'  (45  IMass.)   221,  223, 

Exhibition    Co.    v.    Pickett,    78    Md.  per  Shaw,   C.  J.;   Palmer  v.   Black- 

375,  22  L.R.A.  690,  28  Atl.  279,  44  burne,  1  Bing.  61,  14  Eng.  Rul.  Cas. 

Am.  St.  Rep.  304;  Blake  v.  Stump,  486,  per  Dallas,  J.,  and  Burrough,  J.; 

73  Md.  160,  10  L.R.A.  103,  20  Atl.  Power   v.   Whitmore,   4   Mces.   &   S. 

788.  141,    150;    Salvador    v.    Hopkins,    3 

Missouri. — Southwestern  Freight  &  Burr.    1707;    1    Duer    on    Ins.     (ed. 

Cotton  Press  Co.  v.  Stanard,  44  i\Io.  1845)  265. 
71,  100  Am.  Dec.  255.  ^^  1  Arnould  on  Marine  Insurance, 

OMo.— Columbus  Coal  Ins.  Co.  v.  Perkins'  (ed.  1850)  71.     See  Id.  (9th 

Tucker,  48   Ohio   St.   41,   12  L.R.A.  od.  Hart  &  Simey)   sees.  55  et  seq., 

631 


§§  242,  243  JOYCE  ON  INSURANCE 

§  242.  Usage  may  be  of  recent  origin. — Although  it  is  said  that 
usage  must  be  ancient,^"  public,  and  continued,^  and  although  it  is 
held  that  a  usage  of  short  continuance  is  not  entitled  to  any  weight,^ 
yet  it  is  well  settled  that  a  usage  may  be  of  recent  origin.^  So  in 
Noble  V.  Kenneway  *  a  usage  existing  for  three  years  was  held  suf- 
ficient, and  Lord  Mansfield  declares  in  that  case  that  "every  un- 
derwriter is  presumed  to  be  acquainted  with  the  in-actice  of  the 
trade  he  insures,  whether  recently  established  or  not.  If  he  does 
not  know  it,  he  ought  to  inform  himself.  It  is  no  matter  if  the 
usage  has  been  only  for  a  year."  So  Mr.  Arnould^  says  that  where 
the  trade  is  recent,  it  is  only  necessary  that  a  usage  be  coextensive 
therewith,  and  be  general  and  well  known.  In  a  Maine  case  the 
court  ^  declares  that  a  usage  must  be  "certain,  general,  frequent, 
and  so  ancient  as  to  be  generally  known  and  acted  upon,"  while  in 
a  New  York  case  "^  it  is  said  that  "the  true  test  of  a  commercial  usage 
is  its  having  existed  a  sufficient  length  of  time  to  have  become  gen- 
erally known,  or  to  warrant  a  presumption  that  contracts  are  made 
in  reference  to  it."  ^ 

§  243.  Usage  must  be  reasonable. — A  usage  must  be  valid,  rea- 
sonable, and  not  one  Avhich  would  by  construction  result  in  an  ab- 
surdity', for  it  must  be  assumed  that  an  unreasonable  usage  or  one 
leading  to  an  absurdity  w^as  not  contemplated  by  the  parties  in  ef- 
fecting the  contract.^    It  is  held  that  a  general  and  notorious  cus- 

pp.  74  et  seq.     And  see  eases  in  two        ^  Leach  v.  Perkins,  17  Me.  462,  35 
preceding  notes.  Am.  Dec.  268,  per  Shipley,  J. 

^oColhngs  V.  Hope,  3  Wash.  (C.  'Smith  v.  Wright,  1  Caines  (N. 
C.)  149,  Fed.  Cas.  No.  3003.  See  Y.)  43.  Usage  in  this  ease  carried 
Commonwealth  v.  Mayloy,  5<  Pa.  St.  back  by  some  witnesses  as  far  as 
291.  thirty  years,  and  it  was  objected  that 

^  See    Crosby   v.    Fitch,    12    Conn,    period  wa.s  too  short. 
422,   31  Am.  Dec.  745;    Sipperly  v.        *  See  Renner  v.  Bank  of  Columbia. 
Steward,  50  Barb.   (N.  Y.)   62.  9  Wheat.    (22  U.   S.)    581,  6  L.  ed. 

^  Wall  V.  Ea.st  River  Ins.  Co.  3  166,  per  Thompson,  J.  "No  particu- 
Duer  (N.  Y.)  264.  lar  period  is  i-equisite  to  the  estab- 

^  Macy  V.  WliaJing  Ins.  Co.  9  lishment  of  a  usage."  1  Piiillips  on 
Mete.  (50  Mass.)  363,^364,  per  Hub-  Insurance  (2d  ed.)  sec.  138.  "It  is 
bard,  J.,  citing  2  Starkie  on  ICvi-  quite  certain  that  where  a  usage  is 
.dence,  453.  See  Townsend  v.  Whit-  recent  or  local,  it  may  have  sufficient 
by,  5  Harr.  (Del.)  55.  force  to  affect  the  construction  of  the 

*Doug.   3d   ed.   pt.   2,  513.      Cited    policy  if  brought  home  to  the  knowl- 
also  in  Renner  v.  Bank  of  Columbia,   edge  and  recognition  of  the  parties." 
9  Wheat.    (22  U.   S.)   581,  589,  6  L.    1  Parsons  on  Ins.    (ed.  1868)    93. 
ed.  166.  9  Collings  v.  Hope,  3  Wash.  (U.  S. 

5  1  Arnould  on  Ins.  (Perkins'  ed.  C.  C.)  149,  150,  Fed.  Cas.  No.  3003, 
1850)  69,  70.  See  Id.  (9th  ed.  Hart  per  Washington,  J.;  Mobile,  Jackson 
&  Simey)  sees.  55  et  seq.,  pp.  74  et  &  Kansas  City  R.  Co.  v.  Bav  Sliore 
seq.  Lumber  Co.  165  Ala.  610,  138  Am. 

632 


CONSTRUCTION— USAGE  §  243 

torn  of  steamboat  captains  at  large  river  ports  to  insure  their  boats 
and.  execute  premium  notes  therefor  is  reasonable  and  valid  as 
against  the  owners.^"  But  a  custom  of  a  particular  port  to  strike  off 
one-third  the  gross  freight  for  charges  and  to  pay  two-thirds  only 
to  the  assured  in  a  freight  policy  is  unreasonable,^^  and  a  usage 
which  would  continue  a  time  policy  in  force  at  the  election  of  the 
insured  for  an  unlimited  time  is  unreasonable. ^^  So  a  usage  for  a 
master  to  sell  without  necessity  is  invalid."  80  a  usage  permitting 
an  intermediate  voyage  may  be  unreasonable,  as  in  a  case  where 
the  policy  gave  "liberty  of  other  port  or  ports,"  but  was  indorsed, 
"liberty  is  given  to  deviate  by  going  to  port  or  ports  in  Europe,  by 
paying  an  equitable  premium  therefor."  ^*  A  local  custom  that  in- 
surance agents  may,  after  the  termination  of  their  agency,  cancel 
any  policies  issued  through  them,  is  unreasonable  and  void.^*     It 

St.  R^p.  84,  51  So.  956;  Bvrd  v.  Pennsiilvania. — Dcmpsey  v.  Doh- 
Beall,  150  Ala.  122,  124  Am.  St.  Rep.  son,  174  Pa.  122,  32  L.R.A.  761,  63 
60,  43  So.  749;  Leach  v.  Perkins,  17  Am.  St.  Rep.  809,  34  Atl.  459;  Jor- 
Me.  462,  35  Am.  Dec.  268;  Seccomb  dan  v.  Meredith,  3  Yeates  (Pa.)  318, 
V.  Provincial  Ins.  Co.  10  Allen  (92  2  Am.  Dec.  373,  and  note. 
Mass.)  314,  per  Biijelow,  C.  J.;  Macy  Texas. — IMissouri  Pacific  R.  Co.  v. 
V.  Whaling-  Ins.  Co.  9  Mete.  (50  Fagan,  72  Tex.  127,  2  L.R.A.  75,  13 
Mass.)  363,  per  Shaw,  J.;  Bryant  v.  Am.  St.  Rep.  7/6,  9  S.  W.  749. 
Commonwealth  Ins.  Co.  6  Pick.  (23  "Usage,  to  be  valid,  must  be  rea- 
Mass.)  131;  London  Assurance  Corp.  sonable.  It  must  not  tend  to  increase 
V.  Thompson,  170  N.  Y.  94,  62  N.  E.  extravagantly  or  indefinitely  the 
1066,  31  Ins.  L.  J.  351,  354;  Ougier  risks  that  the  undei'writer  meant  to 
V.  Jenning,  1  Camp.  505,  note.  Lord  assure,  or  to  deprive  the  assured  of 
Eldon's  charge  to  jurv-  the  Avhole  or  a  large  portion  of  the 

See  also  Alabama. — Loval  v.  Wolf,  indemnity  on  which  he  certainly  re- 
179  Ala.  505,  60  So.  298;  Shaw  v.  lied.  It  must  not  lead  to  conscquen- 
Ingraham-Dav  Lumber  Co.  152  Kv.  ces  that  could  not  have  been  contera- 
329,  L.R.A.1915D,  145,  153  S.  W.  plated  by  the  parties,  thus  repelling 
231.  the  presumption  that  they  meant  to 

Kentucky. — Kendall  v.  Russell,  5  adopt  it  as  the  basis  of  their  con- 
Dana  (Ky.)  501,  30  Am.  Dec.  696,  tract."  1  Duer  on  Ins.  (ed.  1845) 
698.  268,  sec.  63,  lect.  ii.  p.  2. 

Massachusetts,  —  Farnsworth        v.        ^"^  Adams  v.  Pittsburgh  Ins.  Co.  95 
Hemmer,  1  Allen  (83  Mass.)  494,  79    Pa.  St.  348,  40  Am.  Rep.  662. 
Am.  Dec.  756,  and  note,  759;  Eager       ^^  McGregor   v.   Pennsvlvania   Ins. 
V.  Atlas  Ins.  Co.  14  Pick.  (31  Mass.)    Co.  1  Wash.  (C.  C.)  39,  Fed.  Cas.  No. 
141,  25  Am.  Dec.  363.  8811. 

New  York. — Hatch  v.  Luckman,  ^2  p]yj.g  y  IMarine  Ins.  Co.  5  Serg. 
140  N.  Y.  Supp.  1123,  155  App.  Div.  &  W.  (Pa.)  116,  6  Whart.  (Pa.)  247. 
765,  aff'g  118  N.  Y.  Supp.  689,  64  "  B,.vant  v.  Commonwealth  Ins. 
^lisc.  508.  Co.  6  Pick.  (23  Mass.)  131. 

0/»'o.— Columbus  Coal  Ins.  Co.  v.        1*  Secomb    v.    Provincial    Ins.    Co. 
Tucker,   48   Ohio   St.   41,  12   L.R.A.    10  Allen    (92  ]\Ia.ss.)   305. 
577,  29  Am.  St.  Rep.  534,  per  Spear,        ^5  Merchants'    Ins.    Co.    v.    Prince, 
J-  50  Minn.  53,  52  N.  W.  131. 

633 


§  244  JOYCE  ON  INSURANCE 

is  said  that  a  usage,  to  be  enforced  by  law,  "must  be  reasonable  in 
its  provisions,  for  though  usages  apparently  unreasonable  may  have 
been  so  long  continued  as  to  have  acquired  the  force  of  law,  yet  the 
unreasonableness  now  apparent  may  have  grown  out  of  changes 
occurring  after  the  usage  was  established."  ^^ 

§  244.  Usage  must  be  uniform. — The  course  of  trade  or  custom 
which  constitutes  a  usage  must  be  uniform  in  its  practice  during 
its  continuance,  whether  the  usage  be  recent  in  its  origin  or  long 
established;  that  is,  its  practice  must  be  regular,  uninterrupted, 
and  constant  in  its  observance  and  settled,  not  indeterminate  nor 
variable  in  its  character ;  ^"^  for  occasional  instances,  or  its  practice 
among  a  few  only,  will  not  establish  a  usage,"  and  as  was  said  by 
Shaw,  C.  J.,  in  Macy  v.  Whaling  Insurance  Company,^'  it  must 
also  be  ''convenient  and  adapted  not  only  to  increase  facilities  in 
trade,  but  to  the  promoting  of  just  dealings  in  the  intercourse  be- 
tween the  parties."  It  is  said  that  "the  course  of  trade  must  be  uni- 
form and  general  to  enable  it  to  be  considered  as  a  legal  defense,"  2" 
but  Lord  Ellenborough  declares,  in  Vallance  v.  Dewar.^  that  "if  a 
usage  be  general,  though  not  uniform,  the  underwriters  are  bound 
to  take  notice  of  it."    Mr.  Duer  ^  explains  the  word  "uniform,"  as 

iSMacv    V.    Whaling    Ins.    Co.    9  Dav     Lumber     Co.     152     Kv.     329, 

Mete.   (50  Mass.)   363,  per  Shaw,  C.  L.R.A.1915D,  145,  153  S.  W.  231. 

J.     It  is  declared  that  by  '•unreasou-  Mari/land. — Baltimore    Base    BaH 

able"  is  meant  not  that  the  usage  it-  &  Exhibition  Co.  v.  Pickett,  78  Md. 

self  is  not   reasonable,  but  that  the  375,  22  L.R.A.  690.  28  Atl.'  279. 

unreasonableness  consists  in  suppos-  3Iissotiri. — Southwestern       Freight 

ing  that  the  parties  included  a  cer-  &  Cotton  Press  Ins.  Co.  v.  Stanard, 

tain  usage  in  their  contract.     1  Par-  44  Mo.  71,  100  Am.  Dec.  255. 

sons   on   Insurance    (ed.    1868)    102,  New      York. — London     Assurance 

103.     But  see  Ougier  v.  Jennings,  1  Corp.   v.   Thompson,   170   N.  Y.  94, 

Camp.    505,   where    Lord    Eldon    in-  62  N.  E.  1066,  31  Ins.  L.  J.  391,  394; 

structed  the  jury,  "If  you  think  the  Hatch  v.  Luckman,  140  N.  Y.  Supp. 

usage  does  exist,  if  you  think  it  rea-  1123,  155  App.  Div.  765,  aff'g  118  N. 

sonable''  then  sending  a  ship  on  an  Y.  Supp.  689,  64  Misc.  508. 

intermediate    voyage    might    be    rea-  Texas. — Missouri  Pacific  R.  R.  Co. 

sonable.  v.  Fagan,  72  Tex.  127,  2  L.R.A.  75, 

"  United     States.— See     Trott     v.  13  Am.  St.  Rep.  776,  9  S.  W.  749. 

Wood,   1   Gall.    (U.    S.    C.    C.)    443,  Wisconsin.— Lemke  v.   Hage,  142, 

Fed.  Cas.  No.  14,190,  per  Storv,  J.;  Wis.    178,   135   Am.    St.   Rep.   1066, 

Ceilings   V.   Hope,   3.  Wash.    fU.    S.  125  N.  W.  440. 

C.  C.)   149,  Fed.  Cas.  No.  3003.  is  See  §§  2.39,  240  herein. 

Alahama.—Steele       v.       McTver's  ^^9  lletc.   (50  Mass.)   363. 

Admr.  31  Ala.  677,  70  Am.  Dec.  516,  20  Trott  v.  Wood,  1  Gall.   (C.  C.) 

and  note,  523.  443,  Fed.  Cas.  No.  14,190,  per  Slory, 

Illinois. — Cleveland,        Cincinnati,  J. 

Chicao-o  &  St.  Louis  Rv.  Co.  174  111.  1 1   Camp.  .508. 

398,  02  L.R.A.  922,  51  N.  E.  811,  66  ^1  Duer  on  Ins.    (ed.  1845),  264, 

Am.  St.  Rep.  296.  sec.  58,  note  b. 

Kentucky. — Shaw     v.     Ingraham- 

634 


•CONSTRUCTION— USAGE  §§  245,  246 

used  by  Lord  Ellenborough,  to  mean  "universal,"  and  says:  "It 
is  not  necessary  that  the  usage,  when  it  is  a  usage  of  trade,  or,  in 
the  technical  application  of  words,  to  be  uniform,  should  be  uni- 
versal; that  is,  should  be  followed  at  all  times  by  all  persons  or 
A-essels  concerned  or  employed  in  the  trade  to  wliich  it  relates,  for 
this  would  be  inconsistent  with  the  meaning  which  in  these  cases 
is  attributed  to  the  word  'general.'  "  A  usage  which  is  uniform  is 
not,  however,  necessarily  a  valid  one,  although  of  long  continu- 
ance, as  where  it  is  a  particular  usage  and  not  known  to  the  as- 
sm-ed.  and  where  the  result  of  its  application  would  be  unreason- 
able.3 

§  245.  Parties  may  by  express  contract  include  or  waive  usage. — 
It  is  undoubtedly  true  that  parties  may  by  express  reference  in  the 
policy  to  certain  valid  usages  adopt  such  usages  as  the  standard  by 
which  their  rights  under  the  contract  may  be  determined,  and  the 
contract  will  be  construed  thereby.'*  It  is  likewise  true,  as  we  have 
before  stated,^  that  the  parties  may  always  expressly  contract  so  as 
to  waive  usage.® 

§  246.  Usage  admissible  where  contract  ambiguous  or  obscure. — 
Where  the  terms  of  the  contract  are  ambiguous  or  obscure  or  in- 
deiinite,  or  where  the  words  have  by  the  usages  of  trade  acquired  a 
particular  meaning,  or  are  technical  or  local,  usage  is  admissible 
to  explain  them.'    The  "true  and  appropriate  oflice  of  a  usage  or 

'  McGregor    v.    Insurance    Co.    of  gers  Fire  Ins.  Co.  of  N.  Y.  v.  David 

Pa.  1  Wash.    (C.  C.)    39,  Fed.   Cas.  Moffat  Co.  154  Fed,  13,  83  C.  C.  A. 

No.  8811,  per  Washington,  J.  91;    Wintlirop   v.    Union    Ins.    Co.    2 

*  Union    Bank   v.    Union    Ins.    Co.  Wa.^Ii.  (U.  S.  C.  C.)  7,  Fed.  Cas.  No. 

Dud.   (S.  C.)    171;   Canton  Ins.  Of-  17,901;   Hancox  v.  Fishing  Ins.   Co. 

tice,  Ltd.  V.  Woodside,  90  Fed.  301,  3  Sum.  (U.  S.  C.  C.)  132,  Fed.  Cas. 

3-3  C.  C.  A.  63,  61  U.  S.  App.  214,  No.   6,013. 

28  Ins.  L.  J.  269.  Man/land. — Allegro     v.     Maryland 

5  See  §  196  herein.  Ins.  Co.  6  Har.  &  J.   (Md.)   108,  14 

6  Schooner   Reeside,    The,   2    Sum.  Am.  Dec.  289. 

(U.  S.  C.  C.)  567,  570,  Fed.  ("us.  Xo.  Massachusetts.  —  Boruszweski       v. 

11,  657,  per  Ston-,  J.     See  also,  sren-  Middlesex    Mutual    As.sur.    Co.    186 

erally,  New  Roads  Oilmill  &  Manu-  Mass.  589,  72  N.  E.  250;  ^Mooney  v. 

facturing  Co.  v.  Kline,  Wilson  &  Co.  Howard  Ins.  Co.  138  ]\Iass.   375,  52 

154  Fed.  296,   83   C.   C.  A.  1.     See  Am.  Rep.  277;  Murray  v.  Hatch,  6 

marine  ins.   act  1906    (6  Edw.  YJI.  Mass.  477. 

c.   4)    .sec.   87;.  Buttervvorth's   Twen-  Missouri. — Tesson  v,  Atlantic  IVFut. 

tieth    Cent.    Stats.     (1900-1909)     p.  Ins.  Co.  40  Mo.  33,  93  Am.  Dec.  293. 

423;     Chittv's     Stats.     Eng.     (1902-  New  YorA;.— New  York  Betting  & 

1907)   p.  905.  Packing  Co.  v.  Washinston  Jn.<^.  Co. 

Wnited  States.— Vnited   States  v.  10  Bosw.  (N.  Y.)  428,  23  N.  Y.  Sup. 

Macdaniel,  7  Pet.   (32  U.  S.)   1,  13,  Ct.  428;  Coit  v.  Commercial  Ins.  Co. 

14,  8  L.   ed.   587;    St.   Paul   Fire   &  7  Johns.    (N.  Y.)    385,   5   Am.   Dec. 

Marine  Ins.  Co.  v.  Balfour,  168  Fed.  282;    Rankin    v.    American   Ins.    Co. 

212,  93  C.  C.  A.  498;  Globe  &  Rut-  1  Hall  (N.  Y.)  619. 

635 


§  :M6  JOYCE  ox  INSURANCE 

custom,"  says  Story,  J.,^  "is  to  inteipret  the  otherwise  indetermi- 
iiate  intentions  of  the  parties,  and  to  ascertain  the  nature  and  extent 
of  their  contracts,"  and  "courts  have  long  allowed  mercantile  in- 
struments to  be  expounded  according  to  the  custom  of  merchants."  ' 
So  the  "contract  of  insurance  is  presumed  to  have  been  made  with 
reference  to  the  usages  of  the  place  to  which  the  contract  has  ref- 
erence," ^°  and  usage  may  be  proved  by  parol,  although  it  has  its 
origin  in  law  or  edict  of  the  government.^^  Evidence  of  local  cus- 
tom is  admissible  to  supply  details  in  oral  or  written  contracts  in 
regard  to  which  the  contract  itself  is  silent,  or  to  explain  provincial- 
isms or  technical  terms  which  have  acquired  a  known,  fixed,  and 
definite  meaning  different  from  the  ordinary  import  of  such  terms, 
or  where  such  terms,  if  not  explained,  are  susceptible  of  more  than 
one  reasonable  construction. ^^  And,  in  general,  evidence  of  usage 
is  admissible  to  apply  the  written  contract  to  the  subject  matter 
of  the  action,  to  exi^lain  expressions  used  in  a  particular  sense  by 
particular  persons  as  to  particular  subjects,  and  to  give  effect  to 
language  in  a  contract  as  it  was  understood  by  those  who  made  it.^' 
80  evidence  of  usage  is  admissible  to  explain  the  meaning  of  the 
word  "explosion"  in  an  insurance  contract.^* 

Pennsi/lvauia. — Citizens'    Ins.    Co.  ®  Smith  v.  Wilson,  3  Bam.  &  Adol. 

V.  jMeLaughliu,  53  Pa.  St.  485;  Eyre  728,  per  Parke,  J. 

V.   Marine    Ins.    Co.    5    Watts   &"S.  ^°  Cobb  v.  New  England  Mut.  Ins. 

(Pa.)  116.  Co.  C  Gray  (72  Mass.)  192,  200. 

Virf/inia. — Harris    v.    Nicholas,    5  ^^  Livingston  v.  Maryland  Ins.  Co. 

Munf.  (Va.)  483.  7  Cranc-h  (11  U.  S.)  506,  3  L.  ed.  421. 

England. — Wigglesworth  v.   Dalli-  Time  policies  are  said  by  Mr.  Duer 

son,  1  Doug.  207,  15  Eng.  Rul.  Cas.  (1    Duer    on    Insurance    [ed.    1845] 

542.  205)   to  embrace  all  usages  or  none. 

See    1    Arnould    on    Marine    Ins.  See   note  in   3   L.R.A.(N.S.)    248, 

(Perkins'  ed.  1850)   64;  Id.   (9th  ed.  on  admissibility  of  evidence  of  cus- 

Hart  &   Simey)    sec.  67,   p.   90,  sec.  lom  to  create  an  exception  to  written 

1273,  p.  1591.  contract. 

Proof  of  usage  or  custom  is  admis-  12  Barlow  v.  Lambert,  28  Ala.  704, 

sible   only   as  an   aid   or  instrument  65  Am.  Dec.  374,  and  note  379, 

lending-  to  aid  interpretation.    Amer-  13  gj^ith  v.  Clews,  114  N.  Y.  390, 

iTV.rx  "^i^^'ilw  p"  "n  ?<^  4  L.R.A.  392,  11  Am.  St.  Rep.  627, 
12  Cal.  App    133    10b  Pac.   .20,  39    31  N.  E.  160;  Dillon  v.  Continental 

wi7"       K      '  1     1  Casualty  Co.  130  Mo.  App.  502.  109 

Where    bv   usage   words   have   ae-  o     ttt     on     -f->    i.    1  t 

quired  a  special  and  peculiar  mean-  ^-    ^-    ^^/    Destrehan    v.    Louisiana 

ing    different    from    their    ordinary  S^P^ff  ,^"3"^^"    ?''•    1^   ^-    ^"5 

meaning  this  may  be  shown.     Ocean  ''-"'  ^"^  ^^-  ^■^'  ^"  ^^-  ^^-  ^^P-  -^'^' 

Steamsiiip  Co.  v.  .Etna  Ins.  Co.  (U.  Bowman   v.  First   National  Bank,  9 

S.   D.   C.)    121   Fed.   882;   Paepcke-  ^as^^-  614,  43  Am.  St.  Rep.  8/0,  38 

Leicht    Lumber    Co.    v.    Tallev,    106  Pac.  211;  John  O'Brien  Lumber  Co. 

Ark.  400,  153  S.  W.  833.        "  v.  Wilkinson,  123  Wis.  272,  101  N. 

8  Schooner  Reeside,  2  Sum.  (U.  S.  W.  1050. 
C.  C.)  567,  569,  Fed.  Ca.s.  No.  11,657.        1*  Hartford    Steam  Boiler  Inspee- 

636 


I 


CONSTRUCTION— USAGE 


§  247 


§  247.  Usage  inadmissible  to  contradict  or  substantially  vary  the 
plain  terms  of  the  policy. — It  reasonably  follows  the  rule  that  par- 
ties niav  make  such  valid  contracts  as  tliev  wish,  that  iisaiie  is  in- 
admissible  to  contradict,  nullify,  or  substantially  vary  the  positive 
terms  in  which  they  have  expressly  stipulated,  where  the  words  are 
clear  and  are  of  a  plain  and  decisive  character.  To  admit  such  evi- 
dence for  such  purpose  would  establish  the  principle  that  courts 
can,  by  construction,  incorporate  into  the  policy  that  w^hich  was 
never  contemplated  by  the  parties,  and  would  allow  mere  presump- 
tions and  implications  to  overthrow  the  most  formal  and  deliberate 
declarations  of  the  parties."  It  wa.s  early  stated  by  Emerigon,^® 
who  refers  to  Vattel,^'''  '"that  the  first  general  rule  of  construction 
is  that  it  is  not  permitted  to  interpret  what  has  no  need  of  inter- 
pretation," ^^  And  "if  the  parties  have  explained  themselves  out 
the  point  in  a  precise,  special,  and  clear  manner,  all  interpretation 
becomes  superfluous,  cum  in  verbis  nulla  est  ambiguita.s  non  debet 
admitti  voluntatis  in  quaestio;  and  the  stipulated  agreement  nmst 
be  adhered  to."  ^'  The  words  ''precise,"  "clear,"  and  "special,"  used 
by  Emerigon,  add  much  to  the  force  of  the  rule,  make  it  easier  of 
application,  and  operate  more  strictly  to  the  exclusion  of  usage.^° 


tiori  &  Ins,  Co,  v.  Pabst  Brewing  Co, 
201  Fed.  (J17,  120  C.  C.  A,  4.3. 

15  Schooner  Reeside,  2  Sum.  (U.  S. 
C.  C.)  567,  570,  Fed.  Cas.  No.  11,657, 
per  Story,  J.  See  New  York  Ins.  Co. 
V.  Thomas,  3  Johns,  Cas.  (N.  Y,)  1, 
per  Kent,  J, 

1®  Emerigon  on  Ins.  (Meredith's 
ed.)   e,  ii.  see.  7,  p.  49. 

^''  Droit  des  Gen.s,  liv.  3,  c.  17. 

1®  "When  an  instrument  is  con- 
ceived in  clear  and  precise  terms, 
when  its  sense  is  manifest  and  leads 
1o  nothing  absurd,  there  is  no  e.xcuse 
for  refusing  the  meaning  it  naturally 
presents.  To  seek  elsewliere-  conjec- 
tures to  restrain  or  enlarge-  it  is  to 
wish  to  evade  it."  Emerigon  on  In- 
surance (Meredith's  ed.)  c.  ii.  sec.  7, 
p.  49.  And  he  adds  that  when  in 
doubt  as  to  the  interpretation,  "it 
must  be  understood  with  reference  to 
principles  of  law  and  to  the  practice 
of  commerce." 

1®  Emerigon  on  Insurance  (Mere- 
dith's ed.  1850)  e.  xiii.,  sec.  7,  p.  555. 
"If  the  covenants  are  clear  in  them- 
selves, and  contain  nothing  prohibit - 

63 


ed  by  law,  the  judge  is  not  allowed  to 
stray  out  of  them;"  that  it  is  only 
where  the  contract  is  ambiguous  "that 
the  magistrate  is  authorized  to  form 
his  decision  by  the  light  which  legal 
equity,  the  common  law,  the  nature  of 
the  contract,  and  the  circumstances 
of  the  case  may  afford  him."  Emer- 
igon on  Insurance  (Meredith's  ed. 
1850)  c.  i.  sec.  5,  p.  17.  It  will  be 
observed  that  Emerigon  uses  the 
words  "clear"  and  "precise."  The 
words  "plain  and  decisive  character" 
are  also  used  by  Hubbard,  J.,  in 
Macy  v.  Whaling'ins.  Co.  9  Met,  (50 
^lass.)  363.  So  also  in  1  Arnould 
on  jMarine  Insurance  (Perkins'  ed. 
1850)  64a,  note,  who  says:  "Where, 
liowever,  the  terms  employed  are 
clear  and  pi'ecise  in  themselves,"  etc. 
no  evidence  of  usage  is  admissible. 
See  also  1  Parsons  on  Ins.  (ed.  1868) 
84  note. 

^°  See  remark  in  1  Parsons  on  In- 
surance (ed.  1868)  83,  84,  note  1.  See 
also  1  Arnould  on  Insurance  (Per- 
kins' ed.  1850)   75,  rule  iii.  sec.  44. 


§  248 


JOYCE  ON  INSURANCE 


So  Mr.  Justice  Harlan,  in  Grace  v.  American  Central  Insurance 
Company  ^  declares  that  "an  express  written  contract  embodying 
in  clear  and  positive  terms  the  intention  of  the  parties  cannot  be 
varied  by  evidence  of  usage  or  custom,"  and  there  are  numerous  au- 
thorities of  like  tenor.^ 

§  248.  Same  subject:  cases  and  authorities. — Evidence  of  usage 
for  vessels  to  go  to  two  ports  in  the  same  island  is  inadmissible 
where  the  contract  is  written  and  plain,  and  the  usage  is  inconsist- 


1 109  U.  S.  278,  283,  3   Sup.  Ct.  Blancliard,  67  N.  H.  268,  68  Am.  St. 

207,  27  L.  ed.  932.  Rep.  664,  36  Atl.  556. 

^United      States.  —  Winthrop      v.  -^^ew  York. — Hopper  v.  Sage,  112 

Union  Mut.  Ins.  Co.  2  Wash.  (C.  C.)  N-  Y.  530,  8  Am.  St.  R«p.  77i;  20  N. 

7,  Fed.   Cas.  No.  17,901;   McGresror  E.  3o0j  Hone  y.  Mutual  Safety  Ins. 


V.  Pennsyhania  Ins.  Co.  1  Wash.  (U. 
S'.  C.  C.)  39,  42,  Fed.  Cas.  No.  8,811. 
See  Delaware  Ins.  Co.  of  Phila.  v. 
S.  S.  White  Dental  Manufacturing 
Co.  109  Fed.  334,  48  C.  C.  A.  382, 


Co.  1  Sand.  (N.  Y.)  137,  2  N.  Y.  (2 

Comst.)  235;  St.  Nicholas  Ins.  Co.  v. 

Mercantile  Mut.  Ins.  Co.  5  Bosw.  (N. 

Y.)   238;  Baro-ett  v.  Orient  Ins.  Co. 

3  Bosw.  (N.  Y.)  385. 

on  T        T     T    nr-i         ^-        •    i     •  j  Texcis. — Henry  v.   Green  Ins.   Co. 

30  ins.  L.  J.  961,  eertioi'ari  denied,  ^f    Aw,„.v„           rr„„     n-        a 

TQQ  TT   c    r-f.f.    AC  T       1    Qop   oo  c  *^^  America,  —  Tex.   Civ.   App.  — , 

183  U.  S.  /OO,  46  L.  ed.  390,  22  Sup.  203  S    W   836 

Ct.  936,  s.  e.  105  Fed.  642  Wri/Zmi-Mutual    Assur.    Soc.   v. 

^ia&«.m«.— Byrd  v.  Beall,  loO  Ala.  Scottish  Union  &  National   Ins.   Co. 

122,   124   Am.    St.   Rep.    60,   43    So.  84  Va.  116,  4  S.  E.  175,  10  Am.  St. 

749;  Smith  v.  Mobile  Nav.  &  Mutual  Rep.  819. 

]ns.  Co.  30  Ala.  167.  ^Vhconsin. — Vogt    v.    Schienebeck, 

^?7.a)«sff.s.— Paepeke-Leicht     Lum-  122  Wis.  491,  106  Am.  St.  Rep.  989, 

her  Co.  v.  Talley,  106  Ark.  400,  153  100  N.  W.  820,  67  L.R.A.  756. 

S.  W.  833.  Englana.—^'&W  v.  Janson,  4  El.  & 

Connecticttt. — Wiggin    v.    Federal  B.    500,   508,    per    Campbell,    C.   J.; 

Stock  &  Grain  Co.  77  Conn.  507,  59  Crofts  v.  Marshall,  7  Car.  &  P.  597, 

Atl.  607.  607,  per  Lord  Denman ;  1  Arnould  on 

Delaimre. — Lattomus    v.    Farmers'  Insurance     (Perkins'    ed.    1850)     78 

Mut.  Fire  Ins.  Co.  3  Houst.   (Del.)  rule  iv. ;  1  Parsons  on  Insurance  [ed. 

254.  1808]  85,  et  seq.     Mr.  Duer  (1  Duer 

Illinois. — Delaware  &  Hudson  Ca-  on  Insurance   [ed.  1845]    269)    says, 

nal  Co.  V.  ^Mitchell,  113  111.  App.  429,  that  usage   must  be  consistent  with 

aff'd  2n  111.  329,  71  N.  E.  1026;  II-  the  terms  of  the  policy,  and  is  never 

linois    Mason's    Benevolent    Soc.    v.  admissible  to  contradict  its  terms  or 

Baldwin,   86   111.  479.  to  nullify  or  expunge  them.     "Usage 

Iowa. — Duncan  v.  Green,  43  Iowa,  may  be   admissible   to   explain  what 

679.  is  doubtful.    It  is  never  admis.^ible  to 

Minnesota. — Northwestern   Fire   &  contradict  what  is  plain."     Blackett 

Marine  Ins.  Co.  v.  Connecticut  Fire  v.  Rov'al  Exch.  Assur.  Co.  2  Cromp. 

Ins.  Co.  105  Minn.  483,  117  N.  W.  &    J. "  244,   14   Eng.    Rul.    Cas.   179. 

825.  "Where  the  terms  of  a  contract  are 

Missonri. — Dillon     v.     Continental  ])lain,  usage  can  have  little  effect  up- 

Casualty  Co.  130  Mo.  App.  502,  109  on  the  construction  to  be  placed  up- 

S.  W.  89.  on  it."    Boldero  v.  East  India  Co.  26 

New     Hampshire. — Cummings     v.  Beav,  316. 

638 


CONSTRUCTION— USAGE  §  249 

ent  with  and  repugnant  to  the  contract.^  So  usage  is  held  inadmis- 
sible to  qualify  an  express  stipulation  as  to  keeping  a  watch  nights 
by  showing  that  certain  rights  were  excepted  by  custom,*  nor  can 
the  practice  of  an  insurance  company  to  surrender  the  notes  of  its 
members  and  cancel  their  policies  on  the  happening  and  payment 
of  losses  be  shown  to  contradict  or  vary  the  terms  of  the  policy  or 
note.*  And  usage  will  not  permit  a  deviation  contrary  to  the  terms 
of  a  policy  expressly  giving  liberty  to  touch  at  a  particular  port,^ 
nor  can  evidence  be  received  against  the  plain  language  of  the  pol- 
icy of  a  custom  that  a  marine  policy  on  goods  shipped  from  New 
Orleans  to  Mobile  covers  the  overland  transportation  of  the  goods  by 
railroad.'  And  where  the  policy  provides  in  express  terms  that  the 
company  shall  pay  the  amount  of  loss  without  any  deduction,  a 
custom  or  usage  of  the  company  which  would  vary  or  limit  such 
express  agreement  is  inadmissible.'  So  a  local  custom  among  in- 
surers to  pay  only  a  certain  proportion  of  the  loss  is  inadmissible 
to  vary  or  control  the  plain  terms  of  the  contract  or  to  reduce  the 
amount  of  recovery.^  It  is  also  held  that  where  the  contract  is  sus- 
ceptible of  a  reasonable  construction  on  its  face,  custom  or  usage  is 
inadmissible  to  vary  its  language,  although  the  instrument  be  an 
open  or  running  policy  and  the  contested  clauses  are  scattered  over 
the  document.^"  Where  the  policy  was  drawn  in  accordance  with 
the  terms,  and  the  proposal  provided  for  insurance  ''on  the  char- 
ter of  the  barque  'Maria  Henry,'  Liverpool  to  port  in  Cuba,  and 
thence  to  port  of  advice  and  discharge  in  Europe,"  evidence  was 
lield  inadmissible  to  show  a  usage  for  vessels  so  chartered  to  go  to 
two  ports  in  Cuba."  So  the  conditions  and  agreements  in  a  policy 
of  life  insurance  form  the  contract  between  the  partie,"^.  and  will  not 
be  varied  or  controlled  by  the  subsequent  course  of  dealing  between 
them,  in  the  absence  of  fraud  or  bad  faith.^^ 

§  249.  Whether  usage  controls  the  plain  legal  import  of  words  of 
the  policy. — It  is  said  that  usage  must  be  consistent  with  the  rules 

3  Hearne    v.    Marine    Ins.    Co.    20  ^  Swamscot  M.  Co.  v.  Partridge,  5 

Wall.  (87  U.  S.)  488,  22  L.  ed.  395.  Fost.  (25  N.  H.)  3G9. 

*  Ripley  v.  ^Etna  F.  Ins.  Co.  30  N.  ^  IMutual  Safety  In.'?.  Co.  v.  Hone, 

Y.  136,  86  Am.  Dec.  362,  and  note  2  N.  Y.   (2  Comst.)   235. 

371_  ^"Orient      ]\lutual      Ins.      Co.      v. 

5  New  Hampshire  Mntual  Fire  Ins.  Wright,  1  Wall.   (68  U.  S.)   456,  17 
Co.  V.  Rand,  4  Fost.  (24  N.  11.)  428.  L.   ed.   505. 

See  Mntnal   Assur.   Soc.   v.   Scottish  "  Hearn  v.  New  England  IMut.  M. 

Union   &   National   Ins.   Co.   84  Va.  Ins.   Co.  4  Cliff.    (C.   C.)    200,  Fed. 

116,  17  Ins.  L.  .T.  570,  4  S.  E.  178.  Cas.  No.  6,302. 

6  Elliott  V.  Wilson,  4  Brown  Pari.  ^^  Union   Central  Life  Ins.   Co.  v. 
C.  470.  Bnxer,   62   Ohio    St.   385,   49  L.R.A. 

7  Smith  V.  Mobile  Nav.  &  Mutual  737,  57  N.  E.  66. 

Co.  30  Ala.  167. 

639 


§  249 


JOYCE  ON  INSURANCE 


of  law,  but  exactly  what  is  meant  by  "consistent"  is  much  contro- 
verted.^^ If  usage  is  admissible  to  control  the  plain  and  legal  im- 
port of  the  words  of  the  policy,  the  rule  given  in  the  last  section 
would  be  too  limited  in  its  application.^*  It  is  held  that  usage  can 
only  be  resorted  to  where  the  law  is  unsettled.  Chancellor  Wal- 
worth "  declares  that  "if  the  terms  employed  have  received  a  settled 
legal  construction,  that  must  govern,  and  no  evidence  of  a  particu- 
lar custom  or  usage  in  opposition  to  such  legal  construction  can  be 
received."  ^^  So  Sandford,  J.,  declares:  "  "We  find  it  clearly  settled 
that  a  general  usage,  the  effect  of  which  is  to  control  rules  of  law, 
is  inadmissible,  so  of  one  which  contradicts  a  settled  rule  of  com- 
mercial law."  ^^  Mr.  Arnould  ^^  says  parol  evidence  "will  never  be 
admitted  to  set  aside  or  control  its  (the  policy's)  plain  and  unam- 
biguous terms."  ^"  But  the  same  author,  however,^  also  declares  that 
usage  is  admissible  to  explain  the  meaning  or  words  which  are  am- 
biguous in  themselves,  or  made  so  by  proof  of  extrinsic  circumstances. 
Mr.  Marshall  says '^  that  "usage  is  only  to  be  consulted  where  the 
law  is  doubtful.  Where  the  law  is  clear  it  must  prevail."  ^  He  also 
asserts  *  that  "the  usage  of  trade  often  controls  the  general  construc- 
tion of  the  policy."     In  Homer  v.  Dorr,*  it  is  declared  that  the 


^^  Usage   must   be   consistent   "with  between  law  properly  so  called  and 

the  rules  of  law.    This  rule,  however,  the   mere   result   of   decisions,   as  to 

is  to  be  explained  and  limited,  since  the  meanings  of  words.     Usages  con- 

a  usage  inconsistent  with  an   estab-  tinually     vary,     and     do     certainly 

lished   rule   of   commercial   law    may  change  from  time  to   time." 

be  allowed  to  prevail,  and  a  definite  ^'^  Hone  v.  Mutual  Safety  Ins.  Co. 

rule  of  law  is  frequently  set  aside,  1   Sand.   (N.  Y.)   149. 

although  plainly  applicable,  and  ev-  ^^  See  this  case  as  to  the  general 

ery    rule    of    law    which    the    parties  rule  of  construction,  also  as  to  usage 

may  by  stipulation  vary  or  prevent  and  how  far  usage  is  admissible;  and 

is  subject  to  a  valid  i;sage.     1  Duer  same  case,  2  N.  Y.  (2  Comst. )  235. 

on  Ins.    (ed.  ISI-j)    271  et  seq.    This  ^^1  Arnould  on  Ins.   (Perkins*  ed. 

means  only  that  the  usage  must  be  1850)    78,  see.  45,  rule  iv. ;  Id.   (9th 

consistent  with  the  rules  of  law,  in  ed.  Hart  &  Simey)   sees.  67,  71,  pp. 

(he  same  sense  that  the  policy  itself  90,  95. 

is  a  prohibited  usage  cannot  be  made  ^°  This    rule    is    criticised    as    too 

valid,  no  matter  how  long  practised,  broad;  1  Parsons  on  Ins.  (ed.  1868) 

^*  Winthrop   v.    Union    Ins.    Co.    2  83,  note. 

Wash.  (U.  S.  C.  C.)  7,  Fed.  Cas.  No.  ^1  Arnould  on  Ins.    (Perkins'  ed. 


17,901. 

15  Dow  V.   Whitten,  8  Wend.    (N. 
Y.)   108. 

i«In   1   Duer   on   Ins.    (ed.   1845) 


1850)  75,  sec.  44,  rule  iii. 

2  1    Marshall    on    Ins.    (ed.    1810) 
707a. 

^  Criticised  in  1  Duer  on  Ins.  (ed. 


229,  it  is  said  that  this  rule  is  true    1845)  235. 

only  in  a  verv  limited  sense.     In  1       *2   Marshall    on    Ins.    (ed.    1810) 
Parsons  on  Ins.   (ed.  1868)   98,  it  is   727. 

said:     "We   apprehend  that   in   thi*!       *  ^q  Mass.  26,  28.     This  decision  is 
remark  a  distinction  is  lost  sight  of  said  to  be  erroneous,  and  irreconeila- 

640 


COXSTRUCTIOX— USAGE  §  249 

"usage  of  no  class  of  citizens  can  be  sustained  in  opposition  to  prin- 
ciples of  law."  So  it  is  said  in  Bargett  v.  Orient  Insurance  Com- 
pany ^  that  "no  usage  can  exist  or  be  proved  by  which  the  liabilities 
of  parties  to  a  written  contract  will  be  greater  or  less  than  the  writ- 
ten law  of  the  state  has  adjudged  it  to  be."  Mr.  Parsons'  says: 
"No  usage  can  be  relied  vipon  which  opposes  either  a  rule  or  prin- 
ciple of  law.  ...  If  terms  have  received  by  definite  adjudica- 
tion a  fixed  and  definite  meaning,  no  usage  will  be  permitted  to 
show  that  the  parties  had  another  meaning,"  but  he  also  asserts,  in 
an  earlier  part  of  his  work,^  that  it  must  not  be  understood  "that 
where  words  are  unambiguous,  and  have  as  commonly  used  a  plain 
and  certain  meaning,  usage  is  never  permitted  to  control  or  vary  its 
meaning,"  and  that  it  is  certain  "that  the  natural  and  ordinary 
meaning  of  the  words,  as  that  may  be  determined  by  common  use, 
may  be  controlled  by  evidence  of  usage."  Mr.  Wood  ^  states  the 
rule  as  follows:  "If  the  words  written  in  the  policy  have  received 
a  judicial  construction,  and  also  a  peculiar  commercial  construc- 
tion by  usage  variant  with  such  judicial  construction,  the  judicial 
construction  is  to  control,  but  if  no  judicial  construction  has  been 
given  to  them,  and  by  usage  they  have  acquired  any  meaning  var- 
iant from  that  in  which  they  are  ordinarily  used,  such  meaning  by 
usage  may  be  shown,  unless  from  the  whole  instrument  it  was  evi- 
dent they  were  used  in  their  ordinary  sense."  Emerigon  ^"  says: 
"In  most  cases  it  is  very  probable  that  words  have  been  used  in  their 
ordinary  sense;  that  always  implies  a  very  strong  presumption 
which  cannot  be  overcome  but  by  a  contrary  presumption  still 
stronger ;  "  and  he  adds  ^^  that  inasmuch  as  insurance  is  a  contract 
bona  fides,  "the  subtleties  of  law  are  to  be  made  to  jdeld  to  that  of 
equity,  which  is  the  soul  of  commerce.  .  .  .  The  clauses  of  the 
contract  are  to  be  interpreted  according  to  the  style,  the  customs, 
and  usages  of  the  place  where  the  insurance  has  been  made,  though 
the  inclination  of  the  common  law  might  appear  different."  It  is 
also  declared  in  Long  v.  Allen  ^^  that  evidence  of  usage  might  be 
received  to  explain  or  control  the  policy.     Mr.  Pliillips  ^^  says  this 

ble  with  Long  v.  Allen,  4  Doug.  27fi,  »!  Parsons  on  Ins.  (ed.  18G8)   83. 

14  Eng.  Rul.  Cas.  517,  in  1  Duer  on  ^1  Wood  on  Fire    Ins.     (2d    cd.) 

Ins.     (ed.    1845)     246,    247.      It    is  14.'?. 

also   said   of   Homer  v.   Dorr,   "that  ^°  Emerigon    on    Ins.     (IMeredith'* 

this   decision    has   never   been    acted  ed.  1850)   c.  ii.,  see.  7,  p,  50. 

upon,"  in  note  attached  to  the  case.  ^^  Id.  c.  i.,  .sec.  5,  p.  17. 

See    also    1    Parsons    on    Ins.     (ed.  ^^  4  Dong.  276,  14  Eng.  Rul.  Cas. 

1868)  m,  note  :J.  517,  i)er  Bullor.  J.,  and  note. 

63  Bosw.  (N.  Y.)  397.  "1  Phillips  on  Ins.   (3d  ed.)   86. 

'1  Parsons  on  Ins.  (ed.  1868)  97, 
98. 

Joyce  Ins.  Vol.  I.— 41.  G41 


§  249  JOYCE  OX  INSURANCE 

"is  true  if  'to  control'  means  to  interpret  the  policy,  and  give  a 
meaning  to  it  ditierent  from  that  imputed  by  the  language  in  its 
ordinary  acceptation,  but  that  the  use  of  the  word  in  this  connec- 
tion is  likely  to  convey  an  erroneous  meaning,"  and  that  ''evidence 
of  usage  cannot  be  admitted  to  control  what  is  written  in  contrast 
with  explaining  it.''  The  words  of  Buller,  J.,  are,  we  apprehend, 
made  clearer  if  considered  in  connection  with  those  used  by  him  in 
Brough  v.  Whitmore,"  where  he  declares  that  he  'Svould  not,  on 
account  of  any  usage  to  the  contrary  among  underwriters,  overturn 
a  solemn  determination  of  this  court."  Although  in  Long  v. 
Allen  "  Lord  Mansfield  said  "The  law"  is  clear  that  where  the  risk 
has  never  commenced  the  premium  shall  be  returned,"  but  it  was 
held,  nevertheless,  tliat  a  usage  that  in  certain  cases  the  premium 
should  be  returned,  deducting  a  per  centum,  would  control.  i\Ir. 
Duer^®  says  the  distinction  made  by  Buller,  J.,  is  perfectly  accur- 
ate, since  where  the  words  are  ambiguous,  usage  "explains"  them, 
"but  where  they  convey  a  definite  meaning  that  the  court  would  be 
bound  to  adopt,  or  their  construction  has  been  settled  by  law,  the 
usage  controls  them,  and  in  these  cases  it  does  set  aside  what  .  .  . 
was  the  plain  intention  of  the  parties,  but  in  controlling,  the  usage 
does  not  contradict  the  words — it  merely  varies  by  restraining  or 
enlarging  their  application."  He  also  lays  down  the  proposition 
that  while  usage  may  modify  or  control  the  policy,  yet  it  must  be 
consistent  with  its  terms,  and  is  inadmissible  to  contradict  its  ex- 
press words  ;^'^  and  finally  he  declares  that  "in  the  only  cases  in 
which  the  evidence  has  been  admitted  to  supersede  a  rule  of  law 
the  usage  was  solely  derived  from  a  use  and  practice  between  the 
assurers  and  the  assured,  and  they  contain  no  intimation  that  when 
the  usage  is  of  a  difl'erent  character  the  evidence  could  be  justly  re- 
ceived." ^* 

1*4  Term   Rep.   210.  "It   has   been    seriously    doubted   by 

15  4  Doug.  276,  14  Eng.  Rul.  Cas.    eminent  judges  whether  a  usage  not 

517.  adopted  nor  refen-ed  to  in  the  policy 

1^  1  Duer  on  Ins.  (ed.  1845)  245.       ought  ever  to  be  permitted  to  con- 

"1  Duer  on  Ins.   (ed.  1845)   186,   trol   its   operation.     .     .     .    Yet   the 

269.  270.  propriety  of  receiving  the  evidence, 

1^1  Duer  on  In.s.   (ed.  1845)   275,    when   subject  to  its  just  limitations, 

citing  Renner  v.  Bank  of  Columbia,   is  readily  conceded:"     Duer  on  Ins. 

9  Wheat.   (22    U.    S.)     581,    592,    6    (ed.  184o)   378.  sec.  29,  citing  Lord 

L.  ed.  166 ;  Halsey  v.  Brown,  3  Day   Holt   in   Letliiellier's    case,    2    Salk. 

(Conn.)    46;    Lennox   &   Kennebeck   443;   Lord   p]ldon,    in    Anderson    v. 

Bank  v.  Paige.  9  Ma.s.s.  158;   Frith   Pitcher,  2  Bos.  &  P.  164,  168;  Story 

V.   Barker,  2   John.s.    (N.    Y.)     328;    J.,  in  Schooner  Reeside,  2  Sum.   (U. 

citing  Edie  v.  East  India  Co.  2  Burr.    S.  C.  C.)   567,  Fed.  Cas.  No.  11657, 

12,  16,  4  Ens'.  Rul.  Cas.  344:  Stew-   and  in  Palmer  v.  Warren  Ins.  Co.  1 

art  V.  Aberdeen,  4  Mees.  &  W.  228.    Story   (C.  C.)    360,    Fed.    Cas.    No. 

642 


CONSTRUCTION— USAGE 


§  250 


§  250.  Same  subject:  opinions  and  cases. — It  is  held  that  general 
usage  operating  as  a  general  rule  of  law  may  be  pleaded  against  a 
contract  plain  and  unambiguous  in  its  terms.^^  So  it  is  said: 
''Evidence  is  admissible  to  show  that  the  contract,  notwithstand- 
ing the  common  meaning  of  the  language  ui^ed,  was  in  fact  made 
in  reference  to  the  usage  in  the  trade  to  which  the  contract  re- 
lates." ^^  Language  substantially  to  the  same  effect  is  used  in  an- 
other case,  where  it  is  said  that  usage  may  be  "admitted  to  vary 
and  control  the  language  used  in  the  policy,  and  to  give  a  construc- 
tion different  from  that  which  it  otherwise  would  have  received  or 
did  receive."  ^  A  general  and  established  rule  of  law  may  be  set 
aside  even  by  a  particular  and  local  usage,  as  in  case  of  a  usage  at 
Lloyds,  proven  to  have  been  known  to  underwriters.  This  is  so 
decided  in  Stewai^t  v.  Aberdeen.^  So  a  rule  of  law  may  be  con- 
trolled by  a  particular  usage  between  the  parties  known  to  them 
and  the  basis  of  contracting.^     So  a  usage  at  Lloyds  as  to  adjust- 


10698.  "A  usage  in  the  mterpreta-  their  own  contract,  the  parties  them- 
tion  of  the  policy  is  the  substitute  for  selves  were  competent  to  cliange.  If 
a  judicial  decision,  and  that  which  this  position  be  correct,  the  propriety- 
supersedes  a  rule  of  law  has  itself  of  the  decision  of  the  supreme  court 
the  force  of  law  in  the  eases  to  Avhich  of  New  York,  in  Frith  v.  Barker,  2 


Johns.  (N.  Y.)  328,  seems  very  ques- 
tionable: "  1  Doer  on  Ins.  (ed.  1845) 
303.  It  Avas  held  in  the  decision 
referred     to     that     usage     is     inad- 


it  applies:''  1  Duer  on  Ins.  (ed. 
1845)  261.  "Upon  an  examination 
of  the  decisions,  it  will  appear  that  in 
a  large  majority  of  the  cases  the 
effect  of  the  usage  as  proved  was  to  missible  to  change  a  settled  rule 
set  aside  a  construction,  or  super-  of  commercial  law.  "Now,  the  rule 
sede  a  rule  that  the  court  must  other-  in  question  is  certainly  one  that  the 
wise  of  necessity  have  followed;  parties  may  change  by  an  express 
.  .  .  the  usage,  therefore,  over-  stipulation:"  1  Duer  on  Ins.  (ed. 
rules  and  sets  aside  a  plain  and  set-   1845)  303. 

tied  construction:"  Id.  256.  "A  ^^  Lattonous  v.  Farmers'  "Mut. 
usage  sufficiently  and  clearly  proved  Fire  Ins.  Co.  3  Houst.  (Del.)  254. 
has  a  controlling  effect  to  vary  the  In  this  case  the  text  was  the  argu- 
plain  import  or  settled  construction 
of  the  words  of  the  policy,  or  to 
prevent  the  application  of  an  estab- 
lished rule  of  law  by  which  tjie 
rights  of  the  parties  under  their 
contract  would  otherwise  be  de- 
termined:"  1  Duer  on  Ins.  (ed. 
1845)  257,  citing  Preston  v.  Green- 
wood Ins.  Co.  4  Doug.  28,  per  Lord 
Mansfield.  "Usage  is  always  consid- 
ered in  policies  of  insurance,  even 
when  no  dil'licidty  arises  on  the  words 
themselves."  Tlie  test  is,  "Avliether 
the  rule  of  law  that  the  usage  super- 
sedes is  one  that,  in  its  application  to 


643 


ment  of  counsel  for  jilaintitT  on  de- 
muiTer,  which  demurrer  was  sus- 
tained, but  no  opinion  given. 

20  Macy  v.  Whaling  Ins.  Co.  9  Met. 
(50  Mass.)  363,  per  Tlubliard.  J. 

^  Eyre  v.  Marine  Ins.  Co.  5  Watts 
&  S."(Pa.)  ]]6,  122,  per  Sergeant, 
J.  See  s.  c.  6  Whart.  (Pa.^)  249.  Mr. 
Duer  (1  Duer  on  Ins.  [ed.  1845] 
296)  says  this  "language  involves 
the  not  infrequent  error  of  confound- 
ing a  usage  of  trade  and  a  iisage  in 
the  interpretation  of  the  policy." 

24  Mees.  &  W.  211. 

^  Renner  v.  Bank  of  Columbia,  9 


§  250  JOYCE  ON  INSURANCE 

nient  has  been  admitted,  although  contrary  to  the  principle  of  in- 
demnity, which  governs  marine  insurance.'*  So  a  custom  of  adjust- 
ing partial  losses  may  be  shown,  and  must  govern  the  general  law 
regulating  the  assessment  of  damages  under  such  policies.^  "It  is 
a  principle  that  the  general  common  law  may  be,  and  in  many  in- 
stances is,  controlled  by  special  custom,  so  the  general  commercial 
law  may  by  the  same  reason  be  controlled  by  a  special  local 
usage  so  far  as  that  usage  extends."  *  So  it  is  said  in  an  Ohio  case ' 
that  ''if  it  be  assumed  that  the  custom  is  a  general  one,  tlien  it  is 
part  of  the  common  law  itself,  and  there  would  be  presented  an  in- 
stance of  two  rules  of  law  equally  binding,  and  yet  wholly  incon- 
sistent the  one  with  the  other,"  although  the  point  decided  in  this 
last  case  was  that  a  usage  which  is  not  according  to  law,  though 
universal,  cannot  be  set  up  to  control  the  law.  Mr.  Lawson  says: 
"It  was  no  objection  to  a  common-law. custom  that  it  was  contrary 
to  the  common  law  of  the  land.  ...  In  general,  too,  evidence 
of  a  usage  of  trade  is  not  inadmissible,  because  it  is  contrary  to  the 
principles  of  law  governing  such  cases,  for  it  is  obvious  that  if  proof 
of  a  usage  could  be  rejected  because  it  established  something  ditl'er- 
ent  from  the  law,  no  custom  would  ever  be  proved,  because  if  it 
were  not  different  it  would  be  a  part  of  the  law,"  *  and  he  adds:  ^ 
"This  being  so  plain,  it  is  somewhat  startling  to  find  a  large  number 
of  cases  in  the  reports  in  which  the  principle  is  broadly  laid  down 
that  a  usage  or  custom  in  opposition  to  an  established  rule  of  law 
is  void  and  of  no  eft'ect,"  and,  noting  the  cases,  he  asserts  that  the 
meaning  of  the  various  expressions  used  is  this:  "That  a  custom 
or  usage  which  changes  what  would  otherwise  be  the  situation  of 
the  parties,  or  alters  to  any  extent  their  rights  according  to  the 
rules  of  law  applicable  to  such  cases,  is  invalid  and  ineffectual,"  and 
in  a  subsequent  .section  he  notes  a  large  number  of  cases  in  insur- 
ances where  usages  in  conflict  with  established  rules  of  law  have 
been  controlled  by  evidence  of  different  customs.^"     As  opposed  to 

Wheat.  (22  U.  S.)  5S1,  582,  6  L.  ed.    Wasli.     (C.    C.)    391,    and    Trott    \. 

I(i0,  per  Tliompsou,  J.,  an  exliaustive    Wood,    1    Gall.   44:3,    Fed.    Cas.   No. 

opinion.  14190,    are    cited    as    supi^orting  bis 

*  Palmer  V.  Blackburn,  1  Bins:.  61.    proposition.      See    cases    cited    in    1 
5  Fulton    Ins.     Co.   v.    Milner,   23    Parsons  ou  Ins.    (ed.  1868)    83,  84, 

Ala.  420.  and  notes. 

^  Halsey  v.  Brown,  3  Day  (Conn.)        ''  Columbus  &  Hocking  Coal  &  Iron 

346.      See    also    cases    considered    at    Ins.   Co.  v.   Tucker,  48  Oliio   St.  41, 

length  by  Mr.  Duer  in  support  of  his   29  Am.  St.  Rep.  528,  534,  12  L.R.A. 

proposition   cited  under   §§   249  and    577.  26  N.  E.  630,  per  Spear,  J. 

250    herein,    and    also     cited    under        ^  Lawson  on  Usages  and   Customs 

"Proofs    and    Illustrations,"    291    et    (ed.  1881)  465,  sec.  225. 

seq.      See   also   Id.   294,   where   Mc-       ^  Id.  sec.  226. 

Gregor   v.    Insurance    Co.    of   Pa.    1        ^°  Id.  sec.  233,  and  see  Id.  sec.  234. 

644 


CONSTRUCTION— USAGE 


§  250 


the  above  cases  and  opinions  there  are  numerous  decisions  which 
sustain  the  general  proposition  that  usage  is  admissible  to  control 
a  rule  of  law,  or  the  plain  and  legal  import  of  the  words  used  in  a 
policy  of  insurance."  So  where  the  term  of  a  lease  is  fixed  by 
statute,  evidence  of  usage  to  control  its  operation  has  been  held 
inadmissible.^^     So  usage  to  give  notice  of  increa-se  of  risk  is  in- 


"  Winthrop  v.  Union  Ins.  Co.  2 
Wash.  (C.  C.)  7,  Fed.  Cas.  No. 
17901 ;  Rankin  v.  American  Ins.  Co. 
1  Hall  (N.  Y.)  619,  682.  Mr.  Duer 
(1  Duer  on  Ins.  [ed.  1845]  231) 
says  of  this  ease:  "It  was  certainly 
no  objection  that  the  usage  would 
have  varied  the  construction  of  the 
policy,"  and  that  it  would  not  have 
rendered  a  single  word  of  it  in- 
operative, but  have  only  qualified  its 
terms  conditional  upon  usage;  Lat- 
tonous  V.  Fanners'  ]\Iut.  Fire  Ins. 
Co.  3  Houst.  (Del.)  254;  Warren  v. 
Franklin  Ins.  Co.  104  Mass.  521 
(held  custom  of  particular  port 
could  not  vary  rule  of  law  as  to  dam- 
ages). Usage  "cannot  be  allowed  to 
control  the  settled  and  acknowledged 
law  of  the  state :  "  Higgins  v.  Moore, 
34  N.  Y.  425  (usage  in  this  ease  not 
a.  general  usage);  Mobile  ^Marine, 
Dock  &  Mutual  Ins.  Co.  v.  Mc:\Iillan, 
27  Ala.  77;  St.  Nicholas  Ins.  Co.  v. 
Mercantile  Ins.  Co.  5  Bosw.  (N.  Y.) 
238,  246.  Evidence  of  local  custom  is 
inadmissible  to  contravene  any  ex- 
press contract  or  provision  of  law : 
Barlow  v.  Lambert,  28  Ala.  704,  75 
Am.  Dec.  374.  "We  think  it  clearly 
settled  by  the  decided  weight  of  au- 
thority that  a  general  usage,  the 
effect  of  which  is  to  control  a  rule  of 
law,  is  inadmis.'^ible:''  Boon  &  Co.  v. 
Steamboat  Belfast,  40  Ala.  184,  88 
Am.  Dee.  761  (in  this  case  proof 
was  held  inadmissible  of  a  custom 
by  which  all  carriers  navigating  the 
river  were  relieved  from  liability  for 
losses  occasioned  by  armed  bodies  of 
men  without  fault  or  negligence  of 
the  carrier).  See  also  Boardman  v. 
Spooner,  13  Allen  (95  Mass.)  353, 
90  Am.  Dec.  196;  Dickinson  v.  Gay, 
7  Allen  (89  Mass.)  29,  83  Am.  Dec. 
656;    Cranwell  v.   Ship   Fosdick,   15 

645 


La.  Ann.  436,  77  Am.  Dec.  190; 
Cox  V.  Riley,  4  Ind.  368,  58  Am. 
Dec.  633,  and  note  638;  Southwest- 
ern Freight  &  Cotton  Press  Co.  v. 
Stanard,  44  Mo.  71,  100  Am.  Dec. 
255.  Hopper  v.  Sage,  112  N.  Y. 
530.  8  Am.  St.  Rep.  771.  A  person 
cannot  establish  a  usage  or  custom 
which  in  his  own  interest  contra- 
venes an  established  rule  of  com- 
mercial law:  Jackson  v.  Bank,  92 
Tenn.  154,  36  Am.  St.  Rep.  81. 
That  local  usage  to  overthrow  an 
established  rule  of  law  is  inadmissi- 
ble, see  Merchants'  Ins.  Co.  v.  Prince, 
50  Minn.  56,  57,  52  N.  W.  131,  per 
GiltiUan,  C.  J.  See  Seccomb  v. 
Provincial  Ins.  Co.  10  Allen  (92 
Mass.)  312-14,  per  Bigelow,  C.  J., 
v,'here  it  is  said  that  usag'e  is  inad- 
missible to  vary  or  control  the  writ- 
ten words,  and  give  them  a  different 
construction  than  that  given  them  by 
.<-ettled  judicial  determinations,  but 
that  it  is  admissible  to  show  the 
.sense  in  which  particular  words  or 
phrases  are  used,  and  to  show  that 
as  applied  to  the  subject-matter  the 
language  of  the  instruments  was 
nndor.'^t^ood  by  the  parties  to  have  a 
special  and  peculiar  meaning,  differ- 
ing from  that  which  might  ordinarily 
be  attributed  to  it,  and  that  this  is 
especially  true  of  policies  of  assur- 
ance. And  see  Lawson's  Usages  and 
Customs,  ed.  1881,  465,  sees.  226, 
234,  and  eases  collected;  and  articles 
of  Jno  D.  Lawson,  6  S.  Rev.  N.  S. 
845,  7  Id.  1;  Eaton  v.  Smith,  20 
l^ick.  (37  Mass.)  150;  East  Birming- 
ham Land  Co.  v.  Dennis,  85  Ala. 
565.  2  L.R.A.  836,  5  So.  317,  7  Am. 
St.  Rep.  73. 

12  Jackson  v.  Billing,  22  La.  Ann. 
378. 


§  251  JOYCE  ON  mSUKANCE 

admissible  to  control  the  legal  effect  of  the  policy;  "  nor  can  a  local 
custom  to  deduct  one-third  new  for  old  from  the  gross  amount  of 
the  expenses  and  repairs,  without  first  deducting  the  proceeds  of  the 
old  materials,  control  a  general  principle  of  law  requiring  sucli 
deduction  of  the  proceeds  of  the  old  materials. ^^  Evidence  is  ad- 
missible of  usage  of  words  in  peculiar  senses  in  an  application  for 
insurance  where,  although  such  words  severally  and  as  first  read 
seem  plain,  an  ambiguity  becomes  apparent  when  they  are  applied 
to  the  subject-matter,^^  and  when  words  are  used  in  policies  having 
a  limited  meaning  in  the  trade,  botli  parties  must  be  assumed  to 
have  understood  it  in  the  sense  in  which  the  trade  usually  under- 
stood it.^®  So  if  any  of  the  terms  used  in  a  policy  have  by  the 
known  usage  of  trade,  or  by  use  and  practice  as  between  insurer 
and  insured  acquired  an  appropriate  sense,  they  are  to  be  construed 
accordingly.^'' 

§  251.  Same  subject:  conclusion. — We  believe  that  Mr.  Duer's 
position  is  not  irreconcilable  with  the  law  as  generally  stated  by  the 
courts  and  text-writers,  and  is  entitled  to  consideration.  Certain- 
ly, if  the  parties  could  incorporate  by  express  terms  in  their  con- 
tract a  usage  which  would  have  controlled  the  plain  and  ordinary 
meaning  of  words  used  in  the  policy,  then  may  not  a  known  usage, 
with  reference  to  which  the  parties  expressly  contracted,  have  a  like 
effect?  We  apprehend,  however,  that  whatever  distinction  exists 
between  the  statement  of  Mr.  Duer  and  those  of  Emerigon  and  the 
others  above  considered,  is  more  apparent  than  real.  Mr.  Duer 
says  that  usage  must  be  consistent  with  the  rules  of  law.  His  illus- 
trations are  those  of  a  particular  usage  known  to  the  parties,  with 
express  reference  to  which  the  contract  was  made,  and  which  be- 
came thereby  a  part  thereof.  He  asserts  that  usage  does  control 
words  that  convey  a  definite  meaning,  which  the  court  would  other- 
wise be  bound  to  adopt,  or  where  their  construction  has  been  settled 
by  law,^^  and  does  set  aside  what,  judging  from  the  terms  of  the 
policy  or  the  rules  of  law,  was  the  plain  intention  of  the  parties, 
"but,"  he  adds,  "in  controlling,  the  usage  does  not  contradict  the 
^vords — it  merely  varies  by  restraining  or  enlarging  their  applica- 
tion," and  that  usage  "can  never  be  admitted  to  nullify  or  expunge" 

"Stebbins  v.  Globe  Ins.  Co.  2  Hall  Barb.   (N.  Y.)    383;   A.stor  v.  Union 

(N.  Y.)   632,  674.  Ins.  Co.  7  Cow.  (N.  Y.)  202. 

1*  Eao-er  v.  Atlas  Ins.  Co.  14  Pick.  ^'  Coit   v.    Commercial   Ins.   Co.   7 

(31  IMals.)  141,  25  Am.  Dec.  363.  Johns.  (N.  Y.)  385,  5  Am.  Dec.  282. 

15  Daniels  v,  Hudson  River  Fire  See  also  as  to  evidence  of  usage  to 
Ins.  Co.  12  Cush.  (66  Mass.)  429,  59  control  forfeiture  for  nonpayment  of 
Am   Dec   192.  premium,  chapter  on  Premiums. 

16  Wall    V.    Howard    Ins.    Co.    14  ^^1  Duer  on  Ins.   (ed.  1845)   245. 

646 


CONSTRUCTION— USAGE  §§  252,  253 

the  plain  words  of  a  contract."  The  use  of  the  word  "control," 
in  this  sen^e,  does  not  seem  irreconcilable  with  the  conclusion  of 
eminent  and  learned  judges  and  text-writers.  We  deduce,  there- 
fore, from  the  authorities  that  the  presumption  is  that  words  have 
been  used  in  their  ordinary  sense,  and  if  words  are  of  such  a  plain 
and  decisive  character  that  a  reference  to  the  subject-matter  and 
context  shows  the  evident  intent  of  the  parties  to  be  in  accordance 
with  this  presumption,  then  usage  is  inadmissible  to  vary  or  con- 
trol the  plain  and  legal  import  of  words.  This  presumption,  that 
words  have  been  used  in  their  ordinary  sense,  may  be  overcome  by 
a  contrary  presumption  still  stronger:  thus,  if  words  apparently 
plain  and  unambiguous  are  shown  to  be  ambiguous  in  fact,  then 
evidence  of  usage  to  control  their  meaning  is  admissible.  A  settled 
judicial  construction  governs  a  commercial  construction  by  usage, 
variant  therewith,  so  far  certainly,  as  the  rights  of  parties  are  de- 
pendent upon  settled  rules  of  law,  and  the  contract  is  made  clearly 
with  reference  thereto.  But  custom  or  usage  may  undoubtedly 
affect  and  control  what  before  was  law,  especially  in  insurance  cases 
where  the  custom  is  of  such  a  character  that  the  parties  may  rea- 
sonably be  assumed  to  have  been  fully  cognizant  thereof,  and  to 
have  contracted  in  reference  thereto.  Where  plain  words  have  ac- 
quired by  usage  a  meaning  different  from  that  in  which  they  are 
ordinarily  used,  evidence  of  such  usage  is  admissible,  unless  it  is 
clearly  evident  from  the  subject-matter  and  context  that  the  or- 
dinary meaning  was  intended,  and  usage  can  never  be  admitted  to 
nullify  or  expunge  the  plain  words  of  the  contract.^" 

§  252.  Usage  cannot  legalize  an  illegal  act. — It  is  held  that  a  par- 
ticular usage  and  custom  by  which  owners  of  insured  property  were 
permitted  to  purchase  the  property  at  sales  for  the  benefit  of  the 
insurers,  cannot  have  the  effect  of  legalizing  a  sale  wliich  by  the 
general  law  is  unlawful  and  void.^  And  prior  errors  of  the  insurer 
in  paying  similar  claims  not  within  the  terms  of  the  policy  do  not 
constitute  a  custom  of  the  trade  in  the  communit3^^* 

§  253.  General  usage  may  be  controlled  by  evidence  of  a  different 
usage. — A  general  usage  may  be  controlled  by  evidence  of  another 
and  different  usage.     Thus,  a  custom  for  a  ship  to  pursue  a  certain 

"  Id.  270.  ^*  Sleet    v.    Farmers   Mutual    Fire 

^^  As  to  usage  in  foreign  trade,  see  Ins.  Co.  (1908)  —  Ky.  — ,  19  L.R.A. 

Livingston   v.   Maryland   Ins,    Co.   7  (N.S.)    421    (and  note  as  to  custom 

Cranch  (11  U.  S.)  506,  3  L.  ed.  421.  to  pay  certain  classes  of  losses  as  ai'- 

^  Robertson  v.  Western   Marine  &  fecting  liability  of  company  for  sucb 

Fire  Ins.  Co.  19  La.  0.   S.    (10  La.  a  loss  not  covered  by  policy)  113  S. 

143)    227,    36    Am.    Dec.    673.      See  W.  515. 

Brv'ant  v,    Connecticut    Tns.     Co,    6 

Pick.  (23  Mass.)  131,  144. 

647 


§§  254,  255  JOYCE  ON  INSURANCE 

course  which  is  the  safest,  most  usual,  and  expeditious  in  the  course 
of  the  voyage  insured  may  be  controlled  by  evidence  that  it  is  usual 
and  customary  for  one  boat  on  a  voyage  to  stop  and  aid  another 
boat  in  distress.^  So  it  is  held  that  a  commercial  usage  of  long 
standing,  such  as  that  of  adding  the  premiums  to  the  invoice  value, 
in  cases  of  insurance,  may  be  modified  and  controlled  by  a  local 
usage  clearly  proven  and  shown  to  be  known  to  the  other  party .^ 

§  254.  Usage  controls  implied  limitations. — ''The  usage,  and  or- 
dinary incidents  of  a  risk  should  override  any  implied  limitations, 
either  as  to  the  place  or  conduct  of  the  risk."  * 

§  255.  Usage  of  another  similar  trade  or  place  or  of  another  com- 
pany.— Evidence  of  usage  in  another  similar  trade  was  held  by  Lord 
Mansfield  admissible,  on  the  question  whether  a  recently  estab- 
lished usage  existed.^  Usage  of  a  particular  place,  as  of  London, 
may  be  shown  by  proof  of  usage  there  and  elsewhere.^  But  where 
the  vessel  was  insured  at  New  York,  but  belonged  to  New  Bedford, 
where  the  owners  resided,  a  local  usage  of  the  last-named  place,  by 
which  taking  sea  elephants  is  not  within  the  scope  of  "whaling  voy- 
age," is  inadmissible,  although  a  uniform  usage  of  insurers  to  in- 
sert a  permission  for  vessels  insured  on  a  whaling  voyage  to  take  sea 
elephants  on  payment  of  an  additional  premium  is  inadmissible  to 
establish  such  local  usage.'  It  is  held  that  usage  of  the  custom  of 
other  like  establishments  to  keep  a  watch  may  be  shown  to  explain 
the  term  "keeping  a  watch."  *  Where  the  contract  is  made  with 
reference  to  local  usages,  usages  of  other  places  are  not  binding,  for 
such  usage  cannot  be  considered  as  entering  into  the  consideration 
of  the  parties,^  and  a  usage  of  marine  underwriters  of  Boston  to 
except  barratry  of  the  master  from  the  risks  assumed,  Avhen  the 
assured  is  her  owner,  will  not  import  such  an  exception  by  impli- 
cation in  a  policy  underwritten  at  Gloucester.^"  So  a  policy  of  in- 
surance against  fire  upon  a  vessel  building  in  the  port  of  Baltimore, 
and  for  a  specified  period,  is  not  controlled  in  its  operation  by  proof 

2  Walsh  V.  Homer,  10  Mo.  6;  «  Milhvard  v.  Hibbort,  3  Q.  B.  120, 
Gould  V.  Oliver,  2  Scott  N.  R.  241,  2  Gale  &  D.  142,  24  Eng.  Rul.  Cas. 
252,  5  Scott,  445,  4  Bing.  N.  C.  134,   473. 

14  Eng.  Rul.   Cas.  400.  '  Chdd    v.     Sun    Mut.   Ins.   Co.  3 

3  Merchants'  Mut.  Ins.  Co.  v.  Wd-    Sand.   (N.  Y.)  26. 

son,  2  Md.  217.  ^  Broeker  v.  People's  Mut.  Ins.  Co. 

*1  Wood  on  Fire  Insurance    (2d  S  Cush.  (62  Mass.)  79. 

ed.)   116.     Tlie  author  here  changes  ^  Mason  v.  Franklm  Fire  Ins.  Co. 

the  rule  from  that  given  in  a  former  12  Gdl  &  J.  (Md.)  468;  Chdd  v.  Sun 

edition  with  reference  to  cases  where  Mut.  Ins.  Co.  3  Sand.  (N.  Y.)  26. 

the  words  "contained  in"  are  used  in  ^°  Parkhurst  v.  Gloucester  Fishing 

policies  describing  the  risk.  Ins.  Co.  100  Mass.  301,  1  Am.  Rep. 

5  Noble  V.  Keunoway,  2  Doug.  (3d  105,  97  Am.  Dec.  100. 
ed.)  510,  per  Lord  Mansfield. 

648 


CONSTRUCTION— USAGE  §  256 

of  usage  in  other  parts  of  the  Union ;  "  and  a  usage  of  towing  boats 
by  steamers  on  the  Mississippi  cannot  affect  a  contract  of  insur- 
ance made  at  Natchez,  unless  shown  to  be  so  general  and  well- 
known  that  it  is  fair  to  presume  the  parties  contracted  with  refer- 
ence to  it.^2  A  clause  in  a  policy  of  marine  insurance  providing 
that  all  matters  of  adjustment  and  settlement  of  losses  shall  be  sub- 
ject to  the  rules  and  regulations  of  the  ports  of  New  York,  refers 
only  to  the  manner  of  making  the  adjustment  when  a  liability  is 
admitted,  and  cannot  decide  the  question  of  the  existence  of  any 
liability  by  the  usage  of  such  ports  when  the  insurance  is  made 
elsewhere.^^  So  the  constructive  total  loss  of  a  whaling  ship  at  a 
port  where  whaling  outfits  are  bought  and  sold,  and  where  the  out- 
fits are  in  safety,  is  not  a  constructive  total  loss  of  the  outfits;  and 
evidence  of  a  usage  to  regard  it  as  such  at  the  port  from  which  the 
ship  sailed  is  inadmissible.^*  And  usage  of  the  company  in  mat- 
ters of  insurance  is  inadmissible  to  bind  another  company."  Such 
evidence  should  be  limited  to  the  custom  and  usage  of  the  com- 
pany directly  concerned.  So  the  practice  of  other  insurance  agents 
in  the  same  town  is  inadmissible  to  establish  a  custom  that  proofs 
of  loss  are  not  required.^^  But  it  is  held,  however,  that  the  phrase 
''fire  by  lightning"  may  be  shown,  by  evidence  of  the  practice  of 
other  companies,  to  mean  that  the  company  is  not  liable  where 
there  is  no  burning. ^''^ 

§  256.  Evidence  of  usage:  liberal  construction. — Much  stress  has 
been  placed  upon  the  statements  made  by  the  courts  in  many  of  the 
early  insurance  cases,  looking  toward  a  liberal  construction  of  pol- 
icies in  reference  to  usage.  Thus,  it  is  said  in  Long  v.  Allen, ^^  that 
"in  mercantile  cases  from  Lord  Holt's  time,  and  in  policies  of  in- 
surance in  particular,  a  great  latitude  of  construction  as  to  usage  has 
been  admitted.  By  usage,  places  come  within  the  policy  that  are 
not  within  the  words."  This  idea,  however,  arose  in  a  great  mea- 
sure from  the  clumsiness  of  the  instrument,^^  and  because  insur- 
ance is  based  upon  mercantile  law  and  the  customs  of  merchants, 

"  Mason  v.  Franl^lin  Fire  Ins.  Co.  ^^  Phoenix  Ins.   Co.  v.  Hunger,  49 

12  Gill  &  J.  (Md.)  4G8.  Kan.  178,  30  Pac.  120. 

^2  Natchez   Ins.    Co.   v.   Stanton,  2  "  Babcoc-k     v.     Montgomery     Co. 

Smedes  &  M.    (Miss.)    340,  41  Am.  Mut.  Ins.  Co.  6  Barb.  (N.  Y.)  637,  4 

Dec.  592.  Corast.  (N.  Y.)  326. 

13  Hazleton  v.  Manhattan  Fire  Ins.  "  4  Doug.  276,  per  Buffer,  J.     See 

Co.  11  Biss.    (U.   S.  C.  C.)    210,  12  afso     Coggeshaft    v.    American    Ins. 

Fed.  159.  Co.  3  Wend.  (N.  Y.)  283. 

1*  Taber  v.  China  Mut.  Ins.  Co.  131  ^^  Gordon  v.  Little,  8  Serg.  &  R. 

Mass.  239.  (Pa.)    562,  11  Am.    Dec.    632,    per 

15  Reynofds  v.  Continentaf  Ins.  Co.  Gibson,  J. 
36  Micii.  131;  American  Ins.  Co.  v. 
Neiberger,  74  Mo.  167. 

649 


§  257  JOYCE  OX  INSUKxVNCE 

and  that  down  to  Lord  Mansfield's  time  there  had  been  few  adjudi- 
cations on  questions  in  insurance  law  and  the  custom  of  merchants, 
usage  was  necessary  to  be  resorted  to  for  interpretation ;  ^^  but 
Story,  J.,^  says  that  usage,  though  in  former  times  freely  resorted 
to,2  ''is  now  subjected  by  our  courts  to  more  exact  and  well-defined 
restrictions  .  .  .  and  it  should  therefore  ...  be  admit- 
ted with  a  cautious  reluctance  and  scrupulous  jealousy."  ^ 

§  257,  What  is  sufficient  evidence  of  usage. — The  court  deter- 
mines the  admissibility  of  evidenoe  of  usage,  and  it  will,  as  we  have 
seen,  be  cautious  in  this  respect,  and  the  evidence  thereof  ought  to 
be  clear  and  satisfactory  to  the  jury.*  The  question  is,  did  the 
usage  claimed  exist,  and  this  must  he  established  by  instances  known 
to  the  witnesses,  coupled  with  evidence  of  its  duration  and  that  it 
is  uniform,*  and  a  few  or  occasional  instanoes  are  insufficient  to  es- 
tablish a  usage.^     So  of  a  single  witness  or  individual,'  and  wit- 

20  See  Smith  v.  Wilson,  3  Barn.  &  259 ;  Durrell  v.   Bederly,  1  Holt  N. 

Adol.  728,  per  Parke,  J.  P.    283,    per     Gibbs,    J.;     Syers    v. 

^In  Rooers  v.  Mechanics'  Ins.  Co.  Bridge,  2  Doug.  52/,  530,  per  Lord 

1  Story  (U.  S.  C.  C.)  607,  Fed.  Cas.  Man.^field;    Salisbury  v.   Townson,  1 

No.  12016.  Burr.  341;  Millars  Ins.  418. 

2  As  a  rule  it  was,  but  examine  ^  United  States. — Trott  v.  Wood, 
Ander-son  v.  Pitcher,  2  Bos.  &  P.  164,  1  Gall.  (U.  S.  C.  C.)  443,  Fed.  Cas. 
168,    per    Lord    Eldon;    Lethiellier's  No.  14,190. 

case,  2  Salk.  443,  per  Lord  Holt.  Connecticut.— Crosby  v.  Fitch,  12 

3  See  also  Palmer  v.  Warren  Ins.    Conn.  422,  31  Am.  Dec.  745. 

Co.  1  Story  (U.  S.  C.  C.)  360,  Fed.  Z)«^ofa.— Clevenger  v.  Mutual  Life 

Cas   No.  10698;  Schooner  Reeside,  2  Ins.  Co.  2  Dak.  114. 

Sum.    (U.   S.  C.   C.)    567,  Fed.  Cas.  Lonisiana.— Herman     v.     Western 

No    11,657,  per   Story,  J.  Fire  &  :\Iarine  Ins.  Co.  13  La.  0.  S. 

4  See  Bentaloe  v.  Pratt,  Wall.  Sr.  (7  La.  N.  S.  325)  516. 

(U   S   C   C.)  58,  Fed.  Cas.  No.  1330.  Massachmetls.— Taunton      Copper 

See  Leach  v.  Perkins,  17  Me.  465,  35  Co.  v.  Merchants'  Ins.  Co.  22  Pick. 

Am    Dec.  268;  Winsor  v.  Dillawney,  (39  Mass.)   108. 

4  Mete.   (45  Mass.)   221,  223;  Pelly  ^eu-     YorA-.-Bunten     v.     Orient 

V   "Royal  Exeh.  Assur.   Co.   1   Burr.  Mutual  Ins.  Co.  4  Bosw.  (N.  Y.)  2o4. 

341     349     14    Eno-      Rul.     Ca.s.     30;  England.— Bond  v.  Nutt,  2  Cowp. 

Lucas  v'  Growing,    7    Taunt.    164;  001;  Cutter  v.  PoweU,  6  Term  Rep. 

Crofts  V.  Marshall,  7  Car.  &  P.  597;  320,  6  Eng.  Rul.  Cas.  627. 

Gabav  V.  Lloyd,  3  Bam.   &   C.   793;  Isolated   instances    are   insufficient 

Greenleaf    oii    Evidence    (14tli    ed.)  to  prove  a  custom,    and    cannot    be 

sec    '^9'''  et  seq.  shown  to  overcome  or  change  the  ex- 

5  Rogers  v.  Mechanics'  Ins.  Co.  1  press  provisions  of  a  contract  of  in- 
Story  IjJ  S  C  C.)  603,  Fed.  Cas.  surance.  Kocher  v.  Supreme  Council 
No  12016,  per  Storv,  J.;  Martin  v.  Catholic  Benevolent  Legion,  6o  N. 
Delaware  Ins.  Co.  2  Wash.  (U.  S.  C.  J.  L.  649,  86  Am.  St.  R^p.  687,  52 
C.)  254,  Fed.  Cas.  No.  9161;  Illinois  L.R.A.  861,  48  Atl.  544. 

Masons'  Benevolent  Soc.  v.  Baldwin,  '  Parrott  v.  Thatcher,  9  Pick.  (26 
86  111.  479;  Hennessv  v.  New  York  Mass.)  426;  Loring  v.  Gurney,  o 
M    M.  Ins.   Co.  1   Old.    (Nov.   Se.)    Pick.   (22  Mass.)  15. 

650 


CONSTRUCTION— USAGE  §  258 

nesses  are  confined  to  the  faxit  of  usage,  and  will  not  be  permitted  to 
give  their  opinions.^ 

§  258.  Evidence  of  usage,  when  admissible:  cases. — The  follow- 
ing cases  illustrate  when  usage  is  admissible:  Thus,  an  insurer  is 
liable  for  a  loss  occurring  within  the  general  course  of  a  trade,  of 
which  he  is  presumed  to  have  knowledge,  as  in  case  goods  are  lost 
from  the  deck  of  a  lighter  in  being  transmitted  from  the  ship  at 
quarantine  to  the  customary  landing  place.^  And  a  well-known 
usage  of  boats  in  the  Mississippi  trade  to  touch  at  intermediate  ports 
will  cover  additions  to  the  cargo  received  in  the  usual  manner  at 
such  ports.^°  So  if  goods  are  lost  while  in  transportation  from  the 
shore  to  a  ship  engaged  in  a  trading  voyage,  the  insurer  is  liable  if 
such  transportation  is  according  to  usage.^^  The  course  of  trade  in 
a  particular  place  governs  the  construction,  as  where  the  usual 
method  of  unloading  and  reshipping  in  a  place  was  '•'that  when 
there  is-  no  British  ship  there,  then  the  goods  are  to  be  kept  in  store 
ships,"  and  if  it  is  usual  to  stay  a  certain  time  at  a  port  or  to  go 
out  of  the  way,  the  insurer  is  considered  as  understanding  that 
usage.i2  go  acts  done  by  the  assured  to  avoid  confiscation  under 
the  laws  of  a  foreign  power  are  valid  if  warranted  by  the  usage  of 
trade.^3  Thus  a  concealment  of  papers  is  not  a  breach  of  warranty 
if,  by  the  usage  of  trade,  it  is  necessary  that  they  should  be  on  board 
although  they  increase  the  risk  of  capture.^*  It  may  be  shown 
that  it  is  the  custom  generally  to  charge  a  higher  premium  for  un- 
occupied dwelling-houses,^^  also  that  it  is  a  general  custom  to  refuse 
risks  on  vacant  houses.^^  So  usage  is  admissible  to  explain  a  blank, 

8  Winthrop    v     Union    Ins.    Co.    2  i°  Stillwell  v.  Home  Ins.  Co.  3  Dill. 

Wash.     (C.    C.)     7,    Fed.    Cas.    No.  (CO  80,  Fed.  Cas.  No.  13450. 

17901,  per  Washington,  J.;  Rogers  v.  ^^  Cogge.shall  v.  American  Ins.  Co. 

Mechanics'  Jns.  Co.  1  Story  (U.  S.)  3  Wend.   (N.  Y.)   283. 

(303,  Fed.  Cas.  No.  1201G,  per  Story,  ^^  pgHy  v.  Royal  Exeh.  Assur.  Co. 

J.;  A.stor  v.  Union  Ins.  Co.  7  Cow.  1  Burr.  341,  348,  349,  14  Eng-.  Rul. 

(N.    Y.)    202;    Gordon    v.    Little,    8  Cas.  30.     See  also  Matthie  v.  Potts, 

Serg.  &  R.   (Pa.)   549,  11  Am.  Dec.  3  Bos.  &  P.  23. 

U32,  636,  per  Tilghman,  C.  J. ;  Syers  "  Livingston  v.  ]\raryland  Ins.  Co. 

V.  Bridge,  Doug.  512;  569;  Crofts  v.  7   Cranch    (11  U.   S.)    506,  3  L.  ed. 

Maishall,  7  Car.  &  P.  597.  421. 

Story,  J.,  in  Rogers  v.  :\rechanics'  i^  Livingston  v.  Maryland  Ins.  Co. 

Ins.  Co.  1   Story   (C.  C.)    607,  Fed.  6  Cranch    (10  U.   S.)    274,  3  L.  ed. 

Cas.  No.  12016,  declares    that    "this  222,  7  Cranch   (11  U.  S.)   506,  3  L. 

court   has   nothing  to     do    with    the  cd.  421. 

private   opinions   of  witnesses,   how-  ^^  hnce   v.   Dorehe.ster    Mut.    Fire 

ever   respectable,   which   respect    the  Ins.  Co.  105  Mass.  298,  7  Am.  Rep. 

proper  interpretation  of  contracts."  522. 

9  Wadsworth  v.  Pacific  Ins.  Co.  4  ^^  Kirby  v.  Plioenix  Ins.  Co.  13  Lea 

Wend.  (N.  Y.)  33.  (81  Tenn.)  340. 

651 


§  258  JOYCE  ON  INSURANCE 

as  "A  B  on  account  of ."  "     So  the  nature  of  the  subject-matter 

may  be  such  that  usage  is  admissible  to  construe  the  contract,^^  and 
in  estimating  the  damage  in  case  of  partial  loss  evidence  is  compe- 
tent of  the  custom  of  merchants  in  relation  to  the  sale.^^  So  where 
the  insurance  was  "from"  Amsterdam,  a  custom  for  vessels  of  certain 
tonnage  to  take  in  part  of  their  cargo  at  Amsterdam  and  the  rest  at 
another  port  is  admissible.'^"  So  evidence  of  a  custom  for  one  boat 
to  stop  and  aid  another  in  distress  is  competent.^  Usage  of  a  par- 
ticular trade  to  keep  goods  on  board  for  a  long  time  after  the  ship's 
arrival  is  admissible.'^  So  evidence  is  admissible  of  a  particular 
custom  whiereby  the  party  holding  a  certificate  thereof  kept  an  ac- 
count of  shipments  made  and  covered  by  the  certilicate,  reporting 
the  same  monthly  to  the  agent.^  So  usage  between  a  principal  and 
his  agent  may  determine  their  rights,  as  in  case  whether  a  lien  on 
the  policy  exists  in  favor  of  the  agent.*  So  the  commencement  * 
and  termination  of  a  risk  may  be  determined  by  usage.^ 

So,  evidence  of  a  custom  as  to  the  time  when  a  parol  contract  of 
insurance  should  become  operative  is  admissible  where  the  parties 
have  agreed  upon  nothing  in  relation  thereto.^*  So  a  clearance  for 
a  port  without  intending  to  go  there  may  be  justified  by  a  constant 
and  notorious  usage  of  the  trade,  as  where  it  was  the  custom  for 
ships  going  with  British  goods  to  France  to  clear  for  Ostend.'  So 
evidence  of  a  custom  is  admissible  that  policies  executed,  but  not 
delivered,  are  held  for  the  benefit  of  the  insured.^  So  usage  of 
commission  merchants  in  New  York  to  effect,  without  orders  from 
their  consignors,  insurance  on  goods  consigned  to  them  for  sale  is 
admissible.^  And  usage  to  put  into  a  certain  port  for  bait  where 
the  vessel  was  engaged  in  cod-fishing  may  be  shown. ^°  So  a  con- 
tract mav  be  governed  in  certain  cases  bv  the  uniform  and  settled 
custom  of  the  company,  with  reference  to  conditions  contained  in 

"  Turner  v.  Burrows,  5  Wend.  (N.  ^  Kingston    v.    Knibbs,    1    Camp. 

Y.)  541,  8  Id.  144.  508. 

^^  Sayles  v.  Northwestern  Ins.  Co.  ^  Grade  v.  Maryland    Ins.    Co.    8 

2  Curt.   (C.  C.)    610,  Fed.  Cas.  No.  Craneh  (12  U.  S.)  75,  3  L.  ed.  492. 
12422,  per  Curtis,  J.  ^■^  Cleveland  Oil  &  Paint  Manufac- 

^^  Stanton   v.   Natchez   Ins.   Co.    6  turine:  Co.  v.  Norwich  Union  Fire  Ins. 

Miss.  (5  How.)  744.  Co.  34  Oreg.  228,  55  Pac.  435. 

20Mev  v.  South  Carolina  Ins.  Co.  "^  Planche  v.   Fletcher,   Doua:.   251. 

3  Brev."(S.  C.)  329.  8  g^xter  v.  Massasoit  Ins.  Co.  13 

1  ^Yalsh  V.   Homer,  10   Mo.   6,  45    Allen  (95  Mass.)  320. 

Am.  Dec.  342.  ^  DeForest  v.  Fulton  Fire  Ins.  Co. 

2  Noble  v.   Kennoway,  Dou?.  492.    1  Hall  (N.  Y.)  84. 

^  Hartshorne  v.  Union  Mutual  Ins.        ^°  Burgess  v.   Equitable  Life  Ins. 
Co.  36  N.  Y.  172.  Co.  126  ]\fass.  70,  30  Am.  Rep.  654. 

*  Green  v.  Farmer,  4  Burr.  2214. 

652 


CONSTRUCTION— USAGE  §  259 

like  policies,^^  and  a  usage  by  an  incorporated  benevolent  society, 
showing  a  valid  practical  construction  by  it  of  a  by-law  relating  to 
holding  the  annual  meeting  and  election,  is  admissible  in  quo  war- 
ranto to  determine  title  to  office  in  the  society. ^^  In  all  cases  of 
local  or  partial  usage  tlie  insurers  will  be  bound  where  it  was  ex- 
pressly communicated  to  them  and  the  contract  based  thereon." 
80,  the  local  usage  of  a  place  is  of  importance  in  construing  the 
iron  safe  clause,  and  it  is  proper  to  prove  w^hat  the  custom  of 
stores  is  in  a  place  or  district  to  accommodate  trade  there,  where 
such  custom  is  one  of  which  the  insurer  is  bound  to  take  notice."* 
Again,  evidence  of  a  universal  custom  of  insurance  adjusters  in  re- 
spect to  proofs  of  loss  on  a  retail  stock  of  merchandise  is  held 
admissible. ^^'' 

§  259.  Evidence  of  usage,  when  inadmissible:  cases. — The  fol- 
lowing cases  illustrate  when  usage  is  inadmissible :  Thus,  a  local  cus- 
tom as  to  the  materiality  of  an  undisclosed  fact  respecting  the  risk 
is  inadmissible,  unless  it  is  communicated  to  the  insured  or  is  of  such 
a  character  that  a  presumption  of  knowledge  thereof  attaclies  there- 
to;^* nor  is  evidence  admissible  of  a  usage  in  New  York  to  give 
the  insurer  notice  when  anything  is  done  by  the  assured  to  increase 
the  risk."  So  the  usage  of  a  company  to  require  particular  proof 
of  loss  does  not  bind  the  insurer  where  not  known  to  him,^^  and 
no  law  or  usage  requires  the  assured  to  have  his  house,  if  untenant- 
ed, guarded  by  a  keeper."  So  a  usage  in  a  particular  mill  or  lo- 
cality to  keep  a  watchman  over  Sunday  is  inadmissible  where  the 
policy  is  unambiguous."  In  estimating  a  loss  under  an  open  pol- 
icy of  marine  insurance  evidence  of  the  usage  of  a  particular  port 
is  inadmissible  to  vary  the  rule  that  the  damages  are  to  be  based  on 
the  market  value  of  the  goods  at  the  inception  of  the  risk  and  not 

11  Home   Ins.   Co.   v.   Favorite,  46  u.sages  of  Lloyds  in  res  poet  thereof, 

111    20.3.  see  It    Earl   of  Halsbury's  Laws  of 

""state  v.  Conklin,  34  Wis.  21.  Endaiul,  p.  .352;  Canton  Ins.  OfTice, 

"Gabay  v.  Llovd,  3  Biim'.  793;  1  Ltd.  v.  Woodside,  90  Fed.  301,  33  C. 

Duer  on   Insurance    (ed.   1845)    2(54.  C.  A.  63,  61  U.  S.  App-  214,  28  Ins. 

See    further    as  to  when   custom  or  L.  J.  269. 

usage  is  admissible,  §§  84,  120  here-        "Hartford  Protection  Ins^  Co.  v. 

in,   and   chapters   on    Seaworthiness,  Harmer,  2   Ohio    St.    452,    59    Am. 

Duration,  Risk,  and  Premium.  Dee.  684. 

"a  Capital  Fire  Ins.  Co.  v.  Kanf-        "  Stebbins    v.    Globe    Ins.    Co.    2 

man,  91   Ark.   310,   121   S.  W.   289,  Hall  (N.  Y.)  632. 

38  Ins.  L.  J.  289.  •     ^^  Taylor  v.  ^T5na  Life  Ins.  Co.  13 

"t  Sherlock   v.    German    American  Gray  (79  Mass.)  434,  per  Met  calf,  J. 

Ins.  Co.  47  N.  Y.  Sup  p.  315,  21  App.  See  §  258  herein. 
Div.  18,  case  aft'd  162  N.  Y.  656,  57       "  I.  >ve   v.   Merchants'   Ins.   Co.    6 

N.  E.  1124.  La-  A""-  "61. 

As'  to    settlement    of    losses     and       "  Qi^ndale   Woolen    Co.     v.    Pro- 

653 


§  259  JOYCE  ON  INSURANCE 

on  the  invoice  price."  "Where  b}'  the  terms  of  a  policy  a  vessel 
was  insured  ''to  a  port  in  Cuba,  and  at  and  thence  to  a  port  of  ad- 
vice, and  discharge  in  Europe,"  and  the  vessel  was  lost  in  going 
from  the  port  of  discharge  in  Cuba  to  another  port  in  the  same 
island  for  reloading,  it  was  held,  in  a  suit  on  the  policy  for  a  loss, 
that  evidence  by  the  assured  was  inadmissible  to  show  a  usage  that 
vessels  going  to  Cuba  might  visit  at  two  ports,  one  for  discharge  and 
another  for  loading.^"  So  ''the  usage  or  custom  of  a  particular 
port  in  a  particular  trade  is  not  such  a  custom  as  the  law  con- 
templates to  limit  or  control  or  qualify  the  construction  of  contracts 
of  insurance,"  ^  and  evidence  is  inadmissible  of  an  alleged  custom 
of  insurance  companies,  claimed  to  have  been  known  to  plain liti'.s 
agent,  that  upon  the  happening  of  a  future  event,  the  policy  should 
be  void,  said  condition  not  having  been  inserted  in  the  policy.^ 
Nor  is  evidence  admissible  of  a  custom  that  when  insurance  is  made 
on  goods  with  a  particular  mark,  those  goods,  so  marked,  must  be 
on  board,  in  order  to  charge  the  underwriter  with  the  loss ; '  and 
there  is  no  law  or  usage  that  requires  the  master  of  a  vessel  to  ac- 
cept a  general  average  bond  in  place  of  the  cargo,  after  the  adjust- 
ment of  loss  has  been  completed.*  Nor  does  the  length  of  time  a 
vessel  may  wait  to  take  in  her  cargo  without  discharging  the  under- 
writers depend  on  the  usage  of  the  trade.^  And  it  is  not  compe- 
tent to  prove  a  custom  that  notice  to  a  broker  by  the  agent  of  the 
company  should  operate  to  cancel  a  policy.  So  lield  in  an  action 
against  the  agent  by  the  principal  seeking  recovery  for  a  loss  paid 
by  the  company  which  occurred  after  it  had  directed  the  agent  to 
cancel.^  So  held,  also,  where,  notice  of  cancelation  was  given  to 
the  local  agent. '^  A  particular  usage  of  insurance  companies  with 
respect  to  risks  on  grain  in  elevators  does  not  bind  the  insured  in 
the  absence  of  proof  of  knowledge  on  his  part,*  and  where  the  in- 
fection Ins.  Co.  21  Conn.  19,  54  Am.  S.)  573,  21  L.  ed.  229;  Oelrielis  v. 
Dec.  19;  Kiplev  v.  .^tna  Ins.  Co.  30  Ford,  23  How.  (64  U.  S.)  49,  16 
N.  Y.  136,  80  Am.  Dec.  362.  L.  ed.  534. 

19  Warren  V.  Franklin  Ins.  Co.  104       ^R^aj^   ^    Gardner,   1   Wash.    (C. 
Mass.  518.  C.)     145,     Fed.     Cas.     No.     12,100. 

20llearne   v.   Marine 'Ins.    Co.   20        *  The    Water    ^Yitch's    Cargo,    29 
Wall.  (87  U.  S.)  488,  22  L.  ed.  395.    Fed.   159. 

1  Roo-ers  v.  Mechanics'  Ins.  Co.  1       *  Oliver  v.  Maryland    Ins.    Co.    7 
Storv  ^(C.   C.)    603,    Fed.    Cas.    No.    Cranch  (11  U.  S.)  487,  3  L.  ed.  414. 
12016,   per   Story,   J.      See   remarks        ^  pj.,,nklin   Ins.    Co.    v.    Sears,   21 
hereon  in  1  Phillips  on  Insurance  (3d    Fed.  290. 
ed.)  see.  140.  *       ''^  Hodge  v.   Security  Ins.    Co.    33 

2Candee  v.   Citizens'    Ins.    Co.    4    Hun.  (N.  Y.)  583. 
Fed.  143,  citing  Partridge  v.  Phoenix       *  Pettit  v.  State  Ins.  Co.  41  Minn. 
Mutual  Life  Ins.  Co.  15  Wall.  (82  U.   299,  43  N.  W.  378. 

654 


CONSTRUCTION— USAGE  §  259 

surance  was  upon  a  boat  lying  at  a  wharf  in  the  Ohio  river,  evidence 
is  not  admissible  of  a  custom  to  remove  such  boats  to  the  ice  harbor, 
some  miles  distant,  for  safety  during  the  season  of  moving  ice.^ 
Where  goods  claimed  to  have  been  damaged  by  perils  of  the  sea 
were  landed  on  their  arrival  at  New  York,  before  a  survev  bv  the 
wardens  of  the  port,  a  usage  at  that  port  is  inadmissible  to  prove 
the  liability  of  the  master  for  damages  sustained  by  goods  delivered 
by  him  to  the  owner  or  consignee,  unless  there  had  been  such  sur- 
vey, and  a  finding  by  the  Avardens  that  the  goods  had  been  stowed 
properly  and  were  damaged  by  the  perils  of  the  sen,  and  that  bj'  a 
similar  usage  as  betw^een  assurers  and  assured  the  survey  so  made 
must  be  produced,  in  order  to  charge  the  assurer,  and  that  the  pre- 
liminary proof  is  deemed  insufficient  unless  the  survey  is  exhibited 
as  a  part  of  it.^°  In  a  suit  upon  a  policy  of  insurance  to  recover 
for  a  loss,  where  there  is  no  question  as  to  the  rates  of  insurance 
charged  and  paid  by  the  insured,  evidence  of  the  custom  or  usage 
of  insurance  companies  as  to  the  rates  is  immaterial. ^^ 

Parol  evidence  of  usage  or  custom,  either  general  in  the  com- 
munity or  special  between  the  people  engaged  in  the  particular 
trade  or  business,  is  not  admissible  to  show  that  an  unconditional 
acceptance  of  an  order  to  ship  goods  was  subject  to  the  exigencies 
of  transportation  and  to  the  further  condition  that  if  the  goods 
could  not  be  shipped  within  a  reasonable  time  the  contract  was  no 
longer  to  be  obligatory. ^^^  And  evidence  is  inadmissible  to  show  a 
custom  of  insurers  to  accept  applications  from  persons  who  had  at- 
tempted suicide."^ 

9  Franklin  In?.  Co.  v.  Humphrey,  Mc-Neelev  &   Co.   52   Wash.   223.   28 

65  Infl.  549,  32  Am.  Rep.  78.  L.R.A.(N.S.)    1007,  108  Pac.  621. 

^^  Rankin  v.  American  Ins,   Co.  1        ^^^  Loni.s    v.     Connecticut     Mutual 

Hall  (N.  Y.)  619.  Ins.  Co.  68  N.  Y.  Supp.  683,  58  App. 

"  King  V.  Enterprise  Ins.  Co.  45  Div.  137,  case  aff' d  172  N.  Y.  659,  65 

Ind.  43.  N.  E.  1119. 

"a  R.  J.  Menz  Lumber  Co.  v.  E.  J. 

655 


CHAPTER   X. 

THE  POLICY— ALTERATION  AND  MODIFICATION. 

§  265.     Material  alteration  without  consent  avoids  contract. 

§  266.     Immaterial  alteration  does  not  avoid  contract. 

§  267.     Alteration  when  contract  is  inchoate. 

§  268.     Alteration  by  a  third  party. 

§  269.     Alteration  by  the  insurer. 

§  269a.  Substitution  of  corrected  policy  by  insurer. 

§  270.     Material  alteration  of  policy  may  be  made  by  consent, 

§  271.     Same  subject :   decisions. 

§  271a.  Alteration  of  certiiicate  of  membership:  consent. 

§  272.     Alteration  of  contract  by  parol. 

§  273.     Same  su1)ject :  decisions. 

§  274.     Alteration  with  intent  to  obtain  i*nsurer's  consent. 

§  275.     Same  subject:  decisions. 

§  276.     Alteration:  substitution  of  parties. 

§  276a.  Alteration  or  modifieation  of  standard  policy. 


§  265.  Material  alteration  without  consent  avoids  contract. — If 

a  completed  contract  of  insurance  is  altered  in  any  material  part 
without  the  consent  of  the  parties  thereto,  such  alteration  makes 
the  entire  contract  void.^^  So  a  material  and  unauthorized  altera- 
tion of  the  application  after  the  delivery  of  the  policy  of  which 
it  is  a  part,  and  which  is  apparent  on  the  face  of  the  application 
Avill  preclude  a  defense  of  misrepresentations.^^'*    What  constitutes 


12  Langhorne  v.  Cologan,  4  Taunt,  avoids,     though     made     innocently. 

330:  1  Duer  on  Insurance  (ed.  1845)  Barton  Savings  Bank  &  Trust  Co.  v. 

78,  sec.  24,  et  seq.;   Chitty  on   Con-  Stephenson,   87   Vt.   433,   51   L.R.A. 

tracts,   7th    Am.    ed.    783-85,   notes;  (N.S.)   346   (annotated  on  alteration 

Fairlie  V.   Christie,    7    Taunt.    416;  of  date  of  note)  89  Atl.  639. 
Piicenix  Ins.  Co.  of  Hartford  v.  Me-        ^^^  Kansas  Mutual  Life  Ins.  Co.  v. 

Kernan,  100  Kv.  97,  18  Kv.  L.  Rep.  Coalson,  22  Tex.  Civ.  App.  64,  54  S. 

617,  37  S.  W.  490.     See  in  general,  W.   388. 

Baldwin   v.   Ha.skell   Xational   Bank,       What  is  not  a  material  alteration 

104  Tex.  122,  133  S.  W.  864,  134  S.  of  copy  of  application,  see  Steeley's 

W.  1178,  rev'g  —  Tex.  Civ.  App.  — ,  Creditors  v.  Steeley,  23  Ky.  L.  Rep. 

124  S.  W.  443.  996,  64  S.  W.  642. 

Generally :       material       alteration 

656 


THE  POLICY— ALTERATION  AND  MODIFICATION      §  260 

a  uiaterinl  alteration  is  a  question  of  much  importance.  If  the 
words  are  introduced  into  the  body  of  the  policy  and  increase  the 
risk,  they  are  certainly  material,  and  in  consequence  nullify  the 
contract,"  and  we  apprehend  that  any  alteration  would  be  material 
which  would  operate  to  so  change  the  risk  or  subject  matter  as  to 
make  the  policy  essentially  variant  in  terms  from  that  intended  by 
the  parties  at  the  time  of  its  completion,  and  words  which  would 
legally  effect  this  result  wherever  written,  whether  on  the  margin 
of  the  policy  or  elsewhere,  constitute  a  material  alteration, ^^  for  the 
necessary  result  of  a  material  alteration  is  to  substitute  a  new  con- 
tract in  place  of  the  old,  which  can  be  legally  effected  only  with 
the  insurer's  consent  imder  an  original  agi'eement  or  by  subsequent 
ratilication,  or  through  a  court  of  proper  and  competent  jurisdic- 
tion.^^ 

§  266.  Immaterial  alteration  does  not  avoid  contract. — If  the 
alteration  adds  nothing  to  the  contract  nor  detracts  therefrom,  and 
makes  it  none  the  less  the  contract  legally  contemplated  by  the  par- 
ties at  the  time  of  its  completion,  the  alteration  is  immaterial,  and 
while  a  policy  of  insurance  is  an  instrument  of  much  solemnity, 
even  where  not  under  seal,  its  alteration  in  an  immaterial  point 
does  not  affect  its  validity.^^  So  if  the  law  would  imply  the  words 
added,  they  do  not  operate  to  annul  the  contract,^''^  and  where  the 
words  ''and  trade"'  were  inserted  in  the  policy,  they  were  held  im- 

"  Forshaw  v.  Chabert,  3  Brod.  &  alteration,  however  made,  not  at  all 
B.  158.  affecting  the   terms   of  the   promise, 

^*Mr.  Duer  (1  Duer  on  Ins.  [ed.  seems  not  to  be  within  the  same 
1845]  81)  asserts  that  words  on  the  principle  of  deeds  which  from  the 
margin,  if  material,  avoid  the  policy,  alteration  may  not  be  the  deeds  of 
See  also  1  Parsons  on  Ins.  (ed.  the  parties,  while  a  similar  alteration 
1868)  138,  note  1.  See  Forshaw  in  a  written  simple  contract  might 
V.  Chabert,  6  Moore,  369,  386.  leave    it     complete    evidence    of   the 

What  constitutes  a  material  altera-  same  contract:  "  Id.,  per  Parsons,  C. 
tion  of  contract:  Generally,  see  J.,  ''When  the  alteration  is  wholly 
Wicker  v.  Jones,  159  N.  Car.  102,  74  immaterial,  .  .  .  the  assent  of  the 
S.  E.  801,  40  L.R.A.(N.S.)  169,  underwritei-s  is  wholly  unimportant. 
Ann.  Cas.  1914B,  1083n;  Barton  Tiiose  who  assent  are  bound  by  the 
Savings  Bank  &  Trust  Co.  v.  Steph-  policy  as  altered;  those  who  dissent, 
enson,  87  Vt.  433,  89  Atl.  639,  51  by  its  original  form,  but  the  liability 
L.R.A.(N.S.)  346  and  note.  in  both  classes  is  precisely  the  same, 

*^  See  1  Marshall  on  Ins.  (ed.  and  the  distinction  between  the  two 
1810)  343.  contracts,  where  a  suit  is  commenced, 

^®  Sanderson  v.  McCallum,  4  consists,  not  in  the  nature  and  ex- 
Moore,  5;  Nichols  v.  .Johnson,  10  tent  of  the  relief,  but  solely  in  the 
Conn.  192;  Sanderson  v.  Svmonds,  form  of  declaring:"  1  Duer  on 
1  Brod.  &  B.  426;  Pequamket  Bridge  Tn.s.  (ed.  1845)  80.  See  1  Parsons  on 
V.  Mathes,  8  N.  H.  139;  Hunt  v.  .Marine  Insurance  (ed.  1868)  140. 
Adams,  6  Mass.  519.  ''But  in  a  "Hunt  v.  Adams,  6  Mass.  519;  1 
simple  contract  which  is  merely  evi-  Greenleaf  on  Evidence,  sec.  567. 
dence   of   a   promise,    an    innnaterial 

Joyce  Ins.  Vol.  I.— 42.  657 


§§  267-269 


JOYCE  ON  INSURANCE 


material,  in  view  of  the  fact  that  the  policy  as  it  stood  before  the 
alteration  gave  by  implication  a  power  to  trade.^* 

§  267.  Alteration  when  contract  is  inchoate. — Where  the  altera- 
tion is  material,  and  is  made  before  subscription  while  the  contract 
is  in  fieri,  it  does  not  vitiate  the  policy,^^  for  when  the  contract  is 
imperfect  and  inchoate  the  assured,  by  preventing  the  inception  of 
the  risks,  may  prevent  it  from  becoming  operative  and  in  effect  dis- 
solve it,  but  in  no  other  case  can  he  release  himself  by  his  own 
act  from  his  own  obligations.^" 

§  268.  Alteration  by  a  third  party. — If  the  alteration  be  made  by 
a  third  person  without  the  consent,  co-operation,  or  privity  of  the 
insured,  or  without  his  being  responsible  therefor,  it  does  not  in- 
validate the  policy.^ 

§  269.  Alteration  by  the  insurer. — It  is  held  in  a  Massachusetts 
case  ^  that  an  alteration  of  the  policy  by  an  agent  of  the  company 
who  made  a  certain  indorsement  thereon,  which  was  not  agreed  to 
by  the  pai'ties  and  which  would  have  operated  to  prevent  a  recovery 
did  not  affect  the  contract,  but  that  such  alteration  was  void.  And 
in  a  Delaware  case  ^  it  was  held  that  the  terms  of  the  contract  were 
not  affected  by  an  indorsement  on  the  policy  made  by  the  secre- 
tary of  an  insurance  company  at  the  request  of  the  insured,  where- 
by the  insurance  was  transferred  from  the  goods  in  a  building  to 
the  building  itself.  But  when  alterations  are  accustomed  to  be 
made  by  the  president  or  secretary,  an  alteration  made  by  either  is 
valid.*  And  where  an  alteration  is  made  in  the  terms  of  the  policy 
by  a  clerk  of  an  insurance  company,  and  he  enters  the  same  in  the 
record-book,  sufficient  notice  thereof  is  thereby  given  the  company.^ 

And  a  fraudulent  alteration  by  insurer's  agent  may  preclude  de- 
fenses by  the  insurer.^* 

Again,  an  application  which  is  part  of  the  contract  may  be  so 
far  severed  therefrom  that  a  material  alteration  in  said  application 

"  Sanderson  v.  Symonds,  1  Brod.  ^  Kennebec    Co.    v.    Augusta    Ins. 

&  B.  426,  4  Moore,  42.  &  Banking  Co.   6   Gray   (72  Mass.) 

19  Robinson  v.  Tobin,  1  Stark.  336,  204. 

per  Lord  Ellenborough.  See  note  m  38  L.R.A.(N.S.)    630, 

20Langhorn  v.,  Cologan,  4  Taunt,  on  insurance  broker  as  agent  for  m- 

330:  1  Duer  on  Ins.   (ed.  1845)   82,  sured  in  alteration  of  policy, 

see.  27.  3  jjoffecker    v.    New    Castle    Co. 

1  Langhorn   v.    Cologan,   4   Taunt.  Mutual  Ins.  Co.  5  Del.  101. 

330;  Rees  v.  Overbaugh,  6  Cow.  (N.  *  Warren    v.    Ocean    Ins.    Co.    16 

Y.)  746;  Jackson  v.  Malin,  15  Johns.  Me.  439,  33  Am.  Dec.  674. 

(N   Y.)  293,  per  Piatt,  J.;  Nicholas  ^ -^lashington  Ins.  Co.  v.  Dawson, 

V.  Johnson,  10  Conn.  192.     See  also,  30   Md.   91.      See   §   272   herein,   on 

generally,    Frv   v.    Jenkins,  173   111.  alteration  by  parol. 

App.  486;  Wicker  v.  Jones,  159  N.  ^a  gwau    v.    Watertown    Fire    Ins. 

Car.  102,  40  L.R.A.(N.S.)  169,  Ann.  Co.  96  Pa.  37. 
Cas.  1914B,  1083n,  74  S.  E.  801. 

658 


THE   POLICY— ALTERATION  AND  MODIFICATION      §  270 

by  the  insurer  or  through  its  negligence  may  preclude  reserved  de- 
fenses.*^ And  a  letter  from  insurer  is  held  not  to  constitute  a  modi- 
fication there  being  no  request  therefor  by  insured.^ 

§  269a.  Substitution  of  corrected  policy  by  insurer. — An  accident 
insurance  company  has  power,  after  the  occurrence  of  an  accident 
under  a  policy  in  which  the  occupation  of  the  insured  was  incor- 
rectly described,  to  substitute  a  corrected  policy  therefor,  and  render 
itself  liable  thereunder  for  such  previous  accident^ 

§  270.  Material  alteration  of  policy  may  be  made  by  consent. — 
There  is  no  doubt  but  that  the  parties  may  make  such  lawful  al- 
terations and  modifications  as  they  wish  of  contracts  of  insurance 
which  have  been  completed  between  them.  Such  alterations  or 
modifications  may  be  made  by  indorsements  on  the  policy,  either 
marginal,  or  on  its  back,  or  by  inserting  words  in  the  body  of  the 
instrument,  or  by  a  separate  paper,  or  orally.^  And  a  change  made 
with  the  consent  of  insured's  agent  may  be  ratified  by  the  princi- 
pal's acts.^  And  the  contract  may  upon  a  sufficient  consideration 
be  subsequently  modified  by  limiting  the  amount  recoverable.^" 
But  if  the  insurer,  after  issuing  a  policy  insuring  against  accident, 
notifies  the  insured  of  a  change  of  classification  greatly  lessening  the 
amount  of  his  indemnity,  his  a.ssent  to  such  change  is  not  to  be  con- 
clusively inferred  where  he  did  not  expressly  a.ssent,  nor  forward 
his  policy  to  have  it  rewritten  as  requested,  and  the  dues  and  assess- 
ments paid  and  required  to  be  paid  were  the  same  as  before.^^ 

Again,  if,  after  a  contract  of  insurance  is  effected,  a  memorandum 
is  sent  to  the  assured  in  effect  modifying  such  terms,  he  is  not 
deemed  to  have  accepted  or  acquiesced  in  this  modification,  because 
of  his  silence  respecting  it,  where  it  is  not  shown  that  the  insurer 
was  influenced  in  his  conduct  by  the  silence  of  the  assured."* 

SI*  Kansas  Mutual  Life  Ins.  Co.  v.  &  R.  (Pa.)  98;  Robinson  v.  Tobin,  1 

Coalson,  22   Tex.    Civ.   App.   64,  54  Stark.   336;   1   Phillips  on  Ins.   see. 

S.  W.  388.  109;  1  Duer  on  Ins.   (ed.  1845)   78, 

^  Pringle     Bros.     v.     Philadelphia  sees.   24  et   seq.   and  see   cases  next 

Casualty  Co.  138  N.  Y.  Supp.  330,  section. 

153  App.  Div.  180.  Consideration  necessary.     See  Pat- 

'Ford    V.    United    States    Mutual  lerson    v.    American    Ins.    Co.    164 

Accident  Relief  Co.  148  Mass.  153,  Mo.  App.  157,,  148  S.  W.  448. 

1  L.R.A.  700,  19  N.  E.  169.  '  Belt  v.  American  Central  Ins.  Co. 

8  Hoftecker  v.  New  Castle  County  1G3  N.  Y.  555,  57  N.  E.  1104. 

Ins.     Co.     4     Houst.      (Del.)      306;  1°  Kettelmann    v.    Fire    Assoc,    of 

Mattinglv    v.     Springfield     Fire     &  Phila.  79  Mo.  App.  447,  2  Mo.  App. 

Marine    Ins.    Co.    26    Ky.    L.    Rep.  Reptr.  487. 

1187,   83   S.   W.   577,  34  Ins.  L.   J.  "Morse     v.     Fraternal     Accident 

136;  Northrup  v.  Mississippi  Valley  Assoc.   190  Mass.   417,  112  Am.   St. 

Ins.   Co.   47  Mo.   435,  4  Am.   Rep.  Rep.  337,  77  N.  E.  491. 

337;  Bell  v.  Marine  Ins.  Co.  8  Serg.  "^  Shakman     v.     United      States 

659 


§§  271-272  JOYCE  ON  INSURANCE 

§  271.  Same  subject:  decisions. — Almost  any  change  as  to  parties 
or  terms  may  be  made  by  indorsement  with  consent.^^  So  the  con- 
tract may  be  altered  by  a  writing  on  the  margin  of  the  policy  in- 
creasing the  valuation,"  or  covering  other  property,^*  and  the  ter- 
mini may  be  changed  by  a  proper  indorsement  on  the  policy .^^  and 
an  additional  agreement  may  be  made  to  cover  certain  shi]:)meiits 
not  covered  by  the  original  policy.^^  So  a  deviation  from  the  risk 
assumed  in  the  policy  may  be  agreed  upon  between  the  parties  by 
indorsement  written  across  the  policy,  although  it  is  not  signed, 
where  it  has  been  the  practice  of  the  company  to  make  alterations 
in  the  risk  in  this  manner,  and  such  change  is  recorded  by  the 
secretary."  So  an  indorsement  may  be  made  giving  the  captain 
authority  to  act  as  his  own  pilot,  without  prejudice  to  the  insur- 
ance.^* 

§  271a.  Alteration  of  certificate  of  membership:  consent. — A  cer- 
tificate of  membership  in  an  insurance  benefit  society  is  a  contract 
which  can  be  changed  only  by  and  with  the  consent  of  both  par- 

ties.^^ 

§  272.  Alteration  of  contract  by  parol. — It  has  been  held  that  the 
alteration  must  be  of  as  high  a  nature  as  the  contract  itself,  whether 
made  by  indorsement  or  upon  a  separate  paper,  and  that  it  must 
be  subscribed  by  the  underwriters.^"  But  the  authorities  are  now 
numerous,  and  there  is  no  doubt  but  that  in  the  absence  of  a  statu- 
tory provision  the  parties  may  by  consent  alter,  modify,  or  enlarge 
the"  terms  of  a  policy  of  insurance  by  parol,  for  the  fact  that  the 

Credit  System   Co.   92  Wis.  366,  53  ^o  Kaines  v.  Kniqhtly,  Skin.  54. 

Am.  St.  Rep.  920,  32  L.R.A.  383,  66  A  contract  varying  a  policy  is  as 

N.  W.  528.  much  an  instrument  as    the    policy 

12  Howes  V.  Union  Ins.  Co.  16  La.  itself  and,  therefore,  can  be  executed 

Ann.  235.  only   in   the   manner    prescribed    by 

"  Robinson  v.  Tobin,  1  Stark.  336.  law.     Head  v.  Providence  Ins.  Co.  2 

i^Northnip   V.    Mississippi   Valley  Cranch   (6  U.  S.)  127,  2  L.  ed.  229, 

Ins.  Co.  47  Mo.  435,  4  Am.  Rep.  337.  cited  in   Laclede   Fire   Brick   Manu- 

15  Bell  v.  Marine  Ins.  Co.  8  Serg.  facturing    Co.    v.    Hartford    Steam- 

&  R.    (Pa.)   98.  Boiler   Inspection    Co.   60   Fed,  358, 

i^Marx  v.  National  Marine  &  Fire  9   C.   C.   A.  7,  19   U.   S,  App.  510; 

Ins.  Co.  25  La,  Ann.  39.  Presbyterian        Mutual       Assurance 

17  Wan-en  v.  Ocean  Tn.'^.  Co.  16  Fund  v.  Allen,  106  Ind.  596,  7  N.  E. 
Me.  439,  33  Am.  Dec.  674.  See  Ker-  317;  Leonard  v.  American  Ins.  Co. 
shaw  V.  Cox,  3  Esp.  246.  97  Ind.  304;  Platho  v.  Merchants'  & 

18  Gulf  of  California  Navigation  &  Manufacturers'  Ins.  Co.  38  Mo.  255j 
Express  Co.  v.  State  Invest.  &  Ins.  Hathron  v.  Germania  Ins.  Co.  55 
Co.  70  Cal.  586,  12  Pac.  473.  Barb.    (N.  Y.)   34.     As  to  execution 

19  Rus,s  v.  Supreme  Council  Amori-  of  policy,  see  §§  178  et  seq.  herein. 
can  Legion  of  Honor,  110  La.  588,  98 

Am.  St.  Rep.  469,  34  So.  697.     See 
§§  377-380  herein. 

660 


THE  POLICY— ALTERATION  AND  MODIFICATION     §  272 

contract  is  written  does  not  prevent  its  change,  enlargement,  or  con- 
tinuance by  a  subsequent  parol  agreement.^  So  the  alterations  may- 
be made  by  consent  without  a  new  signature,^  but  where  the  con- 
tract is  required  by  statute  to  be  in  writing,  it  cannot  be  shown  to 
have  ])een  altered  by  parol  after  its  execution.'  And  where  a  stat- 
ute requires  that  a  contract  of  fire  insurance,  to  be  binding,  must 
be  made  in  writing,  an  agreement  to  alter  such  contract  must  be  in 
wiiling.'* 

Parties  may  stipulate  that  a  policy  may  be  modified  only  by  a 
writing  of  equal  dignity  and  credit  with  the  policy  itself,  and  a 
"loss-payable"  indorsement  may  be  written  upon  the  policy  in  pur- 
suance of  a  mutual  and  expressly  declared  purpose  to  make  it, 
with  the  indorsement,  a  complete  and  entire  agreement  and  pre- 

1  Westchester  Fire  Ins.  Co.  v.  C.  C.  A.  645,  650,  36  U.  S.  App.  327 ; 
Earle,  33  jVlich.  143;  llaitfoid  J^^ire  Fireman's  Fund  Ins.  Co.  v.  Norwood, 
Ins.  Co.  V.  Webster,  69  111.  392,  393;  69  Fed.  71,  75,  16  C.  C.  A.  136,  140, 
Howell  V.  Knickerbocker  Life  Ins.  32  U.  S.  App.  490. 
Co.  44  N.  Y.  276,  3  Rob.  (N.  Y:)  232,  3Iassachiisetts.-~EmeTy  v.  Boston 
19  Abb.  Pr.  (N.  Y.)  217,  4  Am.  Rep.  Marine  Ins.  Co.  138  Mass.  398,  412. 
()75.  Norris  v.  Cl'ina  Traders'  Ins.  Michigan. — Cobbs  v.  Fire  Assoc. 
Co.  52  Wash.  554,  100  Pac.  1025.  of  Phila.  68  Mich.  463,  464,  36  N. 
"In  the  United  States  there  is  no  re-  W.  222. 
,  striction  on  the  rio-hts  of  the  parties  Mississippi. — Home  Ins.  Co.  v. 
to  alter  their  original  contract  at  any  Gib.^on,  72  Miss.  58,  65,  17  So.  13. 
time  and  in  any  manner  they  may  Missouri. — Burdick  v.  Security 
deem  expedient;  but  in  I]ngland,  al-  Life  Assoc.  77  Mo.  App.  629,  635; 
though  certain  alterations  are  per-  Burnham  v.  Greenwich  Ins.  Co.  63 
mitted  to  be  made  without  the  addi-  Mo.  App.  85,  88,  1  Mo.  App.  Repr. 
tion  of  a  stamp,  those  that  seem  the    616. 

most  material,  if  unstamped,  are  Tennessee. — Dale  v.  Continental 
whoUy  invalid :  "  1  Duer  on  Ins.  (ed.  Ins.  Co.  95  Tenn.  38,  49,  31  S.  W. 
1845)  82,  see.  28;  1  Parsons  on  Ins.  266;  American  Central  Ins.  Co.  v. 
(ed.  1868)  139  note.  But  this  state-  McCrea,  8  Lea,  513,  52.5,  41  Am. 
ment  should  be  qualified  in  view  of    Rep.  647. 

statutory  provisions  requiring  the  Texas. — Cohen  v.  Continental  Fire 
contract  to  be  in  writing,  and  per-  Ins.  Co.  67  Tex.  325,  328,  60  Am. 
haps  in  case  of  revenue  stamp  acts  Rep.  24,  3  S.  W.  296;  Missouri 
and  provisions  of  charters  and  by-  Kansas  &  Texas  Ry.  Co.  v.  Cook,  8 
laws  of  mutual  companies  or  so-  Tex.  Civ.  Ajop.  376,  381,  27  S.  W. 
cieties.  769. 

Contracts    of    insurance    may    be        ^  Wai-r^n  v.  Ocean  Ins.  Co.  16  Me. 
altered  by  parol.    Knickerlxx-kcr  Lite    439.  33  Am.  Dec.  674. 
Ins.  Co.  "v.  Norton,  96  U.  S.  234,  24        3  ^litf.l,^.]l    v.    Universal    Life    Ins. 
L.  ed.  689.  Co.  54  Ga.  289. 

Cited  in:  United  States. — ^Futual  ^Lippman  v.  .T]lna  Ins.  Co.  108 
Reserve  Fund  Life  Assoc,  v.  Cleve-  Ga.  391,  33  S.  E.  897,  28  Ins.  L.  J. 
huid  Woolen  Mills,  82  Fed.  508,  513,  886,  887,  Ga.  Civ.  Code,  sec.  2089. 
27  C.  C.  A.  212,  217,  54  U.  S.  App.  The  court  declared  that  such  was  the 
290;  London  &  Lancashire  Fire  Ins.  rule  by  repeated  adjudications  in 
Co.  V.   Slorrs,  71  Fed.  120,  125,  17    (hat  state. 

661 


§  273  JOYCE  ON  INSURANCE 

elude  a  resort  to  parol  evidence.^  But  it  is  also  held  that  the  rule 
that  a  written  contract  may  be  changed  by  a  subsequent  parol  agree- 
ment is  not  changed  by  the  fact  that  the  contract  provides  that  no 
subsequent  agreement  shall  be  valid  unless  in  writing  and  endorsed 
on  the  policy,  for  this  part  of  the  contract  stands  like  any  other 
part  of  it.^ 

§  273.  Same  subject:  decisions. — Where  before  the  expiration  of 
the  policy  the  insured  goods  were  removed  to  another  story  in  the 
same  building,  and  the  insurer,  knowing  such  fact,  issued  a  renew- 
al receipt  and  received  the  consideration,  it  was  held  that  this  was 
equivalent  to  an  indorsement  or  assent  by  parol  to  the  change  of 
location,  and  was  a  modification  of  the  contract.'  So  it  was  held 
that  the  policy  might  be  changed  by  a  subsequent  parol  agreement, 
altliough  the  policy  provided  that  ''the  use  of  general  terms,  or 
anything  less  than  a  distinct,  specific  agreement,  clearly  expressed 
and  indorsed  on  this  policy,  shall  not  be  construed  as  a  waiver  of 
any  printed  or  written  condition  or  restriction  hereiij  contained."  ^ 
So  the  contract  may  be  modified  by  a  subsequent  agreement  that  a 
mill  may  be  run  all  night  where  the  policy  provides  otherwise,^  and 
an  oral  agreement  to  extend  the  insurance  in  an  open  policy  to  ad- 
ditional merchandise  may  be  valid,  notwithstanding  the  policy  pro- 
vides that  it  shall  not  be  binding  until  countersigned  at  the  general 
office,  and  there  is  no  countersigning  as  raspects  the  extension ;  ^° 
and  notwithstanding  a  provision  in  the  by-laws  of  an  insurance 
company  that  the  president  shall  receive  applications,  fix  rates,  and 
sign  all  policies,  it  may  be  inferred  from  evidence  of  the  way  in 
which  the  business  of  the  company  was  actually  done  that  the  secre- 
'tary  had  authority  to  make  a  binding  oral  agreement  to  enter  an 
indorsement  on  a  policy.^^  Where  the  loss  is  payable  to  the  mort- 
gagee, with  a  condition  to  be  void  in  case  of  change  in  title  or  alien- 

5  Atlas  RediK'tion  Co.  v.  New  Zea-  As  to   agents'   powers  to  vary   or 

land   Ins.    Co.    9    L.R.A.(N.S.)    433,  waive  conditions  and  restrictions  in, 

138   Fed.   497,   71   C.    C.   A.   21,   34  policy,  see  §§  439  et  seq.,  533  et  aeq. 

Ins.  L.  J.  805,  aff'g  121  Fed.  929.  herein.     As  to  agents'  power  to  alter 

^  Mattinglv  v.   Springfield  Fire  &  policy,  see  §  549  herein. 

Marine  Ins.  Co.  26  Ky.  L.  Rep.  1187,  »  North  Berwick  Co.  v.  New  Eng- 

83  S.  W.  577,  34  Ins.  L.  J.  136.  land  Fire  &  Marine  Ins.  Co.  52  Me. 

'Ludwig  V.   Jersey   City  Ins.   Co.  336. 

48  N.  Y.  379,  8  Am.  Rep.  556.  ^°  Kennebec  Co.  v.  Augusta  Ins.  & 

8Dav  V.  Mechanics'  &  Traders'  Ins.  Banking  Co.  6  Gray  (72  Mass.)  204. 

Co.  88*Mo.  325,  57  Am.  Rep.  416.  ^^  Emery  v.  Boston  Marine  Ins.  Co. 

As  to  right  of  parties  to  original  138  Mass.  398. 
contract   to   vary  terms  thereof,  see 
Cowles  V.  United   States  Fidelitv  & 
Guaranty  Co.  32  Wash.  120,  126,  98 
Am.  St.  Rep.  838,  72  Pac.  1032. 

602 


THE  POLICY— ALTERATION  AND  MODIFICATION     §  274 

ation,  and  the  property  is  foreclosed,  it  may  be  shown  that  an  agree- 
ment was  made  after  the  sale  that  the  policy  should  stand  as  re- 
curity  for  the  insured's  interest,  and  that  the  company  would  make 
the  proper  entries  therefor  in  its  books.^^  Where  a  policy  was  exe- 
cuted ''upon  the  freight  bill  of  a  steamboat,  and  the  boat  was  in- 
jured in  the  hull  so  as  to  lose  the  voyage,  but  the  insurers  and  in- 
sured made  a  subsequent  agreement  "that  the  insurers  would  be 
bound  by  their  policies  on  cargo  and  freight  bill  by  a  transfer  of  the 
same  to  another  boat,"  it  was  decided  that  this  agreement  exempted 
the  insurers  from  their  liability  as  to  the  first  boat.^^  In  another 
case  where  there  was  no  provision  in  the  policy  authorizing  an  in- 
dorsement for  removal  of  the  insured  property,  but  the  property 
was  removed  under  an  indorsement  granting  permission  so  to  do, 
it  was  held  that  no  action  would  lie  under  the  original  policy  for 
the  loss,  and  that  the  indorsement  was  a  new  and  distinct  contract 
by  parol,  upon  which  an  action  of  covenant  could  not  be  sustained.^* 
So  an  oral  agreement  to  pay  part  of  the  amount  of  the  insurance 
within  a  certain  time,  such  amount  to  be  received  in  full  satisfac- 
tion of  a  claim  for  loss,  is  valid.^^  But  where  an  indorsement  was 
made  giving  liberty  to  deviate,  it  was  held  that  parol  evidence  of 
the  conversation  between  the  parties  at  the  time  the  indorsement 
was  made  was  inadmissible.^^  A  policy  of  insurance  issued  to  an 
agent  insuring  his  principal's  property  cannot  be  modified  by  him 
and  the  company  by  parol,  so  as  to  exclude  such  property,  after  tho 
contract  ha^  been  ratified  by  the  principal.^' 

v§  274.  Alteration  with  intent  to  obtain  insurer's  consent. — Where 
the  insured  makes  an  alteration  on  tlie  policy  purposing  to  obtain 
the  insurer's  consent  thereto,  and  there  are  several  underwriters, 
such  alteration,  if  material,  avoids  the  policy  in  respect  to  all  such 
underwriters  as   do  not  consent. ^^ 

12  Pratt  V.  New  York  Cent.  Ins.  Co.  123  Wis.  130,  68  L.R,A.  934,  101  N. 

55  N.  Y.  505,  61  Bai-b.  589,  11  Am.  W.  395,  107  Am.  St.  Rep.  99j. 

Rep    304.  isj^irsljaw  v.  Cliabert,  3  Bred.  & 

i3*Field   V.    Citizens'    Ins.    Co.    11  B.    158;     Campbell    v.     Christie,    2 

Mo    50  Stark.    64;    Laird    v.    Robertson,    4 

1^  Sbertzer  v.  Mutual  Fire  Ins.  Co.  Brown  Pari.  C.  488;  Fairlie  v.  Cbris- 

46  Md.  506.     See  Maryland  Fire  Ins.  tie,  7  Taunt.  410;  1  Ducr  on  Ins.  (ed. 

Co.  V.  Gusdorf,  43  Md.  506.  1845)  79,  sec.  24  et  seq.     In  the  case 

15  Millers'    Ins.    Co.    v.    Kinneard,  of     an     alteration      made      without 

136  111.  199,  26  N.  E.  368.  fraudulent  intent,  with  the  purpose 

leSeccom'b  v.  Provincial  Ins.   Co.  of  obtaining   the   underwriter's  con- 

10  Allen   (92  Mass.)   305.     Compare  sent,  but  which  is  not  obtamed,  Mr. 

Norris  v.  China  Traders'  Ins.  Co.  52  Parsons   (1  Parsons  on  JMaiine  Ins. 

Wash.  554,  100  Pac.  1025.  [ed.  18681  142)  refers  to  Mr.  Duer's 

1"^  Johnston  V.  Charles  Abresch  Co.  (1   Duer   on    Ins.     [ed.     ISlo]     80) 

663 


§§  275,  276  JOYCE  ON  INSURANCE 

§  275.  Same  subject:  decisions. — Where  the  date  when  certain 
ships  were  warranted  to  sail  was  struck  out  and  a  later  date  inserted 
in  the  memorandum,  with  the  purpose  of  getting  the  assent  of  the 
insurers,  it  was  lield  that  an  underwriter  was.  not  bound  who  did 
not  assent,^^  and  where  a  blank  was  filled  out  in  writing  with  the 
names  and  quantities  of  certain  articles,  so  that  the  insurance  might 
attach  specifically  thereon,  it  was  held  a  material  alteration,  and  not 
binding  on  an  underwriter  who  did  not  give  his  assent.'"' 

§  276.  Alteration:  substitution  of  parties. — It  was  held  in  an 
early  Massachusetts  case  ^  that  an  indorsement  on  the  back  of  a 
policy,  whereby  another  underwriter  Avas  substituted,  was  binding, 
although  only  signed  by  the  insurance  broker, ^  and  evidence  is  ad- 
missible to  show  a  substitution  of  another  party  in  place  of  the 
original  insured,  as  in  case  of  the  continuation  of  a  partnership 
business  by  a  member  of  the  firm.^  So  where  C.  took  out  a  fire 
polic}^,  borrowed  money  of  F.,  gave  F.  a  trust  deed,  caused  the  sec- 
retaiy  of  the  company  to  write  on  the  policy,  "loss,  if  any,  made 
payable  to  F.,"  sold  the  property  to  G.  subject  to  the  trust  deed,  and 
caused  an  entry  to  be  made  on  the  company's  policy  register  at  the 
policy's  page,  "transferred  to  G./'  and  G.  paid  off  the  trust  deed  and 
received  the  policy  from  F.,  it  was  held  that  thereupon  F.'s  interest 
in  the  jDolicy  vested  in  G.,  and  that  the  entry  in  the  register  tended 
to  show  that  the  company  accepted  G.  as  the  insured  in  place  of 
C,  and  not  of  F.*  And  where  A.  obtained  a  policy  of  fire  insur- 
ance on  his  museum  building  and  collections,  and  before  the  ex- 
piration of  the  policy  he  sold  the  insured  property  to  B.,  and  the 
acting  secretary  of  the  insurance  company  then  indorsed  on  the 
policy  the  words  "loss,  if  any,  payable  to"  B.,  and  afterward  B. 
sold  the  museum  collections,  and  the  president  of  the  company 

statement  that  it  avoids    the    policy,  contracts,    where    the    suit    is    eom- 

and  also  to  Mr.    Phillips'    opposing  menced,  consists  not  in  the  nature  or 

view  that  it  does  not.     But  the  latter  extent  of  the  relief,  but  solely  in  the 

(1  Phillips  on  Ins.  [3d  ed.]  sec.  114,  form  of  declaring." 

note  1),  referring  to  Mr.  Duers  criti-  ^^  Fairlie  v.  Christie,  7  Taunt.  416, 

cism  of  the  eases  relied  on  by  him,  1  Moore,  114. 

says:     "1  am  indebted  to  Mr.  Duer  ^o  Lgjjg],Qj.j^  y_   Cologan,  4  Taunt, 

for  pointing  out  my  error  in  stating  330. 

these  two   eases   in   my   former   edi-  ^  Merry  v.  Prince,  2  Mass,  176. 

tions."     Mr.  Parsons   (1  Parsons  on  ^  One    judge    dissented,    and    Mr. 

Marino    Ins,    [ed.    1868]    142)    also  Duer  (1  Duer  on  Ins.  [ed.  1845]  145, 

says:     "We  doubt  whether  any  uni-  146)   says  "the  propriety  of  the  de- 

versal  rule  on  this  subject,  either  in  cision  seems  very  questionable," 

the  affirmative  or  negative,  would  be  ^  Wood  v.  Eutland  Mut.  Fire  Ins. 

accurate."     But   Mr.   Duer    (1  Duer  Co.  31  Vt.  552. 

on  Ins.   [ed.  1845]   80)   also  declares  *  Griswold  v.  American  Cent,  Ins. 

that  "the  distinction  between  the  two  Co.  70  Mo.  654. 

664 


THE  POLICY— ALTERATION  AND  MODIFICATION    §  276a 

made  an  additional  indorsement  on  the  policy  in  the  words,  "this 
policy  is  hereb}'  changed  to  cover  chairs,  benches,  and  furnaces,  in- 
stead of  museum  collection,  which  is  removed,"  an  action  being- 
brought  upon  the  policy  it  was  decided  that  the  indorsements  con- 
stituted valid  contracts  of  insurance,  and  that  the  company  was 
liable  thereon.* 

§  276a.  Alteration  or  modification  of  standard  policy. — If  it  is 
intended  to  modify  the  provisions  contained  in  the  standard  form 
of  policies  of  insurance  either  by  conditions  or  riders  attached  to 
the  policy,  such  intention  must  be  manifested  by  unambig-uous 
words.  ^ 

^Northrup  v.  Mississippi  Valley  Standard  policy;  stipulations  eon- 
Ins.  Co.  47  Mo.  435,  4  Am.  Rep.  337.    tra,    additions,    changes,    etc.,    see    § 

^  Hardy   v.    Lanr-aster,   166   Mass.    176b  herein. 
210,  55  Am.  St.  Rep.  395,  33  L.R.A. 
241,  44  N.  E.  209. 

t65 


CHAPTER  XI. 

WAR— ALIEN  ENEMIES. 

§  281.  Effect  of  war  generally. 

§  282.  Insurances  on  enemies'  property  formerly  upheld. 

§  283.  Insurances  on  enemies'  property  now  illegal. 

§  284.  Same  subject :  early  decisions. 

§  285.  Trading  with  enemy:  mistake  or  ignorance  no  excuse. 

•  §  286.  Defense  of  alien  enemy. 

§  287.  Binding  force  here  of  laws  of  belligerent  nations. 

§  288.  Alien  enemies:  life  insurance. 

§  289.  Effect  of  war  on  pre-existing  valid  contract. 

^  290.  Same  subject :  loss  before  war. 

§  291.  Same  subject :  that  war  merely  suspends  the  contract. 

§  292.  Right  of  citizen  to  bring  property  from  enemy's  country. 

§  293.  War:  license  to  trade. 

§  294.  Who  are  alien  enemies :  domicil. 

§  295.  Alien  enemy:  what  constitutes  domicil. 

§  296.  Residence  with  intent  to  return. 

§  297.  Change  of  domicil. 

§  298.  Alien  enemy:  what  is  enemy's  country. 

§  299.  Alien  enemy:  commencement  and  cessation  of  hostilities. 

§  299a.  Alien  enemy:  intention  to  subsequently  wage  war.  '^ 

§  281.  Effect  of  war  generally. — All  intercourse  between  citizen:^ 
of  belligerent  powers  which  is  inconsistent  with  a  state  of  war  is 
prohibited  by  the  law  of  nations.  Such  prohibition  includes  all 
negotiations,  commerce,  or  trading  with  the  enemy ;  all  acts  which 
will  increase  or  tend  to  increase  its  income  or  resources ;  all  acts  of 
voluntary  submission  to  it  or  of  receiving  its  protection ;  also,  all 
acts  concerning  the  transmission  of  money  or  goods,  and  nullifies 
all  contracts  relating  thereto.  It  further  prohibits  insurances  upon 
trade  with  or  by  the  enemy,  and  upon  the  life  or  lives  of  aliens  en- 
gaged in  service  with  the  enemy; '  for  the  subjects  of  one  country 

'  See  Kershaw  V.  Kelsey,  100  Mass.  Rapid,  8  Cranch,  12  (U.  S.)  155,  3 
561,  97  Am.  Dee.  124,  per  the  court;  L.  ed.  520;  The  Emulous,  1  Gall.  U. 
The  Julia,  8  Cranch,  12  (U.  S.)  181,  S.  (C.  C.)  563,  Fed.  Cas.  No.  4479; 
3    L.    ed.    528,    per    Story,    J.;    The    The  Hoop,  1  Rob.  Adm.  196;  3  Phil- 

66G 


WAR— ALIEN  ENEMIES 


§  281 


cannot  be  permitted  to  lend  their  assistance  to  protect  by  insurance 
the  commerce  or  property  of  belligerent,  alien  subjects,  or  to  do 
anything  detrimental  to  their  country's  interest.*  The  purpose  of 
war  is  to  cripple  the  power  and  exhaust  the  resources  of  the  enemy, 
and  it  is  inconsistent  that  one  country  should  destroy  its  enemy's 
property  and  repay  in  insurances  the  value  of  what  has  been  so  de- 
stroyed, or  that  it  should  in  such  manner  increase  the  resources  of 
the  enemy  or  render  it  aid,^  and  the  commencement  of  war  de- 
termines, for  like  reasons,  all  trading  or  intercourse  with  the  enemy 
which  prior  thereto  may  have  been  lawful^"  All  individuals, 
therefore,  who  compose  the  belligerent  powers  exist,  as  to  each  other, 
in  a  state  of  utter  exclusion,  and  ai'e  public  enemies.^^ 


lips  on  Evidence,  *279;  Ex  parte 
Bousmaker,  13  Ves.  Jr.  71;  3  Kent's 
Commentaries  (5tli  ed. )  253. 

See  Hershey's  Essentials  of  Inter- 
national Public  Law  (ed.  1912),  pp. 
366  et  seq.,  sees.  349,  350,  and  bibli- 
ography on  effect  of  war  on  corpora- 
tions, and  declaration  of  war  and  its 
immediate  effects.     Id.  pp.  370,  371. 

An  alien  enemy  may  be  a  cor- 
poration as  well  as  an  individual.  7 
Moore's  Dig.  International  Law  (ed. 
1906)  p.  434. 

^Furtado  v.  Rogers,  3  Bos.  &  P. 
191,  198,  14  Eng.  Rul.  Cas.  125,  per 
Lord  Alvanley. 

^  "As  marine  insurance  has  for  its 
object  the  protection  of  commerce 
and  navigation,  it  would  obviously 
be  inconsistent  with  the  very  purpos- 
es of  a  maritime  war  to  permit  in- 
surance on  the  shipping  and  trade  of 
an  enemy."  Arnouhl  on  Ins.  (Per- 
kins' ed."'l850)   88,  •*87. 

lOMcStea  v.  Matthews,  50  N.  Y. 
166,  170,  per  Church,  C.  J.;  GrLs- 
wold  V.  Waddington,  15  Johns.  (N. 
Y.)  57,  16  Johns.  (N.  Y.)  438.  In 
this  case  the  effect  of  war  upon  the  in- 
tercourse of  hostile  states  is  exhaus- 
tivelv  considered.  See  also  notes  on 
"Belligerent  riglits,"  91  Am.  Dec.  279, 
280;  "Contracts  with  alien  enemies 
and  right  to  sue  them  in  our  courts," 
96  Am.  Dec.  624-33.  Commencement 
of  war;  declaration  of,  see  7  Moore's 
Dig.  of  International  Law  (ed.  1906) 
p.  168,  see.  1106.     Suspension  of  in- 

6(i 


tereourse  and  interruption  of  com- 
mercial relations,  see  Id.  p.  237,  sec. 
1135. 

11  The  Rapid,  8  Cranch  (12  U.  S.) 
155,  160,  3  L.  ed.  520,  per  Johnson, 
J.  "The  citizen  or  native  of  a  lios- 
tile  country  is  thus  an  enemy  as  one 
of  the  constituents  of  the  hostile 
state  or  nation,  and  a.s  such  is  sub- 
jected to  the  hardships  of  war."  7 
Moore's  Dig.  of  International  Law 
(ed.  1906)  p.  172,  sec.  1109. 

The  following  Federal  decisions 
are  of  importance  in  this  connection. 
In  war,  the  belligerents  and  all  their 
citizens  and  subjects  are  enemies  to 
eacli  other.  All  intercourse  and  com- 
munication between  them  are  unlaw- 
ful. Jecker  v.  jMontgomery.  18  How. 
(59  U.  S.)  110,  15  L.  ed.  311;  Lamar 
V.  Browne,  92  U.  S.  187,  23  L.  ed. 
650. 

Cited  in:  United  States. — Levy  v. 
Stewart,  11  Wall.  (78  U.  S.)  250.  20 
L.  ed.  88;  Hanger  v.  Abbott,  6  Wall. 
(73  U.  S.)  535,^18  L.  ed.  941;  United 
States  V.  1,756  Shares,  Fed.  Cas.  No. 
15,960b;  United  States  v.  1,756 
Shares,  Fed.  Cas.  No.  15,960a;  United 
States  V.  100  Barrels  of  Cement,  3 
Am.  L.  Reg.  N.  S.  737,  Fed.  Cas.  No. 
15,945 ;  The  Peterhoff ,  Blatchf .  Prize 
Cas.  497,  Fed.  Cas.  No.  11,024;  The 
Hiawatha,  Blatchf.  Prize  Cas.  14, 
Fed.  Cas.  No.  6,451;  The  Edward 
Barnard,  Blatchf.  Prize  Cas.  123, 
Fed.  Cas.  No.  4,291:  Cadwell  v. 
Southern  Exp.  Co.  1  Flipp,  89,  Fed. 


§  281 


JOYCE  ON  INSURANCE 


Cas.    No.    2,303;    The    A.    J.    View,  the  citizens  or  subjects  of  one  bel- 

Blatchf.  Prize  Cas.  143,  Fed.  Cas.  No.  ligerent   enemies   of  the   government 

118;    The    Advocate,    Blatchf.    Prize  and  of  all  the  citizens  or  subjects  of 

Cas.  143,  Fed.  Cas.  940.  the  other  applies  equally  to  civil  and 

Indiana. — Perkins    v.    Rogers,    35  to  international  wars.    United  States 

Ind.  145,  9  Am.  Rep.  C39.  v.  Cooke   (The  Venice)   2  Wall.   (69 

New   York.— Cohen  v.   New   York  U.  S.)  258,  17  L.  ed.  866. 
Mutual  Ldfe  Ins.  Co.  50  N.  Y.  617,        Cited  in :  Thiited  States.— Bnrhank 

10  Am.  Rep.  522.  v.  Conrad,  96  U.   S.  301,  24  L.  ed. 

Tennessee. — Conley    v.    Burson,    1  727 ;  Desmare  v.  United  States,  93  U. 

Heisk.   (Tenn.)   149.  S.  611,  23  L.  ed.  960;  Levy  v.  Stew- 

r«>f7/»/«.— Manhattan     Life     Ins.  art,  11  Wall   (78  U.  S.)   253,  20  L. 

Co.  V.  Warwick,  20  Gratt.  (Va.)  655,  ed.  89;  The  Peterhoff  (The  Peterhoff 

3  Am.  Rep.  218.  v.  United  States)  5  Wall.  (72  U.  S.) 

So  limited  hostilities  between  two  60,    18    L,    ed.    571;     The    Reform 

nations,  authorized  by  their  respec-  (United    States    v.    The    Reform)    3 

tive  governments,   coiistitute  a  pub-  Wall.  (70  U.  S.)  632,  18  L.  ed.  110; 

lie  war,  and  the  parties  enemies.    Ba.'j  The    Ambrose   Light,   25    Fed.   446; 

V.   Tingy,   4  Dall.    (4  U.   S.)    37,   1  Philips  v.   Hatch,   1  Dill.   576,   Fed. 

L.    ed.    731.      Cited   in    Montoya   v.  Cas.  No.  11,094;  Kanawha  Coal  Co. 


United  States,  180  U.  S.  267,  45  L. 
ed.  524,  21  Sup.  Ct.  358;  Cush- 
ing  V.  United  States,  22  Ct.  CI.  34; 


V.  Kanawha  &  O.  Coal  Co.  7  Blatchf. 
409,  Fed.  Cas.  No.  7,606;  Brown  v. 
Hiatt,    1    Dill.    381,    Fed.    Cas.    No. 


Metropolitan  Bank  v.  Van  Dyck,  27  2,011;    Carver  v.   United   States,   16 

N.  Y.  449.  Ct.  CI.  384. 

And  citizens  of  a  neutral  country  Alabama. — Scheible   v.    Baeho,    41 

established  in  business  in  the  enemy's  Ala.  433. 

country  must  be  regarded  as  enemies,  Indian-a. — Perkins    v.    Rogers,    35 

and  their  propertv  as  enemv's  prop-  3nd.  148,  9  Am.  Rep.  639. 

erty.      The    Flying    Scud    v.    United  7o»«.— Hill  v.  Baker,  32  Iowa,  310, 


States  (The  Flving  Scud)  6  Wall. 
(73  U.  S.)  263,  18  L.  ed.  755.  Cited 
in  The  Benito  Estenger,  176  U.  S. 
571,    44    L.    ed.    593,    20    Sup.    Ct. 


7  Am.  Rep.  193. 

Mississippi. — j\Iims  v.   Armstrong, 
42  Miss.  435,  97  Am.  Dec.  472. 

Missotiri.—'De  Jamette  v.  De  Giv- 


489;    The  Paquete   Habana    (United  erville,  56  Mo.  444. 

States  V.  The  Paquete  Habana)   189  New  York. — Bank  of  New  Orleans 

U.  S.  466,  47  L.  ed.  904,  23  Sup.  Ct.  v.  IMatthews,  49  N.  Y.  15;  Pepin  v. 

593;  Lee  v.  Kaufman,  3  Hughes,  134,  Lacjienmever,  45  N.  Y.  33;  Harden 

Fed.  Cas.  No.  8,191.  v.  Boyce,  59  Barb.  432. 

If  one  abandons  his  home,  enters  Tennessee. — Apperson  v.  Bynum, 
the  military  lines  of  the  enemy,  and  5  Coldw.  350;  Bank  of  Tennessee  v. 
is  in  sympathy  and  co-operation  with  Woodson,  5  Coldw.  350. 
the  enemy,  lie  is,  during  his  stay,  him-  Virginia. — McVeigh  v.  Bank  of 
self  an  enemy,  and  liable  to  be  treat-  Old  Dominion,  26  Gratt.  835.  Bill- 
ed as  such  as  to  both  person  and  gerry  v.  Branch,  19  Gratt.  428,  100 
propertv.  Gates  v.  Goodloe,  101  U.  Am.  Dee.  679. 
S.  612,  25  L.  ed.  895.  West  Virginia. — Winternitz  v.  Hy- 

Nor    will    the    individual    acts    of  land,  3  W.  Va.  476. 

friendship  of  a  subject  of  one  nation  And    all    persons    residing    within 

at  war,  toward  the  other  nation,  af-  tlie   territory   of  the   revolted   states, 

feet   his    status    as   an    enemy.      The  whose   property  may  be  used  to  in- 

Benito  Estenger,  176  U.   S.  568,  20  crease    the    revenues    of    the    hostile 

Suy).  Ct.  489,  44  L.  ed.  592.  power,  are  liable  to  be  treated  as  ene- 

Again  the  rule  that  war  makes  all  niies,   though   not  foreigners.     Prize 

608 


WAR— ALIEN  ENEMIES 


§  281 


Cases,   2   Black    (67  U.   S.)    035,  17    States   v.    Alexander    (Mrs.    Aloxan- 
L.  ed.  459.  der's  Cotton)  2  Wall.  (G9  U.  S.)  404, 

Cited  in:  United  States.— Fov(\  v.  17  L.  ed.  915. 
Surget,  97  U.  S.  604,  24  L.  ed.  1021;  Cited  in:  United  ^^a^es.— Mitchel 
United  States  v.  Farragut,  22  Wall.  v.  United  States,  21  Wall.  (88  U.  S.) 
(89  U.  S.)  423,  22  L.  ed.  884;  Miller  351,  22  L.  ed.  587;  Hamilton  v.  Dil- 
V.  United  States  (Pag-e  v.  United  lion.  21  Wall.  (88  U.  S.)  96,  22  L. 
States)  11  Wall.  (78  U.  S.)  306,  20  ed.  533;  New  Orleans  v.  New  York 
L.  ed.  145;  The  Peterhott'  (The  Peter-  Mail  S.  S.  Co.  20  Wall.  (87  U.  S.) 
hoti'  V.  United  States)  5  Wall.  (72  394,  22  L.  ed.  358;  Coppel  v.  Hall, 
U.  S.)  60,  18  Fed.  571;  The  Venice  7  Wall.  (74  V.  S.)  554,  19  L.  ed. 
(United  States  v.  Cgoke)  2  Wall.  (69  247;  The  Onachita  Cotton  (Withen- 
U.  S.)  274,  17  L.  ed.  867;  The  Steoh-  burv  v.  United  States)  6  Wall.  (73 
en  Hart,  Blatchf.  Prize  Cas.  387,  U.  S.)  532,  18  L.  ed.  939;  The  Peter- 
Fed.  Cas.  No.  13,364;  The  Peterhotf,  hofif  (The  Petei-holf  v.  United  States) 
Blatchf.  Prize  Cas.  497,  Fed.  Cas.  No.  5  Wall.  (72  U.  S.)  60,  18  L.  ed.  572; 
n,024;  Elgee  v.  Lovell,  Woohv.  120,  Goodie  v.  United  States,  15  Ct.  CI. 
Fed.  Cas.  No.  4.344;  Coolidsre  v.  287;  Chesapeake  and  Ohio  R.  Co.  v. 
Guthrie  1  Flipp,  99,  Fed.  Cas.  No.  United  States,  20  Ct.  CI.  66;  Brown 
3,185;  Caldwell  v.  Southern  Exp.  Co.  v.  Hiatt,  1  Dill.  381,  Fed.  Cas.  No. 
1  Flipp,  89,  Fed.  Cas.  No.  2,303 ;  Sto-  2.011 ;  Caldwell  v.  Southern  Exp.  Co. 
vail  V.  United  States,  26  Ct.  CI.  240;  2  Flipp,  90,  Fed.  Cas.  No.  2,303; 
Carver  v.  United  States,  16  Ct.  CI.  Coohdoe  v.  Guthrie,  1  Flipp,  99, 
384 ;  Enslev  v.  United  States,  6  Ct.  Fed.  Cas.  No.  3,185 ;  El^ee  v.  Lovell, 
CI.  290;  Mills  v.  United  States,  6  Ct.  Woohv.  121,  Fed.  Cas^  No.  4,344; 
CI.  268;  United  States  v.  1,756  Kanawha  Coal  Co.  v.  Kanawha  &  O. 
Shares,  Fed.  Cas.  No.  15,960b;  Unit-  Coal  Co.  7  Blatchf.  409,  Fed.  Cas. 
ed  States  v.  Cathcart,  1  Bond,  564,  No.  7,606;  Philips  v.  Hatch,  1  Dill. 
Fed.  Cas.  No.  14,756.  576,  Fed.   Cas.  No.  11,094 ;  Planters  ■ 

Georgia.—MnyQT  v.  Reed,  37  Ga.  Bank  v.  St.  John,  1  Woods,  591,  Fed. 
487;  United  States  v.  Athens  Armo-  Cas.  No.  11,208;  United  States  v. 
ry,  35  Ga.  355.  1500  Bales  of  Cotton,  Fed.  Cas.  No. 

Missouri. — Wellman  v.  Wicker-  15,958 ;  White  v.  Red  Chief,  1  Woods, 
man,  44  Mo.  486.  41,  Fed.  Cas.  No.  17,556;   The  Ara- 

New  Jersey. — Mutual  Benefit  Life   brose  Light,  25  Fed.  446. 
Ins.  Co.  V.  Hillvard,  37  N.  J.  L.  489,       Alahanm.—QcheiUe   v.    Bacho,   41 
18  Am.  Rep.  741.  Ala.  433;  Watson  v.  Stone,  40  Ala. 

New  York.— Bank  of  New  Orleans   469,  91  Am..  Dec.  484. 
V.  Matthews,  49  N.  Y.  15.  Arkmisas.—Hice  v.  Shoak,  27  Ark. 

0^(o.— Penny  wit  V.  Foote,  27  Ohio  ].38,  11  Am.  Rep.  785;  Latham  v. 
St.  628,  22  Am.  Rep.  340.  Clark,  25  Ark.  603 ;  Taylor  v.  Jenk- 

VirginM.—Merchani?,   Ins.    Co.    v.    ins,  24  Ark.  340,  88  Am.  Dec.  773. 
Edmond,  17  Gratt.  150.  Georgia. — Mayer  v.  Reed,  37  Ga. 

West  Virginia. — Haymond  v.  Cam-   488. 
den,  22  W.  Va.  197;  Grinnau  v.  Ed-       Indlanft. — Perkins    v.    Rogers,    35 
wards,    21    W.    Va.    357;    Ex    parte   Ind.  153,  9  Am.  Rep.  639. 
Quarrier,  2  W.  Va.  572.  loua.—mW    v.    Baker,    32    Iowa, 

So  all  the  people  of  each  state  or  310,  7  Am.  Rep.  193. 
district  in  insurrection  against  the  Ma.'^snchusetts. — Ker.'^haw  v.  Kes- 
LTnited  States  must  be  regarded  as  ley,  100  Mass.  570,  1  Am.  Rep.  142, 
enemies,  until,  by  the  action  of  the  97  Am.  Dec.  124. 
legislature  and  the  executive,  or  oth-  Mississippi. — Shackett  v.  Polk,  51 
erwise,  that  relation  is  thoroushlv  Miss.  391;  Statham  v.  New  York  L. 
and    permanently    changed.      United   Ins.   Co.  45  Miss.  594,  7   Am.  Rep. 

(J69 


§§  282,  283  JOYCE  ON  INSURANCE 

§  282.  Insurances  on  enemies'  property  formerly  upheld. — Under 
the  early  English  cases  insurances  on  the  property  of  alien  enemies 
were  countenanced  if  not  directly  upheld, ^^  and  so  eminent  an  au- 
thority as  Lord  Mansfield,  Avhile  not  distinctly  affirming  their 
validity,  defended  such  insurance.^'  upon  the  ground,  as  is  said  by 
Buller,  J.,^*  of  ^'isxpedience,"  and  for  a  long  time  neither  counsel 
nor  court  raised  any  objection  to  the  legality  of  such  contracts.^* 

§  283.  Insurances  on  enemies'  property  now  illegal. — Certain 
acts  of  Parliament  applicable  to  existing  wars  were  passed  in  1748  ^^ 
and  1792  ^'  and  these  acts  were  followed  by  decisions  in  the  Eng- 
lish courts  holding  unequivocally  that  such  insurances  were  abso- 
lutely void,  and  it  is  now  undisputed  that  insurances  of  enemies' 
property  or  of  any  interest  therein  are  illegal  and  void.^*    So  where 

737;  Durden  v.  Smith,  44  Miss.  553;  1  Duer  on  Ins,  (ed.  1845)  419,  see.  9, 

Hill  V.  Bayland,  40  Miss.  631.  463,  note  2. 

Missouri. — DeJamette    v.    DeGiv-        ^*  Bell  v.  Gilson,  1  Bos.  &  P.  345- 

erville,  56  Mo.  44^ ;  Wellman  v.  Vick-  54. 
erman,  44  Mo.  486.  ^^  g^jgi-,  y    Parkinson,  Doug.  732; 

New  Jersey. — Mutual  Benefit  Life  Plantamour  v.  Staples,  1  Term  Rep. 

Ins.  Co.  V.  Hillyard,  37  N.  J.  L.  489,  611,  note.    Emerigon  says :     "During 

18  Am.  Rep.  741;   Smith  v.  Gaines,  the  course  of  the  last  war,  English 

38  N.  J.  Eq.  67.  merchants    insured    our    goods,    and 

New  Yorfc.— Bank  of  New  Orleans  thus  restored  to  us  the  value  of  the 

V.  Mathews,  49  N.  Y.  15;  Woods  v.  prizes  taken   from  us  by  their  own 

Wilder,  43   N.  Y.  168,   3   Am.  Rep.  cruisers.      Since    Frenchmen   effect  ed 

684;  Egerton  v.  New  York  &  H.  R.  insurance  in  London  for  their   own 

Co.  39  N.  Y.  231.  account,  it  seemed  by  a  parity  of  rea- 

RJiode  Island. — Hubbard  v.  Harn-  son   that   the   merchants   of   London 

den  Exp.  Co.  10  R.  I.  252.  should  be  equally  allowed  to  effect  in- 

South    Carolina. — Mitchell   v.    The  surance   in   France."      Emerigon    on 

Sehamps,  13  Rich.  Eq.  13.  Ins.  (Meredith's  ed.  1850)  103. 

Tennessee. — Gholson  v.  Blaekman,        ^^  21  Geo.  II.,  c.  4. 
4  Coldw.  595;  Cummings  v.  Diggs,  1        i^  33  ^eo.  III.,  c.  27. 
Heisk.  72.  ^^"The    Reglement    of    Barcelona 

Texas. — Hall    v.    Keese,    31    Tex.  (Consulat,  c.  341)  forbids  to  insure 

543.  tlie   enemy's   property,   and   declares 

Virginia. — Small   v.   Lumpkin,   28  such  insurances  null  and  void.     The 

Gratt.   835;   Newton  v.  Bushong,  22  Guidon  de  la  Mer,  e.  2,  art.  5,  con- 

Gratt.  638,  12  Am.  Rep.  533;   Bill-  tains  the  same  prohibition,  unless,  as 

gerry  v.  Branch,  19  Gratt.  406,  100  it  says,  there  is  a  safe  conduct  and  li- 

Am.  Dee.   679.  cense    to    trade.      This    also    follows 

West  Vircjinia. — Haymond  v.  Cam-  from  the   interdiction   of   commerce, 

den,  22  W,  Va.  197;  Hedges  v.  Price,  contained  in  the  form  of  declarations 

2  W.  Va.  218,  94  Am.  Dec.  507.  of  war."  Emerigon  on  Ins.     (Mere- 

i^IIenkle  v.  Royal  Exeh.  Ins.  Co.  dith's  ed.  1850)    103,  e.  iv.,  sec.  9. 

1  Ves.  Sr.  318,  320.  "By  the  undivided"  testimony  of  for- 

^^Planche  v.  Fletcher,  Doug.  251;  eign    jurists    the   rule    has    obtained 

Gist  V.  Mason,  1  Term  Rep.  84,  88;  from  the  earliest  pei-iod  that  an  in- 

Tyson  v.  Gurney,  3  Term  Rep.  477;  surance  made  in  a  belligerent  <?ountry 

670 


WAR— ALIEN  ENEMIES  §  284 

the  policy  was  on  a  ship  from  Boston  to  a  port  of  discharge  in 
Europe,  it  was  held,  in  an  action  on  the  premium  note,  that  it  was 
avoided  as  an  unlawful  contract,  it  being  shown  that  it  was  intend- 
ed to  make  the  voyage  to  an  interdicted  port  of  the  United  States 
and  that  the  voyage  was  so  made.^^  But  the  principle  of  law  which 
invalidates  insurance  of  an  alien  enemy's  property  does  not  apply 
to  insurance  against  seizure  by  a  belligerent  government  of  the 
property  of  its  own  subjects.^" 

§  284.  Same  subject:  early  decisions. — The  following  are  the 
cases  most  frequently  cited  upon  this  subject  by  text-writers  and 
the  courts.  In  Brandon  v.  Curling  ^  insurance  was  made  during 
peace  on  goods  on  board  a  neutral  ship  from  London.  The  con- 
f^ignees  were  French  subjects,  residing  at  Bayonne.  Although  the 
ship  left  port  at  London  one  day  before  war  was  declared,  yet  it 
stopped  at  Gravesend  for  papers,  and  did  not  leave  there  until  two 
days  later.  The  goods  were  seized  at  a  port  in  Spain  by  Spanish 
officers  and  condemned.  It  was  held  that  no  recovery  could  be  had 
for  the  loss,  thus  determining  that  a  prior  legal  insurance  on  such 
property  is  made  void  by  war  supervening  between  the  attachment 
and  termination  of  the  risk.  Kellner  v.  Le  Mesurier  ^  was  a  case 
of  a  foreign  ship  and  British  capture,  where  the  insurance  was  held 
void,  since  it  would  be  repugnant  to  state  interests  for  a  British 
subject  to  insure  against  British  capture.  In  Potts  v.  Bell,^  there 
was  a  war  between  Holland  and  Great  Britain.  The  goods  were 
purchased  in  Holland  on  account  of  British  merchants,  resident  in 
England,  and  shipped  on  a  neutral  vessel.  It  was  held  that  trad- 
ing with  the  enemy  without  the  King's  license  was  illegal  in  Brit- 

upon   the   property   of   the   subjects  Life  Ins.  Co.  50  N.  Y.  626,  10  Am. 

of   an    opposite   belligerent   is   void,  Rep.  535;   Griswold  v.  Waddington, 

and  this  rule  is  now  sanctioned  by  15   Johns.    (N.  Y.)    57;  10  Id.  438; 

legislative    or    judicial    adoption    in  Harmon  v.  Kingston,  3  Camp.  loO, 

every  country  of  Europe."     1  Duer  152;  Flindt  v.  Waters,  15  Ea^t,  260; 

on  Ins.  (ed.  1845)  417,  sec.  6.  3    Phillips    on    Evidence,    *279;    3 

See  notes  in  5  B.  R.  C.  4,  on  lia-  Kent's  Commentaries  (5th  ed.)  2o3; 

bility   of  marine  insurer  for  losses  Ex  parte  Bousmakcr,  13  Ves.  Jr.  71; 

arising  out  of  war,  and  5  B.  R.  C.  Potts  v.  Bell,  8  Term.  Rep.  548,  561, 

836,  on  validity  of  insurance  of  en-  2  Eng.  Rul.  Cas.  654,  13  Eng.  Rul. 

emy  property  against  seizure.  Ca.s.  547. 

"Russell  V.  De   Grand,  15  Mass.  20  D^ief ontein     Consolidated    Gold 

35;  The  Julia,  8  Cranch  (12  U.  S.)  Mines,   Ltd.  v.   Janson;   West  Rand 

181,  3  L.  ed.  528,  per  Story,  J. ;  The  Consolidated  Gold  Mines  Co.  Ltd.  v. 

Rapid,  8  Cranch   (12  U.  S.)   155,  3  De    Rougemont     (Eng     Consl     Ct.) 

L.  ed.  528;  The  Emulous,  1  Gall.  C.  [1900]  2  Q:  B.  Div.  L.  Rep.  339,  346. 

C.  563,  Fed.  Cas.  No.  4,479,  per  Sto-  ^  4  East,  410. 

ry,  J.  See  New  York  Life  Ins.  Co.  v.  ^  4  East,  396. 

Clopton,  7  Bush   (Ky.)    179,  189,  3  ^S   Term   Rep.   548,  2  Eng.   Rul. 

Am.  Rep.  290;  Sands  v.  New  York  Cas.  654,  13  Eng.  Rul.  Cas.  547. 

671 


§§  285,  286 


JOYCE  ON  INSURANCE 


ish  subjects,  and  the  insurance  was  wholly  void.  In  Bristow  v. 
Towers,^  the  parties  were  alien  enemies  when  the  policy  was  affect- 
ed and  at  the  commencement  of  the  voyage.  The  judgment  was 
for  defendant  upon  the  ground  that  action  could  not  be  sustained 
by  or  in  favor  of  alien  enemies.  In  Brandon  v.  Nesbit  ^  the  parties 
were  alien  enemies  at  the  inception  of  the  voyage,  and  were  resid- 
ing in  France,  then  at  war  with  England.  The  court  decided  that 
an  alien  enemy  could  not  sustain  an  action.  In  Furtado  v.  Eod- 
gers,^  the  insurance  was  on  a  French  ship  during  peace.  The  ship 
was  seized  in  a  war  between  England  and  France,  and  was  con- 
demned by  the  British  government.  Suit  was  brought  after  peace 
was  restored,  and  the  insurance  was  held  not  valid  against  British 
capture.  In  Gamba  v.  Le  Mesurier '  insurance  was  effected  during 
■peace  on  a  French  ship  and  goods.  This  was  a  case  of  British  cap- 
ture aft^r  hostilities  commenced  between  England  and  France,  and 
suit  was  brought  after  peace  was  restored,  and  the  underwriter  was 
held  not  liable. 

§  285.  Trading  with  enemy:  mistake  or  ignorance  no  excuse. — 
Mistake  or  ignorance  is  not  a  valid  excuse  for  trading  with  the 
enemy.* 

§  286.  Defense  of  alien  enemy. — Although  the  illegality  of  such 
insurances  is  a  valid  defense,^  the  defense  of  alien  enemy  is  not 
favored  in  law,^°  and  it  is  held  in  Hume  Small  &  Company  v.  Prov- 
idence and  Washington  Insurance  Company  "  that  although  an 
alien  may  not  own  a  vessel  under  pain  of  forfeiture,  yet  if  he  does 
own  one,  and  insures  it.  and  it  is  lost,  the  insurance  company  can- 
not set  up  his  alienage  as  a  bar  to  an  action  for  the  insurance  mon- 
ey, and  that  it  must  be  specially  pleaded  as  a  defense.  It  cannot 
be  availed  of  where  the  fact  of  alienage  merely  falls  out  casually 
during  the  trial,  and  a  plea  that  when  a  promissory  note  sued  on 
was  made,  the  plaintiff  was  a  citizen  of  Minniesota  and  the  defend- 
ant a  citizen  of  Arkansas  aiding  the  rebellion  and  public  enemies 
of  the  United  States  was  held  guod.^^ 


^1 


*  6  Term  Rep.  35. 

5  6  Term  Rep.  23,  2  Eng.  Ral.  Cas. 
649.     See  note  in  5  B.  R.  C.  583. 

6  3  Bos.  &  P.  191, 198, 11  Eng.  Rul. 
Cas.  125. 

7  ^  East    407. 

8  The  Compte*  de  Wohrohzoff,  1  C. 
Rob.  206.  As  to  trading  with  enemy, 
see  Hershey's  Essentials  of  Interna- 
tional Law  (ed.  1912)  pp.  366-370, 
sees.  349,  350. 

6 


9  Griswold  v.  Waddington,  _  18 
Johns.   (N.  Y.)   438,  15  Johns,  oi. 

1°  Shepler  v.  Durant,  14  Com.  B. 
582;  Society  for  Propagation  of  the 
Gospel  V.  Wheeler,  2  Gall.  (U.  S.  C. 
C.)  105,  127,  Fed.  Cas.  No.  13,156, 
per  Storv,  J. 

"  23  S.  C.  190. 

12  Rice  v.  Shook,  27  Ark.  137,  11 
Am.  Rep.  783. 


72 


WAR— ALIEN  ENEMIES  §§  287,  288 

§  287.  Binding  force  here  of  laws  of  belligerent  nations. — It  is 

declared  by  an  eminent  jurist  that  the  prize  law  of  the  British  em- 
pire became  our  prize  law  after  our  separation  so  far  as  adapted  to 
us ;  "  and  it  is  also  said  that  the  general  doctrines  applicable  to  sub- 
jects of  bellioerent  nations  were  applicable  to  the  Civil  War  here 
between  the  North  and  the  South  so  far  as  warranted.^* 

§  288.  Alien  enemies:  life  insurance. — Such  insurances  are  not 
only  invalid  in  respect  to  maritime  risks,  but  it  is  also  held  that  the 
life  of  an  alien  enemy  cannot  be  insured  by  his  creditor,^^  and  if 
the  insured  engages  in  hostilities  against  his  country,  the  policy  is 
thereby  voided. ^^  So  where  the  insured  was  post-quartermaster  in 
the  Confederate  service,  it  was  held  that  the  policy  was  invalidat- 
ed.^'^ In  another  case  an  insurance  on  the  life  of  a  person  who  went 
below  a  certain  parallel  fixed  in  the  policy  as  the  limit,  and  served 
on  the  staff  of  several  Confederate  generals,  was  held  voided  there- 
by. The  policy  contained  a  condition  that  the  party  should  not 
enter  military  service,  and  the  court  declared  that  it  would  not  im- 
pose upon  the  party  the  neca^^sity  of  producing  a  commission  to 
prove  military  service,  and  that  the  moment  the  party  connected 
himself  in  any  way  with  the  belligerent  service  the  policy  became 
void,  or  even  when  he  became  a  member  of  the  belligerent  govern- 
ment,^* and  it  would  necessarily  follow  that  death  in  battle  in  the 
enemy's  service  would  have  like  effect. ^^  It  is  said  by  the  court  in 
the  case  of  New  York  Life  Insurance  Company  v.  Clopton  ^°  that 
in  case  of  a  neutral,  even  though  his  domicil  would  make  him  a 
technical  enemy,  the  hostility  does  not  subject  his  life,  like  his 
estate,  to  peril,  and  no  belligerent  right  is  affected  by  the  continued 
validity  of  a  life  insurance,  and  that  neither  authorit}'  nor  prin- 
ciple would  avoid  the  policy ;  ^  and  that  a  policy  insuring  property 

^3  Thirty     Hogsheads      Sugar     v.  ^^  Hamilton    v.    Mutual    Life    Ins. 

Bovle,  9  Cranch  (L3  U.  S.)  191,  198,  Co.    9    Blatehf.    (C.    C.)    234,    249, 

3  L.  ed.  701,  per  Marshall,  C.  J.  Ecd.  Cas.  No.  17,297 ;  Sands  v.  New 

"Prize  Cases,  2  Black  (67  U.  S.)  York   Life   Ins.    Co.   50   N.   Y.    62G, 

635,  17  L.   ed.  459.     See  §  I.,  pre-  635,    10    Am.    Rep.    535. 

liminary  chapter,  generally,  as  to  how  i'  Drillard  v.  Manhattan  Life  Ins. 

far  binding  are  the  decisions  of  other  Co.  44  Ga.  119,  9  Am.  Rep.  164. 

countries.  ^*  Mitchell  v.  Mutual  Life  Ins.  Co. 

As  to  contraband  of  war,  the  Dee-  of   N.   Y.    (Md.)    cited   in    Bliss    on 

laration  of  London,  the  British  Proc-  Life  Ins.  699. 

lamation,    or    Declaration    of    Aug.  ^^  Bliss  on  Life  Ins.  (ed.  1872)  see. 

1914,  etc.,  during  the  great  war,  the  407,  citing  Ex  parte  Lee,  13  Ves.  Jr. 

effect  thereof:     This  subject  is  here-  64. 

inafter  fully  considered.  20  -  g^gh   (Ky.)    179,  188,  3  Am. 

15  See  Sands  v.  New  York  Life  Ins.  Rep.   290. 

Co.  50  N.  Y.  626,  635,  10  Am.  Rep.  ^  Citing  Keir  v.  Andrade,  6  Taunt. 

535.     See  note,  ''Civil  war,  effect  of  498,  504. 
upon"  life  insurance,  9  Am.  Rep.  169. 

Joyce  Ins.  Vol.  I.— 43.  673 


§  289 


JOYCE  ON  INSURANCE 


exempted  by  law  from  belligerent  power  would  not  be  avoided,  but 
that  a  policy  insuring  the  life  of  an  actual  enemy  of  the  govern- 
ment would  be  invalid.  The  court  also  said  that  it  would  be  "a 
grave  question  whether  the  implied  condition  as  to  perils  of  the 
war  should  be  extended  beyond  the  belligerent  right  of  capture  or 
destruction  by  the  government  of  the  insurer,  and  to  that  extent 
only  we  may  admit  that  the  continuation  of  the  policy  during  war 
would  be  illegal  and  its  pre-existing  obligation  become  avoided." 

§  289.  Effect  of  war  on  pre-existing  valid  contract. — The  effect 
of  war  between  the  countries  of  the  assured  and  insured  upon  a 
pre-existing  valid  contract  is  a  question  upon  which  there  is  a  de- 
cided conflict  of  authority.  It  is  held  in  England  that  in  such 
cases,  if  loss  happens  during  the  war,  this  discharges  the  insurer 
from  all  liability  therefor,  but  that  the  contract  is  not  thereby  made 
totally  void,  and  a  liability  exists,  capable  of  enforcement,  when 
peace  ensues,  for  losses  on  such  contract  arising  before  the  war.^ 
So  Lord  Ellenborough  ^  declai'es  that  policies  of  this  kind  must  be 
considered  to  have  incorporated  therein,  as  a  part  thereof,  a  pro- 
vision that  ''this  insurance  shall  not  extend  to  cover  any  loss  hap- 
pening during  the  existence  of  hostilities  between  the  respective 
countries  of  the  assured  and  assurer,"  and  that  during  the  contin- 
uance of  the  war  such  contracts  are  illegal  and  void.'*  It  is  declared 
by  Washington,  J.,  in  Gray  v.  Sims,^  that  "if  the  contract  be  legal 
when  it  is  made,  and  the  performance  of  it  is  rendered  illegal  by 
a  subsequent  law,  the  parties  are  both  discharged  from  its  obliga- 
tions. The  insured  loses  his  indemnity  and  the  insurer  his  pre- 
miums." ^  While  in  Furtado  v.  Rodgers'^  it  was  said  that  since 
the  contract  was  legal  in  its  inception,  there  should  be  no  return 
of  the  premium.  In  the  case  of  New  York  Life  Insurance  Com- 
pany V.  Clopton  *  the  court  argues  that  "both  principle  and  policy 
would  have  dissolved  a  contract  made  before  the  war  for  'continu- 
ing performance,'  such  as  partnership  or  affreightment,"  and  that 
"insurance  is  a  contract  sui  generis,  governed  by  a  peculiar  and 


2Flindt  V.  Waters,  15  East,  260, 
265,  per  Lord  Ellenborough;  1  Duer 
on  Ins.  (ed.  1845),  444,  see.  45.  See 
11  Am.  Law  Rev.  221;  Hersh- 
ey's  Essentials  of  International  Pub- 
lie  Law  (ed.  1912)  pp.  3ti8,  369,  sec. 
350. 

^Brandon  v.  Curling,  4  Ea.st,  410. 

*  See  Furtado  v.  Rodgers,  3  Bos. 
&  P.  191;  14  Eng.  Rul.  Cas.  125; 
Gamba  v.  Le  Mesurier,  4  East,  407. 
The  facts  to  the  cases  cited  in  this 

67 


and  the  last  note  are  briefly  noticed 
in  §  284  herein. 

53  Wash.  (C.  C.)  276,  Fed.  Cas. 
No.  5729. 

^  See  Leathers  v.  Commercial  Ins. 
Co.  2  Bush  (Ky.)  296,  92  Am.  Dec. 
483. 

'3  Bos.  &  P.  191,  14  Eng.  Rul. 
Cas.  125,  per  Lord  AJvanley. 

87  Bush  (Ky.)  179,  3  Am.  Rep. 
290. 


WAR— ALIEN  ENEMIES  §§  290,  291 

rather  arbitrary  code  of  the  modern  common  law.  ...  Its  char- 
acter, however,  is  so  far  matured  and  established  as  to  distinguish 
it  essentially  from  ordinary  commercial  contracts,  and  especially 
in  the  effect  of  war,  on  its  pre-existing  validity,  which  the  wai",  as 
a  general  rule,  destroys,  whether  the  contract  belongs  to  the  cate- 
gory of  'continuing  performance'  or  not."  And  it  is  held  in  a 
Virginia  case^  that  assessments  by  a  mutual  assurance  society, 
chartered  under  the  laws  of  Virginia  and  located  within  the  en- 
emy's lines  during  the  Civil  AVar  to  pay  for  losses  incurred  during 
the  war,  can  create  no  liability  upon  property  insured  in  the  com- 
pany located  in  loyal  territory. 

§  290.  Same  subject :  loss  before  war. — If  a  contract  of  insurance 
is  otherwise  valid,  it  would  seem  that  war  merely  suspends  the  right 
of  action  where  the  loss  and  the  right  to  a  remedy  accrues  before 
the  commencement  of  the  war.^° 

§  291.  Same  subject:  that  war  merely  suspends  the  contract. — 
Mr.  Duer,^^  after  an  exhaustive  review  of  the  cases,  says:  ''There 
are  doubtless  many  contracts  of  which  a  war  suspends  the  existence 
without  dissolving  the  obligation.  The  distinction  is  probably  this : 
a  vested  right  under  a  subsisting  contract  is  not  effected  by  a  sub- 
sequent war,  but  where  the  contract  is  executory,  and  would  have 
been  illegal  if  made  in  time  of  war,  it  becomes  so  from  the  time 
that  hostilities  commence,  as  to  all  acts  to  be  performed  by  either 
party  during  the  war."  Mr.  Arnould  ^^  declares  that  if  the  policy 
be  effected  before  and  the  loss  occurs  after  hostilities,  the  assured 
cannot  sue  upon  it,  even  after  the  return  of  peace,^^  but  where  ilie 
loss  occurs  before  war  commences,  the  right  to  sue  is  only  suspend- 
ed.^* So  it  has  been  declared  to  be  a  "well  known  rule  of  law,  that 
where  the  contract  of  indemnity  and  the  loss  are  before  the  com- 
mencement of  hostilities,  the  declaration  of  war  only  suspends  the 
remedy  while  the  war  lasts."  ^^  Both  Mr.  May  and  Mr.  Parsons  ^^ 
adopt  the  language  of  the  court  in  New  York  Life  Insurance  Com- 

8  Mutual  Assur.    Soe.  v.  Berkeley  1887)    135;    Id.    (9th    ed.    Hart    & 

Co.  4  W.  Va.  343.  Siraey)  see.  89,  p.  125. 

1°  Semmes  v.  City  Fire  Ins.  Co.  6  ^^  Citing  Flindt  v.  Waters,  15  East, 

Blatfhf.  445,  Fed.   Cas.  No.  12,651,  266. 

]3  Wall.    (80  U.   S.)    158,  20  L.  ed.  ^*  Citing  Gamba  v.  Le  Mesurier,  4 

490;  Flindt  v.  Waters,  15  East,  266;  East,  407. 

Chitty   on   Contracts    (7th   Am.   ed.)  ^^  Driefontein     Consolidated     Gold 

182,  note.  Mines,   Ltd.   v.   Jan.son;   West  Rand 

"  1  Duer  on  Ins.  (ed.  1845)  478.  Consolidated  Gold  Mines  Co.  Ltd.  v. 

See  Hershey's  Essentials  of  Interna-  De    Rongemont    (Eng.    Com'l    Ct.), 

tional  Public  Law  (ed.  1912)  p.  369,  [19001   2  Q.  B.  Div.  Law  Rep.  339, 

see.   350.  346,  per  Mathew,  J. 

1^1  Arnould  on  Ins.   (Perkins'  ed.  ^^1  May  on  Ins.  (3d  ed.)  sees.  39, 

1850)  91,  92;  1  Id.  (Madachlan's  ed.  39s. 

675 


§  291 


JOYCE  ON  INSURANCE 


pany  v.  Clopton."  While  Mr.  Bacon  ^^  relies  principally  upon  the 
doctrine  of  the  case  of  New  York  Life  Insurance  Company  v.  Stal- 
ham/^  which  holds  that  if  a  policy  is  conditioned  to  be  void  upon 
nonpayment  of  the  annual  premium,  a  failure  to  pay  such  pre- 
mium subjects  the  policy  to  forfeiture  if  the  assurer  insists  upon 
the  condition,  even  though  such  failure  to  pay  be  caused  by  the 
intervention  of  war  between  territories  in  which  the  insurance  com- 
pany and  the  assured  respectively  reside,  and  which  makes  it  un- 
lawful for  them  to  hold  intercourse,  but  in  such  case  the  insured 
is  entitled  to  the  equitable  value  of  the  policy  arising  under  the 
premiums  actually  paid.  This  equitable  value  is  the  difference 
between  the  cost  of  a  new  policy  and  the  present  value  of  the  pre- 
miums yet  to  be  paid  on  the  forfeited  policy  when  the  forfeiture 
occurred,  and  ma}'  be  recovered  in  an  action  at  law  or  a  suit  in 
equity.  The  average  rate  of  mortality  is  the  fundamental  basis 
of  life  insurance,  and  as  this  is  subverted  by  giving  to  the  assured 
the  option  to  revive  their  policies  or  not  after  they  have  been  sus- 
pended by  a  war  (since  none  but  the  sick  and  dying  would  apply), 
it  would  be  unjust  to  compel  a  revival  against  the  company. 2°  In 
Spratley  v.  Mutual  Benefit  Life  Insurance  Company  ^  a  citizen  of 
Virginia,  who  had  insured  his  life  in  1860  in  a  New  .Jersey  com- 
pany, died  at  Petersburg,  Virginia,  in  1863.  In  1872  his  widow 
presented  proof  of  the  death  to  the  agent  of  the  company  at  Louis- 
ville. Kentucky,  and  demanded  payment,  and  instituted  suit  in 
1873,  and  it  was  held  that  notice  and  proof  of  the  death  should  have 
been  made  and  payment  demanded  withirf  a  reasonable  time  after 
the  close  of  the  Civil  War — by  January  1,  1866 — and  a  suit  thereon, 
either  in  Virginia  or  New  Jersey,  was  barred  by  limitation ;  that 
the  policy,  being  payal)le  in  New  Jersey,  was  governed  by  the  laws 
of  that  state  as  to  limitation.  In  Worthington  v.  Charter  Oak  Life 
Insurance  Comj^any  ^  a  policy  was  taken  out  in  1854  by  a  husband 
upon  his  own  life  for  the  benefit  of  his  wife.  The  ihsuring  com- 
pany was  located  in  Connecticut.  The  insured  was  located  in  South 
Carolina  when  the  policy  was  effected,  and  continued  to  reside  there 
until  his  death,  and  the  insurance  wa.s  made  through  a  local  agent 
residing  in  the  latter  state.  Premiums  w^re  paid  to  the  agent  until 
1860,  when  he  was  withdrawn,  and  premiums  were  then  remitted 
to  the  company  in  Connecticut.    From  1862  to  1865  no  premiums 


"7  Bush  (Ky.)  179,  3  Am.  Rep. 
290.  Quoted  iu  the  text  herein  in 
§  289,  and  also  in  this  .'section. 

18  Bacon's  Benefit  Societies  and 
Life  Ins.  sec.  35G. 

19  93  U.  S.  (3  Otto)  24,  23  L.  ed. 

789. 

676 


^°  See  also  New  York  Life  Ins, 
Davis,  95  U.  S.  425,  21  L.  ed. 
Ill  Bush   (Kv.)   443. 
241  Conn.  372,  19  Am.  Rep. 


Two 

point. 


judges     dissented    upon 


Co. 
453. 

495. 
this 


WAR— ALIEN  ENEMIES  §  291 

were  paid,  owing  to  -the  war  and  the  President's  proclamation  for- 
bidding intercourse  between  citizens  of  the  loyal  and  confederate 
states.    At  the  close  of  the  war  the  insured  tendered  the  premiums 
with  interest,  which  were  refused  and  liability  on  the  policy  denied 
by  the  company.    No  further  premiums  were  ever  paid.     In  1869 
the  insured  died,  and  it  was  held  that  the  company  was  not  liable. 
In  Cohen  v.  New  York  Mutual  Life  Insurance  Company  ^  it  was 
decided  that  a  contract  of  life  insurance  between  citizens  of  differ- 
ent states,  lawful  in  its  inception,  and  upon  which  large  sums  of 
money  have  been  paid  for  premiums,  is  not  dissolved  by  war  be- 
tween the  states.     The  contract  remains.     The  remedy  simply  is 
suspended,  but  revives  with  the  return  of  peace.     In  another  New 
York  case  the  court  held  that  vested  rights  under  subsisting  con- 
tracts are  not  affected  by  a  subsequent  war,  except  so  far  as  relates 
to  the  remedy  which  is  suspended  during  its  continuance,  but  where 
the  contract  is  executory,  and  would  have  been  illegal  if  made  in 
time  of  war,  it  becomes  so  from  the  time  that  hostilities  commence 
as  to  all  acts  to  be  performed  by  either  pai-ty  during  the  war.*    In 
a  Virginia  ca^e  ^  the  court  declares  that  ''if  the  contract  is  partly 
executed,  and  rights  under  it  have  vested,  and  it  cannot  be  dissolved 
without  the  loss  or  forfeiture  of  one  of  the  parties,  and  cannot  be 
carried  into  execution  consistently  with  the  duties  of  the  parties  to 
their  countries  respectively  Mdiile  the  war  lasts,  in  such  case  it  should 
not  be  dissolved,  but  only  suspended.    But  if  it  can  be  carried  into 
execution  notwithstanding  the  war,  without  conflicting  with  the 
obligations  of  allegiance  of  either  party,  it  will  be  neither  dissolved 
nor  suspended."    In  this  case  tlie  insurance  was  obtained  through 
the  agent  of  the  company  at  Richmond,  and  the  premiums  subse- 
quent to  the  first  were  there  paid  to  the  agent,  and  the  premium  for 
1862  was  tendered  him,  but  he  refused  to  receive  it,  and  the  in- 
sured died  in  that  year,  and  it  was  held  by  the  supreme  court  of 
Virginia,  two  judges  dissenting,  that  the  policy  was  not  forfeited, 
but  that  the  company  must  pay  the  sum  insured,  less  the  amount 
of  unpaid  premiums,  and  the  court  proceeded  upon  the  theory  that 
the  insured  had  become  vested  with  a  right  by  the  payment  of  pre- 
miums, not  for  a  year,  but  for  life,  and  that  no  new  contract  was 
necessary  each  year,  but  only  the  annual  payment  of  premiums. 
While  in  the  Kentucky  case  already  referred  to  ^  it  is  said  that 
"where  a  single  act,  such  as  the  payment  of  a  debt  would  perform 

8  50  N.  Y.  610.  wick,  20  Gratt.  (Va.)  614,  635,  3  Am. 

*  Sands  v.  New  York  Life  Ins.  Co.   Rep.  218. 
(N.  Y.  Sup.  Ct.  1871)   4  Alb.  L.  J.       «  New  York  Life  Ins.  Co.  v.  CIop- 
11,  50  N.  Y.  626,  10  Am.  Rep.  535.     ton,  7  Bush,  179,  184,  3  Am.   Rep. 
.     5  Manhattan  Life  Ins.  Co.  v.  War-   290. 

677 


§  291  JOYCE  ON  INSURANCE 

a  contract  made  before  the  war,  a  belligerent  policy  interdicted  it, 
because  it  might  aid  the  enemy  in  the  prosecution  of  hostilities, 
consequently  suspension  of  performance  until  the  restoration  of 
peace  would  effectuate  the  whole  aim  of  the  law,  without  dissolving 
the  contract,  which  may  be  ultimately  enforced  in  perfect  consis- 
tency with  the  principle  and  end  of  the  temporary  interdict.  In 
that  class  of  cases  it  is  the  contract,  and  not  the  performance,  that 
is  continuing,  and  a  suspension  of  remed}-,  and  not  a  dissolution 
of  the  contract,  is  all  that  is  necessary,  befitting,  and  just.  But  in 
such  cases  as  i^artnership  or  affreightment  the  performance  is  con- 
tinuing and  unremitting  until  the  end  of  the  contract  shall  have 
been  consummated,  and,  therefore,  as  supervening  war  between  the 
parties  disables  them  from  performing  any  of  the  incumbent  duties 
and  defeats  the  object  of  the  contract,  a  dissolution  of  the  contract 
is  the  natural  and  legal  effect  of  the  war." 

The  conclusion  from  these  cases  and  opinions,  and  from  other 
cases  cited  hereafter,  would  seem  to  be  that  where  a  right  has  vested 
under  the  contract,  then  a  supervening  war  merely  suspends  the 
remedy;  but  where  the  loss  happens  during  the  war,  and  under  a 
pre-existing  valid  contract  of  insurance,  then  if  merely  suspending 
the  contract  or  its  enforcement  is  within  the  reason  and  policy  of 
the  law,  and  would  effectuate  its  whole  aim  and  purpose,  it  will  only 
be  suspended,  and  not  dissolved.  Such  a  rule  would  not  appear  to 
be  inconsistent  with  the  reason  of  the  rule,  which  prohibits  all  in- 
surances of  alien  enemies,  or  their  property,  although  it  will  be 
noted  that  nearly  all  the  decisions  relating  to  the  Civil  War  are 
those  pertaining  to  life  risks,  which  from  their  very  nature  are  of 
longer  duration  than  marine  and  fire  risks.  Although  in  many 
cases  these  contracts  of  life  insurance  have  been  held  to  be  con- 
tracts from  year  to  year  and  voidable  for  nonpayment  of  pre- 
miums.' 

'  See   Dillard   v.   Manhattan   Life  yard  v.  Mutual  Benefit  Life  Ins.  Co. 

Ins.  Co.  44  Ga.  119,  9  Am.  Rep.  167  35  N.  J.  L.  415. 
(that  war  merely  suspended.)  New    York. — Martini    v.    Interna- 

United   States. — See   also :    United  tional  Life  Assur.  Soc.  53  N.  Y.  339, 

States  V.  Wilev,  11  Wall.  (78  U.  S.)  13    Am.    Rep.   529;    Sands   v.   New 

508,  20  L.  ed.  211.  ^  York  Life  Ins.  Co.  50  N.  Y.  626,  10 

Kentucky. — New    York    Life  'Ins.  Am.  Rep.  535,  539;  Cohen  v.  Mutu- 

Co.  V.   Clopton,  7  Bush    (Ky.)    179,  al  Life  Ins.  Co.  50  N.  Y.  610,  10  Am. 

3  Am.  Rep.  290.  Rep.    522;    Buchanan    v.    Curry,    19 

Mississippi. — Statham       v.       New  Johns.  (N.  Y.)  137, 10  Am.  Dec.  200; 

York  Life  Ins.  Co.  45  Miss.  581,  7  Saltus  v.  United  States  Ins.   Co.  15 

Am.  Rep.  737.  Johns.    (N.   Y.)    523;   Bell  v.   Chap- 

New  Jersey. — Mutual  Benefit  Life  man,  10  Johns.    (N.  Y.)   183. 
Ins.  Co.  V.  Hillvard,  37  N.  J.  L.   (8        Virginia.— Clement    v.    New   York 

Vroom.)  444,  18  Am.  Rep.  741;  HUl-  L.  Ins.  Co.  76  Va.  355;  Connecticut 

678 


WAR— ALIEN  ENEMIES  §  292 

Again  it  is  held  in  the  Federal  Supreme  Court  that  "absolute 
suspension  of  the  right  of  the  citizens  of  one  belligerent  to  sue  the 
citizens  of  the  other,  and  prohibition  to  exercise  such  right,  exist 
during  war,  by  the  law  of  nations;  but  the  restoration  of  peace  re- 
moves the  disability  and  opens  the  doors  of  the  courts.'  So  where 
a  debt  is  not  confiscated,  the  right  to  enforce  payment  revives  with 
the  restoration  of  peace.^  And  complainants  who,  before  the  Civil 
War,  had  brought  suit  in  the  circuit  court  of  the  United  States  in 
Texas,  against  citizens  of  that  state,  to  quiet  title  to  a  tract  of  land, 
had  a  right  to  proceed  in  such  suit  to  protect  their  property  from 
seizure,  invasion,  or  disturbance  by  citizens  of  that  state,  so  soon  as 
court  was  opened  after  the  cessation  of  hostilities,  whether  an  ofh- 
cial  proclamation  had  been  made  or  not.^°  And  a  holder  of  a  bill 
of  exchange  might  demand  its  payment  by  the  drawee  in  New  Or- 
leans, and  notify  his  indorser  in  Tennessee  of  the  nonpayment,  at 
any  time  after  the  President's  order  of  April  29,  1865,  which  "re- 
moved all  restrictions  on  commercial  intercourse  between  these 
places.^^ 

§  292.  Right  of  citizen  to  bring  property  from  enemy's  country. — 
It  is  said  by  the  supreme  court  of  the  United  States  that  if  an  Amer- 
ican citizen  residing  in  an  enemy's  country  at  the  breaking  out  of 
the  war  has  the  right  to  withdraw  his  property  acquired  before  the 
war,  it  must  be  done  within  a  reasonable  time  after  knowledge  there- 
of, and  with  due  diligence,   and  that  a  shipment  made  eleven 

Mut.  Life  Ins.  Co.  v.  Duerson,  28  sees.  406-17.  "No  policy  of  insur- 
Gratt.  (Va.)  630;  Mutual  Benefit  ance  issued  to  a  citizen  of  the  corn- 
Life  Ins.  Co.  V.  Atwood,  24  Gratt.  monwealth  by  an  authorized  compa- 
(Va.)  497,  18  Am.  Rep.  652;  New  ny,  organized  under  the  laws  of  a 
York  Life  Ins.  Co.  v.  Hendren,  24  foreign  country,  shall  be  invalidated 
Gratt.  (Va.)  536;  Manhattan  Life  by  the  occurrence  of  hostilities  be- 
Ins.  Co.  V.  Warwick,  20  Gratt.  (Va.)  tween  such  foreign  country  and  the 
614,  3  Am.  Rep.  218.  United    States."      Mass.    acts    1887, 

England. — See  Ex  parte  Bousmak-  c.  214,  sec.  84. 

er,  13  Ves.  Jr.  71.  »  Caperton  v.  Bowver,  14  Wall.  (81 

Contra.     See  New  York  Life  Ins.  U.   S.)    216,  20  L.  ed.  882;  Levy  v. 

Co.  V.  Davis,  95  U.  S.  425,  24  L.  ed.  Stewart,  11  Wall.  (78  U.  S.)  244,  20 

453;  New  York  Life  Ins.  Co.  v.  Sta-  L.  ed.  86. 

then,  93  U.  S.  24,  23  L.  ed.  789 ;  Tait  Cited  in  McKinzie  v.  Hill,  51  Mo. 

V.  New  York  Life  Ins.  Co.  1  Flipp.  307,  11  Am.  Rep.  450. 

(C.  C.)    288,  Fed.  Cas.  No.  13,726;  » Han<?er  v.   Abbott,  6   Wall.    (73 

Worthington    v.    Charter    Oak    Life  U.  S.)  532,  18  L.  ed.  939. 

Ins.  Co.  41  Conn.  372,  19  Am.  Rep.  i»  Masterson  v.  Howard,  18  Wall. 

495;  Dillard  v.  Manhattan  Life  Ins.  (85  U.  S.)  99,  21  L.  ed.  764. 

Co.  4^4  Ga,  119,   9   Am.   Rep.   167;  Cited  in  Bond  v.  Moore,  93  U.  S. 

Abell  V.  Pennsylvania  L.  Ins.  Co.  18  595.  23  L.  ed.  983. 

W.  Va.  400.  11  Bond  v.  Moore,  93  U.  S.  593,  23 

See  generally,  as  to  effect  of  war,  L.  ed.  983. 
Bliss  on  Life  Insurance   (ed.   1872) 

679 


§  293 


JOYCE  ON  INSURANCE 


months  after  was  too  late.^^  But  this  right  to  withdraw  property 
was  subsequently  denied  by  the  same  court,  with  the  exception 
where  the  act  is  done  with  tlie  consent  of  the  citizen's  own  govern- 
ment.-'' 

§  293.  War:  license  to  trade. — Inasmuch  as  the  power  of  Con- 
gress to  regulate  commerce  between  the  United  States  and  foreign 
nations  and  among  the  several  states  is  general,  and  has  no  limita- 
tions except  those  prescribed  by  the  Constitution  itself,^*  there  is 
no  doubt  of  the  power  of  the  government  to  authorize  trading  with 
an  enemy  or  the  protection  of  enemy's  property,  and  it  may  grant 
privileges  or  licenses  to  trade. ^*  Thus,  during  the  Civil  War  the 
subject  was  regulated  by  Congress,  but  by  the  act  of  July  16,  1861,^* 
the  President  alone  had  power  to  license  commercial  intercourse 
between  places  within  the  lines  of  military  occupation  by  forces  of 
the  United  States  and  places  under  the  control  of  insurgents  against 
it.  "The  sovereign  may  license  trade,  but  in  so  far  as  it  is  done  it 
is  a  suspension  of  war  and  a  return  to  the  condition  of  peace.  It 
is  said  there  cannot  be  at  the  same  time  war  for  arms  and  peace  for 
commerce.  The  sanction  of  the  sovereign  is  indispensable  for 
trade."  ^'  It  is  held  to  be  of  itself  an  illegal  act  to  sail  under  an 
enemy's  license.** 


12  The  St.  Lawrence,  9  Cranr-h  (13  "  Gibbons  v.  Offden,  9  Wheat.  (22 

U.  S.)   121,  3  L.  ed.  676,  per  Story,  U.  S.)  1,  6  L.  ed.  23. 

J.;  1  Gall.  (C.  C.)  467,  Fed.  Cas.  No.  "  gee  The  Schooner  Rapid,  1  Gall. 

12,232.     See  Amory  v.  McGregor,  15  (C.   C.)    295,  Fed.   Cas.  No.   11,576, 

Johns.    (N.  Y.)   24.  per  Story,  J.,  who  says :    "It  must  be 

1' The  Rapid,  1  Gall.  (U.  S.  C.  C.)  considered  as  a  settled  principle  of 

304,  8  Craneh    (12  U.  S.)    155,  3  L.  maritime   and   national   law  that    all 

ed.  520;  The  Mary,  8  Craneh  (12  U.  trade  with  the  enemy,  unless  with  the 

S.)  388,  3  L.  ed.  590,  601,  1  Gall.  (C.  permission   of   the   sovereign,   is   in- 

C.)    621,   Fed.    Cas.    No.    9,184,   per  terdicted." 

Story,  J. ;  The  Alexander,  8  Craneh  *^  See  also  act  of  July  2,  1864. 

(12  U.  S.)  169,  3  L.  ed.  524.   See  The  "  Coppell  v.  Hall,  7  Wall.  (74  U. 

Ladv  Jane,  1  Rob.  202;  The  Venus,  S.)    542,    554,    19    L.    ed.    244,    per 

8  Craneh    (12  U.   S.)    253,  3  L.  ed.  Swayne,   J.      See   McKee   v.   United 

553;  Marshall,  C.  J.,  and  Livingston,  States,  8  Wall.  (75  U.  S.)  163,  19  L. 

J.,   dissenting.     See  Walker's  Inter-  ed.  329;  IMaddox  v.  United  States,  15 

national  Law   (ed.  1895)   125  et  seq.  Wall.  (82  U.  S.)  58,  21  L.  ed.  61;  The 

"I    adopt    the    conclusion    that    the  Sea  Lion,  5  Wall.  (72  U.  S.)  630,  18 

property    of    subjects    withdrawing  L.  ed.  618;   The  Ouachita  Cotton,  6 

themselves  in  good  faith  from  a  hos-  Wall.  (73  U.  S.)  521,  18  L.  ed.  935; 

tile  country  within  a  reasonable  time  The  Reform,  3  Wall.  (70  U.  S.)  617, 

after  knowledge   of  the   war  is  not  18  L.  ed.  389;  United  States  v.  Lane, 

stamped  with  the  illegal  character  of  8   Wall.    (75  U.   S.)    185,  19   L.   ed. 

trading  with  an  enemy,  but  it  is  to  445;  Butler  v.  Naples,  9  Wall.  (176  U. 

be   considered,   by   a   just   exception  S.)   766,  19  L.   ed.  822;   Mitcliell  v. 

from    the    general    rule,    as    exempt  Harmony,  13  How.    (54  U.  S.)   115, 

from  confiscation."     See  1  Duer  on  14   L.   ed.   75;   affirming  1   Blatehf. 

Marine  Ins.  (ed.  1845)  565,  sec.  11.  (C.    C.)    549,    Fed.    Cas.   No.    6,082. 

680 


WAR— ALIEN  ENEMIES 


§  294 


§  294.  Who  are  alien  enemies:  domicil. — Though  the  term  "en- 
emies," when  strictly  construed,  means  public  enemies/^  the  ques- 
tion whether  a  party  is  an  alien  enemy  or  not  depends  upon  his 
domicil,  rather  than  upon  the  place  of  his  birth ;  for  although  one 
born  out  of  the  allegiance  to  the  government  or  out  of  the  jurisdic- 
tion of  the  United  States,  and  not  naturalized,  may  be  an  alien,^° 
yet  domicil  is  the  test  of  an  alien  enemy.  And  if  one  be  domiciled 
in  a  country  at  war  with  the  United  States,  he  is  an  alien  enemy 
without  reference  to  his  place  of  birth. ^  And  if  he  has  resided  long 
enough  in  the  enemy's  country  to  acquire  a  domicil  there,  he  is 
subject  to  all  the  disabilities  of  an  enemy  with  relation  to  his  prop- 
erty.'^   And  where  a  country  is  part  of  an  enemy's  country,  under 

Concerning  Hcenses  to  trade,  see  Hal-  Cranch  (12  U.  S.)  253,  3  L.  ed.  553; 

leek's   International   Law    and   Laws  Willeson  v.  Patterson,  7  Taunt.  438; 

of  War  (ed.  1861)  675;  Hall's  Inter-  United  States  v.  Farragut,  22  Wall, 

national    Law    (ed.    1880)    478,    sec.  (89  U.  S.)   406,  22  L.  ed.  879;  The 

190;    Wheaton's    International    Law  Schooner  Edward  Barnard,  Blatchf. 

(ed.  1863)   554,  582,  690-92;  Walk-  Pr.  Cas.  122;  The  Mary  and  Susan,  1 

er's    International    Law     (ed.    1895)  Wheat.    (14  U.   S.)   46;   The  Flying 

123.  Scud,  6  Wall.  (73  U.  S.)  263,  18  L. 

18  Craig  V.  United  States  Ins.  Co.  ed.  755 ;  Rogers  v.  Schooner  Amado, 

2  Pet.    (C.   C.)    410,  Fed.   Cas.   No.  Newb.  Adm.  400;   The  Prize   Cases, 

3,340;  The  Ariadne,  2  W^heat.  (15  U.  2  Black.    (67  U.   S.)    635,  17  L.  ed. 

S.)   143,  4  L.  ed.  405;  The  Julia,  1  459;  Potts  v.  Bell,  8  Terra  Rep.  548, 

Gall.    (C.    C.)    594,   Fed.    Cas.    No.  2  Eng.  Rul.  Cas.  654,  13  Eng.  Rul. 

7,575;  The  Aurora,  8  Cranch  (12  U.  Cas.    547;     Porter    v.    Freudenberg 

S.)  203,  3  L.  ed.  536;  The  Hiram,  1  [1915]  1  K.  B.  857,  5  B.  R.  C.  548. 

Wheat.  (14  U.S.)  440,  4  L.  ed.  131;  See    Note    "Enemies,    who    are,"    88 

Maisonnaire  v.  Keating,  2  Gall.   (C.  Am.   Dec.  779,  780;   1  Kent's  Com- 

C.)    325,   Fed.   Cas.   No.   8,978;   The  mentaries,    (13th    ed.)     74,    et    seq.; 


See  Walkers  International  Law  (ed.  573;  Walker's  International  Law  (ed. 

1895)  115.  1895)  107,  sec.  40;  Lawrence's  Prin- 

"  Mononga.hela   Ins.   Co.  v.    Ches-  ciples  of  International  Law    (3d  ed. 

ter,  43  Pa.  "^St.  491.     See  note  at  end  1909)    pp.    318-322,   sees.   176,   177. 

of  §  281  lierein.  Civil  status  determined  by  domicil 

2"  See  note   "Who   are  aliens,"   84  no  matter  what  may  have  been  ones 

Am.  Dec.  210-13.     Enemy  character:  birthplace.     Maxey  on  International 

Belligerent    domicil,    see    7    Moore's  Law    (ed.  1906)    p.   61.     See  also   7 

Dig.  of  International  Law  (ed.  1906)  Moore's   Dig.    of   International   Law 

p.   424,   sec.    1189.      Domicil    (I)    a  (ed.  1906)    p.  428,  see.  1189,  as  to 

source  of  civil  status:      (II)   Bellig-  domicil;  meaning  of  etc.     See  Her- 

erent  domicil.     See  3  Moore's  Dig.  of  shcv's     Essentials     of     International 

International   Law    (ed.    1906)    sees.  Law    (ed.   1912)    pp.   2^52-256,   sees. 

487,  488.     See  also  Id.  sees.  489,  491.  237-243,  and  bibliography  on  p.  273. 

See  note  at  end  of  §  281  lierein.  ^  United  States  v.  Cargo  Schooner 

iThe  Venice,  2  Wall.   (69  U.  S.)  El  Telegrafo,  Newb.  Adm.  383;  The 

57,  58,  17  L.  ed.  818;  Sloop  Charter,  Frances       (Gillespie's       Claim)       8 

2  Dall.   (2  U.  S.)  41;  The  Venus,  8  Cranch  (12  U.  S.)  363,  3  L.  ed.  591; 

681 


§  294  JOYCE  ON  INSURANCE 

the  recognized  rules  of  war,  all  persons  residing  therein  during  a 
war  with  the  United  States,  are  to  be  deemed  enemies  without  re- 
gard to  their  nationality  and  even  citizens  of  the  United  States  there 
domiciled  and  doing  business  are  included.  So  a  neutral,  or  a  cit- 
izen of  the  United  States,  domiciled  in  an  enemy's  country,  not 
only  in  respect  to  his  property,  but  also  as  to  his  capacity  to  sue,  is 
deemed  as  much  an  alien  enemy  as  a  person  actually  born  under 
the  allegiance  and  residing  within  the  dominions  of  the  hostile  na- 
tion.^ A  partnership  between  parties  domiciled  in  Savannah  and 
New  York  was  held  dissolved  by  the  Rebellion.*  But  it  is  decided 
that  securities  held  by  a  citizen  and  resident  of  New  York  prior  to 
the  Civil  War  upon  a  resident  of  North  Carolina,  could  not  be  ex- 
tinguished durante  bello,  either  through  the  agency  of  the  courts 
there  or  through  the  former  agents  and  attorneys  of  such  nonresi- 

affirming  1  Gall.  (U.  S.)  614,  Fed.  dents  of  the  territory  under  the  con- 
Cas.  No.  5,034.  Domicil  distinct  from  trol  of  the  party  resisting  that  gov- 
residenee;  Essentials  of  domicil;  ernment,  and  their  property  may  be 
Domicil  of  origin ;  Domicil  of  Choice,  lawfully  confiscated.  Page  v.  Unit- 
see  Maxey  on  International  Law  (ed.  ed  States  (Miller  v.  United  States) 
l<JO(i)    pp.   62,   63.  11  Wall.    (78  U.  S.)   268,  20  L.  ed. 

2  Juragua     Iron     Co.     v.     United  135. 

States,    212   U.    S.    297,   308,   53   L.  Cited  in  Manley  v.  Park,  62  Kan. 

ed.  520,  29  Sup.  Ct.  383,  in  opinion  561,  64  Pac.  28;  Micou  v.  Benjamin, 

of  the  court,  per  Mr.  Justice  Harlan,  26   La.    Ann.    721 ;    State   v.   United 

qtioting  from  Whitings  War  Powers  States  &  C.  Exp.  Co.  60  N.  H.  2oo; 

Under    the    Constitution,    340,    342.  Opinion  of  Justices,  66  N.  H.  632, 

See  above  case  at  end  of  this  section.  33  Atl.  1076. 

See    Wheaton's     International     Law  Persons  residing  in  the  insurrected 

(5th  English  ed.)  pp.  442  et  seq.  states  at  any  time  during  the  Civil 

If  a  foreign  war  break  out,  a  citi-  War  must  be  considered  as  enemies, 
zen  abroad  should  return  to  his  conn-  without  regard  to  their  personal  sen- 
try, without  delay;  if  a  civil  war  timents  or  dispositions.  The  Peter- 
break  out  and  he  reside  in  a  rebel-  hoff  v.  United  States  (The  Peterhoff) 
lious  section,  he  should  at  once  return  5  Wall.  (72  U.  S.)  28,  18  L.  ed.  56^4. 
to  and  support  the  regular  estab-  Cited  in  The  Benito  Estenger,  176 
lislied  government.  The  Wm.  Baga-  U.  S.  571,  44  L.  ed.  593,  20  Sup.  Ct. 
ley  V.  United  States  (The  William  489;  Seheible  v.  Bacho,  41  Ala. 
Bao-alev)  5  Wall.  (72  U.  S.)  377,  18  433;  Perkins  v.  Rogers,  35  Ind.  153, 
L.^ed.  583.  0  Am.  Rep.  639;  Hill  v.  Baker,  3'2 

Cited  in  Gates  v.  Goodloe,  101  U.  Iowa,   310,  7   Am.  Rep.   193. 

S.  617,  25  L.  ed.  897 ;  Foster  v.  Unit-  ■*  Woods  v.  Wilder,  43  N.  Y.  164, 

ed  States,  5  Ct.  CI.  416;  Desmare  v.  3  Am.  Rep.  684.     See  The  William 

United  States,  10  Ct.  CI.  390;   Sey-  Bagaley,  5  Wall.  (72  U.  S.)  377,379, 

mour  V    Bailey,  66  111.  298;  Hall  v.  18  L.  ed.  583;  The  Cheshire,  3  Wall. 

Connecticut  Mut.  L.  Ins.  Co.  68  111.  (70  U.  S.)   231,  18  L.  ed.  175;  The 

2Qi  San  Jose  Indiano,  2  Gall.   (U.  S.  C. 

In  a  civil  war,  those  are  to  be  treat-  C.)  268,  Fed.  Cas.  No.  12,322;  The 

ed  as  enemies  who,  although  subjects  Friendschaft,  4  Wheat.    (1/    U.   S.l 

of  the  lawful  government,  are  resi-  105,  4  L.  ed.  525. 

682 


WAR— ALIEN  ENEMIES 


294 


dent.^  The  residence  of  a  consul  or  minister  in  a  foreign  country, 
on  account  of  his  official  duties  in  such  capacity,  does  not  change 
his  domicil,^  but  if  he  engages  in  mercantile  business  in  such  for- 
eign country,  the  trade  is  affected  by  the  hostile  character  of  the 
country^  But  the  consul  of  a  belligerent  may,  it  is  held,  engage 
as  a  merchant  in  the  commerce  of  a  neutral  state  where  he  resides ;  ^ 
and  it  is  declared  that  the  character  of  property  is  determined  by 
the  domicil  of  the  owners.^  In  regard  to  corporations,  they  are  now 
considered  to  be  citizens  of  the  state  of  their  incorporation  and 
transaction  of  business.^"     So  where  a  foreign  insurance  corpora- 

A  firm  doing  business  in  the  ene-  United  Ins.  Co.  1  Johns.  Cas.  (N.  Y.) 

ray's  territory,  where  the  active  mem-  363,  368,  affirmed,  Jenks  v.  Hallett, 

her  of  the  firm  resided,  must  be  ruled  1  Caines  (N.  Y.)  60;  The  Vigilaiitia, 

by    liis   status,    in    reference    to    the  1   Rob.   Adm.   13,  14,  per   Sir  Wm. 

property  of  the  firm  under  his  con-  Scott. 

trol    in    the    enemy's    country.      The  lo  Lafayette  Ins.  Co.  v.  French,  IS 

Wm.  Bagalev  v.  United  States  (The  How.  (59  U.  S.)  404,  15  L.  ed.  451; 

William  Bagaley)  5  Wall.  (72  U.  S.)  Louisville  C.  &  C.  R.  Co.  v.  Letson, 

377,  18  L.  ed.  583.  2  How.  (43  U.  S.)  497,  11  L.  ed.  353. 

5  Black  well   v.   Willard,   65  N.   C.  g^^  -^  -^  ^^-^  ^^y  ^£j..  Phillips  that 


555,  6  Am.  Rep.  749. 

6  Wheat    V.    Smith,    50    Ark.    266, 


the  national  character  of  a  corpora- 
tion   is    that    of    its    members:       1 

167; 


7  S.  W.  161.     See  The  Indian  Chief  pi^jm       ^n   Ins.    (3d  ed.)    sec 

3  Rob.  Adm.  12;  Arnold  V    United  ^^^    ^^    •„    Arnould    on    Ins.    (Per- 

Ins    Co.  1  Johns.  Cas.   (N- J.)   363;  ^.^^,  ^^^    g^    ^^^    55^  ^^^^e   1,  both 

Bark  Pioneer,  Blatchf.  Pr.  Cas   666;  ^.^.         g  j^^     Co.    v.    Board- 

7  Moore's  Dig.  of  International  Law  r^    ^^^^^j^    ^p    U.    S.)     57,    3 

(ed.   1906)    p.   431.     Privileges   and  j^   ^^    gg.  ^^^^  ^f  United  States  v. 

immunities     of     consuls      generally,  j^^^^^^    5  Craneh   (9  U.  S.)   61,  62, 

see  5  Moore's  Dig.  of  International  o  t.      .    00.  Sor-iplv  for  Pronaoation 


Law   (ed.  1906)   pp.  32  et  seq.  sees 
702  et  seq 


3  L.  ed.  38;  Society  for  Propagation 
of  the  Gospel  v.  Wheeler,  2  Gall.  (U. 
S.  C.  C.)  105,  Fed.  Cas.  No.  13,156; 


'The  Indian  Chief  (Mdtons  c^se)    jj^^^^.j^  ^   Chicago  Rock  Island  &  Pa- 
T^.K     A^..    19    o.    o«      M,-    Phil-    ,ifie  Rd.  Co.  6  Blatchf.  (U.  S.  C,  C.) 

X,      105,  Fed.   Cas.  No.   6,204;   Minot  v 


3  Rob.  Adm.  12,  27,  28.     Mr.  Phil 
lips    (1    PhilUps    on    Insurance    [3d 
ed.]     114;     sec.    168)     says 


Philadelphia,    Wilmington    &    Balti- 

^^„..-„-   ;--«.--,   .  V      1  •       ir        "lore  Rd.  Co.  2  Abb.   (U.  S.  C.  C.) 

consul  is  not   affected  by   his  office,    323   Fed.  Cas.  No.  9,645.     See  Wood 


commercial   national    character   of   a 


but  is  determined,  like  that  of  other 
persons,  by  his  residence  and  the  va- 
rious other  circumstances  that  con- 
stitute national  character  as  affecting 
that  of  his  property."    Wheaton's  In- 


V.  Hartford  Fire  Ins.  Co.  13  Conn. 

202,    33    Am.    Dec.    395,    note    399; 

Shelby  v.  Hoffman,  7  Ohio  St.  450_; 

Thompson  on  Corporations,  ed.  1895, 

7 — ,v  "    /-J    -.c^oN   r-o  vol.    i.,   sec.    12;    Id.    vol.    vi.,   sees. 

ternational  Law  (ed.  1803)   5m,  sec.    ^421-25 

1Q-     TT«ill'«     Tnfprnnfinnnl     Law      (ed.  --      -    • 

Corporations     as     citizens     under 


19;  Hall's  International  Law  (ed. 
1880)  431. 

8  The  Sarah  Christiana,  1  Rob. 
Adm.  239,  per  Sir  Wm.  Scott. 

*  Livingston  v.  Maryland  Ins.  Co. 
7  Craneh  11  (U.  S.)  506,  542,  3  L. 


Federal    Constitution,   see   notes,    60 
L.R.A.  230,  14  L.R.A.  580;  Joyce  on 
Franchises  (ed.  1909)  sec.  291. 
Bibliography.     As  to  effect  of  war 


ed    421    per   Story,   J. ;    Arnold   v.    on  corporations,  see  Hershey's  Essen 
'  683 


295 


JOYCE. ON  INSURANCE 


tion,  upon  compliance  with  the  insurance  laws  of  New  York,  has 
been  authorized  to  do  business  there,  and  has  established  a  perma- 
ment  general  agency,  and  conducts  its  business  there  as  a  distinct 
organization  in  the  same  manner  as  domestic  corporations,  it  will 
be  regai'ded,  as  to  the  business  transacted  there,  as  domiciled  and 
subject  to  the  same  obligations  and  liabilities  as  domestic  institu- 
tions." And  substantially  the  same  ruling  obtains  in  Ohio.'^^  So 
a  foreign  corporation  is  an  ''inhabitant"  under  the  first  section  of 
the  Judiciary  Act  of  that  district  in  which  it  is  engaged  in  lousi- 
ness.^' An  insurance  company  is  also  an  inhabitant,  for  the  pur- 
poses of  taxation,  of  the  town  w^here  it  has  its  principal  place  of  bus- 
iness." But  an  American  corporation  doing  business  in  Cuba  was, 
during  the  war  with  Spain,  an  enemy  to  the  United  States  with  re- 
spect of  its  property  found  and  then  used  in  Cuba,  and  such  prop- 
ert}^  could  be  regarded  as  enemy's  property,  liable  to  be  seized  and 
confiscated  by  the  United  States  in  the  progress  of  the  war,  subject 
also  under  the  laws  of  war  to  be  destroyed  whenever,  in  the  conduct 
of  military  operations,  its  destruction  was  necessary  for  the  safety 
of  troops  or  to  weaken  the  power  of  the  enemy."* 

§  295.  Alien  enemy:  what  constitutes  domicil. — What  constitutes 
domicil  depends  almost  exclusively  upon  whether  the  party  intends 
to  remain  in  a  given  country  or  state,  either  permanently  or  for  a 
definite  period,  or  whether  his  abode  is  taken  up  for  a  temporary 
purpose  with  the  intent  to  return.^*     Thus  the  intent  to  reside  an 


tials  of  International  Law  (ed.  1912) 
pp.  370,  371.  See  7  Moore's  Dig.  of 
International  Law  (ed.  1906)  p.  434, 
to  point  that  alien  enemy  may  be  a 
corporation. 

See  note  in  5  B.  R.  C.  333,  on  stat- 
us of  foi'poration  a.s  alien  enemy. 

^^  ^Martin  v.  International  Life  Ins. 
Sec.  53  N.  Y.  339,  13  Am.  Rep.  529. 

See  note  in  70  L.R.A.  693,  on 
constructive  domestic  residence  of 
foreign  corporation. 

12  New  York  Life  Ins.  Co.  v.  Bert, 
23  Ohio  St.  105. 

1'  Gilbert  v.  New  Zealand  Ins.  Co. 
49  Fed.  884,  15  L.R.A.  125. 

See  note  in  14  L.R.A.  184,  on  resi- 
dence of  corporation  for  purpose  of 
Federal  jurisdiction  in  state  other 
than  that  wliere  created. 

"  City  of  Portland  v.  Union  Mut. 

Life  Ins.  Co.  79  Me.  231,  9  Atl.  613. 

But    see  International    Life    Assur. 

Soc.    V.  Commissioners     Taxes,    28 


G84 


Barb.  (N.  Y.)  318.  A  corporation 
is  said  not  to  be  a  citizen  of  the  Unit- 
ed States  within  the  14th  Amend- 
ment :  Insurance  Co.  v.  City  of  New 
Orleans,  1  Woods  (U.  S.  C.  C.)  85, 
Fed.  Cas.  No.  7,052. 

"**  Juragua  Iron  Co.  v.  United 
States,  212  U.  S.  297,  53  L.  ed.  520, 
29  Sup.  Ct.  385,  see  this  case  near 
beginning  of  this  section.  See  note 
in  5  B.  R.  C.  333. 

1^  HalloAvell  V.  Saeo,  5  Grecnl. 
(jMe.)  143;  Harvard  College  v.  Gore, 
5  Pick.  (22  Mass.)  372,^374.  For 
definition  of  "domicil,"  see  note  34 
Am.  St.  Rep.  313:  Wood  v.  Roeder 
45  Neb.  311,  63  N.  W.  853;  Arnold 
V.  United  Ins.  Co.  1  Johns.  Cas.  (N. 
Y.)  366,  367,  per_Kent,  J.;  Stoi-y's 
Conflict  of  Laws  (/th  ed.)  c.  iii.,  sec. 
43,  p.  36.  "Domicil  how  acquired," 
see  note  34  Am.  St.  Rep.  314, 
see  note  for  definition  of  "domicil," 
59  Am.  Dee.  111-15;  note:  terms 
inhabitancy,"    "residence,"   "citizen- 


WAR— ALIEN  ENEMIES 


§  295 


indefinite  time  will  establish  a  commercial  domicil.^^  And  if  a  cit- 
izen of  one  country  goes  into  another  and  remains  there,  and  en- 
gages in  trade  and  commerce,  he  becomes  Ijy  the  law  of  nations  a 
merchant  of  that  country  and  acquires  a  domicil  there."  So  Brit- 
ish subjects  residing  and  trading  in  Portugal  are  to  be  deemed  Port- 
uguese subjects.^*  A  foreigner  coming  to  the  United  States  for 
health,  and  remaining  and  engaging  in  trade,  acquires  a  domicil 
here.^^  If  the  domicil  is  acquired  for  mercantile  purposes  in  the 
enemy's  country,  the  person  acquiring  such  domicil  becomes  an 
alien  enemy,^"  for  the  domicil  in  an  enemy's  country  is,  as  has  been 
stated,^  the  test  of  hostile  status.  So  a  businass  in  a  hostile  country 
is  stamped  with  the  national  character  of  such  country.^  So  if  a 
neutral  who,  having  resided  in  the  hostile  country,  withdraws 
therefrom,  or  who,  never  having  resided  there,  retains  a  business  or 
trading  house  there,  the  entire  commerce  of  the  house  is  stamped 
with  the  hostile  character  of  the  enemy.'  The  intention  to  return 
at  some  future  period  to  one's  native  country  does  not  destroy  the 
presumption  of  domicil,  since  if  there  be  any  doubt  as  to  the  time 
or  certainty  of  the  return,  this  will  not  avail  against  the  pra>^ump- 
tion  of  hostile  residence,  or  where  the  intention  is  fixed  as  of  a  defi- 
nite and  certain  time  at  a  period  distantly  removed,  this  is  not  suf- 
ficient ;  *  and  where  the  intent  to  permanently  reside  in  the  country 
is  avowed,  or  where  it  is  otherwise  ascertained,  it  makes  no  dili'cr- 
ence  how  recently  the  residence  may  have  been  established,  or  that 
it  may  have  been  for  only  a  day  or  two.^    So  the  character  of  the 


ship,"  32  Am.  Dee.  42/,  429.  Change 
of  domicil,  see  7  Moore'.s  Dig.  of  In- 
ternational Law  (ed.  190())  p.  433, 
sec.  1193;  Maxey  on  International 
Law  ed.  190G)  p.  67. 

16  The  Venus,  8  Cranch  (12  U.  S.) 
279,  3  L.  ed.  553. 

1'^  The  Indian  Chief,  3  Rob.  Adm. 
12. 

18  The  San  Jose  Indiano,  2  Gall. 
(U.  S.  C.  C.)  268,  293,  Fed.  Cas.  No. 
12,322,  per  Story,  J.;  The  Friend- 
schatt,  3  Wheat.  (16  U.  S.)  52,  4  L. 
ed.  .322,  per  Mai^hall,  C.  J. 

1^  Elbers  v.  Union  Ins.  Co.  16 
Johns.  (N.  Y.)  128.  In  this  case 
there  was  a  warranty  in  the  policy 
that  the  property  was  Swedish,  which 
the  court  held  was  not  complied  with. 
But  see  on  this  point,  Duguet  y. 
Rhinelander,  2  Johns,  Cas.  (N.  Y.) 
476,  reversing  1  Johns.  Cas.  (N.  Y.) 
360. 


See  note  in  9  L.R.A.(N.S.)  1159, 
on  change  of  domicil  as  affected  by 
removal  for  benefit  of  health. 

snicConnell  v.  Hector,  3  Bo.';.  & 
P.  114,  per  Alvanle\%  C.  J.;  Tabbs  v. 
Bendelack,  4  Esp.  10/  ;  1  Kent's  Com- 
mentaries (13th  ed.)  74.  See  also  as 
to  neutral  engaging  in  enemies'  com- 
merce. The  San  .Jose  Indiano,  12  Gall. 
(U.  S.  C.  C.)  268,  286,  Fed.  Cas.  No. 
12.322,  per  Story,  J. 

1  See  last  section  and  cases  there- 
under. 

2  The  Friendschaft,  4  Wheat.  (17 
U.  S.)   105,  4  L.  ed.  525. 

3  The  Friendschaft,  4  Wheat.  (17 
U.  S.)  105,  107,  4  L.  ed.  525;  The 
San  .lose  Indiano,  2  Gall.  (C.  C.) 
268,  Fed.  Cas.  No.  12,322. 

4  1  Duer  on  Ins.  (ed.  1845)  500, 
sec.  9. 

*  Case  of  Mr.  Whitehall,  cited  in 
The  Diana,  5  C.  Rob.  Adm.  60,  per 


685 


§  296  JOYCE  ON  INSURANCE 

trade  is  immaterial  where  the  party  is  domiciled  bona  fide  in  the 
United  States,  intending  to  indefinitely  reside  here,  although  he 
had  emigrated  here  from  a  foreign  countr3\^ 

§  296.  Residence  with  intent  to  return. — Where  a  person's  resi- 
dence in  a  country  exists  only  for  a  special  or  temporary  purpose, 
with  the  intent  to  return  within  a  short  time  to  his  own  country, 
this  does  not  constitute  such  residence  his  domicil,  nor  invest  the 
party  with  a  commercial  character  at  variance  with  his  -actual 
domicile  and  this  was  held  true  in  a  case  where  the  stay  was  pro- 
longed sixteen  months  and  the  party  intended  to  and  did  return :  * 
and  it  was  so  held  where  the  party  was  a  naturalized  citizen  and 
liad  a  commercial  domicil  in  the  United  States,  and  was  detained 
by  business  in  another  country  over  one  year.^  The  intent  to 
return,  however,  must  have  some  limit,  for  it  cannot  absolutely 
govern  in  all  cases,  since  the  time  of  the  continuance  of  the  resi- 
dence and  the  attendant  circumstances  may  make  the  party's 
domicil  that  of  the  place  where  he  continuously  resides,  although 
his  going  to  and  residing  in  another  country  may  have  been  in- 
cepted in  a  special  purpose,^"  for  if  the  residence,  although  originat- 
ing in  a  special  purpose,  be  continued  for  a  long  period. of  time,  it 
may  be  reasonably  assumed  that  the  special  purpose  has  become 
affected  by  other  purposes  and  designs,  or  that  the  intent  of  re- 
turning has  been  indefinitely  postponed.  This  intent,  however, 
depends  largely  upon  circumstances,  and  is  subject  to  some  latitude 

Sir  Wm. 'Scott;  s.  c.  given  in  1  Duer  7  Cranch  (11  U.  S.)   506,  542,  3  L. 

on  Ins.  (ed.  1845)  496,  see.  3,  as  fol-  ed.  421. 

lows :     "The   property   of   a   British       '  See    The    Hannony,    2    C.    Rob. 

merchant,    who    had    removed    to    a  Adm.   324;   "Wheaton's   International  • 

Dutch  island  in  the  West  Indies  at  Law   (ed.  1863)   560;  Id.   (5th  Eng- 

a  time  when  a  war  between  England  hsh  ed.)  p.  444.    As  to  evidence  gen- 

and    Holland    was    expected,    at   the  erally    to     show     change    of    domi- 

breaking  out  of  actual  hostilities,  was  cil,   see   Viles   v.    Citj^   of   Waltham, 

condemned  as  that  of  an  enemy,  al-  157  Mass.  542,  34  Am.  St.  Rep.  311, 

though  he  had  resided  in  the  island  32   N.   E.   901.     Change  of   domicil, 

only  a  dav  or  two  previous  to  its  cap-  see  first  note  under  §  295  herein, 
itulation'to  a  British  force,  but  he       ^^ Sears  v.  City  of  Boston,  1  Met. 

was  proved  to  have  gone  there  with  ^  q  n,,  ^^^*     "^'  r^ 

the  avowed  design  of  forming  a  per-  ^  IJ  '^^-V'"^   .^'''  h     .h   ^i'u-?' 

manent    establishment,    and    by    this  ,    B^iwn    1  Wall^^Tr    rV  S  '  C^  C  )^ 

design  he  was  held  to  be  concluded;"  o'lj, ""S.     CaS  'No.'    17,538;  'The 

and  m  a  note  thereto  he  refers  to  re-  Friendschaft,  3  Wheat.    (16  U.   S.) 

marks  or  Chiet  .Justice  Marshall  on  ^^    4  L    ed    3'^'' 

this  case  in  The  Yenus,  8  Cranch  (12  '    io  gee   The    Harmony,   2    C.    Rob. 

U.  S.)  288,  3  L.  ed.  553.    See  also  1  Adm.  322,  328,  per  Sir  Wm.  Scott; 

Kent's  Commentaries   (13th  ed.)    76.  Wlieaton's    International    Law     (ed. 

77.  1863)  560.    Id.  (5th  English  ed.)  p. 

*  Livingston  v.  Maryland  Ins.  Co.  444. 

686 


WAR— ALIEN  ENEMIES  §  297 

of  application.  Thus,  residing  in  a  country  shortly  before  and  up 
to  the  beginning  of  war,  with  intent  to  return,  should  not  be  held 
binding.  The  party  should  be  permitted  a  reasonable  time  to  dis- 
close his  actual  intention,  and  disengage  himself,  but  a  continuous 
residing  in  such  country  thereafter  and  identifying  himself  with 
its  interests  and  commerce,  and  aiding  its  resources  by  paj'^ment 
of  taxes,  or  otherwise  adding  to  its  strength  as  a  belligerent,  would 
establish  a  domicil  there,  against  which  the  original  special  pur- 
pose ought  not  to  avail  as  a  defense.^^  But  if  a  man  is  forcibly 
restrained  and  his  residence  is  involuntary,  that  is  not  his  domicil. ^^ 
§  297.  Change  of  domicil. — A  domicil  once  acquired  is  presumed 
to  continue,  and  is  retained  until  another  is  acquired. ^^  Nor  is 
intent  alone  sufficient  to  constitute  a  change  in  domicil.  There 
must  also  be  a  consummation  of  the  intention — an  actual  change  in 
fact,  some  overt  act.^*     And  if  a  hostile  subject  gees  to  his  native 

^^  The  Harmony,  2  C.  Rob.  Adm.  New   Hampshire. — Moore   v.   Wil- 

324,  per  Sir  Wm.   Scott;   Fifty-two  kins,  10  N.  H.  456,  per  Parker,  C.  J. 

Bales   of   Cotton,   Blatchf.    Pr.    Cas.  England. — Sparenburgh  v.  Banna- 

644;    reversins:    Id.    309;    The    Brig  tyne,  1  Bos.  &  P.  163,  per  Eyre,  C.  P. 

Sarah  Starr,  Blatchf.  Pr.  Cas.  6o0;  ^'^  United  States.— Tlhe  Frances,  1 

Id.  69;  Schooner  Gilpin,  Blatchf.  Pr.  Gall.  (U.  S.  C.  C.)  614,  Fed.  Cas.  No. 

Cas.  661;  reversing  Id.  291;  Wheat-  5,034,  8  Cranch    (12  U.  S.)    335,  3 

en's    International    Law    (ed.    1863)  L.  ed.  581. 

560.     Id.    (5th   English  ed.)    p.  444.  Louisiana. — Gravillon  v.  Riehai'ds, 

The  above  is  also  substantially  the  13  La.  293,  33  Am.  Dee.  563,  and 

opinion  of  Mr.  Duer.    1  Duer  on  In-  note. 

suranee    (ed.    1845)    489;    Tabbs    v.  Maryland. — Ringgold  v.  Barlev,  5 

Bendelaek,  4  Esp.  108;  The  St.  Law-  Md.  186,  59  Am.  Dee.  107,  and  note, 

rence,  9  Cranch  (13  U.  S.)  120,  3  L.  113. 

ed.  676.  Massachusetts. — Otis    v.     City    of 

12  The    Ocean,    5    Rob.    Adm.    84;  Bo.ston,    12    Cush.     (66    Mass.)    44; 

Bromley   v.   Heseltine,   1   Camp.   77,  Kilburn    v.     Bennett,     3    Met.     (44 

per  Lord  Ellenborough,  Mass.)  199. 

1^  Illinois. — Knowlton     v.     Knowl-  Mississippi.- — Hariston     v.     Haris- 

ton,  155  111.  158,  35  N.  E.  595.  ton,  27  Miss.  704,  61  Am.  Dec.  530. 

loiva. — State  v.  Adams,  45  Iowa,  Missouri. — State   v.    Sanders,   106 

99,  24  Am.  Rep.  760.  Mo.   88,   and  see  note  32   Am.   Dee. 

Kentucky. — See   Fidelity   Trust   &  428. 

Safetv  Vault  Co.  v.  Preston,  96  Ky.  Nebraska.— Wood    v.    Boeder,    45 

277,  28  S.  W.  058.  Neb.  311,  63  N.  W.  853. 

Massachusetts. — Keilburn    v.    Ben-  New       Jersey. — Cadwallader       v. 

nett,  3  Met.  (44  Ma&s.)  199,  201,  per  Howell,  3  Harr.  (18  N.  J.  L.)  138. 

Wilde,  J.  Arlington  v.  North  Bridge-  Pennsylraiii/i.-'PYice  v.  Price,  156 

water,  23  Pick.   (40  Mass.)  176,  per  Pa.  St.  617,  27  Atl.  291. 

Shaw,  C.  J.  Virginia. — Brown  v.  Butler,  87  Va. 

Mississippi. — Mayo     v.     Equitable  621,  13  S.  E.  71. 

Life   Assur.    Soc.    71   Miss.    590,   15  England.— The  Citto,  3  Rob.  Adm. 

So.  791.  38. 

Nebraska.— Wood    v.    Roeder,    45  See  note  in  33  L.R.A.(N.S.)   766, 

Neb.  311,  63  N.  W.  853.  on  gaining  new  domicil  or  residence 

687 


§  297 


JOYCE  ON  INSURANCE 


country  for  a  temporary  or  special  purpose  only,  intending  to  re- 
turn, this  does  not  change  his  character  of  alien  enemy.^*  So  if  a 
domicil  be  once  acquired  the  party  cannot  be  deprived  of  his  rights 
in  this  respect  by  a  temporary  residence  in  his  native  country. ^^ 
But  if  the  intent  to  abandon  a  foreign  domicil  is  coupled  with  the 
fact  of  abandonment,  as  where  a  party  leaves  such  domicil  with 
the  intent  not  to  return,  the  acquired  national  character  changes, 
and  especially  is  this  true  in  case  of  a  return  under  such  conditions 
to  one's  native  country,  for  in  such  case  the  domicil  of  both  attaches 
in  transitu  the  instant  of  abandonment  of  the  acquired  foreign 
domicil. ^'^  But  a  merchant  must  actually  return  to  his  native 
country  with  intent  to  remain,  to  overcome  the  hostile  character 
arising  from  residence  in  the  enemy's  country,  but  his  withdrawal 
from  that  country  must  be  limited  to  a  reasonable  time,  or  delay 
must  have  proceeded  from  necessity  or  compulsion,  and  where  the 
withdrawal  was  a  long  time  after  the  war  had  commenced,  his 
property  was  nevertheless  held  liable  to  confiscation."  The  right 
of  a  naturalized  citizen  of  this  country  domiciled  in  England  to 
ship  his  property  from  that  country  after  the  war  has  commenced 
is  distinctly  denied  in  the  United  States  courts  in  a  case  where  such 
an  attempt  was  made,  although  without  knowledge  of  the  war, 
the  parties  still  being  residents  of  England,  the  court  holding  that 
the  right  of  such  party  surprised  by  war  in  the  country  of  his 
domicil  to  make  his  election  to  return  to  his  adopted  country,  or  to 
remain  in  the  country  of  his  domicil  and  have  his  property  pro- 
tected meanwhile,  was  not  warranted  by  the  principles  of  equity 
or  the  law.^^    It  seems  to  be  settled  in  this  country  that  a  person 

before  abandoning  occupation  of  old  Wall.   (72  U.  S.)   28,  18  L.  ed.  564; 

residence    by    purchasing    or    hiring  Story's  Conflict  of  Laws  [ith  ed.)  c. 

property  in  new  locality  with  inten-  iii.,  p.  53,  sec.  48.     See  the  dissenting 

tion  of  establishing  permanent  resi-  opinion  of  Chief  Justice  iMarshall,  in 

dence  there.  The  Venus,  8  Cranch  (12  U.  S.)  299, 

15  See  The  Friendschaft,  3  Wheat.  3  L.  ed.  553. 
(16  U.  S.)  52,  4  L.  ed.  322;  The  Ann        See  note  in  40  L.R.A.(N.S.)    986, 

Green,  1  Gall.  (U.  S.  C.  C.)  274,  Fed.  on  whether  domicil  is  lost  by  aban- 

Cas.  No.  414.  donment  without  intention  of  return- 

1^' Wilson  V.  Maryat,  8  Term.  Rep.  ing  before  acquiring  a  new  one. 
31                               ^  18  The  St.  Lawrence,  1  Gall.  (U.  S. 

17  The  Lidian  Chief,  3  Rob.  Adm.  C.  C.)  471,  9  Cranch  (13  U.  S.)  120, 

12,  per  Sir  Wm.  Scott;  The  Frances,  3  L.  ed.  676;  and  see  cases  in  pre- 

8  Cranch    (12  U.  S.)    335,  3  L.  ed.  ceding  note. 

.581:  The  Joseph,  1  Gall.    (U.  S.  C.        i^  The  Venus,  8  Cranch  (12  U.  S.) 

C.)    614,  Fed.   Cas.   No.   5,034;   The  253,  283,  3  L.  ed.  553;  Chief  Justice 

St.  Lawrence,  1  Gall.   (U.  S.  C.  C.)  Marshall  and  Mr.  Justice  Livingston 

467,  Fed.  Cas.  No.  12,232.     See  The  dissented.     See  Desty's  Federal  Cita- 

Gray    Jacket,    5    Wall.    (72    U.    S.)  tions,  731,  as  to  this  case.     See  The 

342,  IS  L.  ed.  646;  The  Peterhoff,  5  Rapid,  1  Gall.    (U.   S.   C.C.)    304, 

688 


WAR— ALIEX  ENEMIES 


§  298 


cannot  be  j)ern)itted  to  emigrate  into  anotlier  country  flagrante 
bello,  and  thereby  acquire  a  neutral  domicil  which  will  protect  his 
trade  against  the  belligerent  powers.^" 

§  298.  Alien  enemy:  what  is  enemy's  country.  — We  have  seen 
ihmt  the  national  character  of  a  country,  whether  it  be  hostile  or 
neutral,  determines  that  of  its  inhabitants,^  and  it  also  becomes 
necessary,  in  order  to  decide  wlio  are  alien  enemies,  to  determine 
what  constitutes  the  enemy's  country.  It  was  said  in  regard  to  the 
Civil  War  that  the  enemy's  territory  was  that  south  of  the  line  of 
war.  or.  in  otlier  words,  the  line  of  demarcation  claimed  and  held 
by  the.  Confederate  forces,^  and  that  ''all  persons  residing  within 
this  territory  whose  property  may  be  used  to  increase  the  revenue 
of  the  hostile  power  are  in  the  contest  liable  to  be  treated  as  enemies, 
though  not  foreigners.  They  have  cast  off  their  allegiance  and 
made  war  on  their  government,  and  are  none  the  less  enemies." 
In  case  of  acquisitions  made  diu'ing  the  war,  if  the  country  is  in 
possession  of  tlie  conqueror,  and  the  government  under  his  con- 
trol, it  tliereby  becomes  part  of  his  domain  for  every  commercial 
and  belligerent  purpose;^  but  if  such  country  retains  its  own  gov- 
ernment and  civil  power,  it  will  still  remain  neutral.*  But  a  mere 
cession  by  treaty  is  insufficient;  the  territory  must  be  solemnly 
delivered  by  the  ceding  power.* 


per  Story,  J.;  The  Mary,  1  Gall, 
(C.  C.)  621,  Fed.  Cas.  No.  9,184; 
The  Ladv  Jane,  1  Rob.  Adm.  202; 
Tlie  St.  Lawrence,  9  Cranch  (U.  S.) 
121,  per  Story,  J.     See  remarks  on 


284,  348,  5  L.  ed.  454,  per  Story,  J. 
But  see  Dug'uet  v.  Rhinehmder,  2 
Johns.  Cas.  (N.  Y.)  476,  rever.shig  1 
Johns.  Cas.  (N.  Y.)  360;  Jackson  v. 
New  York  Ins.  Co.  2  Johns.  Cas.  (N. 


the  decision  in  1  Duer  on  Insnrance,   Y.)    191,   overruled   bv   last   case;   1 

(ed.  1845)  503-10,  sees.  12,  21;  1  Ar-   Duer  on  Ins.  (ed.  1845)  521. 

nould    on    Insurance     (Perkins'    ed.        ^  See    also    The    Indian    Ctief,    3 

1850)   102,  and  note;  1  Kent's  Com-   Rob.  Adm.  12,  and  cases  cited  tliere- 

menlaries    (6th   ed.)    78;    1    Parsons'   in;   The  Henriek  and  Maria,  4  Rob. 

Marine  Insurance  (ed.  1868)  30,  note   Adm.  43,  61. 

3.     But   see  Amorv  v.  McGresor,  15       »  prij,e  c^ses,  2  Black   (67  U.  S.) 

Johns.  (N.  Y.)  24,  58  Am.  Dec.  205.    635,  17  L.  ed.  459. 

As  to  the  right  of  a  subject  of  one       ^  TJiii-ty    Hogsheads    of    Sugrar    v. 

country    who    is    not    domiciled    but    Boyle,  9   Cranch    (13  U.    S.)    191,  3 

merely  resident  of  a  foreign  country,    L.  ed.  701,  per  Marshall,  C.  J. 

to  export   tiience  his  property  after        ^  Hagedorn   v.  Bell,  1   Mees.  &   S. 

war  breaks  out,  .see  1  Duer  on  Insur-    450.      See   The  San  Jose   Judiano,  2 


ance    (ed.   1845)    561-66,  sees.  9-11, 
and  notes. 

^°  The    Dos    Herraanas,    2    Wheat. 
(15  U.  S.)  76,  98,  4  L.  ed.  189,  per 


Gall.  (U.  S.  C.  C.)  268,  292,  Fed. 
Cas.  No.  12,322;  The  Henriek,  4  Rob. 
Adm.  43,  per  Sir  Wm.  Scott. 

^1  Duer  on   Insurance    (ed.  1845) 


Story,  J.;  1  Kent's  Commentaries,  437,  sec.  .■>7,  citiufi  Tlie  Kama,  5  Rob- 
(5tli  ed.)  75.  See  The  Santissima  Adm,  106;  The  Bolleta,  1  Ed.  Adm. 
Trinidada,  7  Wheat.  (20  U.  S.)   283,   171.  .  -  .  - 

Joyce  Ins.  Vol.  I.— 44.  f)89 


§  299 


JOYCE  ON  INSURANCE 


§  299.  Alien  enemy:  commencement  and  cessation  of  hostilities. 

— ^Whether  a  contract  of  insurance  is  valid  and  in  force,  or  whether 
property  is  subject  to  condemnation  on  the  ground  of  trade  with 
the  enemy,  or  whether  a  party  is  an  aUen  enemy,  depends  upon 
the  existence  of  war,  and  necessarily  the  date  of  the  commencement 
and  cessation  of  hostilities  is  of  vital  importance.  It  would  seem, 
therefore,  in  all  reason  and  justice  to  the  parties  concerned,  that  the 
intentions  of  the  government  should  be  plainly  manifested,  and 
that  the  fact  should  be  so  public  and  notorious  that  the  presumption 
necessarily  exists  that  the  parties  had  knowledge  of  the  existence 
of  war,  and  this  should  satisfactorily  appear  to  the  court.  In 
relation  to  the  commencement  of  hostilities  a  formal  declaration  of 
war  would  certainly  seem  to  fix  a  definite  time,  although  such 
formal  declaration  is  unnecessars^^  The  War  of  1812  between  Great 
Britain  and  this  country  was  immediately  commenced  by  us  after 
the  act  of  Congress  declaring  a  state  of  war,  which  seems  to  have 
been  deemed  a  formal  notice,  although  the  declaration  was  not 
formally  communicated  to  the  British  government.'^  It  is  held, 
however,  that  where  the  declaration  of  war,  although  made,  was 
not  known  at  the  foreign  port  of  shipment  at  the  time  the  vessel 
sailed  and  goods  of  a  citizen  were  shipped  thereon,  and  there  was 
no  opportunity  to  countermand  the  order  after  notice  of  the  war, 
that  there  was  no  such  illegality  as  to  affect  the  importation,^  from 
which  it  may  fairly  be  implied  that  even  though  the  declai^ation  of 
war  may  fix  a  definite  time,  yet  the  rights  of  parties  may  remain 
unchanged  when  justifying  circumstances  exist.  A  state  of  war 
may  exist  without  any  formal  declaration  of  it  by  either  party, 
and  this  is  true  both  of  a  civil  and  foreign  war,  and  that  a  civil  war 
exists  and  may  be  prosecuted  on  the  same  footing  as  if  those  op- 
posing the  government  were  foreign  invaders,  whenever  the  regu- 
lar course  of  justice  is  interrupted  by  revolt  so  that  the  courts 
cannot  be  kept  open.^     Mr.  Wheaton  says:    ''A  treaty  of  peace 

«  See  1   Duer   on  Ins.    (ed.  1845)  Cooper's  American  Politics,  book  v. 

592,  sec.  35.     "There  is  no  difficulty  p.  110;  book  i.,  pp.  17,  et  seq.     But 

where  a  public  declaration  or  mani-  see  Wheaton's  International  Law  (ed. 

festo  precedes  an  actual  war.     The  1863)  532.    Id.  (5th  English  ed.)  pp. 

war  then  exists  from  the  time  it  is  412  et  seq.  ,     „  ^        ,    /-.o  tt 

declared:"     Id.  »  The  Merrimack,  8  Cranch  (12  U. 

As  to  declaration  of  war  and  its  S.)  317,  3  L.  ed.  575. 
immediate  effects;  bibliogi-aph  on,  see       »  Prize  Cases,  2  Black  (67  U.  S.) 

Hershev's  Essentials  of  Internation-  635,  17  L.  ed.  459.     Cited  in  Ford  v. 

at  Public  Law,  p.  370.  Surget,  97  U.  S.  613,  24  L.  ed.  1024; 

'  The   American   minister   was   re-  Swmnerton    v.    Columbian    Ins.    Co. 

called  in  the  early  part  of  1811.    The  37  N.  Y.  186,  93  Am.  Dec   760     See 

declaration  of  war  was  approved  by  The  Brig  Sally  Magee,  Blatcht.  Pr. 

the  President  on  June  18,  1812.    See  Cas.  379,  382.     See  Walker  s  Inter- 

690 


WAR— ALIEN  ENEMIES  §  299 

binds  the  contracting  parties  from  the  time  of  its  signature.  Hos- 
tilities are  to  cease  between  them  from  that  time,  unless  some  other 
period  be  provided  in  the  treaty  itself;  but  the  treaty  binds  the 
subjects  of  the  belligerent  nations  only  from  the  time  it  is  notified 
to  them."  "  But  in  the  Civil  War  between  the  North  and  South 
there  is  some  conflict  of  opinion  both  as  to  the  time  when  the  war 
commenced  and  when  it  ceased.  In  Leather  v.  Commercial  In- 
surance Company/^  Robertson,  J.,  giving  the  opinion  of  the  court 
says,  referring  to  the  proclamation  of  blockade  of  May  2,  1861: 
"But  that  proclamation  did  not  attempt  to  affect  interior  inter- 
course and  commerce  between  the  people  of  the  conflicting  states, 
and  cannot  be  understood  as  having  any  such  legal  eft'ect,  and  so 
Congress  seemed  to  think  when  by  the  act  of  July  13,  1861,  it  au- 
thorized the  President  to  issue  a  proclamation  interdicting  all  com- 
mercial intercourse  between  the  citizens  of  the  then  and  thereby 
recognized  belligerent  states.  This  enactment  was  impliedly  an 
authoritative  recognition  of  the  fact  that  insurrection  had  cul- 
minated into  war.  Before  that  time  the  national  government  had 
not  acknowledged  that  secession  had  become  belligerence,  with  all 
belligerent  rights  and  obligations  resulting,  according  to  the  laws 
of  technical  war,  and  this  statute  necessai-ily  implies  also  that  Con- 
gress did  not  consider  previous  intercourse  between  all  the  states 
as  illegal,  and  consequently  did  not  recognize  such  a  previously 
subsisting  war  as  per  se  made  commercial  intercourse  contraband 
and  contracts  void.  And  history,  verified  by  the  presentment  of 
this  note  for  payment  in  New  Orleans  after  the  second  of  May, 
1861,  shows  that  after  the  blockade  there  was  some  commercial 
intercourse  between  the  contesting  states  which  had  never  been 
adjudged  unlawful,  and  will,  we  presume,  never  be  so  decided. 
But  before  contracts  shall  be  nullified  by  war  both  reason  and  jus- 
tice require  that  the  contracting  parties  should  have  cause  to 
know  when  they  contracted  that  they  violated  the  laws  of  an 
existing  war.  And  to  give  notice  of  the  congressional  recognition 
of  such  a  state  of  war  was  the  sole  object  of  requiring  the  Presi- 
dent to  proclaim  the  fact  of  recognition  by  the  act  of  the  13th  of 
.Tuly,  1861,  and  that  proclamation  was  made  on  the  16th  of  Au.sjust. 
1861,  and.  before  that  time  contracts  and  other  acts  of  commercial 

national  Law   (ed.  1895)   103  et  seq.  International  Kaw  and  Law  of  War 

See  also  references  to  other  writers  (ed.   1801)    c.   34,   p.   844;   Walker's 

at  end  of  this  chapter.  ]\ranual    of    International    Law    (ed. 

i»Wheaton's     International     Law,  1895)  lo6;  1  Duer  on  Insurance  (ed. 

(ed.    1863)    884.      Id    (5th    English  1845)   593. 

ed.)   pp.  412  et  seq.;  Hall's  Interna-        "2  Bush  (Ky.)  296,  92  Am.  Dee. 

tional  Law  (ed.  1880)  482;  Halleck's  483'. 

691 


§  299  JOYCE  ON  INSUIiANCE 

intercourse  were  not  made  illegal  by  the  war."  The  Prize  cases  ^^ 
related  to  vessels  in  port  or  upon  the  high  seas  after  the  time  al- 
lowed by  proclamation  by  the  President  for  blockade,  and  it  was 
held  that  such  proclamation  of  April  27  and  30,  1861,  prohibited 
in  efi'ect  all  commercial  relations  and  was  of  itself  conclusive  evi- 
dence of  war.  The  court  was  divided,  four  of  the  justices  dissent- 
inn,  and  holding  that  commercial  relations  did  not  cease  till 
August  16,  1861.  ^^  And  the  court  in  Perkins  v.  liogers,^^  says 
of  these  cases:  ''The  decision  pronounced  by  the  majority  of  the 
court  has  been  overruled  by  several  decisions  rendered,  and 
the  opinion  exjjressed  by  the  minority  of  the  court  has  since 
been  approved  and  recognized  as  the  law."  In  Smith  v.  Char- 
ter Oak  life  Insurance  Company "  a  citizen  of  Alrginia  had 
his  life  insured  in  a  Connecticut  company.  The  premium  had 
been  paid  for  several  years  until  May,  1861,  when  they  were  re- 
fused by  the  company.  After  the  death  of  the  assured  the  bene- 
ficiary brought  an  action  for  damages  against  the  company  for  dis- 
solving the  contract  by  its  refusal  to  receive  premiums.  The  action 
was  sustained  and  damages  given  for  the  value  of  the  policy  when 
dissolved  with  interest  on  that  amount,  it  being  held  that  nonin- 
tercourse  between  the  states  could  not  be  pleaded  as  justifying  the 

18  2  Black    (67  U.   S.)    635,  17  L.  No.   11.094;   United   States  v.   Catli- 

ed.  459.  ''art,  1  Bond,  564,  Fed.  Cas.  No.  li,- 

13  It   was   also   decided   that   when  756 ;  United  States  v.  269J  Bales  of 

the  reo-ular  course  of  justice  is  inter-  Cotton,    Woolw.    246,   Fed.    Cas.  No. 

rupted  by  revolt,  rebellion,  or  insur-  1(),.)8;>. 

rection,  so  that  the  courts  of  justice  Arkansas. — Hawkins  v.  Filkins,  24 

cannot  be  kept  open,  civil  war  exists;  Ark.    308. 

and  hostilities  may  be  prosecuted  on  Georrjki. — Bailey  v.  Milner,  3-5  Ga. 

the  same  footing  as  if  those  opposing  334. 

the  2'overnment  were  foreig-n  enemies  Keiitiicli/. — Martin    v.    Ilorton.    1 

invading  the    land.      Prize    Cases,    2  Bush,  631;  Corbin  v.  Marsh,  2  Uuv. 

Black  (67  U.  S.)  635,  17  L.  ed.  459.  209. 

Cited  in:    United  States. — Coppell  Xew  York. — Allen  v.  Bridgers.  52 

v.  Hall,  7  Wall.   (74  U.  S.)   554,  19  Barb.  604;  Swinnerton  v.  Colunilnan 

L.  ed.  247;  Texas  v.  White,  7  Wall.  Ins.  Co.  37  N.  Y.  178,  93  Am.  Dee. 

(74  U.  S.)   740,  19  L.  ed.  242;  New  560;    Robin.son     v.    International    L. 

Orleans  v.  New  York  Mail  S.  S.  Co.  Assur.  Soc.  42  N.  Y.  62,  1  Am.  Rep. 

20  Wall    (87  U.  S.)   394,  22  L.  ed.  400. 

3.58;  Ford  V.  Surget,  97  U.  S.  608,  24  Penrisiihanifi.—Kneedler   v.   Lane, 

L.    ed.    1022;    La    Plante    v.    United  3  Grant,  Cas.  519;  Ford  v.  Surget.  36 

States,  6  Ct.  CI.  319;  Bailey  v.  Mil-  Phila.  Les.   Int.  29. 

ner,    1    Abb.    (U.    S.)    265,    1    Nat.  L'hode  /.s7r/>^r/.--Hubbard  v.  Harn- 

Bankr.  Res.  423,  Fed.  Cas.  No.  740;  den  Kx]).  Co.  10  R.  I.  253. 

Brown  v.  Hiatt,  1  Dill.  380,  Fed.  Cas.  Tennessee.— Smith  v.  Brazelton,  1 

No.  2.011;  Cuvler  v.  FeiTill,  1  Abb.  Heisk.  .54.  2  Am.  Re|..  ()78. 

U.  S.  169,  Fed.  Cas.  No.  3,523:   Ex  Te.ms.— State   v.    White,    25    Tex. 

parte  McCann.  5  Ain.  L.  Res'.  N.  S.  Supji.  616. 

1.58  note,  Fed.  Cas.  No.  8.679 ;  Phil-  "  :!5  Iiid.  124,  9  Am.  Rep.  639. 

lips  V.  Hatch,  1  Dill.  576,  Fed.  Cas.  ^^  64  Mo.   330. 

092 


WAR— ALIEN  ENEMIES  §  299 

nonpayiDcnt  on  llie  ground  that  the  proclamation  by  the  President 
of  August  1(>,  IHGl.  inade  pursuant  to  the  act  of  Congress  of  July 
13,  1861,  was  (lie  dale  of  prohibition  of  commercial  intercourse, 
in  The  Froleclor,^^  Chief  Justice  Chase,  who  delivered  the  opinion 
of  the  coui't,  says:  ''The  question  in  the  present  case  is,  When  did 
tlie  Rebellion  begin  and  end?  In  other  words,  What  space  of 
time  must  be  considered  as  exce|)ted  from  the  operation  of  the  stat- 
ute of  limitations  by  the  war  of  the  Rebellion?  Acts  of  hostility 
])y  the  insurgents  occurred  at  periods  so  various  and  of  such  dif- 
ferent degrees  of  importance,  and  in  parts  of  the  country  so  re- 
mote from  each  other,  both  at  the  commencement  and  close  of  the 
late  Civil  War,  that  it  would  be  diflicult,  if  not  impossible,  to  say  on 
wbat  precise  day  it  began  or  terminated.  It  is  necessary,  there- 
fore, to  refer  to  some  public  act  of  the  political  departments  of  the 
government  to  fix  the  dates,  and  for  obvious  reasons  those  of  the 
executive  department  which  may  be,  and  in  fact  wa>s  at  the  com- 
mencement of  hostilities  obliged  to  act  during  the  recess  of  Con- 
gress, must  be  taken.  The  proclamation  of  intended  blockade  by 
the  President  mav,  therefore,  be  assumed  as  markine;  the  first  of 
these  dates,  and  the  proclamation  that  the  war  had  closed  as  mark- 
ing the  second.  But  the  w^ar  did  not  begin  or  close  at  the  same 
time  in  all  the  states.  There  were  two  proclamations  of  intended 
blockade,  the  first  of  the  19th  of  April.  1861,  embracing  the  states 
of  South  Carolina,  Georgia,  Alabama.  Florida,  Mississippi,  Louisi- 
ana, and  Texas.  The  second  of  the  27th  of  April,  1861,  embracing 
the  states  of  Virginia  and  North  Carolina,  and  there  were  two 
proclamations  declaring  the  war  had  closed,  one  issued  on  the 
second  day  of  April,  1866,  embracing  the  states  of  Virginia,  North 
Carolina,  South  Carolina,  Georgia,  Florida,  Mississippi,  Tennessee, 

16  Freeborn    v.    Tlie    Proteetor,    12  CI.  383;  Gooeh  v.  United   States,  1.5 

Wall.  (79  U.  S.)  700,  20  L.  ed.  463.  Ct.  CI.  287;  Raines  v.  United  States, 

Ciled    in:     Vvited    States.— McVA-  H    Ct.    CI.    6ri2;    Sierra    v.    United 

rath  V.  United  States,  102  U.  S.  426,  States,  9  Ct.  CI.  231. 

4:!8,  26  L.  ed.  189.  191;   Coleman  v.  Arlnnsas.—Yiix[\     v.     Denekla,     28 

Tennessee,  97  U.  S.  509,  533,  24  L.  ^^'J^-  ''If-     ^,  „ 

ed.  1120,  1128;  Lamar  v.  Browne,  92  ,/ f'^T'-T  J        ..  ^'ao  .^r^^r^a^''''^ 

U.  S.  187,  193,  23  L.  ed.  650,  653;  ^^"^"'^^^  ^^'If.  ["^-  C«-  ^8  JH-  .60. 

T>              ,         mi               m    TT    cj    Tio  iowa. — Bishop     v.      Knowles,     53 

Raymond  V.    J^ho^^as,  91  U    S     rl2,  ^           .,^.,    .  ^^  ^^ 

H  {f«^Vl/;«^    tfr      ^-'----Aby    V.    Brigham,    28 

V.  Howard,  18  Wall.   (8.)  U.  S.)    99,    j^g    j^^^    g^j 

105,    21    L.    ed.    764,    766;    United       Rhode  Island.— H\^hhnrd  v.  Harn- 

States    V.    Muhlenlnink,    1    Woods,  den  Exp.  Co.  10  R.  I.  253. 
570,  P'ed.  Cas.  No.  15,831;  Ciririin  v.        F/r^/j^/a.— Isaacs  v.  City  of  Rich- 

Uniled  States,  25  Ct.  CI.  295;  Carter  mond,  90  Va.  30,  38,  17  S.  E.  760; 

V.    United    States,    23    Ct.    CI.    328;  Portsmonth  Ins.  Co.  v.  Reynolds,  3'> 

Hodges  V.  ITnited  States,  18  Ct.  CI.  Gratt.  628;  Walker  v.  Beauehler,  27 

703;  Carver  y.  United  States,  16  Ct.  Gratt.  524. 

693 


§  299  JOYCE  ON  INSURANCE 

• 

Alabama,  Louisiana,  and  Arkansas,  and  the  other  issued  on  the 
20th  of  August,  18G6,  embracing  the  state  of  Texas.  In  the  ab- 
sence of  more  certain  criteria  of  equally  general  application,  we 
must  take  the  date  of  these  proclamations  as  ascertaining  the  com- 
mencement and  close  of  the  war  in  the  states  mentioned  in  them." 
In  Portsmouth  Insurance  Company  v.  Reynolds  ^"^  the  policy  pro- 
vided against  loss  '"by  means  of  any  invasion,  insurrection,  riot,  or 
civil  commotion,  or  of  any  military  or  usurped  power."  April  17, 
1861,  the  ''ordinance  of  secession"  was  passed ;  and  April  21st,  by 
order  of  the  United  States,  the  navy-yard  buildings  at  Portsmouth 
were  fired ;  the  fire  spread  to  the  insured  buildings,  which  Avere  de- 
stroyed, and  it  was  decided  that  the  "ordinance"  was  not  in  force 
when  the  buildings  were  fired ;  that  the  United  States  government 
did  not  become  foreign  to  the  state  of  Virginia  by  its  passage,  and 
an  action  was  maintainable  on  the  policy.  In  McJ^tea  v.  Nathan,^* 
Church,  C.  J.,  in  his  opinion,  says:  "It  is  pertinent,  therefore,  to 
inquire  whether  such  intercourse  was  permitted  by  the  government, 
and  if  so,  up  to  what  period.  The  Prize  cases  ^^  recognize  the  acts 
of  the  President  prior  to  the  assembling  of  Congress  as  the  acts 
of  the  government,  having  equal  effect  upon  this  question  as  if 
authorized  by  Congress.  The  first  proclamation  bears  date  April 
15,  1861,  prior  to  which  time  several  of  the  states  had  passed  or- 
dinances of  secession,  several  of  the  forts  and  some  public  property 
had  been  seized,  and  Fort  Sumter  had  been  attacked.  The  proc- 
lamation, after  reciting  that  the  laws  of  the  United  States  were 
obstructed  by  combinations  too  powerful  to  be  suppressed  by  the 
ordinary  course  of  judicial  proceedings,  made  a  call  for  militia,  to 
the  number  of  seventy-five  thousand  men,  and  contains  this  clause : 
'I  deem  it  proper  to  say  that  the  first  service  assigned  to  the  force 
hereby  called  forth  will  probably  be  to  repossess  the  forts,  places, 
and  property  which  have  been  seized  from  the  Union,  and  in  every 
event  the  utmost  care  will  be  observed,  consistently  with  the  ob- 
jects aforesaid,  to  avoid  any  devastation,  any  destruction  of,  or 
interference  luith  property,  or  any  disturbance  with  peaceful  citi- 
zens in  any  part  of  the  country.'  The  terms  of  this  proclamation 
repel  the  idea  of  prohibiting  or  restricting  free  business  intercourse 
between  citizens  of  different  sections  of  this  country.  On  the  con- 
trary, it  pledges  j^rotection  to  property  and  the  lawful  pursuits  of 
peaceful  citizens.  It  seeks  only  to  repossess  the  property  which  had 
been  seized,  and  put  down  the  unlawful  combination  to  resist  the 
laws.  The  next  is  a  proclamation  of  intended  blockade,  bearing 
date  April  19,  1861.     The  president  in  his  proclamation,  after 

".32  Gratt.   (Va.)   613.  19  2  Black  (67  U.  S.)  635,  17  L.  ed. 

"  50  N.  Y.  166, 171.  459. 

694 


WAK— ALIEX  ENEMIES  §  299 

reciting  that  an  insurrection  had  broken  out  in  several  states,  and 
that  a  combination  of  persons  threatened  to  grant  pretended  letters 
of  marque  and  reprisal,  proceeds  to  say  that  Svith  a  view  to  the 
same  purposes  before  mentioned,  and  to  the  protection  of  the  public 
peace  and  the  lives  and  property  of  quiet  and  orderly  citizens  pur- 
suing their  lawful  avocations,  initil  Congress  shall  have  assembled 
and  deliberated  on  the  said  unlawful  proceedings,  or  until  the 
same  shall  have  ceased,'  he  deems  it  advisable  to  set  on  foot  a  block- 
ade of  the  ports  of  states  in  which  the  insurrection  existed.  Upon 
the  authority  of  the  Prize  cases,  this  was  an  act  of  war  upon  the 
part  of  the  government,  and  justifiable  as  a  war  measure  based 
upon  the  existence  of  a  state  of  war.  But  so  far  as  it  operated  as 
a  restriction  upon  trade,  it  was  confined  to  the  commerce  of  the 
ports,  and  ostensibly  in  preventing  the  filling  out  of  vessels  to  cruise 
upon  pretended  letters  of  marque  and  reprisal,  and  it  expressly  as- 
sumed to  protect  the  lives  and  property  of  quiet  and  orderly  citi- 
zens pursuing  their  lawful  avocations,  'until  Congress  shall  have 
assembled  and  deliberated.'  Nothing  is  plainer  to  my  mind  than 
the  intention  by  this  proclamation  to  avoid  any  interference  with 
the  business  relations  of  the  citizens  of  this  country,  except  so  far 
as  the  blockade  would  have  that  effect  until  the  meeting  of  Con- 
gress. It  seems  incongruous  to  hold  that  a  proclamation  which 
expressly  declares  protection  to  citizens  in  their  lawful  avocations 
should  have  the  legal  effect  of  invalidating  all  business  transactions. 
The  next  material  act  of  the  government  bearing  upon  this  question 
was  the  act  of  Congress  of  July  13,  1861,  the  fifth  section  of  which 
declares  that  in  a  certain  specified  contingency  'it  may,  and  shall  be, 
lawful  for  the  President,  by  proclamation,  to  declare  tliat  the 
inhabitants  of  such  state,  or  any  section  or  part  thereof  where  such 
insurrection  exists,  are  in  a  state  of  insurrection  against  the  United 
States,  and  thereupon  all  commercial  intercourse  between  the  same 
and  the  citizens  of  the  rest  of  the  United  States  shall  cease  and  be 
unlawful  so  long  as  such  hostility  shall  continue.'  This  was  the 
first  intimation  on  the  part  of  the  government  of  an  intention  to 
prohibit  commercial  intercourse,  while,  as  we  have  seen,  every  pre- 
vious expression  repelled  such  intention.  The  fair  construction  of 
this  act  is  to  regard  it  both  as  an  admission  of  the  lawfulness  of 
commercial  intercourse  up  to  that  time  and  a  permission  to  con- 
tinue it  until  the  President  should  issue  the  proclamation.  It  is 
urged  that  this  act  provided  merely  for  a  warning  or  notification  to 
the  people  that  war  existed  so  that  they  might  know  and  protect 
their  rights,  but  this  view  is  inconsistent  with  the  terms  of  the 
act.  It  authorizes  an  act  to  be  done,  the  effect  of  which,  if  done, 
is  declared  to  be  to  prohibit  commercial  intercourse  from  the  time 

695 


§  299 


JOYCE  ON  INSUKANCE 


the  act  is  done.  It  does  not  purport  to  prohibit  such  intercourse, 
nor  to  declai-e  a  state  of  war  the  legal  consequence  of  which  would 
be  to  prohibit  it.  The  language  of  the  act  is  utterly  inconsistent 
with  the  claim  that  such  intercourse  was  then,  or  had  been,  un- 
lawful. In  pursuance  of  this  act  the  President,  on  the  16th  day 
of  August,  1861,  issued  his  proclamation  declaring  certain  states 
in  a  state  of  insurrection,  and  that  commercial  intercourse  with 
the,  citizens  of  other  states  was  unlawful.  From  .that  period  such 
intercoui'se-  became  unlaAvful,'  and  up  to  that  period,  by  the  im- 
])lied  or  ex]>ress  permission  of  the  government,  it  was  lawful.  If 
the  war  had  cea.sed  on  the  loth  day  of  August,  1861,  and  the  proc- 
lamation of  the  16th  had  never  been  issued,  can  there  be  any  doubt 
that  the  ordinary  business  relations  of  the  citizens  of  the  resj^ective 
sections  of  the  Union  would  have  been  unaffected?  It  may  well 
be  that  the  citizens  of  the  insurrectionary'^  states  should  be  regarded 
as  public  enemie^s  for  the  purpose  of  enforcing  the  blockade,  and 
that -when  the  courts  were  interfered  with  so  as  to  practically  pre- 
vent an  appeal  the  running  of  the  statute  of  limitations  should  be 
suspended,  and  that  these  should  be  regarded  as  in  consequence 
of  an  existing  state  of  war,  but  they  ai*e  not  necessarily  inconsistent 
with  the  continuance  of  ordinary  business  relations,  and  certainly 
not  with  the  rights  of  the  government  to  permit  such  continuance. 
The  language  used  by  the  government  is  capable  of  no  other  con- 
struction than  an  intention  to  permit  business  intercourse.  Such 
must  have  been  the  general  understanding  of  the  people,  and  good 
faith  demands  that  it  be  maintained."  In  Woods  v.  Wilder,^"  it 
was  held  that  a  bill  of  exchange  drawn  by  a  member  of  a  partner- 
ship in  Savannah  on  his  copartners  in  New  York,  on  August  23, 
1861,  was  illegal  and  void,  by  virtue  of  the  proclamation  of  Au- 
gust 16,  1861.^  AVar  between  the  United  States  and  Spain  existed 
in  April  21,  1898,  when  diplomatic  relations  were  broken  off,  and 
Spain,  in  a  communication  to  the  United  States  minister  at  Ma- 
drid, accepted  the  resolution  of  Congress  for  intervention  in  Cuba 


20  43  N.  Y.  164,  3  Am.  Rep.  684. 

^  See  furtlier  on  this  question 
notes  on  "Belligerent  rights,"  91 
Am.  Dec.  27f),  280.  "Levying  Avar 
against  United  States,  what  is,"  94 
Am.  Dee.  579-81;  Wheaton's  Inter- 
national Law  (ed.  1863)  .114,  523, 
52(5;  1  Duer  on  Insuiani-e  (ed.  1845) 
592-94,  sees.  35,  36;  Hall's  Interna- 
tional Law  (ed.  1880)  pt.  iii.  c.  1.  p. 
315;  Hallec-k"s  International  Law  and 


696 


Laws  of  War  (ed.  1861)  e.  xv.  p. 
350;  Walker's  Mmma]  of  Inter- 
national Law  (ed.  1895)  pp.  103,  154. 
As  to  tlie  eoinniencement  and  close  of 
the  Civil  AVar  in  the  United  States 
and  the  different  states,  see  Adger  v. 
Alston,  15  Wall.  (82  U.  S.)  .5.55,  21 
L.  ed.  234;  Laniar  v.  Browne,  92  U. 
S.  187,  23  L.  ed.  650;  Batesville 
Lislitnte  v.  Kanfniann,  18  Wall.  (85 
V.  S.)  151,  21  L.  ed.  775;  Grossmeyer 


WAR— ALIEN  ENEMIES  §§  299a,  29i)b 

m  a  declaration  of  war,  although  the  formal  decree  by  Spain  and 
the  declaration  of  war  by  Congress  were  not  made  until  afterwards.^ 

§  299a.  Alien  enemy:  intention  to  subsequently  wage  war. — In 
an  English  case  it  appe;u'ed  that  gold,  the  property  of  a  company 
carrying  on  business  in  the  Transvaal  was  insured  with  British  un- 
derwriters, by  a  policy  containing  a  clause  against  capture,  for 
transit  from  mines  in  the  Transvaal  to  the  United  Kingdom,  and 
during  transit  was  seized  by  the  Transvaal  government.  The  pol- 
icy was  made,  and  the  loss  occurred,  before  the  actual  commence- 
ment of  hostilities  between  her  Majesty's  government  and  the 
Transvaal.  The  comjjany  sued  on  the  policy,  and  the  underwriters 
defended  on  the  ground  that  the  plaintiffs  were  alien  enemies,  and 
the  loss  was  by  arrest,  restraint,  or  detainment  of  the  Transvaal  gov- 
ernment, incidental  to  actual  or  expected  hostilities  against  her 
Majesty,  and  made  for  a  purpose  connected  therewith,  namely,  to 
supjily  that  government  with  funds  with  which  to  levy  war  on  her 
Majesty.  It  was  agreed  that  no  dilatory  plea  should  be  set  up  based 
upon  the  fact  that  the  plaintiff  company  was  alien  and  could  not 
sue  while  the  war  lasted,  but  the  case  should  be  dealt  with  as  if  the 
war  were  over.  It  was  held  that  the  intention  of  the  Transvaal 
government  to  wage  war  subsequently  could  not  be  treated  as  creat- 
ing an  actual  state  of  war,  and  that  the  commencement  of  the  war, 
which  took  })lace  a  few  days  later,  could  not  have  the  effect  of  niak- 
ing  the  seizure  a  hostile  act;  and,  furthermore,  that  the  subsequent 
bieaking  out  of  war  did  not  invalidate  the  contract  of  insurance, 
and  the  plainlifi's  were  entitled  to  recover.' 

§  299b.  Alien  enemies:  status  of:  power  of  government  over:  acts 
of  Congress:  effect  of  war  declaration. — In  addition  and  as  perti- 
nent to  what  we  have  stated  under  this  chapter  and  elsewhere  upon 
this  subject  as  affecting  their  contract  rights,  especially  those  of 
insurance,  the  questions  of  who  are  alien  enemies,  their  status  in 
this  country,  the  ])0wer  of  the  government  and  the  jurisdiction  of 

V.  United   States,  4  Ct.   CI.  1;   Ross  2  The  Pedro,  175  U.  S.  354,  20  Sup. 

V.  Jones,  22  Wall.  (89  U.  S.)  576,  22  Ct.  138,  44  L.  ed.  195. 

L.  ed.  730.  Cited  in  The  Buena  Ventura  (The 

Tlie    rebellion    was    dosed    in    all  Buena    Ventura    v.    United     States) 

ea.ses  wheie  private  rishts  are  affeet-  175  U.  S.  387,  44  L.  ed.  207,  20  Sup. 

ed  by  the    time    ot    it.s    termination,  Ct.  Rep.  148. 

Aus'ust  20.  ]860.     McElrath  v.  Unit-  '  p^.i^.f^^^tein     Consolidated      Gold 

ed   States,  102  U.   S.  426,  26  L.  ed.  .Alines,   Ltd.  v.   Janson;   West  Rand 

189;    United    States   v.    Anderson,   9  Central    Gold    Alines   Co.  Ltd.   v.    De 

Wall,  note   (76  U.  S.)   56,  19  L.  ed.  Rougemont  (Eng.  Com'l  Ct.)   [1900] 

615;  MeKee  v.  Rains,  10  Wall   (77  2  Q.  B.  Div.  L.  Rep.  339,  346.     Cited 

U.  S.)  22,  19  L.  ed.  860.  in  Porter  v.  Freudenbers:  (Kregling- 

Cited  in  Lunenburg  v.  Shirley,  132  er  v.  Samuel  &  Rosenfeld)  [1915] 
Mass.  500. 

697 


§  299b  JOYCE  ON  INSUKANCE 

the  courts  over  them  further  appears  from  the  following  acts  (Jf 
Congress  and  Federal  decisions. 

The  Revised  Statutes  of  the  United  States  provide : 

(a)  Removal  of  alien  enemies. — "  §  4067.  Whenever  there  is  a 
declared  war  between  the  United  States  and  any  foreign  nation  or 
government,  or  any  invasion  or  predatory  incursion  is  perpetrated, 
attempted  or  threatened  against  the  territory  of  the  United  States,  by 
any  foreign  nation  or  government,  and  the  President  makes  public 
proclamation  of  the  event,  all  natives,  citizens,  denizens,  or  subjects 
of  the  hostile  nation  or  government,  being  males  of  the  age  of  four- 
teen j^eai-s  and  upward,  who  shall  be  within  the  United  States,  and 
not  actually  naturalized,  shall  be  liable  to  be  apprehended,  re- 
strained, secured  and  removed,  as  alien  enemies.  The  President  is 
authorized,  in  any  such  event,  by  his  proclamation  thereof,  or  other 
public  act,  to  direct  the  conduct  to  be  observed,  on  the  part  of  the 
United  States,  toward  the  aliens  who  become  so  liable;  the  manner 
and  the  degree  of  the  restraint  to  which  they  shall  be  subject,  and  in 
what  cases,  and  upon  what  security  their  residence  shall  be  permit- 
ted, and  to  provide  for  the  removal  of  those  who,  not  being  permit- 
ted to  reside  within  the  United  States,  refuse  or  neglect  to  depart 
therefrom;  and  to  establish  any  other  regulations  which  are  found 
necessary  in  the  premises  and  for  the  public  safety."  ^^ 

(b)  Tiyne  for  removal. — "§  4068.  When  an  alien  who  becomes 
liable  as  an  enemy,  in  the  manner  prescribed  in  the  preceding  sec- 
tion, is  not  chargeable  with  actual  hostility,  or  other  crime  against 
the  i3ublic  safety,  he  shall  be  allowed,  for  the  recovery  disposed,  and 
removal  of  his  goods  and  effects,  and  for  his  departure,  the  full 
time  which  is  or  shall  be  stipulated  by  any  treaty  then  in  force 
between  the  United  States  and  the  hostile  nation  or  government  of 
which  he  is  a  native  citizen,  denizen,  or  subject;  and  where  no  such 
treaty  exists,  or  is  in  force,  the  President  may  ascertain  and  declare 

1  K.  B.  857,  112  L.   T.  N.   S.   313,  cisions    upon    the    points    discussed 

84  L.  J.  K.  B.  N.  S.  1091,  29  Can.  therein)  no  opinion  was  rendered  but 

Cas.  189,  32  R.  P.  C.  109,  [1915]  W.  exhaustive  opinions  of  the  judges  ex- 

N.  43,  31  T.  L.  R.  162,  59   Sol.  J.  plaining  the  statutes  and  the  points 

216,  5  B.  R.  C.  546,  per  Lord  Read-  of  eonliict  with  the  Constitution  and 

ing,   Ch.   J.     See  also  note  Id.  583.  laws    of   the   United    States   are    re- 

^^  Act  Julj'^  6,  1798,  sec.  1,  v.  1,  p.  ported.     The  following,   however,  is 

577.  taken     from     the     official     syllabus : 

In  the  Passenger  Cases  (Smith  v.  "Statutes  of  the  State  of  New  York  & 
Turner;  Norris  v.  City  of  Boston)  7  Massachusetts,  imposing  taxes  upon 
How.  (48  U.  S.)  283-573,  12  L.  ed.  alien  passengers  arriving  in  the  ports 
702  (which  has  been  cited  in  eon-  of  those  states,  declared  to  be  con- 
nection with  the  above  see.  4067,  and  trary  to  the  Constitution  and  laws  of 
which  has  also  been  cited,  explained,  the  United  States  and  therefore  null 
or    distinguished    in    numerous    de-  and  void." 

698 


WAR— ALIEN  ENEMIES  §  299b 

such  reasonable  time  as  may  be  consistent  with  the  pubHc  safety,  and 
according  to  the  dictates  of  humanity  and  national  hospitality."  ^* 

(c)  Jurisdiction  of  United  States  courts  and  over  alien  enemies. 
— "  §  4069.  After  any  such  proclamation  has  been  made,  the  sev- 
eral courts  of  the  United  States,  having  criminal  jurisdiction  and 
the  several  justices  and  judges  of  the  courts  of  the  United  States,  are 
authorized,  and  it  shall  be  their  duty,  upon  complaint  against  any 
alien  enemy  resident  and  at  large  within  such  jurisdiction  or  dis- 
trict, to  the  danger  of  the  public  peace  or  safety,  and  contrary  to 
the  tenor  or  intent  of  such  proclamation,  or  other  regulations  which 
the  President  may  have  established,  to  cause  such  alien  to  be  duly 
apprehended  and  conveyed  before  such  court,  judge,  or  justice;  and 
after  a  full  examination  and  hearing  on  such  complaint  and  suffi- 
cient cause  appearing,  to  order  such  alien  to  be  removed  out  of  the 
territoiy  of  the  United  States,  or  to  give  sureties  for  his  good  be- 
havior, or  to  be  otherwise  restrained,  conformably  to  the  procla- 
mation or  regulations  established  as  aforesaid,  and  to  imprison,  or 
otiierwise  secure  such  alien,  until  the  order  which  may  be  so  made 
shall  be  performed."  ^^ 

(d)  Duties  of  marshal  in  re/moving  alien  enemies. — **  §  4070. 
When  an  alien  enemy  is  required  by  the  President,  or  by  order  of 
any  court,  judge,  or  justice,  to  depart  and  to  be  removed,  it  shall  be 
the  duty  of  the  marshal  of  the  district  in  which  he  shall  be  appre- 
hended to  provide  therefor,  and  to  execute  such  order  in  person,  or 
by  his  deputy,  or  other  discreet  person  to  be  employed  by  him,  by 
causing  a  removal  of  such  alien  out  of  the  territory  of  the  United 
States;  and  for  such  removal  the  marshal  shall  have  the  warrant  of 
the  President,  or  of  the  court,  judge,  or  justice  ordering  the  same, 
as  the  case  may  be."  ^^ 

It  is  declared  by  ^Ir.  Chief  Justice  ^larshall  that  no  doubt  is 
entertained  as  to  the  power  of  the  government  in  such  cases,  and 
that  war  gives  to  the  sovereign  full  right  to  take  the  persons  and 

^^  Act  July  6,  1708,  e.  66,  see.  1,  Alien  enemy:  limited  li;il)ili(y  cora- 

vol.  1,  p.  577;  aet  'iuly  6,  1812,  c.  pany    registered    in    England:    share 

130,  vol.  2,  p.  781.  capital  held  by  alien  enemies:  right 

^<=Act  July  6,  1798,  e.  66,  sec.  2,  to  sue,  see  Continctiial  Tyre  &  Riih- 

vol.  2,  p.  577.  l)er  Co.  Ltd.  v.  Dainder  Co.  (Same  v. 

Alien  enemy:  right  to  sue:  liabilitv  Thomas  Tilling,  Ltd.)   [1915]  1  K.  B. 

to  be  sued:  rigid  to  appear  and  de-  893,   [1915]  W.  N.  441,  84  L.  J.  K. 

fend:  right  of  appeal,  see  Porter  v.  B.  N.  S.  927,  20  Com.  Cas.  209,  59 

Freuden'berg  (Krelinger  v.  Samuel  &  Sol.  J.  232,  5  B.  R.  C.  304  &  note. 

Rosenfeld)    [1915]   1  K.  B.  857,  112  Alien    enemies    as    litigants.'     See 

L.  T.  N.  S.  313,  84  L.  J.  K.  B.  N.  S.  note  5  B.  R.  C.  583. 

1001,  20  Com.  Cas.  189,  32  R.  P.  C.  Alien  enemy:  right  to  habeas  cor- 

109  [1915]  W.  N.  43,  31  T.  L.  R.  162.  pus,  see  note  5  B.  K.  C.  600. 

59  Sol.  J.  216,  5  B.  R.  C.  548.  See  §§  289-291  herein. 

699 


§  299b  JOYCE  ON  INSURANCE 

confiscate  the  property  of  the  enemy  wherever  found.  But  that 
"The  mitigations  of  this  rigid  rule,  which  the  humane  and  wise 
pohcy  of  modern  times  has  introduced  into  practice,  will  more  or 
less  affect  the  exercise  of  this  right,  but  cannot  impair  the  right 
itself.  That  remains  undiminished,  and  when  the  sovereign  au- 
thority shall  eh  use  ^®  to  bring  it  into  operation,  the  judicial  depart- 
ment must  give  effect  to  its  will.  But  until  that  will  shall  be  ex- 
pressed, no  power  of  condemnation  can  exist  in  the  court."  This 
opinion  was  given  in  1814  in  a  case  holding  that  enemy's  property 
found  in  the  United  States  on  land  at  the  commencement  of  hos- 
tilities cannot  be  confiscated  without  authority  of  the  legislature 
and  that  a  declaration  of  war  does  not  of  itself  enact  a  confiscation 
of  enemy  property  and  that  the  legislature  must  declare  its  will  to 
confiscate  property.^^ 

In  Lockington  v.  Smith ,^^  decided  in  1817,  in  an  opinion  de- 
livered by  Washington,  J.,  there  was  an  order  made  on  February  23, 
1813,  requiring  all  alien  enemies  residing  within  forty  miles  of 
tide  water,  forthwith  to  apply  to  the  marshal  of  the  district  in  whidi 
they  resided,  for  passports  to  retire  to  such  placas  beyond  that  dis- 
tance from  tide  water  as  said  marshal  should  designate.  Said 
marshals  were  at  the  same  time  instructed  and  required  to  take  into 
custody  and  convey  to  the  place  assigned  to  them  all  those  to  whom 
the  said  order  had  reference  who  were  engaged  in  commerce,  and 
who  did  not  immediately  conform  to  said  order.  There  were  also 
other  instructions  to  the  marshals.  It  was  held  that  the  act  of 
Congress  of  July  6,  1798,  conferred  upon  the  President  of  the 
United  States  all  means  for  enforcing  such  orders  as  he  might  give 
in  relation  to  the  execution  of  those  powers;  that  the  marshals  were 
the  proper  officers  to  execute  said  orders;  that  after  the  President's 
establishing  such  regulations  as  he  deems  necessary  in  relation  to 
alien  enemies  it  was  not  necessary  to  call  in  the  aid  of  the  judicial 
authority  on  all  occasions  to  enforce  them  and  that  the  marshal 
could  act  without  such  latter  authority;  that  by  the  provisions  of 
the  law  Congress  intended  to  make  the  judiciary  auxiliaiy  to  the 
executive  in  eflecting  its  great  objects  and  each  department  was  to 
act  independently  of  the  other  except  that  the  former  was  to  make 
the  ordinances  and  the  latter  the  rule  of  decision. 

The  status  of  alien  enemies  the  power  of  tlie  government  and 
jurisdiction  of  the  courts  over  them  in  this  country  at  the  present 

3dAvt  July  6,  1798,  c.  66,  sec.  3,  (12  U.  S.)  110,  121,  3  L.  ed.  504, 
vol.  1,  p.  578.  Storv',  J.,  dissented. 

3e^'Ciiuse:"  so  in  opinion  in  official  3^'Pcter.s  (U.  S.  C.  C.)  466,  Fed. 
report.  Cas.  No.  8448. 

3^  Brown  v.  United  States,  8  Cranch 

VCO 


WAR— ALIEN  ENEMIES  §  299b 

time  in  what  has  been  designated  as  "The  Great  War"  is  also  set 
forth  in  the  subjoined  Proclamation  of  the  President  of  the  United 
States.3^ 

3i»The  Proclamation  by  the  Prcsi-  and  direct  lliat  tlie  conduct  to  be  ob- 
dent  of  the  United  States  of  April  served  on  the  part  of  the  United 
(i,  1917,  reads:  "Wherea-'5,  the  Con-  States  towai-ds  all  natives,  citizens, 
gress  of  the  United  Slates,  in  the  denizens,  or  subjects  of  Germany,  be- 
exercise  of  the  constitutional  author-  ing-  males  of  the  age  of  fourteen  years 
ity  vested  in  them,  have  resolved,  by  and  upwards,  who  shall  be  witiiin  the 
joint  resolution  of  tlie  Senate  and  United  States  and  not  actually  nat- 
itouse  of  Representatives,  bearing  ni-alized,  who  for  the  purpose  of  this 
date  this  day,  that  the  slate  of  war  proclamation  and  under  such  sections 
between  the  United  Stales  and  the  of  tlie  revised  statutes  are  termed 
Imperial  German  Government  which  alien  enemies,  shall  be  as  follows: 
has  been  thrust  upon  the  United  "All  alien  enemies  are  enjoined  to 
States  is  hereby  formally  declaied:  preserve  the  ])eace  towards  the  United 
"Whereas,  it  is  provided  by  Section  Stales  and  to  refrain  from  crime 
4067  of  the  Revised  Statutes,  as  fol-  against  the  public  safety,  and  from 
lows:"  (Giving  here  said  section  in  violating  the  laws  of  the  United 
full,  see  above  text).  States  and   of   the   states  and   terri- 

"Whereas,  by  sections  4068,  4069  tories  thereof,  and  to  refrain  from  ac- 
and  4070  of  the  revised  statutes,  fur-  tual  hostility  or  giving  information, 
ther  provision  is  made  relative  to  aid  or  comfort  to  the  enemies  to  tlie 
alien  enemies:  United  States,  and  to  comply  strictly 

"Now,  therefore,  I,  Woodrow  Wil-  with  the  regulations  which  are  hereby 
son.  President  of  the  United  States  or  which  may  be  from  time  to  time 
of  America,  do  hereby  proclaim  to  all  promulgated  by  the  President;  and  so 
whom  it  may  concern  that  a  state  long  as  they  shall  conduct  themselves 
of  war  exists  between  the  United  in  accordance  with  law  they  shall  be 
States  and  the  Imperial  German  Gov-  undisturbed  in  the  peaceful  pursuit  of 
ernmenl;  and  I  do  specitically  direct  their  lives  and  occupations  and  be  ae- 
all  officers,  civil  or  military,  of  the  corded  the  consideration  due  to  all 
United  States  that  they  exercise  vig-  peaceful  and  law-abiding  persons,  ex- 
ilauce  and  zeal  in  the  discharge  of  the  cept  so  far  as  restrictions  may  be 
duties  incident  to  such  a  state  of  necessary  for  their  own  protection 
war;  and  I  do,  moreover,  earnestly  and  for  the  safety  of  the  United 
appeal  to  all  American  citizens  that  States;  and  towards  such  alien  ene- 
they,  in  loyal  devotion  to  their  coun-  mies  as  conduct  themselves  in  accord- 
try",  dedicated  from  its  foundation  to  ance  with  the  law,  all  citizens  of  the 
the  jH-inciples  of  liberty  and  justice,  United  States  are  enjoined  to  pre- 
uphold  the  laws  of  the  "land  and  give  serve  the  peace  and  to  treat  them  with 
undivided  and  willing  support  to  all  such  friendliness  as  may  be  com- 
tliose  measures  wiiicli  may  be  adopted  patible  with  loyalty  and  allegiance  to 
by  the  constitutional  authorities  in  the  United  States, 
prosecuting  the  war  to  a  successful  "And  all  alien  enemies  who  fail  to 
issue  and  in  obtaining  a  secure  and  conduct  themselves  as  so  enjoined,  in 
just  peace;  addition   to   all   other  penalties   ]>re- 

"And,  acting  under  and  by  virtue  scribed  by  law,  shall  be  liable  to  re- 
ef the  authority  vested  in  me  by  the  straint,  or  to  give  security,  or  to  re- 
Constitution  of  the  United  States  and  move  and  depart  from  the  United 
the  said  sections  of  the  revised  stat-  States  in  the  manner  iirescribed  by 
utes,   I   do   hereby   further   proclaim  sections  4069   and    4070   of   the   Re- 

701 


§  299b 


JOYCE  ON  INSURANCE 


vised  Statutes  and  as  prescribed  in 
the  regulations  duly  promulgated  by 
the  President; 

"And  pursuant  to  the  authority 
vested  in  me,  I  hereby  declare  and 
establish  the  following  regulations, 
which  I  find  necessary  in  the  premises 
and  for  the  public  safety: 

"(1)  An  alien  enemy  shall  not  have 
in  his  possession,  at  any  time  or 
place,  any  firearm,  weapon  or  im- 
plement of  war,  or  component  part 
thereof,  ammunition,  maxim  or  other 
silencei",  bomb  or  explosive  or  ma- 
terial used  in  the  manufacture  of  ex- 
plosives ; 

"(2)  An  alien  enemy  shall  not 
have  in  his  possession  at  any  time 
or  place  or  use  or  operate  any  air- 
craft or  wireless  apparatus,  or  any 
form  of  signalling  device,  or  any 
form  of  cipher  code,  or  any  paper, 
document  or  book  written  or  printed 
in  cipher  or  in  which  there  may  be 
invisible  writing; 

"(3)  All  property  found  in  the 
possession  of  an  alien  enemy  in  vio- 
lation of  the  foregoing  regulations 
shall  be  subject  to  seizure  by  the 
United  States; 

"(4)  An  alien  enemy  shall  not  ap- 
proach or  be  found  within  one-half 
Doile  of  any  Federal  or  state  fort, 
camp,  arsenal,  aircraft  station.  Gov- 
ernment or  naval  vessel,  navy  yard, 
factory,  or  workshop,  for  the  manu- 
facture of  munitions  of  war  or  of 
any  products  for  the  use  of  the  Armj^ 
or  Navy; 

"(5)  An  alien  enemy  shall  not 
write,  print  or  publish  any  attack 
or  threats  against  the  Government  or 
Congress  of  the  United  States  or  ei- 
ther branch  thereof  or  against  the 
measures  or  policy  of  the  United 
States  or  against  the  person  or  prop- 
erty of  any  person  in  the  military, 
naval  or  civil  service  of  the  United 
States  or  of  the  states  or  territories 
or  of  the  District  of  Columbia  or  of 
the  municipal  governments  therein;" 

"(6)  An  alien  enemy  shall  not 
commit  or  abet  any  hostile  acts 
against  the  United  States  or  give  in- 

70 


formation,  aid,  or  comfort  to  its  ene- 
mies; 

"(7)  An  alien  enemy  shall  not  re- 
side in  or  continue  to  reside  in,  to 
remain  in,  or  enter  any  locality  which 
the  President  may  from  time  to  time 
designate  by  an  executive  order  as  a 
prohibitive  area,  in  which  residence 
by  an  alien  enemy  shall  be  found  by 
him  to  constitute  a  danger  to  the  pub- 
lie  peace  and  safety  of  the  United 
States,  except  by  permit  from  the 
President  and  except  under  such  limi- 
tations or  restrictions  as  the  Presi- 
dent may  prescribe; 

''(8)  An  alien  enemy  whom  the 
President  shall  have  reasonable  cause 
to  believe  to  be  aiding  or  about  to 
aid  the  enemy  or  to  be  at  large  to 
the  danger  of  the  public  peace  or 
safety  of  the  United  States,  or  to 
have  violated  or  to  be  about  to  vio- 
late any  of  these  regulations,  shall  - 
remove  to  any  location  designated  by 
the  President  by  executive  order,  and 
shall  not  remove  therefrom  without 
permit,  or  shall  depart  from  the 
United  States  if  so  required  by  the 
President ; 

"(9)  Xo  alien  enemy  shall  depart 
from  the  United  States  until  he  shall 
have  received  such  permit  as  the 
President  shall  prescribe,  or  except 
under  order  of  a  court  judge,  «r 
justice,  under  sections  4069  and  4070 
of  the  Revised  Statutes; 

"(10)  No  alien  enemy  shall  land 
in  or  enter  the  United  States  except 
under  such  restrictions  and  at  such 
places  as  the  President  may  pre- 
scribe ; 

"(11)  If  necessary  to  prevent  vio- 
lation of  the  regulations,  all  alien  ene- 
mies will  be  obliged  to  register; 

"(2)  An  alien  enemy  whom  there 
may  be  reasonable  cause  to  believe  to 
be  aiding  or  about  to  aid  the  enemy, 
or  who  be  at  large  to  the  danger  of 
the  public  i:)eace  or  safety,  or  who 
violates  or  who  attempts  to  violate  or 
of  whom  there  is  reasonable  grounds 
to  believe  that  he  is  about  to  vio- 
late, any  regulation  to  be  promul- 
gated by  the  President  or  any  crimi- 


WAR— ALIEN  ENEMIES 


§  299b 


nal  law  of  the  United  States,  or  of 
the  states  or  territories  thereof,  will 
be  subject  to  summary  an-est  by  the 
Unit.ed  States  Marshal,  or  his  deputy, 
or  such  other  officers  as  the  Presi- 
dent shall  designate,  and  to  confine- 
ment in  such  penitentifiry,  prison, 
jail,  military  camp,  or  other  place  of 


detention  as  may  be  directed  by  the 
President. 

"This  proclamation  and  the  regula- 
tions herein  contained  shall  extend 
and  apply  to  all  land  and  water,  con- 
tinental or  insular,  in  any  way  with- 
in the  jurisdiction  of  the  United 
States." 


703 


TITLE  IV. 

PARTIES— AGENTS— BENEFICIARIES. 

CHAPTER  XII. 

PARTIES   TO  THE   CONTRACT— THE   INSURED. 

§  305.  Who  may  be  parties  to  the  contract. 

§  306.  Who  are  not  parties. 

§  306a.  Parties:  husband  or  wife. 

§  307.  Parties:  infants. 

§  307a.  Same  subject :  statutes. 

§  307b.  When  infant  bound. 

§  307c.  Corporation  or  partnership  as  party  insured. 

i^  307d.  Municipal  corporation  as  party  insured. 

§  307e.  Parties:  employees  under  employers'  liability  and  fidelity  or  guar- 
anty insurance. 

§  308.  When  aliens  may  be  insured. 

^  300.  Relations  of  insurer  and  insured. 

§  309a.  Same  subject :    title   guaranty. 

>^  309b.  Relation  of  insured  to  each  other. 

i:;  310.  Name  of  assured  need  not  be  set  out  in  policy, 

y^  311.  Name:  evidence  admissible  to  show  actual  party  in  interest. 

§  305.  Who  may  be  parties  to  the  contract. — All  persons  capable 
of  contracting  may  become  parties  to  the  contract  of  insurance. 
This  rule  is  so  well  settled  as  not  to  require  the  citation  of  autliorities 
in  its  support.'* 

§  306.  Who  are  not  parties. — One  whose  life  is  insured  by  a 
])()Iicy  issued  to  another  is  not  a  party  to  the  contract,  and  cannot 
recover  back  money  paid  by  himself  for  premiums  nor  avoid  the 
])olicy  for  fraud,*  and  a  stranger  to  the  policy  who  pays  the  pre- 

^  As     to     insurable     interest     and,  to  contract,  see  Southern  Home  Ins. 

right  of  parties  to  insure,  see  §§  912  Co.   v.   Pntnal,  57   Fla.   199,   49    So. 

et  seq.  herein.  922. 

'•Insured"  and  "assured,"  see  §  1        ^  North  American  Life  Ins.  Co.  v. 

Iierein.  Wilson,  111  Mass.  542.     See  §§  7.'), 

Constitutional   protection   of   right  869,  1148  herein. 

704 


11 


JOYCE  OX  INSURAXCE  §§  306a,  307 

mium  thereon,  without  any  contract  with  the  person  entitled  to  the 
benefit  of  the  policy,  is  a  mere  volunteer,  and  obtains  no  title  there- 
to nor  lien  on  the  insurance.^ 

§  306a.  Parties :  husband  or  wife. — The  husband  is  not  the  party 
insured,  although  the  polic-y  is  upon  his  property  where  the  policy 
wa.s  taken  in  his  wife's  name,  and  she  paid  the  premium,  accepted 
and  retained  the  policy,  and  the  only  contract  assented  to  by  the 
insurer  was  with  her.'' 

And  a  life  policy  the  application  for  which  is  signed  by  a  married 
woman  as  applicant  and  by  her  husband  whose  life  is  proposed  for 
insurance,  when  the  policy  recites  a  payment  by  the  wife,  and  de- 
clares that  it  assures  the  life  of  her  husband  for  her  sole  use,  agree- 
ing to  pay  her  the  amount  for  her  sole  use  if  living,  and,  if  not 
living,  then  to  her  children  or  their  guardian  for  their  use,  though 
it  does  not  expressly  declare  that  the  promise  is  made  to  the  wife, 
is  a  contract  between  insurer  and  the  wife,  though  it  appears  that 
the  husband  made  the  application,  representing  himself  as  agent 
for  the  wife  and  that  he  paid  all  the  premiums.'* 

§  307.  Parties:  infants. — It  is  held  that  an  infant  may  enter  into 
a  contract  for  insurance,  which  will  be  obligatory  upon  the  com- 
pany but  voidable  by  the  infant.*  So  a  contract  of  insurance  made 
with  an  infant,  is  not  for  necessaries  and  is  voidable  at  his  elec- 
tion, but  binds  the  insurer.^  And  a  policy  on  the  life  of  a  minor, 
payable  to  him,  if  living,  at  maturity,  and  to  his  executors,  admin- 
istrators or  assigns,  if  he  dies  before  maturity,  together  with  the 
notes  given  by  him  for  premiums  thereon,  is  not  void,  though  void- 
able. Nor  is  the  minor's  assignment  of  the  policy  during  his  mi- 
nority necessarily  void.^°    Nor  is  the  infant  bound  by  his  warranties 

^  Loekwood  v.  Bishop,  51  How.  Pr.  *  Monaghan  v.  Amei'ican  Fire  Ins. 

(N.  Y.)   221.     See  §§75,  869,  1148  Co.  53  .Alicli.  238,  18  N.  W.  797.    See 

herein.  also   Gonackey   v.   General  Accident, 

'  Agricultural  Ins.  Co.  v.  Fritz,  61  Fire  &  Life  Assur.  Corp.  6  Ga.  App. 

N.  J.  L.  211,  39  Atl.  910,  27  Ins.  L.  J.  381,  65  S.  E.  53;   Simpson  v.  Pru- 

710.  dential  Ins.  Co.  184  Mass.  348,  100 

As  to  hu.sband's  insurable  interest.  Am.  St.  Rep.  560,  G3  L.R.A.  741,  68 

see  §§  1048-1052  herein.  N.  E.  673;  Imperial  Life  Ins.  Co.  v. 

As  to  effect  on  wife's  rights  of  pay-  charleboi.s      (Quebec,      S.      C.)      22 

ing    to    husband    insurance    on    her  Canadian    L.    T.   417.      See   note   61 

property,  see  Kautman  v.  State  bav-  .        o^   p        cc, 

ings  Bank,  151  Mich.  65,  18  L.R.A.  o'      '  +     •"    "?  t  t?  *     Ann 

(N.S.)  630,  114  N.  W.  863,  123  Am.  ^'^  note  in  ,)/  L.R.A.  496,  on  m- 

St.  Rep.  259.  ^"J^'.'"^  «"   ^'^\f  'TZ'      fi.    t -. 

7^  Millard    V.    Bravlon,    177    Mass.  ^  P'l^pen    v.    Mutual    Bonefil    Life 

533,  52  L.R.A.  117,  83  Am.  St.  Rep.  Ins.  Co.  130  N.  Car.  23,  25,  57  L.R.A. 

294;  59  N.  E.  436.  -^'05,  40  S.  E.  822. 

Wife  and  children  as  beneficiaries,  ^°  Union   Central  Life  Ins.   Co.  v. 

see  §§  804  et  .seq.  herein.  Hdliard,  63  Ohio  St.  478,  81  Am. 
Jovce  Ins.  Vol.  I.— 45             705 


§  307a      PARTIES  TO  THE  CONTRACT— THE  INSURED 

in  a  contract  of  life  insurance."  And  a  minor's  rights,  under  an 
insurance  on  his  property,  where  the  policy  is  issued  to  him  by 
general  agents,  are  not  affected  by  a  rule  of  the  insurer,  and  instruc- 
tions to  that  effect  to  its  agents,  not  to  insure  minor's  property, 
where  neither  he  nor  the  person  acting  for  him  in  procuring  the 
policy  had  notice  of  such  rule  or  instructions.^^ 

But  it  is  also  decided  that  a  mutual  benefit  society  incorporated 
under  the  laws  of  New  York,^^  said  laws  being  silent  as  to  the  limi- 
tation of  the  age  of  members,  cannot  insure  the  lives  of  minors,^* 
since  mutuality  of  obligation  being  the  fundamental  principle  upon 
which  these  corporations  are  established  under  this  act,  and  the  re- 
lation between  the  members  and  the  society  being  one  of  contract, 
an  infant  cannot  become  a  member,  since  he  is  not  able  to  con- 
tract.^^  In  Illinois  a  view  contrary  to  that  expressed  in  the  New 
York  case  has  been  taken,  it  being  said  that  since  there  is  no  legal 
obligation  to  pay  the  dues,  and  the  only  result  of  a  failure  to  pay  is 
suspension  from  membership,  an  infant  may,  upon  the  perform- 
ance of  the  conditions  prescribed,  become  a  member  and  be  en- 
titled to  the  benefits  of  a  contract  ^^  which  provides  that  "no  person 
shall  become  a  member  who  is  under  ten  or  over  seventy  years  of 
age."  It  has  also  been  held  that  insurance  against  loss  by  fire  is 
not  a  contract  for  necessaries  binding  upon  an  infant.^''' 

§  307a.  Same  subject:  statutes. — That  section  of  the  New  York 
Insurance  Law  which  provides  that  a  minor  is  not  incompetent  to 

St.  Rep.  644.  53  L.R.A.  462,  59  N.  ^^  Chicago  Mut.  Life  Ind.  Assn.  v. 
E.  230,  '  Hunt,  127  111.  257,  20  N.  E.  56,  2 
^^  O'Rourke  v.  John  Hancock  L.R.A.  549.  The  statute  was  silent 
Mutual  Life  Ins.  Co.  23  R.  I.  457,  57  in  this  case  as  to  the  age  of  members, 
L.R.A.  496,  50  Atl.  834,  91  Am.  St.  but  the  certilicate  of  association  pro- 
Rep.  643.  vided  that  "no  person   shall  become 

12  Johnson  v.  Scottish  Union  &  a  member  who  is  under  ten  or  over 
National  Jns.  Co.  93  Wis.  223,  67  N.  seventy  years  of  age."  "It  follows 
W.  416,  26  Ins.  L.  J.  59.  Cited  in  that  unless  the  society  is  permitted 
Link  V.  New  York  Life  Ins.  Co.  107  by  the  express  provisions  of  the  law 
Minn.  33,  35,  119  S.  W.  488.  governing  its  organization  to  admit 

13  Stilts.  1883,  c.  175.  infants  into  its  membership,  a  con- 
i*In  re  Globe  Mut.  Benefit  Assn.   tract  between  the  society  and  a  per- 

43  N.  Y.  756,  17  N.  Y.  Supp.  852,  son  who  has  not  attained  the  age  of 

Van    Brunt,    P.    J.,    dissenting,    aff'd  majority   is   one   into   which   the   so- 

135  N.  Y.  280,  17  L.R.A.  547,  32  N.  ciety    may    not    enter:"       Niblack's 

E.  122.  Mutual  Benefit  Societies   (ed.  1888) 

15  Van  Brunt,  P.  J.,  dissented  from  sec.     142.       E.ramine     Insurance     of 

this     view,     but     held,    upon    other  Minors,  In  re  (Atty.  Genl.)  5  Det.  L. 

grounds,  that  a  minor  could  not  be-  N.   No.   18,   under   Mich,    acts   1887, 

come  a  member.     Infant  as  member  act  187,  sees.  16,  166. 
of  co-operative  company,  see  note  17       ^''  New     Hampshire    Mutual    Fire 

L.R.A.  547.  Ins.  Co.  v.  Noyls,  32  N.  H.  345. 

706 


PARTIES  TO  THE  CONTRACT— THE  INSURED      §  307b 

contract  for  insurance  ^^  is  not  declai"atory  of  the  common  laAv  but 
is  in  contravention  thereof.  And  a  claim  that  the  policy  sought 
to  be  rescinded  is  an  endowment  policy  and  not  merely  a  policy  of 
insurance  will  not  be  sustained  as  it  will  be  presumed  that  the  legis- 
lature had  knowledge  of  the  different  forms  of  insurance  commonly 
in  use  and  its  failure  to  specify  what  insurance  an  infant  might, 
under  the  statute,  be  lawfully  permitted  to  take  out  would  indicate 
that  such  infant  might  validly  contract  for  insurance  in  any  form 
commonly  used.^^  And  under  the  above  statute  a  person  may  re- 
cover the  amount  of  premiums  paid  by  him  at  the  infant's  request 
the  same  as  he  might  recover  for  necessaries  furnished.  If,  how- 
ever, a  recovery  is  not  sought  upon  this  theory  but  the  suit  is  strict- 
ly upon  a  written  request  made  by  the  infant  with  such  third  per- 
son to  pay  the  premium  and  a  written  agreement  to  repay  the 
amount  advanced,  there  can  be  no  recovery  without  alleging  and 
proving  the  payment  of  the  premium  by  such  third  person. 2°  The 
New  York  statute  ^  which  fixes  the  amount  of  insurance  which  a 
person  liable  for  the  support  of  a  child  may  take  upon  such  child's 
life,  limits  the  total  amount  of  such  insurance  and  does  not  alone 
restrict  the  amount  by  a  single  policy .^ 

Receiving  infants  as  members  of  a  co-operative  or  assessment  in- 
surance company  organized  under  the  New  York  Laws  of  1883  ^  is 
unlawful  and  may  be  prevented  by  injunction.* 

§  307b.  When  infant  bound. — An  infant  may  be  precluded  from 
disaffirming  his  contract  of  life  insurance  by  his  conduct  subsequent 
to  his  attaining  majority,  unless  there  be  fraud.^  And  if  an  infant 
surrenders  a  life  policy  for  its  cash  value  it  binds  him  and  his  per- 
is Section  55,  Laws  1892,  e.  690,  as  America,  207  N.  Y.  315,  100  N.  E. 
am'd  by  Laws  1902,  c.  437,  makes  794,  rev'g  130  N.  Y.  Supp.  546,  145 
ail  infant  over  fifteen  years  of  age  App.  Div.  704._ 
competent  to  contract  i'or  insurance  ^  Chapter  175. 
for  tlie  benefit  of  snch  minor  or  of  *  In  re  Globe  IMutual  Benefit 
certain  specified  relatives,  or  to  con-  As.soc.  135  N.  Y.  280,  17  L.R.A.  547, 
tract  for  the  surrender  of  such   in-    32  N.  E.  122. 

snrance,  or  to  give  a  valid  discharge  Insurance  on  life  of  infant.  The 
for  any  benefit  accruing,  or  for  pai/ment  of  premiums  upon  a  policy 
money  payable  under  tlie  contract.        of  insurance  effected  \n'wv  to  the  chite 

19  llamm  v.  Prudential  Ins.  Co.  of  when  the  Children  Act,  1908,  making 
America,  122  N.  Y.  Supp.  35,  137  it  an  offense  for  a  person  to  insure 
App.  Div.  504,  s.  c.  {mein.)  138  the  life  of  an  infant  which  he  lias 
App.  Div.  933, 123  N.  Y.  Supp.  1119.    undertaken  to  nurse  for  reward,  does 

20  Equitable  Trust  Co.  of  N.  Y.  v.  not  constitute  an  offense  under  said 
Moss,  134  N.  Y.  Supp.  533,  149  App.  act.  Glasgow  Pari.sh  Council  v. 
Div.  615,  s.  c.  (mem.)  150  App.  Martin,  [1910]  S.  C.  (J.)  102  Ct.  of 
Div.  905,  135  N.  Y.  Supp.  1110.  Just. 

^Consol.'Laws,  c.  28,  sec.  55.  ^  Link  v.  New  York  Life  Ins.  Co. 

2  Flvnn  v.  Prudential  Ins.  Co.  of   107  Minn.  33,  119  S.  W.  488. 

707 


§§  307c-307e  JOYCE  ON  INSURANCE 

sonal  representatives.^  If  an  infant's  personal  contract  is  fair  and 
reasonable  and  tliere  is  no  fraud,  overreaching  or  undue  influence 
b}'  the  other  party,  and  l)oth  parties  have  wholly  or  partially  execut- 
ed it,  so  that  its  benefits  have  been  received  by  the  infant,  who  has, 
however,  parted  with  what  he  has  received  and  the  nature  of  the 
benefits  precludes  their  being  restored  he  cannot  recover  what  he 
has  paid,  but  if  the  contract  was  fair  and  reasonable  what  the  in- 
fant has  paid  in  excess  of  value  received  may  be  recovered.' 

§  307c.  Corporation  or  partnership  as  party  insured. — A  manu- 
facturing corporation  may  insure  its  property  and  so  become  obli- 
gated upon  its  premium  notes.'  So  it  is  decided  in  a  Federal  case 
that  a  manufacturing  company  was  the  insured  where  it  was  plainly 
so  named  in  the  policy,  even  though  the  loss  was  payable  to  another 
as  interest  might  appear.^  And  it  is  held  that  any  association  of 
individuals,  whether  a  corporation  or  only  a  partnei-ship,  may  make 
contracts  and  take  out  insurance  on  personal  property  owned  by  it.^° 

§  307d.  Municipal  corporation  as  party  insured. — If  the  charter 
of  a  city  ^^  empowers  it  to  exact  and  maintain  certain  public  build- 
ings the  city  acquires  as  incidental  to  the  power  thus  granted  the 
right  to  contract  for  indemnity  against  loss  of  such  buildings  by 
fire  and  such  right  can  be  exercised  by  insuring  on  the  mutual  plan, 
especially  so  where  the  legislature  had  located  such  a  company  with- 
in the  city  limits,  and  the  fire  insurance  companies  created  by  the 
legislature  prior  to  a  certain  date  were  generally  organized  upon 
such  plan.^^ 

§  307e.  Parties:  employees  under  employers'  liability  and  fidelity 
or  guaranty  insurance. — It  is  held  that  an  injured  employee  has 
no  rights  legal  or  equitable  or  any  title  or  interest  against  a  liability 
company  in  or  to  a  policy  issued  by  such  company  under  an  in- 

^  Pippen    V.    Mutual    Benefit    Life  Insured  and  assured,  see  §  1  herein. 

Ins.   Co.  130  N.   Car.  23,  57  L.R.A.  As    interest    may    appear,    see    §§ 

505,  40  S.  E.  822.  020,  2030,  3641  herein. 

'Johnson  v.  Northwestern  Mutual  i°  Holbrook    v.    St.    Paul    Fire    & 

Life  Ins.  Co.  56  Minn.  305,  372,  26  Marine  Ins.  Co.  25  Minn.  229.     Co- 

L.R.A.   187,  180,   59   X.   W.  992,  45  partners:  insurable  interest.     See  §§ 

Am.  St.  Rep.  473.  912,  944,  945  herein.    As  to  express, 

8  St.  Paul  Trust  Co.  v.  Wampach  implied,  or  incidental  powers  of 
Manufaoturing-  Co.  50  Minn.  93,  52  corporations  in  general,  see  Joyce  on 
N.  W.  274,  luuler  Laws  1881,  c.  91,  Actions  and  Defenses  by  and 
being  "an  act  authorizing  the  for-  against  Corporations  (ed.  1910)  sec. 
mation   of  millers'   and   manufactur-  223. 

ers'  mutual  insurance  companies."  "  N.  J.  Pampli.  L.  1806,  p.  116. 

Corporations  as  Persons,  see  Jovce  ^^  French,     Receiver,     v.     IVIillville 

on  Franchises  (ed.  1909)  sees.  64-^66.  City,  66  N.  J.  L.  393,  49    All.    465, 

9  American  Cereal  Co.  v.  Western  aff'd  (mem.)  67  N.  J.  L.  349,  51  Atl. 
Assur.   Co.    (U.   S.   C.  C.)    148  Fed.  1109. 

77,  36  Ins.  L.  J.  134. 

708 


PARTIES  TO  THE  CONTRACT— THE  INSURED       §  307e 

demnity  contract  with  the  employer.^'  So  in  Oregon  no  privity  ex- 
ists between  insured  and  an  employee  under  an  employers'  liability 
insurance."  Under  a  New  York  decision  a  steam  boiler  insurance 
policy  covering  loss  of  life  to  employees  of  assured  is  deemed  to 
have  been  intended  at  most  as  a  pecuniary  indemnity  to  the  em- 
ployees' legal  representatives  for  loss  consequent  upon  his  death. ^* 
In  a  New  Jersey  case  under  an  employers'  liability  insurance  con- 
tract, in  equity  the  insurer  becomes  the  principal  debtor  to  the  in- 
sured employee  and  the  assured  the  surety.^® 

An  insurance  under  an  indemnity  policy  taken  out  by  insured 
for  the  benefit  of  employees  will  not  include  an  employee  whose 
name  did  not  appear  in  the  schedule  of  names  attached  when  the 
policy  was  issued."  So  a  transfer  of  a  policy  of  casualty  insurance 
will  not  extend  its  terms  to  cover  a  class  of  employees  that  were  not 
included,  at  the  time  of  its  execution,  in  a  policy  insuring  an  em- 
ployer against  liability  to  its  employees.^* 

A  guarantee  company's  liability  to  a  bank  is  not  a  joint  liability 
with  that  of  its  cashier,  where,  in  the  bond  for  the  cashier  as  such 
there  is  no  provision  by  which  he  assumes  an  obligation  directly  to 
the  bank  for  his  own  defalcations,  especially  so  where  the  cashier 
seems  to  have  been  made  a  party  merely  that  he  might  enter  into 
certain  obligations  to  the  guaranty  company  in  case  of  his  defalca- 
tion.^^ Where  a  fidelity  bond  for  the  indemnity  of  an  employer 
against  the  dishonesty  of  an  employee  who  has  made  the  applica- 
tion and  pays  the  premium  and  delivers  the  same  to  the  employer, 
and  said  bond  contains  an  undertaking  of  the  employee  to  the  ob- 
ligor that  the  latter  shall  not  be  bound  unless  the  employee  signs 
the  bond  it  must  be  so  signed  to  be  binding  upon. the  obligor  in  the 

^^Kinnan   v.   Fidelity   &   Casualty  ^^  Beaton  Lamp  Co.    v.    Travellers 

Co.  107  111.  App.  406.     See  Burke  v.  In.s.  Co.  61  N.  J.  Eq.  59,  47  Atl.  579. 

London    Guarantee    &    Accident    Co.  "L"^nited     Zinc     Cos.     v.     General 

93  N.  Y.   Supp.   6.V2,  47   .Misc.  171;  Accident   Ins.    Corp.   125   Mo.   App. 

Finley  v.  United  States  Casualty  Co.  41,  102  S.  W.  605. 

113  tenn.  592,  83  S.  W.  2.     See  §§  On  wliat  employees  are  covered  by 

27a  et  scq.  herein.  indemnity    policy    see    note    in    41 

On    injured    employee's    right    to  L.IJ.A.(N.S.)    963. 

reach  fund  under  employer's  liability  ^^  i\j.^i.y]j^,^,]  Casualty  Co.   v.   Little 

policv   see  notes  in   7   L.R.A.(N.S.)  Rock  Rv.  &  Electric  Co.  92  Ark.  306, 

958,  48  L.R.A.(N.S.)  19.  122  S.  W.  994. 

"  Scheuerraan     v.     Mathison,     74  19  Guarantee  Co.  of  North  America 

Oreg.  40,  144  Pac.  1177.  v.  Mechanics'  Savin?  Bank  &  Trust 

"  Embler  v.  Hartford  Steam  Boil-  Co.    80    Fed.    766,  26  C.  C.  A.  146, 

er  Inspection  &  Ins.  Co.  158  N.  Y.  rev'd  for  want  of  lurisdiction  in  the 

431,  44  L.R.A.  512,  53    N.    E.    212,  circuit   court,   173  U.   S.  582,  43  L. 

aff'g  40  N.  Y.  Supp.  450,  8  App.  Div.  ed.  818,  19   Sup.   Ct.  551. 
186.    In  this  case  loss  was  payable  to 
assured  for  benefit  of  injured  person. 

709 


§§  308,  309  JOYCE  ON  INSURANCE 

absence  of  waiver  of  such  signing.  And  the  signing  by  the  obligor 
of  the  bond  and  its  delivery  to  the  employee  does  not  make  the  lat- 
ter the  former's  agent  with  authority  to  bind  the  former  by  waiver 
of  the  signature.^" 

§  308.  When  aliens  may  be  insured. — An  alien  friend  may  enter 
into  and  enforce  a  contract  of  insurance.-^  So  an  alien  enemy  resid- 
ing here  by  permission  of  the  government  may  sue  and  be  sued  in 
our  courts,  and  he  or  his  agent  receive  payment  of  the  debt.^  Alien 
enemies  residing  in  a  hostile  country  may,  hy  treaty  between  the 
belligerent  powers,  have  all  the  rights  and  remedies  which  are  en- 
forceable in  the  courts.^  So  the  war  itself  has  been  held  to  create 
by  necessity  a  contract  with  an  alien  enemy  which  would  be  enforce- 
able in  time  of  peace,*  as  in  case  of  ransom  bills ;  ^  and  a  contract 
with  an  alien  enemy  before  the  war  may  be  fulfilled  during  war  by 
performance  or  payment  to  an  agent  in  the  United  States  appointr 
ed  before  the  war.^  So  if  aii  alien  enemy  have  the  privilege  or  li- 
cense to  trade  or  hold  property  he  may  be  insured,'  and  it  is  held 
that  an  enemy's  license  to  trade  is  the  legitimate  subject  of  insur- 
ance.* 

§  309.  Relations  of  insurer  and  insured. — The  relation  between 
the  parties  to  a  contract  of  insurance  is  that  of  debtor  and  creditor, 
of  one  contracting  party  to  another  contracting  party,  but  not  that 
of  trustee  and  cestui  que  trust.  It  is  a  legal,  rather  than  an  equit- 
able, relation.^    So  after  liability  actually  attaches  under  a  policy 

20  United  States  Fidelity  &  Guar-  6  Taunt.  237  (a  case  of  a  bill  of  ex- 

anty  Co.  v.  Ridgely,  70  Neb.  622,  97  change  drawn  by  a  British  prisoner 

N.  W.  836.  in  France  for  his  support,  which  was 

^  Pisani   v.   Lawson,   6   Bing.    (N.  indoi-sed  to  an  alien  enemy  and  held 

C.)  90.  enforceable  after  the  war). 

2  Clark  V.  Morey,  10  Johns.  (N.  ^  United  States  v.  Grossmayer,  9 
Y.)  70;  Buehankn  v.  Curry,  19  Wall.  (76  U.  S.)  72,  19  L.  ed.  627; 
Johns.  (N.  Y.)  137,  10  Am.  Dec.  200.  Buchanan  v.  Curry,  19  Johns.  (N. 
See  United  States  v.  Grossmayer,  9  Y.)  137,  10  Am.  Dec.  200;  Kershaw 
Wall.  (76  U.  S.)  72,  19  L.  ed.  627.  v.  Kelsey,  100  Mass.  561,  97  Am. 
See     note,     "Contracts     with     alien  Dec.  124,  per  Gray,  J. 

enemies  and  right  to  sue  them  in  our  '''  Kensington  v.  Ingiis.  8  East,  273; 
courts,"  96  Am.  Dec.  624-33.  McStea  v.  Matthews,  50  N.  Y.  166, 
On   alien  enemies  as  litigants  see  per  Church,  C.  J.;  Fenton  v.  Pear- 
note  in  5  B.  R.  C.  583.  .son,    15    East,    419.     See  Clarke  v. 

3  Society    for    the    Prop,    of    the  Morey,  10  Johns.  (N.  Y.)  69. 
Gosp.  V.  Wheeler,  2  Gall.   (U.  S.  C.  »  Perkins  v.  New  England  Ins.  Co. 
C.)   105,  127  Fed.  Cas.  13,  156,  per  12  Mass.  214;  Hay  ward  v.  Blake,  12 
Story,  J.  Mass.  176.    But  see  1  Duer  on  Insur- 

^Griswold     v.     Waddington,     16  ance  (ed.  1845)  588,  589,  sec.  32. 

Johns.    (N.  Y.)   451,  per  Chancellor  »  See  Bewlev  v.  Equitable  Life  Ins. 

Kent.  Co.  61  How.  Pr.   (N.  Y.)  345. 

SRieorfl    v.    Bettenham,    3    Burr.  See  also  the  following  cases: 

1734;    Cornu   v.    Blackbui-ne,   Doug.  Corniecticut.^-ljothvo-p      v.      Sted- 

641.     See  also  Antoine  v.  Morehead,  man,  42  Conn.  583,  589. 

710 


PARTIES  TO  THE  CONTRACT— THE  INSURED        §  3U9 

of  insurance,  the  entire  relation  between  the  parties  is  changed 
from  that  of  insurer  and  insured  to  that  of  debtor  and  creditor ;  and 
clauses  in  the  policy  which  pro^dde  that  certain  acts  or  omissions 
of  insured  shall  invalidate  it  are  thereafter  inoperative.^" 

In  mutual  benefit  associations  the  by-laws,  articles  of  association, 
and  certificates  of  membership  determine  the  rights  of  the  members 
and  of  the  association,  and  may  be  enforced  by  the  parties  and  bene- 
ficiaries according  to  their  respective  rights  as  therein  provided,^^ 
for  the  rights  of  the  insured  or  of  persons  claiming  insurance  in 
either  a  mutual  insurance  company  or  a  mutual  benefit  society  arise 
out  of  and  depend  upon  the  contract  between  the  parties,  and  must 
be  ascertained  and  fixed  by  that  contract,  regardless  of  the  char- 
acter of  the  company. ^2  So  it  is  held  in  New  York  that  the  holder 
of  a  policy  in  a  mutual  company  is  in  no  sense  a  partner  of  the 
corporation,  but  his  relation  with  the  company  is  one  of  contract, 
measured  by  the  terms  of  the  policy.^^  So  it  is  held  in  an  Indiana 
case  that  the  relation  of  the  company  to  a  member  is  a  contractual 
one  and  a  distinct  legal  entity,^*  and  this  has  also  been  held  as  to 
the  relation  of  members  of  a  beneficial  association.^*  Again,  where 
a  party  contracts  for  the  insurance  of  property  and  pays  the  pre- 
mium, and  the  loss  is  made  payable  to  him,  the  agreement  to  pay  the 
loss  is  a  contract  with  the  person  who  pays  the  consideration.^®  So 
if  by  the  terms  of  the  policy  the  loss  is  made  payable  to  a  mortgagee, 
the  contract  is  one  for  the  benefit  of  the  mortgagee.^®*  Notwith- 
standing the  above  decisions,  it  is  held,  as  we  have  noted  elsewhere, 

Z«*a«.a.— Willcutts  v.  Northwest-  Am.  St.  Rep.  519.     See  §§  316-319 

cm  Mutual  Life   Ins.   Co.    81    Ind.  herein. 
300,   307.  i2<^o    i^pid    in     Block     v.     Valley 

Kentucky.  —  Commonwealth       v.  Mutual  Ins.  Assn.  52  Ark.  201,  12  S. 

Richardson,  29  Ky..  L.  Rep.  622,  94  W.  702,  20  Am.  St.  Rep.  166. 
S.  W.  639.  isUhhuan  v.  New  York  Life  Ins. 

Massachusetts.— Vievce   v.    Equita-  Co.  109  N.  Y.  421,  17  N.  E.  363,  4 

ble  Life  Assurance  Soc.  145  Mass.  56,  Am.   St.  Rep.  482.     See  §§  316-319 

1  Am.  St.  Rep.  433,  12  N.  E.  858.  heroin. 

New     York. — Bogardus     v.     New        ^*  Schmidt  v.  German  Mutual  Ins. 

York  Life  Ins.  Co.  101  N.  Y.  328,  4  Co.  4  Ind.  App.  340,  30  N.  E.  939. 
N.  E.  522.  ^5  Logsdon  v.  Supreme    Lodge    of 

Ohio. — Examine  State  v.  Standard  Fraternal     Union    of    America,     34 

Life  Assn.  38  Ohio  St.  281.  Wash.  006,  76  Pac.  292. 

England. — Matthew     v.     Northern        ^®  Traders'  Ins.  Co.  v.  Pacaud,  150 

Assur.  Soc.  L.  R.  9  Ch.  ,D.  80;   Re  111.  245,   37  N.  E.  400,  41   Am.   St. 

Haycock's  Policy,  L.  R.  1  Ch.  D.  611.  Rep.  355.   Examine  Agricultural  Ins. 

i<>  Seyk  V.  Miller's    National    Ins.  Co.  v.  Fritz,  61  N.  J.  L.  211,  39  Atl. 

Co.  74  Wis.  67,  3  L.R.A.  523,  41  N.  910,  27  Ins.  L.  J.  710. 
W.  443.  ^^*  iMaxey  v.  New  Hampsliire  Fire 

"Union   Mut.  Assn.   v.  Montgom-  Ins.  Co.  54  Minn.  272,  55  N.  W.  1130, 

ery,  70  Mich.  587,  38  N.  W.  588,  14  40  Am.  St.  Rep.  325. 

711 


309 


JOYCE  ON  INSURANCE 


that  in  construing  a  life  policy  in  a  mutual  benefit  society  the  courts 
will,  as  far  as  possible,  hold  it  to  be  in  the  nature  of  a  testament,  and 
treat  it  as  a  will,^'^  and  an  insured  member  in  a  mutual  or  fraternal 
benefit  society  has  no  interest  or  property  in  the  fund,  but  only  the 
power  of  appointment,  which  must  be  exercised  to  become  opera- 
tive.^8 

In  Massachusetts,  it  is  decided  that  one  who  holds  a  policy  on 
the  tontine  plan  is  a  creditor  at  the  termination  of  the  tontine  period, 
and  not  a  member  of  the  company,  and  is  therefore  entitled  to  an 
accounting,^^  But  in  a  New  York  case  ^°  the  action  was  for  an  ac- 
counting, and  it  was  claimed  "that  the  relation  between  the  plain- 
tift'  and  defendant  is  not  one  solely  of  contract,  but  that  as  to  the. 
participation  in  the  profits  of  this  tontine  system  that  relation  is 
similar  to  one  of  trustees  and  cestui  que  trust."'  The  court,  in  de- 
termining this  claim,  said:  "We  are  convinced,  after  a  careful  ex- 
amination of  the  character  of  the  relations  existing  between  these 
parties  that  it  cannot  be  said  that  the  defendant  is  in  any  sense  a 
trustee  of  any  particular  fund  for  the  plaintiff,  or  that  it  acts,  as  to 
him  and  in  relation  to  any  such  fund,  in  a  fiduciary  capacity.  It 
has  been  held  that  the  holder  of  a  policy  of  insurance  even  in  a  mu- 
tual company,  was  in  no  sense  a  partner  of  the  corporation  which 
issued  the  policy,  and  that  the  relation  between  the  policy  holder 
and  the  company  was  one  of  contract  measured  by  the  terms  of  the 


"  Chartrand  v.  Brace,  16  Col.  19, 
29  Pae.  152,  12  L.R.A.  209,  25  Am. 
St.  Rep.  235;  Supreme  Council 
Catholic  Knights  of  America  v. 
Densford,  —  Ky.  — ,  56  S.  W.  172, 
173.  Compare  Southern  Mutual 
Life  Ins.  Co.  v.  Durdin,  132  Ga.  495, 
131  Am.  St.  Rep.  210,  64  S.  E.  264. 
See  §  738  herein. 

18  Rollins  V.  McHatton,  16  Col. 
203,  25  Am.  St.  Rep.  260,  27  Pac. 
254;  Northwestern  Masonic  Aid 
Assoc.  V.  Jones,  154  Pa.  St.  99,  35 
Am.  St.  Rep.  810,  26  Atl.  253 ;  Cook 
V.  Supreme  Conclave  Improved 
Order  of  Heptasophs,  202  Mass.  85, 
88  N.  E.  584. 

1^  Pierce  v.  Equitable  Life  Assur. 
Soc.  145  Mass.  56,  1  Am.  St.  Rep. 
433,  12  N.  E.  858.  Examine  Peters 
V.  Equitable  Life  Assur.  Soc.  200 
Mass.  579,  86  N.  E.  885. 

2'^Uhlmann  v.  New  York  Life  Ins. 
Co.  109  N.  Y.  421,  17  N.  E.  363,  27 
Cent.  L.  J.  360,  4  Am.  St.  R^p.  482. 

71 


Quoted  from  and  considered  at 
length  in  Equitable  Life  Assurance 
Soc.  V.  Brown,  213  U.  S.  25,  46-49, 
53  L.  ed.  682,  29  Sup.  Ct.  404,  upon 
point  that  by  decisions  of  the  highest 
courts  of  New  York  the  society's  re- 
lation to  its  policy-holders  is  not 
that  of  trustee,  but  that  the  relation 
is   one   of  contract. 

Cited  (in  dissenting  opinion)  in 
Langdon  v.  Northwestern  Mutual 
Life  Ins.  Co.  199  N.  Y.  188,  205,  92 
N.  E.  440  (to  point  that  under  such 
form  of  policy  relation  is  not  that 
of  trustee  and  cestui  que  trust  but 
merely  of  debtor  and  creditor).  A 
case  of  an  action  brought  in  part 
to  reform  a  policy  so  as  to  corre- 
spond with  a  claimed  special  con- 
tract: Burns  v.  Burns,  190  N.  Y. 
211,  82  N.  E.  1107  (to  point  that 
relation  one  of  contract  merely). 
Distinguished  in  Thomas  v.  New 
York  &  GreenAvood  Lake  Co.  139  N. 
Y.  163,  180,  34  N.  E.  877.  Quoted 
2 


PARTIES  TO  THE  CONTRACT— THE  INSURED        §  309 

policy.*     Upon  the  payment  of  the  premiums  by  the  various  policy 
holders  embraced  in  the  tontine  class  the  money  immediately  be- 
comes the  property  of  the  company,  and  no  title  thereto  remains  in 
any  of  the  policy  holders.     Under  such  a  policy  as  this  there  is  no 
obligation  on  the  part  of  the  corporation  to  keep  the  premiums  paid 
on  such  policies  separate  and  apart  from  its  other  funds.     Nor  is 
there  any  obligation  on  its  part  to  invast  such  funds  in  any  particu- 
lar way  or  at  any  particular  time.     The  contract  contemplates  the 
fact  that  the  funds  will  be  inve^^ted ;  but  the  character  of  such  invest- 
ment is  left  absolutely  to  the  discretion  of  the  defendant,  except  as 
it  may  be  limited  by  the  laws  of  the  state.     .     .     .     The  question  is 
distinctly  up,  as  to  what  rights  the  plaintiff  had  after  the  expiration 
of  the  ten-year  period,  the  policy  itself  being  in  force:  and  unless 
there  was  some  relation  fiduciary  in  its  nature,  the  right  to  an  ac- 
counting on  that  ground  cannot  be  claimed.     We  think  the  pay- 
ment of  a  premium  by  the  policy  holders  of  this  class  of  policies  is 
much  more  like  that  of  a  deposit  in  a  bank  by  a  depositor,  as  to 
which  it  is  conceded  that  there  is  no  such  relation  as  that  of  trustee 
and  cestui  que  trust.'^     By  the  very  terms  of  this  policy  the  amount 
of  the  fund  is  necessarily  uncertain.     What  it  may  be  depends,  not 
only  upon  the  number  of  policies  taken  out  during  the  period,  but 
upon  the  number  of  policies  in  the  class  which  may  lapse  or  become 
forfeited,  and  upon  the  amount  of  the  proper  expenses  of  the  com- 
pany which  shall  justly  become  chargeable  to  this  fund.     So  that 
the  dividend  which  may  come  to  the  plaintiff,  or  any  other  policy 
holder,  depends  upon  numerous  contingencies,  and  in  relation  to 
all  these  matters  the  parties  have  agreed  in  specific  terms,  contained 
in  the  policy  itself,  that  this  surplus  or  fund,  derived  as  already 
stated,  'shall  be  apportioned  equitably  among  such  policies  of  the 
same  class  as  shall  complete  their  ten-year  dividend  period.'     Here 
is  the  extent  of  the  obligation  of  the  defendant — that  it  shall  equi- 
tably apportion  this  sum.    As  has  been  said,  there  is  no  title  in  the 
plaintiff  to  any  specific  moneys.     There  is,  in  reality,  no  specific 
or  separate  fund,  as  it  is  made  up  simply  by  a  system  of  debits  and 
credits  contained  in  the  books  of  the  company,  which  debits  and 
credits  are  made  during  the  running  of  the  tontine  period.     There 
is  no  separation  of  the  fund  belonging  to  this  system,  and  no  legal 
necessity  for  such  separation  from  any  other  fund  or  property  be- 

from    Russell   v.    Pittsburgh   Life   &  Life  Ins.  Co.  50  N.  Y.  610,  10  Am. 

Trust   Co.   132  App.  Div.   217,  227,  Rep.    522;    People   v.    Security   Life 

116  N,  Y.  Supp.  841.     See  also  Mr-  Ins.  &  Annuity  Co.  78  N.  Y.  114,  34 

Donnell  v.  Mutual  Life  Ins.  Co.  of  N.  Am.  Rep.  522. 

Y.  116  Nv  Y.  Supp.  35, 131  App.  Div.       «  See  Foley  v.  Hill,  2  H.  L.  Cas. 

1.43.  32. 
^  See  Cohen  v.  New  York  Mutual 

713 


§  309a 


JOYCE  ON  INSURANCE 


longing  to  defendant.  The  situation  of  the  parties  is  that  of  dehtor 
and  creditor  simply,  the  amount  of  such  debt  being  determinable  by 
this  equitable  apportionment,  which,  taking  the  language  of  the 
policy  into  consideration,  necessarily  means  that  the  apportionment 
is  to  be  made  by  the  corporation  through  its  officers."  And  it  was 
held'  that  equity  would  not  order  an  accounting  on  the  principle  of 
trusteeship.  The  court  also  says  of  the  Massachusetts  case  above 
noted  that  it  ''was  decided  under  the  peculiar  wording  of  the  stat- 
ute of  Massachusetts  in  regard  to  complicated  accounts,  and  we  do 
not  think  it  should  be  followed  by  the  courts  of  this  state."  The 
New  York  case  is  also  in  accord  with  the  decision  in  a  case  in  the 
United  States  circuit  court,  where  it  is  held  that  no  trust  relation- 
ship, which  can  give  equity  jurisdiction,  exists  between  the  holder 
of  a  tontine  policy  and  an  insurance  company  in  which  he  is  en- 
titled to  a  share  of  the  assets.'  In  later  Federal  decisions  it  is  held 
that  the  relation  between  the  holder  of  a  matured  semi-tontine  pol- 
icy and  the  insurer  is  that  of  debtor  and  creditor  and  involves  no 
trust  relation.*  So  in  a  Wisconsin  case  it  is  held  that  the  nature  of 
the  obligation  of  an  insurance  company  to  a  holder  of  a  tontine 
dividend  policy  is  that  of  debtor  and  creditor  under  the  stipulations 
of  the  agreement.^ 

A  "participating  policy"  of  life  insurance,  whereby  surplus  profits 
of  the  company  are  shared  with  others  holding  like  policies,  does  not 
create  a  trust  relation  between  the  parties.^ 

§  309a.  Same  subject:  title  guaranty. — A  corporation  organized 
for  the  purpose,  among  others,  of  examining  and  guaranteeing  titles 
to  real  estate  and  which  in  all  matters  relating  to  conveyancing  and 
searching  titles  holds  itself  out  to  the  public  and  assumes  to  dis- 
charge the  same  duties  as  an  individual  conveyancer  or  attorney 
has  the  same  responsibilities  and  its  duty  to  its  employer  is  gov- 
erned by  the  principles  applicable  to  attorney  and  client.' 


'  Hunton  v.  Equitable  Life  Assur. 
Soe.  45  Fed.  661. 

*  Everson  v.  Equitable  Life  Assur. 
Co.  (U.  S.  C.  C.)  68  Fed.  258,  aff'd 
71  Fed.  570,  18  C.  C.  A.  251,  which 
i.s  cited  as  "on  all  fours"  in  Grieb  v. 
Equitable  Life  Assur.  Soe.  (U.  S. 
C.  C.)  189  Fed.  498,  502,  aff'd  194 
Fed.  1021,  114  C.  C.  A.  658,  on  opin- 
ion below.  See  also  Peters  v.  Equit- 
able Life  Assur.  Soe.  200  Mass.  579, 
86  N.  E.  885. 

^  Timlin  v.  Equitable  Life  Assur. 
Soe.  141  Wis.  276,  124  N.  W.  2o3, 
39  Ins.  L.  J.  295,  301,  citing  Uhlman 


v.  New  York  Life  Ins.  Co.  109  N.  Y. 
421,  17  N.  E.  363,  4  Am.  St.  Rep. 
482;  Gadd  v.  Equitable  Life  Assur. 
Co.  97  Fed.  834. 

^  Taylor  v.  Charter  Oak  Life  Ins. 
Co.  9  Daly  (N.  Y.)  489. 

'  Ehmer  v.  Title  Guarantee  &  Trust 
Co.  156  N.  Y.  10,  50  N.  E.  420. 

Cited  in  Trenton  Potteries  Co.  v. 
Title  Guarantee  &  Trust  Co.  176  N. 
Y.  65,  75,  68  N.  E.  132  (which  dis- 
tinguishes between  the  contract  of 
insurance  and  contract  of  searching 
in  such  cases) ;  Glvn  v.  Title  Guar- 
antee &  Trust  Co.  132  App.  Div.  859, 


714 


i 


PARTIES  TO  THE  CONTRACT— THE  INSURED    §§  309b,  310 

§  309b.  Relation  of  insured  to  each  other. — Each  policy  holder 
in  any  insurance  company,  whether  mutual  or  not,  has  an  associat- 
ed relation  whereby  he  is  interested  in  the  engagements  of  all,  as 
out  of  the  coexistence  of  many  risks,  arises  the  law  of  average,  which 
underlies  the  whole  business.^ 

§  310.  Name  of  assured  need  not  be  set  out  in  policy. — It  is  not 
necessary  to  the  validity  of  the  policy  that  the  name  of  the  assured 
should  appear  therein.  He  may  be  described  in  other  ways  than 
by  name.^  If  the  interest  of  a  person  other  than  that  of  the  one 
named  in  the  policy  is  intended  to  be  protected,  words  must  be  used 
in  the  contract  sufhciently  clear  to  indicate  an  intention  to  protect 
interest  covered.^" 

A  party  may  insure  as  agent  or  trustee,  naming  the  actual  party 
in  interest;"  or  one  may  insure  in  his  own  name  goods  lield  in 
trust  by  him,  and  he  can  recover  for  their  entire  value,  holding  the 
excess  over  his  own  interest  for  the  benefit  of  those  who  have  in- 
trusted the  goods  to  him ;  ^^  and  insurance  in  the  name  of  a  manager 
of  a  warehouse  for  account  of  whom  it  may  concern,  applies  to  the 
beneht  of  any  person  who  may  own  property  therein  at  the  time  of 
a  loss,  though  such  property  was  not  therein  when  the  policy  was 
issued."  So  an  agent  may  insure  in  his  own  name  as  agent ;  ^* 
or  a  consignee  may  effect  an  insurance  in  his  own  name  on  account 
of  wiiom  it  concerns,  loss  payable  to  him,  and,  in  case  of  loss,  may 
maintain  an  action  thereon ;  ^^  or  the  policy  may  be  left  blank  and 
the  name  filled  in,  or  it  may  be  made  for  "whom  it  may  concern," 
or  to  the  "estate  of;  "  ^*  and  a  policy  on  "account  of ,"  or  "for 

861,  117   N.   Y.    Supp.    424     (upon  Johns.    Ca.s.     (N.    Y.)     329.     As    to 

]>oint   of  relation    of    attorney    and  right  of  agent  to  insure,  see  §§  G09 

client).  et  .seq.  herein. 

See  ^  27i  herein.  ^^  California    Ins.     Co.    v.    Union 

8  New     York     Life     Ins.     Co.     v.  Compress  Co.  133  U.  S.  387,  19  Ins. 

Statham,  93  U.  S.  24,  23  L.  ed.  789.  L.  J.  385,  33  L.  ed.  730,  10  Sup.  Ct. 

Cited  in   Connecticut   ^lutual  Life  365. 
Ins.  Co.  V.  Home  Ins.  Co.  17  Blatchf.        ^^  Morotock  Ins.   Co.  v.  Cheek,  93 

(U.  S.  C.  C.)  142,  147,  Fed.  Cas.  No.  Va.  8,  57  Am.  St.  Rep.  782,  24  S. 

3107.  E.  464. 

See  §  17  herein.  ^*  Davis  v.  Boardman,  12  Mass.  80; 

^  Weed  V.  London    Fire    Ins.    Co.  Marts  v.  Cumberland  Ins.  Co.  44  N. 

116  N.  Y.  106,  114,  22  N.  E.  231;  J.  L.  478. 

Weed  V.  Hamburg-Bremen  Fire  Ins.       ^^  Sturm  v.  Atlantic  Mut.  Ins.  Co. 

Co.  133  N.  Y.  394,  31  N.  E.  231.  63  N.  Y.  77. 

As    to    description    of    parties    or       ^^  Fire   Ins.    Assn.    v.    Merchant.*;' 

their  interest,  see  §§  1689  et  seq.  Transportation    Co.    66  Md.   339,  7 

1"  Stanley    v.    Fireman's  Ins.    Co.  Atl.  905,  59  Am.  Rep.  162;   Turner 

34  R.  I.  491,  84  Atl.  601,  42  L.R.A.  v.  Burrows,  8  Wend.    (N.  Y.)   144; 

(N.S.)  79.  Clinton  v.  Hope   Ins.   Co.   51   Barb. 

"  Holmes  v.  United    Ins.    Co.    2  (N.  Y.)  647,  45  N.  Y.  454.    But  see 

715 


§  311 


JOYCE  ON  INSURANCE 


/'  is  equivalent  to  a  policy  ''for  whom  it  may  concern."  "     If 

property  is  insured  "on  account  of  whom  it  may  concern,"  there  is 
a  privity  between  the  insurance  company  and  the  actual  owner  of 
the  property  from  the  time  of  the  insurance  and  the  contract  is 
with  him  as  the  assured.^*  If  one  is  named  by  mistake  it  may  be 
cured  by  indorsement,^^  and  in  such  case  a  recovery  may  be  had  in 
the  name  of  the  real  party  in  interest,  for  the  indorsement  may  be 
regarded  as  a  new  contract  of  insurance  with  him.^° 

§  311.  Name:  evidence  admissible  to  show  actual  party  in  in- 
terest.— If  the  name  of  the  person  for  whose  benefit  the  insurance 
is  obtained  does  not  appear  upon  the  face  of  the  policy,  or  if  a  blank 
is  left  in  the  policy  for  the  name  of  the  person  on  whose  account  the 
insurance  is  effected,  or  if  the  designations  used  are  applicable  to 
several  persons,  or  if  the  description  of  the  assured  is  imperfect  or 
ambiguous,  or  the  policy  be  "to  whom  it  may  concern,"  evidence 
aliunde  may  be  resorted  to  to  ascertain  the  meaning  of  the  contract 
and  to  show  who  are  the  real  parties  in  interest.^  So  in  an  action 
upon  a  policy  in  the  name  of  a  party  not  the  Qwner,  a  letter  from  an 
owner,  directing  the  plaintiff  to  obtain  insurance  on  the  vessel  in 
his  own  name,  and  stating  the  interest  of  the  plaintiff'  in  the  vessel 
insured,  is  admissible  in  evidence  for  the  plaintiff.^  In  such  cases 
the  risk  attaches  to  the  interest  of  the  party  actually  intended  to  be 
covered,  and  he  may  sue,^  even  though  such  intention  may  have 
been  unknown  to  the  insurer.*  But  the  party  intended  must  have 
been  in  contemplation  of  the  contract,  or  the  insured  must  have 


V.     Canal    Ins.     Co.    10 


State  V.  Standard  Life  Assn,  38  Ohio  ^  Vairin 

St.  281.  Ohio  223. 

1'  Burrows    v.    Turner,    24    Wend.  ^  Crosbv 

(N.  Y.)  27G,  35  Am.  Dec.  622.     See  Bosw.    (N 

Turner  v.  Buitows,  8  Wend.  (N.  Y.)  Hooper  v.  Robinson,  98  U.   S.  528, 

141.  25  L.  ed.  219;  The  Sidney,  23  Fed. 

18  Pacific  Mail   S.   S.  Co.  v.  Great  88;   Newson  v.  Douglass,  7  Har.  & 

Western  Ins.  Co.  65  Barb.    (N.  Y.)  J.    (Md.)    417,   16   Am.     Dee.     317; 


V.  New  York  Ins.  Co.  5 
Y.)    369,  377.     See  also 


334. 

1^  Sohns  V.  Rutgers  Fire  Ins.  Co. 
4  Abb.  App.   (N.  Y.)   279. 

^^  Sohns  v.  Rut2:ers  Fire  Ins.  Co. 
4  Abb.  App.  (N.  Y.)  279. 

1  Weed  v.  London  Assoc.  Ins.  Co. 
116  N.  Y.  106,  114,  22  N.  E.  229; 
Clinton  v.  Hope  Ins.  Co.  45  N.  Y. 
454;  Burrows  v.   Turner,  24  Wend. 


Clinton  v.  Hope  Ins.  Co.  45  N.  Y. 
454;  Cincinnati  Ins.  Co.  v.  Rieman, 

I  Disn.  (Ohio)  396. 

4  The    Sidnev,    27   Fed.    119    (dis- 
missed in  139  U.  S.  331,  35  L.  ed.  177, 

II  Sup.  Ct.  620)  ;  Buck  v.  Chesa- 
peake Ins.  Co.  1  Pet.  (26  U.  S.)  151, 
7  L.  ed.  90;  Newson  v.  Douglass,  7 
Har.  &  J.   (Md.)   417,  16  Am.  Dec. 


(N.Y.)  276,  35  Am.  Dec.  622;  Weed    317.      See   also   Hurlburt   v.    Pacific 
V.    Hamburg-Bremen    Fke    Ins.    Co.   Ins.  Co.  2  Sum.   (U.  S.  C.  C.)   471, 
133  N.  Y.  394,  31  N.  E.  231;  Pro-  Fed.  Cas.  No.  6,919. 
tection   Ins.    Co.   v.   Wilson,   6   Ohio 
St.  553. 

716 


PARTIES  TO  THE  CONTRAGT— THE  INSURED         §  311 

subseqiienlly  adopted  it,  for  this  clause  does  not  cover  any  and 
everybody  who  may  chance  to  have  an  interest  in  the  thing  insured.^ 
And  if  a  bailee  holding  the  property  of  another,  insures  it  against 
loss  or  damage  by  fire,  for  the  protection  of  his  special  interest  there- 
in and  that  of  the  owner,  the  fact  such  owner  was  not  a  party  to  the 
contract  of  insurance  at  its  inception,  does  not,  after  he  has  adopted 
and  ratified  it,  and  after  loss  and  notice,  permit  the  parties  and  those 
claiming  under  them,  to  contradict,  vary,  or  modify  the  contract  by 
showing  that  it  does  not  embody  the  agreement  actually  made.® 
Where  a  party  who  has  an  insurable  interest  in  a  house  owned  by 
another  takes  out  a  policy  in  the  owner's  name,  and  upon  its  loss  col- 
lects the  insurance  money  as  the  owner's  agent,  he  is  liable  to  the 
owner  therefor  without  a  prior  demand,  and  cannot  defend  on  the 
ground  that  he  intended  the  insurance  to  cover  his  own  interest.' 
Where  a  policy  is  issued  by  a  mutual  insurance  company  "for  whom 
it  concerns"  to  one  who  has  no  interest  in  the  property  insured,  the 
owner  of  the  property,  by  whose  authority  the  policy  was  obtained, 
may  maintain  an  action,  subject  to  any  right  given  to  the  insurers 
by  the  terms  of  the  policy  to  deduct  any  amount  due  them  from  the 
insured.*  But  it  was  held,  in  an  Iowa  case  that  an  action  at  law 
could  not  be  maintained  by  Caroline  Zimmerman  upon  a  policy 
issued  to  ''C,  Zimmerman,  where  the  application  was  referred  to  as  a 
part  of  the  policy  and  was  signed  Conrad  Zimmerman."  ^  And  a 
policy  of  insurance  made  in  the  name  of  a  particular  person  who  is 
the  owner  of  a  small  proportion  of  the  property  insured  cannot  be 
made  to  cover  the  interest  of  others  upon  parol  proof  that  the  appli- 
cation for  insurance  was  for  such  others,  as  well  as  for  the  party 
named,  and  that  this  was  well  known  to  the  insurers,  and  that  it  was 
the  intention  of  all  the  parties  that  the  policy  was  to  cover  the  inter- 
est of  all  the  owners.^"  Again,  an  Indiana  Insurance  Company  lo- 
cated at  Evansville,  in  said  state,  in  order  to  do  business  in  Ohio  and 
avoid  the  laws  of  that  state  prescribing  the  terms  upon  which  insur- 
ance companies  might  carry  on  business  therein,  issued  to  persons, 
who  insured  with  their  agents,  11.  &  11,  in  Ohio,  certain  slips,  certi- 
fying that  H.  &  B.  were  insured  in  the  property  therein  described 
under  an  open  policy,  numbered  38,  which  the  insurance  company 

^  Newson  V.  Douglass,  7  liar.  &  J.  '  Looney  v.  Loonev,  116  Mass.  283. 

(Md.)  417,  16  Am.  Dee.  317;  Hooper  8(-'o|,i,  "y,    j^Tgw    England    Mutual 

V.  Robinson,  98  U.  8.  528,  25  L.  ed.  .Atarine  Jns.  Co.  6  Gray  (Mass.)  192. 

219 ;  Waring  v.  Indemnity  Ins.   Co.  ^  Zimmerman  v.  P'armei-s'  Ins.  Co. 

45  N.  Y.  606.                       '  76  Iowa,  352,  41  N.  W.  39. 

®  Johnston  v.  Charles  Abresch  Co.  ^°  Finney   v.   Bedford    Commercial 

123  Wis.  730,  107  Am.  St.  Rep.  995,  Jns.    Co.    i3    JMetc.    (Mass.)    348,   41 

101  N.  W.  395.  Am.  Dec.  515. 

717 


311 


JOYCE  ON  INSURANCE 


had  previously  issued  to  II.  &  B.,  its  own  managing  agent  at  Evans- 
ville,  H.  &  B.  insured  plaintiff  on  a  cargo  of  salt  in  a  barge  on  the 
Ohio  river ;  they  received  the  premium  from  plaintiff  and  delivered 
to  him  a  slip  certifying  that  they,  the  agents,  were  insured  under  the 
open  policy,  number  38.  The  company  knew  that  plaintiff  was  the 
owner  of  the  salt,  and  knew  everything  material  to  the  risk.  The 
salt  was  shipped  by  plaintiff'  to  S.  &  Co.,  Memphis,  who  was  expect- 
ed to  make  advances  thereon  and  pay  charges  therefor,  and  S.,  one 
of  the  firm,  was  made  appointee  in  the  slip  or  insurance  certificate 
to  receive  the  insurance  in  case  of  loss.  The  salt  became  a  total 
loss  by  the  perils  insured  against ;  proof  was  made  of  loss,  and  the 
plaintiff's  interest  therein.  It  was  held  that  parol  evidence  was  ad- 
missible to  show  that  plaintiff  was  the  party  intended  to  be  insured, 
although  the  contract  was  in  writing  and  there  was  no  ambiguity 
on  its  face  concerning  the  same;  that  the  company  was  bound  to 
know  what  its  agents,  H.  &  B.,  knew,  and  could  not  set  up  the  latter's 
want  of  interest  in  the  property,  and  conld  not  evade  liability  by 
saying  that  the  contract  was  void;  that  even  if  it  should  be  held 
void  because  H.  &  B.,  while  acting  as  agents  for  the  company,  could 
not  insure  themselves,  nevertheless  the  writings  and  parol  proof 
showed  a  valid  parol  contract  to  insure  plaintiff;  that  the  action  was 
properly  brought  in  plaintiff's  name.^^  The  court  says:  "In  apply- 
ing insurance  contracts  to  the  proper  subject-matter  and  the  part}'  or 
parties  intended  to  be  covered  by  the  risk,  courts  have  been  liberal 
in  receiving  parol  testimony  in  favor  of  the  assured.  It  is  well  set- 
tled that  when  a  written  contract  is  made  by  an  agent  in  his  own 
name,  the  undisclosed  principal  may  sue  upon  it,  and  prove  by  parol 
evidence  that  the  contract  was  made  for  his  benefit,  and  this  may  be 
done  although  the  other  party  had  no  knowledge  of  the  agency,  and 
supposed  he  \Vas  dealing  with  the  one  who  was  acting  for  himself.^^ 
If  by  mistake  a  policy  is  issued  in  the  husband's  name  on  his  wife's 
property  such  mistake  may  be  shown  by  their  testimony.^^ 


1^  Daniels  v.  Citizens'  Ins.  Co.  5 
Fed.  425. 

^^(Utinrj:  Uvited  Staiefi. — Thomp- 
son V.  Raih*oad  Co.  6  Wall.  7,3  (U. 
S.)  134,  137,  18  L.  ed.  765;  Insur- 
ance Co.  V.  Cliase,  5  Wall.  (72  U.  S.) 
509,  18  L.  ed.  524. 

loir  a. — Anson  v.  Winnesheik  Ins. 
Co.  23  Iowa,  85. 

Massachusetts. — Shawmitt  Sugar 
Refining  Co.  v.  Hampden  Ins.  Co.  12 
Gray  (78  Mass.)  540;  Huntington  v. 
Knox,  7  Cush.  (61  Ma.ss.)  371;  Rider 
V.  Ocean  Ins.  Co.  20  Pick.  (37  Mass.) 
259. 


718 


Ohio. — Protection  Ins.  Co.  v.  WU- 
son,  %  Ohio  St.  561. 

England. — Arcangelo  v.  Thomp- 
son, 2  Campb.  620. 

Story  on  Agency,  see.  61. 

On  the  point  that  parol  insurance 
is  valid,  the  court  cites  Relief  Ins. 
Co.  V.  Eggleston,  96  U.  S.  572,  574, 
24  L.  ed.  841 ;  Sanborn  v.  Fireman's 
Ins.  Co.  16  Gray  (Mass.)  448,  77  Am. 
Dec.  419. 

^3  Fredericks  v.  Hanover  Fire  Ins. 
Co.  28  Pitts.  L.  J.  259,  56  Leg.  Intel. 
47,  15  Lancaster  L.  Rev.  150,  7  Pa. 
Dist.  R.  79,  under  Pa.  act  May,  1887. 


CHAPTER  XIII. 

PARTIES— MEMBERS  OF  MUTUAL  INSURANCE  COMPANIES, 
MUTUAL  BENEFIT,  ETC.,  SOCIETIES. 

§  316.     Parties:  members  of  mutual  insurance  companies  and  mutual  bene- 
fit societies. 
§  317.     Membership  exists  when  contract  is  completed. 
§  318.     Obligations  and  rights  of  members  generally. 
§  318a.  Same  subject:  title  to  company's  property. 
§  318b.  Property  rights  of  company  and  members :  constitutional  law. 
§  319.     Relations  of  members  of  mutual  companies:  partnership. 

§  316.  Parties:  members  of  mutual  insurance  companies  and  mu- 
tual benefit  societies. — Members  of  mutual  insurance  companies  and 
of  mutual  benefit  societies,  the  legal  status  of  which  is  that  of  in- 
surance companies,  sustain  a  dual  relation,  since  each  member  is  at 
once  tlie  insured  and  insurer.  In  one  aspect  his  relation  is  sub- 
stantially that  of  a  policy  holder,  or  a  party  who  has  contracted 
upon  a  consideration  for  an  indemnity  or  for  the  payment  of  money 
upon  the  happening  of  a  specified  contingency.  He  has  all  such 
rights  against  the  corporation  or  association  as  are  defined  by  his 
contract  with  it  and  which  could  validly  be  enforced  thereunder. 
In  another  aspect  he  is  a  member  of  the  corporation,  and  becomes  an 
indemnilier  of  the  other  members  as  the  corporation  or  association 
represents  to  each  member  the  aggregate  of  the  other  members.  The 
members  have,  or  may  have,  a  voice  in  the  management  of  the  com- 
pany's affairs,^*  and  their  corporate  rights  depend  upon  the  cliarter 
or  articles  of  association,  and  the  by-laws  and  rules  of  the  organiza- 
tion, as  these  embody  the  compact  between  the  corporation  or  asso- 
ciation and  its  members,  and  to  this  resort  must  be  had  for  the  settle- 
ment of  such  questions  as  involve  their  duties  and  rights  with  rela- 
tion to  the  organization.^^     A  benefit  society  sustains  a  relation  to 

"See  State  v.  Standard  Life  Assn.  Rep.  1023,  7  Am.  &  Eng.  Ann.  Ca.^. 

38  Ohio  St.  281:  Condon  v.  Mutual  400,  105  N.  W.  1031,  35  Ins.  L.  J. 

Reserve  Assoc.   87  Md.   99,   73   Am.  334. 

St.  Rep.  169,  44  L.R.A.  149,  42  Atl.        ^^  Ry^n  v.   Knights  of  Columbus, 

944;  Huber  v.  Martin,  127  Wis.  412,  82  Conn.  91,  72  Atl.  574;  Chamber- 

3    L.R.A. (N.S.)    653,    115    Am.    St.  lain  v.  Lincoln,  129  Mass.  70;  Gros- 

719 


§  316  JOYCE  ON  INSURANCE 

its  members  other  than  that  of  a  life  insurance  company ;  the  fund 
raised  is  practically  a  trust  fund  made  up  of  their  contributions." 
It  is  held  in  Massachusetts  ^'  that  a  statute  providing  that  the  con- 
ditions of  insurance  shall  be  stated  in  the  body  of  the  policy  ^^  does 
not  apply  to  the  obligations  of  the  insured  as  a  member  of  the  cor- 
poration ;  and  that  the  contract  of  each  member  contains  obligations 
on  the  part  of  the  cori3oration  which  enter  into  and  qualify  the 
contract  of  every  other  member.  It  is  necessary  and  equitable 
that  each  person  who  gets  insured  in  such  company  or  society  should 
become  subject  to  the  same  obligations  toward  his  associates  that  he 
requires  from  them  toward  himself. ^^ 

But  where  a  company  is  organized  upon  the  mutual  plan,  having 
no  capital  stock,  and  receives,  as  a  substitute  therefor,  not^s  for  pre- 
miums in  advance,  the  makers  of  such  notes  do  not  thereby  become 
stockholders  of  the  corporation.^"  So  where  a  person  procured  a 
policy  of  insurance  for  a  term  of  years  at  a  fixed  annual  premium, 
and  paid  the  first  year's  premium  in  advance,  and  gave  a  note  pay- 
able in  instalments  at  the  commencement  of  each  of  the  years  dur- 
ing which  the  policy  ran.  it  was  decided  that  the  assured  did  not 
thereby  become  a  stockholder,  or  liable  for  the  debts  of  the  com- 
pany, and  that  when  the  company  failed  all  obligation  to  pay  the 
note  terminated.^  And  it  is  held  in  Maine  ^  that  a  mutual  insur- 
ance company  has  no  stockholders,  and  its  original  corporators  can- 
not be  regarded  as  such  so  as  to  be  entitled  to  assets  remaining  after 
dissolution  and  paying  the  company's  liabilities.  But  it  is  declared 
in  a  New  York  case  that  where  the  statute  ^  provides  that  an  insur- 
ance company  may  sue  or  be  sued  by  any  of  ''its  members  or  stock- 

venor  v.  United  Soc.  118  Mass.  78;  which  is  not  incorporated.     Sergeant 

Commonwealtli  v.  Mas.sachusetts  Fire  v.  Goldsmith  Dry  Goods  Co.  —  Tex. 

Ins.  Co.  112  :\rass.  116,  120,  per  tlie  Civ.  App.  — ,  139  S.  W.  1036. 
Court;  Phmters'  Ins.  Co.  v.  Comfort,        "  Blair  v.  Supreme  Council  Ameri- 

50    Miss.    662,    668,   per    the    court;  can  Legion  of  Honor,  208  Pa.  262, 

Rosenberger  v.   Washington   Mutual  101  Am.  St.  Rep.  934,  57  Atl.  561. 
Fire  Ins."  Co.  87  Pa.  St.  207;  Diehl        i' Commonwealth  v.  Massachusetts 

V.  Adams  County  Mutual  Ins.  Co.  58  Fire  In.^.  Co.  112  IVtass.  116. 
Pa.  St.  443,  98  Am.  Dec.  302;  Com-  ^^  Mass.  Stat.  1864,  c.  196. 
monwealth    v.    St.    Patrick's    Soe.    2        ^^  Baxter  v.  Chelsea  Mut.  Fire  Ins. 

Binn.    (Pa.)    441,  4  Am.   Dec.   452;  Co.  1  Allen  (Mass.)  294,  79  Am.  Dec. 

Farmers'    Mutual   Ins.   Co.   v.   Mylin  730. 

(1888)  —  Pa.  — ,  15  Atl.  710;  Brad-       20  jjiU  v.  Nautilus  Ins.  Co.  4  Sand, 

field  V.  Union  Mut.  Ins.  Co.  9  "Week.  Ch.   (N.  Y.)  577. 
N.  C.  436.  ^  Farmers'  &  ^[erchants'  Ins.  Co.  v. 

The  provisions  of  the  application  Smith,  63  111.  187. 
and  the  policy  determine  the  relative       ^  Titcomb  v.  Kennebunk  Mut.  Fire 

rights  and  liabilities  of  members  of  a  Ins.  Co.  79  Me.  315,  316,  9  Atl.  732. 
mutual  beneht  insurance  corporation       ^  N.  Y.  Laws,  1853,  c.  463,  see.  107. 

720 


PARTIES— MEMBERS  §  317 

holders,"  the  word  "mem}>ers"  is  synonymous  witli  "stockholders.'"  * 
In  another  case  in  that  state  it  is  held  that  notwithstanding  charter 
provisions  by  which  membership  is  limited  to  those  persons  holding 
capital  stock' notes,  still  all  those  are  members  of  a  mutual  fire  in- 
surance company,  organized  under  the  New  York  Laws  of  1892.^ 
who  hold  insurance  in  such  companies.^  Under  a  Wisconsin  de- 
cision, policy  holders  in  mutual  insurance  companies  are,  as  regards 
rights  and  remedies,  stockholders  therein  the  same  as  owners  of 
stock  in  a  stock  corporation,  there  being  no  charter  provision  to  the 
contrary.'  Sometimes,  however,  the  members  of  mutual  insurance 
companies  are  made  stockholders  by  the  statute  of  incorporation.* 
Again  the  holders  of  certificates  are  not  creditors  within  the  me^ui- 
ing  of  a  statute  relative  to  proceedings  in  equitj^  against  corpora- 
tions.^ As  such  member,  the  company's  books  are,  in  law,  as  much 
his  as  other  members;  ^^  but  until  the  act  of  insurance  is  consum- 
mated he  is  a  stranger  to  the  organization.^^  It  is  held  in  Pennsyl- 
v'ania  that  where  one  becomes  a  member  of  a  mutual  insurance 
company,  he  has  a  right  to  vote  for  the  directors,  and  that  they  are 
none  the  less  his  representatives,  though  they  are  incompetent,  ex- 
travagant, or  careless  of  their  trust. ^^ 

§  317.  Membership  exists  when  contract  is  completed. — A  per- 
son becomes  a  member  or  co-corporator  of  a  mutual  insurance  com- 
pany or  mutual  benefit  society,  whose  legal  status  is  that  of  an  in- 
surance company,  when  the  contract  is  completed,  and  prior  to  that 
time  he  is  a  stranger  to  the  organization,^^  and  this  rule  clearly  ap- 
plies where  the  charter  expressly  provid&s  that  a  person  must  take 
out  a  policy  to  become  a  member  and  that  only  holders  of  unex- 
pired policies  can  be  deemed  to  be  members,  for,  in  such  case,  no  one 

*  People  V.  Security  Life  &  Annui-  ^  Hill  v.  Nautilus  Ins.  Co.  4  Sand, 

tv  Co.  78  N.  Y.  114,  7  Abb.  N.  C.  Ch.   (N.  Y.)   577. 

(N.  Y.)  198,  34  Am.  Rep.  322.  ^o  Dielil    v.   Adams    County   Mutu- 

5  Chapter  690.  al  Ins.  Co.  58  Pa.   St.  443,  98  Am. 

fiRaesener   v.    Willard,    60    N.    Y.  Deo.  302. 

Supp.  478,  44  App.  Div.  41.  "  Cumbeilaud  Valley  Mutual  Pro- 

'Huber  v.  Martin,  127  Wis.  412,  teetion  Co.  v.  Sehell,  29  Pa.  St.  31. 

3    L.R.A.(N.S.)     653,    115    Am.    St.  See  §  53  herein. 

Rep.  1023.  7  Amer.  &  Eim'.  Ann.  Cas.  12  Koehler  y.  Beeber,  122  Pa.  291, 

400,  105  N.  W.  1031,  35  Ins.  L.  J.  23  Week.  Not.  Cas.  558,  16  Atl.  354. 

334.  ^^  See  S§  5.3-53c-  herein.     Commoii- 

8  "All   persons   insuring   upon   the  wealth  y.  Mutual  Fire  Ins.  Co.  112 

mutual  plan  in  any  company  organ-  Mass.  116.     See  Bruner  v.  Brother- 

ized    in    accordance    with    the    proyi-  hood  of  American  Yecmien,  136  Iowa, 

sions  of  this  act  shall    constitute  its  612,    111    N.    W.    977;    Cumberlaiul 

meml)ers     and     stockholders,"     etc.;  and  Valley  ^Mutual  Protection  Co.  v. 

and  iiroviding'  also  the  extent  of  their  Scholl.  29  Pa.  St.  31. 

liability.     Kan.    Laws,    1875,    c.    iii.,  When   one  is  full  member  of  mu- 

secs.  5,  8.  tual  benefit  society  and  not  member 
Joyce  Ins.  Vol.  1.— 46.          721 


§  317  JOYCE  ON  INSURANCE 

can  rightly  be  treated  as  a  member  at  any  time  for  any  purpose 
unless  he  then  holds  an  unexpired  policy ;  and  if  there  is  no  charter 
provision  on  the  subject  membership  commences  only  with  the  tak- 
ing out  of  a  policy  and  lasts  only  for  the  policy  period.^*  So,  in  a 
case  involving  the  question  of  the  relative  powers  of  agents  in  mu- 
tual and  in  stock  companies/^  it  is  held  that  the  insured  does  not 
become  a  member  in  a  mutual  company  until  the  policy  is  issued 
to  him,  and  that  prior  to  that  time  he  stands  in  same  relation  to  a 
mutual  company  as  he  would  to  a  stock  company.^^  And  a  con- 
tract with  a  mutual  benefit  society  must  become  effective  and  bind- 
ing prior  to  the  member's  death;  otherwise  no  liability  exists  as 
against  the  company." 

But  where  a  party  had  a  policy  on  his  barn,  and  subsequently 
applied  for  insurance  on  its  contents,  it  was  decided  that  at  the  time 
of  the  latter  application  he  was  a  member.^^  Where  the  secretary 
of  the  defendant  company,  who  was  its  general  agent  for  that  pur- 
pose, received  applications  of  more  than  fifty  persons  for  insurance 
and  membership  in  the  company,  accompanied  by  their  premium 
notes,  etc.,  and  plaintiff's  application  and  premium  note  were  so 
received,  and  his  due-bill  for  the  ten  per  cent  and  fees  required  to 
be  paid  in  advance  was  accepted  by  the  secretary,  and  the  board  of 
directors  thereupon  completed  the  organization  of  the  company,  it 
was  held  that  the  plaintiff'  (like  all  other  persons  whose  applica- 
tion, etc.,  had  been  so  received  up  to  the  time  of  such  organization) 
was  a  member  of  the  company,  liable  to  assessment  for  the  payment 
of  subsequent  losses  of  other  members,  and  entitled  to  a  policy  up- 
on the  property  described  in  his  application,  although  the  directors 
had  not  formally  approved  of  such  application  or  indorsed  their 
approval  thereon,  on  the  day  of  such  organization,  as  required  by 
the  by-laws.  ^^ 

solely  of  social  class,  see   Supreme  ive  Mutvial  Fire  Ins.  Co.  89  Pa.  464. 

Council  of  Order  of  Chopcn  Friends  See  §§  53-53e  herein. 

V.  Bailey,  21  Ky.  L.  Rep.  1G27,  55  S.  "  Sovereign    Camp    Woodmen    of 

W.   888.     When  one  becomes  a  so-  the  World  v.  Hall,  104  Ark.  538,  148 

eial  member  only  see  Asselto  v.  Su-  S.    W.    526,    41    L.R.A.(N.S.)    517. 

preme  Tent  Knights  of  Maccabees  of  See  §  104  herein. 

the  World,  172  Pa.  St.  5,  43  Atl.  400.  is  Farmers'  Mut.  Ins.  Co.  v.  Mylin, 

1^  Huber  v.  Martin,  127  Wis.  412,  —  Pa.  — ,   15   Atl.   Rep.   710.     See 

3    L.R.A.(N.S.)     653,    115    Am.    St.  Fuller  v.  Madison  Mutual  Ins.  Co.  36 

Rep.  1023,  7  Am.  &  Eng.  Ann.  Cas.  Wis.  599;  Tyrell  v.  Washburn,  6  Al- 

400,  105  N.  W.  103,  35  Ins.   L.   J.  len   (88  Mass.)   466. 

334.  See  §§  53-53e  herein.  ^^  Van  Slyke  v.  Trempealeau  Coun- 
ts See  §  393  herein.  ty  Farmers'  ]\Iut.  Ins.  Co.  48  Wis. 
16  Fidelity  Mutual  Fire  Ins.  Co.  v.  683,  5  X.  W.  236,  39  Wis.  390,  20 

Lowe,  4  Neb.   (unof)   159,  93  N.  W.  Am.  Rep.  50. 

749.     Citing  Eilenberger  v.  Protect- 

722 


I 


PARTIES— MEMBERS     .  §  318 

All  persons  are  ipso  facto  members  of  a  mutual  accident  com- 
pany on  the  mutual  plan  where  they  are  insured  therein,  and  the 
fact  that  they  are  trustees  for  their  employees  who  may  sustain  in- 
jury does  not  affect  their  membership.^" 

§  318.  Obligations  and  rights  of  members  generally. — Where  one 
becomes  a  member  of  such  organizations  as  are  the  subject  of  con- 
sideration herein,  he  becomes  bound  by  the  charter  and  by-laws  or 
articles  of  association  and  rules  of  the  society  or  association.^  He 
is  bound,  aside  from  the  express  provisions  of  the  policy  relating 
to  the  point  at  issue,  to  take  notice  of  the  by-laws  of  the  company.^ 
Nor  can  he,  as  such  member,  deny  the  validity  of  by-laws  which  he 

20  Wermuth  v.  Minden  Lumber  Co.  Missouri. — Bnrehard  v.  Western 
129  La.  912,  57  So.  170.  Commercial     Travelers'    Assoc.     139 

^Alabama. — United   Order   of   the   Mo.  App.  606. 
Golden    Cross   v.    Hooser,    160    Ala.       Nebraska.— Swett      v.       Antelope 
331,  49  So.  354.  County  Farmers'  Mutual  Ins.  Co.  91 

Arkansas.  —  Soverei^  Camp   Neb.  5G1,  136  N.  W.  347   (valid  by- 

Woodmen  of  the  World  v.  Hall,  104   law  binds). 

Ark.  538,  41  L.R.A.(N.S.)   517,  148       New   Yorfc.— Stanton   v.   Eccentric 
S.  W.  526.  Assoc,  of  Firemen,  No.  50  of  Inter- 

Cow  wecf/ci<*. — Ryan  v.  Knisrhts  of  national  Brotherhood  of  S.  F.  114  N. 
Columbus,  82  Conn.  91,  72  Ad.  574.   Y.    Supp.   480,   130    App.    Div.   129 

Delaware.  — King  v.  Wynema  (might  be  bound  by  by-law  whether 
Council  No.  10,  Daughters  of  Poca-  reasonable  or  not), 
hontas  I.  0.  R.  M.  25  Del.  (2  See  §§  53-53c,  188,  188a  herein. 
Boyce's)  255,  78  Atl.  845  (constitu-  Member  impliedly  agrees  to  be 
tion  and  by-laws  constitute  contract  bound  by  constitution  etc.,  by  joining 
in  beneficial  or  fraternal  associations,  fraternal  benefit  association.  O'Brien 
By  them  each  party  is  bound).  v.  Rittman,  176  111.  App.  237. 

Illinois. — Quinn'v.  North  Ameri-  Constitution  binds  member  of  fra- 
can  Union,  162  111.  App.  319  (fra-  lernal  beneficiary  association  when 
ternal).  terms    of    certificate    make    it    part 

Indiana. — Supreme  Lodge  Knights  thereof.    Howton  v.  Sovereign  Camp 
of  Pythias  y.  Knight,  117  Ind.  489,   Woodmen    of   the    World,    162    Ky. 
3  L.R.A.  409,  20  N.  E.  479;  Supreme  432,  172  S.  W.  687. 
Lodtre   Knights   of   Pythias   \.    Gra-       A  member  of  a  benefit  order  which 
ham^  49  Ind.  App.  535,  97  N.  E.  806.   is  in   effect  a  mutual  life  insurance 

loiva. — Boeck  v.  Modern  Woodmen  company  is  obligated  by  the  rules  of 
of  America,  162  Iowa,  159,  143  N.  the  society  as  well  as  by  the  general 
W.  999  (by  accepting  certificate  laAvs  applicable  to  insurance.  Home 
agrees  to  be  bound:  mutual  benefit  Forum  Mutual  Benefit  Order  y. 
society) :  Walsh  y.  iEtna  Life  Ins.  Jones,  5  Okla.  598,  50  Pae.  165,  27 
Co.  30  Iowa,  133,  6  Am.  Rep.  664;    Ins.   L.   J.   8. 

Simeral  y.  Dubuque  Mutual  Fire  Ins.       2  Connecticut. — Treadway  v.  Ham- 
Co.  18  Iowa,  319 ;  Coles  y.  Iowa  State  ilton  Mutual  Ins.  Co.  29  Conn.  68. 
Mutual  Ins.  Co.  18  Iowa,  425.  Illinois. — Benes  v.  Supreme  Lodge 

Minnesota. — Hesinger      y.      Home  Knights  &  Ladies  of  Honor,  231  111. 
Benefit  Assn.  41  Minn.  516,  43  N.  W.  .134,  14  L.R.A.(N.S.)    540  note,  121 
481;  Mitchell  y.  Lycoming  Mut.  Ins.   Am.  St.  Rep.  304,  83  N.  E.  127. 
Co.  51  Pa.  St.  402.  Mississippi. — Odd  Fellows  Benefit 

^  723 


§  318 


JOYCE  ON  INSURANCE 


has  assented  to  by  befoiuiiig-  a  nieniber,  on  the  ground  that  they  were 
not  regularly  adopted,^  nor  avail  himself  of  any  irregularity  which 
affects" the  company's  incorporation.*  And  such  member  is  liable 
for  his  proportionate  share  of  the  losses  which  may  occur  while  he 
is  a  member:  that  is,  for  the  time  during  which  his  policy  runs, 
and  no  longer.^  In. North  Dakota  all  persons  are  members  of  a 
mutual  fire  insurance  company  organized  under  the  laws  of  that 
stale  and  each  one  has  the  same  proportionate  interest  that  every 
other  member  possesses  and  is  liable  to  the  same  proportionate  ex- 
tent,^ but  he  is  not  bound  by  a  by-law  subsequently  passed  which 
is  in  conflict  with  the  charter  and  to  which  he  did  not  assent,  unless 
he  has  expressly  agreed  that  by-laws  may  be  subsequently  enacted ; ' 
nor  is  he  bound  by  the  business  regulations  and  instructions  to 
agents  adopted  by  the  officers  of  the  company,^  although  it  is  held 
that  as  such  member,  the  books  of  the  company  or  association  are 
e^idenee  against  him  to  show  the  action  of  the  managers.^  But 
before  a  party  becomes  such  a  member  he  cannot  be  bound  by  the 
acts  of  the  company's  agents,^"  nor  by  its  charter  and  by-laws  or 
articles  of  association  and  rules.^^  And  one  who  is  induced  to  be- 
come a  member  by  fraud  of  the  company  or  its  authorized  agents 
incurs  thereby  no  obligations  toward  the  company.^^  And  one 
who  insures  his  property  in  a  mutual  company  in  a  stated  amount 


Assoc.  V.  Smith,  101  Miss.  332,  58 
So.  100. 

Missouri. — Burchard  v.  Western 
Commercial  Travelers'  Assoc.  139 
Mo.  App.  (506;  Smoot  v.  Banker's 
Life  Asso.  138  Mo.  App.  438,  120 
S.  W.  719   (assessment  co.). 

OMalioma. — Home  Forum  Benefit 
Order  v.  Jones,  5  Okla.  598,  50  Pac. 
165,  27  Ins.  L.  J.  8  (member  pre- 
sumed to  know  rules  of  order) . 

Texas. — McWilliams  v.  Modern 
Woodmen  of  America,  —  Tex.  Civ, 
App.  — ,  142  S.  W.  641. 

Virginia. — Bixler  v.  Modern  Wood- 
men of  America,  112  Va.  678,  38 
L.R.A.(N.S.)  571  note,  72  S.  E.  704. 

3  Blister  v.  Gerwig,  122  Ind.  567, 
23  N.  E.  1041. 

*  Traders'  Mut.  Fire  Ins.  Co.  v. 
Stone,  9  Allen  (91  Mass.)  483;  Nash- 
xia  Fire  Ins.  Co.  v.  Moore,  55  N.  H. 
48;  Sands  v.  Hill,  42  Barb.  (N.  Y.) 
651. 

nianlove  v.  Naw,  39  Ind.  289; 
Manlove  v.  Bender,  39  Ind.  371,  13 


Am.  l^ep.  280;  Stockley  v.  Schwerd- 
teg-er,  19  Pa.  Super.  Ct.  289. 

6  J.  P.  Lamb  &  Co.  v.  Merchants 
National  Mutual  Fire  Ins.  Co.  18  N. 
Dak.  253,  119  N.  W.  1048. 

''  Creat  Falls  Mut.  Fire  Ins.  Co.  v. 
Harney,  45  N.  H.  292;  Northwest- 
ern Benefit  &  Mutual  Aid  Assn.  v. 
Wanner,  24  Bradw.  (Til.)  361;  New 
England  Mut.  Fire  Ins.  Co.  v.  But- 
ler, 34  Me.  451.  See  §§  377  et  seq. 
herein. 

8  Walsh  v.  .^tna  Life  Ins.  Co.  30 
Iowa,  133,  6  Am.  Rep.  664. 

^Diehl  V.  Adams  Countv  IVtutnal 
Ins.  Co.  58  Pa.  St.  443,  98  Am.  Dec. 
302. 

10  Columbia  Ins.  Co.  v.  Cooper,  50 
Pa.  St.  331;  Cumberland  Valley  Mu- 
tual Protection  Co.  v.  Schell,  29  Pa. 
St.  3L 

11  Eilenbersrer  v.  Protection  In.s. 
Co.  89  Pa.  St.  464;  Columbia  Ins. 
Co.  V.  Cooper,  50  Pa.  St.  331. 

12  Salmon  v.  Richardson,  30  Conn. 
360,  79  Am.  Dee.  255 ;  Brown  v.  Don- 

24 


PARTIES— MEMBERS  §§  318a,  318b 

for  a  specific  premium  does  not  become  a  member  of  the  company 
so  as  to  be  liable  for  future  assessments.^^  A  valid  contract  with 
such  a  company  or  society  is,  however,  binding  on  both  parties, 
llie  insured  and  the  company,^*  In  an  action  for  an  accounting 
brought  by  a  member  of  a  fraternal  benefit  society  against  the  cor- 
])oration,  it  was  declared  by  Prentice,  J.,  that:  ''This  member- 
ship brought  him  into  a  contractual  relation  as  an  assured  with  the 
order  as  the  insurer.  Whatever  the  evidence  of  that  relation  might 
be,  and  whether  it  is  to  be  found,  either  in  whole  or  in  ]iart,  in  the 
constitution  and  by-laws  of  the  order,  in  a  certificate  of  insurance 
issued  to  the  plaintifl',  or  in  some  other  form,  tliere  came  into  exist- 
ence upon  his  admission  as  an  insurance  member  a  contract  of  in- 
surance of  some  sort,  and  his  rights  and  liabilities,  on  the  one 
hand,  and  those  of  the  order,  on  the  other,  were  to  be  thenceforw^ard 
governed  by  that  contract."  Upon  demurrer,  however,  the  com- 
plaint was  held  insufiicient  in  that  it  was  silent  as  to  the  terms  of 
the  contract  which  of  necessity  determine  the  respective  obligations 
and  rights  of  the  parties.^^ 

§  318a.  Same  subject:  title  to  company's  property. — The  title 
to  the  property  of  a  mutual  insurance  corporation  is  in  the  com- 
pany, but  the  equitable  interests  therein  ai'e  vested  in  the  members, 
the  same  as  in  case  of  a  stock  corporation.  While  the  corporation 
owns  the  property,  the  members  own  the  corporation.  And  for  all 
except  corporate  purposes,  the  property  of  a  mutual  insurance  com- 
pany, the  same  as  that  of  any  other  corporation,  belongs  to  its  mem- 
bers, whether  they  are  stockholders  in  the  technical  sense  or  in  the 
broader  one  which  includes  policy-holders  in  such  company. ^^  So 
it  is  held  that  a  policy  holder  in  a  mutual  life  insurance  company 
has  a  quasi  ownership  in  its  assets,"  the  fund  raised  is  practically 
a  trust  fund,^®  and  each  member  has  the  same  proportionate  in- 
terest that  every  other  uiemlter  possesses. ^^ 

§  318b.  Property  rights  of  company  and  members;  constitutional 
law. — The  property  of  a  mutual  insurance  conqjany  and  the  equi- 

iiell,  49  Me.  421,  77  Am.  Dee.  266;  400,  105  N.  W.  1031,  35  Ins.  L.  J. 

Jones  V.  Dana,  24  P.arl).  (N.  Y.)  :?05.  334. 

"Mntnal   Guaranty   Fire  In.s.   Co.  "Rn.^sell     v.    Pittsburgh    Life    & 

(In  re  Assignment)    v.    I5arl.-er    (Al-  Trust   Co.   62   Misc.  403,  115  N.   Y. 

vord   V.   Barker)    107   Iowa,   14:?,  70  Suiip.  950. 

Am.  St.  Rep.  149,  77  N.  W.  868.  ^^  Blair  v.  Supreme  Council  Ameri- 

i^New  Enolaiid  INIut.  Fire  Ins.  Co.  <an   Leffion  of  Honor,  208  Pa.  262, 

V.  Butler,  34  Me.  451.  101  Am.   St.  Rep.  934,  57  Atl.  564. 

iSRvan   v.    Knicrhts   of   Columbus,  See   §§   341,   1273,   1287,   1288,  1455 

82  Conn.  91,  72  Atl.  574.  lierein. 

16  1  ruber  V.  Martin,  127  Wis.  412,  ^^  J.  P.  Lamb  &  Co.  v.  :\tereliants 

3    L.i;.A.(N.S.)     653.    115    Am.    St.  Naiional  ]\lutual  Fire  Ins.  Co.  18  N. 

Rep.  1023,  7  Am.  &  Eng.  Ann.  Cas.  Dak.  253,  110  N.  W.  1048. 

725 


§  319  JOYCE  ON  INSURANCE 

table  property  rights  of  its  members  are  within  the  guaranties  of  a 
state  Constitution  as  regards  the  inhibition  against  laws  impairing 
the  obligation  of  contracts,  and  the  inhibition  of  the  national  Con- 
stitution as  regards  the  equal  protection  of  the  laws  and  depriva- 
tion of  property  without  due  process  of  law.^° 

§  319.  Relations  of  members  of  mutual  companies:  partnership. — 
The  relations  of  members  in  companies  or  associations,  the  legal 
status  of  which  is  that  of  insurance  companies,  is  declared  in  some 
cases  to  be  that  of  partners,  in  others  not.  In  Georgia,  it  is  held 
that  a  mutual  insurance  company  is  governed  by  the  general  law 
of  partnership  as  to  division  of  profit  and  loss,  so  far  as  its  charter 
does  not  change  the  rule,  and  in  dividing  profits  equity  will  regard 
the  rights  of  all  those  who  have  contributed  premiums  without  re- 
gard to  the  fact  whether  they  were  members  when  the  profits  were 
distributed.'^  So  in  Pennsylvania  it  is  declared  that  persons  insur- 
ing in  a  mutual  insurance  company  are  associated  in  the  nature  of 
limited  or  special  partners.^  And  under  a  AVisconsin  decision  policy 
holders  in  mutual  companies,  where  neither  the  charter  of  the  com- 
pany nor  the  policy  provides  otherwise,  stand  on  the  basis  of  'a  part- 
nership as  insurers  and  as  such  are  entitled  to  share  in  profits  and  are 
liable  for  losses.^  But  in  New  Jersey  it  is  held  that  the  fact  an  insur- 
ance company  is  mutual  does  not  create  a  partnership  among  the 
insured,  so  as  to  make  a  contract  continuing;  the  insurance  is  be- 
tween the  corporation  and  the  insured.*  And  under  an  Iowa  deci- 
sion while  the  officers  or  directors  of  a  mutual  insurance  company 
may  be  held  individually  liable  for  a  wrong  done  to  a  person  to 
whom  they  have  issued  an  illegal  and  void  policy,  no  liability  for 
such  wrong  can  be  enforced  against  the  members  of  the  company  as 
partners.*  A  provision,  however,  in  the  charter  of  a  stock  life  insur- 
ance company  that,  after  certain  dividends  to  stockholders,  the  net 
profits  should  be  paid,  twenty  per  cent  to  the  stockholders  and  eighty 
per  cent  to  the  policy  holders,  was  decided  not  to  make  the  policy 
holders  partners ;  such  share  was  not  profits  but  simply  an  equitable 
adjustment  of  premiums  paid.^     But  the  holder  of  an  immatured 

20  Huber  v,  Martin,  127  Wis.  412,  &  Eng-.  Ann.  Cas.  400,  35  Ins.  L.  J. 

3  L.R.A.(N.S.)  653, 115  Am.  St.  Rep.  334. 

]023,  7  Am.  &  Eng.  Ann.  Cas.  400,       *  Mutual  Benefit  Life  Ins.   Co.  v. 

105  N.  W.  1031,  35  Ins.  L.  J.  334.  Hillvard,    37    N.    J.    L.    (8    Vioom) 

1  Carlton  v.  Southern  Mut.  Ins.  Co.  441,  18  Am.  Rep.  741. 

72  Ga.  371.  s  j^Iutual   Guaranty   Fire   Ins.    Co. 

2  Ivrugh  V.  Lycoming"  Fire  Ins.  Co.  (In  re  Assio-nment)    v.  Barker   (Al- 
77  Pa.  St.  15.  vord  v.   Barker)    107  Iowa,  143,  70 

3  Huber  v.  Martin,  127  Wis.  412,  Am.  St.  Rep.  149,  77  N.  W.  868.    See 
3    L.R.A.(N.S.)    653,    115    Am.    St.  §  683  herein. 

Rep.  1023,  105  N.  W.  1031,  7  Am.       « People  v.   Security   Life   Ins.  & 

726 


PARTIES— MEMBERS  §  319 

life  policy  is  entitled  to  share  with  other  creditors  in  the  assets ;  he 
is  not  a  partner."^  So  a  policy  holder  is  not  a  partner  of  the  com- 
pany.' There  is  no  trust  relation  between  the  policy  holder  of 
the  mutual  company  and  the  company,  and  an  action  in  equity  will 
not  lie  on  such  a  theory.^  In  People  v.  Security  Life  Insurance 
and  Annuity  Company,^"  (the  organization  was  a  regular  insur- 
ance company,  incorporated  with  a  capital),  the  court  said:  ''The 
argument  that  they  are  to  be  treated  as  partners  is  quite  ingenious, 
but  I  think  clearly  unsound,"  and  also  declared  that  the  stock 
was  contributed  by  stockholders,  and  not  policy  holders,  and  man- 
aged by  directors  chosen  by  stockholders,  and  that  the  members 
had  no  voice  in  the  election  of  officers  unless  they  were  stockholders, 
and  had  no  voice  in  the  management  of  the  business.  In  another 
case.  Mutual  Benefit  Life  Insurance  Company  v.  Hillyard,"  the 
court  says:  "The  suggestion  that  this  being  a  mutual  company  the 
contract  is  therefore  like  a  partnership,  and  dissolved,  is  disposed 
of  by  what  Allen,  J.,  said  in  substance  in  Cohen  v.  New  York 
Mutual  Life  Insurance  Company /^  that  the  company  is  a  body 
corporate,  capable  of  contracting  as  such,  and  the  relation  is  be- 
tween insurer,  a  corporation,  and  insured;  that  the  members  are 
not  partners  between  themselves.  The  contract  is  the  contract  of 
a  corporation,  and  whatever  incidental  advantages  appertain  to  a 
member,  that  does  not  affect  the  contract  in  the  policy."  In  Cohen 
V.  Mutual  Life  Insurance  Company,^^  referred  to  in  the  last  case, 
the  court,  Allen,  J.,  says:  "But  whatever  analogies  there  may  be 
between  mutual  companies  and  ordinary  partnerships,  and  the  re- 
lation of  the  members  of  the  two  organizations,  an  incorporated 
company,  although  organized  on  the  mutual  principle,  is  in  no 
proper  or  legal  sense  a  partnership.  The  defendant  is  a  body  poli- 
tic and  corporate,  capable  of  contracting  and  of  suing  and  being 
sued,  and  the  relation  between  the  plaintiff  and  the  corporation 
is  that  of  insured  and  insurer,  and  the  rights  and  duties  of  the  con- 
tracting parties  are  to  be  governed  and  determined  by  the  terms 
of  the  policy  by  which  the  insurance  is  effected,  as  in  other  cases. 
Other  and  incidental  rights  are  secured  to  the  plaintiff  as  a  mem- 
ber of  the  company,  one  of  the  corporators ;  but  this  does  not  make 
the  members  partners  as  between  themselves,  or  affect  the  express 

Annuity   Co.   78  N.   Y.   114,  s.   e.  7  »  Taylor  v.  Charter  Oak  Life  Ins. 

Abb.  N.  C.  (N.  Y.)  198,  34  Am.  Rep.  Co.  59  How.  Pr.   (N.  Y.)   468. 

422.  ^°  78  N.  Y.  114,  34  Am.  Rep.  522. 

'  People   V.    Security   Life   Ins.    &  "  37  N.  J.  L.   (8  Vroom)   444,  18 

Annuity  Co.  78  N.  Y.  114,  7  Abb.  N.  Am.  Rep.  741. 

C.  (N.  Y.)  198,  34  Am.  Rep.  522.  12  50  N.  Y.  024,  10  Am.  Rep.  522. 

8  Brown  y.  Stoerkel,  74  Mich.  209,  "  50  N.  Y.  624,  10  Am.  Rep.  522. 
276,  3  L.R.A.  530,  41  N.  W.  921. 

727 


§  319  JOYCE  ON  INSURANCE 

contract  of  the  coi-poration."    In  another  New  York  case  it  is  decided 
that  the  holder  of  a  policy  of  insurance  in  a  mutual  company  is  in 
no  sense  a  partner  of  the  coi*poration  ;  his  relation  with  the  company 
is  one  of  contract,  measured  by  the  terms  of  the  policy.^*    In  Brown 
V.  Stoerkel/*  Morse,  J.,  declares:  "This  association  was  in  no  sense 
a  copartnership.    There  Avas  no  business  carried  on  by  it,  and  noth- 
ing involving  a  loss  or  profit  in  a  business  sense.     It  was  purely  a 
benevolent  and  social  organization,  having  also  in  view  the  protec- 
tion, benefit,  and  welfare  of  its  members  in  their  vai-ious  employ- 
ments.    It  must  now  be  considered  as  well  settled  that  persons 
as  to  their  membership  and  rights  in  such  societies  and  the  funds 
of  the  same,  oy  the  constitution  and  by-laws  of  the  association  which 
they  adopt  or  subscribe  to  after  adoption.     Such  an  organization 
may  he  neither  a  partnership  nor  a  corporation.     The  articles  of 
agreement  of  such  an  association,  whether  called  a  'constitution,' 
'charter,'  or  'by-laws.'  or  any  other  name,  constitute  a  contract  be- 
tween the  members,  which  the  courts  will  enforce,  if  not  immoral 
or  contrary  to  the  public  policy  or  the  law  of  the  land."     In  Gor- 
man V.  Russell.^^  the  a.«sociation  was  unincorporated,  and  its  pur- 
pose was  to  provide  certain  benefits  to  its  members  in  case  of  sick- 
ness or  death.     The  funds,  therefore,  were  to  be  raised  under  its 
con.stitution  by  the  collection  of  an  initiation   fee,  weekly  dues, 
fines,  etc.     Certain  persons  claiming  membership  were  excluded 
liave  a  right  to  enter  into  such  associations,  and  to  bind  themselves 
from  the  meetings  of  the  organization,  and  brought  a  bill  for  its 
dissolution,  and  an  accounting  of  the  partnership.     Although  no 
American  cas&s  are  cited  in  the  opinion,  the  court  apparently  rely- 
ing on  the  English  decisions,  it  was  decided  that  henevolent  associ- 
ations are  partnerships;  that  voluntary  organizations  of  this  char- 
acter for  mutual  relief  in  sickness  or  distress,  provided  for  by  funds 
raised  as  they  were  here,  are  jiartnerships,  and  could  be  dissolved 
in  equity  for  improperly  excluding  a  member,  and  l)e  compelled  to 
account.     In  Atkins  v.  Ilunt,^^  the  defendants  signed  articles  of 
association  in  trade,  under  the  name  of  "The  Farmers  and  Mechan- 
ics' Store,"  by  which  it  was  provided  that  any  stockholders  might 
withdraw  upon  giving  six  months'  notice,  and  that  the  business  of 
the  company  should  be  done  pursuant  to  a  major  vote  of  those 
present.     Tlie  defendants  subscribed  a  certain  sum,  and  a  by-law 
provided  that  each  member  should  become  a  partner,  and  it  waa 

i«  Uhlman  v.  New  York  L.  Ins.  Co.       ^^  74  Mich.  269,  276,  3  L.R.A.  430, 
109  N.  Y.  421,  4  Am.  St.  Rep.  482,   41  N.  W.  921. 
17   N.   E.   363.      See   also    Grobc   v.        ^^  14  Cal.  531. 
■  Erie  County  iMntual  Life  Ins.  Co.  2  \       "14  N.  H.  205. 
Misc.  462,  53  N.  Y.  Supp.  628. 

728 


PARTIES— MEMBERS  §  319 

held  that  the  defenclants  were  partners  in  the  company.  This  was 
not  a  contract  to  form  a  partnership  in  futuro,  but  an  actual  exist- 
ing association,  liable  as. partners,  and  the  liability  rested  upon  hav- 
ing signed  by-laws  forming  a  present  company.  It  is  held  in  New 
York,^^  in  an  action  to  dissolve  it,  that  a  voluntary  a&sociation  es- 
tablished for  moral,  benevolent,  and  social  objects,  where  there  is 
no  power  to  compel  the  payment  of  dues,  and  where  the  right  of 
the  member  eea.ses  on  his  failure  to  make  such  payment,  is  not  a 
partnership,  and  the  court  per  Miller,  J.,  says:  ^'Xor  are  the  plain- 
tifl's  entitled  to  the  relief  claimed  upon  the  ground  that  the  members 
of  the  society  were  copartners.  Associations  of  this  description  are 
not  usually  partnerships.  There  is  no  power  lo  compel  payment 
of  dues,  and  the  right  of  the  member  ceases  when  he  fails  to  meet 
his  annual  subscription.  This  certainly  is  not  a  partnership,  and 
the  rights  of  copartners  as  such  are  not  fully  recognized.  The  pur- 
pose is  not  business,  trade,  or  profit,  but  the  benefit  and  protection 
of  its  members  as  provided  for  in,  its  constitution  and  by-laws.  In 
accordance  Avith  well-established  rules  no  partnership  exists  under 
such  circumstances."  Another  important  case  is  that  of  Ash  v. 
Guic,^^  wherein  it  was  decided  that  the  members  of  a  ^lasonic  lodge 
are  presumptively  not  partners.  The  action  was  assumpsit  on  a 
certificate  of  indebtedness  executed  by  the  master  and  wardens  of 
the  lodge,  and  was  directed  against  a  large  number  of  the  members. 
And  the  court  said:  "Copartnership  has  been  defined  to  be  a  'com- 
bination by  two  or  more  persons  of  capital  or  labo'r  or  skill,  for  the 
purpose  of  business  for  their  common  benefit.'  ...  It  would 
seem  that  there  must  be  a  community  of  interest  for  business  pur- 
poses. Hence  voluntary  associations  or  clubs  for  social  and  chari- 
table purposes,  and  the  like,  are  not  proper  partnerships,  nor  have 
their  members  the  jjowers  and  responsibilities  of  partners.  A  be- 
nevolent and  social  society  has  rarely,  if  ever,  been  considered  a 
partnership.  .  .  .  Here  there  is  no  evidence  to  wan^ant  an  in- 
ference that  when  a  person  joined  the  lodge  he  bound  himself  as 
a  partner  in  the  business  of  purcliasing  real  estate  and  erecting 
buildings,  or  as  a  partner,  so  that  other  members  could  borrow 
money  on  his  credit.  The  proof  fails  to  show  that  the  otlicers  or 
a  committee,  or  any  number  of  members,  had  a  right  to  contract 
debts  for  the  building  of  a  temple  which  would  be  valid  against 
every  member  from  the  mere  fact  that  he  was  a  member  of  the 
lodge.  But  those  who  engaged  in  the  enterprise  are  lial)le  for  the 
debts  they  contracted,  and  all  are  included  in  such  liability  who 
assented  to  the  undertaking  or  subsequently  ratified  it.     Those  who 

"  Lafond  v.  Deems,  81  N.  Y.  507,       "  97  Pa.  St.  493,  39  Am.  Rep.  818 
514. 

729 


§  319  JOYCE  ON  INSURANCE 

participated  in  the  erection  of  the  building,  by  voting  for  and  ad- 
vising it,  are  bound  the  same  as  the  committee  who  had  it  in  charge ; 
and  so  with  reference  to  borrowing  money.  A  member  who  sub- 
sequently approved  the  erection  or  borrowing  could  be  held  on  the 
ground  of  ratification  of  the  agent's  acts."  In  an  English  case  ^  it 
is  held  that  the  right  to  participate  in  the  profits  of  the  company 
did  not  constitute  the  insured  a  partner  with  the  proprietors  of  the 
company.  Mr.  Parsons'  definition  of  partnership  contemplates  a 
division  of  profits  as  an  element  of  partnership.'^  A  right  to  re- 
ceive a  share  of  the  profits,  however,  is  held  in  New  Jersey  not  to 
be  an  invariable  test.^  But  in  Babb  v.  Reed  *  it  is  held  that  an 
association  for  purposes  of  mutual  benevolence  among  its  members 
only  is  not  an  association  for  charitable  uses.  If  not  incorporated, 
its  members  are  regarded  in  law  as  partners  in  relation  to  third 
persons. 

1  In    re    English    Assur.    Soc.    11       '  Seaburv  &  Jolm.son  v.  Bolles,  51 
Week.  Rep.  681,  8  L.  T.  N.  S.  724.      N.  J.  L.  (22  Vroom)  103,  11  L.R.A. 

2  Parson.s     on     Partnerships     (4th   136,  16  Atl.  54,  and  note. 

ed.)  sec.  1.     This  is  also  true  of  the       ^5  Rawle  (Pa.)  151,  28  Am.  Dee. 
definition     under    Deering-'s     Annot.    650. 
Civ.  Code  of  California,  sec.  2395. 

730 


I 


CHAPTER  XIV. 
PARTIES— THE  INSURER. 

§  325.     Insurer  defined. 

§  326.     Stock  insurance  companies  defined. 

§  327.     Legislation  concerning  insurance  companies. 

§  328.     Same  subject:  foreign  companies. 

§  328a.  State  regulation:  insurance  business  as  franchise. 

§  328b.  State  regulation :  quasi  public  character  of  insurance  business. 

§  329.  Foreign  company:  retaliatory  and  anti-compact  laws:  combina- 
tions to  control  rates. 

§  329a.  Anti-compact  laws :  combinations  to  control  rates  continued :  con- 
spiracy. 

§  330.     Foreign  companies :  what  constitutes  "doing  business,"  etc. 

§  330a.  Same  subject. 

§  331.  Foreign  company  estopped  to  avoid  contract  by  setting  up  non- 
compliance with  statutes. 

§  332.  When  contracts  valid  although  company  has  not  complied  with 
statutes. 

§  332a.  Same  subject. 

§  332b.  Same  subject:  insurance  in  foreign  state  of  property  in  another 

state. 
§  .333.     When  contracts  not  valid  where  company  has  not  complied  with 

statutes. 
§  333a.  Same  subject. 
§  333b.  Same  subject. 

§334.     Charter:  corporate  powers:  ultra  vires. 

§  334a.  Same  subject :  power  of  corporation  to  insure  life  of  its  president. 
§  335.     Forfeiture  of  charter. 

§  325.  Insurer  defined.— An  insurer  is  the  person  who  in  a  cer- 
tain sense  assumes  the  risk  and  undertakes  to  indemnify  or  pay  a 
certain  sum  on  the  happening  of  the  specified  contingency .^     Sucli 

5  See  1  Phillips  on  Ins.    (3d  ed.)  "The  word 'underwriter' has  an  ac- 

ggg    2.  cepted  and  well  understood  meaning. 

"The   insurer   is   commonly   called  Borrowed  fi'om  the  early  method  of 

the  underwriter  because  he  subscribes  obtaining    marine    insurance,    it    has 

the  policy."     17  Earl  of  Halsbury's  now    acquired    the    meaning    of    any 

Laws  of  England,  p.  336.  one  who  insures  another,  on  life  or 

731 


§  325 


JOYCE  ON  INSURANCE 


person  may  be  a  corporation  or  association  or  individual  when  not 
precluded  by  statute.  Formerly,  a  large  proportion  of  the  risks 
were  underwritten  by  private  individual;;,^  but  the  business  of 
insuring  in  this  country  is  almost  exclusively  in  the  hands  of  cor- 
porations or  associations,  which  are  divided  into  either  stock  com- 
panies and  mutual  companies  or  associations.  Sometimes  a 
company  combines  both  plans  of  insurance.''^ 


property  in  a  policy  of  insurance." 
Childs  (ex  rel.  Smitli)  v.  Fireman's 
In.s.  Go.  66  Minn.  393,  397,  69  N.  W. 
141,  35  L.R.A.  99. 

WJien  the  legislature  used  the  term 
''board  of  fire  underwriters,"  the  pre- 
sumption is  that  tliey  meant  a  board 
composed  exclusively  of  fire  insur- 
ance; that  is  of  those  engaged  in  the 
bu.siness  of  insuring  others,  on  prop- 
erty against  loss  by  fire.  Childs  (ex 
rel.  Smith)  v.  f^iremen's  Ins.  Co.  66 
Minn.  393,  397,  35  L.R.A.  99,  69  N. 
W.  141. 

^  See  prelim,  chap.  §  IV.  a  herein; 
2  Parsons  on  Contracts  (7th  ed.) 
351;  10  New  International  Ency. 
(1908)  p.  685.  As  to  individuals  un- 
incorporated associations  Lloyds  and 
partnerships,  see  §§  335b  et  seq.  here- 
in. 

''A  policy  may  be  underwritten 
by  individuals  or  a  company."  Earl 
(•f  llalsburv's  Laws  of  England,  vol. 
37,  p.  339." 

At  common  law  individuals  might 
contract  with  another  to  indemnify 
him  against  loss  by  fire  and  both  in 
England  and  in  this  country  the  busi- 
ness was  carried  on  bv  individuals. 
Barnes  v.  People,  168  111.  425,  429, 
48  N.  E.  91. 

"Insurance,  in  its  early  existence, 
when  the  nature  of  the  risks  assumed 
were  few,  and  the  amount  of  busines.s 
small,  was  done  chiefly,  if  not  entire- 
ly, by  individuals.  But  in  more  re- 
cent times,  it  ha.s  been  extended  un- 
til it  embraces  almost  every  kind  of 
risk,  and  has  grown  to  such  ]>i-opor- 
tions  that  it  enters  into  every  depart- 
ment of  business,  and  affects  all  class- 
es of  people  and  their  property;  and 
ha.'!,   in   consequence,  everywhere  be- 

73; 


come  the  subject  of  legislative  regula- 
tion and  control.  Tlie  several  states 
have  enacted  laws,  designed  to  place 
the  business  within  their  limits  on 
such  substantial  basis  as  will  afford 
adequate  protection  to  the  citizens, 
and  to  their  property."  State  v: 
Ackerman,  51  Ohio  St.  163,  189,  190, 
37  N.  E.  828,  24  L.R.A.  298,  per  Wil- 
liams, J.  Quo  warranto  for  unlaw- 
fully exercising  a  public  franchise 
brought  against  certain  jiersons 
transacting  business  under  the  name 
(i\'  the  "Guarantee  and  Accident 
Lloyds,  New  York"  held  that  under 
the  revised  statutes  of  Ohio  they 
should  be  ousted  from  transacting  the 
business  of  insurance  within  that 
state. 

^  The  Pennsylvania  act  of  Febru- 
ary, 1S70,  provided  that  it  should  be 
unlawful  to  issue  or  execute  any 
policy  of  insurance  or  guaranty 
against  loss  by  fire  or  lightning,  ex- 
cept under  authority  expressly  con- 
ferred by  a  charter  of  incorporation. 
See  Arrott  v.  Walker,  118  Pa.  St. 
249,  12  Atl.  280. 

Classification  of  insurance  compa- 
nies important.  5  Earl  of  Halsbury's 
Laws  of  England,  616. 

Mixed  companies  defined.  Burt  on 
Life  Ins.  (1849)  p.  52.  Mixed  com- 
panies began  to  appear  about  1848. 
Subsequent  to  1850  the  new  incorpo- 
lations  Avere  mostly  of  the  mixed 
class.  When  tlie  Civil  War  ])i'oke 
out  in  1861  the  majority  of  the  cora- 
l)anies  were  mixed  comiianies,  but 
the  mutuals  were  considered  sounder 
institutions.  In  1877  there  were 
twenty-four  mixed,  eleven  mutual, 
three  propr-ietary.  Pamphlet  on 
Progress  of  American  Life  Ins.  (Re- 
vieAv  Pub.  Co.  Phila.  1877). 


PARTIES— THE  INSURER  §§  32G,  327 

§  326.  Stock  insurance  companies  defined. — A  stock  insurance 
company  is  one  which  has  a  capital  stock  owned  by  its  stockholders, 
and  which  capital  is  the  basis  of  its  business,  and  is  liable  for  losses 
and  expenses.  Those  insured  in  such  companies  pay  premiums  as 
the  basis  of  their  contract  with  the  company.'  A  share  of  stock 
may  be  defined  as  a  right  which  its  owner  has  in  the  management, 
protits,  and  ultimate  assets  of  the  corporation.  A  stockholder  in  an 
insurance  company  has  the  same  rights  as  a  stockholder  in  any 
other  corporation,  but  he  has  no  legal  title  to  the  property  or  profits 
of  the  corporation  until  a  dividend  is  declared  or  a  division  made 
on  the  dissolution  of  the  corporation.^ 

§  327.  Legislation  concerning  insurance  companies. — In  most,  if 
not  all,  the  states  of  the  Union  statutes  have  been  enacted  princi- 
l)ally  for  the  protection  of  policy  holders,  prescribing  certain  con- 
ditions upon  which  insurance  companies,  associations,  or  societies 
may  be  permitted  to  organize  or  transact  business  within  the  state, 
and  these  apply  to  both  domestic  and  foreign  insurance  cor|)ora- 
tions,  associations,  or  societies.     The  statutes  will  only  be  brioliy 

"Prior  to  1874  the  staututes  of  Toomey  v.  Supreme  Lodge  Knights 
Missouri  recognized  three  kinds  of  of  Pythias,  147  Mo.  129,  136,  48  S. 
insuranoe  f-ompanies, — stock  com-  W.  936;  Rev.  Stat.  Mo.  1909,  sec. 
panies,  mutual  companies,  and  stock  6896  (Rev.  Stat.  1899,  sec.  7853). 
and  mutual  companies,  the  general  ^  Commercial  Fire  Ins.  Co.  v. 
nature  of  whicli  is  well  understood,  Board  of  Revenue,  99  Ala.  1,  42  Am. 
but  one  purpose  of  which  was  to  St.  Rep.  17,  14  So.  490,  wlien  ineor- 
make  a  profit  for  the  promoters,  and  porators  become  a  corporation  before 
one  feature  of  whicli  was  the  pay-  stock  subscriptions  are  invited,  mere 
ment  of  fixed  premiums  at  stated  agreement  to  subscrilx-,  see  \'an 
times  by  the  insured,  and  the  pay-  Schaick  v.  Mackin,  113  N.  Y.  Supp. 
ment  of  a  sum  certain  by  the  com-  408,  129  App.  Div.  335. 
pany  to  the  beneliciary  named  in  the  Neir  Yuri:. — Insurance  Law,  sec. 
policy  upon  the  death  of  the  in-  110  (Laws  1892,  p.  1974,  c.  690,  ]i. 
sured,"  and  prior  to  the  act  of  1887  1975,  sec.  112);  N.  Y.  Stock  Corj). 
assessment  companies  were  not  au-  (Laws  1892,  p.  1835,' c.  688,  sec.  41). 
thorized  by  the  laws  of  Missouri.  See  also  for  definition  of  share  of 
Aloe  V.  Fidelitv  Mutual  Life  Assoc,  stock;  three  elements  in  rights  of 
164  Mo.  675,  55  S.  W.  993,  29  Ins.  i)ropei'ty,  Carnagie  Trust  Co',  v.  Se- 
L.  -J.  6/9-681,  per  Marshall,  J.  curity  Life  Ins.  Co.  of  America,  111 

A  company  falls  under  the  classi-  Va.  1,  31  L.R.A.(N.S.)  1186  (anno- 
fication  of  a  "mixed  company"  or  tated  on  validity  of  agreements  to 
association  where  it  possesses  some  of  control  the  voting  power  of  corpo- 
the  features  incident  to  1)otli  a  "stock  late  stock)  21  Amer.  &  Eng.  Ann. 
company"  and  a  "mutual  company,"  Cas.  1287,  6S  S.  E.  412  (ease  as  to 
but  is  neither.  State  v.  Allev,  96  voting  trust  in  stock  and  stockhold- 
Miss.  720,  51  So.  467,  39  Ins.  L.  J.  er's  rights;  valid  trust).  Capital 
629.  stock  delined,  see  Cal.  Stat.  &  Amdts. 

*  See    Anderson's    Law    Diet.    558.    1907,   p.   1C6.      (New   Art.   XVI.   of 
State   V.   Willett,   171    Ind.   296,   23   Polit.  Code  Chap.  119,  see.  634a). 
L.R./.(N.S.)     197,    86    N.    E.    68; 

733 


§  327 


JOYCE  ON  INSURANCE 


noticed,  however,  in  this  work.  The  power  of  the  state  to  enact 
such  laws  is  inherent,  since  corporations  and  associations  within 
its  jurisdiction,  hke  natural  persons,  are  subject  to  the  laws  which 
may,  in  the  proper  exercise  of  its  police  power  and  within  constitu- 
tional limits  be  enacted  for  the  regulation  of  the  community  and 
the  protection  of  citizens.^"  And  statutes  of  the  above  characler 
should  be  liberally  construed,^^  but  they  should  not  constitute  class 
legislation  or  discriminate  between  citizens  of  equal  standing  and 
merit  within  or  without  the  state.^^  -phe  legislature  has  also  the 
same  power  to  regulate  the  conduct  of  the  agents  of  such  corpora- 
tions as  it  has  to  regulate  the  conduct  of  the  corporations  them- 
selves,^^ and  it  may  impose  upon  such  agents  a  privilege  tax  or 

^°  United  States. — German  Alliance  Ohio. — Robbins  v.  Hennessey,  86 
Ins.  Co.  V.  Hale,  219  U.  S.  307,  55  Ohio  St.  181,  99  N.  E.  319,  Ohio  Rev. 
L.  ed.  229,  31  Sup.  Ct.  246 ;  John  Stat.  1908,  as  am'd  99  Ohio  Laws,  p. 
Hancock    Mutual    Life    Ins.    Co.    v.    131. 

Warren,  181  U.  S.  73-75,  45  L.  Fraternal  order  subject  to  state 
ed.  755,  21  Sup.  Ct.  535,  30  Ins.  L.  regulation.  State  v.  Arlington,  151 
J.  623,  per  Mr.  Chief  Justice  Fuller;  N.  Car.  640,  73  S.  E.  122;  mutual 
Orient  Ins.  Co.  v.  Daggs,  172  U.  S.  company  also  so  subject.  ^lontgom- 
557,  43  L.  ed.  552,  19^  Sup.  Ct.  281,  ery  v.  Harker,  9  N.  Dak.  527,  84 
(see  this  case  under  §  328  herein)  ;    N.  W.  369. 

McClain  v.  Provident  Savings  Life  The  business  of  insurance  against 
Assur.  Soc.  110  Fed.  80,  49  C.  C.  A.  loss  bv  fire  is  a  proper  subject  for 
31,  s.  e.  184  U.  S.  699,  46  L.  ed.  765,  the  exercise  of  the  police  power  of 
23  Sup.  Ct.  938.  the  state.      Commonwealth  v.   Vroo- 

AIabama.—B.ORdley     v.     Purifoy,   man,  164  Pa.  St.  306,  25  L.R.A.  250, 
107  Ala.  276,  30  L.R.A.  351,  18  So.   30  Atl.  217,  44  Am.  St.  Rep.  603. 
220.  As  to  police  power,  see  Joyce  on 

Idaho. — Continental  Life  Ins.  &  In-  Franchises  (ed.  1909)  see.  366,  and 
vestment  Co.  v.  Ilattabaugh.  21  Ida-  note  p.  582;  Joyce  on  Electric  Law 
ho,  285,  121  Pac.  81.  '  (2d  ed.)   see.  215,  and  note. 

Illinois. — People  v.  Hartford  Life  As  to  standai-d  policy;  eonstitu- 
Ins.  Co.  252  111.  398,  37  L.R.A. (N.S.)  tional  law;  power  of  legislature  and 
778,  96  N.  E.  1049.  of  commission,  see  §  176a  herein. 

11  Kentucky. -^Bell  v.  Louisville  On  fire  insurance  as  business  af- 
Board  of  Fire  Underwriters,  146  Ky.  fected  by  public  interest,  see  notes  in 
841,  143  S;  W.  388.  29  L.R.A.  (N.S.)  1195;  L.R.A.1915C, 

Mississippi.  —  General       Accident,   1189.      On    power    of   legislature   to 
Fire  &  Life  Assur.  Co,  v.  Walker,  99   regulate  life  insurance  rates,  see  note 
Miss.  404,  55   So.  51,  40  Ins.  L.   J.   in''37  L.R.A. (N.S.)   466. 
1504;   State  v.  Alley,  96  Miss.  720,       "State  v.  Alley,  96  Miss.  720,  51 
51  So.  467,  39  Ins.  L.  J.  629.  So.  467,  39  Ins.  L.  J.  629. 

Missouri.—  State  v.  Stone,  118  Mo.  ^2  gtate  v.  Stone,  118  Mo.  388,  25 
388,  25  L.R.A.  243,  40  Am.  St.  Rep.  L.R.A.  243,  40  Am.  St.  Rep.  388,  24 
388,  24  S.  W.  164;  State  v.  Mat-  S.  W.  164;  State  (ex  rel.  Inter-in- 
thews,  44  Mo.  523.  suranee    Auxiliary    Co.)    v.    Revelle, 

Ne^v    rorfc.— People    v.    Formosa,   257  Mo.  529,  165  S.  W.  1084. 
131  N.  Y.  478,  27  Am.  St.  Rep.  612,       13  People   v.   Formosa,   131   N.   Y. 
30  N.  E.  492;  People  (ex  rel.  Moore)    478,  27  Am.  St.  Rep.  612,  30  N.  E. 
V.  Holmes,  135  N.  Y.  Supp.  467,  151   492. 
App.  Div.  257. 

734 


PARTIES— THE  INSURER  §  327 

license  fee  as  a  condition  precedent  to  transacting  business.^*  These 
laws  are  numerous;  they  provide  for  the  possession  of  a  certain 
capital   by   insurance   companies   before   commencing   business,^* 

^*  Cole  Insurance  Commr.  v.  Am-  Louisiana. — Statute  requiring  for- 

erican  Surety  Co.  90  Miss.  782,  44  feiture  of  charter  where  "whole  of 

So.  871,  Miss.  Code  1906,  sec.  3828,  the  capital   stock"   not   paid   for  in 

case  of  a^ent  of  surety  company.  specified  time.     La.   Laws  1898,  act 

Legislature    may    declare    void    a  105,  sec.  3,  as  am'd  by  act  1902,  No. 

contract  with  one  who  has  not  paid  50;  State  (ex  rel.  Guion,  Atty.  Genl.) 

a  privilege  tax,  and  this  applies  to  v.  People's  Fire  Ins.  Co.  of  New  Or- 

a    premium    note    given    to    agent,  leans,  126  La.  548,  52  So.  763.     See 

White  v.  Post,  91  Miss.  685,  45  So.  also  State  (ex  rel.  People's  Fire  Ins. 

366,   under  Miss,  act  1898,   pp.  18,  Co.  of  New  Orleans)  v.  Michel,  125 

30,  c.  5.  La.  55,  51  So.  66. 

Agent  of  assessment  plan  company  Maryland.  —  Corporation  created 
liable  for  license  tax.  Mutual  Re-  by  special  charter  requiring  as  con- 
serve Fund  and  Life  Assoc,  v.  City  dition  precedent  that  specified  amount 
Council  of  Augusta,  109  6a.  73,  35  of  capital  stock  be  subscribed  for 
S.  E.  71,  29  Ins.  L.  J.  319.  and  a  certain  per  cent  thereof  paid 

Agent  cannot  be  refused  license  in  cash.  Effect  of  acts  of  insurance 
when  all  statutory  requirements  have  department  in  recognizing  corpora- 
been  complied  with,  under  Oreg.  tion  as  in  existence  even  though  con- 
Laws  1911,  pp.  376,  377,  sees.  1-4;  ditions  precedent  not  complied  with. 
Guy  L.  Wallace  &  Co.  v.  Ferguson,  Munich  Re-Ins.  Co.  v.  United  Sure- 
70  breg.  306, 140  Pac.  742.  ty  Co.  113  Md.  200,  77  Atl.  579. 

Agent  for  domestic  company  does  Massachusetts. — Held     that     Stat, 

not    require    license    in     Kentucky.  1847,  Mass.  c.  273,  sec.  2,  and  Rev. 

Commonwealth  v.  Gregory,  121  Ky.  Stat.  c.  37,  sec.  42,  with  regard  to 

356,  89   S.   W.   163.  payment,  etc.  of  a  certain  amount  of 

^^  AU  agents  included  under  N.  Y.  capital  before  doing  business,  did  not 

Consol.  act,  see.  523,  requiring  pay-  apply   to   mutual   insurance  compan- 

ment   by   agent   to   fire   department,  ies.    Williams  v.  Cheney,  3  Gray  (69 

Fire  Department  of  city  of  New  York  Mass.)   215.     See  also  Atlantic  Mu- 

V.  Stanton,  51  N.  Y.  Supp.  242,  28  tual    Fire   Ins.    Co.    v.    ConckHn,    6 

App.  Div.  334.  Gray  (72  Mass.)  73. 

Arkansas. — As    to    obtaining   loan  Minnesota. — State   v.    Critchet,   37 

on  note  to  raise  required  capital,  and  Minn.   13,   32   N.   W.   787;    Stat«   v. 

use  of  capital  stock  in  making  pay-  Truly,  37  Minn.  97,  33  N.  W.  554. 

ment  of  loan.     Dodge  v.   State  Na-  Nebrashx. — In  re  Babcock,  21  Neb. 

tional  Bank,  96  Ark.  65,  131  S.  W.  500,  32  N.  W.  641,  under  Com.  Stat. 

65    (Kirby's    Dig.    Laws    Ark.    sec.  Neb.  1885,  c.  16. 

4335).                                                 .  New  York. — People  v.  Manhattan 

California.    —    People     (ex     rel.  Mut.  Fire  Ins.  Co.  34  N.  Y.  St.  Rep. 

Schindler)    v.  Flint    (Cal.  1892),  28  570,  12  N.  Y.  Supp.  264,  58  Hun,  605 

Pae.  495.  under  N.  Y.  Laws,  1853,  c.  460. 

Indiana. — As  to  corporation  creat-  Oregon. — American  Life    Accident 

cd  by  special  act,  and  amendment  to  Ins.  Co.  v,  Ferguson,  66  Oreg.  417, 

charter  permitting  increase  of  capital  134   Pac.   1029;    Union    Pacific   Life 

stock    in    violation    of    constitution.  Ins.  Co.  v.  Ferguson,  65  Oreg.  142, 

Marion    Trust    Co.    v.-  Bennett,    109  43  L.R.A.(N.S.)    958,  129  Pac.  529, 

Ind.  346,  124  Am.  St.  Rep.  228,  82  rehearing  denied  130  Pae.  978. 

N.  E.  782.  Pennsylvania. — As      to      company 

735 


327 


JOYCE  ON  INSURANCE 


for  the  deposit  of  a  security  fund  with  the  state/®  for  giving  bonds," 
for  procuring  a  certificate  or  license/^  for  an  examination  into  the 


incorporated  by  special  act ;  charter 
held  subject  to  constitutional  amend- 
ment and  also  to  statutes  creating 
insurance  department,  and  governing- 
life  insurance  and  so  paid  up  capi- 
tal a  condition  precedent.  Union 
National  Life  Jns.  Co.  In  re,  58  Pitts- 
burg Leg.  J.  2  (opinion  of  Atty. 
Genl.).  See  Pennsylvania  Ins.  Co. 
of  Pittsburg,  In  re,  37  l^a.  Co.  Ct. 
Rep.  69  (opinion  of  Atty.  Crenl.); 
Provident  Life  &  Trust  Co.  v.  Board 
of  Revision  of  Taxes,  29  Pa.  Co.  Ct. 
Rep.  43-L. 

^®  State  (ex  rel.  Unity  Industrial 
Life  Ins.  &  Sick  .Ben.  Assoc.)  v. 
Michel,  121  La.  330,  46  So.  352,  37 
Ins.  L.  J.  58/  (industrial  and  sick 
benelit  .association)  ;  act  1906,  no.  65, 
p.  101,  act  1898.  no.  105,  p.  132; 
Employei-s  Liability  Assur.  Co.  v. 
Commissioner,  64  Mich.  614,  31  N. 
W.  542;  :\Iich.  Stat.  Laws  1884,  p. 
279,  act  237;  Attorney  General  v. 
North  American  Life  Ins.  Co.  82  N. 
Y.  172,  N.  Y.  Laws  1866,  c.  576; 
People  V,  Chapman,  5  Hun  (N.  Y.) 
222.  As  to  change  in  securities  and 
liability  of  Superintendent  of  Insur- 
ance, see  Ravmond  v.  Securitv  Life  & 
Trust  Ins.  Co.  97  N.  Y.  Supp.  557, 
111  App.  Div.  191,  rev'g  91  N.  Y. 
Supp.  1041,  101  App.  Div.  546,  rev'g 
89  N.  Y.  Supp.  753.  44  Misc.  31; 
Metropolitan  Casualtv  Ins.  Co.  of 
N.  Y.  V.  Basford,  31  S.  Dak.  149,  139 
N.  W.  795. 

Life  insurance  companies  on  co- 
operative pkin  excepted.  When 
State  Treasurer  not  entitled  to  re- 
tain deposits  made.  Illinois  Life  Ins. 
Co.  V.  Tullv,  174  Fed.  355,  98  C.  C. 
A.  259. 

When  reinsurer  a  right  to  icith- 
drair  deposits,  see  Prewitt,  Commr. 
V.  Illinois  Life  Ins.  Co.  29  Ky.  L. 
Rep.  447,  93  S.  W.  633,  35  Ins.  L. 
J.  688. 

^"^  Union  Central  Life  Ins.  Co.  v. 
Skipper,  115  Fed.  69,  52  C.  C.  A. 
663,  Sand.  &  H.  Ark.  Dig.  sec.  4124: 


Kaw  Life  Assn.  v.  Lemke,  40  Kan. 
661,  20  Pac.  512,  under  Laws  Kan. 
1885,  c.  131.  Construction  of  bond 
filed  by  mutual  fire  insurance  com- 
]  janies ;  liability  of  sureties,  see 
Crawford  v.  Ozark  Ins.  Co.  97  Ark, 
549,  134  S.  W.  951,  40  Ins.  L.  J. 
819,  Laws  Ark.  1905,  p.  492.  See  al- 
so United  States  Fidelitv  &  Guaranty 
Co.  V.  Fultz,  76  Ark.  410,  89  S.  W. 
93. 

Bonds  may  be  required  from  one 
applicant  for  license  and  securities 
from  another.  State  v.  McMaster.  94 
S.  Car.  379,  382,  77  S.  E.  401,  402. 

^^  Roane  v.  Union  Pacific  Life  Ins. 
Co.  67  Oreg.  264,  135  Pac.  892, 
Lord's  Oreg.  Laws,  .sec.  4609.  See 
Commonwealth  ]\Iulvial  Fire  Ins.  Co. 
v.  Edwards,  124  N.  Car.  116,-  32 
S.  E.  404. 

Only  one  license  can  be  required 
from  fire  insurance  company  under 
license  laws  acts  1898,  No.  171,  State 
(ex  rel.  Hartford  Fire  Ins.  Co.)  v. 
Fitzpatrick,  133  La.  115,  62  So. 
494;  but  as  am'd  by  acts  1906,  No. 
214,  certain  other  companies  com- 
bining two  kinds  of  business  may 
liecome  liable  for  a  second  license. 
State  V.  Marvland  Ca.>^ualtv  Co.  133 
La.  146,  62  So.  606.  Only  one  license 
rec[uired  from  accident  and  sickness 
companies.  State  v.  Continental 
Casualty  Co.  134  La.  806,  64  So. 
/57,  act  1902,  no.  50,  sec.  5. 

Auditor  no  authority  to  issue 
certificate  to  society  under  name  re- 
sembling one  in  tise.  Knigiits  of 
Maccabees  of  the  World  v.  Searle,  75 
Neb.  285,  106  N.  W.  448.  Cobbev's 
Ann.  Stat.  Neb.  1903,  sec.  6502.  Ex- 
amine People  (ex  rel.  Traders  Fire 
Ins.  Co.)  V.  Van  Cleave,  183  111.  330, 
47  L.R.A.  795,  55  N.  E.  698;  Knights 
of  i\Iodern  Maccabees  v.  Martin,  33 
Pa.  Co.  Rep.  58. 

License  may  be  refused  where  all 

conditions    of    statute    not    complied 

with.      State    (ex   rel.    Lumberman's 

Accident  Co.)  v.  Michel,  124  La.  558, 

36 


PARTIES— THE  INSURER 


327 


company's  affairs,^^  for  furnishing  information  to  the  superintend- 
ent of  insurance  by  the  eom[)anies  regarding  their  business  and 
iinaneial  condition,^"  for  publication  of  annual  statements  in  daily 
papers  designated  by  the  insurance  commissioners,^  for  making  re- 
ports to  the  comptroller,^  for  returns  to  the  insurance  commis- 
sioners,^ for  the  payment  of  a  license  tax  or  fee,*  for  the  taxation  of 


50  So.  543,  acts  La.  1898,  no.  105, 
p.  134,  sec.  2,  par.  4. 

Association  to  sell  cotitracts  to 
covipensale  employee.-'  out  of  einploy- 
ment:  All  companies  whose  object 
is  to  transact  business  in  Nebraska 
must  obtain  a  license  in  compliance 
wifh  the  statute,  act  1873,  Genl.  Slat. 
1873  c.  33,  p.  42S.  which  exr-epts  life 
insurance.  State  (ex  rel.  National 
Employees  Assoc.)  v.  Barton,  92  Neb. 
66G,  139  N.  W.  225. 

13  Bell  V.  Louisville  Board  of  Fire 
Underwriters,  146  Kv.  841,  143  S.  W. 
388,  Kv.  Stat.  752;  People  v.  State 
Ins.  Co.  19  Mich.  392;  Re  World's 
Ins.    Co.   40    Barb.    (N.   Y.)    499. 

20  Stale  V.  Matthews,  44  Mo.  523; 
Commonwealth  v.  ?Ioc-k  A.  IMut.  B. 
Assn.  10  l^hila.   (Pa.)   554. 

As  to  filing'  certificate  with  county 
clerk  showing  finan.cial  condition: 
Liability  of  president  for  noncom- 
pliance, notwitlistanding-  requirement 
of  another  section  of  the  statute  as  to 
filing-  statement  witii  state  auditor, 
see  Welch  Slave  &  Mercantile  Co.  v. 
Stevenson,  92  Ark.  2(iG,  22  S.  W. 
1000.  Kirbv's  Dig.  of  Ark.  sec.  848, 
859,  4349.  'See  also  as  to  conflict  of 
laws  requiring  annual  statement.  Fire 
Association  of  Pliila.  v.  Love,  101 
Tex.  37(),  108  S.  W.  810,  158  Tex. 
Rev.  Stat.  1895,  art.  3084,  subd.  7. 
Tex.  Laws  1907,  p.  482,  c.  18,  .sec.  8. 

As  to  failure  to  make  annual  re- 
port: loans:  forgery:  false  entries: 
])eriurv,  etc.,  under  N.  Y.  Laws 
1892,  p.  1952,  c.  090,  sec.  44.  See 
People  (ex  rel.  Hegeman)  v.  Corri- 
gan,  195  N.  Y.  1,  87  N.  E.  7f)2,  rev'g 
113  N.  Y.  Supp.  504,  129  App.  Div. 
62,  aff'g  129  App.  Div.  75. 

1  Slate  (ex  rel.  Cowles)  v.  Schive- 
ly,  Commr.  63  Wash.  103,  114  Pac. 
Joyce  Ins.  Vol.  I. — 47.  73 


901,  Hem.  &  Bal.  Code  (Wash.)  sec. 
6119. 

^  People  V.  National  Fire  Ins.  Co. 
27  II un  (N.  Y.)  188,  under  N.  Y. 
act   -June  1,  1880. 

^  ("(inunnnwoalth  v.  Germania  Life 
Ins.  Co.  11  Phila.   (Pa.)   .5-53. 

*  .4k6a»m.— Acts  1886,  1887,  p. 
105,  does  not  apply  to  domestic 
corporations.  Iloadlev  v.  Purifov, 
107  Ala.  276,  30  L.R.A.  251,  18  So. 
220. 

Kentucky. — Competent  for  legis- 
lature to  classify  and  subdassify  and 
may  delegate  })ower  to  municipality 
which  may  constitutionally  impose 
greater  license  tax  on  industrial  than 
on  life  insurance  companies.  Metro- 
politan Life  ins.  Co.  v.  City  of  Paris, 
J  38  Ky.  801,  129  S.  W.' 112.  See 
Northwestern  Mutual  Life  Ins.  Co.  v. 
James,  138  Ky.  48,  127  S.  W.  505, 
under  Ky.  Stat.  sec.  4226.  License 
tax  not  in  lieu  of  ad  valorem  taxes; 
Gernuui  National  Ins.  Co.  v.  City  of 
Louisville,  21  Ky.  L.  Rep.  1179,  54 
S.  W.  732. 

Louisiana. — La.  act  101,  1886,  sec. 
7,  is  constitutional.  State  v.  New 
England  Mut.  Ins.  Co.  43  La.  Ann. 
133,  8  So.  888.  License  tax  oh  in- 
surance companies  need  not  be  equal 
and  uniform  as  lo  all  companies: 
State  v.  Liverpool,  London  &  Globe 
ins.  Co.  40  La.  Ann.  463,  4  So.  504. 
As  to  division  of  companies  into 
several  classes  and  gra<l nation  ac- 
cording lo  amount  of  jiremium  re- 
ceived, see  State  v.  Liverpool,  Lon- 
don &  Globe  Ins.  Co.  40  La.  Ann. 
463,  4  So.  504.  New  Orleans  v. 
Salamander  Co.  25  La.  Ann.  650. 

I\Iiss-issippi. — License  fees  and 
taxes  imposed  cannot  l)e  collected 
from  association  unlaicfnlly  conduct- 
ing    hnsiness.      Adams    v.    Lumber- 


§  327  JOYCE  ON  INSURANCE 

corporate  property,*  for  taxation  to  pay  expenses  of  fire  rati/i* 


man's  Indemnity  Exchange  (1911) 
—  Miss.  — ,  55  So.  882,  40  Ins.  L.  J. 
3819. 

Nebraska. — City  of  Columbus  v. 
Hartford  Ins.  Co.  25  Neb.  83,  41  N. 
W.  140,  under  Neb.  Laws,  1887,  c. 
66.  Payment  to  auditor  illegal  when 
constitution  requires  payment  to 
State  Treasurer.  State  v.  Home  Ins. 
Co.  59  Neb.  524,  81  N.  W.  443.  When 
unconstitutional  sections  of  chapter 
invalidates  entire  act.  State  (ex 
rel.  Cornell)  v.  Povnter,  59  Neb.  417, 
81  N.  W.  431.  Sess.  Laws  1899,  e. 
47,  sees.  36,  37. 

Pennsylvania. — -3ljtna  Fire  Ins. 
Co.  V.  Reading,  5  Pa.  (L.  ed.)  570,  11 
Cent.  Rep.  858,  under  Pa.  act  1873, 
April  4th,  rejiealed  act  May  24,  1887. 

Virginia. — City  may  constitution- 
ally impose  license  tax  on  property 
which  could  be  reached  by  ad  valorem 
tax.  Scottish  Union  &  National  Ins. 
Co.  V.  City  of  Winchester,  110  Va. 
451,  66  So.  84. 

As  to  conditions  as  to  license  fees 
etc.,  see  Joyce  on  Franchises  (ed. 
1909)   sees.  356,  357. 

Workmen's  compensation  act:  In- 
dustrial insurance  law  of  Washing- 
ton, which  requires  certain  contri- 
butions from  employers,  to  be  used 
not  to  meet  expenses  of  the  govem- 
.ment  but  to  recompense  employees 
in  certain  industries,  doas  not  impose 
a  tax  under  the  constitutional  mean- 
ing of  that  word,  although  it  is  in 
the  nature  of  a  license  tax,  and  the 
act  is  not  uncotistitutional  as  creating 
taxation  not  uniform.  State  (ex. 
rel.  Davis-Smith  Co.)  v.  Claussen,  65 
Wash.  156,  37  L.R.A.(N.S.)  466, 
117  Pae.  1101. 

*  Power  of  commissioner  of  insur- 
ance to  grant  license  or  revoke  is 
only  ministerial,  and  not  judicial: 
Hartford  Fire  Ins.  Co.  v.  Commis- 
sioners, 70  Mich.  485,  38  N.  W.  474. 
See  §  328  herein  and  notes. 

On  constitutionality  of  compulsory 
industrial  insurance,  see  note  in  37 
L.R.A.(N.S.)  466. 

7 


5  United  States. — Taxation  of  en- 
forceable credits  or  premiums  due  on 
open  accounts  does  not  constitute 
taking  property  without  due  process 
of  law.  Orient  Ins.  Co.  v.  Board  of 
Assessors  for  Parish  of  Orleans,  221 
U.  S.  358,  55  L.  ed.  769,  31  Sup.  Ct. 
554;  Liverpool,  London  &  Globe  Ins. 
Co.  V.  Board  of  Assessors  for  Parish 
of  Orleans,  221  U.  S.  346,  55  L.  ed. 
762,  act  170,  La.  1898,  sec.  1. 

Excise  tax  upon  entire  net  income 
over  $5,000  is  valid  and  within  power 
of  Congress  even  though  certain  fra- 
ternal, etc.  societies  exempted,  and 
idthough  the  source  of  part  of  income 
is  non-taxable  property.  Flint  v. 
Stone  Tracv  Co.  220  U.  S.  107,  55  L. 
od.  389,  31  Sup.  Ct.  342,  Ann.  Cas. 
192B,  1312,  corporation  tax  law,  act 
of  Congress,  Aug.  5,  1909,  sec.  38, 
Stat,  at  L.  61st  Congress,  pp.  Ill, 
112,  117,  c.  6,  U.  S.  Comp.  Stat. 
Supp.  1909,  pp.  659,  844,  849. 

Excise  tax  under  act  of  Congress, 
Aug.  5,  1909  (36  Stat.  112,  c.  6,  .sec. 
38^  [Comp.  Stat.  1913,  sees.  6300, 
6301]).  Surplus  not  a  "dividend:" 
"income  received:"  deductions.  See 
Connecticut  General  Life  Ins.  Co.  v. 
Eaton  (U.  S.  D.  C.)  218  Fed.  188, 
45  Ins.  L.  J.  258  (case  of  life,  "stock" 
and  "mutual"  company)  ;  Connecti- 
cut Mutual  Life  Ins.  Co.  v.  Eaton 
(U.  S.  D.  C.)  218  Fed.  206,  45  Ins. 
L.  J.  281  (case  of  "mutual"  life  com- 
pany without  capital  stock). 

Income  tax  provided  by  acts  of 
Congress,  June  30,  1864,  and  July 
13,  1866,  on  premiums,  assessments, 
etc.,  is  not  direct  tax,  but  duty  or 
excise:  Pacific  Ins.  Co.  v.  Soule,  7 
Wall.  (74  U.  S.)  433,  19  L.  ed.  95. 
Capital  stock  invested  in  United 
States  bonds  are  not  exempt  from 
taxation  under  laws  of  N.  Y.  1880,  c. 
542;  amended  bv  laws  1881,  c.  361; 
Home  Ins.  Co.  v.  New  York,  119  U. 
S.  129,  30  L.  ed.  350,  8  Sup.  Ct.  1385 
(court  divided).  Compare  Inter- 
national Life  Assur.  Co.  v.  Commis- 
sioners, 28  Barb.  (N.  Y.)  318. 
38 


\ 


PARTIES— THE  INSURER 


§  327 


Arkansas.  —  What  constitutes 
double  taxation.  But  company  liable 
to  assessment  on  capital  even  though 
invested  in  nontaxable  shares  of 
slock  in  another  corporation.  Dallas 
County  V.  Home  Ins.  Co.  97  Ark. 
254,  133  S.  W.  1113.  Kirby's  Dig. 
Ark.  sec.  6902. 

Georgia. — Payment  of  occupation 
or  business  tax  no  exemption  of 
personal  property  from  taxation. 
Georgia  Fire  Ins.  Co.  v.  Citv  of 
Cedartown,  134  Ga.  87,  19  Am.  & 
Eng.  Ann.  Cas.  954,  67  So.  410. 

Iowa. — When  surplus  designated 
as  unassigned  funds  not  a  liability 
Avliich  can  be  deducted  from  taxable 
credits.  Chicago  Life  Ins.  Co.  v. 
Board  of  Review,  131  Iowa,  254,  108 
N.  W.  305,  Code  Supp.  1902,  sees. 
1311,  1333b.  Amount  to  which  stock- 
holders would  be  entitled,  on  distribu- 
tion of  money  and  credits  due  them 
and  found  reserved,  to  pay  or  rein- 
sure policy  holders,  may  be  deducted 
from  taxable  property  under  Iowa 
Code,  sec.  814:  Equitable  Life  Ins. 
'Co.  V.  Board  of  Equalization,  74 
Iowa,  178,  37  N.  W.  141. 

Kentucky. — Exemption  of  capital 
stock  and  accumulated  funds  under 
Ky.  act  May  8,  1886.  repealed  by 
Ky.  Const,  sees.  171,  174.  German 
National  Ins.  Co.  v.  City  of  Louis- 
ville, —  Ky.  — ,  54  S.  W.  732.  What 
classes  of  property  of  insurance  com- 
panies are  liable  to  be  taxed  under 
Kentucky  Statutes  authorizing  tlieir 
taxation  by  municipal  corporations: 
Kenton  Ins.  Co.  v.  City  of  Coving- 
ton, 86  Ky.  213,  5  S.  W.  461.  Lia- 
bility of  company  to  pay  losses  may 
not  be  deducted  from  assets  or  prop- 
erty liable  to  taxation  :  Kenton  Ins. 
Co.  V.  City  of  Covington,  86  Ky. 
213,  5  S.  W.  461. 

Louisiana.- — Notes  and  bills  repre- 
senting money  loaned  at  interest  are 
"'properli/ :"  City  of  New  Orleans  v. 
Mechanics'  &  Merchants'  Mutual  Ins. 
Co.  30  La.  Ann.  876,  30  Am.  Kep. 
232. 

Michigan. — ^Under  Michigan  acts 
200,  Pui).  acts,  1891,  sees.  2^  4,  raort- 

7 


gages  held  by  insurance  companies 
upon  which  they  pay  taxes  are  to  be 
deducted  from  net  assets:  Standard 
Life  &  Accident  Co.  v.  Board  of  As- 
sessors, 91  Mich.  78,  52  N.  W.  17, 
16  L.R.A.  59n,  95  Mich.  466,  55  N. 
W.  112. 

3Iississippi. — Reduction  of  assess- 
ment on  account  of  destruction  of 
property  means  actual  loss  and  does 
not  apply  where  destroyed  property 
is  fully  insured.  Kuhii  Bros.  v.  War- 
ren County,  98  Miss.  879,  54  So.  442. 

Nebraska. — Vahie  of  capital  stock, 
how  ascertained:  when  substantial  in- 
crease of  schedule  unconstitutional: 
What  is  excessive  and  double  tax- 
ation of  property.  Bankers'  Life 
Ins.  Co.  v.  Board  of  P^qualization,  89 
Neb.  469,  131  S.  W.  1034,  Laws  Neb. 
1903c,  73.  Earned  premiums  are 
taxable  as  personal  property  under 
Comp.  Stat.  Neb.  1885,  c.  77:  Stat. 
1885,  e.  13,  see.  25;  Phoenix  Ins.  Co. 
v.  City  of  Omaha,  23  Neb.  312,  36 
N.  W\  522. 

New  Jersey. — What  are  not  ''lia— 
bilities''  to  be  deducted  but  ^^lia- 
bilities on  policies"  subject  to  tax- 
ation. Amounts  apportioned  to  de- 
ferred dividend  policies.  City  of 
Newark  v.  State  Board  of  Equaliza- 
tion, 81  N.  J.  L.  416.  79  Atl.  343,  N. 
J.  Act  May  11,  1906  (Pub.  L.  p. 
418),  N.  J.  L.  1907,  c.  71,  aff'g  77 
Atl.  195.  Tax  is  property  and  not  a 
franchise  tax,  under  N.  J.  act  April 
11,  1886,  Rev.  1156,  15  et  seq. : 
Merchants'  Ins.  Co.  v.  Citv  of  New- 
ark, 54  N.  J.  L.  138,  23  Atl.  395. 
Taxation  of  surplus,  see  State  v. 
Parker,  34  N.  J.  L.  479,  35  N.  -J.  L. 
574. 

New  York. — Franchise  tax:  "Gross 
premiums ;"  reinsurance.  People  (ex 
rel.  Continental  Ins.  Co.)  v.  Miller, 
177  N.  Y.  515.  70  N.  E.  10,  atf  g  and 
modifying  85  N.  Y.  Supp.  1142,  90 
App.  Div.  618.  Reinsurance  reserve 
fund  held  part  of  capital  and  tax- 
able. People  V.  Feitner,  65  N.  Y. 
Supp.  523,  31  Misc.  433,  N.  Y.  Laws 
1896,  c.  908. 

Pennsylvania. — State  tax  upon  en- 
39 


§  327  JOYCE  ON  INSURANCE 

board,^  altliougli  a  requirement  for  payment  of  a  certain  sum  for 
pensions  for  disabled  firemen  is  unconstitutional  and  not  within  the 

tire  amount  of  premiiiins  received  by  -i'iO,  8  N.  Y.  241;  Sun  Mut.  Ins.  Co. 

company  does  vot  co)iflict  with  Fed-  v.    New   York,   8   N.    Y.    241;    as   to 

eral  Constitution:     Insurance  Co.  of  taxation   of  capital   of   mutual   com- 

North  America  v.  Commonwealth,  87  panv,  see  Coit  v.  Connecticut  iMutual 

Pa.  St.  173,  30  Am.  Rep.  332.    Trust  Life  Ins.  Co.  36  Conn.  512;  Mutual 

business  and  life   insurance   business  Life   In.s.    Co.   v.   Jenkins,   16   N.   Y. 

conducted  bi/  same  compani/:     Value  424.     Mutual  life  insurance  com|)any 

of  capital  and  assets  of  latter  cannot  is  taxable  in  town    where    principal 

be  added  to  value  of  capital  stock  of  place  of  business  is  for  stocks,  l)onds, 

former.     Commonwealth  v.  Provident  and    otiier    securities    in     which    its 

Life  &  Trust  Co.  3  Dauph.  Co.  Kep.  funds  and  earnings  have  been  invest- 

130,   6   Lack.    Leg.   N.    140,    9    Pa.  ed :    Rev.  Stat.  Me.  c.  6,  sec.  13 ;  City 

Dist.    R.    479.       See  also  Provident  of  Portland  v.  Union    ^Mutual    Life 

Life  &  Trust  Co.  v.  Board    of    Re-  Ins.  Co.  79  Me.  231,  9  Atl.  013.     As 

vision  of  Taxes,  29  Pa.  Co.  Ct.  Rep.  to    county    mutual    insurance    cora- 

434.     Taxes  to  be  imi/nrm;  constitu-  panics;     exemptions     and     constilu- 

tional    law;    basis    of    raluation    of  lioiuil  law;  organization  for  pecuni- 

capital     stock.        Commonwealth     v.  ary  profit,  see  Iowa  JMutual  Tornado 

Provident  Life  &  Trust   Co.  (57  Leg.  Ins.   Assoc,  v.   Gilbertson,  129  Iowa, 

Intel.  221,  Pa.  act  June  1,  1889,  Pub.  ()-")8,  106  N.  \Y.  153,  Code  .sees.  1642, 

L.  420,  as  am'd  In-  act  June  8,  1891,  17()r),   Code   Supp.  1902,  sec.  1333(1, 

Pub.  L.  229.                                  •  Rev.    Stat.    U.    S.    see.    1977     (civil 

Utah. — Notes  and  accounts  repre-  rights  act)  U.  S.  Comp.  Stat.  1901, 
senting  parts  of  unearned  premiums  ]i.  1259.  Under  Massachusetts  act 
are  taxable,  no  dedii<lio>i  from  1804,  c.  208,  and  Stat.  1805,  c.  283, 
credit  of  future  losses  by  fire  or  as  to  whether  tax  on  capital  stock  of 
cancelations.  Home  Fire  Ins.  Co.  v.  mutuat  life  insui'ance  companies  can- 
Lynch,  19  Utah,  189,  56  Pa.  681.  not  be  taxed  on  unredeemed  guaran- 

Wesi    Virginia. — Whetlier  ine(|ual-  teecai)ital:     Commonwealth  v.  Bi'rk- 

ity   is  produced   in   singling   out    for  shiie  Ins.  Co.  98  Mass.  25. 

taxation:     Franklin  Ins.  Co.  v.  State,  As  to  taxation    of    English    joint 

5  \V.  Va.  349.     See  Cooley  on  Tax-  stock  insurance  companies,  see  Oliver 

ation,  129.                               "  v.   London    Ins.   Co.  100   i\lass.   531; 

Tax  on  gross  receipts  of  premiums  Equitable  Life  Assur.  Soc.  v.  iJishop 

received    by    companies     or    associa-  [1900]  1  Q.  B.  Law  Rep.  177. 

tions  engaged  in  sick  or  funeral  bene-  On  taxation  of  corporate  franchise, 

fit  insurance  is  valid.    Peninsular  In-  see   note   in   57   L.R.A.   34;   on   tax- 

du.strial  Ins.  Co:    v.    State,    01    Fla.  ation    of    capital    stock,    note    in    58 

376,  .55  So.  398.  L.R.A.     513;     on     double     taxation, 

Guarantji  or  secnrilif  companii  notes  in  58  L.R.A.  593,  and  15  L.R.A. 
liable  to  tax  on  franchise  under  Ky.  (N.S.)  })52;  on  corporate  taxation 
Stat.  1899,  sec.  4077;  credits  on  tax.  as  alt'ected  by  contract  clause  in  Fed- 
Fidelity  &  Casualty  Co.  of  N.  Y.  v.  eral  Constitution,  note  in  60  L.R.A. 
Coulter,  115  Ky.  805,  74  S.  W.  1053.  33;  on  constitutional  e(|uality  in  re- 

i\Iutual    insurance    companies    are  lation  to  corporate  taxation,  note  in 

liable  to  taxation  on  amount  of  their  60  L.R.A.  321. 

capital  or  accumulated  premiums  the  ^  Fireman's  Fund  Ins.  Co.  v.  Von 

same  as  other  companies:     Sun  Mut.  Rosenbers',  Commr.  lO.'i  Tex.  571,  132 

Ins.  Co.  V.  Mavor,  8  Barb.    (N.  Y.)  S.  W.  4(i7.     See  §  328  herein. 

740 


PARTIES— THE  INSURER 


§  327 


police  power  of  the  stale '  for  a  liinitation  of  tlie  amount  of  new- 
business  which  may  be  done  and  such  provision  grants  no  exchisive 
privilege  or  imnmnity,  or  franchise  although  it  exempts  corpora- 
tions doing  a  certain  amount  of  industrial  insurance  ^  for  proceed- 
ings for  the  dissolution  of  insiu'ance  companies,^  for  obtaining  the 
appointment  of  receivers  of  insolvent  companies,^"  for  instituting 
proceedings  for  an  injunction  to  restrain  companies  from  continu- 
ing their  business,  and  for  winding  up  the  com})any's  affairs  when 
a  continuance  of  its  business  would  be  hazardous  to  the  policy  hold- 
ers or  the  public, ^^  for  jienalizing  insurer  connected  with  tariff  as- 
sociation, or  such  like  thing,  which  fixes  rates.'^^  And  it  is  held 
that  the  state  may  constitutionally  regidate  rates  and  charges  of 
fire  insurance  companies  doing  business  within  its  borders. ^^  But 
it  is  also  decided  that  the  state  has  no  power  to  fix  rates  to  be  charged 
by  surety  or  fidelity  companies,  as  their  business  is  private  and  is 
neither  of  a  quasi  public  character  nor  a  monopoly.^* 


'^^tna  Fire  Ins.  Co.  v.  Jones,  78 
S.  Car.  445,  13  L.R.A.(N.S.)  1147n, 
125  Am.  St.  Hep.  818,  59  S.  E.  148, 
S.  Car.  Const,  art.  III.  sec.  32. 

On  validity  of  law  imposina;  tax  on 
insurance  companies  for  benefit  of 
foremen,  see  note  in  13  L.R.A.(N.S.) 
1147. 

®  Bush  v.  New  York  Life  Ins.  Co. 
119  N.  Y.  Supp.  79G,  135  App.  Div. 
447,  N.  Y.  Ins.  Laws,  sec.  96,  and 
Laws  1906,  p.  794,  c.  326,  in  Consol. 
Laws,  c.  328,  not  in  violation  of  N.  Y. 
Const,  art.  3,  see.  18. 

9  Kurd's  Rev.  Stat.  111.  1905,  ch. 
73,  sec.  2,  providing'  for  dissolution 
is  constitutional.  Cullom  v.  Traders' 
Ins.  Co.  163  Fed.  45,  89_C.  C.  A.  295. 
Act  of  111.  Feb.  17,  18^4,  providing 
for  dissolution  of  insurance  com- 
panies, is  constitutional:  Chicago 
Life  Ins.  Co.  v.  Auditor,  101  111.  82. 
(^ourt  of  equity  has  power  to  decree 
dissolution  of  a  mutual  l)pnefit  so- 
ciety where  it  violates  a  statute  in  the 
conduct  of  its  affairs;  Chicago  Mut. 
Life  Assn.  v.  Hunt,  127  111.  257,  2 
L.R.A.  549n,  20  N.  E.  55. 

^°  Attornev-General  v.  Atlantic 
Mut.  Ins.  Co.  77  N.  Y.  336;  Jermaiu 
v.  Hendricks  (N.  Y.  1885),  under 
sec.  7,  c.  902,  Laws  1869.  Under  this 
act  the  court  mav  direct  receivers  to 


continue  business:  People  v.  At- 
lantic Mut.  Ins.  Co.  15  Hun  (N.  Y.) 
84,  100  N.  Y.  279.  Appointment  of 
Receiver  under  New  York  act  183(5, 
does  not  di.ssolve  corporation :  Re- 
ceiver of  Globe  Ins.  Co.  6  Paige  (N. 
Y.)   106. 

^^  Cliicago  Life  Ins.  Co.  v.  Auditor, 
101  111.  82,  decided  under  lU.  act 
Feb.  17,  1874;  Fi-y  v.  Charter  Oak 
Co.  31  Fed.  197;  Repul)lic  Life  Ins. 
Co.  v.  Swigert,  135  111.  150,  12 
L.K.A.  328,  25  N.  E.  680,  flecided 
under  111.  Rev.  Stat.  1889,  c.  73,  see. 
103,  holds  that  such  act  is  not  in 
rioktiion  of  contract  clauses  of  Fed- 
eral  Constitution. 

^^  German  Alliance  Ins.  Co.  v. 
Hale,  219  U.  S.  307,  31  Sup.  Ct. 
246,  55  L.  ed.  229,  40  Ins.  L.  J.  333, 
Ala.  Code  1896,  sees.  2619,  2620,  stat- 
ute constitutional.  See  Joyce  on 
Monopolies  (ed.  1911)  sees.  370,  421. 
See  also  §  329  lierein. 

^^  (lerman  Alliance  Ins.  Co.  v. 
Barnes  (U.  S.  C.  C.)  189  Fed.  769, 
40  Ins.  L.  J.  2176,  Kan.  Laws  1909, 
c.  152. 

^*  American  Suretv  Co.  v.  Shallen- 
berger  (U.  S.  C.  C")  183  Fed.  636, 
40  ins.  L.  J.  857,  and  note,  864,  Neb. 
Laws  1909,  e.  27,  held  unconstitu- 
tional. 


741 


§  328                                JOYCE  ON  INSURANCE 

§  328.  Same   subject:   foreign  companies. — The    legislature  has 
power  to  prescribe  the  conditions  upon  which  foreign  insurance 

companies  shall  be  permitted  to  transact  business  within  its  terri- 
tory, and  effect  will  be  given  such  statutes,  when  not  unconstitu- 
tional, in  all  the  courts  of  the  United  States.^*    So  a  state  may  pre- 

^^  United     States. — Gerniau     Alii-  '-state"  so  far  as  foreign  insurance 

ance    Ins.    Co.    v.    Hale,    219    U.    S.  companies   are   concerned.      State  v. 

307,    55    L.    ed.    229,    31    Snp.    Ct.  Bri.ogs,  116  Ind.  55,  18  N.   E.   395. 

246;     Hunter    v.     Mutual     Keserves  Statute  of  Indiana  is  constitutional. 

Life    Assoc.    218    U.    S.    573,    54   L.  Blackmer  v.  Roval  Ins.  Co.  115  Ind. 

cd.  11.55,  ;jl  Sup.  Ct.  127,  30  L.R.A.  291,  17  N.  E.  580;  Phrenix  Ins.  Co.  v. 

(X.S.)  686,  40  Ins.  L.  J.  172;  Swing  Burdett,  112  Ind.  204,  13  N.  E.  705; 

V.    Western   Lumber   Co.   205   U.    S.  Farmers'  and  Mechanics'  Ins.  Co.  v. 

275,    51    L.    ed.    799,    27    Sup.    Ct.  Harrah,  47  Ind.  236. 

497;  Security  Mutual  Life  Ins.  Co.  v.  Kansas. — State  v.  Phipps,  50  Kan. 

Prewitt,   202   U.    S.   246,   50   L.   ed.  69,  34  Am.  St.  Rep.  152,  18  L.R.A. 

1013,   26    Sup.   Ct.    619;    New  York  654,  31  Pac.  1097. 

Life  Ins.  Co.  v.  Fletcher,  117  U.  S.  Michigan. — Conditions  as  to  trans- 

519,  29  L.  ed.  934,  6  Sup.   Ct.  837  acting  business  may  be  reasonable  or 

(cited  in  Mutual    Benefit    Life    Ins.  unreasonable.     Hartford     Fire     Ins. 

Co.  V.  Robinson,  54  Fed.  585;  Wall  Co.  v.  Commissioner  of  Insurance,  70 

V.  Equitable  Life  Assur.  Soc.  32  Fed.  IMicli.  485. 

276) ;  Paul  v.  Virginia,  8  Wall.  (75  Mif^souri. — Cravens   v.    New   York 

U.  S.)  168,  19  L.  ed.  357;  Lafavette  Life  Ins.  Co.  148  Mo.  583,  53  L.R.A. 

Ins.  Co.  V.  French,  18  How.   (59  U.  305,  71  Am.  St.  Rep.  628.  50  S.  W. 

S.)    404,  15  L.  ed.  451;   ]\Ierchant.s'  519,  aff'd  in  New  York  Life  Ins.  Co. 

Life  Assoc,  of  U.  S.  v.  Yoakum,  98  v.  Cravens,  178  U.  S.  389,  44  L.  ed. 

Fed.    251,    39    C.    C.    A.    56;    Man-  1116,   20   Sup.    Ct.    762;    Da^gs    v. 

Chester  Fire  Ins.  Co.  v.  HaiTiott  (U.  Orient    Ins.    Co.   136    Mo.     382.    35 

S.  C.  C.)   91  Fed.  711;  Ehrmann  v.  L.R.A.  227,  58  Am.  St.  Rep.  368,  38 

Teutonia  Ins.  Co.  1  Fed.  471,  477.  S.  W.  851,  aff'd  in  Orient  Ins.  Co.  v. 

Alabama. — Hoadlev     v.      Purifov,  Dagg-s,  172  U.  S.  557,  43  L.  ed.  552, 

107  Ala.  276,  30  L.R.A.  351,  18  So.  19  Sup.  Ct.  281   (see  next  following 

220;   City  of  Montgomery  v.  Royal  note  herein). 

Exchange  Assur.   Corp.   of  London,  Nebraska. — State  ex  rel.  Brecken- 

5  Ala.  App.   318,  59   So.  508.     But  ridge   v.    Fleming,   70   Neb.   523,   97 

such  acts  do  not  prevent  transacting  N.  W.  1063. 

business  not  in  the  line  of  insurance.  New  Jersei/. — Columbian  Fire  Ins. 

Boulware  v.   Davis,   90   Ala.   207,   9  Co.  v.  Kinyon,  37  N.  J.  L.  33. 

L.R.A.  601,  8  So.  84.  New      Tork.— People       (ex      rel. 

Arkansas. — Federal  Union  Ins.  Co.  !Moore)   v.  Holmes,  135  N.  Y.  Supp. 

V.  Flemister,  95  Ark.  389,  130  S.  W.  467,  151  App.  Div.  257. 

574  (mutual  company).  Pennsylvariia.— hist     v.     Common- 

Connecticut. —State    v.    Travelers'  wealth,  il8  Pa.  St.  322,  12  Atl.  277. 

Ins.    Co.    73    Conn.  2o5,  57  L.R.A.  South  Carolina. — Owen  v.  Bankers 

481,  47  Atl.  299.             .  Life  Ins.  Co.  84  S.  Car.  253,  66  S. 

Illinois.- — Indiana    Millers    Mutual  E.  290;  New  York  Life  Ins.   Co.  v. 

Fire  Ins.  Co.  v.  People,  65  111.  App.  Bradley,  83  S.  Car.  418,  65  S.  E.  433. 

355.  Wisconsin. — Presbvterian       Minis- 

7«f?m«^.— Swing  v.  Hill,  165  Ind.  tors'  Fund  v.  Thomals,  126  Wis.  281, 

411,  75  N.  E.  658.     Under  Indiana  110  Am.  St.  Rep.  919,  105  N.  W.  801 

statutes,   District   of   Columbia   is   a  (effect    given    when    constitutional) ; 

742 


PARTIES— THE  INSURER 


§  328 


scribe  the  liabilities  under  which  corporations  created  by  its  laws, 
and  foreign  corporations,  shall  conduct  their  business  within  the 
state  in  the  future.  Its  power  to  impose  conditions  upon  foreign 
corporations  is  as  extensive  as  the  power  over  domestic  corporations, 
for  that  which  a  state  may  do  with  corporations  of  its  own  creation 
it  may  do  with  foreign  corporations  admitted  into  the  state. ^^    And 


Fire  Department  v.  Helfenstein,  16 
Wis.  136. 

See  also  3  Kent's  Cominentaries, 
13th  ed.  257,  note  b ;  Joyce  on  Fraii- 
<-liises  (ed.  1909)  sees.  351,  352;  note 
24  L.R.A.  298,  on  restrictions  on  bus- 
iness of  foreign  insurance  companies; 
art.  13,  Law  Notes  (Sept.  1909)  ad- 
dress by  Hon.  George  W.  Wicker- 
sliara. 

A  state  may  impose  such  con- 
ditions as  it  pleases  upon  the  doing 
of  any  business  by  foreigTi  insurance 
companies  within  the  state.  Allgeyer 
V.  Louisiana,  165  U.  S.  578,  41  L. 
ed.  832,  17  Sup.  Ct.  427  {cited  in 
Eastern  Building  &  Loan  Assoc,  v. 
Bedford,  88  Fed.  10;  Commonwealth 
V.  Nutting,  175  Mass.  154,  155.  78 
Am.  St.  Rep.  483,  55  N.  E.  895: 
(Commonwealth  Ins.  Co.  v.  Swift,  174 
Mass.  226,  229,  54  N.  E.  1097;  Com- 
monwealth V.  Roswell,  173  Mass.  119. 
122,  53  N.  E.  132).  Domestic  stat- 
utes of  general  application  control 
foreign  companies  and  their  business, 
(luardian  Trust  Co.  v.  Strauss,  123 
N.  Y.  Supp.  852,  139  App.  Div.  884. 
An  insurance  company  doing  busi- 
ness in  another  state  is  subject  as  to 
such  business  to  the  laws  of  that 
state.  New  York  Life  Ins.  Co.  v. 
Fletcher,  117  U.  S.  519,  29  L.  ed. 
934,  6  Sup.  Ct.  837  (cited  in  Mutual 
Benefit  Life  Ins.  Co.  v.  Robinson,  54 
Fed.  585;  Wall  v.  Equitable  Life 
Assur.  Soc.  32  Fed.  276).  Foreign 
corporation  must  comply  with  state 
law  notwithstanding  contrary  pro- 
visions in  its  contracts.  Smoot  v. 
Bankers'  Life  Assoc.  138  Mo.  App. 
438,  120  S.  W.  719.  See  §§  194  (g), 
(h)  herein. 

A  state  legislature  may  define  its 
public  policjf  in  respect  of  life  in- 
surance and  impose  such  conditions 


on  the  transaction  of  that  business 
within  the  state,  a.s  is  deemed  best. 
John  Hancock  Mutual  Life  Ins.  Co. 
V.  Wan-en,  181  U.  S.  73,  45  L.  ed. 
755,  21  Sup.  Ct.  535,  30  Ins.  L.  J. 
623,  626,  per  :\Ir.  Chief  Justice 
Fuller,  case  affirms  59  Ohio  St.  45, 
51  N.  E.  546. 

Rig  Jit  of  foreign  surety  company 
to  do  business  under  Michigan  stat- 
utes. See  Wells  v.  United  States 
Fidelity  &  Guaranty  Co.  of  Bait.  160 
Mich.  213,  135  N.  W.  57,  Comp. 
Laws,  Mich.  sec.  10,442,  and  Pul). 
acts  1901,  no.  206,  as  am'd  by  Pub. 
acts  1903,  no.  34,  and  Pub.  acts 
1907,  no.  310. 

Fraternal  and  benevolent  corpora- 
tion created  by  Congress  for  busi- 
ness in  District  of  Columbia,  cannot 
do  business  in  state  in  violation  of 
its  statutes.  Layden  v.  Endowment 
Bank,  Knights  of  Pvthias,  128  N. 
Car.  546.  39  S.  E.  47,  Pub.  Law:5  N. 
Car.  1899.  c.  62,  sec.  1.  Providing 
how  foreign  corporation  could  be- 
come domestic  corporation. 

As  to  authority  of  foreign  mutual 
hail  companies  to  do  business  in 
state  where  one  statute  prohibits  it 
and  a  subsequent  statute  permits  it 
on  certain  conditions:  Conflict  of 
laws.  State  (ex  rel.  Farmers' 
:\rutual  Hail  Ins.  Co.)  v.  Cooper,  18 
N.  Dak.  583,  120  N.  W.  878. 

^^  Orient  Ins.  Co.  v.  Daggs,  172  U. 
S.  557,  43  L.  ed.  552,  19  Sup.  Ct.  281, 
28  Ins.  L.  J.  97.  alfg  Daggs  v. 
Orient  Ins.  Co.  136  Mo.  382,  35 
L.R.A.  227,  58  Am.  St.  Rep.  368,  38 
S.  W.  85,  26  Ins.  L.  J.  67. 

Cited  in:  fruited  Stales. — Davton 
Coal  &  Iron  Co.  v.  Barton,  183  U.  S. 
23,  24,  46  L.  ed.  64,  22  Sup.  Ct.  5; 
New  Yoik  Life  Ins.  Co.  v.  Cravens, 
178  U.  S.  389,  396,  44  L.  ed.  1122,  20 


743 


§  328  JOYCE  ON  INSURANCE 

the  state  may  also  prohibit  foreign  companies  from  transacting 

business  within  its  territory  and  enforce  its  prohibition  by  penal 
enactments."    It  is  held,  however,  that  the  power  to  exclude  foreign 

Sup.  Ct.  962,  29  In.s.  L.  J.  876;  St.  Fire  Assn.  v.  New  York,  119  U.  S. 

Louis,  Iron  Mountain  &  St.  Paul  Rv.  110,  30  L.  ed.  342,  7  Sup.  Ct.  108; 

Co.  V.  Paul.  173  U.  S.  404,  409,  43  Dovle  v.  Continental  Fire    Ins.    Co. 

L.  ed.  748,  19  Sup.  Ct.  419  (right  to  94  U.  S.  537,  24  L.  ed.  148. 

contract    not    absolute    but    may    be  Illinois. — Indiana    Miller.s'    Mutual 

fiubjeeted  to  the  restraints  demanded  Fire  Ins.  Co.  v.  People,  170  111.  474, 

by  the  safety    and    welfare    of    the  49  N.  E.  364   (penalty  may    be    re- 

fctate)  ;  Union   Central  Life  Ins.  Co.  ceived) ;  Pierce  v.  People,  106  111.  11, 

V.   Skipper,  115  Fed.  69,   72,  .52   C.  46  Am.  Rep.  683;  Cincinnati  Mutu- 

C.    A.    666;    McClain  v.   Provident  al   Health  Ins.  Co.  v.  Rosenthal,  55 

Savings  Life  Assur.  Soc.  110  Fed.  80,  111.  85,  8  Am.  Rep.  626. 

92.  49  C.  C.  A.  44   (s.  c.  184  U.  S.  7x'a».s«.s.— State  v.  Phipps,  50  Kan. 

699,  46  L.  ed.  765,  23  Sup.  Ct.  938) ;  609.  18  L.R.A.  6o4,  34  Am.  St.  Rep. 

Corlev  V.  Travelers'  Protective  A.«?soc.  152,  31  Pac.  1097. 

105  Fed.  854,  859,  46  C.  C.  A.  283.  Marifkind.— Talbot    v.    Fidelity    & 

^rA:a»^«s.— Woodson   v.   State,   69  Casualtv  Co.  74  Md.  536,  13  L.R.A. 

Ark.  521,  529,  65  S.  W.  465.              '  584  and  note.  22  Atl.  395. 

Ma.^sachusetts. — Commonwealth    v.  Missi-^sippi. — Closes    v.     State,    65 

Nutting,  175  Mass.  1.54,  156,  78  Am.  Miss.    562,   3    So.    140,    under    Code 

St.  Rep.  483,  55  N.  E.  805.  Miss.  1880,  sees.  1073-81. 

Missouri. — Cravens    v.    New    York  Missouri. — Cravens    v.    New    York 

Life  Ins.   Co.  148  Mo.  583,  604,  53  Life  Ins.  Co.  148  Mo.  583,  53  L.R.A. 

L.R.A.  30.5,  71  Am    St.  Rep.  628,  50  30.5,  71  Am.  St.  Rep.  628,  50  S.  \Y. 

S-  ^-  510.  519  (aft'-d  New  York  Life  Ins.  Co.  v. 

^  Tennessee.— Conimeutal   Fire   Ins.  Cravens,   178   U.   S.   389,   44  L.   ed. 

J?f-7--o  ?"^''-v'''-,y--  T''"''-<J?^'i'^'  J116,  20  Sup.  Ct.  1162,  29  Ins.  L.  J. 

64  L.R.A.   4o7,  lO.j    Am.    St.    Rep.  q7r\  .   Qf.,f^  ,,    xj^^  v^^u  t  :f^  t„^ 

mn    ^n  o    itt    nn     XT    ^.u  T5  •*•  i    e  ^'^6)     btate  V.  JNew   York  Jjite  Jns. 

916,  i9  S.  W.  119:  North  British  &  n^     Q^    \\^     on    i4-\               u- 

-T,ir    '       xi      T         r*              n     ■        TA«  Co.    81    Ato.    89    (the    penalties    are 

Mercantile    Jns.    Co.    v.    Craisr,    lOo  •  •,    i               -^     )          \^      c^.   . 

Tenn.  621,  630,  62  S.  W.  155:  State  ^^f^f  «"  ^^^J^f  **l^^°t) ;   State  v. 

(ex   rel.   Actor)    v.   Schlitz    Brewing  Charter    Oak    Life    Ins.    Co.    9    Mo. 

Co.  104  Tenn.  715,  732,  78  Am.  St.  '"^PP-  '^"■^• 

Rep.  941,  59  S.  AV.  103.1.  "^^"'  ^(^^^- — \N  oodward  v.  [Mutual 

^United  States.— Yinniev  v.  Mutu-  Reserve  Life  Ins.  Co.  178  N.  Y.  485, 

al  Reserve  Life  Ins.   Co.  218  U.   S.  ''I  N.  E.  10. 

57.3,  584,  54  L.  ed.  1155,  31  Sup.  Ct.  T^r^.s-.— Smith    v.    State,    18    Tex. 

127,   30   L.R.A.  (N.S.)    686,   N.    Car.  App.  69. 

act,  1899;  Orient  Ins.  Co.  v.  Daggs,  Ftirjhind. — See   Hagain    v.    Corap- 

172  U.  S.  557,  43  L.  ed.  552.  19  Sud.  toir  D'Escompte  de  Pans,  23  Q.  B. 

Ct.  281,  28  Ins.  L.  J.  97.  aff'g  Daggs  Div.  519. 

v.  Orient  Ins.   Co.  136  ^lo.   382,  35  Sufficiency  of  complaint  to  recover 

L.R.A.  227,  58  Am.  St.  Rep.  368.  38  penalty.       See    Sandell    v.    Atlanta 

S.  W.  85,  26  Ins.  L.    J.    67;    Horn  I\Iutual  Life  Ins.  Co.  53  S.  Car.  241, 

Silver    ]\lining    Co.    v.     New     York  31  S.  E.  230. 

State,  143  U.  S.  305,  314,  36  L.  ed.  Statute  is  in  nature  of  a  pemdtif 

164,  12  Sup.  Ct.  403,  per  Field,  J.;  where  it  prohibits  issuing  license  to 

Norfolk  &  Western  R.  R.  v.  Pennsyl-  life   company   where   salary   of   any 

vania,  136  U.  S.  114,  118,  34  L.  ed.  officer     thereof     exceeds     a     certain 

394,  10   Sup.   Ct.   958;   Philadelphia  amount.      State    (ex    rel.     Equitable 

744 


PARTIES— THE  INSURER 


§  328 


corporations  from  doing  business  within  the  state,  or  to  exact  con- 
ditions for  allowing  it  to  do  business  therein  is  limited  only  where 
the  corporation  is-  employed  by  the  Federal  government  or  where 
itri  business  is  strictly  commerce,  interstate  or  foreign, ^^  or  where 
such  corporation  is  created  by  Congress  or  engaged  in  business  of 
a  Federal  nature.^^ 

Corporations  engaged  in  the  marine  insurance  business  are  with- 
in the  rule  a})plicable  to  other  insurance  companies  and  may  like- 
wise be  allowed  to  enter  the  state  only  on  performance  of  specified 
conditions  or  they  may  be  entirely  excluded  therefrom.^"  So  the 
state  may  impose  upon  life  or  health  insurance  companies  as  a  con- 
dition precedent  of  doing  business  in  the  state,  the  obligation  to 
pay  damages  and  attorneys'  fees  in  case  of  default  in  the  payment 
of  losses.^ 

It  is  held  that  the  legislature  may  restrict  the  business  of  such 
corporations  to  i)articular  localities,  and  may  require  security  for 


Life  Assur.   Soc.)    v.   Vandiver,  222       Minnesota. — Seamans  v.   Christian 
Mo.  206,  267,  121  S.  W.  45,  63.  Bros.  Mill.  Co.  66  Minn.  205,  207,  68 

It  is  noteworthy  that  an  act  passed   N.  W.  1065. 


in  1814  in  New  York,  Laws  N.  Y. 
3814.  c.  49  (passed  .March  13t.h, 
1814),  was  the  first  enactment  of  its 
kind  in  that  state  and  was  entitled 
"An  act  to  prevent  foveigiiers  from 
becoming  insurers  in  certain  cases  in 
this  state."     There  is  a  special  refer- 


Missouri. — Cravens  v.  New  York 
Life  Ins.  Co.  148  Mo.  583,  614,  58 
L.R.A.  305,  314,  71  Am.  St.  Rep. 
628,  50  S.  W.  519. 

New  Jersey. — Hickman  v.  State, 
62  N.  J.  L.  499,  504,  41  Atl.  942. 

^  Fidelitv    Mutual    Life    Assoc,    v. 


ence  by  name  to  a   certain   English   Mettler,  185  U.  S.  308,  46  L.  ed.  922, 
company   or   association,   and   it   ex-   22  Sup.  Ct.  662. 


pressly  prohibited  all  foreign  in- 
surances against  tire.  Chancellor 
Kent,  hoAvevcr,  dissented  to  its  pas- 
sage in  the  council  of  revision. 

^^  Pembina  Consolidated  Silver 
Mining  &  M.  Co.  325  IT.  S.  181,  8 
Sup.  Ct.  737.  31  L.  ed.  650. 

19  New  York  Life  Ins.  Co.  v.  Brad- 
ley, 83  S.  Car.  418,  65  So.  438. 

^°  Hooper  v.  California,  155  U.  S. 
648,  39  L.  ed.  297,  15  Sup.  Ct.  207. 

(,:ilcd  in:  Untied  Stales. — Nutting 
v.  Massachusetts,  183  U.  S.  553,  556, 
.46  L.  ed.  324,  326,  22  Sup.  Ct.  238; 
Noble  V.  ]\Iitche]l.  164  U.  S.  367,  370, 
41  L.  ed.  472,  473,  17  Sup.  Ct.  110. 

Illinois. — Indiana  Millers  Mutual 
Fire  Ins.  Co.  v.  People,  65  111.  Apr'. 
355,  358. 

Massachusetts.— ^Commonwealth  v. 
Nuttino-.  175  Mass.  156,  78  Am.  St. 
Rep.  483,  55  N.  E.  895. 

745 


Cited  in:  t'nited  States. — Carrol 
v.  Greenwich  Ins.  Co.  199  U.  S.  401, 
409,  50  L.  ed.  246,  249,  26  Sup.  Ct. 
ReiL    66. 

Illinois. — North  American  Ins.  Co. 
V.  Yates,  234  111.  272,  276.  73  N.  E. 
423. 

Kansas. — Alliance  Co-op.  Ins.  Co. 
V.  Carbett,  69  Kan.  564,  571,  77  Pac. 
108. 

Missouri. — Keller  v.  Home  L.  Ins. 
Co.  198  Mo.  440,  459,  95  S.  W.  903. 

Tennessee. — Continental  F.  Ins. 
Co.  V.  Whitaker,  112  Tenn.  151,  171, 
64  L.R.A.  457,  105  Am.  St.  Rep.  916, 
79  S.  W.  119. 

On  right  of  burglary  and  theft  in- 
surance comi)anies  to  do  business  in 
foreign  states,  see  note  in  46  L.R.A. 
(N.S.)  563. 


§  328  JOYCE  ON  INSURANCE 

the  performance  of  its  contracts  as  shall  be  deemed  for  the  best  in- 
terests of  its  own  citizens,  since  a  foreign  corporation  has  no  abso- 
lute right  of  recognition  in  other  states ;  ^  it  doas  business  in  a  state 
other  than  that  of  its  incorporation,  not  by  right  but  by  grace,  and 
.  must  conform  to  its  laws.^  A  corporation  is  a  mere  creature  of 
local  law;  it  can  have  no  legal  existence  beyond  the  limits  of  the 
state  of  its  creation,  and  is  entitled  to  no  recognition  in  other  states, 
except  upon  the  principle  of  comity.  It  is  not  a  citizen  within 
those  clauses  of  the  Federal  Constitution  which  provide  for  citizens 
of  each  state  all  the  privileges  and  immunities  of  citizens  in  the 
several  states.*  But  an  insurance  company  having  capital  stock 
and  stockholders  for  whose  benefit  it  was  created  may  be  admitted 
to  transact  business  on  the  assessment  plan  in  Ohio,  if  authorized 
to  transact  such  business  under  the  laws  of  the  state  which  created 
it,  although  there  is  no  statutory  authority  given  to  Ohio  stock  cor- 
porations to  do  such  business.^ 

2  Bank  of  Augusta    v.    Earle,    13  Citv  Fire  Ins.  Co.  v.  Basford,  27  S. 

Pet.   (38  U.  S.)  ^519,  538,  589,  10  L.  Dak.  164,  130  N.  W.  U. 

P(j   274.  -A-  foreign  insurance  company  does 

On  restrictions  on  business  of  for-  not    acquire    any    vested    rights    by 

eign  insurance  companies,  see  note  in  complying  with   existing   police   reg- 

24  L.R.A.  298.  ulations  or  comity  laws  which   can- 

"  3  Cravens  v.   New  York  Life  Ins.  not  be  affected  by  subsequent  changes 

Co    148  Mo.  583,  53  L.R.A.  305,  71  in   such   regulations   or   laws.     State 

Am.  St.  Rep.  628,  50  S.  W.  519,  aff'd  (ex  rel.    Crow)    v.   Firemen's   Fund 

in  New  York  Life  Ins.  Co.  v.  Cravens,  Ins.  Co.  152  Mo.  1,  52  S.  W.  59,),  4;) 

178   U.   S.  389,  44  L.  ed.  1116,  20  L.R.A.  363. 

Sup.  Ct.  762.  A  foreign  insurance  company  do- 

4  Paul  v.  Virginia,  8  Wall.   (75  U.  ina-  business  in  a  state,  without  cora- 

S.)  168,  19  L.  ed.  357.     See  Bank  of  plying  with,  and  in  defiance  of,  its 

Augusta  V.  Earle,  13  Pet.  (38  U.  S.)  laws,    cannot    insist    that    its    courts 

538^^  10  L.  ed.  274.     See  2  Morawetz  must,  as  an  exercise  of  comity,  give 

on  Corporations,  sec.  973;  1  Thomp-  effect  to  its  contracts  made  with  citi- 

son  on  Corporations,  see.  12.  zens    of    the    state.      Commonwealth 

See  also  Orient  Ins.  Co.  v.  Daggs,  :\[ut.    Fire   Ins.    Co.   v.    Hayden,   60 

17'^    U     S     557,   43   L.    ed.    552,    li)  Neb.  636,  83  Am.   St.  Rep.  545;  83 

Sup.  a.  281,  28  Ins.  L.  J.  97   (cor-  N.  W.  922. 

poration     not     citizen     within     14th  See     also     American     Automobile 

am'd't  U.  S.  Const.);  Equitable  As-  Ins.   Co.  v.   Palmer,  174  Mich.   295, 

sur.  Soc.  V.  Frommhold,  75  111.  App.  140  N.  W.  557,   42  Ins.  L.   J.  885, 

143    (interstate    comity) ;    Common-  where  the  right  of  the  in.surer  to  issue 

wealth  V.   Gregory,  121  Ky.  256,  89  a  so-called  liability  insurance  on  au- 

S.  W.  168   (not  "a  citizen  within  U.  tomobiles  as  a  matter  of  comity  was 

S.  Const,  art.  4,  sec.  2)  ;  Webster  v.  denied.     Examine   as   to   comity   the 

Columbian  National  Life  Ins.  Co.  116  opinion    of    Walker,    J.,    in    United 

N.  Y.  Supp.  404,  131  App.  Div.  837  States   Fidelity   Sc   Guaranty   Co.   v. 

(is  a  citizen  of  New  York  so  far  as  Linehan,  73  N.  H.  41,  58  Atl.  956,  33 

litigation  is  concerned),  aff'd  (mem.)  Ins.  L.  J.  1023. 

196  N.  Y.  523,  89  N.  E.  1114;  Queen  ^  state  (ex  rel.  National  Life  As- 

746 


PARTIES— THE  INSURER 


§  328 


Statutes  prohibiting  foreign  insurance  companies  from  carrying 
on  business  except  on  compliance  with  ]3rescribed  conditions,  such 
as  obtaining  a  hcense  therefor,  etc.,  do  not  conflict  with  the  guar- 
anty under  the  Federal  Constitution  of  privileges  and  immunities 
to  citizens  in  the  several  states;  ^  nor  do  such  statutes  conflict  with 


soe.)  V.  Matthews,  58  Ohio  St.  1,  40 
L.R.A.  418,  49  N.  E.  1034,  under 
Ohio  Rev.   Stat.  sec.  3630e. 

On  laws  of  state  of  incorporation 
as  limitation  on  powers  of  insurance 
company,  see  notes  in  63  L.R.A.  853, 
and  52L.R.A.{N.S.)   278. 

6  Paul  V.  Viroinia,  8  Wall.  (75  U. 
S.)  168,  19  L.  ed.  357;  Tatem  v. 
Wright,  23  N.  J.  L.  (3  Zab.)  429. 

Such  statutes  are  constiiuiional. 

United  States. — Orient  Ins.  Co.  v. 
Board  of  Assessors  for  Orleans,  221 
U.  S.  358,  55  L.  ed.  769,  31  Sup.  Ct. 
554  (ease  atfirms  124  La.  872,  fiO 
So.  778) ;  Liverpool  &  London  & 
Globe  Ins.  Co.  v.  Board  of  Assessors 
for  Orleans,  221  U.  S.  346,  55  L.  ed. 
762,  31  Sup.  Ct.  550,  L.R.A.1915C, 
903  (ease  affirms  122  La.  98,  47  So. 
415)  ;  Fidelity  Mutual  Life  Assoc,  v. 
Mettler,  185  t.  S.  308,  46  L.  ed.  922, 
22  Sup;  Ct.  662;  John  Hancock  Mu- 
tual Life  Ins.  Co.  v.  Warren,  181  U. 
S.  73,  45  L.  ed.  955,  21  Sup.  Ct.  535, 
30  Ins.  L.  J.  623,  case  aflfirms  59 
Oliio  St.  45,  51  N.  E.  546. 

Iowa. — Parker  v.  C.  Lamb  &  Sons, 
99  Iowa,  265,  34  L.R.A.  704,  68  N. 
W.  686. 

Kentuckii. — Commonwealth  v.  111. 
Life  Ins.  Co.  159  Ky.  589,  167  S.  W. 
909. 

Missouri. — Cravens  v.  New  York 
Life  Ins.  Co.  148  Mo.  583,  53  L.R.A. 
305,  71  Am.  St.  Rep.  628,  50  S.  W. 
519,  aff'd  in  New  York  Life  Ins.  Co. 
V.  Cravens,  178  U.  S.  389,  44  L.  ed. 
1116,  20  Sup.  Ct.  762. 

New  York. — Bush  v.  New  York 
Life  Ins.  Co.  63  Misc.  89,  116  N.  Y. 
Supp.  1056;  Fire  Department  of 
City  of  New  York  v.  Stanton,  51  N. 
Y.  Supp.  243,  28  App.  Div.  334. 

South  Carolina. — Saudall  v.  Atlan- 
ta Mutual  Life  Ins.  Co.  53  S.  Car. 
241,  31  S.  E.  230. 

74 


Statutes  merely  regulating  the 
methods  of  conducting  the  business 
of  insurance,  foreign  and  domestic, 
are  but  the  exercise  of  tlie  police 
power  of  the  state  in  the  interests  of 
the  public,  and  are  valid  and  con- 
stitutional. Swinii'  V.  ]Munson,  191 
Pa.  St.  582,  58  L.R.A.  223.  71  Am. 
St.  Rep.  772,  43  Atl.  342.  See  eases 
throughout  this  .section. 

A  law  of  a  state  requiring  insur- 
ance companies  of  other  states  or 
countries  to  file  security,  or  take  out 
a  license,  or  pay  a  specific  tax  or  cer- 
tain fees  and  percentages,  before 
they  can  issue  policies  in  the  state,  is 
constitutional.  Home  Ins.  Co.  v. 
City  Council  of  Augusta,  93  U.  S. 
116,  23  L.  ed.  825. 

Difitinguished  in  State  v.  Hipp,  38 
Ohio  St.  226. 

Cited  in  Postal  Telegraph  Cable 
Co.  V.  Charleston,  153  U.  S.  692, 
695,  38  L.  ed.  871,  873,  4  Inters.  Com. 
Rep.  639,  14  Sup.  Ct.  1094;  Western 
Union  TelegTaph  Co.  v.  Charleston, 
56  Fed.  421 ;  Bishoft"  v.  State,  43  Fla. 
67,  80,  30  So.  808;  Badger  v.  City 
of  New  Orleans  (State  ex  rel.  Badger 
V.  New  Orleans)  49  La.  Ann.  804, 
843,  37  L.R.A.  555,  21  So.  870. 

When  unconstitutional:  See  Atlas 
Mutual  Ins.  Co.  v.  Fisheries  Co.  6 
Penn.  (Del.)  256,  68  Atl.  4;  Mutual 
Reserve  Fund  Life  Assoc,  v.  City 
Council  of  Augusta,  109  Ga.  73,  35 
S.  E.  71. 

Whether  constitutional  or  not, 
quaere?  Katz  v.  Herrick,  12  Idaho, 
1,  86  Pac.  873. 

Are  mere  police  regulations.  State 
(ex  rel.  Equitable  Life  Assur.  Soc.) 
V.  Vandiver,  222  Mo.  206,  267,  121 
S.  W.  45,  63. 

As  to  police  power,  see  Joyce  on 
Franchises   (ed.  1909)   sec.  366,  and 


§  328 


JOYCE  ON  INSURANCE 


the  statutes  providing  that  Congress  sliall  have  power  to  regulate 
commerce  with  foreign  nations  and  between  the  states,  since  issuing 
a  pohcy  of  insurance  is  not  commerce,  notwithstanding  the  dom- 
icil  of  the  parties  be  in  different  states.'  Nor  is  marine  insurance 
commerce,  or  an  instrumentaUty  thereof,  but  is  merely  an  incident, 
and  the  state  has  power  to  prescribe  and  enforce  conditions  upon 
which  foreign  companies  may  transact  business,  notwithstanding 
the  constitutional  provision  as  to  interstate  commerce.*    There  is  a 


Exclusion  of  foreign  companie.s  as 
affecting  commerce,  see  note  2-t 
L.l^'.A.  :512. 

^  Hooper  v.  California,  155  U.  S. 
648,  3!)  L.  ed.  297.  15  Sup.  Ct.  207, 
40  Cent.  L.  J.  228.  The  court,  per 
White,  J.,  said:  "The  business  of 
insurance  is  not  commerce.  The  con- 
tract of  insurance  is  not  an  instru- 
mentality of  commerce.  The  mak- 
ing of  such  a  contract  is  a  mere  in- 
cident of  commer('ial  intercourse,  and 
J.  172;  Nutting  v.  Massaciiusetts,  183  in  this  respect  there  is  no  difference 
U.  S.  553,  46  L.  ed.  634,  22  Sup.  Ct.  Avhatever  between  insurance  against 
238,  239;  New  York  Life  Ins.  Co.  v.  fire  and  insura,nce  against  'the  perils 
Cravens,  178  U.  S.  389,  44  L.  ed.  of  tlie  .sea.'  The  state  of  California 
llKi,  20  Sup.  Ct.  762,  29  Ins.  L.  J.  has  the  right  to  exclude  foreign  in- 
876,  aff'g  Cravens  v.  New  York  Life  surance  companies  altogether  from 
Ins.    Co.   148   Mo.   583,   71   Am.    St.   her    territory,    whether     they     were 


note  p.  582;  Joyce  on  Electric  Law 

{2d  ed.)  see.  215  and  note. 

-    'Paul  V.  Virginia,  8  Wall.  (75  U. 

S.)  168,  19  L.  ed.  357. 

See  also  the  following  cases : 
United    States. — New     York     Life 

Ins.  Co.  V.  Deer  Lodge  County,  231 

U.  S.  495,  58  L.  ed.  332,  34  Slip.  Ct. 

167,  43  Ins.  L.  J.  3;  Hunter  v.  I\Iu- 

lual  Reserve  F'und  Life  Ins.  Co.  218 

U.  S.  573,  54  L.  ed.  1155,  3]  Sup.  Ct. 

127,  30  L.R.A.(N.S.)  686,  40  ins.  L. 


Rep. 
519. 


628,  53  L.R.A.  305,  50   S.  W 


Kansas. — State  v.  Phipps,  50  Kan. 
609,  18  L.R.A.  657,  31  Pac.  1097,  34 
Am.  St.  Rep.  152. 

Kentuchif.  —  Commonwealth  v. 
Gregory,  121  Ky.  256,  89  S.  W.  168. 


formed  for  the  purpose  of  doing  a 
fire  or  marine  business.  Slie  has  the 
poM  er,  if  .she  allows  any  such  com- 
]ianies  to  enter  her  confines,  to  de- 
tennine  the  conditions  on  which  the 
entries  shall  be  made.  And,  as  a  nec- 
essary consequence  of  her  possession 


Montana. — New  York  Life  Ins.  Co.   of  these  powers,  she  has  the  riglit  to 
V.  Deer  Lodge  County,  43  Mont.  243,  enforce   any   conditions   imposed   by 


115  Pac.  911 

Pennsi/lvania. — List  v.  Common- 
wealth, 118  Pa.  322,  12  Atl.  277,  279 ; 
Insurance  Co.  of  North  America  v. 
Commonwealth,  87  Pa.  173,  183,  30 
Am.  Rep.  352. 


her  laws  as  a  preliminary  to  the 
transaction  of  business  within  her 
confines  by  a  foreign  corporation, 
whetiier  the  business  is  to  be  carried 
on  through  officers  or  througli  ordi- 
nary agents  of  the  company.     And 


Tennessee.^D' Avcy  v.  Connecticut  slie  has,  also,  the  further  right  to  pro- 
108  TeiH).  567,  liibit  a  citizen  from  contracting  with- 
in her  jurisdiction  with  any  foreign 

Te.ras. — Queen    Ins.    Co.   v.    State,  company  which  has  not  acquired  the 

privilege  of  engaging  in  business 
therein,  either  in  his  0A?n  behalf  or 


Mutual  Life  Ins.  Co 
69  S.  \V.  768,  769. 


W 


86  Tex.  250,  22  L.R.A.  483,  24  S 
397. 

Virijiiiia. — Harris  v.  Common-  Uirough  an  agent  empowered  to  that 
wealth,  113  Va.  746,  73  S.  E.  561,  end.  The  power  to  exclude  embraces 
38  L.R.A. (N.S.)  458  note.  the  power  to  regulate  and  enforce  all 

748 


PARTIES— THE  INSURER 


§  328 


distinction,  with  reference  to  the  power  to  contract,  between  the  ex- 
istence of  a  corporation  de  facto  and  de  jure.  A  valid  contract  can- 
not be  made  with  a  corporation  that  does  not  exist  as  a  matter  of 
fact  at  tlie  time  of  contracting,  and  it  must  be  shown  that  the  cor- 
poration was  in  existence  de  facto  at  the  time  of  entering  into  the 
contract.  But  a  contract  can  be  entered  into  with  a  corporation 
actually  in  existence  at  the  time,  although  the  legality  of  its  organ- 
ization may  be  questioned  or  its  acts  forbidden  by  law.  The  ques- 
tion of  the  legal  validity  of  such  a  contract  will  be  one  to  be  deter- 
mined by  the  courts,  dependent  upon  the  terms  of  the  prohibition.^ 
The  principal  object  of  such  statutes  is  the  protection  of  the  inter- 
ests of  its  own  citizens  b}^  the  slate.  The  legislature  may  also  pro- 
vide for  the  supervision  of  such  corporations,  as  in  case  of  domestic 
corporations. 


legislation,  in  regard  to  things  done  sec.  744.  See  Jennings  v.  Dark,  1/5 
within  the  territory  of  the  stale,  Ind.  332,  92  N.  E.  778.  "(5)  Assum- 
which  may  be  directly  or  incidental-  iiig,  as  defendant  contends  that  the 
ly  requisite  in  order  to  render  the  i)Iaintitit''s  case  falls  short  of  the  evi- 
enforcenient  of  the  conceded  power  dence  required  to  establish  the  ore- 
efiicacious  to  the  fullest  extent,  sub-  ation  of  a  corporation  de  jure,  the 
ject  always,  of  course,  to  the  para-  record  neverthele.ss  discloses  e\idence 
mount  autiiority  of  the  Constitution  amply  sufficient  to  support  plain- 
of  the  United  States."  tiff's  existence  as  a  de  facto  corpf)ra- 

^  This  is  subsUinlially  the  rule  laid  lion,  and  as  such  it  was  entitled  to 
down  ill  the  learned  treatise  of  Mr.  maintain  this  action."  Creditors 
Morawetz  on  Private  Corporations,  Union  v.  Lundy,  IG  Cat.  App.  ~)67, 
2d  vol.  2d  ed.  sees.  744-40.  He  also  ]17  Pac.  624,  40  Ins.  L.  J.  1<IS1, 
says:  ''The  courts  have,  in  some  in-  1083.  Case  of  action  on  a  premium 
stances,  failed  to  bear  in  mind  the  note  executed  to  insurance  c()m])any. 
distinction  l)etween  Ihe  aclual  exist-  Estoppel  to  deny  coi-porale  existence, 
ence  of  a  corporate  association,  and  see  Brady  v.  Delaware  Mutual  Life 
the  legality  of  such  an  ass()ciali(jn  Ins.  Co.  —  Del.  — ,  4.1  All.  34'). 
after  it  has  been  actually  formed.  An  unconstitutional  act  of  the  leg- 
it seems  to  have  been  assumcil  in  islature  does  not  constitute  a  suili- 
some  of  the  cases  that  a  coriiorale  as-  cient  basis  for  a  cor])()rali()n  de  facto, 
sociafion  formed  in  violation  of  the  That  can  exist  only  where  there  is 
general  rule  of  the  common  law  pro-  a  valid  law  under  which  the  corpora- 
hibiting  such  associations  must  nee-  lion  migiit  have  b(>en  created  de  jure, 
essarily  be  treated  by  the  courts  as  a  and  the  law  that  corporate  existciico 
nullity — as  no  corporation  at  all.  cannot  be  inquired  into  except  by  a 
This  doctrine  is  not  only  founded  on  direct  action  in  the  name  of  the 
a  misconception,  but  is  in  most  ca.s-  hlate  is  not  applicable  to  a  pretended 
es  unjust  in  its  consequences."  Id.  but  not  even  a  de  facto  corporation, 
see.  74."i;  and  in  a  ])ri()r  section  he  Huber  v.  Martin,  127  Wis.  412,  3 
says:  "The  unauthorized  dealings  of  L.R.A.fN.S.)  053,  115  Am.  St.  Rep. 
such  associations  will,  in  many  in-  1023,  7  Amer.  &  Eng.  Ann.  Cas.  400, 
stances,  be  recognized  and  given  ef-  ]05  N.  W.  1031,  1135,  35  Ins.  L.  J. 
feet  by  the  courts,  notwitlistanding  334. 
the    common-law    prohibition."       li\. 

749 


328 


JOYCE  ON  INSURANCE 


These  statutes  provide  that  certain  acts  be  done  by  agents  of  such 
companies  as  prerequisites  to  making  contracts  within  the  state,^° 
and  prescribe  the  manner  in  which  the  agents  of  such  companies 
shall  be  qualified  before  entering  on  their  duties."  The  legislature 
has  power  also  to  prohibit  foreign  insurance  companies,  their 
agents  or  brokers  from  soliciting  business  within  a  state,  even 
though  the  insurance  contract  makes  the  solicitors  the  agents  of 

'"^Florida. — Requirement  of  pay-  of  New  York  v.  Stanton,  51  N.  Y. 
ment  from  agent  constitutes  license  Supp.  242,  28  App.  Div.  334. 
taxes  under  acts  1905,  c.  5459,  sec.  7;  Oregon. — Certificate  or  license  re- 
acts 1907,  c.  5597;  Afro-American  quired.  Roane  v.  Union  Pacific  Life 
Industrial  &  Benefit  Assoc,  of  the  In.s.  Co.  67  Greg.  264,  135  l^ac.  892, 
United  States  of  America  v.  State,  Lord's  Oreg.  Laws,  sec.  4609. 
61  Fla.  85,  54  So.  383.  Pennsylvania.— Agent    must    com- 

<9eor^/a.— License  tax  payable  by  pl.y  with  laws  or  become  personally 

a<'ent   of    association    on    assessment  liable.    Bartlett  v.  Rothschild,  214  Pa. 

plan:  Mutual  Reserve  Fund  Life  As-  "i^l,.  63   Atl.   1030.     Agent's  hcense 

soe.  V.  City  Council  of  Augusta,  109  iiot  issuable  to  corporation.   Incorpo- 

Ca   73    35  S    E    71  rated  Ins.  Agent,  In  Re,  38  Pa.  Co. 

■',"•'       "  J  Ct.  104.    Insurance  Agents  Licenses, 

Kentucky. — License  required;  pen-  "  ' 


of  agent  must  procure  license  or  be-    J^,^   (opinion 'of  Attv.  Genl.). 
come   sub,ect   to    penalty;    Common-       ,^,,, J,  ^^,^^,-„«._s.  Car.  Civ.  Code 


ibject   to    pena 
wealth  V.   Gaither,  107  Ky.  572,  54 
S.  W.  956,  30  Ins.  L.  J.  91. 

Louisiana. — When  license  fees  can- 


sec.   1801,   specifies   upon   what    con- 
ditions license  to  agent  issuable;  dis- 


.  .   ^         ',       e   crimination;  constitutionality;   Trav- 
not  be  required  from  joint  agents  of   ^j^^.^,   j^^    ^^    ^^_   McMasters,  84   S. 


two    nonresident    companies.       State 
V.  Philadelphia  Underwriters,  112  La. 


Car.  495,  66  S.  E.  877. 

1^  List  V.   Commonwealth,  118  Pa. 


47    36  So.  221.     Agent  for  soliciting  g^_  g^o,  12  Atl.  277;  Paul  v.' Virginia", 

and  placing  insurance  is  not    under  g   ^^^^^            ^    g^             ^g   ^    ^^ 

La.  acts,  1886,  no.  101,  sec.   /,  liable  —    m       •     t       n          ro    .i  ++   no 

^„  ,:„    '  „  -P„  '  .     c.„f.  ,,   w^Li.   ±a  3o<  ;  Phoenix  Ins.  Co.  v.  Burdett,  112 


for  license  fees:  State  v.  Woods,  40 
I^.  Ann.  175,  3  So.  543;  State  v. 
New  England  Mut.  Ins.  Co.  43  La. 
Ann.  133,  8  So.  888. 

New   York. — Statute   valid:   Haus- 
er  V.  North  British  &  Mercantile  Ins 


Ind.  204,  13  N.  E.  705.  under  Rev. 
Stat.  Ind.  1881,  sec.  3768.  Massa- 
chusetts Rev.  Stat.  c.  37,  sec.  40,  re- 
quiring deposit  by  agent  of  foreign 
company  of  copy  of  charter,  etc.,  ap- 

General 


^     ;o^  xt\.    c  nnr-  Tro   A  plies  to  mutual  companies.     General 

Co.  136  N.  Y.  Supp.  lOlo,  152  App.  K...  y,^„  ^^  „  punn^^  13  Gray 
Div.  91,  atf'd  206  N.  Y.  456,  42  ^L^^tual  Ins.  Lo.  ^^  l^lnilips,  id  Lrray 
L.R.A.(N.S.)  1139,  100  N.  E.  52,  N.  ('^  ^a^^-)  90-,  ^ee  notes  m  Jones 
Y.  In.s.  Law  sec.  50,  as  am'd  by  Laws  ^^  Business  Corporations  106  et 
1912  (but  see  same  case  as  to  police  ^eq.  See  also  Bulware  v.  Davis  90 
power).  Agents  of  all  companies  in-  Ala.  207,  9  L.R.A.  66,  8  So.  84;  City 
eluded  under  N.  Y.  Consol.  act  see.  of  Trenton  v.  Huniel,  134  Mo.  App. 
523,  a.s  to  liability  for  support  of  fire  595,  114  S.  W.  1131  (agent  of  fra- 
dei)arlinent.  Fire  Department  of  City  ternal  benefit  association). 

750 


PARTIES— THE  INSURER 


§  328 


the  insured  in  the  transaction.^^  Nor  is  any  state  or  Federal  con- 
stitutional right  abridged  by  enactments  restraining  persons  from 
acting  as  agents  of  foreign  insurance  companies.^^  Again,  a  state 
can  lawfully  punish  or  regulate,  by  the  imposition  of  civil  liability 
or  otherwise,  the  doing  of  acts  within  its  territory  by  agents  of  a 
foreign  insurance  company,  which  are  calculated  to  neutralize  and 
make  ineffective  a  statute  prescribing  conditions  of  the  right  of 
such  corporation  to  do  business  within  the  state.^* 

Such  statutes  fiu'ther  provide  for  a  license  tax  or  fee,^*  for  taxa- 


^^  Commonwealth  v.  Nutting,  175 
Mass.  154,  78  Am.  St.  Rep.  483,  55 
N.  E.  895. 

"Hickman  v.  State,  62  N.  J.  L. 
499,  41  Atl.  942,  aft'd  44  Atl.  1099. 

"  Noble  V.  Mitchell,  164  U.  S.  367, 
17  Sup.  Ct.  110,  41  L.  ed.  472. 
Cited  in  London,  Paris  &  American 
Bank  v.  Aronstein,  117  Fed.  601, 
608,  54  C.  C.  A.  663,  670;  Cook  v. 
Howland,  74  Vt.  393,  398,  59  L.R.A. 
338,  339,  93  Am.  St.  Rep.  912,  52 
Atl.  973.  When  indictment  against 
agent  bad  on  demurrer,  see  Gage  v. 
State,  67  Ark.  308,  55  S.  W.  165. 

As  to  actions  against  agents  of 
foreign  insurance  companies  acting 
•without  a  license;  statutes,  see  §  713 
herein. 

^^  Alabama.— K(tis  1886,  1887,  in- 
cludes foreig)!  companies  only. 
Hoadlev  V.  Purifov,  107  Ala.  276,  30 
L.K.A.  351,  18  So.  220. 

Florida. — No  express  limitation  on 
states  power;  .statute  is  constitu- 
tional; Taxes  under  Fla.  acts  1905 
c.  5459,  sec.  7;  act  1907,  c.  5597  are 
license  tares;  ease  of  sick  and  funer- 
al benefit  insurance.  Afro-American 
Industrial  &  Bonetit  Assoc,  of  the 
TTnited  States  of  America  v.  State,  61 
Fla.  376,  54  So.  383. 

Indiana. — Payment  required  of  a 
certain  amount  on  premiums  received 
not  a  license  fee  hut  taxes  under 
Burns's  Ann.  Stat.  Ind.  1908.  sec. 
10213.  Taxes  are  not  ''debts"  and 
bear  no  interest  from  time  due  if  not 
paid.  State  v.  IMutual  Life  Ins.  Co! 
of  N.  Y.  175  Ind.  59,  42  L.R.A. 
(N.S.)  256,  93  N.  E.  213,  40  Ins.  L. 
J.  216. 

7 


Louisiana. — Companies  doing  a 
life  accident,  and  icorkingmen's  col- 
lective business  liable,  and  they  ai'e 
also  liable  for  a  second  license  if  oth- 
er insurance  combined.  State  v. 
Maryland  Casualty  Co.  133  La.  146, 
62  So.  606.  When  company  entitled 
to  reduction  of  city  license  by  credit 
for  license  tax  paid  on  premiums  col- 
lected outside  such  city;  City  of  New 
Orleans  v.  London,  Liverpool  & 
Globe  Ins.  Co.  52  La.  Ann.  1904,  28 
So.  267. 

Pennsylvania. — ^Etna  Fire  Ins.  Co. 
V.  Reading,  119  Pa.  St.  417,  5  Pa.  L. 
ed.  570,  il  Cent.  Rep..  858,  13  Atl. 
451,  under  acts  Pa.  April  4,  1873, 
Sec.  17  (Pub.  L.  20),  May  24,  1887 
(Pub.  L.  204). 

South  Dakota.  — ■  Legislature  may 
classify,  etc.;  License  tax  and  not 
property  tax;  is  constitutional; 
Queen  Citv  Fire  Ins.  Co.  v.  Basford, 
27  S.  Dak.  164,  130  N.  W.  44. 

Texas. — Tax  on  net  receipts  not  a 
license  but  a  tax;  net  receipts  ai"e 
personal  property ;  increase  of  assess- 
ment ;  review.  American  Bonding 
Co.  V.  Wilhams,  —  Tex.  Civ.  App. 
— ,  131  S.  W.  652. 

Wisconsin. — Accident  Company 
obligated  to  pav  license  fee  under 
Wis.  Rev.  Stat.  1878,  sec.  1220,  not- 
withstanding Laws  Wis.  1880,  e.  105, 
subject.s  it  to  same  fees  and  taxes  as 
tire  insui'ance  companies.  State  (ex 
rel.  Fidelity  Casualty  Co.)  v.  Fricke, 
102  Wis.  107,  10  Am.  &  Eng.  Corp. 
Ca-s.  N.  S.  584,  78  N.  W.  455. 

See  further  as  to  license  and  occu- 
pation taxes  and  when  corporations 
51 


§  328  JOYCE  ON  INSURx\NCE 

tion,^^  for  a  deposit  with  the  state,  or  giving  bonds,^"^  for  procuring 

subject    thereto   notes    129    Am.    St.  Orient  Tns.  Co.  v.  Board  of  Assessors 

Rep.  288,  24  L.R.A.  299.  for  Orleans,  221  U.  S.  358,  55  L.  ed. 

Foreign    insurance    company    may  769,  31   Sup.   Ct.  554,  affg  124  La. 

be    required    to    pay    fees    and    ])er-  872,  50  So.  778,  follovvino-  as  to  tirst 

centages    on    all    premiums    received  point.     Liverpool  &  London  &  Globe 

as  a  condition  of  doing  business  in  Ins.   Co.   v.   Board   of  Assessors   for 

Slate  Ducat  v.  Chicago,'  10  Wall  (77  Orleans,  221  U.  S.  .'UG,  .55  L.  ed.  702, 

U.  S.)   410,  19  L.  ed.  972.  31  Sup.  Ct.  550,  aff'g  122  La.  98,  47 

Cited   in :    United   States. — Ashley  So.  415.     See  also  La.  cases  cited  be- 

V.  R_.yan,  153  U.  S.  436,  442,  38  L.  low  in  this  note.     "Policy  loans"  so 

ed.   1 73,  777,  14  Sup.  Ct.  865,  4  In-  called   and   which   are   only   a   witli- 

ler.-^.     Com.   Rep.  26;  Pembina  Con-  drawal  by  the  policy  holder  of  a  por- 

solidated  Silver  ^Mining  &  Milling  Co.  tion   of  the  reserve   are   not   taxal)le 

v.  Penn.sylvania,  125  U.  S.  181,  186,  "credits;"    when     hank    deposit    not 

31  L.  ed.  650,  652,  8  Sup.  Ct.  737,  taxable.      Board  of  Assessors  for  Or- 

2  Inters.    Com.   Rep.   26;   Barron  v.  leans  v.  New  York  Life  Ins.  Co.  216 

Burnside,  121  U.  S.  186,  200,  30  L.  U.  S.  517,  54  L.  ed.  597,  30  Sup.  Ct. 

ed.  915,  920,  7  Sup.  Ct.  931,  1  Inters.  385,   affg  New  York   Life   Ins.   Co. 

Com.  Rep.  290.  v.   Board    of   Assessors   for   Orleans, 

Arkansas. — Baker  v.  State,  44  Ark.  158    Fed.    462.      But    see    Travelers 

138.  Ins;   Co.   v.   Board   of   Assessors  for 

Indiana.— Htate   (ex  rel.  Baldwin)  Orleans,    122    La.    129,    24    L.R.A. 

V.  Insurance  Co.  of  Nortli  America,  (N.S.)  388,  47  So.  4.'!9.     See  also  N. 

115  Ind.  257,  17  N.  F.  574;  State  (ex  J.  case  cited  below  in  this  note.     Tax 

rel.    Carr)    v.    Woodruff    Sleeping   &  on  premium  receipts  a  tax  on  bnsi- 

Parlor  Coach  Co.  114  Ind.  155,  157,  ness  and  not  on  property;  when  de- 

15   N.    E.   814,   1   Inters.    Com.   Rep.  posits  with  state  superintendent   are 

803;    Phoenix    Ins.    Co.    v.    Burdett,  taxable.  "Western  Assur.  Co.  v.  Hal- 

112  Ind.  204,  205,  13  N.  E.  705;  In-  liday  (U.  S.  C.  C.)  127  Fed.  830,  s.  c. 

surance    Co.    of    North    America    v.  110  Fed.  259;  Rev.  Stat.  Ohio,  sees. 

Biiui,   111   Ind.  281,   288,   12   N.   E.  2730,   2731,  -2734,   2745,   3660.     Tax 

315.  on  gross  premiums  under  Iowa  Code, 

Louisiana. — Parker  v.  North  Brit-  sec.   1333;    remedy   for   nonpayment, 

ish  &  JNtercantile  In.s.  Co.  42  La.  Ann.  Manchester  Fire  Ins.  Co.  v.  Herriott 

428,  431,  7  So.  599.  (U.  S.  C.  C.)   91  Fed.  711. 

Maine. — State    v.    Western    Union  Alabama. — Tax   a   privUccje   or   li- 

Teleg.  Co.  73  Me.  518,  525.  (ense    la.r,    and    not    franchise    far; 

Michigan. — Hartford  Fire  Ins.  Co.  statute    constitutional;    (ax    payable 

V.   Raymond,  70   Mich.   485,   502,  38  whether  iiremiums  received  williin  or 

N.  W.  474.                 '  outside  of  slate;  Brown  v.  Pittsbm'ii'h 

Tennessee. — State  v.   Phoenix  Ins.  Life  &  Trust  Co.  10  Ala.  App.  614, 

Co.  92  Tenn.  420,  4.31,  21  S.  W.  893.  65  So.  699. 

Wisconsin. — Stanhilber   v.    Mutual  California. — When    taxation    is    a 

Mill  Ins.  Co.  76  Wis.  285,  291,  45  N.  revenue  and  not  intended  as  a  condi- 

W.  221;  State  v.  United  States  Mu-  tion    under  Pub.   act.   Mar.   3,   1885. 

tual    Accident    Assoc.    67    Wis.    624,  San  Francisco  v.  Liverpool  &  London 

630,  21  S.  W.  893.  &    Globe   Ins.    Co.    74    Cal.    113,   15 

^^  United      States. — Premiums      or  Pac.  380. 

credits    due    on    open    accounts    are  Connecticut. — Insurance     Comrais- 

taxable;    state   may   limit    reasonable  sioner  to  determine  amount  of  taxes 

iime  iciihin    which  action   for  reduc-  to    be    refunded;    retaliatory    laws; 

tion  of  assessments  mav  be  brought;  mandamus;   Conn.   Genl.   Stat.  1902, 

752 


PARTIES-THE  INSURER  §  328 

sees.  2450,  360G ;  N.  Y.  Laws  1901,  e.  is      constitutional,      whether      such 

118,  p.  297;  N.  Y.  Laws  1896,  p.  864,  moneys  be  regarded  as  taxes  for  reve- 

c.  908,  sec.  195;  State  (ex,rel.  Metro-  ntie  or  as  license  fees.     State  v.  In- 

politan   Life  Ins.  Uo.)   v.  Upsou,  79  .surauce   Co.   of  North   America,   115 

Conn.  154,  64  Atl.  2.  Ind.  257,  17  N.  E.  574,  15  West  Rep. 

Statute    constitutional.      State    v.  93;  Tenn.  act,  Jan.  29,  1879,  sees.  7, 

Travekrs'  Ins.  Co.  TA  Conn.  255,  57  53. 

L.R.A.  481,  47  Atl.  299.  Kentucky. — When       liahle       after 

Georgia.—When  tax  on  gross  pre-  witlidrairal    from    stale    for    tax    on 

miums   not  a  propertij   tax  so  as  to  premiums,  midcr  Ky.  Stat.  sees.  4226, 

apply  ad  valorem  system;  ordinance  4227-4230a;    Statute    constitutional ; 

unconstitutional  for  want  of  uiiifor-  Commonwoaltli    v.    Illinois    Life    Ins. 

mity;  Mutual  Ke.serve  Fund  Life  As-  Co.   159  Ky.  589, 167  S.  W.  909;  Coni- 

soc.  V.  City  Council  of  Augusta,  109  monwealth  v.  Life  Ins.  Co.  159  Ky. 

Ga.  73,  35  S.  E.  71.  581,  167  S.  W.  8/2.    Gross  premiums 

Illinois. — Castialty   Company's   net  included   without   deduction   of   divi- 

receipts    not    taxable    under   general  dends;   not  a  property  tax;  but   li- 

Revenne  Act;  is  in  nature  of  special  cense    tax;    classification    valid;    Ky. 

tax;  property  taxable,  only  such  as  Stat.  sec.  4226,  as  am'd  by  acts  1906, 

has   situs   in   state   acts   1869,    1879,  c.  22,  art.  13,  subd.  2;  Northwestern 

1899.      Fidelity    &    Casualtv    Co.    of  Mutual  Life  Ins.  Co.  v.  James,  138 

N.  Y.  V.   Board   of  Review',   264  111.  Kv.   48,  127  S.   W.  505;   see   Metro- 

II,  105  N.  E.  704,  44  Ins.  L.  J.  322.  politan  Life  Ins.  Co.  v.  City  of  Paris, 
Unearned  premiums  returned  on  can-  338  Ky.  801,  129  S.  W.  112;  Mutual 
celation  of  policies  not  a  part  of  -  Benefit  Life  Ins.  Co.  v.  Common- 
gross  premiums  taxable;  when  action  wealth,  128  Ky.  174,  107  S.  W.  802. 
against  insurance  superintendent  to  Deposits  ivrongfully  withheld  by 
refnnd  not  action  against  state;  state  treasurer,  not  taxable;  Board 
equitv.  (rerman  Alliance  Ins.  Co.  v.  of  Councilmen  of  city  of  Frankfort 
Van 'Cleave,  191  111.  410,  61  N.  E.  v.  Illinois  Life  Ins.  Co.  129  Ky.  82;?, 
94.     (See  case  under  Nebraska  cited  112  S.  W.  924. 

below  in  this  note.)     Tax  on  net  re-  Louisiana. — Outstanding    accounts, 

ceipts  is  not  Ucense  but  tax;  People  credits  liable  to  taxation.     S(;indard 

V.    Cosmopolitan    Fire   Ins.    Co.   246  Marine    Ins.    Co.    Ltd.    v.    Board    of 

III.  442,  92  N.  E.  922.  Assessors,  123  La.  717,  29  L.R.A. 
Indiana. — Percentage  of  receipts  (N.S.)  59,  49  So.  483.  Fin-eign  col- 
on premiums  is  not  license  fee  but  porations  are  not  taxable  for  premi- 
a  tax.  State  v.  Mutual  Life  Ins.  Co.  urns  uncollected.  Railey  v.  Board  of 
of  N.  Y.  175Ind.  59,  42L.R.A.(N.S.)  Assessors,  44  La.  Ann.  765,  11  So. 
256,  93  N.  E.  213,  40  Ins.  L.  J.  251;  93.  See  also  Liverpool  &  London  & 
Burns's  Ann.  Stat.  1908,  sec.  10.216.  Globe  Ins.  Co.  v.  Board  of  A.ssessors 
Payment  to  auditor  of  state  is  not  for  Orleans,  51  La.  Ann.  1028,  45 
payment  into  treasury  of  state  under  L.R.A.  524,  25  So.  970,  and  U.  S. 
Burns's  Ann.  Stat.  Ind.  1908,  sees,  cases  above  cited  in  this  note. 
9247,  10,216;  Dailev  v.  State  (ex  rel.  Massachusetts. — Rate  imposed  un- 
Bigler)  171  Ind.  646,  87  N.  E.  4.  der  Mass.  Stat.  (Rev.  Laws  c.  14, 
Life  policies  not  subject  to  taxation;  sees.  24,  28)  equal  to  higliest  rate  im- 
Const.  Ind.  art.  10,  sec.  1;  Tax  Law  posed  by  foreign  state.  IMetropolitan 
1891,  sec.  3  (Rev.  Stat.  Ind.  1894,  Life  In's.  Co.  v.  Conunonwealth,  198 
see.  8410)  sees.  50,  53;  State  Board  Mass.  466,  84  N.  E.  863. 

of  Tax  Commrs.  v.  Holliday,  150  Ind.  Minnesota. — Payment    of    tax    on 

216,  42  L.R.A.  820,  49  N.  E.  14,  27  premiums     received     no     exemption 

Ins.  L.  J.  97.  from  j>aymerit  of  fee  on  debt  secured 

The  act  Rev.  Ind.  Stat.  Sec.  3773,  bv  mortgage;  Minn.  Genl.  Laws  1907, 

Joyce  Ills.  Vol.  I.— 48.  753  " 


§  328  JOYCE  ON  INSURANCE 

e.  328,  p.  448,  also  Id.  p.  449,  see.  3;    Ins.  Co.  v.  Bradley,  83  S.  Car.  418, 
Mutual  Benefit  Life  Ins.  Co.  v.  Mar-   65  S.  E.  433. 

tin  County,  104  Minn.  179,  116  N.       South     Dakota. — Tax      on      gross 
W.  572.  premiums  is  license  tax,  not  property 

Mississippi. — When  Odd  Fellows  tax:  statute  constitutional:  Queen 
property  not  exempt  under  Ann.  City  Fire  Ins.  Co.  v.  Basford,  27  S. 
Code  Miss.  sec.  3744  as  to  ''charitable  Dak.  164,  130  N.  W.  44. 
society"  etc.  Ridgely  Lodge  No.  28,  Tennessee. — Amended  Laws  1881, 
I.  0.  0.  F.  V.  Redus,  78  Miss.  352,  e.  85,  sec.  18,  does  not  impose  a  tax 
29  So.  163.  upon    foreign    insurance    companies, 

Montana. — Intrastate  tax  on  excess  but  on  the  agents  who  do  business  in 
of  premiums  does  not  interfere  with  that  stat«,  and  is  not  affected  by  the 
interstate  commerce.  New  York  Life  revenue  acts  of  1887,  1889,  and  1891, 
Ins.  Co.  V.  Deer  Lodge  County,  43  providing  for  a  payment  by  such 
Mont.  243,  115  Pae.  911.  Statute  companies  of  a  certain  per  cent  in 
applies  to  foreign  life  insurance  cor-  lieu  of  taxes:  City  of  Memphis  v. 
porations.  Northwestern  Mutual  Carrington,  91  Tenn.  511,  19  S.  W. 
Life  Ins.  Co.  v.  Lewds  &  Clarke  Coun-   673. 

ty,  28  Mont.  484,  98  Am.   St.  Rep.       A     foreign     corporation     has     no 
572,  72  Pac.  982.  status  as  a  citizen    in    other    states, 

Nehraskoi.  —  Unearned  premiums  and  cannot  object  that  the  tax  is  not 
returned  to  insured  not  taxable;  tax  uniform:  Phoenix  Ins.  Co.  v.  Com- 
on  gTOSs  receipts  not  in  lieu  of  all  monwealtli,  5  Bush  (Ky.)  68,  96 
other  taxes.  When  statute  not  un-  Am.  Dec.  331;  Ducat  v.  City  of  Chi- 
constitutional ;  State  ex  rel.  Breck-  cago,  48  111.  172,  95  Am.  Dec.  529. 
enridge  v.  Fleming,  70  Neb.  523,  97  But  see  Erie  Rv.  Co.  v.  State,  31  N. 
N.  W.  1063.  See" Illinois  case  cited  J.  L.  (2  Yroom)  531,  86  Am.  Dec. 
above  in  this  note.  When  entire  stat-  226.  Legislature  may  discriminate 
nte  unconstitutional.  State  v.  Poyn-  as  to  taxation  between  domestic  and 
ter,  59  Neb.  417,  81  N.  W.  431.  foreign  corporations  when  the  policy 

New  Jersey.  —  Average  weekly  and  interest  of  the  state  demand  it. 
premium  deposit  by  local  agent  in  Ducat  v.  City  of  Chicago,  48  111.  172, 
bank  when  not  assessable  for  yearly  95  Am,  Dec"  529.  But  see  Erie  R. 
taxes:  Metropolitan  Life  Ins.  Co.  v.  q^  y  g^ate,  31  N.  J.  L.  (2  Vroom) 
City  of  Newark.  62  N.  J.  L.  74,  40  53^^  36  Am.  Dec.  226.  Compare 
Atl.  573.  See  216  U.  S.  517,  cited  Mutual  Reserve  Fund  Life  Assoc,  v. 
above  in  this  note.  City  Council  of  Augusta,  109  Ga.  73, 

New  York. — Foreign  corporation  35  "g  jj_  y^. 
is  not  liable  for  taxation  of  capital  Exemption  of  firemen's  relief  as- 
invested  in  United  States  bonds:  sociation  includes  what:  Long 
International  Life  Assur  Co.  v.  Com-  grarieh  Firemen's  Relief  Assoc, 
missioners,  28  Barb.  (N.  Y.)  318;  /pj-os.)  v.  Johnson  (State  v.  John- 
Laws  N.  Y.  1855,  c.  37.  Compare  ^^^^  33  N.  J.  L.  625,  43  Atl.  573. 
Home  Ins.  Co  V  New  York,  119  U.  n  jj^Hed  States.^When  deposit 
S.  129,  30  L.  ed.  3o0,  8  Sup.  Ct.  138o  ^^^^  required  by  statute  does  not 
(court  divided).  constitute  trust  for    domestic    policy 

Pennsylvanm.-Grosspremmmsol   ^^^^^^^^      ^^^^^  ^.    ^j^   ^  ^ife 

every  character  included    under    l^a.  „   ,    „„„    lofi  n    n    a 

Pub:  L.  sec.  1   (June  1895);  North-   l^  Co.  209  Fed.  309,  126  C.  C.  A. 

western  Mutual  Life  Ins.  Co.,  In  re,  ^^^-  ,  ^  ^  .    ,        -x 

36  Pa    Co    Ct   Rep    100.  Arkansas. — Guaranty  or  indemnity 

South     Carolina.— When     tax     on  l>ond  filed  by   mutual    fire    company 

gross  receipts  a  2?roper^?/ faa;.- statute  covers   loss   tvhrle   bond  in  force   al- 

unconstitutional:     Civ.     Code     1902,  though    executed    after    issuance    of 

sees.  302,  1808,  1809;  New  York  Life  policy.     Acts  Ark.  1905,  p.  492,  sec. 

.754 


I 


PARTIES— THE  INSURER  §  328 

a  certificate  of  authority  or  license  from  the  state/^  for  an  annual 


4;  American  Fire  Ins.  Co.  v.  Haynie, 
91  Ark.  43,  120  S.  W.  825. 

Connecticut. — Such  law  is  consti- 
tutional. Cooke  V.  Warner,  56  Conn. 
234,  14  All.  798. 

Illinois. — A  foreign  company 
which  has  made  a  deposit  as  large  as 
is  required  by  the  Illinois  statutes 
for  any  kind  of  insurance  business 
is  not  required  to  make  a  different  de- 
posit for  each  kind  of  insurance 
business  which  it  cai"ries  on,  although 
one  domestic  corporation  could  not 
be  organized  to  carry  on  the  same 
kinds  of  business.  People  (ex  rel. 
Stephens)  v.  Fidelity  &  Casualty  Co. 
153 Jll.  25,  26  L.R.A.  295,  38  N.  E. 
752."  See  People  (ex  rel.  Ocean  Acci- 
dent &  Guarantee  Corp.  Ltd.)  v.  Van 
Cleave,  187  III.  125,  58  N.  E.  422. 

Kentucky. — As  to  amount  of  de- 
posits rec^uired  under  Ky.  Stat.  sec. 
687,  el.  2,  sec.  693;  Ky.  Const,  sec. 
202 :  See  Clav  v.  Employers  Indem- 
nity Co.  of  Pliila.  157  Ky.  232,  162  S. 
W.  1122.  When  foreig-n  reinsurer  of 
domestic  reinsured  entitled  to  tcith- 
draw  deposit:  When  reinsurer  not 
required  to  make  deposit:  Under 
Ky.  Stat.  1903,  see.  648,  Const,  sec. 
200.  See  Prewitt,  Ins.  Commr.  v. 
Illinois  Life  Ins.  C.o.  29  Ky.  L.  Rep. 
447,  93  S.  W.  633,  35  Ins.  L.  J.  688. 

North  Carolina.  ■ —  When  policy 
void  where  deposit  not  made  under 
Code  sec.  3062,  and  Laws  1893,  c.  299, 
sec.  8.  Commonwealtli  Mutual  Fire 
Ins.  Co.  V.  Edwards,  124  N.  Car.  116, 
32  S.  E.  404. 

North  Dakota.- — Deposit  required 
from  Mutual  Hail  Companies: 
State  (ex  rel.  State  Farmei's'  Mutual 
Hail  Ins.  Co.)  v.  Cooper,  18  N.  Dak. 
583.  120  N.  W.  878. 

Ohio. — Assignee  in  insolvency  can- 
not recover  securities  'unless  company 
no  longer  liable  to  policy  holders. 
State  (ex  rel.  Cincinnati  Life  Assoc. 's 
Assignee)  v.  Matthews,  64  Ohio  St. 
419.  ""60  N.  E.  605.  Such  law  consti- 
,  tutional.     Fidelity  &  Casualty  Co.  v. 


Hahn,  Supt.  Ins.  (Ohio,  1895)  33 
Week.  L.  Bull.  286. 

South  Dakota. — Employer's  lia- 
bility: Laws  1905,  c.  73,  sec.  2,  as 
am'd  by  Laws  1907,  c.  110,  Laws 
1909,  c.  243,  Laws  1911,  c.  176; 
Metropolitan  Casualty  Ins.  Co.  of  N. 
Y.  V.  Basford,  31  S.  Dak.  149,  139 
N.  W.  795. 

Texas.  —  When  bond  inures  to 
benefit  of  policy  holders:  South- 
western Surety  Ins.  Co.  v.  Anderson, 
—  Tex.  — ,  155  S.  W.  1176,  rev'g  — 
Tex.  Civ.  App.  — ,  152  S.  W.  816. 
Only  one  bond  required  under  the 
several  provisions  of  Tex.  act  of 
March  20,  1909,  sees.  1,  3,  and  it  must 
contain  only  the  statutory  conditions. 
.-Etna  Ins.  Co.  v.  Hawkins.  Commr. 
103  Tex.  195,  125  S.  W.  313,  39  Ins. 
L.  J.  511.  Betaliatory  statutes : 
deposit:  Rev.  Stat.  3066.  See  Seid- 
ers  V.  Merchants'  Life  Assoc,  of  the 
U.  S.  93  Tex.  194,  54  S.  W.  753,  29 
Ins.  L.  J.  97,  rev'g  —  Tex.  Civ.  App. 
— ,  51  S.  W.  547. 

Washington. — Must  comply  with 
statute  even  though  state  of  incorpo- 
ration requires  no  deposit:  Statute 
(3  Kern,  and  Bal.  Code,  sees.  6059- 
22,  6050-24)  constitutional.  State  v. 
Fishback,  79  Wash.  290,  140  Pac. 
387. 

^^  Jones'  Business  Corporation 
Laws  of  New  York,  105,  106.  See 
also  the  following  cases : 

United  States. — Knapp-Stout  & 
Co.  V.  National  Mutual  Fire  Ins.  Co. 
30  Fed.  607. 

Idalio. — Katz  v.  Herriek,  12  Idaho, 
1,  86  Pac.  873. 

Illi)iois. — Cincinnati  Mutual  Health 
Assur.  Co.  v.  Rosenthal,  55  111.  90,  8 
x\m.  Rep.  626. 

Louisiana. — Separate  license  may 
be  required  by  every  municipality 
wherein  foreign  comjiany  transacts 
business.  City  of  Lake  Charles  v. 
Equitable  Life  Assur.  Soc.  114  La. 
836.  38  So.  578.  See  State  v.  :\rnrv- 
land  Casualty  Co.  133  La.  146,  62  So. 
55 


§  328                                JOYCE  OX  INSURANCE 

606,  noted  ante;  herein  under  license  N.  H.  41,  47  Atl.  611,  33  Ins.  L.  J, 

fee  or  tax.  1023. 

Missouri. — License   not   a    cn)itract  Foreign    company    cannot    be    de- 

hut  police  regulation,  a  grant  of  au-  nied  license  by  reason  of  similarilij 

thority:   effect  of  refn.'^ai    to    renew  of    its    name    to    that    of    domestic 

license:   State  mav  amend  or  repeal  corjioration,   under   111.   act.   May  3, 

statute:    Mo.    Laws    1907,    p.    315;  1879,  see.  1,  and  1  StaiT.  &  C.  Ann. 

State   (ex  rel.  Equitable  Life  Assur.  Stat.  e.  73,  sees.  2,  4.     People   (ex. 

Soc.)  V.  Vandiver,  222  Mo.  206,  267,  rel.   Traders'  Fire  Ins.   Co.)    v.  Van 

121  S.  W.    45,    63.     See    Joyce    on  Cleave,  183  111.  330,  47  L.R.A.  795. 

Franchises  (ed.  1909)  sees.  47,  48.  55  N.  E.  698.     Examine  Knights  of 

Minnesota. — In    action    by    fidelity  Modern  Maccabees  v.  Mai'tin,  32  Pa. 

^'guarantij  insurance  corporation"  no  Co.  Rep.  58;  Knights  of  jNlaccabees 

presumption  that  it  has  not  complied  of  tlie  World  v.  Searle,  75  Neb.  285, 

with  statute,  although  the  complaint  106  N.  W.  448. 

fails  to  allege  a  licen.'^e  to  do  an  in-  Nature  of  acts  and  powers  of  com- 

surance  business.     That  is  a  matter  missioner  or  superintendent  of  insur- 

of  defense.     Fidelity  &  Casualty  Co.  ance:     Mandamus :     Quo     warranto. 

V.  Eickhoff,  63  Minn.  170,  30  L.R.A.  Under  Tenn.  Code,  sec.  2575,  the  ac- 

586,  56  Am.  St.  Rep.  464,  65  N.  W.  tion  of  the  commissioner  is  judicial: 

351.  State  y.  Thomas,  88  Tenn.  491,  12  S. 

Mississippi. — Sick       benefit       and  W.  1034.     So  also  in  Mississippi  the 

hurial    insurance    association    within,  commissioner  acts  judicially  in  is.sa- 

statute  requiring  permit,  under  Laws  ing  a  license,  and  mandamus  will  not 

Miss.  1902,  c.  59;  Fikes  v.  State,  87  lie  to  compel  him  to  revoke  a  license 

Miss.  251,  39  So.  783.  in  the  absence  of  evidence  dehors  the 

Nebraska. — Must   obtain  license  as  policy.     Cole  v.  State,  91  Miss.  628, 

statute  provides   as   act   1873,   Genl.  45    So.   11.      Contra,   Hartford   Fire 

Stat.  1873,  c.  33,  p.  428,  applies  to  In.s.  Co.  v.  Commissioner    of    Insur- 

all  except  life  companies:  State   (ex  ance,  70  Mich.  485,  34  N.  W.  474. 

rel.  National   Employees'   As.soc.)    v.  So  the  statute  is  mandatory  and  duty 

Barton   92  Neb.  666   139  N.  W.  225.  ^ministerial    and   no   exercise   of   dis- 

Mulfiform  insurance  biisiness  mav  ""etion  is  allowed  superintendent  of 

be  carried  on  bv  foreign  corporation  insurance   where   company   applying 

in  state  where  \lomestlc  corporation  ior  certihcate  has  fully  complied  with 

not  authorized  to  do  so,  if  no  posi-  ^^^  /=^^,>   e    n"r  ^  ao'^T.   f^n^"-^''' 

,-             ,  -,••..       ,        ,    ,    .         T^       1  Bovle  (LT.  S.  C.  C.)  82  Fed.  <0d;  dis- 

tive  prohibition  by  statute:     People  ••     ,    o     i         ^t  >.     i  t -.e    t       r- 

,          1    r,,            N    ■     TT  1  1-^     p    /-.  missed,  Bovle  v.  Mutual  Lire  Ins.  Co. 

(ex  rel.  Stevens)  ^^  Iidehty  &  Casu-  gg  p^^    -^5^4    3.,  ^    c.  A.  604.     In 

oiv^^- Jro   ^n  ^°%-^  ^•^"^-  -^^'  ^^««««-^--      That    such    act   is    within 

38  N  E.  /52.     Casualty  company  en-  ^^^^^^,^1  ^f  ^^^  ^^^^^^  ^^^  ^^^  1,^  j.^, 

titled  to  license  to  carry  on   several  viewed    under   Kan.    Laws,    1889,    c. 

lines  of  casualty  insurance  on   com-  159,   see   Kansas'  Home   Ins.    Co.   v. 

phance  with  statute:     Laws  1899,  p.  Wilder.  43  Kan.  731,  23  Pac.  1061. 

237  (act  of  April  21,  1899):  People  In    Nebraska:      Auditor's   discretion 

(ex  rel.  Ocean  Accident  &  Guarantee  is  broad  and  legal  and  not  arbitrary 

Corp.  Ltd.)   V.  Van  Cleave,  187  111.  in     determining     Avhether     fraternal 

125,  58  N.  E.  422.     Foreign    suretii  beneficiary  society  shall    be   licensed. 

company,   empowered   by   charter  to  State  (ex  rel.  Bankers'  Union  of  the 

engage  in  other    kinds    of    business,  World)    v.   Searle,  74  Neb.  486,  105 

may,  in  absence  of  prolnbitory  stat-  N.  W.  284.     Under  N.  Y.  Ins.  Law, 

ute,   be   licensed    under   N.    H.    Pub.  art.  7,  sec.  231,  duty  of  superintend- 

Stat.  c.  172,  sec.  1 ;  United  States  Fi-  ent   of   insurance    is   ministerial   en- 

delity  &  Guarantee  Co.  v.  Linehan,  73  forceable  bv  mandamus:  ineorporat- 

756 


PARTIES— THE  INSURER  §  328 

statement  of  the  company's  financial  condition/^  for  the  possession 
of  certain  assets,^"  for  limitation  of  amount  of  any  one  risk  unless 

(>(1  liintual  fraternity:  reincorpora-  upon  an  independent  valuation  of 
lion:  United  States  Grande  Lodge  0.  such  reserve.  Bankers  Life  Ins.  Co. 
B.  A.  V.  Pavn,  28  Misc.  275.  Under  v.  Howland,  73  Vt.  1,  57  L.R.A.  374, 
N.  Y.  Laws,  1881,  e.  256,  giving  48  Atl.  435,  30  Ins.  L.  J.  193:  first 
certitieate  to  do  business  is  within  case  prescrihiny  rule  for  valuation 
supeiinlondont's  discretion,  and  not  of  life  policy.  Note  Id.  208.  Ex- 
reviewable  by  inand^mns.  In  Re  amine  Bankei's'  Life  Ins.  Co.  v.  Fleet- 
Hartford  Life  &  Ann.  Ins.  Co.  63  wood,  76  Vt.  297,  57  Atl.  239.  In 
How.  Pr.  (N.  Y.)  54.  The  Ohio  Wisconsin  foreign  assessment  cora- 
Kev.  Slal.  sees.  3G31-11,  3631-13,  panies  have  a  riglit,  under  Wis.  Laws, 
3631-14,  is  mandatory  upon  superin-  1891,  c.  418,  to  a  license  to  do  busi- 
tendeiit  of  insurance  to  issue  license:  ness  upon  complying  with  the  condi- 
State  (ex  rel.  Great  Camp  Knights  of  tions  imposed  by  that  act,  of  which 
Modern  ^Maccabees)  v.  Vorys,  69  the  insurance  commissioner  has  no 
Ohio  St.  56,  68  N.  E.  580.  His  act  discretion  to  deprive  them.  State  (ex 
is  ministerial,  not  judicial,  and  such  a  rel.  Covenant  Mutual  Ben.  Asso.)_v. 
license,  although  it  will  protect  the  Root,  83  Wis.  667,  19  L.R.A.  2/1, 
company  in  the  transaction  of  busi-  54  N.  W.  33.  Compare,  as  to  dis- 
ness  during  its  continuance,  is  not  a  cretion  of  commissioner.  High  Court 
bar  to  a  proceeding  in  quo  warranto  of  Wisconsin  Independent  Order  of 
when  the  company  is  found  to  be  Foresters  v.  Commissioner,  98  Wis. 
exercising  any  of  the  franchises  of  94,  73  N.  W.  326. 
the  state,  without  authority  of  law.  ^^  American  Ins.  Co.  v.  Storv,  41 
State  V.  Fidelitv  &  Casualty  Ins.  Co.  Mich.  385,  1  N.  W.  .388. 
49  Ohio  St.  4-10.  16  L.R.A.  611.  .34  20  ^nder  Rev.  Laws  of  Vt.  sec. 
Am.  St.  Rep.  573,  31  N.  E.  658;  3607,  amended  act  1884,  No.  45,  ap- 
State  V.  Western  Mutual  Life  &  Ac-  plies  also  to  mutual  or  co-operative 
cident  Soc.  47  Ohio  St.  167,  8  L.R.A.  companies:  Granite  State  Mut.  Aid 
129,  24  N.  E.  392.  The  statute  is  Assn.  v.  Porter,  58  Vt.  581,  3  Atl. 
held  mandatory  in  Pennsylvania  545.  In  computing  the  reserve  of  a 
and  commissioner  has  no  discietion.  life  insurance  compani/  under  a 
Knights  of  the  a\[odern  Maccabees  v.  statute  requiring  it,  in  order  to  be  en- 
Martin,  Commr.  32  Pa.  Co.  Ct.  Rep.  titled  to  do  business  in  the  state,  to 
58.  In  Tej-as:  Mandamus  lies  have,  in  addition  to  its  capital,  as.'^ets 
where  duty  of  commissioner  is  clear-  equal  in  amount  to  its  outstanding 
ly  ministerial,  but  where  tiiere  is  no  liabilities,  reckoning  the  pi'cmium  re- 
such  duty  and  the  statute  vests  him  serve  on  its  life  risks  based  on  the 
with  discretionary  power  mandanms  actuaries'  tables  of  mortality.  Avith 
does  not  lie:  Tex.  Rev.  Stat.  1895,  interest  at  4  i)er  cent,  as  a  liability, 
arts.  3048,  30.50,  3061,  3062;  .Metro-  the  exiienses  of  securing  the  first 
politan  Life  Ins.  Co.  v.  Love,  101  year's  business  may  be  deducted  from 
Tex.  444,  108  S.  W.  821.  In  Ver-  the  amount  it  receive.'^  as  ])r(>mium3 
mont,  under  a  statute  requiring  in-  for  that  year  by  providing  that  a 
suranee  commissioners  to  issue  policy  shall  be  valued  as  a  term 
licenses  to  a  foreign  insurance  com-  policy  for  one  year  and  a  life  policy 
pany  to  do  business  in  the  state,  if  afterwards.  Bankers  Life  Ins.  Co.  v. 
satisfied  with  its  statement  showing  Howland,  73  Vt.  1,  48  Atl.  435,  57 
its  financial  condition  and  standing,  L.R.A.  374.  But  eramine  Bankers' 
they  liave  no  aulhoriti/  to  question  the  Life  Ins.  Co.  v.  Fleetwood,  70  Vt. 
method  of  computing  the  reserve  .set  297,  57  Atl.  239.  As  to  amount  of 
forth  in  the  statement,    or    to    enter  paid-up  capital  required,  see  Clay  v. 

757 


§  328  JOYCE  ON  INSURANCE 

excess  be  reinsured  in  a  solvent  company  in  state  of  enactment  of 
statute,^  for  contributions  to  fire  departments  or  fire  companies  of 
cities,  or  to  exempt  firemen's  benevolent  funds,^  for  the  revocation 
of  licenses,'  for  the  appointment  of  some  person  on  whom  papers 

Employers'  Indemnity  Co.  of  Pliila.  City  v.  Trustees  of  Exempt  Firemen's 

157  Kv    232,  162  S/W.    1122,    Kv.  Benev.  Fund  of  L.  I.  City.  34  App. 

Stat.   sec.   687,   cl.   2,   sec.   693 ;   Ky.  Div.  138,  rA  N.  Y.  Supp.  621,  Laws 

Const,  .sec.  202.     Iowa   statute,    Mc-  N.  Y.  1896,  c.  141,  Const.  N.  Y.  art. 

Clain's  Code,  sec,  1144,  constitution-  12,  sec.  2.     See'further  as  to  eliargcs 

al.     Parker  v.  C.  Lamb    &    Sons,   99  for  lire  department  or  firemen's  fund, 

Iowa,  265,  34  L.R.A.  704,  68  N.  W.  note  24  L.R.A.  290. 

686,  9  Am.  &  Eng-.  Corp.  Cas   N.  S.  When     city     ordinance     requiring: 

493.  such   payment  not   inconsistent   with 

^  Glens  Falls  Ins.  Co.  v.  Hawkins,  state   statute,    see   Knnz   v.   National 

103  Tex.  327,  126  S.  W.  1114,  Tex.  Fire  Ins.  Co.  169  111.  577,  48  N.  E. 

Rev.   Stat.   1895,  art.   3076,  as  am'd  682. 

))y  laws   29th   Legislature,  c.   80,   p.  '  United    States. — Power    of    com- 

113.  missioner  how   far  limited   in   Cal.: 

2  So  under  Wis.  Rev.   Stat.  c.  65,  discretion  must  be  exercised  in  g-ood 

Fire  Department  v.  Helfenstein,  16  faith:     Liverpool  &  London  &  Globe 

Wis.  130.     The  act  of  March  3,  1885,  Ins.  Co.  v.  Clnnie   (tj.  S.  C.  C.)   88 

Stat.  1885,  c.  15,  proyidino'  for  such  Fed.  160. 

payment,  is  unconstitutional  under  California. — Only  the  comraission- 
the  constitution  of  California,  art.  11,  er,  under  Cal.  act  March  26,  1869, 
sec.  12;  City  and  County  of  San  may  require  insolyent  insurance  coin- 
Francisco  v.  Liverpool,  London  &  pany  to  repair  its  capital  stock  with- 
Globe  Ins.  Co.  74  Cal.  113,  15  Pac.  o^it  "revoking  its  certificate :  Palache 
380,  s.  c.  (U.  S.  C.  C.)  88  Fed.  160.  ,._  paeifie  Ins.  Co.  42  Cal.  419.  See 
The  same  is  true  under  Neb.  Const,  gg  Yed.  160,  above  cited. 
sec.  7,  art.  9 ;  State  y._  Wheeler,  33  Kentiichy.— Rex oQaXiox).  where  corn- 
Neb.  563,  50  N.  W.  7/0.  Examine  ^^^^^.  j^^g  ''failed  to  comply  with  the 
Rhniehart  v.  State,  121  Tenn.  420,  ja^^.V-  eonstrued,  under  Ky.  Stat. 
117  S.  W.  508.  Legislature  has  jqq-^^  ^^^.  753.  ^^.j^gj^  commissioner 
poller  to  impose  such  burden:  Fire-  (^annot  revoke:  see  IMutual  Life  Ins. 
man's  Benev.  Assn.  y.  Lounsburv,  21  q^  ^.  Prewitt,  127  Kv.  399,  105  S. 
111.  511,  74  Am.  Dec.  115.     Such  act  ^r   4(33 

is  not  unconstitHlional,    as    granting  Michigan.— VwAqt       Mich.       Pub. 

an   exclusive   privilege   or   as  giving  ^^.^^^    -^ggy^    ^^_    285,    revocation    bv 

money    of    the    state    to    a    private  ^^^  commissioner  is  wJnislerial  act; 

undertaking  or  as  a  tax:     Trustees  Hartford  Fire  Ins.  Co.  v.  Ravmond, 

of     Exempt^    Firemen's     Fund     v.  -q  i^ji^.j^^  435^  33  n_  ^^Y.  474.     Where 

Roome.  93  N.  Y.  313,  45  Am.  Rep.  ^  company  is  doing  business  against 

217.      See   also   Fire  Department    ot  «^soZ«/e   prohibition   of  hue,   license 

£'^L?^.^^xT  ^''i''V?^''"x^'''\'   o        ;  mav  be  revoked,  although  the  cause  is 

^;  ?.-^''  rt  ^-  ^'-  T'  ^^^J.«"^  ^"?fi  not  specified  in  statute:  National  Life 

of  Fire  Undenvriteiy .  Higo^is   114  ^       ^^     Commissioner   of   Insur- 

N.  Y.  Supp.  506,  130  App.  Div.  /»,  .        ^  -, 

aff'd    (without    opinion)    198   N.   Y.  «"^e   ^^  M^ch.  ..21. 

634,  92  N.  E.  1043,  considered  under  0/..o.-Power  to  revoke  or  decline 

§  326b,  herein.     Fire  Department  of  to  renew  license,  because  of  refusal 

Troy  v.   Bacon,   2   Abb.   App.   Dec.  '«  paP  ^«'^««'  "ot  suspended  by  pen- 

(N/ Y.)    127.       7.S   unconstitulionaJ :  dency  of  action  for  such  taxes  :  State 

Exempt   Firemen's   Assoc,    of   L.    I.  (ex    rel.    National    Life    Assoc.)    v. 

758 


I 


PARTIES— THE  INSURER 


§  328 


may  be  served  in  actions,  suits,  or  proceedings  commenced  by  or 
against  the  company.* 


Matthews,  58  Ohio  St.  1,  40  L.R.A. 
418,  49  N.  E.  1034,  39  Oliio  L.  J.  241, 
39  Wkly.  L.  Bull.  2.^'3,  27  Ins.  L.  J. 
614.  Statute  rcquirins:  notice  of 
revocation  or  discontinuance  of 
license  is  mandatory.  State  (ex  rel. 
Grand  Fraternity)  v.  Lemert,  56 
Ohio  L.  Bull.  118.  See  also  58  Ohio 
St.  1,  last  above  cited. 

Wisconsin.  —  Revocation  where 
accident  company  lias  not  paid  an- 
nual fees,  Rev.  Stat.  sec.  1955.  See 
State  (ex  rel.  Fidelity  &  Casualty 
Co.)  V.  Fricke,  102  Wis.  107,  77  N. 
W.  732,  78  N.  W.  455;  Travelers' 
Ins.  Co.  V.  Fricke,  99  Wis.  367,  41 
L.R.A.  557,  74  N.  W.  372,  99  Wis. 
377,  78  N.  W.  407. 

*  United  States. — Service  good  on 
medical  examiner  as  one  who  "adjusts 
or  settles  a  loss,"  under  2  Mo.  Rev. 
Stat.  1899,  sec.  7992.  Commercial 
Mutual  Accident  Co.  v.  Davis,  213  U. 

5.  245,  29  Sup.  Ct.  445,  53  L.  ed. 
782.  Foreign  insurance  com.panies 
are  not  included  under  Ark.  Stat. 
April  4,  1887,  c.  135,  requiring 
foreign  corporations  generally  to 
designate  agent.  St.  Louis,  Iron 
Mountain  &  Southern  R.  Co.  v.  Com- 
mercial Union  Ins.  Co.  139  U.  S.  22.!, 
11  Sup.  Ct.  523,  35  L.  ed.  154.  Serv- 
ice on  superintendent  of  insurance: 
effect  of  N.  Mcx.  Const,  all.  11,  sec. 

6.  See  Mitchell  v.  National  Sui-etv 
Co.  (U.  S.  D.  C.)  206  Fed.  807,  N. 
Mex.  L.  1909,  e.  48,  see.  4. 

What  must  appear,  to  hind  by  serv- 
ice on  superintendent  of  insurance 
under  Rev.  Stat.  Mo.  1899,  sec.  7991, 
Ann.  Stat.  1906,  p.  3799  :  Webster  v. 
Iowa  State  Traveling  Men's  Assoc. 
(U.  S.  C.  C.)  165  Fed.  367.  Insur- 
ance CO mm'iss loner's  power  to  bind 
after  withdrawal  of  company  from, 
state:  Acts  of  Tenn.  1895,  p.  322, 
c.  160;  Mutual  Reserve  Fund  Life 
Assoc.  V.  Tuckfeld,  159  Fed.  833,  — 
C.  C.  A.  — ,  37  Ins.  L.  J.  536.  When 
secretary    of    mutual    insurance    as- 


sociation is  agent  to  receive  service  of 
process  under  Rev.  Stat.  Wis.  sec. 
2637,  subd.  9,  and  section  1977: 
Dixon  V.  Order  Railway  Conductors 
of  America.  49  Fed.  910.  Presumed 
that  the  company  has  complied  with 
the  law,  and  judgment  will  be  entered 
on  service  on  the  commissioner, 
although  he  refuses  to  accept  service : 
Knapp  Stone  &  Co.  v.  National  Mut. 
Fire  Ins.  Co.  30  Fed.  607. 

Service  on  auditor  is  good  service : 
Ehrman  v.  Teutonia  Ins.  Co.  1  Fed. 
471. 

Arkansas.— ^ee  139  U.  S.  223,  cited 
above  in  this  note. 

California. — When  law  complied 
with  as  to  filing  with  commissioner 
agent's  name.  Polit.  Code  1878,  sec. 
616.  Harrigan  v.  Home  Life  Ins.  Co. 
128  Cal.  53i,  61  Pac.  99. 

Connecticut. — When  company  be- 
comes resident  through  its  duly 
authorized  agent  for  service :  Crouse 
V.  Plwnix  Ins.  Co.  56  Conn.  126,  7 
Am.  St.  Rep.  298,  14  Atl.  82. 

Idcdio. — Compliance  ivith.  statute 
as  to  designating  agent,  ■necessary : 
Katz  V.  Herrick,  12  Idaho,  1,  86  Pac. 
.872. 

Indiana. — Service  may  be  made  on 
state  auditors:  Rehm  v.  German  Ins. 
&  Saving  Inst.  125  Tnd.  135,  25  N. 
E.  173.  Under  Lid.  Stat.  Elliott's 
Supp.  sees.  993,  994,  exempts  foreign 
insurance  companies  from  provisions 
of  Rev.  Stat.  tnd.  1881,  sees.  316, 
3022,  3023,  in  regard  to  service  on 
foreign  corporations  in  general. 
Mutual  insurance  companies  are 
within  the  Indiana  statute  requiring 
designation  of  agent  to  receive  service 
of  papers :  Lamb  v.  Lamb,  13  Bank. 
Reg.  17. 

Iowa. — When  assent  presumed  to 
continuing  last  designated  agent  for 
service  after  company  has  ceased 
business:  Green  v.  P^quitablo  Mutual 
Life  &  Endowment  Assoc.  105  Iowa, 
628,  75  N.  W.  635. 


r59 


§  328 


JOYCE  ON  INSURANCE 


Statutes  of  the  character  of  the  last  are  held  to  apply  to  actions 
growing  out  of  the  ordinary  businesis  of  insurance,  and  not  to  other 


Kentucky. — Fraternal  benejit  so- 
ciety not  within  statutes:  agent  must 
be  designated  and  so  remains  until 
new  agent  desig-nated :  Service  on 
commissioner  insufficient:  American 
Patriots  v.  Kinkead,  144  Ky.  G62,  139 
S.  W.  S34.  Consent  to  service  upon 
commissioner:  effect  of  company's 
■withdraii-al  from  state:  Germania 
Ins.  Co.  V.  Aslibv,  112  Ky.  303,  23 
Ky.  L.  Rep.  1564,  99  Am.  St.  Rep. 
295,  65  S.  W.  611. 

Louisiana. — Agency    of    Secretary 

of  State:  duruiion  of  time  mandate 

'in  force:   acts   1898,  no.   105:      The 

Fair,   Ltd.   v.   American   Union   Fire 

Ins,  Co.  135  La.  48,  64  So.  977. 

Maryland. — The  act  of  Maryland, 
1378,  c.  106,  is  exclusive,  and  general 
corporation  act  does  not  apply: 
Oland  V.  Agricultural  Ins.  Co.  69 
Md.  248,  14^Atl.  669,  12  Cent.  Rep. 
881. 

Michigan. — Surety  companies:  sec. 
5198,  Comp.  Law.«,  is  not  an  act  af- 
fecting general  jurisdiction  of  courts, 
but  icaiver  of  general  provisions  as 
to  service:  People,  to  use  of  Wipfler 
V.  Fidelity  &  Deposit  Co.  163  Mich. 
94,  17  Det.  Leg.  N.  748,  127  N.  W. 
765.  Surety  companies:  Appoint- 
ment of  commissioner  prerequisite 
for  service  on  time  to  bind  company : 
Comp.  Laws,  sec.  5196,  as  ara'd  Pub. 
ads  1907,  no.  321:  Wells  v.  United 
States  Fidelity  &  Guaranty  Co.  160 
Mich.  213,  125  N.  W.  57.  The  Mich. 
St<at.  Comp.  L.  1871,  sec.  1683,  Laws 
1873,  p.  206,  only  applies  to  courts  of 
record,  and  not  to  justices'  courts: 
Hartford  Ins.  Co.  v.  Owen,  30  Mich. 
441. 

Minnesota. — Statute  constitution- 
al requiring  appointment  of  com- 
missioner: State  V.  Queen  City  Fire 
Ins.  Co.  114  Minn.  471,  131  N.  ^Y. 
628. 

Missouri. — Where  foreign  insur- 
ance company  ha.s  complied  with  act 
Mo.  1874,  p.  74,  .';ec.  25,  whicli  re- 
pealed Wagner's  Mo.  Stat.  770,  sec. 

7 


25,  delivery  of  icrit  to  local  agent  is 
not  sufficient:  Baile  v.  Equitable  Fire 
Ins.  Co.  68  Mo.  _617.  See  213  U.  S. 
245,  165  Fed.  36 <,  cited  above  in  this 
note. 

New  Mexico.— See   206    Fed.    807, 
cited  above  in  this  note. 

New  York. — Legislature  has  power 
to  enact  statute:  service  on  commis- 
sioner or  on  secretary  of  state:  Wood- 
Avard  V.  ^lutual  Reserve  Life  Ins.  Co. 
178  N.  Y.  485,  102  Am.  St.  Rep.  519, 
71  N.  E.  10.  Appointment  under  N. 
Y.  Laws,  1884,  c.  346,  of  "superin- 
tendent of  insurance  or  his  successor 
in  office,"  is  valid,  and  extends  to  an 
incumbent  of  office  and  his  succes- 
sors :  Lafflin  v.  Travelers'  Ins.  Co.  121 
N.  Y.  713,  31  N.  Y.  S.  R.  900,  24  N. 
E.  934.  Service  on  designated  attor- 
ney gives  court  jurisdictio)i :  Gibbs  v. 
Qiieen  Ins.  Co.  63  N.  Y.  114,  20  Am. 
Rep.  513.  Service  on  superintendent 
gives  jurisdiction  of  city  court  of  New 
York:  People's  Fire  Ins.  Co.  v.  New 
Y^ork  City  Justices,  33  N.  Y.  147. 
Effect  of  revocation  see  Hunter  v. 
Mutual  Reserve  Life  Ins.  Co.  184  N. 
Y'.  136,  30  L.R.A.(N.S.)  677n,  6 
Amer.  &  Eng.  Ann.  Cas.  291,  76  N. 
E.  1072,  s.  c.  99  N.  Y.  Supp.  888 ; 
Klein  Bros.  &  Co.  v.  German  Union 
Fire  Ins.  Co.  of  Bait.  123  N.  Y.  Sui)p. 
1082,  66  Misc.  538;  Tierney  v. 
Helvetia-Swiss  Fire  Ins.  Co.  122  N. 
Y.  Supp.  869,  138  App.  Div.  469; 
Badaer  v.  Helvetia-Swiss  Fire  Ins. 
Co.  120  N.  Y.  Supp.  161,  136  App. 
Div.  31;  Woodward  v.  Mutual  Re- 
serve Life  Ins.  Co.  82  N.  Y.  Sujip. 
908,  84  App.  Div.  324. 

North  Carolina. — Effect  on  limita- 
tion of  action  of  statute  providing 
for  service  on  commissioner.  Green 
v.  Hartford  Life  Ins.  Co.  139  N.  Car. 
309,  1  L.R.A.(N.S.)  623,  51  S.  E. 
887. 

Oklahoma. — Service  on  chief  officer 
of  agency,  valid.     Comp.  Laws  1909, 
sec.    560});    Continental    Ins.    Co.    v. 
Hull,  38  Okla.  307,  132  Pae.  657. 
60 


PARTIES— THE  INSURER 


328 


actions  on  contract.^  They  also  amount  substantially  to  a  consent 
on  the  part  of  foreign  insurance  companies  to  be  sued  in  the  courts 
of  the  state  where  they  are  doing  business,^  and  some  tribunals  have 
held  that  such  acts  confer  exclusive  jurisdiction  on  the  courts  of 
the  state.'''  But  the  United  States  Supreme  Court  ^  decides  that  such 
a  statute,  so  far  as  it  requires  an  agreeiiicnt  against  the  removal  of 
suits  into  the  Federal  courts,  is  repugnant  to  the  Constitution  of  the 
United  States,  and  such  an  agreement  would  be  void.  So  in  an 
earlier  Wisconsin  case  ^  it  was  held  that  such  an  act  did  not  deprive 
a  foreign  insurance  corporation  of  its  right  to  remove  into  the  Fed- 
eral courts  a  suit  commenced  in  that  state  against  such  company  by 
a  citizen  thereof,  and  it  is  so  decided  in  Massachusetts.^"  Some  of 
the  states  have,  however,  enacted  laws  providing  that  the  license  of 
a  foreign  insurance  company  shall  be  revoked  or  suspended  if  such 
company  make  an  a|)plication  to  remove  a  suit  commenced  in  the 
state  court  to  the  United  States  district  or  circuit  court. ^^    And  such 


Pennsijlvania.—Sevvice     must     be    .169,  24  L.  ed.  853;  Raih'oad  Co.  v. 
made  upon  company's  registered  state   Han-is,  12  Wall.  (79  U.  S.)  65,  20  L. 


agent.  Hall  v.  Metropolitan  Lif:e  Ins. 
Co.  63  I^o..  Intell.  104,  15  Dist.  Rep. 
144,  32  Pa.  Co.  Ct.  Rep.  14.  See 
Southard  v.  Home  Life  Ins.  Co.  67 
Leg-.  Jntell.  428. 

South  Carolina.— Code  Proc.  1902, 


see.    155,    permitting   service   on   ani/    herein. 


ed.  354:  Lafayette  Ins.  Co.  v.  French, 
18  How.  (59  U.  S.)  404,  15  L.  ed. 
451;  Rehm  v.  German  Ins.  &  Saving 
Inst.  125  Ind.  135,  25  N.  E.  173; 
Cunningham  v.  Southern  Express  Co. 
67   N.    C.   425.      See   §§    3497,   3498 


agent,  not  repealed  by  act  1910,  sec. 
17,  26  Stat,  at  L.  755,  requiring  ap- 
pointment of  commissioner.  JMont- 
gomerv  v.  United  States  Fidelity  & 
Guaranty  Co.  90  S.  Car.  283,  7i  S. 
E.  1084. 

Tennessee. — See  159  Fed.  833, 
cited  above  in  this  note. 

TFa-s//  inglon. — Su/)erintendent  of 
Insurance  cannot  accPj)t  or  waive 
peisonal  service.     Laws  1901,  p.  360, 


'''New  York  Life  Ins.  Co.  v.  Best, 
23  Ohio  St.  105,  under  Laws  1872,  69 
Ohio  Laws,  155.  sec.  18;  People  (ex 
rel.  Glens  Falls  Ins.  Co.)  v.  Judge  of 
Jackson  Circuit,  21  Mich.  577,  4  Am. 
Rep.  504.  This  case  also  holds  that 
a  writ  of  mandamus  was  not  the 
yjroper  remedy,  even  "if  the  cause 
could  be  transferred.  .Morse  v.  lloiiie 
Ins.  Co.  30  Wis.  496,  11  Am.  Rep. 
580,  under  Wis.  Stat.  Laws  1870,  c. 


c.   1/4,   sec.    6;    Bennett   v.    Supreme  5(1,  sec.  22.  Overruled,  see  next  note. 

Tent  of  Kniglits  of  -Maccabees  of  the  ^Insurance  Co.  v.  Morse,  20  Wall. 

Worl  1,  40  Wash.  431,  2  L.R.A.(N.S.)  (87  U.  S.)  445,  22  L.  ed.  3(55  (Morse 

389,  82  Pae.  744.  v.  Home  Ins.  Co.)    (IT.  S.  Sui>.  Ct.) 

Wisconsin. — See  49  Fed.   910,  cited  13    Am.    liep.    '2'.h ,    overruling   same 


above  in  this  note. 

See  also  as  to  service  of  ]>apers  or 
process;  agent  of  foreign  company; 
statute.s;  jurisdiction,  etc.,  see  $5§  702, 
703,  3497,  3706  herein. 

*  Rehm  v.  Gernuin  Ins.  &  Saving 
Inst.  125  Ind.  135,  25  N.  E.  173.  See 
also  §  270  Iiei-ein. 

^  Ex  parte  Sehollenberger,  96  U.  S. 

761 


ca.se,  30  Wis.  4!)(i.  11   Am.  Rep.  580. 
^  Knorr  v.  Tlduic  Ins.  Co.  25  Wis. 
143,  3  Am.  Rep.  26. 

10  Morton  v.  Mutual  Life  Ins.  Co. 
105  Mass.  141,  7  Am.  Rep.  505,  and 
note  50/. 

11  Statutes  as  to  foreign  companies; 
removal  of  causes,  see  §  3498  herein. 


§§  32Sa,  328b  JOYCE  ON  INSURANCE 

a  statute  is  not  unconstitutional,  where  it  does  not  require  an  agree- 
ment against  the  removal  of  suits  into  the  Federal  courts.^^ 

§  328a.  State  regulation:  insurance  business  as  franchise. — The 
state  has  the  right  to  regard  the  business  of  insurance  as  one  de- 
pendent upon  the  exercise  of  a  franchise/^  a  franchise  subject  to 
regulation  by  the  state.-'*  So  in  Ohio  the  authority  required  to  en- 
able a  foreign  corporation  to  carry  on  business  in  a  state  other  than 
that  of  its  incorporation,  emanates  from  the  state  and  the  privilege 
granted  is  a  franchise  and  any  company  or  corporation  carrying 
on  its  business  in  the  domestic  state  without  authority  is  unlaw- 
fully exercising  a  franchise. ^^ 

§  328b.  State  regulation:  quasi  public  character  of  insurance 
business. — It  is  determined  that  although  insurance  companies  are 
not  classed  as  public  but  as  private  corporations  and  though  they 
are  not  even  styled  quasi  public  corporations,  still  a  large  insurance 
company  is  a  public  institution.^^  But  it  is  also  declared  that  a 
business,  such  as  that  of  insurance,  private  in  its  inception  may  be- 
come affected  with  a  public  interest.  To  the  eye  of  the  law  and  in 
the  interest  of  the  public,  it  is  one  and  the  same  thing  whether  a 
corporation  is  created  to  subserve  the  public  interest  or  whether  it 
achieves  success  of  such  a  nature  that  the  duty  of  regarding  the  in- 
terest of  the  public  is  thrust  upon  it.^'  Again,  in  a  Federal  case, 
the  court;  per  Pollock,  D.  J.,  in  discussing  the  question  of  the  con- 

12  Security  Mutual  Life  Ins.  Co.  ^^  gtate  v.  Ackerman,  51  Ohio  St. 
(Travelers  Ins.  Co.)  v.  Prewitt,  202  163,  194,  24  L.R.A.  298,  37  N.  E. 
U.  S.  246,  50  L.  ed.  1013,  26  Sup.  Ct.  828,  per  Williams,  J.,  quoting  from 
019,  following  Dovle  v.  Continental  Spelling  on  Extraordinarv  Relief, 
Ins.  Co.  94  U.  S.  535,  24  L.  ed.  148,  sees.  1807,  1808,  and  cited  in  John 
which  is  held  not  overruled  by  Barron  Hancock  Mutual  Life  Ins.  Co.  v. 
V.  Burnside,  121  U.  S.  186,  30  L.  ed.  Warren,  181  U.  S.  73,  74,  75,  45  L. 
915,  7  Sup.  Ct.  931,  nor  by  any  other  ed.  755,  21  Sup.  Ct.  535,  30  Ins.  L. 
decision  of  said  court.  See  also  J.  623,  as  ruling  that  foreign  insur- 
Prewitt  V.  Security  Mutual  Life  Ins.  ance  companies  wlrellier  incorporated 
Co.  119  Ky.  321,  1  L.R.A. (N.S.)  1019  or  not  are  required  as  a  condition 
and  note,  115  Am.  St.  Rep.  264,  83  precedent  to  doing  business  in  the 
S.  AY.  611.  state  to  obtain  a  certificate  of  autlior- 

On   revocation   of   License   of   for-  ity  so  to  do,  and  that  the  privilege 

eign  company  on  account  of  removal  so    conferred    is    a    franchise.      See 

of  action  to  Federal  court,  see  notes  Joyce  on  Franchises   (ed.  1909)   sec. 

in  1  L.R.A. (N.S.)   1019,  and  L.R.A.  13." 
1915F.    1187.  16  Watson  v.  National  Life  &  Trust 

13  People  V.  Loew,  44  N.  Y.  Supp.  Co.  189  Fed.  872,  —  C.  C.  A.  — , 
42,  43,  19  Misc.  248.     See  Joyce  on  40  Ins.  L.  J.  2065. 

Franchises  (ed.  1909)  see,  18,  see  also  "  State  (ex  rel.  McCarter)  v.  Fire 
§  328  herein.  man's  Ins.  Co.  74  N.  J.  Eq.  ,372,  29 

1^  Boston  lee  Co.  v.  Boston  &  L.R.A. (N.S.)  1194  note,  135  Am.  St. 
Maine  Rd.  Co.  77  N.  H.  6,  45  L.R.A.  Rep.  708,  73  Atl.  80,  18  Amer.  & 
(N.S.)  835,  86  Atl.  356.  Eng.  Ann.  Cas.  1018,  ease  reverses  70 

762 


\ 


PARTIES— THE  INSURER 


§  328b 


stitutionality  of  a  statute  regulating  fire  insurance  rates  and  charges, 
and  the  police  powers  of  the  state,  says  that  "It  is  not  entirely  clear 
at  this  late  day"  that  ''the  business  of  fire  insurance,  although  in  it.^ 
nature  a  private  business  will  in  future  continue  to  be  regarded  as 
entirely  unaffected  with  a  public  use."  ^^  jj-  jg  ^^jg^  decided  that  the 
business  of  fire  insurance  is  of  an  extensive  and  peculiar  character, 
and  its  management  concerns  a  large  number  of  people,  especially 
those  desiring  to  protect  their  property  by  insurance;  and  there- 
fore, the  state  may,  in  the  exercise  of  its  police  power,  by  appropri- 
ate legislation,  regulate  such  business  within  constitutional  limits. ^^ 
So  under  a  Mississippi  decision  insurance  contracts  are  not  matters 
of  purely  private  concern.  The  public  is  interested  in  them  to  such 
and  extent  that  they  may  be  said  to  be  contracis  of  a  quasi  public 
character,  to  a  greater  or  less  extent  affected  with  a  pul^lic  interest. ^^ 
And  fire  insurance  is  further  held  to  be  of  such  a  quasi  ])ublic  char- 
acter and  matter  of  public  concern  as  to  be  subject  to  state  regula- 
tion,^ and  this  applies  to  the  regulation  of  rates,  and  a  statute  so 
regulating  rates  is  not  unconstitutional.^ 

A  fire  insurance  patrol  is  a  private  association  and  not  a  public 
corporation  or  a  public  charity  where  its  object  is  to  save  life  and 
property,  minimize  losses  and  promote  the  financial  interests  of  its 
members  who  are  fire  insurance  companies,  said  patrol  being  sup- 
ported by  assessments.^ 


N.  J.  Eq.  291,  61  Atl.  705,  cited  in 
Blancliard  v.  Prudential  Ins.  Co.  78 
N.  J.  Eq.  471,  477,  79  Atl.  533. 

^^  German  Alliance  Ins.  Co.  v. 
Barnes,  (U.  S.  C.  C.)  189  Fed.  709, 
40  Ins.  L.  J.  2176,  2187;  Kan.  Stat. 
1909,  ('.  152,  see  third  next  loUowing 
note  lierein  construing  same  .statute. 

^^  German     Alliance    Ins.     Co.     v. 


Boston  &  Maine  Rd.  Co.  77  N.  H.  6, 
45  L.R.A.(X.S.)  835,  86  Atl.  356,  42 
Ins.  L.  J.  831.  Southwestern  JNIulual 
Life  Ins.  Co.  v.  Lewis  &  Clarke  Coun- 
ty, 28  Mont.  484,  72  Pao.  982.  See 
note  last  above. 

2  German  Alliance  Ins.  Co.  v.  Lew- 
is, 233  U.  S.  389,  58  L.  ed.  1011, 
L.R.A.1915C,  1189,  34  Sup.  Ct.  612, 


Hale,  219  U.  S.  307,  55  L.  ed.  229,  31   43  Ins.  L.  J.  739,  Kan.  Stat.  1909,  c. 


152.  The  Cliief  .Justice  and  two  jus- 
tices di.ssenting. 

^  Coleman  v.  Fire  Insurance  Patrol 
of  New  Orleans,  122  La.  626,  21 
L.R.A.(N.S.)  810,  48  So.  130.  Or- 
ganized under  La.  act  1902,  no.  115, 
p.  180. 

Police  Relief  Association  a  private, 
iind  not  a  jiublic  or  qua.si  pul)lic  cor- 
poration. De  Runtz  v.  St.  Louis  Po- 
ice   Relief   Assoc.    180    Mo.    A]^^.    1, 

D.  C.)  197  Fed.  435.  See  also  Feople  162  S.  W.  1053,  Rev.  Stat.  1909,  sec. 

V.   Aachen  &  Munich  Fire  Ins.   Co.   3458. 

126  111.  App.  636;  Boston  Ice  Co.  v. 

763 


Su|).  Ct.  216,  a  case  of  combination  to 
fix  insurance  rates,  penalty  and- con- 
stitutionality of  a  statute. 

On  fire  insurance  as  a  1)usiness  af- 
fected by  a  public  intei'est,  see  notes 
in  29  L.R.A.(N.S.)  1195,  and  L.K.A. 
1915C,  1189. 

20  Fidelity  Mutual  Life  Ins.  Co.  v. 
Miazza,  93  Miss.  18,  136  Am.  St.  Rep. 
534,  48  So.  1017. 

1  Citizens  Ins.   Co.  v.   Clay   (U.   S. 


§  329  JOYCE  ON  INSURANCE 

§  329.  Foreign  company:  retaliatory  and  anti-compact  laws: 
combinations  to  control  rates. — A  majority  of  the  states  have  en- 
acted what  ai'e  known  as  retaUatory  laws.  By  these  laws  one  state 
imposes  the  same  or  like  reslrictions  and  conditions  upon  insurance 
corporations  of  other  states  doing  business  within  its  territory,  as 
such  other  states  impose  upon  its  insurance  corporations  doing  bus- 
iness therein.*  Such  acts  have  been  held  unconstitutional  in  Ala- 
bania,  as  not  within  the  principle  of  uniformity  of  taxation,  and 
as  an  unwarranted  delegation  of  the  legislative  power  of  such  state 
to  other  states.^  So  the  retaliatory  tax  law  of  Kentucky  is  uncon- 
stitutional.^ But  in  Georgia  an  act'''  has  been  held  to  l)e  constitu- 
tional and  not  repealed  by  subsequently  enacted  general  tax  laws ;  * 
and  the  retaliatory  law  of  Indiana^  is  declared  in  that  state  to  be 
constitutional,  and  not  open  to  the  objection  that  it  is  an  attempt 
to  levy  different  fees  for  the  same  privilege  from  different  mem- 
bers of  the  same  class.  It  is  also  held  not  to  be  an  enactment  of 
the  statutes  of  one  state  into  those  of  another,  nor  unconstitutional 
on  tlie  oround  of  uncertaintv.^"  So  in  New  York  such  statute  is 
held  not  unconstitutional,  although  the  amount  required  for  taxes 
may  be  greater  than  that  required  by  other  laws  of  the  same  state." 

If  a  foreign  corporation  has  complied  with  the  Minnesota  laws,^^ 
it  should  not  be  excluded  from  doing  business  there  where  it  is 
doubtful  whether  the  laws  of  the  state  of  incorporation  of  such  com- 
pany would  prevent  corporations  of  Minnesota  from  doing  business 
there,  and  a  judgment  of  ouster  against  such  corporation  will  be  re- 
fused in  such  a  case.^' 

4  Conn.  Gen.  Stat.  1902,  sees.  24o0,  ^Rev.  Stat.  LkI.  1883,  see.  3773. 
3606,    impo.<;ing-   taxes   by   reason    of    See  acts  1880,  c.  709,  sec.  2. 

like  taxes  being'  imposed  under  laws  ^°  State  v.  Insurance  Co.  of  North 

N.  Y.  1901,  p.  297,  c.  118.     See  also  America,    115    Ind.    257,    17    N.    E. 

Conn,     act     1905,    as    to    reiundino'  575;  Blackmer  v.  Royal  Ins.  Co.  115 

taxe-s.     State  (ex  rel.  Life  Ins.  Co.)  Ind.  291,  17  N.  E.  580. 

v.  Upson,  79   Conn.   154,  64  Atl.  2.  "People  v.   Fire   Assn.  92  N.  Y. 

Retaliatory     statutes,     see     note     24  311,  ,44  Am.  Rep.  380.     See  3  R.  S. 

L.H.A.  303.  8th  ed.  p.  1617;  Laws  1892,  c.  090, 

5  Clark  V.  Mobile,  66  Ala.  217,  10  sec.  38. 

Ins.  L.  J.  3.  12  den    gtiit.  1878,  c.  34,  sec.  269. 

6  We.stern  &  Southern  Life  Ins.  Co.    See  Stat.  1891,  vol.  1,  sec.  2907. 

V.  Commonwealth,  133  Kv.  292,  117  ^3  state  Attorney  General  v.  Fideli- 

S.  W.  376;  Ky.  Stat.  1909,  .sec.  637;  ty  &  Casualty  Ins.  Co.  39  Minn.  538, 

Russeirs  Stat*  sec.  4284,  Const.  Ky.  41  N.  W.  108.     See  Stat.  1891,  vol.  1, 

sees.  60,  171,  180.  sec  2907.     For  construction  of  Con- 

'  Act  1869.  See  Laws  1887,  p.  124,  necticut  statutes,  .see  Croke  v.  War- 
sec.  12.  ner,  56  Conn.  234,  14  Atl.  798.     See 

^  Goldsmith   y.    Home   Ins.   Co.    02  also  tirst  note  umler  this  section.  The 

Ga.  379.  rule  requiring  an  order,  etc.,  to  with- 

764 


PARTIES— THE  INSURER  §  329 

In  State  v.  Moore  ^*  it  is  held  that  the  io^^iirance  cominissioner- 
could  not  be  compelled  by  mandamus  to  issue  a  certificate  to  a  com- 
pany organized  in  a  state  where  Ohio  companies  were  not  permitted 
to  carry  on  business  on  the  same  basis  substantially  as  in  Ohio. 

A  state  statute  imposing  on  insurance  companies  of  another  state 
or  nation  the  same  obligations  and  prohibitions  that  are  imposed 
in  such  other  state  or  nation  upon  corporations  of  the  former  state 
is  retaliatory  in  character,  and  must  be  confined  to  cases  fairly  with- 
in its  letter;  and  to  make  a  case  for  the  retaliatory  provision  of  Uio 
statute  of  Ohio  ^^  as  to  insurance  companies  of  a  state  which  im- 
poses prohi])itions  upon  Ohio  companies  "doing  business  in  such 
state,"  it  must  appear  at  least  that  an  Ohio  comj^any  has  been 
formed  to  do  substantially  the  same  kinds  and  lines  of  insurance 
as  tlie  foreign  company  wishes  to  do  in  Ohio.^^  Again  ina.smuch 
as  Michigan  statutes  allow  policies  of  life  insurance  to  be  issued 
only  when  they  specify  the  sum  payable  at  a  fixed  amount,  and  do 
not  permit  endowment  policies  Ijy  assessment  companies,  while 
assessment  com])anies  in  Ohio  are  not  allowed  to  guarantee  any 
fixed  sum  further  than  what  might  be  realized  from  assessments, 
unless  they  have  complied  with  the  statutes  relating  to  regular  mu- 
tual life  insurance  companies,  and  in  that  case  are  allowed  to  issue 
endowment  policies  at  a  fixed  sum,  Ohio  companies  are  not  per- 
mitted to  do  business  in  Michigan  on  substantially  the  same  basis 
and  limitations  as  they  are  in  Oliio,  and  therefore,  under  the  pro- 
viso of  Ohio  Statute,  Michigan  insurance  corporations  are  not  en- 
titled to  a  license  to  do  business  in  Ohio.^''    in  an  Illinois  case  it 

draw  securities  under  Wagner's  Mo.  sistent  violation  of  law  regulating 
Stat.  p.  769,  sec.  20,  is  not  affected  such  corporations;  and  Wis.  Rev. 
by  the  fact  that  the  state  of  ineorpo-  Stat.  sec.  1974,  providing  that  such 
ration  of  the  foreign  company  does  company  shall  not  issue  any  new  poli- 
not  require  such  order  for  sucli  pur-  cy  after  sixty  days  from  rendition  of 
pose.  State  v.  Gates,  67  IMo.  496.  final  judgment  against  it,  do  not  ap- 
See  Rev.  Stat.  1889,  see.  5932.  As  to  ply  to  appeal  taken  in  good  faith 
taxation,  see  Stale  v.  Reinmund,  45  from  final  judgment.  State  v.  Spoon- 
Ohio  St.  214,  13  N.  E.  30,  under  er,  47  Wis.  438,  2  N.  W.  555.  See 
Rev.  Stat.  Ohio,  sees.  282,  2745.  See  Sanb.  &  B.  Annot.  Stat.  1889,  vol.  1, 
Rev.  Stat.  1890,  sec.  282.     As  to  de-  sec.  1221. 

Ijosits  from  insurance  companies,  see        ^*  39  Ohio  St.  486,  under  80  Ohio 

Seiders  v.  Mercliants  Life  Assoc.  93  Laws,  180,  sec.  3630e.     See  Rev.  Stat. 

Tex.  194,  54  S.  W.  753,  rev'g  —  Tex.  1890,  sec.  282. 
Civ.  App.  — ,  51  S.  W.  547,  hew  Stat.        ^^  Rev.  Stat.  see.  282  note. 
Art.  30C3.     Deposit  with  state  treas-        ^^  State  (ex  rel.  Atty.  Genl.)  v.  Fi- 

urer,  see  Gen.  Stat.  1888,  sees.  2835,  delity  &   Casualtv  Ins.   Co.  49   Ohio 

2913,  and  Pub.   Laws,   1889,   c.   95;  St.  440,  16  L.R.A.  611,  34  Am.  St. 

Wis.  acts  of  1879,  c.  171,  requiring  Rep.  440,  31  N.  E.  658. 
insurance  commissioner  to  revoke  li-        ^^  State    (ex   rel.    Atty.    Genl.)    v. 

cense  of  foreign  company  upon  per-  Western   Union   Mutual   Life  &  Ac- 

765 


§  329  JOYCE  ON  INSURANCE 

is  decided  that  retaliatory  legislation,  which  provides  against  future 
like  legislation  on  the  part  of  other  states,  does  not  become  opera- 
tive until  the  enactment  by  such  other  state  of  the  laws  so  provided 
against.'^*  It  is  also  held  in  that  state  that  retaliatory  statutes  will 
not  be  enforced  against  a  foreign  insurance  corporation  on  the 
ground  of  alleged  restrictions  in  the  statutes  of  the  state  which 
created  it,  unless  it  is  clearly  proved  that  those  statutes  would  have 
the  restrictive  effect  which  is  claimed. ^^  Under  a  Maryland  deci- 
sion a  statute  providing  that  whenever  the  laws  of  any  other  state 
impose  upon  Maryland  insurance  companies  seeking  to  do  business 
wuthin  its  borders  greater  obligations  or  prohibitions  than  are  pre- 
scribed for  foreign  companies  seeking  to  do  business  in  Maryland, 
the  same  obligations  and  prohibitions  shall  be  imposed  on  com- 
panies of  such  state  which  shall  seek  Maryland  Ijusiness,  makes 
such  foreign  law  the  rule  which  Maryland  will  apply  to  companies 
of  the  foreign  state  asking  permission  to  do  business  within  its  ter- 
ritory ;  and  if  a  Maryland  company  is  refused  a  license  in  the  for- 
eign state  merely  on  the  ground  of  discretion,  the  latter's  companies 
may  be  refused  license  in  Maiyland  on  the  same  ground,  although 
the  Maryland  statutes  do  not  in  terms  authorize  it.^" 

Some  of  the  states  ^  provide  substantially  that  the  license  of  any 
insurance  company  not  organized  under  the  laws  of  the  state,  but 
doing  business  therein,  may  be  revoked  if  it  shall  enter  into  any 
compact  or  combination  with  other  insurance  companies,  for  the 

cident  Soe.  47  Ohio  St.  167,  8  L.R.A.  Georgia.— Code    1895,    sec.     2085, 

129,  24  N.  E.  392;  Ohio  Rev.  Stat.  Ga   Laws  1890-91   vol    1   p.  206^ 

sec  3638E.  ^  ^«*^«:-4^^-  Code  1897,  sec.  1/54, 

,» ^            .      T         ^             c    •       (-  Supp.  190y,  sec.  l/o4. 

^8  Germania   Ins.    Co.    v.    bwigert,  *^            '^^^     q,^,     -,qqq    ^  i     -, 

128  111.  237,  4  L.R.A.  473,  21  N:  E.  ^^e   ^  " 

530,  under  Stat.  111.  1874,  c.  73,  see.  iouisiana.— Act  1900,  No.  110. 

29.     See  Cothian's  Rev.  Stat.  1891,  p.  Michigan.— B.o\Ye\Vs    Stat.     Supp. 

830,  sec.  29 ;  p.  833,  see.  55 ;  p.  840g-,  1883-89,    sec.    4340e;    Comp.    Laws 

see.  63w.  See  Union  Central  Life  Ins.  1897,  sec.  5124. 

Co.  V.  Durfee,  164  111.  186,  45  N.  E.  Nebraska.— Laws  1897,  c.  81. 

441,  111.  Laws  1869,  p.  234,  see.  20a.  New    Hampshire.— L,a.ws    1885,    c. 

Like  statute  as  that  in  the  last  above  93. 

cited  case  Ohio. — Rev.   Stat.  1892,  sec.  3659, 

19  People  (ex  rel.  Stephens)  v.  Fi-  Bates  Ann  Stat.  1906  sec.  3650. 

delity   &   Casualty   Co.   153   lU.   25,  ,  ^fo  "fr^  ?7     ""'Tono '      ao^    "'"' 

26  KR.A.  295,  38  N.  E.  752.  ^819,  1  Code  Laws,  1902,  p  695 

20  Talbott  ^^  Fidelity  &  Casualty  ^  \%f;  Dakota.-La.-s  1903,  c.  lo8, 
Co.  74  Md.  536,  13  L.R.A.  584,  22  '  Tennessee.— Acts  1905,  c.  479,  p. 
Atl.  39o.  2019. 

^  Arkansas.— Acts  May  6,  1899;  Washington.— Ball,  Codes  &  Stat. 
act  1905,  p.  1,  as  am'd  by  acts  1907,  p.  725,  see.  2841B;  Pub.  Stat.  1901, 
p.  430.  e.  169,  see.  10. 

766 


PARTIES— THE  INSURER  §  329a 

purpose  of  governing  or  controlling  the  rates  charged  for  fire  in- 
surance on  property  within  the  state,  and  such  an  act  is  held  con- 
stitutional in  Alichigan.^  But  an  insurance  company  is  not  pre- 
cluded from  bringing  a  suit  to  enjoin  revoking  its  certificate  and 
canceling  its  bonds  even  though  it  is  a  member  of  an  illegal  com- 
bination to  raise  insurance  rates.^ 

§  329a.  Anti-compact  laws:  combinations  to  control  rates  contin- 
ued :  conspiracy. — The  state  has  the  power  to  legislate  against  com- 
binations, agreements,  pools,  trusts,  etc.,  to  fix  prices,  and  subject 
to  penalties  any  foreign  insurance  corporation  and  preclude  its 
doing  business  in  the  state  while  a  member  of  such  combination, 
etc.*  But  a  foreign  company  which  enters  into  an  agreement  with 
other  insurance  companies  outside  the  state  in  which  it  is  doing 
business,  for  the  purpose  of  fixing  rates  of  insurance  in  foreign 
countries,  not  intended  to  affect,  and  which  does  not  affect,  persons, 
property,  or  prices  of  insurance  in  the  state  does  not  subject  it«elf 
to  a  penalty  imposed  by  statute  upon  any  corporation  transacting 
any  kind  of  business  in  the  state,  which  becomes  a  party  to  any 
pool  or  combination  to  fix  or  limit  rates  of  insurance.^  And  a  state 
statute  fixing  a  penalty,  to  be  recovered  by  the  insured,  of  a  certain 
per  cent  in  excess  of  the  policy  amount,  where  the  insurer  is  con- 
nected with  a  tariff  association  is  not  unconstitutional  under  the 
Fourteenth  Amendment  and  is  a  valid  exercise  of  the  police  power 
of  the  state.^  The  Iowa  statute  "^  prohibiting  combinations  or  agree- 
ments of  such  companies  as  to  rates,  commissions  and  manner  of 
transacting  business,  is  not  unconstitutional,  its  only  object  being 
to  insure  competition.* 

2  Hartford  Fire  Ins.  Co.  v.  Rav-  Ct.  216,  Ala.  Code  1896,  sees.  2619, 

mond,  70  Mich.  485,  38  N.  W.  474,  2620,   as  am'd   by    Code   1907,   sees, 

under  Pub.  acts  Mich.  1887,  no.  285.  4954,  4955;  Firemen's  Fund  Ins.  Co. 

See   Howell's    Stat.    Supp.    1883-89,  v.  Hellner,  159  Ala.  447,  49  So.  297, 

see.  4340c.        But  see  Niaoara  Fire  Code  1907,  sec.  4594,  Code  1896,  sec. 

Ins.  Co.  V.  Cornell  (U.  S.  C.  C.)  110  2619.     See  Joyce  on  Monopolies  (ed. 

Fed.  816.     See  §  329a  herein.  1911 )   sec.  370. 

^  Livei-pool  &  London  &  Globe  Ins.       '  Code  1897,  sees.  1754,  1755. 
Co.  V.  Clunie   (U.  S.  C.  C.)   88  Fed.        "Carroll  v.  Greenwich  Ins.  Co.  199 

160.  U.  S.  401,  50  L.  ed.  246,  26  Sup.  Ct. 

*  Hartford  Fire  Ins.  Co.  v.  State,  66,  rev's:  Greenwich  Ins.  Co.  v.  Car- 
76  Ark.  303,  89  S.  W.  42,  Ark.  act  roll  (U.  S.  C.  C.)  125  Fed.  121.  The 
Jan'y  23,  1905,  sec.  1.  See  Hartford  court  vev  Mr.  Justice  Holmes,  said: 
Fire  Ins.  Co.  v.  Perkins  (U.  S.  C.  C)  ''Whatever  may  be  thought  of  the 
135  Fed.  502.  policy  of  such  attempts  it  cannot  be 

*  State  V.  Lancashire  Fire  Ins.  Co.  denied  in  this  court,  unless  some  of 
66  Ark.  466,  45  L.R.A.  348,  51  S.  W.  its  decisions  are  to  be  overruled,  that 
632,  Ark.  act  'Slay  6,  1899.  statutes  prohibiting-  combinations  be- 

^  German  Alliance  Ins.  Co.  v.  Hale,  tween  possible  rivals  in  trade  may  be 
219  U.  S.  307,  55  L.  ed.  229,  31  Sup.   constitutional.    The  decisions  concern 

767 


§  330 


JOYCE  OX  INSURANCE 


Insurance  companies  nn,2,lit  legally  combine  at  common  law  to 
establish  uniform  rates  of  insurance  and  of  commissions  to  agents;  ' 
and  although  a  combination  to  maintain  rates  may  be  a  void  con- 
tract, still  it  was  not  an  indictable  offense  at  common  law.^°  But 
an  ultra  ^•ires  contract  in  restraint  of  trade,  to  restrict  competition, 
to  fix  rates,  etc.,  may  l)e  restrained  in  equity  at  the  suit  of  the  at- 
torney general,  where  it  violates  public  policy  and  works  a  public 
injury."  And  a  combination  of  foreign  insurers  to  increase  rates 
of  insurance  may  with  their  agents  become  liable  to  prosecution 
under  a  statute  prohibiting  unlawful  trusts  and  combinations  "in 
restraint  of  trade  and  products.'"  ^^ 

§  330.  Foreign  companies:  what  constitutes  "doing  business," 
etc. — ^\.shas  been  stated,  the  object  of  legislation  regarding  foreign 
insurance  comj)anies  seems  to  be  the  protection  of  the  interests  of 
the  citizens  of  the  legislating  state,  and  certain  of  the  statutory  pro- 
visions above  referred  to  are  substantially  conditions  precedent  to 


not  only  statutes  of  the  United  States  rates  of  insurance  and  of  ao'ent.«'  c-om- 

.     but   also  state  laws  of  simi-  missions.     Queen   Ins.   Co.   v.   State, 

lai-  import."     See  also  State  v.  Smi-  86   Tex.   250,  22   L.R.A.   483,   24   S. 

ley,  6.')  Kau.  240,  67  L.R.A.  903,  69  W.    .397,   under    Tex.    act   of   Mareh 

Pac.    199;    State    (ex   rel.    Crow)    v.  30,   1899.      Contra   as  to   commoditif 

Firemen's  Fund  Ins.  Co.  152  Mo.  1,  under    MeClain's     Iowa     Code,    set*. 

45  L.R.A.  363,  52  S.  W.  595.     Com-  5454;  Beechley  v.  Mulville,  102  Iowa, 

jiare  Niagara  Fire  Ins.  Co.  v.  Cornell  602,  63  Am.  St.  Rep.  479,  70  N.  W. 

(U.  S.  C.  C.)  110  Fed.  816.  107,  71   N.   W.  428.     See   Joyce  on 

9  Queen  Ins.  Co.  v.  State,  86  Tex.  Monopolies  (ed.  1911)  sec.  421.    The 

250,  22  L.R.A.  483.  24  S.  W.  397.  words  '-trade  and  business"  under  the 

On  legality  of  combination  among  Nebraska  Statute,  Laws  1897,  c.  79, 

insurance  iniderwriters,  see  notes,  in  includes  the  regulation  of  insurance 

24  L.R.A.  (N.S.)   153,  and  38  L.R.A,  contracts  in  restraint  of  com[)etiti()n. 

(N.S.)  459.  The  laws  of  1897,  c.  81,  prohibited 

^°  Aetna  Ins.  Co.  v.  Commonwealth,  combinations  to  fix  rates  and  commis- 

j06   Ky.   864,  45  L.R.A.   355,   51    S.  sions  by  fire  insurance  companies  and 

W.    624;    Harris   v.    Common >vealth,  provided  ]ienalties  therefor.     State  v. 

113   Va.   746,   38   L.R.A. (N.S.)    458,  American  Surety  Co.  91  Neb.  22,  135 

73  S.  E.  561,  41  Ins.  L.  J.  883.  N.  W.  365,  41  Ins.  L.  J.  1380,  rey'g 

"  State     (ex     rel.     McCarter)     v.  90  Neb.  154.  13  N.  ^Y.  235,  41  Ins. 

Firemen's  Ins.  Co.  74  N.  J.  Eq.  37,  29  L.   J.   185,   but   aff'g  the   point   that 

L.R.A. (N.S.)  1194,  135  Am.  St.  Rep.  '-trade   and   commerce"   does  not   in- 

708.    18    Amei-.    &    Eug.    Ann.    Cas.  elude  insurance  business.     Insurance 

1048,  73  Atl.  80,  case  reverses  70  N.  is  not  an  article  of  merchandise  or 

J.  Kq.  291,  61  Atl.  705.  manufacture   or   one   of   the   "neces- 

^^  State  V.  Phipps,  50  Kan.  009,  18  sarics  of  life''  or  of  prime  necessity 

L.R.A.  657,  31  Pac.  1007.  under  Kan.  within  the  letter  or  spirit  of  laws  of 

Laws  1889,  c.  257.  Virginia    against   engrossing.      It    is 

Insurance   is   not   "trade"   nor   an  not    a    subject    of    trade    or    barter. 

"article  of  commerce"  or  a,  "commndi-  Harris    v.    Commonwealth,    113    Va. 

ti/"  and  these  words  are  not  applica-  746,  38  L.R.A. (N.S.)   458,  73  S.  E." 

ble  to  a  condiination  to  fix  uniform  561. 

768 


PARTIES— THE  INSURER 


§  330 


doins;  insurance  business  by  such  companies  in  states  other  than 
the  one  of  incorporation.  Therefore,  tiie  question  of  what  consti- 
tutes doing  an  insurance  business  or  making  contracts  becomes  im- 
portant. It  is  held  that  taking  an  application  for  a  policy,  and  for- 
warding it  to  the  home  office  of  the  company  in  another  state,  is 
not  doing  insurance  business. ^^  And  the  insurance  by  correspond- 
ence through  the  mail  of  property  in  a  state,  belonging  to  a  resi- 
dent therein,  by  a  foreign  company  is  not  "doing  business,"  there 
being  no  proof  that  the  company  ever  issued  other  fire  policias  cov- 
ering property  in  that  state."  Nor  is  it  doing  business  in  one  state 
where  the  contract  for  renewal  is  ai)pHed  for  and  consunnnated, 
through  the  mail,  in  another  state;  ^^  nor  receiving  by  mail  at  the 
home  office  renewal  premiums  on  j)olicies  in  force  after  withdrawal 


^'  Hafheny  v.  Leary,  12  Or.  40,  7  421 ;  Lhoneux  v.   Banking-  Corp.   3.'} 

Pac.  329.    ''Not  only  the  intent  of  the  Cli.  Div.  446;  Watkins  v.  In.suranee 

statute  must  be  given  elfect,  but  the  Co.    23    Q.    R.    Div.    285;    Hagsrin  v. 

sweeping    character    of    its    penalty  Coniptoir  d'  Kscninpte  de  Paris,  23  Q. 


must  be  considered.  This  penalty  ex- 
tends to  every  contract.  It  applies  to 
one  transaction  with  as  much  force  as 
it  does  to  a  hundred,  and  it  reaches 
the  case  of  a  corporation  that  has  no 
particular  locality  for  transacting 
corporate  business  here,  as  well  as 
the  case  of  one  that  has  such  a  place 
of  business,  but  is  unwilling  to  com- 
ply with  the  terms  of  the  statute.  No 
foreign  coi})oration,  tlierefore,  can  re- 
ly upon  enforcing  any  contract  here 
made  by  it  in  the  courts  of  this  state, 
unless   it  obeys  the  statute."     Jones' 


B.  Div.  :)1();  Palmer  v.  Railroad  Co. 
[1892]  1  Q.  B.  82.;. 

"Business"  defined  in  Flint  v.  Stone 
Tracv  Co.  220  U.  S.  108,  171,  55  L. 
ed.  389,  31  Sup.  Ct.  357,  Ann.  Cas. 
1912B,  1312,  quoted  in  Sargent  Land 
Co.  V.  Von  Baumbach  (U.^S.  D.  C.) 
207  Fed.  423.  42().  427.  Tax  on  priv- 
ilege of  doing  business. 

JVhat  is  not  ''doing  bu.siue>is"  un- 
der Corp.  Tar.  Lair,  Aug.  5,  1909,  o. 
6,  36  Stat.  112-117  (U.  S.  Comp. 
Stat.  Supp.  1911,  pp.  946,  9.")1)  ; 
United  States  v.  Nipissing  Minas  Co. 


Business  and  Corporation  Law,  111,    206  Fed.  431,  124  C.  C.  A.  313,  rely- 

in(i  upon  McCoach  'v.  Minehill  & 
Scinivlkill  Haven  fJd.  Co.  228  U.  S. 
293,  57  L.  ed.  842,  .33  Sup.  Ct.  419, 
which  is  disTnifiui^ihed  in  Sargent 
Land  v.  Von  l->auinl)ach  (U.  S.  D. 
C.)  207  Fed.  423,  427. 

On  insuj-ance  contract  made  by 
mail  by  unauthorized  foreign  com- 
pany, see  note  in  24  L.R.A.  296;  on 


112. 

"  Hazeltine  v.  Mississipj^i  ^'alley 
Fire  Ins.  Co.  (U.  S.  C.  C.)  55  Fed. 
743.  The  Court,  per  Hammond,  J. 
cites  "as  showing  iiow  the  elastic 
phrase  'carrying  on  business'  or  'do- 
ing business'  seems  to  give  trouble 
everywhere,"  the  following  English 
cases  chronologicallv :  Wilson  v.  Rail- 


road  Co.  5  Kxch.  822;   Carron  Iron    effect  of  location  of  insured  proj^erty 
Co.  v.  Madaren,  5  11.  of  L.  CiUi.  416,    within  the  state  to  prevent  an  action 


458;  Ingate  v.  Llovd  Austria  Co.  4  C. 
B*  N.  S.  704;  Shields  v.  Great  North- 
western Railroad  Co.  7  Jur.  N.  S. 
631;  Newby  v.  Von  Oppen,  L.  R.  7 
Q.  B.  293:"  Mackereth  v.  Glasgow  & 
S*)uthweslern  Rv.  Co.  L.  R.  8  E.\ch. 
149;  Jones  v.  Ins.  Co.  17  Q.  B.  Div. 

Joyce  Ins.  Vol.  I.— 49.  769 


by  a  foreign  nisuranee  company  on 
contract  made  in  another  state,  see 
note  in  9  L.H.A.(N.S.)    417. 

i^Huntinoto!!  v.  Sheehan,  206  N. 
Y.  486,  100  X.  E.  41,  42  Ins.  L.  J. 
267. 


§  330  JOYCE  ON  INSURANCE 

of  insurer  from  the  foreign  state,  premiums  being  payable  at  such 
otiice  under  tlie  policy;  ^^  nor  preliminaiy  telegraphic  negotiations, 
the  policy  being  executed  in  and  sent  by  mail  from  another  state;  " 
nor  does  doing  business  include  such  preliminary  conditions  as  the 
appointment  of  agents,  but  contemplates  only  the  business  of  in- 
surance,^^ nor  is  the  sale  of  stock  and  taking  notes  therefor  doing 
business. ^^ 

Again,  an  agent  who  keeps  his  ofHce  and  carries  on  his  business 
in  another  state  is  not  required  to  take  out  a  license  in  Alabama, 
because  he  issues  policies  on  houses  there,  nor  does  the  single  act 
of  examining  one  house  there,  with  a  view  to  efiect  insurance  there- 
on, bring  the  agent  within  the  statute  of  that  state  in  relation  to 
foreign  companies ;  ^°  and  it  is  well  settled  that  a  single  isolated  fact 
is  not  doing  business  ^  nor  is  effecting  insurance  on  a  single  item 
of  property  doing  business,^  nor  the  transaction  of  such  business  a.s 
is  necessary  under  policies  outstanding  at  the  time  of  withdrawal 
from  the  state  of  the' company's  agencies  and  the  surrender  of  its 
license.^  And  "doing  business,"'  under  a  statute  exempting  assess- 
ment corporations  from  being  subject  to  the  general  insurance  laws 
of  the  state,  refers  to  issuing  policies  and  not  to  pacing  policies 
which  have  been  issued  in  the  past.*  And  a  few  separate  and  dis- 
connected transactions,  such  as  merely  recognizing  existing  insur- 
ance policies  and  receiving  premiums  thereon  at  its  ofhce  in  anoth- 
er state,  together  with  four  isolated  acts  extending  over  a  period  of 

16  State  V.  Connecticut  Mvitnal  Life  to  file  its  charter  as  a  condition  prec- 

Ins.  Co.  106  Tenn.  282,  61  S.  W.  75.  edent.      Shannon's    Code   Tenn.    sees. 

1'  Hammond   v.   International   Ry.  2546,  2547 ;  Tennessee  River  Coal  Co. 

Co.  116  N.  Y.   Supp.  854,  63  Misc.  In  re  (U.  S.  D.  C.)  206  Fed.  802. 

437,  aff'd    (mem.)    119  N.  Y.  Supp.  On   single   or  isolated   transaction 

1127,  134  App.  Div.  995.  by  foreign  corporation  as  doing  busi- 

i^Rehm    v.    German    Insurance    &  ness  within  the  state,  see  note  in  10 
Savings   Inst.   125    Ind.    135,   25   N.  L.R.A.(N.S.)   693. 
E.  173.  ^  Richman   Cedar  Works  v.  Buck- 
ie Hughes  V.  Four  States  Life  Ins.  ner  (U.  S.  C.  C.)   181  Fed.  424. 
Co.    (1914)    —   Tex.    Civ.   App.   — ,  ^  gt^te  v.  Columbian  Natural  Life 
164  S.  W.  898.  Ins.  Co.  141  Wis.  557, 124  N.  W.  502, 

20.1ackson   v.    State,   50   Ala.   141,  under  Stat.  1898,  sec.  1954,  as  am'd 

under   Sess.    acts   1868,   p.   330,   sec.  by  Laws  1907,  c.  597,  requiring  annu- 

107.    But  see  State  v.  Beazlev,  60  Mo.  al  statements. 

220.     See  §  330a  herein.       '  *  Knights     Templans'     &     Masons' 

1  Frawley,    Bnndv    &    Wilcox    v.  Life  Indemnity   Co.  v.  Jarman,  187 

Pennsylvania  Casualtv  Co.  (U.  S.  C.  U.  S.  197,  47  L.  ed.  139,  23  Sup.  Ct. 

C.)    124  Fed.   259,  264.     But  see   §  108,  cited  in  Hunter  v.  Mutual  Re- 

330a  herein.  serve  Life  Ins.   Co.  184  N.  Y.  136, 

The  mere  execution  of  a  mortgage  144,    30    L.R.A.(N.S.)    677    note;    6 

and  recording  the  same  does  not  con-  Amcr.  &  Eng.  Ann.  Cas.  291,  76  N. 

stitute  ''doing  business"  under  a  stat-  E.  1072.                                                 • 
ute  requiring  a  foreign   corporation 

770 


PARTIES— THE  INSURER 


330 


three  years,  consisting  in  rewriting  an  existing  policy,  sending  a 
check  in  ])ayment  of  a  policy,  to  be  delivered  upon  receipt  of  cer- 
tain unpaid  assessments,  and  two  adjustments  within  the  state  of 
claims  which  have  accrued,  do  not  constitute  doing  business  with- 
in the  state  after  the  company's  asserted  withdrawal  therefrom  in 
good  faith,  so  as  to  preclude  it  from  revoking  its  designation  of  the 
insurance  connnissioner  as  its  agent  to  receive  service  of  process,  as 
such  acts  do  not  operate  to  continue  in  force  such  designation.* 
Doing  business  within  the  meaning  of  the  General  Corporation  Law 
of  New  York  relates  to  the  ordinary  business  which  the  corporation 
is  organized  to  do,  and  has  no  relation  to  the  incidental  contract  of 
a  foreign  corporation  with  a  domestic  corporation  such  as  insviring 
its  property,  and  a  foreign  corporation  is  not  doing  business  in  New 
York  by  taking  out  a  policy  in  said  state,  where  the  property  in- 
sured was  in  a  foreign  state  in  which  it  transacted  its  general  busi- 
ness, where  it  did  no  business  in  New  York  when  the  insurance  was 
taken  out,  and  whatever  books  it  had  within  New^  York  state  Avere 
sent  to  the  foreign  state  prior  to  entering  into  said  contract.^  And 
in  that  state  an  agreement  by  A.  to  pay  B.,  a  trousers'  manufactur- 
er, for  services  in  case  of  damage  by  fire  to  material  furnished  B.  to 
manufacture  said  garments  for  A.  does  not  constitute  engaging  ''in 
the  business  of  insurance,"  for  no  risk  is  run.''^  Nor  does  issuing  a 
policy  by  a  corporation  of  one  state  on  property  in  another  state 


*  Hunter  v.  Mutual  Reserve  Life 
Ins.  Co.  184  N.  Y.  136,  30  L.R.A. 
(N.S.)  677  note,  6  Amer.  &  Ens'. 
Ann.  Cas.  291,  76  N.  E.  1072,  51 
Misc.  26,  99  N.  Y.  Supp.  888,  f)7  App. 
Div.  222,  89  N.  Y.  Supp.  849,  43 
Misc.  251,  87  N.  Y.  Supp.  438.  See 
Birch  v.  Mutual  Reserve  Life  Tiis. 
Co.  91  App.  Div.  384,  86  N.  Y. 
Supp.  872,  aff'd  in  Hunter  v.  Mu- 
tual Reserve  Life  Ins.  Co.  218  U.  S. 
573,  54  L.  ed.  1155,  31  Sup.  Ct. 
127,  30  L.R.A.(N.S.)  686,  40  Ins.  L. 
J.  172.  Consi(lerinc)  and  distinijuish- 
■inq:  Commercinl  Mutual  Accident 
Co.  V.  Davis,  213  U.  S.  245,  53 
L.  ed.  782,  29  Sup.  Ct.  445;  Mn- 
Inal  Reserve  Ins.  Co.  v.  Birch. 
200  V.  S.  612,  50  L. 
26  Sup.  Ct.  752; 
Fund  Life  Assoc,  v 
147,  47  L.  ed.  987, 
Connecticut  Mutual 


ed.     620. 

Mutual  Reserve 
Phelps,  190  U.  S. 
23  Sup.  Ct.  707; 

Life  Ins.  Co.  v. 


Sju-atlev,  172  U.  S. 
569,  19  Sup.  Ct.  308. 
Mr.   Justice  McKenna 


602,  43  L.  ed. 

The  coiirl,  per 

in   tlie   prin- 

7 


cipal  case,  says:  ''The  contention  of 
plaintiff,  so  far  as  based  on  the  in- 
stances adduced,  encounters  a  great 
difficulty.  They  were  not  new  busi- 
ness. They  related  to  old  transac- 
tions and  were  intended  only  to  ful- 
lil  tlieir  ob]i^atiolls.  Tliis  was  the 
plain  duty  of  dclVndanl,  a  duty  which 
it  could  not  evade  nor  could  the  state 
even  prevent  it.  Bedfoi'd  v.  Eastern 
Building  &  Loan  Assoc.  181  IJ.  S. 
227,  45  L.  ed.  834,  21  Sup.  Ct.  597. 
Between  doing  business  for  sucli  pur- 
poses and  doing  business  generally 
there  is  quite  a  difference.  If  not, 
the  eonsequeuce.s  are  somewhat  seri- 
ous. Tlie  Ci'aig  act,  as  we  have  seen, 
imposes  a  penalty,"  etc.     Id.  584. 

^  Kline  Brothers  &  Co.  v.  German 
Union  Fiie  Ins.  Co.  132  N.  Y.  Supp. 
181,  147  App.  Div.  790,  aff'd  (mem.) 
210  N.  Y.  535. 

'Stern  v.  Rosenthal,  128  N.  Y. 
Supp.  711,  71  Misc.  422,  Cou.>^ol. 
Laws  N.  Y.  1909,  e.  280,  sec.  54. 


71 


§  330a  JOYCE  ON  INSURANCE 

constitute  carrying  on  business  in  tlie  latter  state ;  ^  nor  insuring 
property  in  one  state,  wliere  the  application  is  received  at,  and  the 
policy  issued  from,  the  home  othce  in  another  state;  ^  nor  bringing 
an  action  in  a  state  other  than  that  of  the  insurer's  home  office,  to 
roco\'er  an  assessment  adjudged  due  hy  a  court  in  the  latter  state 
under  a  policy  issued  there,  upon  an  application  made  in  a  third 
state,  to  a  resident  of  the  state  where  the  suit  was  brought  and  the 
property  insured  was  located.^"  Nor  is  adjusting  a  loss  by  an  un- 
certified agent  of  a  foreign  insurance  company  ''transacting  the 
business"  of  insurance.-^^ 

§  330a.  Same  subject. — Doing  or  transacting  ''business"  may  be 
limited  to  certain  kinds  of  busina*s  and  preclude  doing  only  sucli 
a  particular  kind  or  class  as  a  corporation,  notwithstanding  its  char- 
ter powers,  may  carry  on  uj^on  compHance  with  statutes  prescrihiug 
conditions  precedent  to  transacting  certain  specified  business.^^  A 
single  transaction  indicating  a  j)iu'pose  to  transact  a  substantial  part 
of  insurers  dealings  in  the  state  constitutes  doing  business. ^^  So 
it  is  held  that  taking  a  note  for  an  instalment  of  premivuu  and 
transmitting  it  to  the  company  is  "doing  insurance  business."  " 
So  where  the  policy  is  applied  for,  received  and  the  [)remium  ])aitl 
in  the  state  the  insurer  is  within  a  statute  as  to  taking  risks  and 
transacting  business.^^  So  an  agent  who  has  received  premiums  for 
insurance,  taken  his  commissions,  advertised  himself  as  agent,  for- 

8  Marine  Ins.  Co.  v.  St.  Louis  iron  New   Jersei/. — Columbia   Fire   Jus, 
Mountain  &  Southern  R.  Co.  41  Fed.  Co.  v.  Kinyon,  37  N.  J.  L.  33. 
643;  New  Orleans  v.  Virainia  Fire  &  Pewisi/lrania. — Commonwealtli     v. 
Marine  Ins.  Co.  33  La.  Ann.  10.  Biddle,  13i)   I'a.  603,  11  L.l^.A.  5()1, 

9  Swin->'  V.  Taylor  &  Crate,  G8  W.  21   Atl.  147. 

Va.  621,' 70  S.  E.  373.  ii  People   (ex  rel.  McCall)    v.  Cil- 

lOSwin^  V.  Brister  &  Co.  87  Miss,  bert,  44   Hun    (51  N.  Y.   Sup.   Ct.) 

516,  40   So.  146,  35  Ins.  L.  J.  223.  522. 

Citing  nnd  reli/in(j,  Hi<  to  the  right  \o  ^^  Mi'iropoUtixn    Casualty   Ins.    Co. 

insure    property    in    a    foreign    state  of  N.  Y.  v.  Basford,  31  S.  Dak.  149, 

and    to    enforce    Use    contract    there  139  N.  \V.  795,  Laws  1905,  c.  73,  see. 

where  insured  resides,  etc.,  upon:  2;  Laws  1907,  e.  110;  Laws  1909,  c. 

T'nited  States. — Allaever  v.  Tjouisi-  243;  Laws  1911,  c.  176. 

ana,  165  U.  S.  578,  590,  591,  41  L.  ^^  £,^^1.^  pio^,.  Co.    v.    W viand,   60 

ed.  832,  17  Sup.  Ct.  427.  Kan.  255,  76  Pac.    863,    Gen.    Stat. 

Alabama. — Christian    v.    Auiei'ican  1901,  sec.   1283,  cited   in   Toinson   v. 

Freehold  Land  &  Mortg.  Co.  89  Ala.  Iowa   State  Traveling    Men's    Assoc. 

198,  7  So.  427.  88  Neb.  399,  129  N.  W.  529,  40  Ins. 

Arkansm. — Railway    Co.    v.    Fire  L.  J.  591,  594,  see  §  330  herein. 

Assoc.  55  Ark.  163,  174,  18  S.  W.  43.  i*  Hacheny  y.  Leary,  12  Or.  40,  7 

Indiana. — Swing  v.  Hill,  165  Ind.  Pac.  329.     Thayer,  J.,  dissenting. 

411,  75  N.  E.  658.  ^^  Stevens   y.   Rasin    Fertilizer  Co. 

Mm.somW. — Lumberman's       Mutual  87  Md.  679,  41  Atl.  116,    Code    Pub. 

Ins.  Co.  y.  Kansas  City,  Ft.  S.  &  M.  Gen.  Laws,  art.  23,  sees.  118,  119, 124. 
R.  Co.  149  Mo.  165,  50  S.  W.  281. 

772 


PARTIES— THE  INSURER  §  331 

•warded  premiums  to  tlie  iusuranee  company,  and  received  policies 
for  delivery  to  the  insured,  is  an  agent  of  the  company  and  a  per- 
son aiding  in  the  transaction  of  insurance  business,  under  the  Wis- 
consin statute,  sufficiently  so  at  least  to  give  the  court  jurisdiction 
by  the  service  of  process  upon  him.^^  And  although  a  foreign  com- 
I)any  makes  a  voluntary  assignment  of  its  property,  it  will  be  con- 
sidered as  "doing  business"  within  the  intent  of  the  statute  where 
such  company  has  been  transacting  business  in  the  state,  although 
it  ceases  to  take  new  risks;  ^"^  a  company  is  doing  business  sufficient 
for  the  service  of  process  upon  a  local  agent  where  it  has  outstand- 
ing policies  in  the  state  and  the  right  to  investigate  losses  thereun- 
der, to  have  an  examination  of  deceased's  body  in  proper  cases  and 
to  do  whatever  is  necessary  within  the  state  to  adjust  and  pay  loss- 
es." Other  instances  of  what  constitutes  doing  business  are:  Issu- 
ing insurance  to  residents  upon  property  located  in  the  state  by  an 
unlicensed  company  without  an  otHce  in  the  state;  ^^  where  a  com- 
])any,  with  an  office  in  a  state  foreign  to  that  of  it*;  incorporation 
there  insures  property  in  other  states,  even  though  it  does  not  in- 
sure property  in  the  state  where  such  office  is  located;  2°  actively 
soliciting  membership  by  a  foreign  fraternal  accident  association 
and  receiving  large  sums  of  money  for  assessments;  ^  collecting  pre- 
miums on  policies  in  force  after  withdrawal  of  agents  from  the 
state;  ^  collecting  premiums  and  paying  losses  on  policies  outstand- 
ing after  insurers  withdrawal  from  the  state;  ^  and  the  statute  may 
provide  that  collecting  premiums  from  a  citizen  of  the  state  shall 
constitute  doing  business  therein.'* 

§  331.  Foreign  company  estopped  to  avoid  contract  by  setting 
up  noncompliance  with  statutes. — A  foreign  insmance  com])any 
cannot  avail  itself  of  its  own  turpitude  in  not  cou)plying  with  the 

16  State  v.  United  States  Mul.  Ace.  20  f^jaj^,   y    Amazon    Ins.    Co.    24 

Assn.   67   Wis.   624,   31   N.    \\.   220,  Oliio  Cir.  Ct.  Rep.  387. 

under  Rev.  Stat.  Wis.  %ec.  19<7.  ^  Tomson  v.  Iowa   State  Traveling 

1'^  Williams  v.  Commeveial  Ins.  Co.  ^'en's  Assoc.  88  Net).  309,  129  N.  W. 

75  Mo.  388;  Relfe  v.  Conmieicial  his.  .')29,  40  Ins.  L.  J.  591. 

Co.  5  Mo.  App.  173,  under  Wagner's  ~  Cnnmionwealtli  v.  Providence  Sav- 

]\Io.  Stat.  772.                                '  inos  Life  Assnr.   Soc.   155  Kv.  197, 

18  Commercial  ]\Iutual  Accident  Ins.  159  S.  W.  698,  Kv.  Stat.  see.  4226. 

Co.  V.  Davis,  213  U.  S.  245,  53  L.  ed.  See  i;  330  herein. 

782,  29  Sup.  Ct.  445,  38  Ins.  L.  J.  ^  Connecticut  Mutual  Life  Ins.  Co. 

655.  V.  Spratley,  172  U.  S.  602,  43  L.  ed. 

i^McCord     V.     Illinois     National  569,  19  Sup.  Ct.  313,  s.  c.  99  Tenn. 

Fire  Ins.  Co.  47  Ind.  Aj)p.  602,  94  N.  322,  42   S.  W.   145,  44  L.R.A.  442, 

E.  1053,  40  Ins.    L.    J.    1428,    Act  statute  as  to  service  of  process. 

March  11,  1001,    Burns'    Ann.    Stat.  *  Owen   v.   Bankers   Life  .  Ins.    Co. 

1908,  see.  4708,  as  to  service  of  pro-  84    S.    Car.   253,   137   Am.   St.   Rep. 

«'ess.     See  Swing  v.  Munson.  191  Pa.  845,  66  S.  E.  290. 
582,  58  L.R.A.  223,  43  Atl.  342. 

773 


§  332 


JOYCE  ON  INSURANCE 


statutes  regarding  insurance,  to  defeat  an  action  against  it  on  a  pol- 
icy. It  is  estopped,  or  at  least  prohibited,  by  the  prohibition  of  the 
common  law  against  unauthorized  corporate  action,  from  denying 
its  authority  to  transact  business  as  against  innocent  persons.^  It 
is  estopped  from  setting  up  that  the  contract  was  made  in  violation 
of  the  statute,  in  order  to  avoid  liability  on  the  policy  where  in- 
sured participated  in  the  transaction  without  knowledge,  actual  or 
constructive,  of  the  fact  of  noncompliance  with  the  law  by  insur- 
er,^ and  the  rule  as  to  estoppel  precludes  pleading  disability  of  the 
corporation  to  contract  by  one  who  is  sued  upon  such  contract.' 

§  332.  When  contracts  valid  although  company  has  not  complied 
with  statutes.^ — But  preliminary  contracts  authorized  to  be  entered 
into  by  an  insurance  company  become  valid  on  completing  the  or- 
ganization as  required  by  statute,^  and  the  presumption  attaches 
that  a  company  has  been  duly  incorporated  where  a  question  arises 
between  the  receiver  of  a  corporation  and  persons  who  have  con- 
tracted with  it  as  such,^°  nor  is  compliance  with  the  statute  as  to 
transacting  business  necessary  to  enable  a  foreign  insurance  com- 
pany to  take  securities  in  the  state  of  Wisconsin  for  debts  due  them 


5  United  States.— Bevry  v.  Knights 
Templars'  &  Masons'  Life  luderanity 
Co.  (U.  S.  C.  C.)  46  Fed.  439. 

Illinois. — Watertown  Fire  Ins.  Co. 
V.  Rust,  141  111.  85.  30  N.  E.  772, 
under  Rev.  Stat.  1887,  c.  73,  sec.  124. 

Michigan.— CUy  Fire  &  Marine 
Ins.  Co.  V.  Huron  Salt  &  Lumber 
Mfg.  Co.  31  Mich.  346. 

Minnesota. — Ganser  v.  Fireman's 
Fire  Ins.  Co.  34  Minn.  372,  25  N.  W. 
943. 

Pennsylvania. — Hoge  v.  Dwelling 
House  Ins.  Co.  138  Pa.  66,  20  Atl. 
039;  Watertown  Fire  Ins.  Co.  v. 
Simons,  96  Pa.  St.  520;  Swan  v. 
Watertown  Fire  Ins.  Co.  96  Pa.  St. 
37. 

See  next  section.  See,  also,  as  to 
general  rule,  2  Morawetz  on  Private 
Corporations,  2d  ed.  sec.  752.  As 
to  estoppel  of  corporation  to  plead 
that  contract  is  ultra  vires,  see  note 
13  Am.  Dec.  108.  For  cases  where 
insurance  company  may  set  up  ultra 
vires,  see  Harahro  v.  Hull  &  London 
Fire  Ins.  Co.  3  Hurl.  &  N.  789;  Web- 
ster V.  Buffalo  Ins.  Co.  2  McCrary 
(C.  C.)   348,  7  Fed.  399.     When  it 

T 


is  estopped,  see  Gray  v.  National 
Benefit  Assn.  Ill  Ind.  531,  11  N.  E. 
477.  And  see  generally,  .')  Tliomp- 
son  on  Corporations,  (ed.  1894)  sec. 
6015,  et  seq.;  2  Id.  (2d  ed.)  sees. 
1945-1994,  and  §  334  lierein.  As  to 
estoppel  to  deny  corporate  existence, 
see  Farmers'  Mutual  v.  Reser,  43  Ind. 
App.  634,  738,  88  N.  E.  353. 

On  right  of  foreign  corporation  to 
set  up  noncompliance  with  conditions 
of  doing  business  in  order  to  defeat 
recovery  against  it,  see  note  in  25 
L.R.A.  569. 

^  Corbett  v.  Physicians  Casualty 
Assoc.  135  Wis.  50o,  16  L.R.A.(N.S.) 
177,  115  N.  W.  365. 

■^  Johnson  v.  Mason  Lodge,  No.  38, 
106  Ky.  868,  51  S.  W.  620. 

8  See  §   1452  herein. 

9  Williams  v.  Babcoek,  25  Barb.  (N. 
Y.)  109.  See  Dalv  v.  National  Life 
Ins.  Co.  64  Ind.  1;  National  Mut. 
Fire  Ins.  Co.  v.  Pursell,  10  Allen  (92 
Mass.)  231;  Skillern  v.  Continental 
Ins.  Co.  —  Tenn.  Ch.  — ,  42  S.  W. 
ISO,  acts  1895,  c.  119. 

10  White  V.  Coventry,  29  Barb.  (N. 
Y.)  305. 

74 


PARTIES— THE  INSURER  §  332 

from  residents  thereof,"  nor  does  such  noncompliance  invalidate  the 
bond  of  an  insurance  agent/^  and  where  the  statute  does  not  declare 
the  transactions  of  the  company  void,  in  ca.«e  of  noncompliance  with 
its  pro^•isions,  a  mortgage  made  by  a  foreign  company  will  be  up- 
held ;  ^^  nor  does  it  invalidate  subscriptions  to  the  stock  of  such  cor- 
porations; or  notes  given  in  payment  therefor.  Such  contracts  are 
not  "taking  risks"  nor  "transacting  any  business  of  insurance."  ^* 
So  it  has  been  held  ^^  that  a  statute  requiring  a  certified  copy  of  ar- 
ticles of  association  to  be  filed  with  the  county  clerk  did  not  affect 
the  validity  of  contracts,  as  it  was  intended  merely  to  furnish  proof 
of  corporate  existence. -^^ 

In  Massachusetts,  it  is  held  that  a  foreign  company  may  make  a 
valid  contract  of  insurance  there.^''^  In  Arkansas,  a  failure  to  com- 
ply with  the  statutes  relating  to  foreign  insurance  companies  doing 
business  in  that  state  does  not  afl'ect  the  validity  of  the  policies  is- 
sued by  such  company,  but  only  renders  the  agents  and  brokers? 
of  such  corporation  liable  to  the  penalties  imposed  by  the  statute. ^^ 
So  in  Indiana,  a  policy  is  held  not  to  be  void  for  noncompliance 
with  such  statute. ^^  Nor  is  the  policy  void  in  Ohio  under  such  cir- 
cumstances, nor  is  the  policyholder  excused  from  payment  of  pre- 
miums under  his  contract.^"  And  a  claim  for  premiums  may  be 
enforced  by  a  corporation  which  has  not  complied  with  the  statu- 
tory prerequisites  even  though  such  unauthorized  company  is  guilty 
of  a  misdemeanor  and  subject  to  a  penalty  by  reason  of  the  in- 
surance ;  ^  and  there  are  numerous  cases  which  hold  such  policies 

"  Charter    Oalc    Life    Ins.    Co.    v.  MeCrary   (U.  S.  C.  C.)   123,  1  Fed. 

Rawvev,  44  Wis.  387.  471. 

12  United  States  Life  Ins.  Co.  v.  i^  Bolder  v.  German  Mut.  Fire 
Adams,  7  Biss.  (U.  S.  C.  C.)  30,  Ins.  Co.  68  Ind.  347.  But  see  §  332 
Fed.  Cas.  16,792.  lierein. 

13  Northwestern  Mut.  Life  Ins.  Co.  20  Uiiion  Mut.  Life  Ins.  Co.  v.  Mc- 
V.  OvcrhoU,  4  Dill.  (U.  S.  C.  C.)  287,  Millen,  24  Ohio  St.  67.  See  also 
Fed.  Cas.  No.  in,;!38.  State  Mutual  Fire  Ins.  Co.  v.  Brink- 

i^Bartlett  v.  Chouteau  Ins.  Co.  18  ley  Stave  &  Heading  Co.  61  Ark.  1, 

Kan.  369.  29  L.R.A.  712,  54  Am.  St.  Rep.  191, 

15  dlions  V.  People,   25    Mich.    499,  31    S.    W.    157.      Compare    §    333 

under  Mich.  Sess.  Laws  1859.  p.  1083,  herein, 

sec  9.  1  State    IVFutual    Fire    Ins.    Co.    v, 

isjhous  V.  People,  25  Mich.  499.  Brinkley'  Slave    «fc    Heading  Co    6_1 

See,  also,  American  Ins.  Co.  v.  But-  Ark.  1,  29  L.R.A.  /12   31  S.  W.  lo/, 

ler  70  Ind.  1.  '^4     Am.     St.     Rep.     191.     Compare 

17  T-        'u        ,n              A          4^      T  American    Ins.    Co.    v.    Wellman,    69 
I'lvennebec    Co.    V     Augusta    Ins.  j^^      4^3       s,^,^^^,     ^,     Christian 

Co.  6  Gray  (/2  Mass.)  204.  Brothers  Mill  Co.  66  Minn.  205,  (iS 

On    effect    on    insurance    of    non-  n.  w.  1065.     Compare  §  333  herein. 

compliance    with    statutory'    require-        2  ii..„.ff,,r(l   Live   Stock   Ins.  Co.  v. 

ments,  see  note  in  20  L.R.A.  405.         Matthews,  102  :Nrass.  221;  Connecti- 

18  Ehrmann  v,  Teutonia  Ins.  Co.  1   cut  River  Mut.  Fii-e  Ins.  Co.  v.  Whip- 

775 


§  332a  JOYCE  ON  INSURANCE 

valid  and  the  premium  or  premium  notes  collectable.^  Again,  un- 
der a  statute  providing  that  suits  may  be  brought  against  foreign 
companies  upon  any  contract  made  and  delivered  in  the  state,  an 
action  may  be  maintained  on  a  policy  delivered  by  an  agent  of  the 
company  within  the  state.^  And  a  foreign  company  may  sue  upon 
its  contracts  as  they  are  not  invalidated  by  noncompliance  with 
statutory  conditions  precedent  to  doing  business,  where  by  such 
noncompliance  the  officers  and  stockholders  are  rendered  indi- 
vidually liable  under  the  statute.*  The  insurance  of  one's  own 
j)r()perty  in  an  unauthorized  foreign  company  is  not  criminal  under 
the  Pennsylvania  statute,^  prohibiting  such  companies  from  doing 
business  and  making  it  an  offense  for  ''any  person  .  .  .  pay- 
ing or  receiving  or  forwarding  any  premiums,  applications  for  in- 
surance, or  in  any  manner  securing,  helping,  or  aiding  in  the  plac- 
ing of  any  insurance  or  effecting  any  contracts  of  insurance''  with 
such  companies.^ 

§  332a.  Same  subject. — If  a  statute  permits  a  resident  of  one 
state  to  procure  insurance  at  the  home  office  of  a  foreign  company 
unauthorized  to  do  business,  a  policy  consummated  by  mail  in  the 
foreign' company's  state  is  valid.'  And  a  policy  issued  by  a  foreign 
compan}!-  on  property  in  a  state  without  compliance  with  its  laws 
prohibiting,  under  a  penalty  issuing  such  policies  without  comply- 
ing with  said  laws,  is  valid  as  to  insured  and  binds  the  insurer  where 
no  duty  or  proliibition  in  that  respect  is  imposed  on  insured  by 
said  laws.*  So  a  resident  of  a  state  may  safely  deal  with  a  com- 
pany, which,  although  unauthorized,  holds  it.-^elf  out  as  qualified  to 
do  business  with  him,  in  the  absence  of  knowledge,  actual  or  con- 
structive, to  the  contrary.  And  his  right  to  presume  that  said 
company  is  qualified  to  do  business  is  not  impaired  by  the  fact  that 
it  uses  the  mail  in  negotiating  its  contract  with  him.^     If  a  com- 

ple,  61  N.  H.  61;  Provincial  Ins.  Co.  42    Att    982,    Vt.    Stat.  sees.  4181, 

V.  Lapslev,  15  Cray  (81  Mass.)  262;  4182. 

Behler  v.   German   Ins.    Co.   68  Ind.  On    insurance    contract    made    by 
347,     overruling     Sun     Ins.     Co.     v.  mail   by   unauthorized    foreign    corn- 
Slaughter,    20    Ind.    520;    Clark    v.  pany.  see  note  in  24  L.R.A.  296. 
Middleton,   19   Mo.   53.     Compare   §  «  Pennypacker  v.  Capital  Ins.  Co. 
333  herein  80  Iowa,  86,  8  L.R.A.  236,  20  Am. 

3  Burns  v.  Provincial  Ins.   Co.   35  St.  Rep.  395,  45  N.  W.  408;  Phoeni.K 

Barb    (NY)  525.  Ins.  Co.  v.  Pennsvlvania  Ins.  Co.  134 

*  Helvetia  *  Swiss  Fire  Ins.   Co.  v.  Ind.  215,  20  L.R.A.  405u,_  33  N.  E. 

Edward  P.  Allis  Co.  11  Colo.  App.  970;    Strampe    v.    Farmers'    Mutual 

"64  53  Pae  '^4'^  Ins.    Co.   109   Minn.   364,  26   L.R.A. 

"  5  Act  1887.  note.  (N.S.)  99n,  123  N.  W.  1083.     See  § 

6  Commonwealth  v.  Biddle,  139  Pa.  331  herein. 

605,  11  L.R.A.  561.  21  Atl.  134.  »  Corbet t    v.    Physicians    Casualty 

7  Baker  v.   Spaulding,  71  Vt.  169,   Assoc.     135     Wis.    505,    16    L.R.A. 

776 


PARTIES— THE  INSURER 


§  332b 


pany  has  complied  with  conditions  precedent  and  obtains  a  hcensc 
under  one  statute  but  has  not  complied  with  a  former  law  on  the 
subject,  such  law  is  repealed  by  implication  and  the  company  is 
lawfully  in  the  state  and  may  enforce  its  contract;^  there,  and  a  sub- 
sequently enacted  statute  as  to  certain  requirements  will  not  render 
such  licensed  company's  contracts  void  and  unenforceable.^" 

A  fraternal  beneficiary  association's  liability  is  unaffected  b}^  the 
fact  that  it  has  received  a  certificate  to  do  business  a.s  such,  where 
it  has  issued  a  certificate  payable  to  a  beneficiary  not  within  the 
class  permitted  by  statute. ^^ 

§  332b.  Same  subject:  insurance  in  foreign  state  of  property  in 
another  state. — In. Michigan  the  statute  does  not  apply  to  contracts 
made  abroad  upon  property  within  the  state,  but  only  to  operations 
therein. ^2  And  a  contract  of  insurance  effected  and  issued  in  a 
foreign  state  on  property  situate  in  another  state  whose  laws  render 
it  void  if  made  there  is  valid  and  enforceable  by  either  party. ^^ 
And  a  renewal  policy  covering  property  in  one  state  belonging  to 
a  resident  thereof,  and  which  is  consummated  through  the  mail 
in  another  state  is  a  lawful  contract  in  the  former  state  even  though 
insurer  had  no  license  to  do  business  there.^*  yVnd  a  party  can  pro- 
cure insurance  by  a  contract  made  without  the  state  even  though  tlic 


(N.S.)  177,  115  N.  W.  36.5.  See  also 
Watertown  Fire  Tus.  Co.  v.  Rust,  141 
111.  85,  30  N.  E.  772.  , 

^°  Continental  Ins.  Co.  v.  Rieoen, 
31  Oreg.  336,  48  Pae.  476,  26  Ins.  L. 
J.  490. 

^^  Ordelheide  v.  Modern  Brother- 
hood of  America,  158  Mo.  App.  677, 
139  S.  W.  269,  40  Ins.  L.  J.  1845. 

^^  Clav  Fire  &  Marine  Ins.  Co.  v. 
Hu7-on  Salt  &  Lumber  :\rfo-.  Co.  31 
Mich.  .346,  nndcr  Mich.  Stat.  Comp. 
L.  1871,  .sec.  1683. 

^^  Columbia  Fire  Ins.  Co.  v.  Kin- 
yon,  37  N.  J.  L.  33,  36.  See  also 
Swing  V.  Hill,  165  Ind.  411,  75  N.  E. 
658;  Hammond  v.  International  Ry. 
Co.  116  N.  Y.  Sup|).  854,  63  Misc. 
437,  aff'd  (mem.)  119  N.  Y.  Supp. 
1127,  134  App.  Div.  995:  Seamens  v. 
Knapp-Stout  &  Co.  89  Wis.  171,  27 
L.R.A.  362,  46  Am.  St.  Rep.  425,  61 
N.  W.  757.  See  S§  226,  231a,  231c, 
231f,  333-333b  herein. 

Eramine  the  following  cases: 

loioa. — Seamans  v.  Zimmerman,  91 
Iow;i,  363,  59  N.  W.  290. 

77 


Maine. — Corbin  v.  Houlehan,  100 
Me.  246,  70  L.R.A.  568,  61  Atl.  133. 

Massachusetts.  —  Commonwealth 
Mutual  Fire  Ins.  Co.  v.  Fairbank 
Canning  Co.  173  Mass.  161,  53  N.  E. 
373. 

Michigan. — Clay  Fire  &  Marine 
Ins.  Co.  V.  Huron  Salt  &  Lumber 
Mfg.  Co.  31  Mich.  346. 

Missouri.  —  Lumbermen's  Mutual 
Ins.  Co.  V.  Kansas  Citv,  Ft.  S.  &  M. 
R.  Co.  149  iMo.  165,  50  S.  W.  281. 

Nebraska. — Commonwealth  Mutu- 
al Fire  Ins.  Co.  v.  Havden,  60  Neb. 
636,  83  Aift.  St.  Rep.  545,  83  N.  W. 
922. 

New  Hampshire.  —  Connecticut 
River  Mutual  V'wv  Ins.  Co.  v.  Wav, 
62  N.  H.  622. 

Netv  Jersei/. — Northampton  Mutual 
Live  Stock  Ins.  Co.  v.  Tuttle,  40  N.  J. 
L.  476. 

Neur  York. — AV astern  v.  Genesee 
Mutual  Ins.  Co.  12  N.  Y.  2.58. 

Washington. — Ward  v.  Tucker,  7 
Wash.  399,  35  Pac.  1086.     ■ 

^*  Huntington  v.   Sheehan,  206  N. 


§  333  JOYCE  ON  INSURANCE 

statute  prohibits  procuring  insurance  from  an  unauthorized  com- 
pany making  it  a  misdemeanor  to  do  so/^  or  making  such  contracts 
voidV^  as  the  legislature  has  no  power  to  prohibit  making  such  con- 
tracts," for  a  law  of  one  state  which  interferes  with  the  constitutional 
right  of  an  insurance  company  of  another  state  to  make  them  would 
1)6  void/^  at  least  a  statute  prohibiting  making  them  would  to  that 
extent  be  unconstitutional.^' 

§  333.  When  contracts  not  valid  where  company  has  not  com- 
plied with  statutes, — Notwithstanding  some  of  the  cases  in  the  last 
scftion  hold  that  a  noncompliance  with  statutes  regulating  the  busi- 
ness of  insurance  companies  does  not  invalidate  the  contract,  there 
are  numerous  decisions  which  hold,  that  where  the  contracts  are 
made  within  the  state  a  strict  compliance  with  such  statutes  is  neces- 
sary to  the  validity  of  the  contract.  And  it  would  seem  reasonable, 
in  view  of  what  has  been  stated  in  the  preceding  sections  herein,  that 
it  would  necessarily  follow  that  a  contract  made  in  violation  of  or 
noncompliance  with  such  laws  could  not  be  valid,  or  at  least  should 
be  voidable  on  principle.^"  The  decisions,  however,  are  not  unani- 
mous, and  it  is  extremely  difficult  to  state  any  positive  governing 
rule.  In  Illinois,  it  is  held  that  a  foreign  coiporation  cannot  en- 
force such  a  contract,  nor  recover  on  a  note  given  for  stock  and 
premiums,  notwithstanding  the  law  imposes  a  penalty  for  doing 
l)usiness  in  the  state  in  violation  of  the  statutory  provisions  relating 
thereto.^  In  Massachusetts,  the  statute  prohibits  the  "making  of 
any  contract  of  insurance  within  the  state,"  unless  certain  statutory 
conditions  have  been  complied  with,  and  it  has  been  decided  in 
that  state  that  a  noncompliance  with  such  requirements  prevents 
recovery  on  a  premium  note  given  a  mutual  company.^     And  in 

Y.  486,  100  N.  E.  41,  42  Ins.  L.  J.  Hilton,  58  N.  Y.  Supp.  996,  42  App. 

267.  Div.  52. 

15  Hooper  v.  California,  155  U.  S.  ^^  Atlas  Mutual  Ins.   Co.   v.   Fish- 

648,  39  L.  ed.  297,  15  Sup.  Ct.  207,  eries  Co.  6  Penn.   (Del.)  256,  68  Atl. 

5  Inters.   Com.  Rep.   610,   Cal.  Pen.  4,  3/   Ins.  L.  J.  285. 

Code,  sec.  649.     See  also  Atlas  .Mutu-  ^o  Williams  v.  Cheney,  3  Gray  (69 

fil  Ins.  Co.  V.  Fislieries  Co.  6  Penn.  Mass.)    215,   and   following  eases  in 

(Del.)   256,  68  Atl.  4,  37  Ins.  L.  J.  this  section. 

285.  ^  Cincinnati  Mut.  Health  Assn.  v, 

^MVestern    Massachusetts     Mutual  Rosenthal,  55  111.  85,  8  Am.  Rep.  626. 

Fire  Ins.   Co.   v.  Hilton,    58    N.    Y.  Compare  §  332  herein. 

Supp.  996,  42  App.  Div.  52.  ^  Wa.shington     Mut.    Ins.     Co.     v. 

"Swin?  V.  Hill,  165  Ind.  411,  75  Hastings,   2  Allen    (84  :\rass.)    398; 

N.  E.  658.  Jones  v.   Smith,  3  Gray    (69  Mass.) 

18  Hammond  v.  International  Ins.  500.  But  see  National  Mutual  Fire 
Co.  116  N.  Y.  Supp.  8.54,  63  Misc.  Ins.  Co.  v.  Pursell,  10  Allen  (92 
437,  atf'd  (mem.)  119  N.  Y.  Supp.  Mass.)  232.  In  this  case  it  appeared 
1127,  134  App.  Div.  995;  Western  that  statute  provided  that  the  con- 
Massachusetts  Mutual  Fire  Ins.  Co.  v.  tract  should  be    valid,    though    pro- 

778 


J 


PARTIES— THE  INSURER  §  333a 

Nebraska  a  premium  note  given  to  a  foreign  insurance  company, 
which  has  not  acquired  the  right  to  do  business  in  the  state,  is  not 
enforceable.^  And  it  has  also  been  decided  in  Indiana  that  a  pre- 
mium note  cannot  be  enforced  in  the  state  where  no  certificate  has 
been  issued  to  the  agent  of  a  foreign  company,  as  required  by  the 
statute,  to  enable  him  to  transact  business.*  So,  in  tJiat  state,  there 
are  cases  which  hold  such  contracts  void,  both  as  to  the  foreign  com- 
pany and  its  agents,  and  the  insured  may  sustain  an  action  to  re- 
cover back  his  premium,  and  may  do  this  independent  of  the  doc- 
trine of  recovering  back  the  consideration  upon  the  rescission  of  a 
contract.^  And  the  insured  may  recover  back  premiums  paid  on 
a  policy  issued  by  an  unlicensed  company,  where  the  agreement 
was  to  procure  insurance  from  a  licensed  company,^  In  a  case  in 
Illinois  it  appeared  that  after  publishing  notice  and  filing  an  inten- 
tion to  organize  an  insurance  company,  the  persons  so  intending 
secured  an  application  for  insurance  and  a  premium  note  payable  to 
the  company,  which  they  presented  to  the  state  auditor,  and  on  the 
day  of  the  loss  made  the  oath  required  by  statute,  and  it  was  held 
that  as  at  the  time  of  the  contract  the  corporation  had  no  legal  ex- 
istence, it  could  not  be  bound  thereby.'^ 

§  333a.  Same  subject. — No  recovery  can  be  had  in  Minnesota  of 
a  premium  for  insurance  on  property  there  by  either  a  foreign  cor- 
poration or  a  foreign  unincorporated  mutual  association  which  has 
not  complied  with  the  statutes.'  And  in  Mississippi  noncompli- 
ance with  the  statutory  requirements  precludes  recovery  of  pre- 
miums due  for  insurance  on  property  there  whether  the  policy  was 
issued  in  or  out  of  the  state. ^  >So  under  an  Ohio  decision,  an  un- 
licensed company  cannot  maintain  an  action  in  that  state  for  pre- 
miums on  policies  covering  property  located  there  but  it  can  be 
brought  in  the  state  where  the  policy  was  issued  where  jurisdiction 
over  the  policyholder  may'be  had."  Under  a  Michigan  decision 
a  foreign  insurance  corporation,  prohibited  by  statute  from  issuing 

visions  of  statutes  were  not  com-  ants'  Mat.  Ins.  Co.  107  111.  652,  s.  c. 
plied  with.  Leonard  v.  Washburn,  13  111.  App.  308.  See  American  Ins. 
100  Mass.  251.  Co.  v.  Stoy,  41  Mich.  38.J,  388. 

^  Barbor  v.  Boehm,  21  Neb.  450.  *  Seamans  v.    Christian   Bros.  Mill 

*  Holiman  v.  Banks,  41  Ind.  1.         Co.  6(i  Minn.  205,  G8  N.  W.  1065. 

^  Union  Central  Life  Ins.  Co.  v.  ^  Cowan  v.  London  Assur.  Corp, 
Thomas,  46  Ind.  44.  See  Farmers'  73  Miss.  321,  55  Am.  St.  Rep.  535, 
&  Merchants'  Ins.  Co.  v.  Harrali,  47    19  So.  208. 

Ind.  236;  Charter  Oak  Life  Ins.  Co.  i°  Bankers  Casualty  Co.  v.  Rieh- 
V.  Sawyer,  44  Wis.  387.  But  see  pre-  land  County  Bankino:  Co.  55  Ohio 
ceding  section.  Law  Bull.  428.     See  Parker  v.  Lamb 

6  Barrett  v.  Elliott,  24  Canadian  &  Sons,  09  Iowa,  265,  34  L.R.A.  704, 
Law  Times,  344.     See  §  1402  herein.    68  N.  W.  686. 

'  Gent  v.  Manufacturers'  &  Merch- 

779 


§  ;]33b  JOYCE  ON  INSURANCE 

policies  on  property  within  the  state  without  expre&s  authority,  and 
from  doing  business  or  maintaining  actions  therein  without  com- 
pliance with  certain  regulations  and  conditions,  cannot,  without 
complying  with  sut-h  requirements,  maintain  an  action  in  that  state 
for  an  a.-^sessment  on  a  contract  of  insurance  made  through  the  mail 
on  property  situated  therein  as  such  a  contract  is  in  contravention 
of  the  policy  of  the  state,  even  if  it  evades  the  statute. ^^  And  under 
an  Illinois  decision  assessments  are  not  recoverable  where  the  stat- 
ute has  not  been  complied  with ;  ^^  nor  can  assessments  be  recovered 
in  Pemisjdvania  by  a  foreign  corjioration  which  has  not  complied 
with  its  laws.^^  If  the  statute  declares  that  the  contract  shall  be 
deemed  to  have  been  made  in  the  state  within  which  the  applica- 
tion is  taken  this  applies  to  a  foreign  insurance  company  and  makes 
its  contract  void  if  its  application  is  taken  in  a  state  with  the  laws  of 
which  it  has  not  complied  and  precludes  recovery  there  of  assess- 
ments on  its  contract,^* 

Again,  a  contract  made  by  mail  for  the  insurance  of  property 
within  the  state  by  a  foreign  company  which  is  prohibited  from 
transactinsi  insurance  busina^*  within  the  state,  directlv  or  indirect- 
ly,  will  not  sustain  an  action  by  a  receiver  of  the  company  against 
the  policy  holder  to  recover  an  assessment. ^^ 

§  333b.  Same  subject. — A  foreign  company  can  maintain  no 
action  on  a  contract  made  before  compliance  with  a  statute  requir- 
ing the  company  to  file  a  statement  of  its  condition. ^^  It  is  also 
held  that  the  failure  to  comply  with  the  requirements  of  a  statute 
prescribing  the  terms  upon  which  foreign  insurance  companies  may 
do  business  in  a  state,  such  companies  and  their  agents  and  brokers 
render  themselves  liable  to  the  penalties  denounced  by'  the  act,  but 
such  failure  does  not  affect  the  validity  of  the  policies  issued  by 
them,  or  in  any  manner  operate  to  the  prejudice  of  the  policy 
holder.^'     So  it  is  held  in  Vermont  that  an  insurance  contract  is 

"  Seamans  v.  Temple  Co.  103  Mich.  Co.  6  Pa.  Dist.  K.  54,  19  Pa.  Co.  Ct. 

400,  28  L.R.A.  430,  55  Am.  St.  Hep.  113. 

457,  (i3  N.  W.  408.     See  also  Swing  ^^  Commonwealth  Mutual  Fire  Ins. 

v.  Cameron,  145  Mich.  175,  9  L.R.A.  Co.  v.  Edwards,  124  N.  Car.  116,  32 

(N.S.)  41 7n,  108  N.  W.  5(K),  35  Ins.  S.  E.  404. 

L.  .1.  73(1  "  Rose  V.  Kimberly  &  Clark  Co.  89 

On    effect    of   location    of   insured  Wis.  544,  27  L.R.A.  556,  45  Am.  St. 

property  within  the  state  to  prevent  Rep.  855,  62  N.  W.  526. 

an    action    by    a    foreign    insurance  ^^  ^Etna    Ins.    Co.    v.    Harvey,    11 

company  on  contract  made  in  another  Wis.  394. 

state,  see  note  in  9  L.R.A.  (N.S.)  417.  i''' Ehrmann   v.    Teutonia   Ins.    Co. 

i2Buell  V.  Breese  ^lill  &  Grain  Co.  1  McCrary  (U.  S.  C.  C.)  123,  1  Fed. 

65   111.  App.  271.  471,   citing  Union   Mut.   Ins.   Co.  v. 

"  Western    Massachusetts    Mutual  ]\IcMillen,  24  Ohio  St.  67.    See  Hoop- 
Fire  Ins.  Co.  V.  Girard  Point  Stora2:e  er  v.  California,  155  U.  S.  648,  39  L. 

^780 


PARTIES— THE  INSURER 


§  3331) 


void  when  made  by  a  foreign  company  before  it  has  complied  with 
tlie  statute,  obtained  a  license,  and  filed  a  copy  of  its  by-laws  with 
the  secretary  of  stale,  and  become  responsible  for  the  acts  and  neg- 
lects of  its  agents.^*  If  the  laws  of  a  state  declare  that  all  insur- 
ance effected  by  foreign  corporations  which  have  not  complied  with 
such  laws  is  unlawful,  void,  and  of  no  effect  whatever,  a  policy  is- 
sued in  violation  of  this  rule  is  void  not  only  in  that  state,  but  in 
every  other,  and  hence  no  recovery  can  be  had  thereon  in  the  state 
in  which  such  corporation  was  organized.^^  And  it  is  decided  that 
a  contract  of  insurance  made  with  a  foreign  insurance  coinpany, 
and  valid  where  made,  cannot  l)e  enforced  in  another  state,  when 
in  conflict  with  its  statutes  and  the  declared  policy  of  its  laws.^" 
Under  the  Tennessee  statute  a  foreign  company  unauthorized  to 
transact  business  there  cannot  make  a  lawful  insurance  contract 
there  through  an  agent  not  a  licensed  broker  therefor,  and  any 
agent  soliciting  such  insurance  without  complying  with  the  law  is 
guilty  of  a  misdemeanor,  and  personally  liable  upon  his  unlawfully 
made  contracts  with  unauthorized  companies.^  And  a  corpora- 
tion in  one  state  in  sending  a  policy  to  an  agent  in  another  state, 
where  it  is  not  authorized  to  do  business  has  been  held  chargeable 
with  knowledge  that  it  is  participating  in  an  unlawful  act.^  Nor 
can  an  unlicensed  company  in  Illinois  maintain  an  office  there  and 
solicit  and  write  insurance  upon  property  in  other  states.^  In 
Pennsylvania,  a  foreign  insurance  company  cannot  recover  from 
tbe  bondsman  of  a  sul)agent  for  his  default,  he  not  having  been, 
commissioned  by  the  insurance  commissioner  as  required  l)y  tlie 
statute  of  that  state.'* 

The  want  of  authority  to  do  business  is  a  matter  of  special  de- 
fense, if  it  be  a  valid  one,  to  an  action  on  a  i)remium  note.^     So  it 


ed.  297,  13  Sup.  Ct.  207,  under  Cal. 
Pen.  Code,  see.  (549;  Lainh  v.  Bowser, 
7  Biss.  (U.  S.  C.  C.)  315,  Fed.  Cms. 
No.  8,008,  s.  c.  Id.  372,  Ved.  Cas.  No. 
8009;  Hartford  Live  Stock  Ins.  Co.  v. 
Matthews,  102  Mass.  221;  Clay  Fire 
&  Marine  Ins.  Co.  v.  Huron  Salt  Mt'<i'. 
Co.  31  Mich.  iUO;  Cohunl)ns  Ins.  Co. 
V.  Walsh,  18  Mo.  229.  See  §S  713. 
714  herein. 

^^  Lyeomino-  Fire  Ins.  Co.  v. 
Wrislit,  3.")  Vt.  32G. 

19  Wood  V.  Cascade  Fire  &  Marine 
Tn.s.  Co.  8  \Yasli.  427,  40  Am.  St. 
Rep.  917,  36  Pac.  267. 

20S\vino'  V.  Munson,  191  Pa.  St. 
582,  71  Am.  St.  Rep.  772,  58  L.R.A. 
223,  43  Atl.  342. 


1  Woolvine  v.  Mason,  128  Tenn.  35, 
137  S.  \V.  ()82;  Shannon's  Code,  sees. 
;!274-:}3(i9. 

2. Millers'  Mutual  Kire  Ins.  Co.  v. 
Peo]>le,  03  111.  App.  353.  See  §  313 
herein. 

^  North  American  Ins.  Co.  v.  Yates, 
116  111.  Ap)).  217,  37  Ciiic.  Le,<j'.  N.  59. 

*  Mutual  Benefit  Life  Ins.  Co. 
v.  Bates,  92  Pa.  St.  352.  See  further 
what  policy  is  void  and  note  un- 
collectabie,  Franklin  Ins.  Co.  v.  LouLs- 
ville  Packet  Co.  9  Bush  (Ky.)  390. 

^  Creditors  I^nion  v.  Lnndv,  16 
Cal.  App.  567,  117  Pae.  624,  40  Ins. 
L.  J.  1981.  See  Swinsj  v.  Cameron, 
143  Mich.  175,  9  L.R.A. (N.S.)  417n, 
108  N.  W.  306,  33  Ins.  L.  J.  736. 
81 


§  334  JOYCE  ON  INSURANCE 

is  decided  that  proof  of  authority  to  do  business  in  a  state  is  re- 
quired to  maintain  an  action  there  on  a  contract  relating  to  insur- 
ance.^ 

§  334.  Charter:  corporate  powers:  ultra  vires. — The  charter  of 
a  corporation  is  the  measure  of  its  powers,  and  the  enumeration  of 
certain  powers  implies  the  exclusion  of  all  others.'  This  rule,  how- 
ever, does  not  prohibit  a  corporation  from  exercising  such  powers 
as  are  requisite  to  carry  on  its  business  in  a  manner  usual  and  nec- 
essary, for  this  it  has  authority  to  do ;  ^  but  the  rule  does  operate 
to  restrain  a  corporation  from  engaging  in  transactions  which  are 
not  calculated  to  effect  the  particular  purpose  for  which  it  was  in- 

6  Gilbert  v.  State  Ins.    Co.  3   Kan.  German   Ins.   Co.  v.   Commonwealth, 

App.  1,  44  Pao.  442.    See  Delaware  141  Ky.  606,  133  S.  W.  798. 

Ins.  Co.  V.  Security  Co.  —  Tex.  Civ.  New  YorA.— Lord  v.  Equitable  Life 

App.  _,  54   S.   W.   916.  case  rev'd  A.ssur.  Soc.  194  N.  Y.  212,  22  L.H.A. 

Security  Co.  v.  Panhandle  Nat.  Bank,  (N.S.)  420,  87  N.  E.  443,  38  Ins.  L.  J. 

93  Tex.  575,  51  S.  W.  22.  435,  108  N.  Y.   Supp.  67,  96  N.  Y. 

'State  V.  Atchison  &  Northern  R.  Snpp.  10,  109  App.  Div.  252;  Bush 

Co.  24  Neb.  143,  38  N.  W.  43 ;  Ger-  v.  New  York  Life  Ins.  Co.  119  N.  Y. 

man  Ins.  Co.  v.  Commonwealth,  141  Supp.     796,  135  App.  Div.  447. 

Ky.  606,  133  S.  W.  798.  Pennmjlvania.  —  Union      National 

"^If  a  statute  specifies  the  provisions  Life    Ins.    Co.,   In    re,   58    Pitts.    L. 

which     must     be     contained     in     the  J.  2. 

charters  of  insurance  companies,  the  Wisconsin. — Huber  v.  Martin,  127 
statute  must  be  complied  with.  State  Wis.  412,  115  Am.  St.  Rep.  1027,  105 
(ex  rel.  Lumberman's  Accident  Co.)  N.  W.  1031,  3  L.R.A.(N.S.)  653. 
V.  Michel,  124  La.  558,  50  So.  543,  Charter  or  franchise  as  a  contract: 
Acts  1898,  No.  105,  p.  134,  sec.  2.  Im])airment  of  obligation  of  con- 
But  see  Shoun  v.  Armstrong,  —  tract:  vested  rights.  See  Joyce  on 
Tenn.  Ch.  — ,  59  S.  W.  790.  Franchises    (ed.   1909)    sees.    311   et 

Insurance  companies  have  the  same  seq.     Reservation  of  power  to  alter, 

rights   as    individuals    to   limit    their  amend  or  repeal  grant  of  franchise  or 

liability  and  to  impose  whatever  con-  charter,  see  Id.  sees.  317  et  seq. 

ditions  thev  please  upon  their  obli-  ^  See  Whitewater  Valley  Canal  Co. 

gations,  not  inconsistent  with  public  v.  Yallette,  21  How.  (62  U.  S.)  414, 

policy  or  statutory  provisions.     Du-  424,  16  L.  ed.  154;  Ohio  Life  &  Trust 

mas    V.    Northwestern    National    Ins.  Ins.    Co.    v.    Merchants'    Ins.    Co.   11 

Co.   12  App.   D.   C.   245,  40  L.R.A.  Humph.  (30  Tenn.)  22,  53  Am.  Dec. 

;}58.  742;  Alli.son  v.  Fidelity  i\Lutual  Fire 

Laws  of  states  of  incorporation  as  Ins.   Co.  81   Neb.   494,^129.  Am.   St. 

limitation  upon  powers  of  insurance  Re]i.  694,  116  N.  W.  274. 

companies,    see    notes    in    63    L.R.A.  rori)orations  are  creatures  of  the 

653,  and  52  L.R.A. (N.S.)   278.  legislative  department  of  the  govern- 

Asi  to  poicer    io    oiler    or    amend  ment.     They  can  exercise  no  powers 

charter:  reserved  poirer,  .see:  which  are  not  expressly  granted  them 

Uniled    States.~Fo\k     v.     Mutual  or  are  necessarily  implied  from  the 

Reserve  Fund  Life  Assoc.  207  U.  S.  express  powers  given.    Knapp  v.  Su- 

310,  52  L.  ed.  222,  28  Sup.  Ct.  65.  preme  Commandery  United  Order  of 

////■;;o/s.— Yates  v.  People    (ex  rel.  the  Golden  Cro.ss  of  the  World,  121 

Anderson)  207  111.  316,  69  N.  E.  775;  Tenn.  212,  118  S.  W.  390. 

782 


PARTIES— THE  INSURER 


§  334 


corporated.^  And  where  a  corporation  has  become  a  corporate  en- 
tity for  obtaining  subscriptions  b}'  receiving  a  certilicate  of  incor- 
poration it  cannot  be  held  to  have  acted  unlawfully  in  issuing  a 
check  before  it  is  licensed  to  do  business,  as  against  a  bona  fide  hold- 
er for  value,  even  though  the  statute  declares  it  unlawful  to  do  any 
kind  of  business  before  being  licensed.^"  But  entering  into  an 
agreement  by  two  companies  to  form  an  uninc©r])orated  associa- 
tion which  is  in  fact  a  partnership  is  ultra  vires  where  the  charter 
of  neither  company  authorizes  a  joint  or  partnership  contract.^^ 
And  a  life  insurance  company  is  not  empowered  to  transfer  its  pol- 
icy holders  without  their  consent  to  another  company. ^'^  So  it  is 
ultra  vires  a  fire  insurance  company  to  enter  into  a  contract  in  re- 
straint of  trade,  to  restrict  competition,  to  limit  its  business  within 
certain  territory,  and  to  regulate  and  fix  prices  therein. ^^ 

An  insurance  company  has  no  authority  to  invest  its  capital  stock 
in  another  corporation  under  a  statutory  power  to  invest  its  monej'' 
in  "real  or  personal  property,  stocks,  or  choses  in  action."  ^*  But 
whether  an  investment  by  an  insurance  corporation  in  the  stock  of 
a  bank  is  authorized  or  not  affects  the  state  only.^^  And  a  contract 
whereby  a  guaranty  life  association  undertakes  to  pay  losses  which 
may  accrue  against  another  and  similar  association  is  an  attempt 


'  See  Penobscot  Corp.  v.  Lamson, 
16  Me.  224.  33  Am.  Bee.  656 ;  Beatty 
V.  Knowles,  4  Pet.  (29  U.  S.)  152, 
162,  7  L.  ed.  813.  People  v.  Utica 
Ins.  Co.  15  Jolnis.  (N.  Y. )  ;]58,  8  Am. 
Dec.  243.  Thi.s  rule  with  its  qualifi- 
cations is  fully  considered  in  Mora- 
wetz  on  Private  Corporations  (ed. 
1882)  sees.  189,  209.  See  also  in  in- 
dex thereto  "Ultra  Vires,"  "Construc- 
tion of  Charter,"  and  " Validity  of 
Corporate  Acts."  See  also  Angell  & 
Ames  on  Corporations,  (9th  ed.)  sec. 
111. 

^°  Reynolds  v.  Gerdelman,  —  Mo. 
App.  — ,  170  S.  W.  1153. 

^^  Philadel])hia  Underwriters,  In  re, 
54  Leg.  Intel!.  469,  6  Pa.  Dist.  R. 
699. 

^^  Watson  v.  National  Life  &  Trust 
Co.  189  Fed.  872,  111  C.  C.  A.  134, 
40  Ins.  L.  J.  2065.  The  options  of 
which  they  may  avail  themselves  in 
case  an  attempt  is  made  to  so  trans- 
fer them  are  stated  in  this  case.     See 


Timberlake  v.'  Supreme  Commandery 
United  Order  of  the  Golden  Cross  of 
the  World,  208  Mass.  411,  36  L.R.A. 
(N.S.)  597,  94  N.  E.  685.  See  §§ 
350r  et  seq.  herein. 

On  liability  of  insurance  company 
on  contracts  of  another  company 
which  it  has  absorbed  or  attempted 
to  absorb,  see  note  in  36  L.R.A. 
(N.S.)  597. 

"  State  (ex  rel.  McCarter)  v. 
Firemen's  Ins.  Co.  74  N.  J.  Eq.  37, 
29  L.R.A.(N.S.)  1194,  135  Am.  St. 
Rep.  708,  18  Amer.  &  Ens;.  Ann. 
("as.  1048,  73  At  I.  80,  rev'g'  70  N.  J. 
Eq.  291,  61  Atl.  705.  See  §  329a 
herein. 

^*  Commercial  Fire  Ins.  Co.  v. 
Board  of  Revenue,  99  Ala.  1,  14  So. 
490,  42  Am.  St.  Rep.  17.  Compare 
Hvde  v.  Equitable  Life  Assur.  Soc. 
116  N.  Y.  Supp.  219,  61  Misc.  518. 

^^  Hvde  V.  Equitable  Life  Assur. 
Soc.  lie  N.  Y.  Supp.  219,  61  Misc. 
518. 


783 


§  334  JOYCE  ON  INSURANCE 

to  divert  the  funds  to  objects  not  authorized  by  its  charter,  and  is 
therefore  uhra  vires  and  void.^^ 

An  insurance  company  can  borrow  money  to  pay  a  loss  or  give 
a  note  to  raise  the  money  for  that  purpose,"  and  it  can  borrow 
money  to  preserve  its  assets,  and  it  may  agree  to  indemnify  the 
guarantors  if  they  are  required  to  pay  the  debt.  The  power  to  bor- 
row money  to  protect  its  assets  is  an  incidental  power  of  every  cor- 
poration, and  its  choice  of  a  means  for  the  execution  of  such  power 
pi-esents  no  question  for  judicial  interference  where  the  means  is 
neither  prohibited  nor  corrupt. ^^  It  is  also  within  the  power  of  a 
life  insurance  company,  and  is  not  ultra  vires  to  make  a  loan  under 
au  agreement  fully  executed  before  insured's  death, ^^  and  in  mak- 
ing a  loan  it  may  lawfully  require  the  borrower  to  insure  the  prop- 
erty with  the  company  and  to  pay  the  premium  in  addition  to  the 
legal  rate  of  interest.^" 

A  corporation  may  also  hold  real  estate,  acquired  in  good  faith 
for  such  purpose,  for  a  necessary  and  proper  future  use  in  carry- 
ing on  its  business,  especially  where  it  is  so  authorized  by  special 
charter,  although  there  is  a  constitutional  and  statutory  limitation 
as  to  time  in  such  case.^  So  the  purchase  by  a  life  insurance  com- 
})any  of  real  estate  upon  which  to  maintain  a  hospital  to  care  for 
and  treat  such  of  its  employees  as  are  afflicted  with  tuberculosis,  is 
a  valid  exercise  of  its  power  within  a  statute  permitting  the  acquisi- 
tion of  such  real  estate  as  shall  be  requisite  for  its  convenient  ac- 
commodation in  the  transaction  of  its  business.^ 

Under  the  Kansas  statute  a  local  camp  of  -Modem  Woodmen  is 
limited  as  to  its  right  to  hold  real  estate  to  such  as  may  be  necessary 
for  the  transaction  of  its  business  and  holding  meetings,  although 
such  necessary  buildings  may  be  partly  used  for  other  purposes.^ 

^^  Twiss  V.  Guaranty  Life  Assn.  87  Kv.  Const,  sec.  192,  Ky.    Stat.    see. 

Towa,  733,  55  N.  W.' 8,  43  Am.  St.  567,  Russell's  Stat.  sec.  ■2152.    It  was 

Reji.  418.  claimed   tiu^t    a   suljsequent    constitu- 

"  Furniss  v.  Gilclnist,  1  Sand.  (N.  tioual  enactment  or  leaislation  could 

Y.)     53;     Oliio     Lite     Insurance     &  not  imj)air  cliarter  rights. 

Trust  Co.  V.  Mercliants'  Insurance  &  ^  People  (ex  rel.  Metropolitan  Life 

Trust  Co.  11  Humph.  (Tenn.)  1,  53  Ins.    Co.)    v.    Hotchkiss,    120   N.   Y. 

Am.  Dee.  742.  Supp.   649,   136   App.   Div.   150,   39 

^^  Hyde   V.   Equitable   Life    Assur.  Ins.  L.  J.  314,  Ins.  L.  Consol.  Laws, 

Soc.  116  N.  Y.  Supp.  219,  61  Misc.  c.  28,  see.  20,  subdiv.  2. 

518.  ^Kpnnett    v.   Kidd,   87   Kan.   652, 

i^Freese  v.  Mutual  Life  Ins.   Co.  125  Pac.  36,  44  L.R.A.(N.S.)   544n, 

of  N.  Y.  11  Cal.  App.  385,  105  Pac.  89  Kan.  4,  44  L.R.A.(N.S.)  549,  130 

265.    See  §  350  lierein.  Pac.  691,  case  of  right  to  take  person- 

^°  New     York     Fire     In.^.     Co.     v.  al  property  or  devise  of  farm  hinds 

Donaldson,  3  Edw.   (N.  Y. )   199.  under    Ka'n.    Gen.    Stat.    1909,    sees. 

1  German    Ins.    Co.    v.    Common-  1832-1834. 
wealth,  141  Kv.  606,  133  S.  W.  793: 

784 


PARTIES— THE   IXSIKEK  §  334 

Wliere  the  cliai'ler  provided  that  an  insurance  company  mighf 
i.ssue  poHcies  on  lives  and  gi'^nt  annuiti^^,  and  authorized  the  set- 
ting apart  of  a.  portion  of  its  capital  as  security  for  the  payment  of 
annuities,  it  was  held  that  the  company  might  insure  lives  and 
grant  annuities  hefore  making  such  approi)rialion  of  the  fund.^ 
Where  the  chai-ter  of  a  com})any  authorized  it  to  insure  property 
'•'against  loss  or  damage  by  fire,  lightning,  and  inland  navigation 
and  transportation,"  a  conti-act  made  by  it,  insuring  horses  against 
death  by  accident  or  disease,  is  void.*     But  a  company  authorized 
to  issue  policies  against  accidents  to  ])ersons  or  property  mav  issue 
policies  against  accidents  to  live  stock  although  the  statute  doas  not 
expressly  refer  to  the  latter;  an  authority,  however,  under  the  statute 
to  insure  the  lives  of  horses,  cattle,  and  other  live  stock  does  not  em- 
power a  company  organized  thereunder  to  issue  accident  policies.^ 
So  a  company  authorized  to  insure  against  losses  by  storms  and  hur- 
ricanes on  hay,  grain,  and  other  agricultural  products  in  barns, 
stacks  or  otherwise  has  power  to  insure  growing  crops,  and  is  liable 
for  loss  to  such  croi)s  caused  by  a  hailstorm. '^     But  it  is  held  in 
Colorado  that  a  lire  insurance  company  could  not  avail  itself  of 
the  defense  of  ultra  vires  when  it  had  insured  plaintiff's  crop  against 
loss  from  hail,  and  had  received  the  premium  therefor,  even  though 
the  contract  were  ultra  vires.*    And  a  corporation  cannot  set  uj)  its 
lack  of  power  to  contract  after  the  other  party  has  perfoi-med  the 
contract  and  it  does  not  contravene  any  statute  or  ])ul)lic  policy.^ 
And  a  similar  ruling  has  been  made  in   Iowa,  where  it  was  held 
that  a  religious  society  insuring  lives  could  not  defend  against  a 
suit  on  one  of  its  policies,  upon  the  plea  of  ultra  vires,  when  it  had 
received  asse^ssments  on  the  policy.^" 

An  employers'  liability  insurance  company  has  no  authority  to 
issue  an  automobile  policy  covering  liability  im))osed  by  law  by 
reason  of  bodily  injuries  including  death  accidentally  sustained  by 
reason  of  maintenance,  use,  etc.,  of  automobiles,  nor  is  such  a  policy 
authorized  by  a  provision  permitting  insurance  of  health  of  persons 

*  Vfrplaiick  v.  Mercantile  Ins.  Co.  ''MiUual  Fire  Ins.  Co.  v.  DeHaven, 

1  Edw.  Ch.  (N.  Y.)  84.  18    Wlcly.    Notes   Ca.s.    (Pa.)    125,  5 

Miocliester  Ins.   Co.  v.  Martin,  13  Atl.  65. 

Minn.    5!).     See    Buroe„ss    &    Stock's  *  f)eiiver  Fire  Ins.  Co.  v.   McClel- 

Case,  31  L.  ,].  Cli.  74!) ;  2  .1.  &  11.  441 ;  land,  9  Col.  11,  9  Pae.  771,  59  Am. 

Natiisch  V.  Irving,  in  Gow.  on  Part-  Rep.  134. 

nersliip.  app.  ii.  9  State  Life  Ins.  Co.  v.  Nelson,  46 

«  Pennsylvania    Casualtv    Co.,    Re,  Ind.  Apj).  i:!7,  92  N.  E.  2. 

36  Pa.  Co.  Ct.  Rep.  635,  act  Uiiy  1,  i°  Malt    v.    Roman    Catholic    Mut. 

1876,  P.  L.  53,  as  am'd  by  act  Julv  Soc.  70  Iowa,  455,  30  N.  W.  799. 
9,  1897,  P.  L.  239. 

Joyce  Ins.  Vol.  I  — 50,  785 


§§  334a,  335  JOYCE  ON  INSURANCE 

and  against  accidents,  injuries,  etc.,  resulting  from  traveling  or 
general  accidents  by  land  or  water." 

A  company  also  has  power  to  reject  an  application,  and  is  not 
bound  by  a  contract  by  its  agent  in  retaining  the  premium  note 
while  endeavoring  to  induce  it  to  reconsider  its  action. ^^  3^^  [^  \^.^^ 
no  power  to  purchase  upon  credit  the  mortgage  obligation  of  one 
insured  by  the  company  and  entitled  to  indemnity  for  a  loss,  for 
the  purpose  of  setting  off  such  mortgage  against  the  policy ,^2  nor 
can  such  company  treat  as  profits,  subject  to  be  divided,  premiums 
received  upon  unexpired  risks,  when  it  has  a  fund  sufficient,  inde- 
pendent thereof,  to  meet  all  liabilities  that  might  accrue  on  the 
pending  risks,  and  dividends  thus  paid  may  be  reclaimed  by  the 
corporation.^* 

if  a  corporation  has  received  the  benefits  and  retains  the  advan- 
tages of  a  contract  it  cannot  escape  its  obligations  upon  a  plea  of 

ultra  vires.^^ 

§  334a.  Same  subject:  power  of  corporation  to  insure  life  of  its 
president. — A  corporation  has  no  implied  power  to  insure  the  life  of 
its  president  for  its  benefit  and  carry  the  policy  after  he  has  retired 
from  office,  and  a  stockholder  who  has  not  consented  to  or  acqui- 
esced in  a  threatened  ultra  vires  act  of  the  conipany  may  enjoin  it. 
In  such  a  case  the  quastion  of  insurable  interest,  and  of  assignment 
to  one  without  such  interest  arises  although  not  very  clearly  in- 
volved here.^^ 

§  335.  Forfeiture  of  charter.— AVhere  the  legislature  repeals  a 
statute  under  which  an  insurance  company  is  organized,  and  de- 
clares its  charter  forfeited  except  it  comply  with  certain  require- 
ments, outstanding  policies  of  the  company  are  not  canceled  by 
such  repealing  act,  notwithstanding  the  company  fails  to  comply 
with  the  provision  of  such  act,"  and  an  insurance  company  does 
not  forfeit  its  charter  because  of  nonuser,  by  refusing  to  insure 
against  extrahazardous  risks.^^    But  it  forfeits  its  franchise  by  de- 

"  American  Fidefity  Co.  v.  Bleak-  ^^  Victor   v.    Louise    Cotton    Mills, 

lev,  157  Iowa,  442,  138  N.  W.  508.  148    N.    Car.    10<,    16    L.K.A.(N.S.) 

'12  Otterbein  v.  Iowa  St.  Ins.  Co.  57  1020n,  16  Araer.  &  Eng.  Annot.  Cas. 

Iowa,  274,  10  N.  W.  667.  291,  61  S.  E.  648.     See  §§  888,  914- 

13  Kansas  In.s.   Co.    v.    Craft,    18  910,  9351)  herein. 

Kan.  283.  ^^"  right  of  corporation  to  insure 

1*  Lexington  Life,  Fire  &  Marine  life  of  officer  for  benefit  of  corpora- 
Ins  Co  V  Page  &  Richardson,  17  B.  tion,  see  notes  in  16  L.R.A.(N.S.) 
Mon    (ky.)  412.  1020,  and  L.R.A.  1915F,  979. 

15  Hyde  v.   Eqnitable   Life   Assur.  i''  Manlove     v.     Coramercial_  Mut. 

Soc.  116  N.  Y.  Supp.  219.  61  Misc.  Fire  Jns.  Co.  47  Kan.  309,  2i   Pac. 

518:  Knott  v.  Securitv    Mutual   Ins.  979 

Co    161  Mo.  App.  579,  144    S.    W.  ^^  State  ex  rel.  Corwin  v.  Urbana 

178,  41   Ins.  L.   J.  843.     See  §   331  &  C.  Mut.  Ins.  Co.  14  Ohio  6. 

herein. 

786 


PARTIES— THE  INSURER  '  §  335 

liberatcly  exceeding  the  amount  for  which  it  is  allowed  by  law  to 
issue  policies  on  any  one  life,  thus  intentionally  attempting  to  evade 
the  insurance  law  in  one  of  its  most  important  provisions."  And 
where  the  making  of  prohibited  insurance  contracts  is  the  only  bus- 
iness the  company  is  transacting  it  constitutes  a  ground  for  forfei- 
ture of  its  charter  even  though  it  has  authority  to  vaUdly  do  other 
things.^"  So  a  company  may  be  ousted  of  all  rights,  privileges  and 
franchises,  because  of  the  violation  of  the  state  laws  by  their  agents 
through  whom  they  do  l)usiness.^^ 

"  International  Fraternal  Alliance  ^^  State  (ex  rel.  Crow)  v.  Fire- 
V.  State,  86  Md.  550,  40  L.R.A.  187,  men's  Fund  Ins.  Co.  152  Mo.  1,  45 
39  Atl.  512.  L.R.A.  363. 

20  Stale  (ex  rel.  Fishback)  v.  Globe 
Ca.sket  &  Undertakinj?  Co.  82  Wash. 
124,  L-R-A.  1915B,  976,  143  Pae.  878. 

787 


I 


CHAPTER  XV. 

INDIVIDUALS,  UNINCORPORATED  ASSOCIATIONS,  LLOYDS, 

PARTNERSHIPS. 

§  335a.  English  and  American  Lloyds  systems  compared. 

§  335b.  Individuals,  unincorporated  associations,  Lloyds:  Alabama. 

§  335c.  Same  subject:  Florida. 

§  335d.  Same  subject :  Georgia. 

§  335e.  Same  subject :  Illinois. 

§  335f .   Same  subject :  Kentucky. 

§  335g.  Same  subject :  Massachusetts. 

§  '335h.  Same  subject :  Minnesota.  ^ 

§  335i.    Same  subject:  Mississippi. 

§  335j.    Same  subject :  Missouri. 

§  335k.  Same  subject :  New  Jersey. 

§  3351.    Same  subject :  New  York. 

§  335m.  Same  subject :  Ohio. 

§  335n.  Same  subject :  Pennsylvania. 

§  335o.  Same  subject :  decisions  inferentially  bearing  thereon. 

§  335p.  Partnerships  as  insurers. 

§  335a.  English  and  American  Lloyds  systems  compared.^— 
Many  of  the  American  iJoyd's  policies  or  agreements  are  very  in- 
tricate in  their  provisions  and  it  is  diflicuU  to  determine,  from  tliose 
wliich  have  been  ]>eforc  the  coiu'ts,  to  what  extent  they  differ  from 
the  EngUsh  Lloyds  ]>olicies.  Certain  (hfferences,  however,  exist  l)e- 
tween  the  two  systems,  snch  as  the  form  of  nndervvriting  and  mode 
of  execntion  of  tlie  i)oH{y  or  contract;  the  power  and  anthority  of 
the  agent  or  manager,  jind  the  nature  of  the  agency;  the  parties  to 
an  action  to  recover  the  loss;  and  the  nature  and  extent  of  their  ha- 
bility.  The  exact  status  of  the  American  Eloyds  is  necessarily  de- 
pendent upon  the  terms  of  their  agreement  as  construed  by  tlie 
courts,  aUhough  it  is  somewhat  in  the  nature  of  a  Umited  liability 
partnership.^     8o  in  a  New  York  case  it  is  stated  that  the  present 

1  See  §§  IVa,  TVc,  herein.  C.   IDIU)    424    (coinpo.<ed   ot   uiuler- 

2  As  to  plan  see:  writers  residing  for  the  most  part  in 
United    States. — Riclimond    Cedar  Canada  :  known  a.^  New  York  Corn- 
Works  V.  Buckner,  181  Fed.  (U.  S.  C.  mercial    Underwriters)  :     Sumner    v. 

788 


INDIVIDUALS,  ETC. 


§  335a 


use  of  tlie  term  ''American  ].loyds"  lias  no  other  signification  llian 
to  designate  a  partnership  or  an  organized  association  of  individual 
underwriters.^  In  Alabama,  however^  it  is  declared  that  the  policy 
is  the  contract  of  a  "company"  or  "association'-'  which  is  not  a  part- 
nership in  a  legal  sense  and  in  no  sense  a  corporation.*  It  is  de- 
clared in  a  New  Jersey  case  that  a  Lloyds  insurance  originally  waa 
an  insurance  based  upon  a  fund  made  up  of  deposits  by  each  one 
of  the  members  from  which  when  a  loss  was  adjusted,  the  agent 
took  the  means  of  payment.  In  this  country,  in  adopting  the 
Lloyd's  system  of  insurance,  money  representing  the  entire  insur- 
ance was  not  deposited.  In  lieu  of  such  a  deposit  the  members 
each  contributed  a  certain  sum  to  make  up  a  fund,  and  each  con- 
tracted with  agents,  who  were  the  representatives  of  the  association, 
to  pay  in  from  time  to  time  so  much  as  should  be  needed  to  pay 
losses.  Under  the  Lloyd's  system  of  insurance,  after  the  loss  was 
adjusted  or  ascertained  by  action  against  the  agents,  the  insured 
received  from  the  fund  so  provided  the  amount  of  loss.  The  fund 
deposited  was  in  the  strictest  sense  a  trust  fund  for  the  benefit  of 
persons  holding  policies.    Under  the  Lloyd's  system,  as  adopted  in 


Piza  (U.  S.  D.  C.  1899)  91  Fed.  677 
(composed  of  thirty  per.^ons  called 
South  &  North  American  Lloyds. 
Policy  signed  in  behalf  of  the  thirty 
by  attorneys). 

Alabama.  —  Hoadlev  v.  Piuifoy 
(1894)  107  Ala.  276,  30  L.R.A.  351, 
18  So.  220  (business  wa.s  carried  on 
in  manner  ot  ancient  Lloyds).    . 

Florida. — State  (ex  rel.  lloadley) 
V.  P.oard  of  fiis.  rommissionors 
(1896)  37  Via.  564,  33  L.R.A.  288,  20 
So.  772  (South  &  North  American 
Lloy(l.s.    See  91  Fed.  ante:  tliis  note). 

Georgia.— Fort  v.  State  (1893)  92 
Ga.  8,  23  L.R.A.  86,  18  S.  E.  14 
(guarantee  and  accident,  Lloyds,  a 
voluntary  unincorporated  association 
consisting  of  one  hundred  natural 
persons). 

Illinois.  —  Warfiold-Pratt-IIowell 
Co.  V.  Williamson  (1908)  233  111. 
487,  84  N.  E.  706;  Clark  v.  Spafford 
(1892)  47  111.  App.  160. 

Mrs\srt!<r/.— State  v.  Stone,  118  Mo. 
388  (1892)  25  L.R.A.  243.  40  Am. 
St.  Rep.  388,  24  S.  W.  164. 

New  Jersey. — Durbrow  v.  Eppens, 
(1900)  65  N.  J.  L.  10,  46  Atl.  582. 


New  York: — Imperial  Shale  Brick 
Co.  v.  Jewett  (1901)  169  N.  Y.  143, 
62  N.  E.  167,  31  Ins.  L.  J.  376; 
Thompson  v.  Colonial  Ins.  Co. 
(1900)  68  X.  Y.  Supp.  143,  3.]  :\Iisc. 
;J7,  case  aff'd  70  N  y.  Si,pp.  §5.  60 
App.  Div.  325;  New  York  Board  of 
Fire  Ihiderwriters  v.  Whipple  &  Co. 
(1898)  55  N.  Y.  Supp.  188,  36  App. 
Div.  49;  (Jough  v.  Sutterlee,  52  N.  Y. 
Supp.  492,  32  App.  Div.  33  (Pro- 
visions declared  very  complicated  and 
their  meaning  obscure  and  doid)tf'ul, 
per  Cullen,  ,).,  Id.  lUj). 

Ohio. — State  (ex  rel.  Riciiards)  v. 
Ackermaii,  51  Ohio  St.  163,  24  L.R.A. 
298,  37  N.  E.  828  (plan  stated  in 
note,  S  335j  herein ). 

3  Fire  Department  of  City  of  N. 
Y.  V.  Stanton,  159  N.  Y.  225,'  232,  54 
N.  E.  28,  per  Gray,  J.,  case  affirms 
57  N.  Y.  Supp.  1138,  38  App.  Div. 
6-tO,  Avhich  affirms  28  App.  Div.  334, 
51  N.  Y.  Supp.  242,  en  opinion  there. 
See  also  Balli  v.  White,  considered  in 
ne.xt  following  note  herein. 

*  Hoadlev  v.  Purifov,  107  Ala.  276, 
30  L.R.A.  351,  18  So.  220. 


789 


§  335b  JOYCE  ON  INSURANCE 

this  country,  the  trust  in  favor  of  the  insured  consists  of  the  amount 
deposited  by  each  member  and  the  covenant  on  the  part  of  each 
member  to  pay  in  money  enough  to  answer  the  amount  due  from 
him  upon  such  loss.^- 

§  335b.  Individuals,  unincorporated  associations,  Lloyds:  Ala- 
bama.— In  Alabama  incorporation  has  been  held  not  a  prerequisite 
to  engaging  in  the  business  of  fire  insurance  in  that  state;  there 
being  no  statute  law,  nor  any  principle  of  public  policy  precluding 
citizens  of  the  state  acting  as  individuals,  associations,  partnerships, 
or  companies  from  engaging  in  such  business  without  being  first 
incorporated,  and  it  was  also  held  that  under  the  Federal  Constitu- 
tion the  citizens  of  each  of  the  United  States  are  entitled  to  '*like 
privileges  and  immunities,  and  that  citizens  of  other  states,  not  in- 
corporated were  not  required  to  have  a  license  to  engage  in  the  fire 
insurance  business  in  said  state"  being  entitled  to  the  same  privi- 
leges and  immunities  as  unincorporated  citizens  of  that  state.^ 

^  Durbrow  V.  Eppens  (1900)  65  N.  members  are  not   partnei-s   for  they 

J.  L.  10,  19,  46  Atl.  582,    585,    per  do  not   bind  themselves  jointl}^,  but 

Depue,  C.  J.  severally,  in  a  specified  amount,  until 

It  is  said  in  a  New  York  ease  that,  the  sum  insured  for  is  nuide  up.  In 
"The  modern  methods  of  these  as-  England,  where  the-se  institutions 
soeiations  merit  notice.  Instead  of  originated,  they  have  been  alternate- 
passing-  the  proposed  policy  of  the  ly  called  'dubs,'  'societies,'  'associa- 
applieant  among  the  members,  that  tions,'  and  'individual  underwriters.' 
each  may  underwrite  for  such  portion  There  tlie  contract  has  been  held  legal 
of  the  required  amount  as  he  wishes  where  the  members  bound  themselves 
to  become  liable  for,  according  to  the  severally  for  specified  amounts,  but 
early  practice  at  Lloyds,  tlie  under-  void,  as  contrary  to  the  insurance 
writers  at  the  metropolitan  Lloyds  (in  laws  of  that  country,  when  the  under- 
common  with  those  of  other  assoeia-  writers  untlertook  a  joint  liability  on 
lions  in  this  state)  organized  for  joint  capital.  Lees  v.  Smith,  (  Term, 
business  by  executing  a  formal  instru-  R.  338 ;  Strong  v.  Harvey,  3  Bing.  304, 
ment  declaring  their  purpose,  and  11  Moore,  73;  Harrison  v.  Millar, 
authorizing  attorneys  in  fact  to  iss'ue  2  Esp.  513,  7  Term.  R.  340,  note; 
policies  in  their  names,  binding  each  Bromley  V.  Williams,  32  Beav.  177, 
underwriter  severally  to  an  equal  32  Law  J.  Ch.  71().  While  the  extent 
amount.  These  attorneys  determined  of  liability  of  each  underwriter  is 
what  risks  the  underwriters  should  specially  limited  to  his  individual 
assume,  and  the  premiums  to  be  share  of  the  loss,  the  rules  of  Jaw 
paid  therefor,  and,  in  effect,  be-  applicable  to  insurers  generally  must 
come  the  chief  executors  and  raana-  in  oth'^r  respects  determine  when  a 
ging  agents  of  the  enterprise,  having  liability  under  the  policy  arises." 
almost  unlimited  power  in  that  re-  Balli  v.  Wiiite  (1800  4<  N.  Y.  Supp. 
gard.  .  .  .  These  associations  are  197,  203,  21  Misc.  285,  292,  per  Me- 
anomolous    institutions,     not     eorpo-  Adam,  J. 

rations,    or    joint    stock     companies,  ^  Hoadley    v.    Purifoy,    107    Ala. 

though  in  some    respects    resembling  276,  30  L.K.A.  351,  18  So.  '2'20.     In 

both,  but  a  combination  of  individuals  this  ease  the  business  was  carried  in 

acting   concretely   as   insurers.      The  the  manner  of  ancient  Lloyds.    It  was 

790 


1ND1\'1DL'ALS,  ETC.  §§  335e,  335d 

§  335c.  Same  subject:  Florida. — Under  a  Florida  decision  unin- 
corporated associations  or  individuals  are  authorized  to  obtain  a  cer- 
tificate of  autliority  to  engage  in  the  business  of  insurance  in  that 
state  upon  compliance  with  certain  statutory  requirements.  The 
Federal  constitution  places  citizens  of  eiich  state  upon  the  same  foot- 
ing as  citizens  of  other  states  so  far  lis  the  advantages  from  citizen- 
ship in  those  states  are  concerned.  The  privileges  and  inununities 
thus  secured  to  citizens  of  each  state  in  the  several  states  are  those 
which  are  common  to  the  citizens  of  other  states  under  their  consti- 
tution and  laws  by  virtue  of  their  status  as  citizens.'^ 

§  335d.  Same  subject:  Georgia. — ^In  Georgia  a  Lloyds  voluntary 
association,  consisting  of  natural  persons  merely,  and  unincorpora- 
ted, could  not  l)e  licensed  to  transact  business  in  that  state  *  under 
the  Act  of  18(S7,^  as  that  enactment  only  included  chartered  com- 
panies. The  legislature,  however  in  1893  ^°  passed  an  act  which  pro- 
vided that  "all  laws  regulating  the  business  of  insurance  in  this 
state  by  companies  are  applicable  to  individuals,  associations,  and 
corporations  in  like  business,"  so  that  a  license  became,  neces- 
sarv  in  such  cases. ^^  And  the  Code  of  1911  in  one  section  recos- 
nizes  individuals,^^  although  another  section,  which  provides  that 

• 
also  held  that  only  chartered  insiir-  act  of  1895,  e.  4380,  sec.  3,  Fed. 
ance  companies  are  inchuled  within  Const.  Art.  4,  sec.  2.  See  also  Penin- 
Ala.  Acts  1886-87,  p.  85,  requiring  all  sular  Industrial  Ins.  Co.  v.  State,  61 
insurance  companies  doing  business  Fla.  376,  55  So.  398.  As  to  require- 
in  the  state,  "whether  chartered  by  luents  as  to  associations,  tirms  and 
the  state  or  admitted  from  other  individuals  transacting  insurance, 
states,"  to  have  an  actual  capital  of  See  Fla.  Genl.  Stat.  1906,  pp.  1078 
not  less  than  $100,000.  et  seq.  sees.  2757  et  seq.  Laws  1909, 

"The  term  'insurance  company,'  as  p.  32,  c.  5887  (No.  18). 

used    in    this   article,   includes   every  »  Fo^t  y.  State  ( 1893 )  92  Ga.  8,  23 

company,  corporation,  association  or  L.R.A.  86,  18  S.  E.  14. 

partnersliij)   organized   for   the   pur-  ^  Acts   1887,   p.   114,   embodied  in 

pose  of  transacting  the  business   of  sec.  2032,  Civ.  Code  1895. 

insurance."      Art.    II.   c.   V.,    Tit.   12  lo  Acts  1893,  p.  81,  Civ.  Code  1895, 

Ahi.  Code  sees.  1205,  1206,  1207,  reg-  sec.  2071. 

ulating  the  subject  of  fire  and  marine  n  Jalonick  v.  Green.  Countv  Oil  Co. 

insurance  within  tliat  state  by  foreign  j  q.^    ^pp.  309,  66  S.  E.  615,  per 

companies     construed     in     Noble     v.  tt-ii    r-    j 

Mitchell  (1896)  164  U.  S.  367^  41  L.  i^'.^rh;  "contract  of  tire  insurance  is 
ed.  4/2, 1/  Sup.  Ct.  110,  following  the  ,  ,  •  j-  -j  i 
state  court  decision  in  Noble  v.  Mitch-  ""^  ^^'.'^^'"^•^  .^  ^^^dividual  or  corn- 
el!, 100  Ala.  519,  25  L.R.A.  238  (an-  P^!^/'  ^"  consideration  of  a  premium 
notated  on  restrictions  on  insurance  1^^^^'  ^§'^^^^  ^"^  indemnify  the  assured 
by  unincorporated  associations  or  in-  against  loss  by  fire  to  the  property 
dividuals;  Lloyds  associations)  14  ^lescribed  in  the  policy,  according  to 
So.  581.  the  terms  and  stipulations  thereof. 
'  State  (ex  rel.  Hoadley)  v.  Board  Such  contract,  to  be  binding  must  be 
of  Ins.  Commissioners,  37  Fla.  564,  in  writing;  but  delivery  is  not  neees- 
33  L.R.A.  288,  20  So.  772;  Revenue  sarv  if,   in   other  respects,  the  con- 

791 


§  335e  JOYCE  ON  INSURANCE 

insurance  companies  must  be  licensed,  covers  only  chartered  domes- 
tic or  foreign  insurance  companies.*' 

§  335e.  Same  subject:  Illinois. — Under  an  Illinois  decision, 
where  there  is  nothing  in  the  statutes  of  a  state  proliibiting  citizens 
thereof  from  transacting  insurance  business,  and  nothing  abridg- 
ing or  restricting  such  privilege,  and  when  not  precluded  by  public 
policy  an  individual  ha';  the  right  to  engage  in  said  business.  And 
a  foreign  citizen  has  the  same  right  as  an  individual  to  engage  in 
the  insurance  business  as  has  a  citizen  of  the  state.  Underwriters 
residing  without  the  state  cannot  be  discriminated  against.  If  citi- 
zens of  a  state  can  without  restriction,  enter  into  contracts  of  insur- 
ance, the  same  right  is  guaranteed  under  the  Federal  constitution  to 
citizens  of  other  state.«.  It  was  also  held  in  the  same  case  that  an 
agent  acting  for  citizens  of  another  state  or  individuals  not  incor- 
porated nor  acting  as  partners  was  not  liable  for  a  penalty  for  acting 
for  a  foreign  insurance  company  without  complying  with  the  re- 
quirements of  the  statute  governing  insurance  companies  doing 
business  in  Illinois. ^^  In  another  case  in  that  state  the  question  was 
whether  any  association  or  number  of  persons  was  acting  in  tlie  state 
as  a  corporation  without  being  legally  incorporated,  and  it  was  held 
that  they  were  so  acting.as  a  corporation  in  limiting  their  liability 
to  the  amount  of  monev  contributed  bv  each,  and  in  assuming  to 
give  perpetuity  to  the  business  by  making  membership  certificates 
transferable  by  the  assignment  of  the  member  or  his  personal  rep- 
resentatives and  the  fact  that  such  individuals  can  be  held  legally 
liable  upon  the  policies  issued  by  them  does  not  malce  them  any  the 
less  a  corporation  and  a  judgment  quo  warranto  will  be  granted.  It 
was  declared  that  even  if  individuals  could  insure  property  against 
loss  by  fire  they  must  act  either  openly  upon  their  responsibility  as 
individuals,  or  must  become  incorporated.*^  In  an  earlier  case  a 
Lloyds  certificate  was  issued  for  memliership  in  a  proposed  mutual 
fire  insurance  company  acting  as  individuals  to  indemnify  each 
other.  A  like  certificate  was  issued  by  an  attorney  in  fact,  except 
as  to  date,  amount,  and  premium.  The  company  had  filed  its  dec- 
laration and  charter,  ete.,  and  when  licensed  and  organized  and  the 
application  for  membership  became  operative,  the  above  agreement 
was  to  become  ended  provided  the  com])any  then  delivered  a  stan- 
dard form  of  policy  to  a])plicant.  The  agreement  was  provisional 
and  temporary  only  until  the  corporation  was  licensed.    It  was  held 

tract    is    consummated."      Ga.    Code   48  N.  E,  91.    See  also  Clark  v.  Spof- 
1911,  p.  650,  sec.  2470   (see.  2089).     ford,  47  111.  App.  ICO.     See  also  §§ 

13  Ga.  Code  1911,  p.  027,  sec.  244    713,  714  heiein. 
(sec.  2032).  is  Greene  v.  People  (1894)  150  111. 

1*  Barnes  v.   People,  168  111.   425,    513,  37  N.  E.  842. 

792 


A 


INDIVIDUALS,  ETC.  -       §§  335f-33:)j 

that  at  common  law  any  number  of  people  could  enter  into  mutua' 
covenants  to  indenmify  each  other  and  unless  restricted  by  statute 
such  agreements  would  be  valid.  It  was  also  decided  that  the 
enforcement  of  a  proportionate  contrilnition  from  the  numerous 
parties  to  the  agreement  for  mutual  indemnity,  and  ascertainment 
and  assessment  of  proportionate  shares  for  such  parties  were  proper 
subjects  for  a  court  of  equity. ^^ 

§  335f.  Same  subject:  Kentucky. — It  is  declared  in  a  Kentucky 
case  that  an  insurance  company  exercises  no  special  or  exclusive 
privilege  not  allowed  by  law  to  natural  persons,  and  that  the  statu- 
utes  of  that  state  recognize  the  common  law  right  of 'individuals  to 
make  contracts  of  insurance." 

§  335g.  Same  subject:  Massachusetts. — Tlie  Massachusetts  stat- 
ute of  1907  ^^  inchides  all  coi'])(»rations,  associations,  or  individuals, 
in  its  declaration  of  what  shall  be  deemed  to  be  life  insurance  com- 
panies.^^ 

§  335h.  Same  subject:  Minnesota. — I"^nder  a  Minnesota  decision 
all  corporations,  associations  and  partnerships  or  individuals  nuist 
comply  with  the  law  requiring  a  license  to  do  business  as  they  are 
enumerated  in  the  statute.^" 

§  3351.  Same  subject:  Mississippi. — In  Mississippi  one  section  of 
the  Code  specifies  the  concerns  subject  to  the  insurance  laws,  whicli 
are:  all  companies,  corporations,  partnerships,  associations,  individ- 
uals and  fraternal  orders,  whether  domestic  or  foreign,  thereby 
clearly  including  every  possible  character  of  association  or  organi- 
zation doing  an  insurance  business  of  any  kind  whatsoever,  and  this 
purpose  of  the  legishiture  is  further  expressed  by  other  sections  of 
said  Code  which  prohibit  any  foreign  insurance  company  from 
doing  business  in  that  state  until  it  has  conijilied  with  certain  condi- 
tions precedent  and  which  define  the  word  "company"  to  mean: 
all  corporations,  associations,  partnerships  or  individuals,  etc.^ 

§  335j.  Same  subject:  Missouri. — In  Missouri  a  statute  providing 
that  "no  company"  shall  transact  an  insurance  business  within  the 

16  Clark  V.  Spoirord  (1892)  47  111.        20  gt^t^  v    Beardslev,  88  Minn.  20, 

App.  160.  92  N.  W.  72,  Gon.  Laws  1895,  e.  17:>, 

"Aeliia  Life  Tns.   Co.  v.   Coulter,  §    101.      See    Seauiaiis    v.    Christian 

25^ Ky.  L.  l^ep.  193,  197,  74  S.   W.  Bros.  Mill.  Co.  (i(i  .Minn.  205,  08  N. 

lOoO,  a  case  of  assessment  of  foreign  W.  1005. 
conipanv  for  Iranchise  tax.  ^  Code   Miss.    190(i,    p.    766,   c.    69, 

18  l^ev.  L.  1907,  c.  lis,  see.  65.  sees.    2559,    2562,    2563,    2606.      See 

1^  This  statute  is  construed  in  Cur-  Laws  1910,  amd'j;-  <■.  69,  also  Id.  sec. 

tis  v.   New   York  Life  Ins.   Co.   217  2559,  covering  LlOyds.     Said  sections 

Ma.'^s.  47,  104  N.  E.  553,  43  Ins.  L.  are  construed   in   State  v.   Allev,  96 

.1.  551,  fully  considered  under  §  336f  Miss.  720,  51  So.  467,  39  Ins.  L.  J. 

herein.  629. 

793 


§§  335k,  3351  JOYCE  OX  INSURANCE 

state  without  having  received  proper  license  to  do  so  from  the  state 
insurance  superintendent,  includes  individuals  or  associations  of  in- 
dividuals, as  well  as  incorporated  companies.  A  state  also  has  the 
right  to  prescribe  reasonable  conditions  upon  which  insurance  bus- 
iness may  be  cai'ried  on  within  it^  limits  by  individuals  as  well  aa 
by  corporations,  provided  that  it  does  not  discriminate  between  citi- 
zens of  equal  standing  and  merit  within  or  without  the  state.^ 

§  335k.  Same  subject:  New  Jersey. — Under  a  New  Jersey  deci- 
sion it  is  held  that  a  fire  Lloyds  association  is  not  prohibited  from 
making  contracts  of  insurance  there  by  the  laws  of  1896.^  And  in 
an  earlier  case  in  that  state  it  is  declared  that  an  action  founded  up- 
on what  is  familiarly  known  as  a  Lloyds  contract  or  policy  of  insur- 
ance where  insurers  are  such  as  individuals  and  not  a  corporate  in- 
surance company  and  where  liability  for  loss  is  several  and  not  joint 
that  the  validity  of  such  insurance  in  the  absence  of  a  statute  pro- 
hibiting the  same  is  well  established.* 

§  3351.  Same  subject:  New  York. — It  is  declared  in  New  York 
that  an  American  Lloyds  is  not  a  corporation  imder  the  laws  of 
that  state.^    But  it  is  also  decided  in  that  state  that  attorneys  in  fact 

2  State  V.  Stone,  118  Mo.  388,  25  42  Atl.  1063,  Id.  21,  per  Lippineott 
L.R.A.  243,  40  Am.  St.  Rep.  388,  24    J. 

S.  W.  164.     Agent  here  Avas  eliarsed  Citing  AJabamn. — Noble  v.  Mitch- 

with   a  violation  of   Rev.   Stat.   Mo.  ell,  100  Ala.  517,  25  L.R.A.  238,  14 

1889,  sec.   5916,   by  repre.sentino-  as  So.  581. 

agent  certain   individuals   in  writing  Florida. — State    (ex  rel.   Hoadley) 

for  them  a  policy  agieeing  to  indem-  v.  Board  of  Ins.   Commissioners,^  37 

nifv  against  accident,  before  said  in-  Fla.  564,  33  L.R.A.  288,  20  So.  772. 

dividnals   had   procured  a  license   to  Georgia.— Fort  v.  State,  92  Ga.  8, 

do    business   in   Missouri.      See   also  23  L.R.A.  86,  18  S.  E.  14. 

State   (ex  rel.   Inter-Insurance  Aux-  Michigat). — Clav  F.  I.  Co.  v.  Huron 

iliary  Co.)   v.  Revelle,  257  Mo.  52.^).  Salt  Lake  Co.  31  Mich.  346. 

165  S.  W.  1084,  Laws  1911,  p.  301.  Missouri.— State  v.  Stone,  118  Mo. 

Individuals  are  not  debarred  from  388,  25  L.R.A.  243,  40  Am.  St.  Rep. 

acting  as  insurers  under  the  laws  of  388,  24  S.  W.  164. 

Missouri;  they  are  only  required  to  New  Hampshire.— Vnion  Ins.   Co. 

conform  to  the  statutory  regulation.s  v.  Smart,  60  N.  H.  458. 

on  the  subject.     State  v.  Phelan,  66  Pennsglvania. — Commonwealth     v. 

Mo.  App.   548,  5.58,   citing   State  v.  Vrooman,  164  Pa.  St.  306,  44  Am.  St. 

Stone,  118   Mo.  .388,  25  L.R.A.  243,  Rep.  603,  25  L.R.A.  250,  30  Atl.  217: 

R.  Stat.  1889,  c.  89.  Arrott   v.   Walker,  118   Pa.   249,  12 

3  Sun  Ins.  Office  v.  Merz(1900)  64  Atl.  280;  Commonwealth  v.  Reinhold, 
N.  J.  L.  301,  52  L.R.A.  330,  45  Atl.  3  Pa.  Dist.  Rep.  287. 

785,  29  Ins.  L.  J.  344.  an  insurable  in-  ^  Fire  Department  of  Citv  of  N.  Y. 
terest  ease.  N.  J.  Pub.  L.  1896,  p.  v.  Stanton,  159  N.  Y.  2-25,  232,  54  N. 
156,  Pub.  acts  March  26,  1896,  amd'g  E.  28,  per  Grav,  J.  a  case  of  special 
act  March  25,  1895.  tax.  payable  to  city  fire  department, 

*  Enterprise  Lumber  Co.  v.  Mundy  upon  agents  of  associations  of  indi- 
(1899)  62  N.  J.  L.  16,  .55  L.R.A.  193,   vidual  fire  underwriters  not  incorpo- 

794 


INDIVIDUALS,  ETC.  §  335m 

of  an  unincorporated  Lloyds  association  wlio  insure  in  New  York 
City,  vessels,  freight,  cargo  and  automobiles  against  fire  are  en- 
gaged in  business  so  as  to  become  obligated  for  their  share  of  assess- 
ments for  the  benefit  of  a  fire  patrol.^  And  under  the  New  York 
laws  of  1892,'^  all  persons,  partnerships  or  associations  were  required 
to  do  certain  acts  as  conditions  precedent  to  doing  business  there, 
)>ut  it  was  thereafter  provided  by  the  laws  of  1894,*  that  said  provi- 
sion should  not  apply  to  individuals,  partnerships,  or  associations  of 
underwriters  known  as  ^'Lloyds"  or  as  individual  underwriters 
which  were  theretofore  on  a  date  specified^  lawfully  engaged  in 
business  there,  and  not  required  to  report  to  the  superintendent  of 
insurance  or  the  insurance  department.^''  It  was  thereafter  made 
unlawful  for  any  such  association  or  copartnership,  or  individual 
underwriters  to  engage  in  or  transact  the  business  of  insurance  after 
a  specified  date  ^^  unless  it  had  complied  with  certmn  conditions 
precedent. ^^ 

§  335m.  Same  subject:  Ohio. — ^In  Ohio  an  unincorporated  guar- 
anty and  accident  Lloyds  association  of  another  state,  which  issues 
policies  in  that  name  and  has  a  board  of  managers  with  powers  like 
those  of  corporate  directors,  to  whom  each  member  gives  a  power  of 
attorney  for  management  of  the  business,  and  the  members  of  which 
contract  for  several  liability  to  a  limited  amount,  with  the  right  to 
transfer  their  membership,  must  be  held,  when  conducting  business 
in  Ohio  without  compliance  with  the  conditions  of  the  statutes,  to 
be  exercising  a  franchise  and  acting  as  a  corporation  so  as  to  be  sub- 
ject to  quo  warranto  proceedings." 

rated  bv  laws  of  New  York,  and  of  ^°  Statutes  construed  in  People  v. 
ai)i)licatioii  of  statute  §  523,  N.  Y.  Loew,  23  Misc.  574,  52  N.  Y.  Supp. 
City  Con.sol.  Act,  Laws  1882,  c.  410,  799,  where  a  Lloyd.s  association  was 
ca.s'e  affirms  57  N.  Y.  Supp.  1138,  38  held  to  be  unlawfully  engaged  in 
Ai)|).  Div.  640,  which  aff'd  51  N.  Y.  business,  as  they  were  transferees  of 
Supp.  242,  28  App.  Div.  334,  on  opin-  certain  Lloyds  which  had  not  organ- 
ion  there.  ized  in  good  faith  but  only  for  pur- 

^   New  York  Board  of  Fire  Under-  poses  of  sale  and  so  were  not  within 

writers  v,  Higgins  (1909)   114  N.  Y.  the  exception  noted  in  tlie  above  text. 

Supp.  506,  130  App.  Div.   78,  aff'd  See  People  v.  Loew,  44  N.  Y.  Supp. 

(1910   without   opinion)    198   N.   Y.  42,  19  Misc.  248. 

034,  92  N.  E.  1093.  under  N.  Y.  Laws,  "  Sept.  1,  1902. 

18(i7,  p.  2113,  c.  846,  organizing  a  fire  ^^  L^^^g  1902^  c.  297,  Laws  1903,  c. 

])atrol  corporation,  etc.    See  also  New  471.      See   Parkers   N.   Y.   Ins.   Law 

York  Board  of  Fire  Underwriters  v.  (1914)  p.  79. 

A\niipple,   55   N.   Y.    Supp.    188,   36  "  g^ate  (ex  rel.  Richards)  v.  Ack- 

App.  Div.  49,  under  same  statute.  erman,  51   Ohio   St.   163,  24  L.R.A. 

'  N.  Y.  Laws  1892,  c.  690.  298.  37  N.  E.  828,     The  court,  per 

"N.  Y.  Laws  1894,  e.  684,  amd'g  Williams,   J.   said:      "It   is   claimed, 

sec.  57.  however,  that  the  laws  of  Ohio  do  not 

9  On  Oct.  1,  1892.  apply  to  the  defendants,  because  they 

795 


§  335u  JOYCE  ON  INSURANCE 

§  335n,  Same  subject:  Pennsylvania. — In  Pennsylvania  the  Act 
of  1870  ^*  prohibited  any  pei-son,  pailneri^hip  or  association,  to  issue, 
sign  or  seal,  or  in  any  manner  execute  any  policy  of  insurance,  con- 
tract or  guaranty,  against  loss  by  hre  or  lightning,  without  author- 
ity expressly  conferred  by  a  charter  of  ini-orporation,  and  making 
such  policy  so  executed  etc.  void.  The  act  was  entitled  "An  Act  to 
prevent  the  issue  of  unauthorized  policies  of  insurance."    In  a  case 

are  not  an  organized  corporation,  to  the  fund,  or  authorized  by  him;  so 
company  or  association,  or  acting  as  that,  if  some  of  tlic  iiieinhers  become 
such,  but  that,  in  making  contracts  of  insolvent,  and  their  contribution  is  ex- 
insurance,  each  individual  acts  for  liausted  by  losses,  or  otherwise,  tlie 
l;imsclf.  A  caxet'ul  considevalion  of  policy  shall  be  enforceable  against 
their  plan  of  business,  as  shown  by  the  others  only  for  an  alicjuot  part 
the  articles  of  agreement  and  powers  equal  to  tlie  proportion  of  tlie  solvent 
of  attorney  executed  by  the  defend-  to  tlie  insolvent  members.  The  lia- 
ants,  has  bronglit  us  to  a  different  bility  of  a  stockholder  of  a  corpora- 
conclusion.  They  have  associated  tion  is  not  more  restricted.  Then,  the 
themselves  together  in  a  business  un-  interest  of  each  member  in  the  con- 
dertaking,  under  a  company  name,  cera  is  made  transferable;  a  member 
in  which,  viz:  'Guarantee  and  Ac-  who  wishes  to  withdraw  l)eing  au- 
eident  Lloyds,  New  York,'  all  of  their  thoiized  to  i^rocuic  another  to  take 
policies  are  issued.  Each  suljscriber  his  place,  and  the  representative  of 
to  the  articles  has  contributed  an  a  deceased  member  may  transfer  the 
equal  amount  to  the  capital  stock  of  latter's  share  in  like  manner,  and,  in 
the  concern,  which  is  i)l"aced  in  the  that  way,  the  organization  may  be 
control  of  a  board  of  managers,  called  made  as  enduring  as  it  is  possible  for 
an  advisory  committee,  to  meet  los.ses  any  corporation  to  be.  The  associa- 
arising  on  the  policies.  This  board  tion  has  the  appearance,  and  some 
of  managers  is  chosen  by  tlie  sub-  of  tlie  characteristics  of  a  corpoia- 
scribers,  like  directors  of  a  corpora-  tion  fomied  for  the  purjiose  of  doing 
tion,  and  invested  with  powers  quite  a  general  insurance  business  in  its 
as  plenai-y.  All  the  subscribers  have  line,  and  its  form  of  policies  and 
executed  powers  of  attorney  to  the  mode  of  conducting  its  business  are 
same  individuals,  investing  them  with  calculated  to  impress  one  who  does 
the  business  management  of  the  in-  not  make  a  critical  examination,  with 
surauce,  under  the  supervision  of  the  the  belief  that  it  is  a  corporation,  eon- 
advisory  board.  The  powers  con-  forming  to  the  usages  of  such  com- 
ferred  on  the  attorneys  in  fact  are  panies."  State  v.  Ackerman  (ISOi) 
analogous  to  those  of  the  executive  .'>!  Ohio  St.  103,  195,  19(3.  37  N.  E. 
officers  of  a  corporation.  They  exe-  828,  24  L.R.A.  298,  per  Williams,  J. 
cute  the  policies,  keep  accounts  of  the  This  decision  is  cited  as  ruling  that 
business  and  expenses,  which  are  foreign  insurance  companies,  wheth- 
open  to  the  inspection  of  the  advisory  er.  incorpoi'ated  or  not  were  required, 
board  adjust  all  losses,  and  prosecute  as  a  condition  precedent  to  doing 
and  defend  all  suits  growing  out  of  business  in  the  State,  to  obtain  a  cer- 
the  business.  Each  member  of  the  tificate  of  authority  so  to  do  and  that 
association  stipulates  with  the  others  the  i)rivilege  so  conferred  was  a  fran- 
that  no  policy  shall  be  issued  unless  chise.  John  Hancock  IMutual  Life 
it  is  executed  in  behalf  of  all,  and  yet,  Ins.  Co.  v.  Warren,  181  U.  S.  73,  74, 
that  his  liability  shall  be  several  only,  75,  45  L.  ed.  755,  21  Sup.  Ct.  535. 
and  limited  to  the  amount  contributed       ^*  Act  Feb.  4,  1870,  P.  L.  14. 

796 


INDIVIDUALS,  ETC.  §  ;J35n 

of  iiulic'tiiiciit  for  issuino-  a  policy  of  insurance  in  violation  of  the 
above,  it  a[)peared  that  defendant  acting  for  himself  and  five  otliers 
had  issued  a  policy  of  insurance  and  contract  of  guaranty  against 
loss  1)}'  lire.  It  was  held  that  the  statute  was  a  valid  exercise  of  the 
police  power  of  the  state;  that  it- did  not  prohibit  but  merely  regu- 
lated (he  business  of  insurance ;  that  it  did  not  strike  at  the  privilege 
of  citizenship  nor  discriminate  between  citizens  of  that  state  and 
those  of  other  states;  that  it  did  not  deny  but  merely  regulated  the 
right  to  acquire,  possess  and  protect  jirivate  property,  and  did  not 
violate  either  the  Federal  or  state  constitution.^^  And  the  above  rea- 
sons as  to  the  police  power  are  declared  applicable  to  life  in.surance, 
although  the  statutes  other  than  the  above  Act  of  1870  are  said  not 
to  directly  ])roliibit  issuing  a  life  policy  and  that  an  individual's 
right  at  common  law  to  make  a  contract  of  any  kind  of  insurance 
seems  to  be  admitted. ^^  Again,  the  words  "insurance  companies." 
in  the  Pennsylvania  statutes  of  1876,  and  1870,  have  reference 
only  to  incorporate  insurance  companies  and  not  to  unincorjxii-ated 
insurance  companies  of  individual  underwriters,  such  as  Lloyds, 
and  therefore  an  agent  of  individual  underwriters  of  auotlier  state 
is  not  liable  to  the  penalty  under  the  statute  of  187(>  im])osed  upon 
insurance  agents  for  issuing  policies  of  insuraiu*e  without  a  license." 
So  a  contract  of  insurance  or  guaranty  against  fire  made  by  a  pri- 
vate person,  who.se  incompetency  to  make  it  both  partias  are  bound 
to  know,  is  void  under  the  Pennsylvania  statute  of  1870  providing 

.  ^^  Commonwealth  v.  Vrooraan,  120,  as  to  police  power,  see  -Tovre  on 
(1804)  164  Pa.  SOG,  25  L.R.A.  250,  Fraiu-liises  (ed.  1909)  sec.  .36(i.  note 
44  Am.  St.  Rep.  (iOll.  .30  Atl.  2.'')0  p.  582;  .Joyce  on  Electric  Law  (2d 
(Three  justices  dis.-eiited)  said  to  be  ed.)  sec.  215,  note  p.  ;>92. 
pioneer  case  in  that  state  on  ques-  Tn  an  opinion  by  tlie  attorney  gen- 
lion  of  constitutionality  of  statute  de-  eral  of  T^cnnsylvania,  tlie  .Net  of  May 
nying  riijht  of  nniruH)rporated  per-  8.  1899,  it  was  decdared  thai  in  con- 
sons  to  do  insurance  business.  In  struiuij-  tlie  laws  relatins'  to  licens- 
the  court  l)elow  tliere  was  a  discus-  iiisj-  insurance  agents,  firms  or  copart- 
sion  of  the  right  of  individuals  to  in-  nersiiips  were  not  to  be  recognized 
sure  others  against  loss  by  lire.  See  in  any  way,  and  non-resideid  indi- 
also  opinions  of  Steirett,  ('.  .1.,  Dean,  \iduals  could  under  no  circunistan- 
J.  and  (ireen,  .J.  ces  transact  business  in  tlie  stale,  but 

^^  Unincorporated  Insurance  Busi-  licenses  were  to  be  issued  to  agents  in- 
ness  (Atty.  Genl.  190(i)  ,32  Pa.  Co.  dividually,  and  that  said  licensed 
(^t.  R.  35.  See  Act  A])ril  4,  187;i,  sec.  agents  were  recpiired  to  sign  all  poli- 
0,  12,  Pub.  L.  20,  am'd  bv  Act  June  cies  in  tlieir  individual  names.  Opin- 
23,  1885,  Pub.  L.  134.  License  of  in-  ion  of  Ally.  (ienl.  8  Pa.  Dist.  Rep. 
dividual  underwriters,  partnerships  354,  56  Leg.  Int.  290.  See  License  in 
and  unincor])orated  life  associations  Penn.sylvania,  In  re,  3  Pa.  Dist.  Rep. 
should  in  abseiu-e  of  judicial  determi-   822. 

nation  be  refu.sed.  Id.  See  also  ^''' ('omnionwealtli  v.  Rein.oelil 
Life  Insurance  (Attv.  Geids.  opinion  (1894)  163  Pa.  287,  25  L.R.A.  247, 
1906)  63  Leg.  Intell.'79,  15  Dist.  Rep.   20  Atl.  896. 

797 


§  335o 


JOYCE  ON  INSURANCE 


that  a  contract  of  insurance  or  guaranty  against  loss  by  fire  or  light- 
ning could  not  be  issued  by  any  person,  partnership  or  association 
without  authority  expressly  conferred  by  a  charter  of  incoi*poration 
given  according  io  law.^^ 

§  335o.  Same  subject:  decisions  inferentially  bearing  thereon. — 
In  addition  to  the  preceding  decisions  there  are  numerous  cases  in- 
ferentially bearing  in  a  greater  or  less  degree,  upon  the  right  of  these 
associations  or  individual  underwriters  to  insure.  Certain  of  these 
decisions  are  noted  here,  but  they  are  hereinafter  more  fully  con- 
sidered. They  determine  the  nature  and  extent  of  liability  of  such 
associations,  actions  to  enforce  the  same,  parties  thereto,  right8  and 
remedies,  proofs  of  loss,  etc.-^^ 


"Arrott  V.  Walker,  118  Pa.  249,  Co.  v.  Mundv  (1899)  62  X.  J.  L.  16, 

12  Atl.  280.  55  L.R.A.  193,  42  Atl.  1063   (condi- 

1^  United  States. — Richmond  Cedar  tion  valid  that  action  must  be  brought 

Works  V.  Buckner  (U.  S.  C.  C.  1910)  only  against  attorney  in  fact), 
(right  to  sue  in  Federal  Courts;  non-       Neiv  York. — Imperial  Shale  Brick 

compliance   with    state   laws;    agree-  Co.  v.  Jewett   (1901)  169  N.  Y.  143, 

ment  to  jointly  and  severally  insure;  62  N.  E.  167.  31  Ins.  L.  J.  376  (un- 

pleadings).     Sumner  v.  Piza   (U.   S.  derwriters  jointly  liable,  except  one 

D.  C.  1899)   91  Fed.  677   (liable  for  who  had  revoked  his  power  of  attor- 

proportionate  share  of  entire  amount ;  ney  etc.),  modifying  60  N.  Y.  Supp. 

assured    may    proceed    against    any-  35,  42  App.  Div.  588;  Unterberg  v. 

one  of  associates,  and  hold  each  for  Elder  (1911)  72  i\lisc.  363,  130  N.  Y. 

whole  amount  until  satisfaction  had,  Supp.  166   (policy  must  be"  issued  in 

but  cannot  sue  jointly).     McAllister  compliance  with  joint  powers  of  at- 

V.  Hoadlev    (U.   S.   D.   C.   1876)    76  tornev)  :      Kriegman      v.      Dumphy 

Fed.  1000  "(several  liability  to  assured  (1910)  66  Misc.  221,  122  N.  Y.  Supp. 

for  whole  subscription;  contribution).  1116    (supplementary    proceedings)  ; 

Ahihama. — Hoadlev      v.      Purifov  McLean  v.  Tobin  (1908)    (action  lies 

(1894)   107  Ala.  276",  30  L.R.A.  35i,  against  attorneys  in  fact);  Burke  v. 

18  So.  220  (mandamus  to  compel  is-  Rhoades,    79    N.    Y.    Supp.    407,   39 

sue  of  license;  each  underwriter  liable  ^lisc.  208,  aff'd  81  N.  Y.  Supp.  1045, 

for  fixed  amount,  but  not  for  whole  82  App.   Div.   325    (not  liable  when 

or  anv  part  of  anotlier'.s  liabilitv).  limited  fund  exhausted,  unless,  etc.) 

//Z/ho/.s.— Warfield  -  Pratt  -  Howell  Cook  v.  Loew,  69  X.  Y.  Supp.  614,  34 

Co.    v.    Williamson    (1908)    233    111.  Misc.  276  (wh^n  not  liable  for  entire 

487,  84  N.  E.  706  (need  not  sue  eacli  subscriptions)  ;  Ketchum  v.  Belding, 

separate  member;   all  members  need  68  N.  Y.  Supp.  1099,  58  App.  Div.  295 

not  be  made  parties;  when  association  (conditions  precedent  to  suing  indi- 

liable    for    loss)  ;    Barnes    v.    People  vidual  underwriters,  valid)  ;  Thomp- 

(1897)    168    111.    425,    48    N.    E.    91  son  v.  Colonial  Assur.  Co.  (1900)  68 

(same  decision  as  to  liability  as  107  N.  Y.  Supp.  143,  33  Misc.  37,  aff'd  70 

Ala.  above  cited) ;  Blair  v.  National  N.  Y.   Supp.  85,  60  App.    Div.  325 

Shirt  &  Overalls  Co.   (1907)   137  111.  (case  of  associate's  individual   right 

App.    413    (each    liable    for    amount  to  sue  reinsurers)  ;  ConanI    v.  Jones 

fixed;  agent  no  authority  to  stipulate  (1900)  64  N.  Y.  Supp.  189,  50  App. 

as  to  number  of  suits  and  jurisdic-  Div.  336  (action  on  judgment  against 

lion.)  general    manager    and    attorney    in 

New    Jersey. — Enterprise    Lumber  fact);  American  Lucol  Co.  v.  Lowe, 

798 


INDIVIDUALS,  ETC. 


§  335p 


§  335p.  Partnerships  as  insurers. — The  citizens  of  a  state  are  en- 
titled to  carry  on  insurance  business  as  partnerships  or  companies, 
in  the  absence  of  any  prohibitory  statute  and  this  includes  citizens 
of  foreign  states.^"  But  under  a  South  Carolina  deeision  articles  of 
agreement  that  the  members  of  an  insurance  company  should  each 
bear  his  proportion  of  the  losses,  without  any  negative  words  that 
they  should  not  be  liable  for  more  in  case  of  insolvency  of  some  of 
the  ]jarties,  is  an  ordinary  copartnership:  the  members  are  bound  in 
solidu,  each  for  the  whole;  not  only  as  to  strangers,  but  as  to  mem- 
bers of  the  company,  who  have  procured  insurance.^    And  in  Penn- 


58  N.  Y.  Snpp.  687,  41  App.  Div. 
500  (I'ight  to  sue  nndenvriters ;  con- 
dition precedent;  misjoinder  of  par- 
ties) ;  New  York  Board  of  Fire  Un- 
dei-writers  v.  Whipple  (1898)  55  N. 
Y.  Snpp.  188,  36  App.  Div.  49  (who 
may  be  made  party  defendant ;  here 
held  jointly  and  severally  liable  on 
assessment  for  fire  patrol)  ;  Gough 
V.  Satterlee  (1898)  52  N.  Y.  Supp. 
492,  32  App.  Div.  33  (extent  of  lia- 
bility of  attorney  as  trustee  of  trust 
funds  in  his  hands;  when  action  lies.) 
Strauss  v.  Hoadlev  (1897)  48  N.  Y. 
Supp.  239,  23  App.  Div.  360  (liable 
severally  not  jointly)  ;  Lia\\Tenee  v. 
Sehaefer,  46  N.  Y.  Supp.  719,  20 
App.  Div.  80,  42  N.  Y.  Supp.  992, 
19  Misc.  239  (separate  action  can- 
not be  first  brought  against  each  un- 
derwriter but  only  against  attorney 
of  all;  condition  valid);  Walker  v. 
Beecher,  36  N.  Y.  Supp.  470,  71  N. 
Y.  St.  Kep.  458,  15  Misc.  149  (when 
stipulation  complied  with  as  to'  serv- 
ice of  notice  and  proofs  of  loss  upon 
attorneys  in  fact.  See  §  3312  here- 
in). 

Ohio. — State  (ex  rel.  Richards)  v. 
Ackerraan,  51  Oliio  St.  163,  24  L.R.A. 
298,  37  N.  E.  828  (liable  to  extent  of 
subscription;  cannot  restrict  liabili- 
tv)  ;  r^errvsburg  tV:  Toledo  Transp. 
Co.  V.  Gilchrist'  (1902)  24  v)liio  Cir. 
Ct.  Re]).  165  (when  individual  mem- 
ber may  be  sued;  clause  valid  which 
provides  as  to  partv  defendant). 

20  Hoadlev  v.  Purifov,  107  Ala. 
276,  30  L.RiA.  351,  18  So.  220  (noted 
under  §  335B  herein) ;  as  to  require- 
ments as  to  firms,  see  Fla.  Genl.  Stat. 


1906,  pp.  1078  et  seq.  sees.  2757  et 
seq.  Laws  1909,  p.  32,  c.  5887  (No. 
18). 

iShubrick  v.  Fisher  (1802)  2  Des, 
Eq.  148.  In  this  case  the  company 
formed  was  called  '"The  South  Caro- 
lina Insurance,  Company"  for  the 
purpose  of  insuring  vessels  and  ear- 
goes.  Several  persons  formed  the 
company  and  signed  by  their  agents 
the  policias  of  insurance.  Lo.sses 
wei'e  agreed  to  be  borne  by  each  and 
eveiy  of  the  several  subscribers  or 
members  in  average  or  proportion  to 
the  sums  of  money  by  them  sub- 
scribed. Each  party  severally,  not 
jointly,  and  not  one  for  the  other, 
covenanted  that  the  company  should 
be  called  the  South  Carolina  Insur- 
ance Company;  that  there  should  be 
a  president,  vice  president,  director, 
treasurer,  and  clerk;  that  any  one  of 
the  directors  signing  a  policy  on  be- 
half of  the  company  made  it  binding 
on  all  the  other  members  in  average 
and  proportion  to  the  sums  by  them 
subscribed  and  that  the  treasurer 
should  give  security  for  faitliful  dis- 
diarge  of  duties  of  his  office.  In  case 
any  loss  should  hapy)en  over  and 
above  the  sums  subscribed  and  depos- 
ited as  capital,  such  loss  .was  lo  be 
borne  by  each  and  every  of  the  sub- 
scribers in  average  and  proportion  to 
the  sum  by  him  subscribed.  The  pol- 
icy in  suit  was  issued  in  1777,  was 
signed  for  said  company  by  one  of 
the  members  acting  for  himself  and 
for  others  as  their  said  agent  for 
such  purposes  specially  constituted. 


799 


§  335p  JOYCE  ON  INSURANCE 

sylvania,  a  policy  of  iiipuraiice  issued  by  a  partnership  without  au- 
thority expressly  conferred  by  act  of  incorporation  as  required  by 
the  statute  of  1870  is  held  to  be  void  in  its  inception.^  It  is  also 
declared  in  that  state  that  two  or  more  insurance  companies  may 
lawfully  issue  a  policy  where  it  distinctly  appears  that  each  receives 
a  certain  and  definite  proportion  of  the  premium  and  assumes  only 
a  certain  and  definite  proportion  of  the  liability,  although  where 
such  company  acts  only  for  itself  and  not  for  the  other  no  two  cor- 
porations can  engage  in  a  business  where,  by  any  possibility,  there 
is  such  a  community  of  interests  as  to  constitute  a  partnership.  In 
other  words  corporations  generally  have  no  authority  to  enter  into 
I)artnership  with  individuals  or  other  corporations,  and  cannot  en- 
ter into  agreements  which  may  create  partnerships,  and  since  no 
authority  is  given  to  insurance  companies  to  combine  in  issuing  pol- 
icies in  Pennsylvania  such  a  proceeding  is  prohibited  ^  under  a 
Georgia  decision  where  a  policy  was  issued  in  the  name  of  the  'Xi^n- 
derwriters  Agency,"  consisting  of  four  companies,  signed  by  a  per- 
son acting  as  agent  for  all  and  not  of  each  company,  although  un- 
der the  contract  each  was  liable  separately  to  pay  his  share  and  each 
received  his  share  separately  of  the  connnon  premium,  still  a  joint 
action  lay  against  them  for  a  loss,  the  contract  being  a  joint  one  like 
a  partnership  with  a  fh-m  name,  but  the  jury  might,  it  was  held 
under  the  Code,  make  their  verdict  conform  to  the  contract,  by  find- 
ing one-fourth  of  the  loss  against  each  separately.*  In  Minnesota 
partnerships  must  comply  Avith  the  law  requiring  a  license  to  do 
business  as  they  are  among  those  enumerated  in  tlie  statute.*  And 
the  Mississippi  code  includes  partnerships.^  So  also  do&s  the  Massa- 
chusetts statute  of  1907.'  Under  a  New  Hampshire  decision  the 
parties  plaintiff  suing  on  a  premium  note  for  an  insurance  contract 
were  held  not  a  corporation,  but  a  partnership  or  association  and  so 
prohibited  from  doing  business  in  the  state  until  they  complied 
with  its  statutes  but  it  also  held  that  an  insurance  contract  made  in 

2  Weed  V.  Cummin^,  198  Pa.  442,  cv  (1874)   '^3  Ga.  442.     See  Serjeant 

48  Atl.  409;   Act.  Febv.  4,  1870.  P.  v.  Goldsmitli  Dry  Goods  Co.    (1913) 

L.  14.     See  also  Philadelpliia  Under Tex.  Civ.  App.  — ,  159  S.  W.  1036. 

writers,  In  re  (1897)   54  Leg.  Intell.        *  state  v.  Beardslev,  88  I\Iinn.  20, 

403,  0  Pa.  Dist.  K.  699  (opinion  At-  92  N.  W.  72.    "In  this  case  tlie  Home 

ty.  Genl.).     See  §  335k  herein.    Ex-  Co-operative    Co.    was   a    copartner- 

amine  Weed  v.  Cumming',  8  Pa.  Di.st.  ship  organized  in  another  State  and 

K.  320,  56  Leg.  Intell.  268,  23  Pa.  Co.  its   contract  with   persons  not   mem- 

Ct.  27.  hers  was  held  to  be  one  of  life  in- 

^  Insurance  Policies  by  Unders\rit-  surance.     Gen.    Laws    1895,    c.    105, 

ors  Agencies,  in   re    (1897)    55  Leg.  §  101. 
Intell.  6,  7  Pa.  Dist.  R.  17  (By  Atty.        «  See  §  3351i  herein. 
Genl.)  ''See  §  336f  herein. 

*  Sutherlin  v.  Underwriters  Agen- 

800 


INDIVIDUALS,  ETC.  '  §  33.->p 

the  state  was  valid  even  though  said  parties  had  failed  to  comply 
with  tlie  statute  and  that  they  could  recover  on  the  note.*  Tn  an 
Indiana  case  tlie  Farmers  Mutual  was  an  unincori)orated  lire  asso- 
ciation of  individuals  partaking  of  the  nature  of  a  copartnership 
for  the  purpose  of  nuitual  insurance  against  fire  and  lightning.  Bv 
its  agreement  a  person  to  be  insured  must  become  a  member,  no 
<aj)ital  was  provided  except  a  sum  sufficient  to  pay  expenses,  the 
business  was  transacted  by  its  officers,  executive  committee  and  oth- 
er agents.  The  constitution  and  by-laws  were  set  out  in  the  policies. 
It  was  held  that  such  an  association  was  not  a  corporation  and  could 
not  be  sued  in  the  company  name  and.  unless  another  mode  was  au- 
thorized by  its  articles,  the  action  should  be  against  all  the  mem- 
bers.^ Again,  it  is  decided  that  a  partnership  contract  is  invalid 
where  the  ))olicies  issued  are  purely  wager  policies,  a  speculation 
up(m  life  and  contrary  to  public  policy,  even  though  the  beneficiary 
is  entitled  to  a  certain  siiare  of  the  insurance.^" 

8  Union  Jns.  Co.  v.  Smart,  60  K.  H.        i"  Cisna  v.  Slielby.  88  111.  App  385 
458.  20  Nat.  Corp.  Repr.  546. 

9  Farmers  Mutual  v.  Reser  (1909) 
43  Ind.  App.  634,  738,  88  N.  \V.  353. 

Joyce  Ins.  Vol.  1. — ul.  801 


§ 

336. 

§ 

336a. 

§  336b. 

§ 

336c. 

§ 

336d. 

§ 

336e. 

§  336f. 

§ 

336g. 

§ 

337. 

§ 

337a. 

§ 

337b. 

§ 

337c. 

§ 

337d. 

§ 

337e. 

§ 

338. 

§ 

338a. 

§ 

338b. 

§ 

338c. 

§ 

338d. 

§ 

338e. 

§ 

339. 

§ 

339a. 

§ 

339b. 

§ 

339e. 

§  339d. 

§  339e. 
§  339f. 
§  339g. 
§  339h. 
§  339i. 


CHAPTER  XVI. 
DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED. 

Policy  against  railroad  liability  for  fires  is  fire,  not  guaranty,  in- 
surance. 

Whether   inter-insurance   or   inter-indemnity   plans   are   insurance 
contracts. 

Same  subject:  agreement  between  printing  companies. 

When  copartnership  agreement  is  life  insurance. 

Burial  or  funeral  benefit  insurance  is  life  insurance. 

Wliether  annuities  are  life  insurance. 

Endowment:  pure  endowTnent  and  annuity  contracts. 

To  what  extent  tontine  insurance  is  life  insurance. 

Whether  contract  one  of  loan  or  of  life  insurance. 

Other  instances  of  what  is  and  is  not  life  insurance. 

Whether  policy,  life  or  accident :  generally. 

Industrial  insurance  with  provisions  as  to  accidental  death  is  not 
accident  insurance. 

Newspaper  contract  may  constitute  an  accident  policy :  ultra  vires. 

Employers'  liability  or  indemnity  insurance. 

Insurance  of  and  by  carriers :  agreement  of,  to  procure  insurance. 

Burglary  insurance. 

What  is  not  insurance  on  automobiles. 

When  bicycle  association  not  insurance  company. 

Sanitary  inspection  of  buildings,  etc.,  is  not  insurance. 

Contracts  to  compensate  unemployed  employees. 

When  guaranty  or  surety  company  contracts  constitute  insurance. 

Fidelity  guaranty  bonds  or  contracts  constitute  insurance. 

Same  subject. 

Contract  to  indemnify  "assured"  for  banks'  default  is  contract  of 
insurance:  bond  to  secure  deposits. 

When  contract,  guaranty  bond,  mortgage,  and  securities  guaranty, 
do  and  do  not  constitute  insurance. 

Guarantee  to  repay  loan  is  contract  of  insurance. 

When  building  contractors'  bonds  are  insurance  contracts. 

Title  guarantee  contract  constitutes  insurance. 

Credit  guarantee  contracts  constitute  insurance. 

Loss  of  crops :  guarantee  of  realty  revenue  constitutes  insurance. 

802 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED   §§  336,  336a 

§  336.  Policy  against  railroad  liability  for  fires  is  fire,  not  guar- 
anty, insurance. — A  contract  insuring  a  railroad  company  against 
claims  for  loss  or  damage  to  property  occasioned  by  fire  communi- 
cated bv  its  locomotives,  and  for  which  it  is  liable  under  a  statute 
and  in  which  property  it  has  an  insurable  interest,  constitutes  hre 
and  not  guaranty  insurance  and  such 'policy  may  be  issued  by  a 
company  authorized  to  insure  only  against  loss  or  damage  by  fire." 

§  336a.  Whether  inter-insurance  or  inter-indemnity  plans  are  in- 
surance contracts. — The  contract  of  inter-insurance  involved  in  a 
Mississippi  Ccose,  decided  in  1910,  is  declared  to  be  the  first  of  its  kind 
ever  reviewed  by  any  court.  The  plan  is  set  forth  in  the  append- 
ed note.  The  parties  mutually  insured  each  other.  The  association 
was  a  voluntary  one  but  it  was  neither  a  ''mutual"  nor  ''stock"  com- 
pany, although  it  possessed  features  incident  to  both,  and  it  was  held 
that  it  came  more  nearly  under  the  classification  of  a  "mixed"'  com- 
pany or  association ;  that  the  question  whether  or  not  an  association 
is  doing  an  insurance  business,  within  the  meaning  of  the  statutes 
of  that  state,  is  not  affected  by  the  fact  that  the  association  confines 
itself  to  the  insurance  of  only  a  particular  kind  of  property,  and 
that  such  a  construction  is  not  unconstitutional ;  that  the  determin- 
ing feature  as  to  the  application  of  insurance  laws  to  an  organiza- 
tion, such  as  this  one,  lies,  not  in  the  name  by  which  it  is  called 
but  in  the  business  conducted  by  it;  that  the  contract  was  clearly 
one  of  insurance  falling  literally  within  the  Code  provisions  specify- 
ing the  concerns  subject  to  the  insurance  laws,  also  prohibiting  any 
"foreign  insurance  company"  from  doing  business  in  that  state 
until  it  had  complied  with  certain  conditions  precedent,  and  de- 
fining "company"  and  a  contract  of  insurance.  It  was  also  decided 
that,  in  a  more  complicated  form  the  association  was  in  effect  noth- 
ing but  an  insurance  association  organized  for  the  purpo.se  of  profit 
to  its  originators,  that  they  did  receive  a  large  profit,  and  in  reality 
constituted  the  association  itself.  It  was  further  determined  that 
the  business  was  unlawful,  that  the  association  was  conducting  it 
unlawfully,  and  that  insurer's  agent  had  unlawfully  assumed  to  act 
as  such  in  soliciting  insurance.^^    \^  Missouri  a  statute,  providing 

"  Canadian  Pacific  Ry.  v.  Ottawa  to  Lloyds,  but  it  differed  therefrom  in 

Fire  Ins.  Co.  11  Ont.  L."  Rep.  465,  6  certain     important     features.       The 

Amer.  &  Eng.  Ann.  Cas.  567.  former  comprehended  an  exchange  of 

12  State  v.^Alley,  96  Miss.  720,  51  contracts  between  the  individual  un- 

So.  467,  39  ins.  L.  J.  629,  under  Code  derwriters,  called  "subscribers,"  eon- 

of   1906,   e.    69,   p.   766,   sees.    2559,  sisting  of  a  number  of  persons,  firms, 

2562,   2563,   2606.      See  Laws   1910,  and  corporations  designated  as  Man- 

arad'g  Code  1906,  also  Id.  sec.  2559.  ufacturing       Lumbermen's       Under- 

Whitfield,  C.  J.,  dissenting.    The  plan  writers,   whereby    the. properties    of 

in  some  of  its  operations  was  similar  each    was    to    be    protected    against 

803 


33Gb 


JOYCE  ON  INSUKANCE 


that  contracts  between  individuals,  tirnis  or  corporations,  indemnify- 
ing each  other  against  lire,  casualty,  or  other  contingency  or  dam- 
age do  not  constitute  insurance  business,  is  held  unconstitutional 
as  to  the  title  of  the  act  and  as  to  sjjecial  laws.  It  is  also  held  that 
the  legislature  cannot,  within  its  power  to  regulate,  discriminate  or 
enact  class  legislation." 

§  336b.  Same  subject:  agreement  between  printing  companies. — 
In  a  Missouri  case  it  appeared  that  in  lUOG  certain  corporations, 


loss  from  fire.      It   was  exclusive  in  also  contained  a  provision  concerninjif 

that    the    association    contined    itself  litig'ation  and  tixin^'  lial)i]ity.     Upon 

to    the   insurance    of   oidy    a   partic-  delivery  of  said  contract  the  subscrib- 

idar  kind  of  jiroperty,   no  contracts  er  i)aid  to  the  attorneys  in  fact  the 

of    insurance    were    written    for    the  amount    of    a    stipulated    deposit    or 

public,  and  onlj'  known  persons  en-  "premium,"    and    tliis    was   delivered 

gaged     in     the     same    business     and  to  the  treasurer,  and  by  him  creilitcd 

wliose  standing  was  of  a  satisfactory  to    the    several    other    subscribers    in 

character    acceptable    to    the    others  the   same   proportion   in   which   tliey 
were    permitted    to    subscribe.      The 
exchange    of    contracts,    on    account 
of     the     number     written,     was     ac- 
complished   through    an    attorney    in 


;;ssunied    liability    to    the 
])aying   said    deposit    or   ' 


subscriber 


piemium. 

Said  sums  thus  credited  were  kept  in 
separate    and    distinct    accounts    for 


fact  wlio  conducted  the  plan,  to  whom  eacli  subscriber.  The  rate  of  prenii- 
each  concern  entering  into  contractu-  um  was  based  upon  that  of  reputable 
al  relation  executed  its  separate  pow-  corporations  writing-  similar  risks  for 
er  of  attorney.  Said  attorney  in  fact  profit.  The  individual  amount  of  in- 
received  for  expenses  and  services  demnity  was  determined  by  the  rela- 
twenty-five  per  cent  of  the  amount  of  five  risk,  and  was  exchanged  In- 
premiums  paid  in.  His  acts  were  di-  each  subscriber  witli  the  others  on  a 
reefed  by  an  advisory  committee,  ])roportionate  basis,  that  is,  each 
which  acted  without  iiay  and  was  se-  agreed  to  indemnify  the  others  in 
lecfed  from  the  subscribers.  The  proportion  as  he  received  indemnify, 
treasurer  was  one  of  the  subscribers.  In  the  event  of  a  hiss  each  confnbuf- 
In  addition  to  the  above  twenty-five  ed  liis  pro  rata  share,  based  upon  the 
per  cent  there  was  a  certain  element  indemnity  that  the  one  who  had  suf- 
of  profit  ill  tliat  the  object  of  each  fered  loss  had  agreed  to  indemnify 
subscriber  joining  in  the  a.ssociation  each  of  the  other  contracting  parties. 


and  faking  out  insurance  was  to  effect 
cheaj)  insurance,  'i'liere  was  no  actual 
(•a])ital  nihcr  tlian  the  premiums  paid 
l)v  tiiose  becominsi'  members.     The  in- 


See  plan  set  forfli  in  I^armers  Mutu- 
al Fire  Ins.  Co.  v.  Cole,  90  Miss.  508. 
On  contracts,   by  which  individual 
or  firms  undertake  to  indemnifv  each 


dividual    subscribers   were    protected  oflier,    as    nuisance,    see    note    in    47 

by  the  privilege  of  wiflidi-awal  at  any  L.R.A.fX.S.)  "Jft?. 
time.     A  subscriber's  apidication  and        "  State     (ex     rel.     Inter-insurance 

note  being  satisfactory,  a  contract  of  Auxiliary   Co.)    v.    Revelle,   2'u    Mo. 

indemnity     following     the     standard  r)29,  165  S.  W.  1084,  Laws  1911,  p. 

forms  used  by  insurance  corporations,  iJOl,  Const,  ail.  4,  sees.  '2S,  od,  par. 

was  executed  to  him  by  the  attorney  'A3.     Compare  Wallace  &  Co.  v.  Fer- 

in    fact   for    the    underwriters.      The  guson,   70   Oreg.   30fi,  140   Pac.  742, 

policy,  however,  set  out    the  various  where   by   a   similar   enactment   such 

amounts    for    which    each    sub.scriber  contracts    constitute    insurance    busi- 

assumed  liabLlitv  in  case  of  loss,  and  ness;  Laws  1911,  pp.  37t),  377,  sees. 

804 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §§  336e,  336<I 

linns  and  individuals  organized  under  llie  name  of  ''The  Printers' 
<fc  Publishers'  Reciprocal  Underwriters  at  Priulers'  Exchange"  for 
tlie  ]>urpose  of  insuring  each  other's  business  establishments.  A 
number  of  different  concerns  in  difl'erent  cities  became  members  of 
tlie  association  by  signing  the  i)reliminary  wi'itlen  agreement  by 
wliicli  it  was  created.  Tlicy  indemnified  eacli  other  against  loss  by 
fire.  Tliere  was  a  connnittee  of  subscribers  elected  annually,  also 
a  managei'  who  underwrote  for  subscribers  in  his  own  name  policies 
of  insurance  against  loss  by  fire  or  lightning,  to  reinsure  same,  et<'. 
Haid  manager  was  under  secui'ity.  He  also  had  power  to  adjust  and 
settle  losses,  etc.  The  organization  was  not  formed  for  profit  but 
to  provide  insurance  to  members  at  cost.  It  was  held  not  a  contract 
for  creation  of  insurance  business  within  the  statute,  but  an  inter- 
iiidenmity  contract  or  exchange.^*     ■ 

§  336c.  When  copartnership  agreement  is  life  insurance. — A  con^ 
tract,  although  containing  other  provisions  may  be  one  of  life  insur- 
ance, and  it  is  innnaterial  that  such  a  contract  does  not  on  its  face 
purport  to  be  one  for  insurance  and  this  applies  to  a  copartnership 
agreement  especially  where  such  copartners] lips  are  among  those 
required  by  statute  to  obiain  a  license  to  do  business.^* 

§  336d.  Burial  or  funeral  benefit  insurance  is  life  insurance. — 
Burial  insurance  being  detei-minable  upon  the  cessation  of  human 
life  and  being  dei)en(lent  ui)on  that  contingency  constitutes  life  in- 
surance. So  where  a  contract  is  issued  by  an  association,  to  furnish 
the  holder  with  the  burial  at  his  death,  at  a  specified  cost,  based  upon 
a  system  of  nmtuMl  contribution  or  asse-ssments,  the  mciiibci's  of  the 
association  being  both  underwriters  and  underwritees  it  conies  with- 
in the  above  principle  and  constitutes  life  insurance  in  all  respects 
similar  to  that  of  a  mutual  life  insurance  com])any.  and  is  within 
the  meaning  of  a  statute  regulating  such  busine.ss.^^    fSo  an  agree- 

1-4,  covering  also  the  riglit  of  agents  sen.se  members  of  tlie  eopartnersliip 

1o  a  license,  see  next  following  sec-  or  company.     The  comi)any  was  en- 

tion  herein.  '  titled  to  all  proHls  and  bore  all  los.ses 

^*  Isaac  H.  Blanehard  Co.  v.  Hamb-  if   any.      A    stipulated    amount    was 

lin,  1()2  Mo.  App.  242,  144  S.  W.  8S0,  paid   for  menibevship  fee  and  also  a 

41  Tns.  L.  J.  894.  certain  montidy  amount  by  ea(4i  con- 

^^  State  V.  Beardsley,  88  Minn.  20,  tract  holder  as  a  premium  and  there 
92  N.  W.  72.  In  this  case  the  Home  was  no  provision  for  levying  assess- 
Co-opcrative  Company  was  a  copart-  ments  upon  such  holdei-s  to  cover 
ner.«;hip  organized  in  another  state.  losse.s.  The  company  assumed  all  ob- 
it consisted  of  a  number  of  citizens  ligations  outside  of  that  of  the  holder 
of  the  latter,  and  under  tlic  above  to  pay  his  premium, 
name  entered  into  its  contracts  as  ^^  State  v.  Willett,  171  Tnd.  206, 
j.arlies  of  the  first  part,  the  parties  23  L.R.A.(N.S.)  107  note,  8ti  N.  E. 
of  the  second  part  being  holdcis  mere-  ti8,  under  Burns's  Ann.  Stat.  1008, 
ly  of  the  contracts  and  not   in   any  sec.  4713,  act  1001,  p.  374.     See  also 

805 


§  336e 


JOYCE  ON  INSURANCE 


ment  to  furnish  funeral  and  requisite  accessories  when  issued  by  a 
company  organized  for  the  purpose  of  selling  such  contracts  con- 
stitutes life  insurance,  even  though  no  beneficiary  is  dasignated." 
§  336e.  Whether  annuities  are  life  insurance.^''* — Annuities  are 
held  not  to  constitute  life  insurance  under  a  New  York  decision." 
The  New  York  insurance  law  providas  for  the  incorporation  of  per- 
sons for  the  purpose  of  making  life  and  health  insurance,  etc.,  ''and 
to  grant,  purchase  or  dispose  of  annuities."  ^^  And  in  a  Michigan 
case  an  agreement  was  made  with  the  defendant,  as  a  consideration 
for  the  sale  of  his  business,  to  pay  the  vendor  a  certain  monthly 
sum  during  his  life,  and  it  was  contended  that  the  corporation  had 
no  power  to  make  such  an  agreement  as  it  was  in  the  nature  of  a 
contract  for  an  annuity  and  under  it  the  corporation  would  be  prac- 
tically dealing  in  life  insurance  but  this  contention  was  not  sus- 
tained.2°  In  a  Maryland  case  the  points  involved  were  as  to  the 
necessity  of  a  seal  and  the  form  of  instrument  required  for  the  crea- 
tion of  an  annuity  and  the  power  of  a  life  insurance  company  to 
grant  an  annuity,  ])ut  the  contract  was  based  upon  the  consideration 
of  a  sum  certain  to  pay  the  annuitant  specified  sums  annually  dur- 

State  (ex  rel.  Atty.  Genl.)  v.  Wichita  505,  c.  204,  sec.  70.    Valuation  of  an- 

Mutnal  Burial  Association,  73  Kan.  unities;    provisions   as   to   lapsed   or 

179,  84  Pac.   757,   under  Gen.   Stat,  forfeited  policies  and  annuities;  de- 

1901,  sec.  3386;  Fickes  v.  State,  87  ferred  annuities.     Laws  1909,  c.  33, 
Miss.    251,    39    So.    783,    under   acts  sees.  84,  88,  c.  28,  Cousol.  Laws. 

1902,  c.   59,  see.  10.     See  §§   Vila,       20  L^e   v.   United    States    Graphite 
7c  herein.  Co.  161  Mich.  157,  125  N.  W.  748. 

On    burial    insurance    and    funeral  The    court,    per   Montgomery    C.    J., 

benetits,  see  notes  in  23  L.R.A.(N.S.)  said:     "It   is  first  insisted  that   the 

197,  and  47  L.R.A.(N.S.)    299.  corporation    itself   did   not   have   the 

"State  (ex  rel.  Fishback)  v.  Globe  power  to  make  this  agreement,  as  it 

Casket  &  Undertaking  Co.  82  Wash,  was  in  the  nature  of  an  agreement 

124,  L.R.A.li)15B,  976,  143  Pac.  878.  for  an  annuity,  and  that  this  agree- 

"*  See  VIIc  herein.  ment  would  show  the  corporation  to 

18  People  V.  Security  Life  Insur-  be  practically  dealing  with  life  in- 
ance  &  Annuity  Co.  78  N.  Y.  114,  7  surance  and  granting  and  disposuig 
Abb.  N.  C.  189,  case  of  receivership  of  annuities.  We  think  this  is  too 
and  distribution  of  assets.  The  court  narrow  a  construction.  The  agree- 
per  Earl,  J.,  said:  "Fifth.  There  ment  to  pay  the  plaintiff  so  much 
are  several  annuitants  of  this  com-  per  month  during  his  life  was  based 
pany — persons  to  whom  the  company,  upon  a  good  and  sufficient  eonsidera- 
f or  gross  sums  paid,  agree  to  pay  cer-  tion.  It  involved  more  than  the  mere 
tain  sums  annually  during  life,  purchase  of  annuity.  It  involved 
.  .  .  These  are  not  cases  of  insur-  supposed  benefits  to  accrue  to  the 
ance,  and  they  are  not  to  be  governed  company  from  time  to  time.  It  was 
by  any  of  the  rules  applicable  to  life  only  a  means  of  measuring  the  ex- 
insurance."     Id.  128.  tent  of  the  consideration  which  should 

19  N.  Y.  Laws  1909,  c.  33,  sec.  70,  be  parted  with  for  the  purchase  of 
c.  28,  Consol.  Laws;  Laws  1914,  p.  this  business." 

806 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  336f 

ing  life  and  it  was  held  that  said  annuity  was  a  mere  chose  in  action 
for  the  payment  of  money,  the  same  as  a  policy  of  life  insurance.^ 
§  336f.  Endowment:  pure  endowment  and  annuity  contracts. — 
Under  a  Massachusetts  decision  a  distinction  is  made  between  an 
ordinary  endowment  policy  and  the  contract  before  the  court.  The 
validity  under  the  statutes  of  that  state  of  pure  endowment  and  an- 
nuity contracts  is  also  fully  considered.  The  principal  point  de- 
cided, however,  is  that  a  pure  endowment  contract  guarantying  the 
payment  of  a  certain  sum  to  a  person  if  living  at  the  end  of  five 
years  and  if  not,  then  said  sum  with  the  premium  paid  should  re- 
main the  insurer's  property,  is  not  a  contract  of  insurance,  within 
the  statutory  definitions  in  Massachusetts,  but  it  is  a  valid  and  en- 
forceable contract.^ 


1  Cahill  V.  Maryland  Life  Ins.  Co. 
of  Bait.  90  Md.  333,  47  L.R.A.  614, 
45  Atl.  180. 

2  Curtis  V.  New  York  Life  Ins.  Co. 
217  Mass.  47,  104  N.  E.  553,  43  Ins. 
L.  J.  551,  under  Rev.  L.  c.  118,  sec.  3. 
The  court,  per  De  Courcy  J.,  consid- 
ers the  statutory  detinition  of  insur- 
ance and  says:  "The  contract  in 
question  does  not  provide  for  pay- 
ment upon  the  'destruction,  loss  or 
injury,'  of  anything.  Under  it  the 
defendant  assumed  the  obligation  of 
payment  not  upon  the  destruction  or 
loss  during-  the  period  named,  but  up- 
on the  continuance  of  the  life  of  Jen- 
ne.ss  durins:  that  period.  It  is  not 
what  is  ordinarily  known  as  an  en- 
dowment insurance  policy,  under 
which  the  sum  named  in  the  policy 
is  payable  to  the  insured  himself, 
if  he  lives  a  certain  length  of  time, 
and  in  the  event  of  his  prior  death 
is  payable  to  his  beneticiarics,  as 
in  the  ordinary  life  policy.  Carr 
V.  Hamilton,  129  U.  S.  252,  32  L. 
ed.  669,  9  Sup.  Ct.  295;  Briggs 
v.  McCulloug-h,  36  Cal.  542;  State 
V.  Federal  Investment  Co.  48  Minn. 
110,  50  N.  W.  1028.  Such  a  con- 
tract is  in  reality  a  combination 
of  a  contract  of  investment  and  one 
of  term  insurance;  and  it  is  the  kind 
that  Jenness  first  applied  for  and 
which  the  defendant  declined  to  issue. 
The  plaintiff  is  right  in  his  conten- 
tion  that   the   policy   in   controversy 

80 


was  not  a  contract  of  insurance  with- 
in the  scope  of  our  statutory  defini- 
tion. 

On  whether  endowment  policies  are 
within  statute  exempting  life  insur- 
ance policies,  see  note  in  25  L.R.A. 
(N.S.)  722. 

"(2)  A  pure  endowment  contract, 
such  as  that  involved  in  this  case, 
not  being  a  contract  of  insurance 
within  the  definition  of  R.  L.  c. 
118,  sec.  3,  the  next  question  is 
whether  it  is  an  agreement  which 
our  laws  prohibit  an  insurance  com- 
pany from  nuiking  in  this  common- 
wealth. In  the  ease  of  Lord  v.  Dall, 
12  Mass.  115,  7  Am.  Dec.  38,  where- 
the  legality  of  a  contract  of  insurance 
and  a  life  was  first  decided  in  this 
state,  Parker,  C.  'J.,  in  deUvering  the 
opinion  of  the  court  said :  'This  is 
a  contract  fairly  made;  tlio  premium 
is  a  sufficient  consideration ;  there  is 
nothing  on  the  face  of  it  whicli  leads 
to  the  violation  of  the  law;  nor  any- 
thing objectionable  on  the  score  of 
policy  or  morals.  It  nnist  then  be 
valid  to  support  an  action,  until 
something  is  shown  by  the  party  re- 
fusing to  porfonn  it,  in  excuse  of 
his  noni)orformance.'  At  tliat  time 
insurance  contracts  were  usually  on 
marine  risks.  Tlie  system  since  then 
has  grown  and  broadened  until  it 
now  furnishes  protection  and  indem- 
nity in  almost  every  department  of 
7 


§  33()£ 


JOYCE  ON  INSURANCE 


bu^;inesS  arifl  pi-ivate  life  and  enter-  plicable  to  a  contract  of  pu;-e  endow-: 
prise.  See  Stat.  1!)()7,  c  .')7(),  sec.  32,  ment,  as  an  annuity  contract  in  effect 
as  amended  by  Stat.  11)08  (chaps.  24<S,  is  one  providing  for  the  payment  of 
r)09,  and  Stat.  1910,  c.  490.  Some  a  .series  of  pure  endowments, 
of  these  contracts  for  many  years  "Although  as  we  liave  seen,  such 
have  been  a  recognized  part  of  the  pure  endowment  and  annuity  con- 
insurance  bu.siness,  although  they  do  tracts  are  not  contracts  of  insurance 
not  come  witliiii  our  present  statutory  as  defined  by  R.  L.  c.  118,  sec.  3,  it 
definition.  This  is  especially  true  of  does  not  follow  that  insurance  com- 
contracts  of  pure  endowment  with  panies  are  prohibited  by  our  law 
return    of   premium.      See .  Gould    v.  from  writing  them.     That  these  com- 


Curtis  (1912)  1  K.  B.  635;  Pruden- 
tial Ins.  Co.  V.  Commissioners  of  In- 
land Revenue  (1904)  2  K.  B.  658_; 
Carter  v.  John  Hancock  Ins.  Co.  12/ 
Ma.ss.    153.      And    one    of   the   Avell- 


panie.s  are  not  conHned  to  the  making 
of  the  contracts  delined  by  section  3 
above  cited,  is  apparent  from  other 
provisions  of  the  chapter.  Thus, 
section    65   provides:      "AH    corpora- 


known  forms  of  contract  is  that  of  tions,  associations,  partnerships  or 
annuities — not  Avithiu  the  technical  individuals  doing  business  in  this  corn- 
meaning  of  the  term,  or  incoi'i)oreal  monwealth  under  any  charter,  corn- 
hereditaments  created  by  grant  but  in  pact,  agreement  or  statute  of  this  or 
the  modern  sense  of  a  simple  i)romise  any  otlier  state,  involving  the  pay- 
to  pay  a  certain  amount  yearly,  ment  of  money  or  other  thing  of 
There  is  nothing  in  such  contracts  value  to  families  or  representatives 
that  offends  against  public  policy  or  of  policy  and  certificate  holders  or 
any  jjrinciple  of  law.  Hayden  v.  members,  conditioned  upon  the  con- 
Snell,  9  Gray  (75  Mass.)  31).'),  (i9  Am.  tinuance  or  cessation  of  human  life, 
Dec.  294;  Cahill  v.  Maryland  Life  or  involving  an  insurance,  guaranty, 
Ins.  Co.  90  Md.  333,  45  Atl.  180,  47  contract  or  pledge  for  the  payment 
L.R.A.  614;  Berry  v.  Doremus,  30  N.  of  endowments  or  annuities  shall  be 
.J.  Law.  399.  As  was  said  bv  the  court  deemed  to  be  life  insurance  compa- 
in  Mutual  Life  Ins.  Co.  v.  Smith,  184  nies,  and  shall  not  make  any  such  in- 
Fed.  1,  106  C.  C.  A.  593,  33  L.R.A.  surance,  guaranty  contract  or  pledge 
(N.S.)  439:  'We  see  verv  little  to'be  i"  tlii«  conunonwealtli,  or  to  or  with 
urged  against  insurance  of  the  nature  any  citizen  or  resident  thereof,  which 


in  question, 


that  does  not  o'o    (^oea  not  distinctly  state  the  amount 


to  the  merit  of  insurance  itself.  It  Ls  of  benehts  payable,  the  manner  of 
not  unnatural  that  one  should  act  up-  Pa.vm™t  and-the  consideration  there- 
on the  idea  that,  in  the  davs  when  he  f^'''  nor  any  such  insurance,  guar- 
is  handling  monev,  it  is  the  part  of  »^it>''  ^:?"tract  or  pledge,  the  perloi-ra- 
wisdom  to  safeouard  the  period  of  ^"""^^  of  which  is  contingent  upon  the 
old  age,  in  which  business  and  earn-  P-'.vment  of  assessments  made  upon 


ing  capacity  will  have  become  a  thing 
of  the  past.  Under  modern  condi- 
tions in  the  various  industries,  as 
Avell  as  in  business  and  in  ofTicial  life, 
men  are  influenced  to  enter  upon  a 
particular  work  by  various  old-age 
safeguards  which  become  operative  at 
the  end  of  a  specihed  ])eriod  of  .serv- 
ice.' In  the  Smith  case  the  ]iolicies  in 
question  provided  for  deferred  annui- 


survivors. 

"This  recognition  and  regulation  of 
policies  conditioned  upon  the  'con- 
tinuance' of  life,  and  of  contracts 
for  the  payment  of  'endowments  or 
annuities'  is  inconsistent  with  the 
view  that  insurance  companies  .are 
forbidden  to  make  such  contracts. 
The  reasonable  inference  rather  is 
that,  subject  to  the  limitations  stated. 


ties,  beginning  in  1916,  if  the  insured  they  may  be  made  in  this  common- 
should  be  alive  at  that  time.  But  wealtli,  even  though  they  are  not  con- 
Avhat  was  there  said  seems  equally  ap-   tracts  of  insurance  as  defined  in  sec. 

808 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  ;J3Gf 


3.  In  other  parts,  also,  of  the  in-  "Fi-om  wlial  lias  boon  said  it  seems 
siiran('-e  statute  are  |)ruvisious  iiuli-  clear  that  while  the  contract  of  pure 
catiiiir  that  annuity  contracts  as  well  endowment  in  (juestion  is  not  one  of 
as  those  of  endort-iuent,  may  be  writ-  insurance  as  defined  by  R.  L.  c.  118, 
ten  under  the  Massachusetts  law.  sec.  3,  nevertlieless  it  is  a  legal  con- 
See  R.  L.  c.  118,  sec.  11,  cl.  3;  \i\.  tract  and  one  which  the  Massachu- 
secs.  68,  76.  And  in  the  revision  of  setts  laws  do  not  iiroliiliit  an  insur- 
St.  1907  (c.  rw6),  although  the  deti-  ance  company  from  making.  In 
nition  of  R.  L.  c  118,  sec.  3,  is  re-  form  it  complies  with  the  require- 
tained,  fre<|uent  reference  is  made  to  ments  of  sec.  6')  in  distinctly  stat- 
endowment,  pure  endowment,  and  an-  ing  'the  amount  of  benelits  payable, 
nuity  contracts  as  a  recognized  the  manner  of  payment  and  the  con- 
l)art  of  the  business  of  life  insurance  sideration  thei-efor.'  As  it  is  not  a 
companies.  See,  for  instance,  sees,  'contract  of  insurance'  within  tiie  deti- 
11,  69,  75,  76,  81.  Section  80,  as  nition  of  our  statute,  the  statutory 
amended  by  statute  1908,  c.  166,  re(iuirements  relative  to  medical  ex- 
in  dealing  with  the  options  open  to  amination  and  to  the  form  of  the  ap- 
the  holder  in  case  of  surrender  of  the  plication  are  not  applicable  and  need 
])olicy,  provides  that. 'in  case  of  an  not  be  considered.  Nor  is  this  a  con- 
endowment  policy,  if  the  sum  ap-  tract  that  can  be  rescinded  as  fraud- 
l)licable  to  the  purchase  of  temporary  ulent  or  unconscioiial)le.  Jenness 
insurance  shall  be  more  than  sufti-  must  have  understood  from  the  ex- 
cient  to  continue  the  insurance  to  press  terms  of  the  application  that 
the  end  of  the  endowment  term  tlie  premium  was  not  to  be  returned 
named  in  the  policy,  the  excess  shall  if  he  should  die  Ijefore  the  maturity 
be  used  to  purchase  in  the  same  man-  of  the  pure  endowment.  The  premi- 
ner  noni)articipating  paid-up  pure  um  Avas  based  upon  the  standard 
endowment,  payable  at  the  end  of  American  Elxperience  Tables,  and  the 
the  endowment  term  on  the  same  loading  added  for  expenses  was  less 
condition."  And  the  same  section,  as  than  4  i^er-cent.  The  wisdom  of  the 
further  amended  by  St.  1910,  c.  :)6(i,  investment  whicli  he  carried  for  more 
concludes  in  these  terms:  'The  pro-  than  four  years  M'a.s  for  him  to  de- 
visions  of  tlie  section  shall  not  apply  termine.  Lee  v.  Kirby,  104  Mass. 
to  annuities,  or  to  policies  of  pure  420.  Finally,  that  the  making  of  the 
endowment  with  or  without  return  of  contract  in  controversy  was  within 
premiums,  or  to  survivorship  insiir-    ^j^g  charter   power  of  the  defendant 


ance,  and,  in  case  of  a  policy  provid- 
ing for  both  insurance  and  annuity, 
shall  apply  only  to  that  i>art  of  the 
contract  providing  for  insurance,  but 
every  such  contract  providing  for  a 
deferred  annuity  on  the  life  of  tlie 
insured  only  shall,  iniless  paid  for  by 
a  single  j)reniium,  provide  that  in  the 
event  of  the  nonpayment  of  any  pre- 
mium after  three  full  years'  premi- 
ums sliall  liave  been  ]nud.  the  annuity 
shall  automatically  become  converted 
into  a  ]>aid-up  annuity  for  such  pro- 
portion of  the  original  annuity  as  the 
number  of  completed  years'  premi- 
ums paid  bears  to  the  total  number 
of  ]Memiums  required  under  the  con- 
tract.' 


corporation  apparently  is  not  ques- 
tioned. Its  amended  charter,  adopted 
under  the  New  York  Insurance  Law 
of  1892  (Laws  1892,  c.  690),  pro- 
vides: 'Article  111.  The  busin&ss  of 
the  company  shall  l)e  insurance  on 
lives  and  all  and  every  insurance  per- 
taining to  life,  and  receiving  and  ex- 
ecuting trusts  and  making  endow- 
ments and  granting,  purchasing  and 
disposing  of  annuities,  such  kind  of 
insurance  being  authorized  under 
subdivisi<;ii  (1),  sec.  70,  of  the  In- 
surance  Laws.'  " 

Endowment  policy  of  benevolent 
Society  is  life  insurance.  Rockhold 
v.   Canton   Masonic   Benevolent    Soc. 


809 


§§  336g,  337  JOYCE  ON  INSURANCE 

§  336g.  To  what  extent  tontine  insurance  is  life  insurance. — '* 

A  tontine  contract  of  insurance  is  more  than  a  policy  of  life  insur- 
ance. In  addition,  it  is  an  agret^ment  on  the  part  of  the  insurance 
company  to  hold  all  the  premiums  collected  on  the  policies  forming 
that  class  for  the  specified  period,  which  is  called  the  tontine  period 
or  period  of  distribution,  and,  after  paying  death  losses,  expenses, 
and  other  losses  out  of  the  fund  so  accumulated,  to  divide  the  re- 
mainder among  those  who  are  alive  at  the  end  of  the  tontine  period, 
and  who  have  maintained  their  policies  in  force.^  But  when  the 
accumulated  surplus  upon  a  policy  is  payable  to  assured  at  his  op- 
tion upon  the  completion  of  the  tontine  dividend  period  if  he  sur- 
vives that  period,  and  is  not  payable  at  all  in  the  event  of  his  death 
before  the  expiration  thereof,  the  agreement  is  nothing  in  the  nature 
of  life  insurance  but  is  merely  a  contract  to  pay  assured  a  computa- 
ble sum  upon  certain  contingencies,  and  this  result  is  not  varied  by 
the  fact  that  the  wife  of  assured  is  named  as  beneficiary.  The  con- 
tract is  only  one  such  as  a  savings  bank  might  make.* 

§  337.  Whether  contract  one  of  loan  or  of  life  insurance. — In  a 
Federal  case  the  contract  was  one  of  loan  secured  by  a  mortgage  on 
real  estate  with  an  agreement  to  release  the  remainder  of  the  debt 
in  case  of  death  of  the  borrower  before  full  payment.  The  contract 
had  about  it  certain  features  of  life  insurance  but  it  was  declared 
"certainly  not  an  ordinary  'life  insurance  contract,'  in  the  general 
acceptation  of  the  term,"  as  the  undoubted  purpose  was  to  loan 
money  and  secure  at  the  same  time,  as  far  as  possible,  indemnity 
against  loss  at  the  borrower's  expense.  And  under  the  circumstances 
of  the  case  the  contract  was  held  to  be  tainted  with  usury  and  con- 
trary to  public  policy  warranting  a  cancellation  of  the  notes  and 
mortgage  involved.^  The  same  or  substantially  the  same  contract 
was  under  consideration  in  a  IMinnesota  case  although  it  did  not 
there  appear  what  the  nature  of  the  corporation  was  except  that  it 
was  organized  for  pecuniary  profit  and  that  it  had  never  complied 

2  L.R.A.  420,  19  N.  E.  710,  aff'd  129  *  Ellison  v.   Straw,  119  Wis.  502. 

111.  440,  21  N.  E.  794.  97  N.  W.  168. 

^*  See  §  11  herein.  ^  Krumseig'  v.  IMissouri,  Kansas  & 

3  Equitable  Life  Assur.  Society  of  Texas   Trust   Co.   71  Fed.  3r)0,   afif'd 

U.    S.    V.    Winn,    13^    Ky.    641,    28  in  Missouri,  Kansas  &  Texas  Trust 

L.R.A.(N.S.)  558,  126  S.  W.  153,  39  Co.  v.  Krumseig,  77  Fed.  32,  23  C.  C. 

Ins.  L.  J.  .587,  holder  held  entitled  to  A.    1,    aff'd    in    Missouri    Kansas    & 

an  accounting.  Texas  Trust  Co.  172  U.  S.  351,  43  L. 

On  right  of  tontine  policyholder  to  ed.  474,  19  Sup.  Ct.  179,  but  whether 

an  accounting  by  insurer,  see  note  in  the   contract  was  one  of  life  insur- 

28   L.R.A.  (N.S.)    558.      On   right   to  ance,    void    because    defendant    had 

subject   tontine   policy  to  clainas   of  not    complied    with    the    Minnesota 

creditors,  see  note  in  4  L.R.A. (N.S.)  contract  was  not  considered  by  the 

456.  Supreme  Court. 

810 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  337a 

with  the  state  laws  regulating  the  transaction  of  life  insurance  and 
the  court  assumed,  without  deciding,  that  the  contract  was  not  one 
of  life  insurance.^  But  in  another  case  in  that  state  the  Krumseig 
case''^  was  considered  and  quoted  from  as  being  a  combination  of  a 
mortgage  loan  and  a  life  insurance  policy  and  as  holding  that, 
viewed  as  a  contract  of  a  life  insurance,  either  in  whole  or  in  part,  it 
was  void  for  non-compliance  with  the  insurance  laws  of  Minnesota 
and  the  court,  per  Collins,  J.,  said:  ''The  contract  there  under  con- 
sideration does  not  really  differ  from  the  one  now  before  us  which 
we  regard  as  a  combination  of  a  loan  of  money  with  security  and  a 
life  insurance  policy.  It  has  the  features  and  essentials  of  both,  and 
the  defendant  having  solicited  and  acted  as  agent  in  procuring  it, 
without  being  licensed  as  an  insurance  agent,  violated  the  law."  ^ 
In  a  case  in  the  District  of  Columbia  the  contract  seemed  to  com- 
bine with  the  ordinary  plan  of  insurance  something  of  the  prin- 
ciple of  annuities,  as  well  as  some  features  of  the  scheme  on  which 
building  and^  loan  associations  are  established,  and  the  principal 
characteristic  feature  that  distinguished  it  from  the  ordinary  plan 
of  life  insurance  was,  that  the  sum  in  gross  payable  by  the  insurance 
company  was  payable  at  the  beginning  instead  of  at  the  end  of  the 
risk.  It  was  held  that  the  contract  was  not  one  of  loan  but  of  in- 
surance governed  by  the  rules  of  construction  applicable  to  ordinary 
insurance  contracts.^  In  a  Kentucky  case  it  is  held  that  a  note  given 
by  insured  for  a  loan  as  stipulated  in  the  policy,  where  the  stipula- 
tions in  the  note  are  not  inconsistent  with  the  terms  of  the  policy 
but  merely  elaliorate  its  meaning  and  effectuate  its  purpose,  is  not 
within  a  statute  prohibiting  the  making  of  any  contract  of  insur- 
ance except  such  as  is  expressed  in  the  policy.^" 

§  337a.  Other  instances  of  what  is  and  what  is  not  life  insurance. 
— Life  insurance  is  also  held  to  include  cattle  or  livestock  insur- 
ance; ^^  also  an  option  to  purchase  realty  upon  certain  conditions  as 
to  the  disposition  of  the  unpaid  balance  of  the  sum  })rovided  for  in 

^  Missouri,  Kansas  &  Texas  Trust  i°  Ja.ijoe  v.  Aetna  Life  Ins.  Co.  12:> 

Co.  V.  McLadilau,  59  Minn.  468,  473,  Kv.  510,  96  S.  W.  598,  36  Ins.  L.  J. 

61  N.  W.  560.  104,  Ky.  Stat.  1903,  sec.  656. 

On   loan    contracts   canceled   upon  ^^  Under  the  act  55,  George  III.  c. 

death    as   insurance,    see   note   in   47  184,  an  insurance  on  the  lives  of  cat- 

L.R.A.(N.S.)    298.  tie  is  hold  an  insurance  on  lives.     At- 

'  Missouri,  Kansas  &  Texas  Tru.st  tornev  General  v.  Cleobury,  18  L.  J. 

Co.  V.  Krumseig,  77  Fed.  32,  23  C.  C.  Ex.  395,  4  Ex.  65.     See  also  State  v. 

A.  1,  above  considered.  Vigilant  Ins.  Co.  30  Kan.  585,  2  Pac. 

*  State  V.  Beardsey,  88  Minn.  20,  840;    State  v.  Northwestern   Mutual 

25,  26,  92  N.  W.  472.  I^ive   Stock   Assoc.   16   Neb.   549,   20 

Hlnited  Security  Life  Insurance  &  N.  W.  852;  Examine  State  v.  Bur- 
Trust  Co.  V.  Bond,  16  App.  D.  C.  gess,  —  Tex.  Civ.  App.  — ,  107  S. 
579  W.  366.     See  §§  7,  27g  herein. 

811 


§  337b 


JOYCE  ON  INSURANCE 


the  contract,  in  case  of  death  or  total  or  permanent  disability  and 
so  held  even  though  the  contract  did  not  on  its  face  ]:)urport  to  be 
one  of  insurance. ^^  But  an  act  to  create  a  police  relief,  health,  life 
insurance  and  pension  fund  and  providing  for  the  payment  of  a  sum 
certain  after  death  does  not  make  a  contract  one  of  life  insurance." 

§  337b.  Whether  policy,  life  or  accident:  generally. — It  is  de- 
clared in  Missouri  that  the  calling  of  a  contract  of  insurance  an  ac- 
cident, tontine  or  regular  Hfe  policy,  or  for  that  matter,  by  any  other 
appellation  that  may  be  adopted  for  business  or  conventional  use.s 
or  classification,  cannot  make  a  policy  containing  an  agreement  to 
pay  to  another  a  sum  of  money  designated  upon  the  happening  of 
an  unknown  or  contingent  event  dependent  upon  the  existence  of  a 
life,  less  a  policy  of  insurance  on  life,  and  it  is  none  the  less  life  in- 
surance because  coupled  with  an  investment  or  bond  feature.  All 
policies  of  insurance  in  wdiich  the  payment  of  the  insurance  monev 
is  contingent  upon  the  loss  of  a  life  are  included  within  insurance 
upon  life.^* 

A  policy  of  insurance  which  primarily  secures  a  weekly  indem- 
nity in  money  to  the  insured  in  the  event  of  his  disability  from  ac- 
cidental injury  and  in  certain  specified  contingencies  resulting  from 
such  injuiy  agrees  to  pay  a  certain  gross  sum,  or  a  ]iroportionate 


12  State  V.  Beardslev,  88  Minn.  20, 
92  N.  W.  472. 

13  Clarke  v.  Police  Life  &  Health 
Ins.  Co.  123  Cal.  24,  55  Pac.  570. 

1*  Losan  V.  Fidelity  &  Casualty 
Co.  14(i  I\lo.  114,  47  S.'W.  948,  a  case 
of  the  a])plication  of  the  statute,  sec. 
5855,  Kev.  Stat.  1889,  as  to  <leath  liy 
suicide  being"  no  defense,  to  policies 
issued  by  accident  insurance  compa- 
nies. The  above  case  is  quoted  from 
in  Zimmer  v.  Central  Accident  Ins. 
Co.  207  Pa.  472,  56  All.  100.!,  33  Ins. 
L.  J.  333,  which  holds  that  a  life  pol- 
icy includes  an  accident  policy  under 
a  provision  of  a  statute  requiring  a 
copy  of  the  ajjplication  to  be  at- 
tached. Case  is  also  cited  193  Fed. 
under  this  section.  But  comjxire  Tic- 
tin  V.  Fklelity  &  Casualty  Co.  (U.  S. 
C.  C.)  8/  Fed.  543,  dccidinii  co)itra  as 
to  sec.  5855  of  the  ^lissouri  statute 
and  holdins:  that  it  did  not  ap])ly  to 
accident  policies  notwithstandino-  Mo. 
Kev.  Stat.  1889,  .sec.  5811,  wiiereby 
Hie  companies  were  authorized  to  en- 
cage in  the  business  of  accident  in- 


surance, but  making  it  a  separate  de- 
liartment  of  the  life  insurance  com- 
])any  engaging'  therein.  This  case  is 
cited  in  I\larvland  Casualty  Co.  v. 
(iehrmann,  9(j  Md.  634,  650,  54  Atl. 
678,  where  court,  per  Pearce,  .J., 
says:  '*We  prefer  to  adopt  and  fol- 
low the  view  of  the  state  court  as 
the  .sounder  and  more  salutary  view," 
viz.  the  Logan  case  although  the 
Federal  case  was  decided  prior  there- 
to. In  tiie  Maryland  case  above  not- 
ed, tlie  main  question  was  whether 
the  warranties  made  in  an  applica- 
tion for  an  accident  insurance  policy 
were  within  the  scoj^e  and  operation 
of  the  Acts  of  1894,  c.  662  (codified 
in  Poe's  Suppl.  to  Code,  as  sec.  142A, 
of  art.  23)  relating  to  life  insurance. 
Said  Code  art.  23,  sec.  127,  providing 
that  life  insurance  conijianies  includ- 
ed engagements  for  the  payment  of 
money  in  tlie  event  of  sickness,  acci- 
dent and  death,  or  other  contingency, 
and  so  sul).j('ct  to  all  the  requirements 
of  law  applicable  to    life    insurance 


812 


companies. 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  337b 

pari  of  the  principal  sum,  or  the  whole  ainouiit  thereof,  as  in  ease 
of  death  resulting  from  the  accident  within  a  stated  time,  is  not  a 
life  insurance  policy  within  a  statute  relating:;  "to  life  and  Hre  in- 
surance policies  upon  the  lives  or  property  of  persons."  ^^  So  a  pol- 
icy which  insures  against  death  resulting  directly  and  inde)>end- 
ently  of  all  other  causes  from  l)odily  injuries  effected  llii'oiigh 
external,  violent  and  accidental  means,  though  in  a  sense  a  jxdicy  of 
life  insurance  is  not  the  sort  of  policy  contemphited  by  the  Alabama 
Code  ^^  nor  does  it  evidence  tiie  character  of  contract  generally 
spoken  of  as  life  insurance."  Under  a  Federal  decision  rendered  in 
1912  it  is  decided  that  the  Pennsylvania  act  of  18sr),i8  providing 
for  nonforfeiture  of  life  policies  in  case  of  warranty,  misrepresen- 
tation or  untrue  statement,  unless  the  same  relates  to  some  matter 
material  to  the  risk,  applies  to  accident  policies. ^^  In  a  .Massacbu- 
setts  case  the  court,  per  Knowlton,  C.  J.,  says:  "An  ordinary  life 
l)olicy  includes  the  occurrence  of  death  by  accident  as  one  of  tbe  con- 
ditions which  call  for  a  payment  by  tbe  company,  as  well  as  death 
from  any  other  cause,  and  ordinary  accident  policies  include  in- 
juries by  accident  causing  death,  and  to  that  extent  tbey  provide 
insurance  for  life.  Yet  neither  of  tbese  two  classes  of  ])olicies  is,  for 
that  reason,  brought  within  the  other  class  also."'  ^°  in  tliat  state  a 
life  insurance  contract  may  combine  certain  fealni'cs  of  accident  in- 

15  Standard  Life  &  Acci.  Ins.  Co.  11,1881  [P.  L.  20] )  covered  accident 
V.  Can-oil,  86  Fed.  567,  30  C.  C.  A.  policies,  it  is  reasonable  to  suppose 
233,  41  L.R.A.  19.  that  the  legislature  by  its  subsequent 

16  See.  .')283,  Form  12.  use  in  the  act  of  188.')  of  the  words 
1''^  National  Life  &  Accident  Tiis.  v.    'lite  insurance'  meant  to  cover  acci- 

Lokey,  166  Ala.  174,  52  So.  45.  dent  policies  also.   [3]    For  these  rea- 

1^  7\.ct  June  23,  1885,  P.  Ij.  134.  sons,  and  with   a  view  to  harmonize 

1^  Miller  v.  Maryland  Casualty  Co.  state  and  Fedei-al  decisions,  and  pro- 

193  Fed.  343,  113  C.  C.  A.  267,  41  ducing    uniformity    in    the    Pennsyl- 

Ins.    L.    J.    900.      The     couil,     per  vania  .system   of  insurance,   we   hold 

Buttington,  C.  J.,  said:     "Wliilc  the  llie    act    of    1885    is    applical)le    to 

case  of  Zimmer  v.  Central  Accident  accident    policies.     Support    of    this 

Ins.  Co."  207  Pa.  472,  56  Atl.  lOO."!,  conclusion    is     fouml     in     Logan     v. 

33  Ins.  L.  J.  333,  "construed  another  Fidelity    &    Casualty    Co.    146    Mo. 

insurance  statute,  yet,  as  that  statute  114,     47     S.     W.     948;     Maiyland 

and  the  one  befoi'e  us    ai-o    in    pari  (^asualty  Co.  v.  Cichrmann,    9(i    Md. 

materia,    we   consider   that    case   evi-  634,  54  Atl.  ()78;  Duiany  v.   Fidelity 

dences    the    views     of    tiie   supreme  &  Casualty  Co.  106   Md.  17,  66  Atl. 

court  of  Pennsylvania  on  the  sco|)o  of  614;   Cook  on   Life    Ins.  sec.  2;   and 

such  insurance  legislation.    Moreover,  McClain    v.    Provident    Savings   Life 

as  the  act  of  1885  was  pas.sed  after  Assur.  Soc.  110  Fed.  80,  49  C.  C.  A. 

that  court  had,  in    Pickett   v.    Pacific  .31." 

Mutual  Life  Ins.  Co.  144  Pa.  79,  13       20  ]y|etropolitan     Life    Ins.    Co.   v. 

L.R.A.  661,  27  Am.  St.  Rep.  618,  23  Ilardison,  208   Ma.ss.   386,  94  N.   E. 

Atl.  871,  held  that  the  term  'life  in-  ^77,  40  Ins.  L.  J.  901. 
surance'  in  the  act  of  1881  (act  Mav 

'813 


§§  337e,  337d 


JOYCE  ON  INSURANCE 


snrance  upon  compliance  with  provisions  of  the  statutes  as  to  state- 
ments of  benefits  and  cost  of  concessions.-^ 

If  it  is  evident  from  the  whole  contract  that  the  risk  is  strictly 
an  accident  insurance,  and  not  a  fire  risk,  it  will  be  so  construed.^ 

"Travelers  insurance"  is  made  a  specialty  of  by  most  accident 
companies.^ 

§  337c.  Industrial  insurance  with  provisions  as  to  accidental 
death  is  not  accident  insurance. — Where  an  industrial  insurance 
policy  makes  a  distinction  between  death  from  different  causes  and 
excepts  death  from  accident  occurring  within  a  certain  time  and  also 
limits  the  amount  payable  if  death  occurs  within  said  specified  time, 
such  provisions  are  only  incidental  to  the  business  of  life  insurance 
and  the  contract  is  not  one  of  insurance  against  accident  except  so 
far  as  all  life  insurance  which  includes  death  by  accident  is  to  that 
extent  insurance  against  accident.  It  is  not  the  giving  of  direct  af- 
firmative benefits  of  a  special  kind  on  account  of  the  accident.  It 
is  simply  the  exception  of  this  class  of  cases  from  the  limitation  up- 
on the  ordinary  rights  of  an  insured  pei'son.  The  provision  is  as  if 
the  limitation  upon  payments  for  death  occurring  within  the  time 
specified  were  expressed  as  applying  to  such  deaths  occurring  from 
causes  other  than  accident.'* 

§  337d.  Newspaper  contract  may  constitute  an  accident  policy: 
ultra  vires. — If  one  is  induced  to  buy  or  to  subscribe  for  a  copy  of  a 
newspaper  by  reason  of  a  promise  to  pay  a  certain  sum  of  money  to 
his  heirs,  in  case  of  death  by  accident  within  a  specified  and  limit- 
ed time,  such  person  to  be  identified  by  having  the  paper  in  his  pos- 
session, it  is  a  contract  of  accident  insurance  although  it  may  be  be- 
yond the  company's  power  to  issue  it.* 


^  Metropolitan  Life  Ins.  Co.  v. 
Hardison,  220  Mass.  52,  107  N.  E. 
397,  Stat.  1912,  c.  524.  The  question 
in  the  above  case  was  wliether  the 
provision  as  to  cost  of  concessions 
had  been  complied  Avith.  Prior  to 
this  statute,  however,  accident  insur- 
ance could  not  be  issued  in  combi- 
nation with  life  in.surance  in  one 
policy,  ^liltna  Life  Ins.  Co.  v.  Hardi- 
son, "199  Mass.  181,  85  N.  E.  407, 
distinguished  in  Metropolitan  Life 
Ins.  Co.  v.  Hardison,  208  Mass.  386, 
94  N.  E.  477,  40  Ins.  L.  J.  901. 

2  Western  Refrigerator  Co.  v. 
American  CasuaJtv  &  Security  Co. 
(U.  S.  C.  C.)  51  Fed.  155. 

^  Travelers'  In.s.  ]\Iachine  Co.  v. 
Travelers'  Ins.  Co.  of  Hfd.  142  Ky. 


523,  528,  529, 134  S.  W.  877,  a  case  of 
action  to  enjoin  use  of  a  name.  See 
also  Herron's  Suppl.  1908-1910,  to 
Sayles'  Tex.  Civ.  Stat.  p.  233.  See 
§§  8,  9a  herein. 

*  IMetropolitan  Life  Ins.  Co.  v. 
Hardison,  208  Mass.  386,  94  N.  E. 
477,  40  Ins.  L.  J.  901,  under  Stat. 
1907,  e.  576,  sec.  34,  cl.  5,  distin- 
guishing iEtna  Life  Ins.  Co.  v. 
Hardison,  199  Mass.  181,  85  N.  E. 
407. 

*  Commonwealth  v.  Philadelphia 
Inquirer,  15  Pa.  Co.  Rep.  463.  See 
§  2535  herein. 

On  newspapers  undertaking  to  in- 
demnify against  accident  as  insur- 
ance, see  note  in  47  L.R.A.(N.S.) 
299. 


814 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED 


5§  337e,  338 


§  337e.  Employers'  liability  or  indemnity  insurance.^ — An  em- 
ployers' liability  or  indemnity  policy  is  lield  to  be  a  contract  of  in- 
surance' and  such  a  policy  is  construed  most  favorably,  for  in- 
sured.* And  the  right  of  subrogation  exists  in  case  of  employers' 
liability  insurance,  as  in  cases  of  fire  and  marine  insurance,  against 
the  wrongdoer  or  person  liable  for  the  loss  upon  payment  by  such 
company  of  the  loss.^  It  is  also  decided  that  employers'  liability  in- 
surance is  a  branch  of  accident  and  casualty  insurance  even  though 
a  distinction  is  seemingly  made  by  statute  as  to  capital  stock  and 
the  right  to  do  business.^" 

§  338.  Insurance  of  and  by  carriers:  agreement  of,  to  procure  in- 
surance.— As  we  have  elsewhere  stated  the  insurance  of  carriers 
against  liability  for  losses  from  injuries  to  passengers  is  a  contract  of 
indemnity,^^  and  where  goods  are  received  by  a  common  carrier  for 
transportation  he  is  held  to  be  an  insurer  of  the  goods  with  a  con- 
tinuing liability  until  the  goods  arrive  at  their  destination  and  arc 
there  delivered  so  that  such  carrier  becomes  liable  as  an  insurer 
where  the  goods  have  been  delivered  to  it  by  a  railroad  company 
and  they  are  destroyed  by  fire  while  in  possession  of  such  carrier.^' 


^  See  §  9a  herein.  maintain    action    against    the    party 

'  Standard  Life  &  Accident  Ins.  Co.  causing  the  loss,  see  note  in  2  L.R.A. 

V.  Banibrick  Bros.   Construction  Co.  (N.S.)  922. 

163  Mo.  App.  504,  143  S.  W.  845;  "  Metropolitan  Casualty  Ins.  Co.  v. 

Mears  Mining  Co.  v.  Maryland  Ca.su-  Basford,  31  S.  Dak.  149,  139  N.  W. 

alty  Co.  162  Mo.  App.  178,  191,  144  145,  42  Ins.  L.  J.  579,  Laws  1911,  c. 

S.  *  W.    883.      Examine    §§    27a-27d  176.    See  also  Laws  1905,  c.  73,  sec. 

herein.  2;  Laws  1907,  c.  110;  Laws  1909,  c. 

On  employers'  indemnity  contracts  243.      See    Traders    Insurance    Ma- 

as  insurance,  see  note  in  47  L.R.A.  chine  Co.  v.  Travelers  Ins.    Co.    142 


(N.S.)  294. 

'  London  Guarantee  &  Accident  Co. 
Ltd.  V.  Morris,  —  111.  App.  — ,  40 
Natl.  Corp.  Rep.  889. 


Ky.  523,  531,  134  S.  W.  877,  881,  per 
Lassing,  J. 

That    employers'    liability     insur- 
ance  for   liability   under   employers' 


On  construction  of  bond  or  policy  liability   act,   1880.   workmen's   com 

indemnifying   em])loyer   agairi.st   loss  pgnsation  act  of  1897,  and  common 

from  neg^ig-ence  o±  employee,  see  note  j^^^,    ^^    ^^^    ^    p^li^^    ^^    insurance 

in  31  L.K.A.(N.S.)    <^5.  against   accident   under  the   English 

J:!:lT^l".^."."  ^rA^S^f  «tamp  act  of  1881,  sec.  98,  sched.  1. 


See  Lancashire  Ins.  Co.  v.  Commis- 
sioners of  Inland  Rev.  [1899]  1  Q.  B. 
Div.  L.  Rep.  353. 

"  See  §  27e  herein. 

As  to  distinction  between  agent  and 


Engineering   Works    Co.    36    L.R.A 
(KS.)  60, 184  Fed.  426,  107  C.  C.  A. 
20. 

On  right  of  life  or  accident  insur- 
ance company  to  subrogation,  see  note 
inl8L.R.A."(N.S.)  211.    On  right  of 
action  of  one  legally  responsible  for   carrier  m  accident  policies,  see  §  2862 
another's  death  against  a  third  person   herein. 

whose   negligence   caused    the   death,       As  to  agent  and  insurance  by  car- 
see  note  in  36  L.R.A. (N.S.)  61.     On   rier,  see  §  630  herein, 
right  of  insurer  who  has  paid  loss  to        ^^  j^^jjatjeip^iia      JVlilling      Co.      v. 

815 


^§  :538a,  338b  JOYCE  ON  INSURANCE 

An  agreement  made  bv  carriers  bv  water,  in  consideration  of  the 
shipping  of  goods  and  of  the  money  to  be  paid  for  its  carriage,  that, 
they  would  ])ro<ure  insurance  of  tlie  goods  against  loss  by  lire  in  a 
consignee's  open  lire  policy,  from  the  time  received  until  delivery 
to  the  consignee,  is  not  a  contract  of  insurance,  nor  a  maritime  con- 
tract, even  though  a  contract  of  insurance  may  be  a  maritime  con- 
tract.^3 

§  338a.  Burglary  insurance. — Burglary  insurance  falls  under  tho 
general  designation  of  insurance  and  is  within  a  statutory  condition 
j)recedent  to  obtaining  a  license  to  carry  on  insurance  business."  So 
a  corporation  is  an  insurance  company  where  it  has  a  system  of 
protection  against  burglary  and  fire  b\'  means  of  wire  connections 
and  the  contract  is  based  upon  a  consideration  of  periodical  pay- 
ments, and  an  indemnity  up  to  a  specified  amount  in  ca.'^e  of  loss  is 
to  be  paid  by  the  company.^* 

§  338b.  What  is  not  insurance  on  automobiles. — A  guarantee  or 
indemnity  policy  does  not  constitute  insurance  authorized  by  statute 
"upon  automobiles,  wdiether  stationary  or  being  operated  under  their 
own  power  against  any  hazard,"  nor  is  it  an  insurance  upon  proi)er- 
ty,  where  the  indemnity  provided  is  against  loss  or  expense  result- 
ing from  claims  upon  the  assured  for  damages  by  reason  of  the 
ownership,  maintenance,  manipulation  or  use  of  any  automobile, 
on  account  of  injury  to  or  death  of  persons  resulting  from  accident, 
or  on  account  of  damage  to  or  destruction  of  proi)t>rty,  with  certain 
exceptions,  said  provisions  being  connected  with  an  agreement  to 
defend  suits,  pay  costs,  and  reimburse  insured  for  the  expense  of 
providing  medical  aid  for  immediate  relief  when  imperative  in 
case  of  accident. ^^ 

Smoker   T\Terf'li;in<lise   Co.    100    Ark.  _As    contract    of    indomnity,    see    § 

37,  139  S.  W.  680.  27f  liereni. 

Carriers   as   insurers,   see    notes    3  On    hurulary   and   tlieft   insurance, 

L  I\  A.  424;  1  L.R.A.  TOli.  see  notes  in  4(i  I..lx.A.(N.S.)  oO'J,  and 

"Citvof  ClarksvUle,  The  (U.  S.  D.  47  L.R.A.(N.S.)   -JOIi. 

C.)  94  Fed.  201,  205.  ^^  Wood  v.  Gross,  Rap    Jud.  Que- 

As    to    lia})ility    of    warehouseman  bee,  5  B.  R.  116. 

under    aiireement    witli     carriers     to  ^^  ^\^,„ei.if.j)„  ^^nt^omobile  Ins.  Co.  v. 

insure,  see  §  2750  lierein.  Palmer,  174  IMich.  295,  140    N.    W. 

As  to  limitation  ofliabilitv  of  ship-  r)r)7,    42    Ins.    L.    J.    885,    Pub.    acts 

owners  under  acts  of  Congress  1894,  1869,  No.  136,  as  am'd  by  Pub.  acts 

18.')1.    See  Great  Lakes  Towiug  Co.  v.  1911,  No.  15,  sec.  1.     The  court,  per 

Mills  Transp.  Co.  If).')  Fed.  11,  83  C.  Moore,  J.,  said :     "The  primary  ques- 

C.  \.  607,  22  L.R.A. (N.S.)   769,  and  tion    presented    for   determination    is 

note.  whether  or  not  in  that  act  the  words 

"United  States  Fidelity    &    Guar-  'any    hazard'    mean    'any   hazard'    or 

anty  Co.  v.  Linehan,  73  N.  11.  41,  58  'any     hazard    except     personal     lia- 

Atl.  958,  33  Ins.  L.  J.  1023.  bility.'      .      .      .      The    language    of 

816     . 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §§  338c-338e 

§  338c.  When  bicycle  association  not  insurance  company. — A 
mutual  protective  association  is  not  an  insurance  company  where 
it  was  chartered  for  the  purpose  of  the  accumulation  of  a  fund  de- 
rived from  the  payment  of  a  fixed  annual  due  and  certain  specified 
amounts  periodically  for  the  protection  of  its  members,  by  virtue 
of  which  payments  they  became  entitled  to  have  their  bicycles 
cleaned;  also  repaired  when  damaged  by  accident,  or  replaced  when 
destroyed  by  accident;  the  tires  repaired  when  punctured  by  acci- 
dent; and  the  bicycle  replaced  when  stolen,  if  not  recovered  in  a 
certain  time,  and  to  provide  a  bicycle  during  that  time.  Such  cor- 
poration does  not  fall  within  a  statutory  class  authorized  to  make 
insurance  against  loss,  damage  or  liability,  "arising  from  any  un- 
known or  contingent  e\ent  whatever."  ^"^ 

§  338d.  Sanitary  inspection  of  buildings,  etc.,  is  not  insurance. — 
The  inspection  and  certification  as  to  the  sanitary  condition  of 
buildings  and  premises  is  not  insurance,  within  the  New  York 
statute.^* 

§  338e.  Contracts  to  compensate  unemployed  employees. — An 
association  incori)orated  for  the  purpose  of  selling  contracts  to  em- 
ployees to  compensate  them  when  out  of  employment  is  an  insur- 
ance company  within  a  statute  regulating  insurance  companies  and 

the  statute  is  not  complex.  Au-  or  indemnifying-  against  injury  or  lia- 
thority  is  given  to  make  insurance  bility  for  injury  cau;?ed  tliereby,  see 
on  automobiles.  If  it  was  an  in-  notes  in  44  L.R.A.(N.S.)  7U;  51 
suranee  on  the  automobile  against  L.R.A. (N.S.)  583;  and  L.R.A.1915E, 
fire,    that    would    be    a    recognized   575. 

hazard  to  wliich  automobiles  are  ^''Commonwealth  (ex  rel.  Hensel) 
subject.  If  it  was  an  insurance  v.  Provident  Bicycle  Assoc.  178  Pa. 
on  the  automobile  against  theft,  that,  63G,  30  W.  N.  C."498,  36  L.R.A.  589, 
too,  would  be  a  recognized  hazard  to    36  AU.  197. 

which  the  automobile  is  subject.  So  On  insurance  of  bicycles,  see  notes 
of  injury  by  accident,  and  the  lia-  in  47  L.H.A.  307,  and  47  L.R.A. 
bility   in   each   case    would    not    be    (N.S.)  298. 

greater  than  the  value  of  the  auto-  ^®  Pco]jle  (ex  rel.  Woodward)  v. 
mobile.  Is  not  the  relator  doing  more  Rosendale,  142  N.  Y.  126,  36  N.  E. 
than  placing  insurance  on  auto-  806;  reversing  2^5  N.  Y.  Supp.  769. 
mobiles?  .  .  .  We  think  it  is  a  The  court  said:  "This  is  not  insur- 
strained  construction  of  language  to  ance  in  any  legal  sense,  but  an  entire- 
say  that  a  contract  of  this  sort  is  ly  distinct  kind  of  business  not  with- 
simply  the  placing  of  insurance  on  in  the  purview  of  the  statute  now 
an  automobile.  The  liability  thus  under  consideration.  We  therefore 
created  is  not  limited  l)y  the  value  of  hold  that  the  lieclaration  and  charter 
the  automobile.  Instead  of  being  of  the  proposed  company  were  not  in 
property  insurance,  it  makes  a  con-  accordance  with  tlie  requii'einenfs  of 
tract  of  an  entirely  different  char-  law,  and  are  not  entitled  to  be  tiled 
aeter  from  that  authorized  by  the  in  the  odice  of  the  superintendent  of 
amendment."  insurance." 

On  insurance  covering  automobiles, 
Joyce  Ins.  Vol.  I.— 52.  817 


§§  339,  339a  JOYCE  ON  INSURANCE 

applying  to  all  kinds  of  insurance  except  that  of  life,  and  requiring 
a  license  from  all  insurance  companies  whose  object  is  to  transact 
business  within  the  state. ■^^ 

§  339.  When  guaranty  or  surety  company  contracts  constitute 
insurance. — A  class  of  contracts  generally  designated  as  guarantee 
insurance  has  been  before  the  courts  in  numerous  cases  for  adjudi- 
cation. This  class  comprises  fidelity,  title,  credit,  bond  and  contract 
guaranty  generally,  and  after  much  discussion  it  seems  to  be  well 
settled  that  these  contracts  are  essentially  those  of  insurance  where 
the  companies  engage  in  the  business  for  profit  and  where  the  terms 
of  the  contract  itself  closely  resemble  the  essential  elements  of  an 
insurance  contract,  so  that  the  rights  and  liabilities  of  the  parties 
are  governed  by  the  rules  of  construction  applicable  to  insurance 
rather  than  by  the  rule  strictissimi  juris  which  determines  the 
rights  of  ordinary  guarantors  or  sureties  without  pecuniary  consid- 
eration. The  application  of  this  rule  will  appear  under  the  next 
following  sections.^"  But  an  insurance  company  is  not  a  guaranty 
or  security  company  within  the  ordinary  meaning  of  that  term 
within  a  statutory  declaration  of  what  is  meant  by  guaranty  or 
security  company.'^ 

339a.  Fidelity  guaranty  bonds  or  contracts  constitute  insur- 
ance.^''— The  bonds  or  contracts  of  those  companies  which  guaran- 
tee the  fidelity  of  employees  and  which  make  the  business  one  for 
profit  are  essentially  insurance  contracts.  This  is  well  settled,  not 
only  by  express  adjudications  but  also  inferentially  by  those  deci- 
sions where  these  contracts  are  involved  but  where  the  point  is  not 

Instate  (ex  rel.  National  Em-  persons:  "The  overwhelming  weight 
plovces'  Assoc.)  v.  Barton,  92  Neb.  of  authority  supports  the  proposition 
666,  139  N.  W.  225.  that  the  rule  of  strictissimi  juris  by 

2°  As  contracts  of  indemnity,  see  which  the  rights  of  uncompensated 
§§  27h,  27i,.  271  herein.  sureties     are     determined,     is     not 

"Many  companies  issue  'guaranty  applicable  to  the  contracts  of  surety 
policies.'  The  use  of  the  word  'policy'  companies  which  make  the  matter  of 
or  'insurance'  does  not  neces.'^arily  de-  suretyship  a  business  for  profit :  that 
termine  whether  a  contract  is  one  of  their  business  is  essentially  that  of  in- 
insurance  or  guaranty;  the  whole  snrance:  and  that,  therefore.,  their 
contract  must  be  looked  at  in  order  to  rights  and  liabilities  under  their  con- 
ascertain  its  real  nature,  and  whether  tracts  will  be  governed  by  the  laws  of 
the  parties  contemplated  the  rights  insurance."  Note  33  L.R.A.(N.S.) 
and  duties  of  principal    and    surety   513-519. 

or  of  assurer  and  assuree."     6  Ren-       On  what  constitutes  insurance,  see 
ton's  Ency.  of  Laws  of  Eng.  p.  106.  note  in  47  L.R.A.(N.S.)  290. 
See  Dane"  v.    Mortsrage    Ins.    Corp.       ^  ^tna  Life  Ins.  Co.  v.  Coulter,  25 
Law  Rep.  [1894]  l^Q.  B.   54,  noted   Ky.  L.  Rep.  193,  197,  74  S.  W.  1050, 
under  §  339c  herein.  a  case  of  assessment    of    a    foreign 

Character  of,  and  rules  governing   company    for    franchise    tax.      Ky. 
contracts    by    corporations    engaged    Stat.  1899. 
for  profit  in  business  of  guarantying       ^^  See  §  339  herein, 
the    fidelity    or    contracts    of    other 

818 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  33iib 

discussed  as  it  is  evidently  conceded  bv  the  contract  beino;  dealt 
with  as  one  of  insurance.^  Po  a  bond  given  to  indemnify  a  county 
treasurer  against  loss  occurring  through  acts  of  a  dejDuty  treasurer 
is  to  be  treated  as  a  contract  of  insurance  and  is  to  be  construed 
against  the  insurer  as  the  rule  strictissimi  juris  does  not  apply  to  a 
surety  for  hire.^  It  is  declared  in  a  Georgia  case  that,  under  the 
Code  *  there  is  a  well  recognized  difference  between  a  contract  of 
suretyship  and  of  guaranty,  but  it  was  not  necessary  to  determine 
whether  the  contract  involved  was  one  of  suretyship  or  of  fidelity 
insurance  as  it  possessed  some  of  the  features  of  both  and  that  that 
point  was  not  the  real  question  in  issue.* 

§  339b.  Same  subject. — In  the  Federal  supreme  court  the  rule  of 
construction  governing  insurance  contracts  is  applied  to  fidelity 
guaranty  contracts.^  And  in  the  lower  Federal  court  a  bond  guar- 
antying against  loss  and  dishonesty  of  a  cashier  of  a  bank  is  in  effect 
one  of  insurance  although  the  attitude  of  a  "surety"  is  assumed  by 
the  form,'  and  it  is  also  determined  that  the  law  of  insurance  ap- 
plies by  analogy.'  In  Arkansas  a  bond  insuring  the  fidelity  of  an 
employee  issued  by  a  paid  surety  is  not  an  ordinary  obligation 
given  by  a  surety,  but  is  an  indemnity  bond  in  the  nature  of  a  con- 

2  See   Champion   lee   Manufartur-  Supp.     523,     31     Misc.    433,    affd 

ins:  &  Cold  Storage  Co.   v.   American  (mem.)    66    N.    Y.    Supp.    1140,    7A 

Bonding  &  Trust  Co.  25  Ky.  L.  Rep.  App.    Div.    633;    Buchner    v.    Title 

239,  75  S.  W.  197;  Nortliem  Assur.  Guaranty  &   Surety   Co.   128   N.   Y. 

Co.  of  England  v.  Borgelt,  67  Neb.  Supp.  1007,  —  App.  Div.  — ,  40  Ins. 

282,  93  N.  W.  226.     As  to  the  latter  L.  J.  1510. 

class  of  decisions  see  the   following  South  Carolina. — Walker  v.  Holtz- 

cases :  claw,  57  S.  Car.  459,  35  S.  E.  754. 

United   States. — Missouri,    Kansas  On   contracts   guarantying   fidelity 

&   Texas   Trust   Co.   v.   (terman   Na-  of  employees  as  insurance,  see  note 

tional  Bk.  77  Fed.  117,  23  C.  C.  A.  in  47  L.R.A.(N.S.)   295. 

65;       Supreme       Council       Catholic  ^American  Surety  Co.  of  N.  Y.  v. 

Knights    of    America   v.    Fidelity    &  Pangburn,  182  Ind.  116,  105  N.  E. 

Casualty  Co.  63  Fed.  48,  11  C.  C.  A.  769. 

96.  *Civ.     Code     (1910)     sees.    2550, 

loiva.  —  Perpetual   Building  and  3538. 

Loan  Assoc,  v.  United  States  Fidolitv  *  John    Church    Co.    v.    ^ICtna    In- 

&  Guarantee  Co.  118  Iowa,  729,  92  demnity  Co.  13  Ga.  App.  826,  Stt  S. 

N.  W.  686.  E.  1093. 

Minnesota.— Fidelity    &    Casualty  ^American    Surety    Co.   v.    Paulv, 

Co.  V.  Grays,  76  Minn.  450,  79  N.  W.  170  U.  S.  133,  42  L.  ed.  977,  18  Sup. 

531;    Eickhoff  v.   Fidelity   &    Casu-  Ct.  552,  s.  c.  170  U.  S.  160,  42  L. 

alty    Co.    74    Minn.  139,  76  N.  W.  ed.  987,  18  Sup.  Ct.  563. 

1030;    Fidelitv    &    Casualty    Co.    v.  ''^Guarantee  Co.  of  North  America 

Eickhoff,  63  Minn.  170,  56  Am.  St.  v.  Merchants'  Sav.  Bk.&  Trast  Co. 

Rep.  464,  30  L.R.A.  586,  65  N.  W.  80  Fed.  766,  772,  26  C.  C.  A.  146. 

351.  '  Mechanics  Savings  Bank  &  Trust 

New  Yor/c.— People    (ex    rel.    Na-  Co.  v.  Guarantee  Co.   (U.  S.  C.  C.) 

tional  Surety  Co.)  v.  Feilncr,  IGG  N.  0*8  Fed.  459. 
Y.  129,  59  N.  E,  731,  s.  c.  65  N.  Y. 

819 


§  339b  JOYCE  ON  INSURANCE 

tract  of  insurance.^  It  is  also  declared  in  Illinois  that  guaranty 
insurance  by  whatever  name  called  is  an  insurance  contract,"  and 
in  tiiat  state  guarantying;  tlie  fidelity  of  oflicers  and  the  perform- 
ance of  contracts  is  insurance  within  a  statute  excepting  insurance 
business  from  those  for  which  corporations  may  be  formed,  al- 
though such  insurance  is  of  a  kind  not  known  at  the  time  of  the 
I)assage  of  tlie  enactment  and  provision  is  made  in  another  statute 
for  corporations  to  transact  all  kinds  of  insurance  then  known.^^ 
In  Kentucky  the  contract  expressed  in  a  fidelity  bond  is  but  a  form 
of  insurance  witliin  the  rule  that  ambiguities  must  be  construed 
most  strongly  against  the  insurer.^^  It  is  also  decided  in  that  state 
that  such  contracts  are  those  of  insurance  and  are  equally,  as  well 
as  policies  of  life  and  fire  insurance,  within  a  statute  as  to  repre- 
sentations and  warranties.^3  Under  a  Michigan  decision  a  bond  for 
indemnity  against  loss  through  default  of  an  employee  makes  the 
surety  an  insurer  in  all  essential  particulars  and  subject  to  the  same 
rules  as  fire  and  life  insurance  companies  in  regard  to  a  general 
agent's  authority.^*  So  in  Missouri  these  companies  are  classed  as 
insurers  and  their  contracts  interpreted  by  the  rules  applicable  to 
ordinary  insurance  contracts.^*  Under  a  North  Carolina  decision 
a  fidelity  indemnity  bond,  given  by  a  surety  company,  which  in  its 
form  and  essence  resembles  an  insurance  contract  and  difi'ers  ma- 
terially from  the  ordinary  forms  of  bonds  should  be  placed  in  the 
general  class  of  insurance  policies,  at  least  so  far  as  the  same  general 
principles  of  construction  apply.^^  In  Tennessee  employers'  in- 
denmity  or  fidelity  bonds  are  contracts  of  insurance,^'  and  a  lidehty 
corporation  is  an  insurance  company  within  the  statute  of  that  state 
imposing  a  privilege  tax  on  insurance  companies,^^  and  a  statute  as 

9  Title  Guaranty  &   Surety  Co.  v.  Surety   Co.    159    Midi.   102,   123   N. 

Bank    of    Fulton,"   89    Ark.    171,    33  W    019.        ^            ^                  „ 

L  R  A  ( N.S. )  U7G,  117  S.  W.  537,  38  ^^  Long     Bros^     Grocery     Co.     v. 

^-      T^T    709  United    States   Fidelitv   &   Guaranty 

3  ^ri  let  ttf  '■ '""'  ^^^^^'^^:^  Se^Lf^ 

-^^,ii^-  1?-'/°^  7  ft'         \       R.«a     Surety  Co.  130   Mo.  App.  401,  110 
"People  (ex  reblvasson)  V.Rose,    <;;^^y-^-j^ 

16  Bank  of  Tarboro  v.  Fidelity  & 


246 


6-                                       .          .        P  Deposit  Co.  128  N.  Car.  366,  83  Am. 

12  Champion  Ice  Manufacturing  &  g^    j^^p    gg2,  38  S.  E.  908. 

Cold  Storage  Co.  v.  American  Bond-  'n  Hunter  v.  United  States  Fidelity 

ing  &  Trust  Co.  115    Ky.    863,    103  ^  Guaranty  Co.  129  Tenn.  572,  167 

Am.  St.  Rep.  356,  75  S.  W.  197.  g,  w.  692. 

"Fidelity     &     Guaranty     Co.     v.  is  American    Surety    Co.    y._Folk, 

Western  Bk.  29  Ky.  L.  Rep.  639,  94  124   Tenn.   139.   135   S.   W.   7/8,  40 

S.  W.  3,  35  Ins.  L.  J.  692.  Ins.  L.  J.  1074  and  note,  Laws  1907, 

"Crystal  Ice  Co.  Ltd.    v.    United  c.  541,  sec.  6. 

820 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  339e 

to  representations  and  warranties  also  applies  to  such  fidelity  bonds.** 
In  Texas  the  rule  of  construction  against  the  insurer  applies  to  fi- 
delity indemnity  contracts.^"  So  in  Wisconsin  bonds  of  this  char- 
acter have  all  the  essential  features  of  insurance  contracts/  so  as  to 
make  the  rule  of  construction  against  the  insurer  applicable.^ 

§  339c.  Contract  to  indemnify  "assured"  for  banks'  default  is 
contract  of  insurance:  bond  to  secure  deposits. — If  a  party  desig- 
nated as  tlie  assured  be  guaranteed  under  an  instrument  purporting 
to  be  a  policy  of  "insurance"  against  the  loss  of  a  sum  of  money  de- 
posited in  a  bank,  it  is  a  contract  of  insurance.^  In  this  case  there 
was  a  contract  under  which  "the  Mortgage  Insurance  Corporation, 
Limited,"  guaranteed  to  a  depositor  in  a  certain  bank  the  payment 
of  the  amount  deposited,  should  the  bank  fail  to  pay.  The  con- 
tract used  these  words:  "This  policy  of  insurance/'  and  the  court 
in  construing  the  same  said:  "It  seems  to  me  that  the  intention 
was  this  contract  should  be  one  of  insurance,  and  that  those  who 
entered  into  it  with  the  plaintiff  should  be  in  the  position  of  under- 
writers. Here  the  policy  recites  that  the  plaintiff  is  the  holder  of  a 
deposit  receipt  for  one  thousand  pounds  of  the  Commercial  Rank 
of  Australia,  and  is  desirous  of  being  'insured'  as  thereinafter  ap- 
pearing, and  the  defendants  thereby  in  effect  promise  to  ))ay  the 
assured  the  .principal  sum  if  the  debtors  have  made  default  in  so 
doing.  What'the  defendants  have  done,  as  it  appears  to  me.  is  to 
insure  payment  of  the  deposit  receipt  according  to  the  contract  made 
between  the  depositor  and-  the  bank,  i.  e.,  that  the  bank  will  pay  the 
amount  at  the  date  fixed  by  that  contract  for  payment.  The  policy 
is  not  a  guaranty  that  the  bank  will  be  able  to  pay.  It  is  a  posi- 
tive, direct  contract  that  if  the  bank  does  not  pay  a  certain  sum  on 
a  fixed  day,  the  insurance  company  will  pay  that  amount."  *  So 
companies  organized  for  the  purpose  of  guarantying  the  repay- 
ment of  deposits  in  state  and  national  banks  are  within  the  Kansas 
statute  relating  to  the  incorporation  of  surety,  fidelity,  and  guaran- 
ty companies.* 

19  First  National  Bank  v.  United  (Eng.  C.  A.  isn4),  1  Q.  B.  Div.  54. 
States  Fidelity  &  Guaranty  Co.  110  See  §  339  iierein.  Examine  Shaw  v. 
Tenn.  10,  75  S.  W.  1076.  R(pyfe,  Ltd.    [1011]   1  Law  Rep.  Ch. 

20  Griffin  v.  Znber,  52  Tex.  Civ.  D.  138,  considered  under  §  339d 
App.  288.  113  S.  W.  961.  herein. 

1  First  National  Bank  v.  United  *  See  Young  v.  Trustee  Assets  & 
States  Fidelitv  &  Guaranty  Co.  150  Invest.  Ins.  Co.  Ld.  (Scot.  C.  S. 
Wis.  601,  137  "N.  W.  742.  1894),  31  Scot.  L.  R.  199. 

2  U^nitod  American  Vive  Ins.  Co.  v.  *  Bankers'  Deposit,  Guaranty  & 
American  Bonding  Co.  of  Bait.  146  Surely  Co.  v.  Barnes,  81  Kan.  422, 
AVis.  573,  40  L.R.A.(N.S.)  661n,  131  105  Pae.  697,  Laws  1905,  e.  159,  sec. 
N.  W.  994,  40  Ins.  L.  1805.  1,  p.  223. 

^  Dane  v.  Mortgage  Ins.  Coiji.  Ld.       As  to  bond  given  to    secure    mu- 

821 


§  339d  JOYCE  ON  INSURANCE 

t 

§  339d.  When  contract,  bond,  mortgage  and  securities  guaranty- 
do  and  do  not  constitute  insurance.^ — A  surety  or  bonding  company 
organized  under  the  Nebraska  statute  "regulating  insurance  com- 
panies" and  whose  declared  businass,  among  other  chartered  ]Hir- 
poses,  is  to  be  responsible  for  any  violation  of  contract  or  statutory 
duty  of  the  principal  for  whose  conduct  it  becomes  responsible  is  in 
its  character  an  insurance  and  this  applies  where  such  a  company 
becomes  surety  on  the  bond  of  a  licensed  saloon  keeper.'  Under 
the  New  York  Insurance  Law  which  classifies  as  insurance  com- 
panies those  guarantying  the  performance  of  contracts  other  than 
insurance  policies  and  executing  or  guarantying  bonds  and  under- 
takings required  or  permitted  in  all  actions  or  proceedings  or  by 
law  required,*  and  also  limiting  the  amount  of  risk  to  which  an  in- 
surance company  may  expose  itself,^  a  surety  company  is  an  insur- 
ance company  and  is  not  exempt  from  such  limitation  of  hazard." 
In  a  South  Dakota  case  a  bond  of  indenniity  against  liability  on  an 
undertaking  in  a  criminal  action  Avas  given,  dndemnity  being  de- 
fined under  the  statute  as  a  contract  by  which  one  agrees  to  save 
another  from  a  legal  consequence  of  the  conduct  of  one  of  the 
parties  or  of  some  other  person,  and  a  distinction  was  made  by  the 
decision  between  an  indemnity  contract  as  an  independent  one,  and 

nieipal    funds    deposited    with    trust  guaranty)  ;     American_    Credit     In- 

company:   action  for  premiums,   see  demnity  Co.  v.  Wood,  73  Fed.  81,  19 

Fidelity  &  Desposit    Co.    of    Md.    v.  C.  C.  A.  2(34  (credit  guaranty). 

Commonwealth    Trust    Co.    65    Misc.        ArkamaH. — American  Bonding  Co. 

88,  110  N.  Y.  Supp.  598.  v.    :\Iorro\v,    80    Ark.    49,    1],     Am. 

As  to  bond  given  for  repayment  of  St.  Kep.  72,  90  S.  W.  (J13  (lideiity). 

deposits  or  money  received  for  trans-       Illinois. — People   (ex  rel.  Kasson) 

mission  to  foreign  countries  by  sellers  v.  Rose,  174  Til.  Ml 9,  44  L.R.A.  124. 

of   foreign  steamship   tickets,   under  51  N.  E.  246  (fidelity). 

N.  Y.  Laws  1908,  c.  479.     See  Russo        Iowa. — Van     Bureu      County      v. 

V.    Illinois    Suretv    Co.    12.')    N.    Y.  American  Surety  Co.  137  Iowa,  490, 

Supp.     991,     141'    App.     Div.     690.  115  N.  W.  24   (building  contractor's 

Examine  Cappadona  v.  Illinois  Sure-  bond;  public). 

ty  Co.  08  Misc.  470,  125  N.  Y.  Supp.        H'/scows/h.— Sbakman     v.     United 

lO''    under  same  statute;  Mattone  v.  States   Credit    System    Co.    92    Wis. 

Illinois  Suretv  Co.  121!  N.  Y.  Supp.  :160,  32  L.R.A.  383,  53  Am.  St.  Rep. 

230,  under  same  statute.  920,  66  N.  W.  528  (credit  guaranty). 
6  See  §  339  herein.  *  N.  Y.  Ins.  Law  (L.  1892,  c.  (i90), 

"^  Sullivan  v.  Radznweit,    82    Neb.  sec.  70,  and  aindts.  L.  1895,  e.  917;  L. 

657,  118  N.  W.  571  (Gen.  Stat.  Neb.  1899,  c.  093:  L.  1901,  c.  634;  L.  1905, 

1873,  c.  23),  citing  U.  S.  Guarantee  c.  5/3;  L.  1900,  c.  326. 

Co.  of  North  America   v.   Mechanics'       »  N.  Y.  Ins.  Law  (L.  1892,  c.  690) 

Savings  Bank  &  Trust  Co.  183  U.  S.  §  24.  aindts  L.  1906,  c.  32(). 

402,  46  L.  ed.  253,  22  Sup.  Ct.  124        1°  Industrial  &  General  Trust,  Ltd. 

(fidelity)  ;     Tebbets     v.     Mercantile  v.  Tod,  67  N.  Y.  Supp.  302,  56  App. 

Credit 'Guarantee   Co.    of   N.   Y.    73  Div.  39. 

Fed.    95,   19    C.    C.    A.    281    (credit 

822 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  339e 

a  contract  of  guaranty  or  suretyship  as  one  collateral  to  a  principal 
existing  contract,  but  the  question  of  insurance  as  such  was  not  dis- 
cussed.^^ Under  an  English  decision  a  contract,  called  a  policy  and 
which  purported  to  insure  a  mortgage  debt  and  securities,  was  held 
to  be  a  contract  of  suretyship  and  not  of  insurance  but  that  whether 
the  contract  was  one  of  suretyship  or  insurance  the  company  and 
surety  were,  under  the  facts  of  the  case  liable  to  contribute  in  pro- 
portion to  their  respective  liability  as  their  position  was  that  of  per- 
sons under  a  common  liability  arising  in  the  same  transaction  which 
had  been  paid  by  one  of  them.^^  This  case  is,  however,  distin- 
guished in  another  English  decision.  As  where  certain  debentures 
were  issued  by  a  guaranty  company  forming  part  of  an  issue  se- 
cured by  a  trust  deed,  which  provided  that  the  debentures  should 
be  guaranteed  by  a  guaranty  trust  society  which  was  to  be  trustee 
for  the  debenture-holders  in  consideration  of  a  remuneration  for 
services  as  trustee  at  a  stipulated  premium,  it  was  held  that  the 
guarantee  was  in  the  nature  of  a  policy  of  insurance  as  well  as  a 
contract  of  suretyship  and  was  not  destroyed  by  the  disappearance 
of  the  debt.^'  Under  an  Illinois  decision  a  mortgage  guaranty  com- 
pany or  one  organized  for  the  purpose  of  guarantying  the  per- 
formance of  contracts,  bonds,  recognizances  and  indebtedness  of 
every  kind,  secured  by  real  estate  mortgage  or  deed  of  trust  cannot 
be  organized  mider  the  casualty  insurance  act  of  Illinois,"  but  may 
be  organized  under  the  surety  act  ^^  of  that  state  although  such  a" 
company  might  be  classed  as  guaranty  or  casualty  insurance  com 
pany.^® 

§  339e.  Guaranty  to  repay  loan  is  contract  of  insurance.^"^ — An 
instrument  whereby  underwriters  at  Lloyds  agreed  to  ■"guarantee" 

11  W&stern  Surety  Co.  v.  Kellev,  27  and  Finley  v.  Mexican  Investment 
S.  Dak.  465,  131  N.  W.  808.    '  Cor])oration  [1807]  1  Q.  B.  517,  than 

12  Denton's  Estate,  In  re  (TjicoiKst's,  the  document  wliioli  wa.^  under  dis- 
Insurance,  Corporation  &  (Juarantoe  cussion  in  In  re  Denton's  Estate 
Fund,  Ltd.  v.  Denton)  [1003]  Law  [li)04]  2  Ch.  178.  Without  soin,^ 
Rep.  Ch.  Div.  670,  2  Ch.  178.  See  ^  more  into  tlie  matter  T  thitdc  there 
330c  herein.  are  material  di.stinctions  between  tliis 

1^  Shaw  v.  Royce,  Ltd.  [1911]  1  document  and  the  one  discussed  in 
Law  Rep.  Ch.  D.  138  (a  case  of  a  In  re  Denton's  Estate,  and  no  ma- 
majority  of  bon(thoIders  binding  tlie  terial  distinctions  between  this  and 
minority,  and  for  an  injunction),  the  documents  discussed  in  the  other 
The  court,  per  Wasliin2:ton.  J.,  two  cases."  See  §  330c  herein, 
said:  "I  think  this  document,  which  i*  Par.  7,  sec.  1  (Kurd's  Stat. 
contains  an  obli<?ation  on  the  part  of  1013,  p.  1466). 

the  society,  to  arise  only  in  case  of  i*  Act  1800   (ITurd's  Stat.  1913,  p. 

default,  is  more  like    the    documents  602). 

which  were  the  subject  of  discussion  1^  People     (ex     rel.     Goslins:)      v. 

in  the  case  of  Dane  v.  Mort^aoe  Ins.  Pott.'^.  264  111,522.  106  N.  E.  524. 

Corporation     [1894]     1    Q.     B.    54,  i'  g^e  §  339  herein. 

823 


§  339f 


JOYCE  ON  INSURANCE 


to  a  bank  to  repay  a  loan,  which  instrument  is  deposited  with  the 
bank  as  security  for  a  loan  made  to  a  syndicate  ui)on  the  personal 
guaranty  of  two  of  the  directors  of  the  syndicate  is  with  respect  to 
said  undenvriters'  contract,  a  contract  of  insurance  and  not  of  sure- 
tyship, and  the  latter  havino;  paid  the  loss  are  subrogated  to  the 
rights  of  assured,  and  the  underwriters  and  the  sureties  do  not  stand 
in  the  relation  of  co-sureties.''* 

§  339f.  When  building  contractor's  bonds  are  insurance  con- 
tracts.^^— The  rule  that  the  bonds  of  surety  companies,  who  en- 
gage in  the  business  for  profit,  are  essentially  insurance  contracts 
governed  by  the  rules  of  construction  applicable  thereto  rather  than 
by  the  rules  applicable  to  suretyship  applies  also  to  building  con- 
tractor's bonds.  Thus  in  a  Pennsylvania  case  a  surety  company 
became  surety  on  the  bond  of  a  contractor  for  the  erection  of  a 
schoolhouse,  said  bond  being  given  under  a  city  ordinance  to  secure 
payment  to  subcontractors  and  others  for  labor  and  materials  sup- 
plied in  the  prosecution  of  the  work,  and  the  court,  per  Moschzisker, 
J.,  quoting  with  approval  from  anotlier  case  in  that  state,  said: 
"  'The  trend  of  all  our  modern  decisions,  state  and  federal,  is  to  dis- 
tinguish between  individual  and  corporate  suretyship  where  the 
latter  is  an  undertaking  for  money  consideration  by  a  company 
chartered  for  the  conduct  of  such  business.  In  the  one  case  the  rule 
of  strictissimi  juris  prevails  as  it  always  has,  with  respect  to  the 
other,  because  it  is  essentially  an  insurance  against  risk,  underwrit- 
ten for  a  money  consideration  by  a  corporation  adopting  such  busi- 
ness for  its  own  profit,  the  courts  generally  hold  that  such  a  com- 
pany can  be  relieved  from  its  obligation  for  suretyship  only  where 
a  departure  from  the  contract  is  shown  to  be  a  material  variance. 
.  While  such  corporations  may  call  themselves  surety  com- 
panies, their  business  is  in  all  essential  particulars  that  of  insur- 
ance. Their  contracts  are  usually  in  the  terms  prescribed  by  them- 
selves, and  should  l)e  construed  most  strictly  in  favor  of  the  ol>ligee.'  " 
And  the  court  continues  as  follows:  "Here  the  bond  was  for  the 
protection  of  subcontractors  and  others  in  the  construction  of  a 
public  building.  It  differs  from  the  ordinary  suretyship  in  that 
it  is  not  an  obligation  for  the  performance  of  any  particular  con- 
tract. It  was  given  for  the  benefit  of  all  ])ersons  who  might  furnish 
labor  or  material  in  the  course  of  the  work,  whetlier  the  contracts 
for  such  labor  and  materials  were  in  existence  at  the  time  the  bond 
was  executed  or  not,  and  without  regard  to  the  terms  of  purchase, 
whether  for  cash  or  credit.     In  its  nature  the  obligation  was  mOre 


18  Parr's  Bank 
Syndif-ate  (1900) 
Mathew,  J. 


V.    Albert    INIines 
5  Com.   Cas.  116 


^^  See  §  339  herein. 


824 


DIFFERENT  FORMS  OF  INSURANCE  CLASSIFIED    §  339f 

of  a  contract  of  insurance  than  of  suretyship."  ^^  Under  a  Mary- 
land decision  it  appeared  that  the  indemnity  company  in  a  letter 
to  insured,  as  was  said  by  the  court,  characterized  "the  bond  very 
properly  as  a  contract  of  insurance."  ^  In  an  Iowa  case,  a  bond  for 
the  faithful  performance  of  a  building;  contract,  it  is  held  that  the 
suretyship  was  not  gratuitous,  and  as  the  bond  was  prepared  by  the 
company  for  the  purpose  of  furnishing  security  for  hire,  the  rules 
applicable  to  guaranty  insurance  governed  and  if  the  language  of 
the  bond  is  in  doubt,  and  is  fairly  and  reasonably  susceptible  of  two 
constructions,  one  favorable  to  the  obligee  and  the  other  to  the 
surety,  the  one  favoral)le  to  the  obligee  should  be  adoi)ted.2  So  in 
Minnesota  a  guarantee  insurance  bond  given  to  secure  the  perform- 
ance of  a  building  contract,  and  entered  into  by  a  surety  company 
engaged  in  the  business  for  profit  is  to  be  construed  by  the  rules 
governing  ordinary  insurance  contracts,  and  not  by  the  rules  of 
construction  governing  contracts  of  suretyship,  as  such  guarantee 
bonds  are  in  effect  insurance  contracts,  even  though  in  form  they 
resemble  those  of  suretyship.'  So  under  a  Washington  decision 
a  guaranty  company  which,  for  a  compensation,  becomes  surety  on 
a  building  contractor's  bond  for  the  faithful  performance  of  his  con- 
tract effects  a  contract  of  insurance  which  cannot  be  distinguished 
in  principle  from  a  fidelity  guarantee  insurance.'*  Under  a  Mis- 
souri decision,  however,  where  the  bond  involved  was  executed,  in 
compliance  with  a  statutory  requirement,  to  a  board  of  education 
by  a  contractor,  conditioned  for  the  faithful  performance  of  a  con- 
tract and  for  the  benefit  of  all  persons  furnishing  material  or  labor 
under  a  contract  to  install  heating,  etc.  apparatus  in  a  school  build- 
ing the  court,  ])er  Norton,  J.  said:  ''Though  a  surety  is  regarded 
as  a  favorite  of  the  law  and  the  obligation  of  suretyship  in  its  ap- 
plication to  concrete  facts  is  therefore  considered  strictissimi  juris, 
the  suretyship  contract  itself  is  nevertlieless  interpreted  and  con- 

20  City  of  Philadelphia  v.  Fidelity  Iowa,  490,  126  Am.  St.  Rep.  290,  115 

&  Deposit  Co.  of  Md.  231  Pa.  208,  80  N.  AV.  24. 

Atl.  62,  quotinf)  from  Young  v.  '  Hornell  &  Co.  v.  American  Bond- 
American  Bonding  Co.  228  Pa.  373,  ing  Co.  112  Minn.  288,  33  L.R.A. 
77  Atl.  623.  (N.S.)    513,    and   note   513-519    (on 

^  TFAna.   Indemnity   Co.   v.   George  character  of  and  rules  governing  con- 

A.  Fuller  Co.  Ill  Md.  321,  338,  73  tracts   by   corporations    engaged    for 

Atl.  738,  743,  74  Atl.  369.     Case  of  profit  in  business  of  guarantying  the 

subcontractor's  bond.  tidelity  or  contracts  of  other  persons) 

2  A.  E.  Sliorthill  Co.  V.  iRtna  In-  128  N.  W.  12,  40  Ins.  L.  .J.  137. 

demnity  Co.  of  Hfd.  145  Iowa,  651,  *  Cowles  v.  United  States  Fidelity 

124  N."W.  612,  619,  c///wr/ Van  Buren  &  Guaranty  Co.  32  Wash.    120,    98 

County  V.  American  Surety  Co.  137  Am.  St.  Rep.  838,  72  Pac.  1032. 

825 


3392  JOYCE  OX  INSURANCE 


o 


strued  in  accord  with  the  identical  rules  which  obtain  with  respect 
to  other  undertakings.  In  other  words  the  terras  employed  in  the 
obligation  are  to  be  given  a  reasonable  interpretation  according  to 
the  intent  of  the  parties  as  disclosed  by  the  instrument  read  in  the 
light  of  surrounding  circumstances  and  the  purpose  for  which  it 
was  made."  The  analogy  of  such  a  bond  to  a  contract  of  insur- 
ance was  not  discussed  and  except  so  far  as  the  above  rule  of  con- 
struction is  applicable  to  insurance  contracts  in  general  with  others 
this  case  is  certainly  not  in  accord  with  the  Pennsylvania  decision 
above  considered.^  And  in  that  state  as  only  a  substantial  compli- 
ance is  required  with  the  contract  of  a  surety  for  hire  the  obligation 
is  not  discharged  by  technical  or  immaterial  variations  from  the 
strict  letter  of  the  contract  and  this  applies  to  a  building  contractor's 
bond.^ 

§  339g.  Title  guaranty  contract  constitutes  insurance. — A  title 
guaranty  contract  constitutes  insurance  within  the  rule  above 
stated.'  And  a  title  insurance  company  is  not  a  surety  where  it 
agrees  to  "indemnify,  keep  harmless,  and  insure"  a  mortgagee 
''from  all  loss  or  damage,  not  exceeding"  the  amount  of  the  mort- 
gage debt,  w^hich  he  or  his  assigns  might  sustain  by  reason  of  defects 
in  the  title  to  the  mortgaged  premises,  or  by  reason  of  liens  or  en- 
cumbrances thereon  existing  at  the  date  of  the  policy.^  So  it  is 
determined  in  Missouri  that  a  guaranty  of  title  is  also  an  indemnity 
similar  to  that  of  insurance  and  is  governed  by  the  same  rule.^ 
In  Pennsylvania  it  is  decided  that  a  contract  to  indemnify  and  in- 
sure against  all  loss  or  damage  from  defects  or  unmarketableness  of 
title,  or  against  loss  on  a  mortgage  given  as  collateral  security  on  a 
loan,  coupled  with  a  guarantee  for  the  completion  of  certain  build- 
ings is  one  of  indemnity  alone  and  cannot  be  severed,  and  evidence 
is  inadmissible  as  to  the  nonerection  of  the  buildings  in  the  absence 
of  a  showing  that  a  loss  on  the  mortgage  had  been  sustained  by  rea- 
son thereof.^"  Under  a  New  York  case  a  contract  of  title  guaranty 
is  one  of  insurance  and  it  is  also  there  declared  that  the  contract  in- 

5  Board  of  Education  of  City  of  Estate  Title  Ins.  &  Trust  Co.  160 
St.  Louis  V.  United  Statas  Fidelity  &   Pa.  408,  28  Atl.  849. 

Guaranty  Co.  155  Mo.  App.  109,  134  Title    oruaranly    insurance    is    con- 

S.   W.  18.  tract  of  indemnity,  see  §  2tg  herein. 

6  Boppart  V.  Illinois  Surety  Co.  »  Minnesota  Title  3ns.  &  Trust  Co. 
140  ^lo.  App.  675,  126  S.  W.  768.  v.  Drexel,  70  Fed.  194,  198,  17  C.  C 

'  See  §  339  herein,  as  to  decisions  A.  56. 

where  it  is  treated  as    an    insurance  ^  Pureell  v.  Land  Title  Guarantee 

contract      without      discussion,      see  Co.  94  Mo.  App.  5,  67  S.  W.  726. 

Stenso-aard  v.   St.  Paul  Real  Estate  i"  Wheeler  v.  Equitable  Trust  Co. 

Title  ins.  Co.  50  ^linn.  429, 17  L.R.A.  206  Pa.  428,  55  Atl.  1065,  s.  e.  221 

425,  52  N.  W.  910;  Wheeler  v.  R«al  Pa.  276,  70  Atl.  750,  37  Ins.  L.   J. 

826 


DIFFf:RENT  FORMS  OF  INSURANCE  CLASSIFIED    §  339h 

suriiig  agaiiLsl  losri  or  damage  on  account  of  defects  of  title,  by  rea- 
son of  liens  and  encumbrances,  etc.,  was  a  contract  of  insurance 
pure  and  simple  and  that  such  corporations  were,  under  the  statute, 
placed  upon  substantially  the  same  footing  and  were  subject  to  the 
same  rules  as  applied  to  other  insurance  companies,  except  so  far 
only  as  the  character  of  the  business  transacted  differed  from  that 
transacted  by  other  insurance  companies  recognized  and  provided 
for  in  the  same  law,  and  that  these  contracts  are  subject  to  the  same 
rules  of  construction  as  are  applicable  to  other  insurance  contracts. ^^ 
§  339h.  Credit  guaranty  contracts  constitute  insurance. — The 
rule  above  stated^^  applies  to  credit  guaranty  contracts.^^  So  in  a 
Federal  case  it  is  declared  that  these  contracts  "of  indeuniity  are 
merely  contracts  of  insurance  carefully  framed  to  limit  as  narrowly 
as  possible  the  liability  of  the  insurer.'"'  ^*  And  in  anotlier  Federal 
case  it  is  decided  that  a  contract  to  guarantee  against  loss  by  uncol- 
lectible debts  is  a  contract  of  insurance  and  not  one  of  suretyship 
and  whether  such  corporations  call  themselves  "guaranty"  or  "sure- 
ty"' companies  their  business  is  in  all  essential  particulars  that  of 
insurers.^^  Again,  under  a  Massachusetts  decision  an  agreement  to 
purchase  at  a  fixed  price  all  accounts  which  during  one  year  a  cer- 
tain business  firm  should  have  against  ascertained  insolvent  debtors 

1037.     See  Ganler  v.  Solieitois'  Loan  demnity  Co.    (U.  S.  C.  C.)   51   Fed. 

&  Trust  Co.  9  Pa.  Co.  Ct.  R.  634.      .  751. 

"  Trenton    Potteries    Co.    v.    Title  Mari/lavd. — American     Credit    In- 

Ouarantee    &     Tra.st    Co.   64   N.   Y.  detnnity_Co.  v.  Cassard,  83  Md.  272, 

8u|)p.    116,    50  App.  Div.  490.     See  34  Atl.  /03. 

also    Trenton    Potteries   Co.    v.    Title  Blinnesota.— Smith      v.      National 

Cniarantee  &  Trust  Co.  176  N.  Y.  63,  Credit    ins.    Co.    65    Minn.    283,    33 

68  N.  E.  1.32.  L.R.A.  511,  68  N.  W.  28. 

^^  §  339  herein.  Aetc  Jersey. — United  States  Credit 

13  Hayne     v.     Metropolitan    Trust  System  Co.  v.  Robertson,  57  N.  J.  L. 

Co    67  Minn.  245,  69  N.  \\.  916   (is  l"-^,  -9  Atl.  421;  Lauer  v.  Gray,  55  N. 

insurance   within    the    statute).      See    ''•   E'^-./H'    ^IJ    f*l\    '^^.j,,  ^o-'\  n' 
Seaton  v.  Heath  [1899]  1  Q.  B.  Div.    Kc'vnolds,  o5  N.  J.  Kq.  oOl,  3.   Atl. 

Law  Rep.  782,  68  L.   J.  Q.  B.  631,  '*^\- 

o/^  T        m   XT    o    --n    ^~  wi  1      u„^  A^io   York. — People  v.   Mercantile 

80  Law  T.  N.  S.  0(9,  4<   Wkly.  hep.  ^      ..^  n            ..       n      inr  \-    v     n  .- 

'                •  Credit  Guarantee  Co.  lob  IS.   i.  41b, 

"^^'^                                               .     ,  ,  60  N.  E.  24;  Steinwender    v.    Phila- 

On  contracts  securing  agam-st  loss  ^^^,p,^j^     Casualty    Co.    126    N.    Y. 

by  gning-  credit  as  insurance,  see  note  ^^^^^^^   ^71,  141  App.  Div.  432. 

in  47  L.R.A.(N.S.)   ^93.  Credit  guarantee  insurance  is  con- 
As  to  decisions  where  point  as  not  {j.^^^  ^f  indemnity,  see  §  271  herein. 

discussed  but  such  contract  is  treat-  14  ^njei-i^-an   Credit  Indeuinily  Co. 

ed  as  one  of  insurance.     See:  v.  Alliens  Woolen  Mills,  92  Fed.  581, 

United    States. — American    Credit  34  c.  C.  A.  161. 

Indemnity  Co.  v.  Wood,  73  Fed.  81,  isxehbels     v.     Mercantile     Credit 

]9    C.    C.    A.    264;    United     States  Guarantee  Co.  73  Fed.  95,  97,  19  C. 

Credit   System  Co.  v.  American  In-  C.  A.  281. 

827 


§  339i 


JOYCE  ON  INSURANCE 


or  judgment  debtors  against  whom  execution  should  be  returned 
unsatisfied  is  a  contract  of  insurance.^^  So  in  another  case  in  that 
state  a  guaranty  as  to  insolvency  of  debtors  is  considered  as  a  con- 
tract of  indemnity,  although  there  is  no  discussion  upon  the  point 
of  analogy  to  insurance. ^''^  And  under  a  Missouri  decision  a  bond 
of  indemnity  or  credit  guaranty  contract  to  indemnify  against  loss 
of  claims  is  held  one  of  indemnity  against  loss  of  property. ^^  Again, 
in  North  Carolina  a  contra-t  indemnifying  a  merchant  against  a 
credit  loss  is  construed  against  the  insurer  as  the  application,  bond 
and  a  schedule  to  which  the  bond  refers  are  held  to  constitute  a 
contract  of  insurance  although  a  new  branch  of  underwriting.^' 
In  Ohio  an  indemnity  contract  against  losses  from  debts  which  are 
not  collectable  constitutes  an  insurance  contract  and  is  construed 
against  the  insurer  in  case  of  ambiguities.^"  So  under  a'  Wisconsin 
decision  a  contract  to  indenmify  against  loss  for  insolvency  of  cus- 
tomers is  a  contract  of  insurance,  as  the  peril  of  loss  to  a  merchant  or 
manufacturer  is  as  definite  and  real  a  peril  as  that  of  loss  by  fire, 
lightning,  tornado  or  accident  and  may  occur  more  frequently.^ 

§  3391.  Loss  of  crops:  guarantee  of  realty  revenue  constitutes  in- 
surance.— A  contract  guarantying  a  fixed  revenue  per  acre  from 
farming  land  and  which  for  a  certain  consideration  agrees  to  pay  a 
lixcd  amount  per  acre  for  the  crop  grown  upoii  such  land,  without 
regard  to  its  value,  if  the  owner  chooses  to  sell  it  constitutes  an  in- 
surance contract  very  like  that  of  a  valued  policy.  AVhen  the  con- 
tingency ha])pens  which  creates  the  liability  then  the  amount  of 
the  policy  nuist  be  paid  and  it  cannot  be  distinguished  in  principle 
from  a  contract  to  purchase  bad  accounts  and  judgments  at  a  fixed 
price,  irrespective  of  value,  which  contracts  constitute  insurance.^ 


16  Clafflin  V.  United  States  Credit 
Svstcm  Co.  Ifio  Mass.  501,  52  Am. 
St.  Rep.  528,  43  N.  E.  293,  quoting 
definition  in  Commonwealth  v. 
Woatherbee,  10.",  :\Iass.  149,  160. 

17  Rice  V.  National  Credit  Co.  164 
Mass.  285,  41  N.  E.  276,  cited  in 
American  Credit  Indemnity  Co.  v. 
Champion  Coated  Paper  Co.  103 
Fed.  609,  614,  43  C.  C.  A.  270  (no 
discussion,  but  bonds  of  this  char- 
acter declared  to  be  essentially  insur- 
ance contracts.     Id.  p.  614). 

"  State  v.  Phelan,  66  Mo.  App. 
54S.  549,  558. 

1^  Lexin2,-ton  Grocery  Co.  v.  Phila- 
delphia Casualty  Co.  157  N.  Car.  116, 
72  S.  E.  870. 

20  Mercantile    Credit    &    Guaranty 


Co.  V.   Littloford   Bros.   18    Cir.    Ct. 
Rep.  (42  Wkly.  L.  Bull.)  889. 

1  Shakraan  v.  United  States  Credit 
System  Co.  92  Wis.  366,  374,  32 
L'.R.A.  383,  53  Am.  St.  Rep.  920,  66 
N.  W.  528,  cited  in  People  v.  Rose, 
174  111.  310,  314,  44  L.R.A.  124,  51 
N.  E.  246. 

2  Ho<>an,  In  re,  8  N.  Dak.  301,  45 
L.R.A.'^166,  73  Am.  St.  Rep.  759,  78 
N.  W.  1051,  28  Ins.  L.  J.  520,  under 
Rey.  Codes,  sees.  4441,  4445,  regulat- 
ins:  insurance.  Citing  Claffiin  y. 
United  States  Credit  System  Co.  165 
i\Iass.  501,  52  Am.  St.  Rep.  528,  43 
N.  E.  293;  Shakman  v.  United  States 
Credit  Systems  Co.  92  Wis.  366,  32 
L.R.A.  383,  53  Am.  St.  Rep.  920,  66 
N.  W.  528,  both  considered  under 
S  339h  herein. 


828' 


CHAPTER  XVII. 
PARTIES-~MUTUAL  COMPANIES,  BENEFIT,  ETC.,  SOCIETIES. 

§  340.     Mutual  insurance  benefit,  etc.  companies  or  associations  defined. 

§  341.  Mutual  and  benefit,  etc.  companies  or  associations:  capital  stock: 
funds  for  payment  of  losses :  guaranty  or  reserve  funds. 

§  341a.  Same  subject. 

§  342.     Kinds  of  mutual  insurance  companies  or  associations. 

§  343.     Plans  of  mutual  insurance. 

§  344.  When  mutual,  etc.  societies  or  associations  are  and  are  not  insurance 
companies. 

§  344a.  Same  subject:  pecuniary  profit  as  a  factor. 

§  344b.  Same  subject:  pecuniary  profit  as  a  factor:  lodge  systems. 

§  344c.  Same  subject:  lodge  s.ystem  continued. 

§  344d.  Same  subject:  pecuniary  profit  as  a  factor:  masonic  benevolent  or 
relief  associations. 

§  .344e.  Same  subject :  rules  of  construction  as  a  factor. 

§  344f.  Same  subject:  attachment  of  copy  of  application  or  by-laws. 

§  344g.  Same  subject:  other  insurance  as  a  factor. 

§  344h.  Same  subject:  liability  as  a  factor. 

§  344i.  Same  subject:  applicability  of  insurance  laws:  statuory  exemp- 
tions. 

§  344j.  Applicability  of  insurance  laws  continued:  right  to  do  business  as  a 
factor. 

§  344k.  Applicability  of  insurance  laws :  live  stock  association. 

§  340.  Mutual  insurance  benefit,  etc.  companies  or  associations 
defined. — A  nuilual  insurance  company  is  one  in  which  the  niem- 
l)ers  mutually  contribute  to  the  payment  of  losses  and  exi)onseH, 
vy^here  the  benefit  to  accrue  or  indenuiity  is  conditioned  in  any  man- 
ner upon  persons  holdin.2;  similar  contractsS.  Such  companies  differ 
essentially  from  stock  insurance  companies.  The  former  need 
many  by-laws  and  conditions  that  are  not  required  in  stock  com- 
panies, and  each  person  who  insures  therein  becomes  a  member  of 
the  association.'    A  mutual  company  is  also  defined  as  one  wherein 

'  Baxter  v.  Chelsea  Mutual  Fire  Corporation  Law  of  New  York,  Laws 
Ins.  Co.  1  Allen  (83  Mass.)  204,  70  1802,  c.  087,  sec.  2,  a  membership 
Am.    Dec.    730;    under    the    General    corporation       includes        benevolent 

820 


§  340 


JOYCE  ON  INSURANCE 


the  members  coni^litute  both  insurer  and  insured,  where  the  mem- 
bers all  contribute  by  a  system  of  assessments,  to  the  creation  of  a 
fund  from  which  all  losses  and  liabilities  are  paid,  and  wherein  the 
profits  are  divided  among  themselves  in  proportion  to  their  in- 
terests.* And  a  Ijenevolent  association  is  defined  as  a  corporation 
society  or  voluntary  association  conducted  not  for  profit  but  for  the 
sole  benefit  of  its  membei's  and  their  beneticiai'ies.* 


orders.  Jones'  Business  and  Corpo-  under  N.  Y.  act,  April  10,  1849)  ; 
ration  Laws,  87 ;  N.  Y.  Ins.  L.  e.  28,  INIodern  Woodmen  of  America  v. 
Consol.  L.  c.  33  of  L.  1909,  sec.  1  Tevis,  117  Fed.  369,  372,  54  C.  C. 
(Parker's  Ins.  L.  [ed.  19151  P-  3)  the  A.  293  (fraternal) ;  National  Union 
term  "Insurance  Law"  is  declared  v.  Marlow,  74  Fed.  775,  21  C.  C.  A. 
"applicable  to  all  .  .  .  corpo-  89,  40  U.  S'.  App.  95  ("fraternal 
rations,  associations  and  societies  beneficial  society"). 
.  .  .  authorized  by  law  to  make  Colorad-o. — Spruance  v.  Farmers 
insurances."  &  Merchants'  Ins.  Co.  9  Colo.  73,  77, 

As  to   stockholders   and   members,   10  Pac.  285,  287  (mutual), 
see  §  341  herein.  Connecticut. — Examine     Miles      & 

Although  tlie  distinction  between  Co.  v.  Odd  Fellows  Mutual  Aid 
stock  and  mutual  companies  is  now  Assoc.  76  Conn.  132,  134,  55  Atl.  607, 
clear,  nevertheless  it  was  declared  at  under  Pub.  acts  1895,  p.  592,  c.  255, 
an  early  date  that:  "There  has  been  sec.  1  (fraternal), 
much  controversy  between  'stock'  and  Illinois. — Examine  Lov3  v.  Modern 
'mutual'  companies,  most  of  which  is  Woodmen  of  America,  2-59  111.  102, 
a  mere  war  of  words.  Insurance,  as  106,  107,  102  N.  E.  183  (fraternal), 
an  average  eontributionship,  is  Indiun-a. — Muller  v.  State  Life  Ins. 
fundamentally  mutual  in  its  struc-  Co.  27  Ind.  App.  45,  51,  60  N.  E.  958, 
ture.     Whether  a  premium  shall  be   960. 

anticipated  as  absolute  or  eontinsrent,  Maine. — Adams  v.  Mutual  Fire 
is  a  question  of  administratron."  Ins.  Co.  16  Shep.  (29  Me.)  292,  294. 
Pamphlet  on  Progress  of  American  Mi.chigan. — Walker  v.  Giddings, 
Life  Insurance  (Review  Pub."  Co.  Commr.  103  Mich.  .344,  347,  348,  61 
Philadelphia,  1877).  N.  W.  512  (fraternal). 

*  State  v..  Willett.  171  Ind.  296,  23  3Iinnesota.— National  Protective 
L.R.A.(N.S.)   197,  '86  N.  E.  68.  Legion  v.  O'Brien,  102  Minn.  15,  16, 

5  Thompson  v.  Royal  Neighbors  of  17,  112  N.  W.  1050  (beneficial  and 
America,  154  Mo.  App.  109.  133  S.   fraternal). 

W.  146,  Rev.  Stat.  1909.  sec.  7109.  Missouri.—Rodgers  v.  National 
Mutual  companies  defined,  .see  Burt  Council  Junior  Order  United  Am.eri- 
on  Life  As.surance  (1849)   p.  53.         can   Mechanics,   172  Mo.   App.   719, 

"Where  two  or  more  persons  155  S.  W.  874  (fraternal  benefici- 
mutually  agree  to  insure  each  other  ary  societies  included  in  "insurance 
against  marine  losses  there  is  said  to  companies,"  under  Rev.  Stat.  1909, 
be  a  mutual  insurance."  Earl  of  sees.  7109,  7112,  7114)  ;  Umberger  v. 
Halsburv's  Laws  of  England,  vol.  17,  3Iodern  Brotherhood  of  America,  162 
p.  505  and  note.  ^  Mo.  App.  141,  143,  144,  144  S.  W. 

For  other  definitions  see  the  898  (fraternal.  Rev.  Stat.  1909,  sec. 
following  cases:  7109). 

United  States. — Union  Ins.  Co.  v.       Neic  York. — Mvjratt  v.  New  York 
Hoge,  21  How.    (62  U.   S.)    35,  64,   Protection  Ins.  Co.^21  N.  Y.  52,  65. 
65,  16  L.  ed.  61    (mutual,  organized       North  Dakota. — J.  P.  Lamb  &  Co. 

830 


PARTIES— MUTUAL  COMPANIES  §  340 

The  statutes  of  some  of  the  states  define  mutual  insurance  com- 
panies, mutual  benefit  associations,  fraternal  beneficiary  orders  and 
like  associations.^ 

V,  Merchants'  National  Mutual  Fire  15  Am.  &  Eng.  Ann.  Cas.  96,  91  N. 

Ins.  Co.  18  N.  Dak,  253,  259,  119  N.  E.  466,  39  Ins.  L.  J.  817. 

W.  1048  (mutual  fire).  lotca. — Acts   21st   Gen.    Assembly, 

Pennsylvania. — Given     v.    Rettew,  c.  65,  see.  20  (what  deemed  a  mutual 

162  Pa.  638,  640,  29  Atl.  703.  association). 

Texas. — Examine  Splawn  v.  Chew,  Kentucky. — Ky.     Stat.    sees.    641, 

60   Tex.  532,    535     (benefit    associa-  664  (insurance  company  or  insurance 

lion).  corporation     defined;    societies    with 

Becomes  member  Boeck  v.  Modern  lodge     system,     etc.),     construed    in 

Woodmen  of  America,  162  Iowa,  159,  Sims  v.  Commonwealth,  114  Ky.  827, 

143  N.  W.  999;  J.  P.  Lamb  &  Co.  v.  71  S.  W.  929  (as  to  unlicensed  a.u:onts 

Merchants'     National     Mutual     Fire  and   incorporation)  ;    also   in    Grand 

Ins.  Co.  18  N.  Dak.  253,  119  S.  W.  Lodge  Ancient  Order  United  Work- 

3048;  Bixler  v.  Modem  Woodmen  of  men  v.  Edwards,  27  Ky.  L.  Rep.  469, 

America,    112    Va.    678,   38   L.R.A.  85  S.  W.  701   (as  to   attachment    of 

(N.S.)  571n,  72  S.  E.  704,  41  Ins.  L.  application  to  policy). 

J.  89.     See  §  317  herein.  Louisiana. — Acts  La.  1912,  p.  565, 

6  California.— Ca\.    Stat.    1891.    c.  No.  256. 

116,  p.  126,  sees,  1,  14,  pp.  126-130.  Maine.— Rex.  Stat.  1903,  p.  497,  e. 

Cok>rado.—l  Mill's  Ann.  Stat.  see.  49,  sec.  134  (fraternal). 

638  (what  associations  not  insurance  Michiga<n. — Pub.     acts     1893,    No. 

companies).  119  (fraternal  beneficiary  societies)  ; 

Conmctind. — Public      acts      1895,  construed  in  McMorran  v.  Great  Hive 

p.   592,  c.   255,   sec.   1,   construed  in  of  the  Ladies  of  tlie  Maccabees,  11^ 

]\Tiles  &  Co.  V.  Odd  Fellows  Mutual  Mich.  398,  5  Det.  Leg.  N.  266,  75  N. 

Aid  Assoc.  76  Conn.  132,  55  Atl.  607  W.  743   (title  of  act  not  uneonstitu- 

( fraternal).  tional). 

Georfjia.—Q&.    Code    1911     (Civ.)  Missouri.— "Rew .     Stat.    1909,    sec. 

sec.  2529  (sec.  2134)  p.  660  (mutual  7109,   p.   371:   Rev.   Stat.   1909,  sec. 

insurance)  :    Civ.    Code    1910,    sees.  6896;    Rev.    Slat.    1899,    sees.    1408, 

2866-2877,  construed  in   Puryear  v.  7853     (benevolent    association;    fra- 

Farmers  ?tlntua!  Ins.  Assoc.  137  Ga.  ternal,    with    lodge    system;     mutual 

579,  73  S.  E.  851  (fraternal).    Laws  companies),    construed    in    National 

1900,  p.  71  (fraternal  beneficial  order  Union  v.  Marlow,  74  Fed.  775,  .778, 

defined  as  a  corporation,  society,  or  21  C.  C.  A.  89;  Toomey  v.  Supreme 

voluntary     association      having      no  Lodge  Knights  of  Pythias,  147  Mo. 

capital   stock   and   having    a    repre-  129,^136,   48   S.   W.   936:   Jacobs  v. 

sentative  form  of  crovernment  and  a  Ompha  Life  Assoc.  146  Mo.  523,  48 

lodge    system,    etcj,    construed    in  S.  W.  462  (Rev.  Stat.  1889,  see.  5860, 

Graham    v.    Eminent    Household    of  "assessment   companies") ;  Umberger 

Coliimbinn  Woodmen,  135    Ga.    777,  v.  Modern  Brotherhood  of  America, 

70    S.    E.    649,   40   Ins.    L.    J.    1098  162  Mo.  App.  141,  144  S.  W.  898; 

(constituent  members  and  powers  of  Thompson    v.    Royal    Neighbors    of 

"supreme  bodies").  America,  154  Mo.  App.  109,  133  S. 

7/;,„^,/s.— Ilnrd's   Rev.   Stat.   1908,  W.    146;    Tico    v.    Supreme    Lodge 

c.  73,  sec.  258   (fraternal  beneficiarv  Kni?-hts   of  Pythias.  123   Mo.   Ap]-). 

f.wiety    defined,    societies    on    lodge  85,  100  S.  W.  519,  aff'd  204  Mo.  349, 

system),    construed    in    Peterson    v.  102    S.    W.    1013.      For    history    of 

ManliattjMi  Life  Ins.  Co.  244  111.  329,  state  legislature  as  to  same,  see  State 

831 


§  340 


JOYCE  ON  INSURANCE 


Other  statutes  exempt  certain  mutual  benefit  or  fraternal  organi- 
zations from  the  insurance  laws,  although  such  societies  or  associa- 
tions might  otherwise  come  within  their  operation.' 


(ex  rel.  Supreme  Lodge  K.  of  P.)  v. 
Vaiidiver,  213  Mo.  187,  204  et  seq. 
ill  S.  W.  911;  Kern  v.  Supreme 
Couneil  American  Legion  of  Honor, 
167  :Mo.  471,  479  et  seq.,  67  S.  AV. 
252. 

Nernd.a.—Rex.  Laws  1912,  p.  379, 
.<=ec.  1310  (mutual  companies),  Comp. 
L.  1900,  sec.  942. 

Neiv  Hampshire.— Fah.  Stat.  1901, 
p.  578,  c.  86.  sec.  1  (fraternal). 

New  York. — Ins.  Law,  c.  28, 
Consol.  Laws,  c.  33  of  L.  1909; 
(Parkers  Ins.  Law,  N.  Y.  [ed.  1915] 
p.  342)  see.  230  (fraternal).  See 
also  sec.  1  of  tlie  same  Law  con- 
sidered in  first  note  to  this  section. 

North  Carolina. — N.  C.  Revisal 
1905,  sec.  4795  (fraternal),  con- 
strued in  State  v.  Arlinoton,  157  N. 
C.  640,  73  S.  E.  122,  41  Ins.  L.  J- 
319. 

0/./fl//oma.— Okla.  Rev.  Stat.  1903, 
sec.  3236  (fraternal). 

Tf'.ms.— Tex.  Rev.  Stat.  1899,  sec. 
1408,  Ann.  Stat.  1906,  p.  1111. 

Washin()ton.-^2  Rem.  &  Ball.  Ann. 
Codes  &  "stats,  sec.  6166,  p.  1012 
(fraternal). 

Porto  Bico. — Rev.  Codes  (Civ.) 
1902,  sec.  1694    (mutual  insurance). 

"^  Arkansas. — Ark.  Stat.  ( Sand  & 
H.  Dig.)  sec.  4133  (mutual  insurance 
company  on  assessment  plan),  con- 
strued in  Iiiijle  V.  Batesville  Grocery 
Co.  89  Ark.  378,  117  S.  W.  241. 

California.— ^iiiL  1891,  c.  116,  p. 
126,  sec.  14,  p.  130.  , 

Illinois.— fitnt.  1885,  c.  32,  sec.  31. 

Kentnchy.— Stat.  1903,  sec.  641 
(fraternal). 

Massachusetts. — Pub.  acts  1882,  c. 
115,  sees.  8-10,  amdt.  1882,  c.  195, 
sec.  2. 

Michigan.— Puh.  acts  1893,  p.  186, 
No.  119;  acts  1907,  p.  243,  No.  180, 
construed  in  Knights  of  the  Modern 
]\Iaccabees  v.  Barrv,  155  Mich.  693, 
118  N.  W.  585  (fraternal). 


Missouri. — Laws  1881,  p.  87;  Laws 
1897,  p.  132,  construed  in  W&ster- 
man  v.  Supreme  Lodge  Knights  of 
Pythias,  196  Mo.  670,  94  S.  W.  470 
(fraternal  beneficiary  associations)  ; 
acts  1887,  construed  in  Aloe  v. 
Fidelity  Mutual  Life  Ins.  Co.  164 
Mo.  675,  55  S.  W.  993,  29  Ins.  L.  J. 
679  (asses-sment  companies)  ;  Jacobs 
^•.  Omaha  Life  Assoc.  142  Mo.  49,  43 
S.  W.  375  (wliat  is  not  contract  on 
assessment  plan  under  Rev.  Stat. 
1889,  sec.  5849);  Ordelheide  v.  Mod- 
ern Brotherhood  of  America,  158  Mo. 
App.  677,  139  S.  W.  269,  40  Ins.  L. 
J.  1845  (fraternal  association  not 
within  general  insurance  laws)  ;  INIis- 
sey  V.  Supreme  Lodge  Knights  & 
Ladie.s  of  Honor,  147  Mo.  App.  137, 
136  S.  W.  559  (benevolent  or  mutual 
benefit  plan:  not  subject  to  general 
insurance  laws)  ;  Citv  of  Trenton  v. 
Ilumel,  134  Mo.  App.  595,  114  S.  W. 
1131,  Rev.  Stat.  1899,  sec.  1408,  Ann. 
Stat.  1906,  p.  1111  (fraternal  bene- 
ficiary association)  ;  Tice  v.  Supreme 
Lodge  Knights  of  Pvthias,  123  Mo. 
App.  85,  100  S.  W.  5i9,  aff'd  204  Mo. 
349,  102  S.  W.  1013  (as  to  non- 
exclusion  from  operation  of  Rev. 
Stat.  1899,  sec.  1423,  Ann.  Stat.  p. 
1118,  Laws  1897,  p.  132,  relating  to 
fraternal  beneficiary  association  and 
specifying  lodges  or  orders  exclud- 
ed) ;  Shotliff  V.  ^lodern  Woodmen 
of  America,  100  Mo.  App.  138,  73  S. 
W.  326,  Rev.  Stat.  1899,  sec.  1408 
(I'rater'nal)  ;  Missouri  statutes  are 
also  construed  in  National  Union  v. 
Marlow,  74  Fed.  775,  21  CCA.  89, 
40  U.  S.  App.  95  ("fraternal  bene- 
ficial society");  Grand  Lodge  An- 
cient Order  United  Workmen  v. 
Grand  Lodge  A.  0.  U.  W.  83  Conn. 
241,  76  Atl.  533  (fraternal). 

New  York. — See  Parker's  Ins.  Law 
(ed.  1915)  p.  343. 

Ohio.— Rev.  Stat.  1880,  sec.  3630; 
Rev.  Stilt,  sees.  3631-11,  construed  in 


832 


PARTIES— MUTUAL  COMPANIES  §  341 

§  341,  Mutual  and  benefit,  etc.,  companies  or  associations:  capital 
stock:  funds  for  payment  of  losses:  guaranty  or  reserve  funds. — 
The  funds  out  of  which  damages  and  losses  are  to  be  paid  are 
the  premiums,  the  earnings  in  the  business,  and  premium  and  de- 
posit notes,  which  hitter  are  a  sort  of  reserve  fund.*  These  usually 
constitute  tlie  capital  of  the  company,^  although  an  absolute  reserve 
or  safety  fund  may  be  provided,  and  all  the  notes,  whether  in  one 
department  or  anotlier,  nuist  be  resorted  to  if  necessity  exists.^"  So 
where  a  mutual  company  is  authorized  to  and  does  issue  policies 
.  on  the  cash  princii»lc  to  other  than  its  members,  the  premium  notes 
of  the  members  represent  the  capital  stock  of  the  company  to  such 
other  insm-crs.^^  80  parol  evidence  is  admissible  to  show  whether  a 
note  executed  prior  to  the  completion  of  the  organization,  and  in 
form  like  those  required  to  form  part  of  the  capital,  was  intended 
to  and  did  constitute  a  part  thereof.^^  But  a  guaranty  fund  in  ap- 
proved notes  to  be  used  only  in  paying  claims,  and  any  part  so 
used  to  be  refunded  out  of  the  first  surplus  receipts,  caimot  be 
reckoned  as  assets  in  determining  whether  the  company  is  solvent;  ^^ 
80  a  guai-anty  fund  is  not,  strictly  speaking,  assets  of  a  nmtual  in- 
surance company  for  the  purpose  of  determining  its  solvency,  when 
the  company  is  required  to  refund  all  moneys  obtained  from  it,^^ 
nor  can  a  premium  note  be  treated  b}'  a  receiver  of  the  company  as 
capital,  and  the  whole  note  collected,  regardless  of  losses.^^  But 
it  is  held  in  another  ca.se  that  a  note  for  premiums  in  advance  passes 

Gilliaau     V.     Supreme     Council      of  ^^  llavs  v.  Lyeotniiig  Fire  Iiis.  Co. 

Roval  Arcanum,  2U  Ohio  Cir.  Ct.  R.  98  Pa.  St.  184* 

42  (fraternal).  12  i).^„3   y    Mmison,  23  N.  Y.  504, 

Pennsi/lvania. — Acts    18!)3,    see.    4  limited  in  Jackson  v.  Van  Slyke,  52 

(P.  L.  9),    construed    in    Thayer   v.  N.  Y.  645,  to  the  extent  tliat  when  a 

Tliompson,  220  Pa.  241,  69  Atl.  758  note  is  given  before  the  organization 

(beneticial  association  limited  to  cer-  of  the  company  there  is  ground  for 

lain   city  employees  exempt).  an  inference  tliat  it  was  given  as  a 

Texas. — Rev.  Stat.  1895,  art.  3096  stock  note,  altliough  evidence  of  the 

(mutual  relief  associations).  attendant     fads     and     circnmstances 

Wisconsin. — Laws     1891,     c.     418,  may  l)e  sutlicient  to  raise  a  question 

construed  in  State  v.  National  Acci-  for  llie  jury  whetlier  the  note  was  a 

dent  Soc.  103  Wis.  208,  79  N.  W.  220,  pi'cmium  or  stock  note.    The  last  case 

28  Ins.  L.  J.  793  (bencliciarv  as.soeia-  is   cifed   in    Sands   v.    Isaac    Sou,   56 

tion  furnishing  casualty  or  life  insur-  N.  Y.  ()62. 

ance  on  assessment  plan).  ^'  Russell  v.  Bristol,  49  Conn.  251. 

See    cases    in    SS    344-346    lierein.-  ^*  Corey  v.  Sherman,  96  Iowa,  114, 

8  Planters'  Ins.  Co.  v.  Comfort,  50  60  N.  W.   232,   64  N.    W.    828,    32 

Miss.  662,  668.  L.R.A.  490.     See  S§  1273,  1288,  1455 

^  Planter's  Ins.  Co.  v.  Comfort,  50  herein. 

Miss.  662,  668.  ^^  P.ell  v.  Sliiblev,  33  Barb.  (N.  Y.) 

10  Sands  v.  Sanders,  28  N.  Y   416,  (ilO.    Sc:-  Farmers'  Ins.  Co.  v.  Smith, 

25  How.  Pr.  82.  (i3  111.  187. 
Joyce  Ins.  Vol.  I.— 53.         833 


§  341  *  JOYCE  ON  INSURANCE 

to  the  receiver  of  a  company  on  its  becoming  insolvent.^^  But  the 
notes  advanced  to  the  company  by  intending  insurers  do  not  con- 
stitute the  makers  stockliolders ;  ^'^  So  a  guaranty  fund  which  is 
merely  a  temporary  advancement  or  loan  and  does  not  constitute 
any  part  of  its  working  capital  does  not  change  the  character  of 
a  mutual  lire  insurance  company  organized  exclusively  to  insure 
the  property  of  its  members  so  as  to  make  subscribers  liable  to 
creditors  as  stockholders.^*  And  the  fact  that  a  mutual  company, 
authorized  by  statute  to  insure  the  property  of  its  members  on  the 
mutual  plan,  provides  in  its  articles  for  a  guarant}^  fund  to  con- 
sist of  shares  issued  to  subscribers  does  not  make  it  a  stock  com- 
pany." Although  it  is  decided  that  in  the  absence  of  a  charter  pro- 
vision to  the  contrary  the  policy  holders  are,  so  far  as  rights  and 
remedies  are  concerned,  stockholders  the  same  as  stockholders  in  a 
stock  corporation.^" 

If  a  note  be  proven  to  be  a  capital  stock  note,  given,  taken,  and 
used  as  such,  on  the  organization  of  the  company,  the  whole  amount 
may  be  recovered  without  an  assessment.'^  A  guaranty  fund  note 
may  be  given  to  a  mutual  company  to  create  a  reserve  fund  re- 
quired by  statute  and  where  the  withdrawal  of  such  notes  is  pro- 
hibited except  on  certain  conditions  the  maker  is  released  from  lia- 
bility where  certain  notes  are  returned  without  complying  with  said 
conditions.^  If  the  charter  provides  that  its  working  capital  shall  be 
in  lieu  of  a  reserve,  under  the  Connecticut  statute  such  capital  is 
treated  as  a  liability  in  proceedings  for  a  receiver.^ 

Where  a  mutual  insurance  company  has  deposited  securities  with 
the  state  treasurer,  under  a  statutory  requirement  therefor,  it  has 
no  absolute  right  to  collect  the  income  therefrom.  But  the  treasurer 
may  grant  permission  to  the  company  to  receive  such  income, 

^^  Cruikshank  v.  Brouwer,  11  Barb.  As  to  liability  of  maker  of  capital 
(N.  Y.)  228.  stock  note  of  mutual    tire    insurance 

^■^  Hill  V.  Nautilus  Ins.  Co.  4  Sand,  corporation,  see  Raegener,  Receiver, 
Ch.  (N.  Y.)  577.  V.  Hubbard,  o7  N.  Y.  Supp.  1018,  40 

18  Smith  V.  Sherman,  113  Iowa,  App.  Div.  359,  afif'd  167  N.  Y.  301, 
601,  85  N.  W.  747.  60  N.  E.  633;  Raegener,  Receiver,  v. 

19  Mutual  Guaranty  Fire  Ins.  Co.  Warner,  56  N.  Y.'^Supp.  310;  Rae- 
In  re  (Alvord  v.  Barker)  107  Iowa,  gener.  Receiver,  v.  Phillips,  26  Misc. 
143,  70  Am.  St.  Rep.  149n,  77  N.  W.  311,  56  N.  Y.  Supp.  174.  Examine 
868,  28  Ins.  L.  J.  205.  Raeaener  v.  Medicus,  32  Misc.  591, 

20  Huber  v.  Martin,  127  Wis.  412,   66  N.  Y.  Supp.  4(50. 

3   L.R..A.(N.S.)    653n,   115   Am.    St.  2  ^eale  v.   Head,   133   Cal.  42,  65 

Rep.  1023,  7  Am.  &  Eng.  Ann.  Cas.  Pac.  131,  576,  Cal.  Stat.  1865-66,  p. 

400,  105  N.  W.  1021,  1135,  35  Ins.  752. 

L.  J.  334.  ^  Betts    v.    Connecticut    Indemnity 

1  Sands  v.  St.  Johns,  36  Barb.  (N.  Co.  71  Conn.  751,  44  Atl.    65,    GenL 

;y.)  628.  Stat.  sees.  2854,  2870. 

834 


I 


PAK TIES— MUTUAL  COMPANIES  §  341a 

should  it  he  Ijcst  for  the  interests  of  the  policy  holders.  Should  such 
permission  be  refused,  the  accrued  interest,  with  the  principal,  goes 
to  the  payment  of  the  policy  holders  and  creditors  in  the  order 
named.* 

§  341a.  Same  subject. — In  the  absence  of  a  charter  limitation  to 
the  contrary  it  is  competent  for  a  mutual  insurance  corporation  to 
make  rates  for  insurance  with  a  view  of  probably  creating  a  surplus 
and  of  subsequently  distributing  the  same  to  members  so  far  as 
experience  shall  show  that  the  same  is  not  needed  in  the  business.* 
And  if  a  reserve  fund  is  not  created  under  any  by-law  or  rule  and 
there  is  no  provision  specifying  of  what  it  shall  consist,  but  certain 
moneys  are  specially  devoted  to  other  purposes,  all  the  net  assets 
not  so  specially  appropriated  may  be  treated  as  belonging  to  said 
fund.^  The  Indiana  statute  providing  for  the  organization  of  com- 
panies on  the  assessment  plan  also  provides  that  nothing  therein 
shall  prevent  the  accumulation  of  other  funds  exceeding  the  amount 
required  for  the  purposes  of  incorporation.'  Again,  a  special  fund 
may  be  created  as  where  a  foreign  insurance  comjjany  may,  in  the 
absence  of  fraud  or  some  positive  prohibitory  law,  agree  voluntarily 
with  its  local  agent  that  a  certain  per  cent  of  the  premiums  re- 
ceived by  him  shall  be  deposited  in  trust  as  a  fund  for  policy  hold- 
ers insured  by  such  agent  as  a  special  fund  for  payment  of  losses 
in  preference  to  other  policy  holders.^  And  a  reserve  or  special  de- 
posit fund  with  a  lien  in  favor  of  beneficiaries  may  be  required  by 
statute  in  the  case  of  mutual  assessment  life  companies.^     So  the 

*Meies  v.  Economical  Mutual  Life  tinguishing  New  York  Life  Ins.  Co. 

Ins.  Co.  12  R.  I.  259.    As  to  what  is  v.  Styles   [1889]   14  App.  Cas.  .381; 

capital,     subject     to     taxation,     see  Last  v.  London  A.ssur.  Corp.   [1885] 

People  V.  Board  of  Supervisors,  20  10  App.  Cas.  438. 

Barb.   (N.  Y.)   81;  People  v.  Board  ^  Bass  v.  Mutual  Relief  A.ssoc.  118 

of  Supervisors,  16  N.  Y.    4'M;    Sun  Cat.  6,  49  Pac.  1056,  26  Ins.  L.  J. 

Mutual   Ins.   Co.   v.   Mayor  of  New  992. 

York,  8  N.  Y.  (4  Seld.)  241,  5  Sand.  'Federal  Life  Ins.  Co.  v.  Arnold, 

Ch.   (N.  Y.)   10;  Mutual  Ins.  Co.  v.  46  Ind.  App.  114.  90  N.  E.  493,  Laws 

Board  of  Supervisors,    4    N.    Y.    (4  1897.  p.  318,  c.  195. 

Comst.)  442.  8  Babcock     Printing     Press     Mfg. 

5  Huber  v.  Martin,  127  Wis.  412,  Co.  v.  Ranous,  164  N.  Y.  440,  .58  N. 

3   L.R.A.(N.S.)    653,   115     Am.     St.  E.   529,   30  Ins.  L.  J.  164,  aff'g  54 

Rep.  1023,  7  Amer.  &  Eng.  Ann.  Cas.  N.  Y.  Supp.  1048,  31  App.  Div.  629. 

400,  105  N.  W.  1031,  1135,  35  Ins.  9  San   Francisco  Savings  Union  v. 

L.  J.  334.  Long,  123  Cal.  107,  53  Pac.  907,  Stat. 

When  net  surplus  of  mutual  plan  1891,  p.  126,  sees.  2,  4. 

life    insurance    company    constitutes  As  to  right  to  issue  paid  up  insur- 

"annual  profits  or  gains"  asse.ssable  ance  under  statute  providing  for  cre- 

to  income  tax  irresyiective  of  return  ation.      maintenance,      disbursement, 

or  credit  to  policyholders,  see  Equi-  and  application  of  reserve,  emergen- 

table    Life    Assur.    Soc.    v.    Bishop  cy  or  surplus  fund  by  mutual  bene- 

[1899]   L.  R.  2  Q.  B.  Div.  439,  dis-  fit  societv,  see  State   (ex  rel.  Grand 

835 


§  Slla 


JOYCE  ON  IXSl  iJAXCE 


statutes  of  the  state  may  coiitemi)la(c  llic  payinom  of  fraternal 
benefit  certificates  from  surplus  or  reserve  funds  derixcd  from  assess- 
ments and  the  charter  may  provide  for  a  '•'mortuary  fund"  to  meet 
death  claims  from  special  causes,  also  a  "death  benefit  fund"  to 
meet  ordinary  death  claims  when  regular  assessments  are  insuffi- 
cient. Such  reserve  adds  to  the  security  of  the  contract  of  insur- 
ance and  makes  more  valuable  the  contributor's  rights  as  certificate 
holders.  The  intent  being  to  create  permanent  funds.  And  dur- 
ing the  life  of  the  order,  the  existence  of  the  trust  and  the  fulfill- 
ment by  the  contributors  of  their  insurance  contracts,  their  interest 
is  limited  to  the  right  to  endow  their  l)eHeliciaries  and  compel  tbe 
preservation  of  the  funds  and  maintenance  of  the  trust  and  such 
funds  are  for  the  benefit  of  all  who  may  l>ecome  members  during 
the  life  of  the  fund.^°  And  although  assessments  may  be  made,  still 
tbe  reserve  fund  may  be  drawn  on  when  necessary  to  pay  death 
claims  in  full."  So  where  the  articles  of  association  so  provide, 
the  guaranty  fund,  consisting  of  deposits  or  pledges  by  members 
for  payment  of  assessments,  may  be  resorted  to  and  levied  upon 
for  the  death  benefit  fund.^^  Ihit  wbere  a  statute  for  the  incorpora- 
tion and  regulation  of  co-o])erative  or  assessineut  life  and  casualty 
insurance  corporations  authorizes  the  creation  of  a  reserve  fund 
for  the  payment  of  death  losses  it  does  not  permit  tbe  aci-uuuilation 
wholly  from  one  class  of  members  of  such  reserve  fund  and  tben 
devote  it  to  the  payment  of  death  losses  to  another  class  who  have 
not  contributed  to  it.^^ 

The  reserve  fund  may  be  one  not  set  apart  for  any  speci.i! 
purpose  and  may  be  transferable  to  the  policy  fund  when  deemed 
expedient  by  the  directors  of  a  beneficial  association  without  ca})i(al 
stock,  and  without  funds  for  payment  of  losses  except  those  deri\cd 
from  assessments  of  members.  In  such  case  a  member  has  no 
vested  interest  in  the  reserve  fund.^^  Again,  the  safety  fund  of  u 
non-fraternal  co-operative  company  may  only  be  available  for  death 
claims  whei'e  it  is  transferred,  by^xpress  direction  of  the  trustees, 
to  the  mortuarv   fund,   and  be   also   limited   to   persistent   living 


Fraternity)    v.   Lemert,   66    Ohio   L.  i3  IVople   (ex  rel.  Atty.   Genl.)    v. 

Bull.   118:   Ohio   Laws   123,   Act   97,  Life  &  Keserve  Assoc.  150  N.  Y.  94, 

see.  9,  Gen.  Code  0170.  45  N.  E.  8.     See  tliis  ease  also  as  to 

^°  Kane    v.   Knights   of   Columbus,  transfer     from     "reserve     fund" 


84  Conn.  96,  79  Atl.  63,  40  Ins.  L. 
J.  874. 

^^  Supreme  Lodge  National  Re- 
serve Assoc.  V.  Mondruwski,  20  Tex. 
Civ.  App.  322,  49  S.  W.  919. 

12  Purdv  V.  Bankei's'  Life  Assoc. 
104  Mo.  App.  91,  74  S.  W.  486. 


to 
"death  fund"  and  a.ssessmeuts  on 
holders  of  "life  reserve  eertiticates." 
1*  Kahu  v.  Fidton  (Wisconsin  Odd 
Fellows  Mutual  Life  Ins.  Co.  In  re.) 
101  Wis.  1,  42  L.R.A.  300,  70  N.  W. 
775. 


836 


PARTIES— MUTUAL  COMPANIES  §§  342.  343 

members  ^^  and  only  the  surplus  of  the  reserve  fund  over  a  certain 
sum  may  be  available  for  death  claims  which  may  be  limited  to 
persistent  members  for  a  certain  time  after  the  completion  of  the 
fund.^^  The  "surplus"  of  a  mutual  life  insurance  company  belongs 
equitably  to  the  policy  holders  who  contributed  to  it,  in  the  propor- 
tion in  which  they  contributed.^''^ 

Where  an  association  is  required  to  accumulate  and  maintain 
an  "a.^scssment  fund''  and  an  "endowment  fund"  and  all  endow- 
ments are  to  be  paid  out  of  the  latter  fund  which  is  made  up  of  a 
certain  per  cent  of  all  assessments  actually  paid  in,  except  all  first 
assessments,  the  balance  of  the  assessments,  less  expenses,  consti- 
tutes the  "assessment  fund"  out  of  which  beneficiaries  are  paid 
where  they  die  within  the  endowment  period." 

§  342.  Kinds  of  mutual  insurance  companies  or  associations. — 
Mutual  insurance  companies  may  be  divided  into  two  general 
classes  1.  Those  which  are  organized  for  the  purpose  of  doing  an 
insurance  business;  2.  Those  mutual  societies  or  associations  which 
have  a  social,  benevolent,  or  like  character,  but  the  nature  and 
prevalent  purpose  of  which  is  that  of  insurance.-^' 

§  343.  Plans  of  mutual  insurance. — There  are  numerous  plans  or 
schemes  of  mutual  insurance.  Premium  notes  may  be  given  which 
are  assessable  from  time  to  time  to  the  amount  stated  therein;  or 
the  members  may  be  assessed  periodically,  or  as  required;  or  they 
may  be  obligated  to  pay  a  fixed  sum  upon  a  loss;  or  notes  may  be 
given  for  a  ]jart  only  of  the  premium,  the  other  part  being  payable 
in  cash,  or  the  entire  ])remium  be  paid  in  advance  in  cash.  Mutual 
companies  are  also  organized  to  issue  policies  upon  premium  notes," 
and  also  for  all  cash  premiums,  and  the  fund  thus  realized  may 
constitute  a  common  fund  for  the  payment  of  losses.^"  Again,  the 
plan  may  require  a  casli  deposit,  from  each  member  of  an  unin- 
corporated association,  fi-om  which  losses  are  to  be  met  such  member 

^5  People    V.    Family    Fund     Soc.  ()lus   upon   the  dissolution  of  a  mu- 

(Shorb's   Appeal)    52   N.   Y.    Supp.  tual  insurance  company,  see  note  in  S 

867,  31  App.   Div.  Ifif).  appeal   dis-  L.R.A.(N.S.)  G.'kI 

missed   (mem.)  159  N.  Y.  534,  53  N.  "  Kerr  v.  Minnesota  Mutual  Bone- 

E.  1129.  tit  Assoc.  39  :Minn.  ]74,  177,  12  Am. 

'iSRird  v.  Mutual  Union  Assoc,  of  S(.  I.^ep.  631,  39  N.  W.  312. 

Rochester,  52  K.  Y.  Suiip.  1044,  30  ^^  As  far  as  necessary  we  have  al- 

App.  Div.  346.  so    noticed    the    shipping    duhs    and 

1'^  United    States   Life   Ins.    Co.   v.  Friendly  Societies  of  England  under 

Spinks,    126    Kv.     405.    13    LM.A.  §  ^    herein. 

(NS  )  1053.  96  S.  W.  389.     See  also  20  Lj.],igi,  Valley  Fire  Ins.   Co.   v. 

Calkins  v.  Rump,  120   Mich.   335.  6  SchimpI',  13  Phila.    (Pa.)    515,  521. 

Det.  Leg.  X.  182.  79  N.  W.  491.    See  See  §  1138  heroin. 

§§  1273,  1288,  1455  herein.  As  to  right  to  change  plan,  see  §§ 

On    the    di-stribution    of    the    sur-  350m-350q  herein. 

837 


§  343 


JOYCE  ON  INSURANCE 


to  become  entitled  to  a  return  of  the  unexpended  portion  of  the 
deposit  ^t  the  expiration  of  his  poUey.^  Where  the  eliarter  of  a  Hfe 
assurance  society  provides  that  its  business  shall  be  conducted  on  the 
mutual  plan  such  provision  is  judicially  declared  to  contemplate 
that  the  premiums  paid  by  each  member  for  insurance  constitutes 
a  common  fund  devoted  to  the  payment  of  losses  as  they  may  occur.^ 
The  fact  that  cash  premiums  are  paid,  without  further  liability, 
at  the  election  of  assured,  as  well  as  premiums  secured  by  note  does 
not  abrogate  the  mutual  principle.^  In  the  cash  premium  plan 
each  member  has  an  interest  in  the  surplus  premium  fund  remain- 
ing after  payment  of  losses  and  expenses,*  for  all  persons  insured  on 
that  principle  are  entitled  to  look  to  the  premium  notes  of  the 
members  as  tbe  capital  of  the  company;^  and  a  mutual  company 
may,  in  New  York,^  issue  policies  for  a  fixed  cash  premium,  with- 
out liability  to  contribute  by  the  assured.'  And  the  charter  of  a 
mutual  company  may  clearly  provide  for  the  issuance  of  policies  on 
the  cash  premium  basis.^    Nor  does  such  company  under  the  Mis- 

1  Sersreant  v.  Goldsmith  Drv  Goods       ^  As  oro-anized  under  N.  Y.   Stat. 


Co.    (1913) 


Tex.   Civ.  App. 


1819,  e.  308. 


159  S.  W.  1036.  '  Myg-att  v.   New  York  Protection 

As    to    relinquisliment    of    capital  Ins.   Co.   21   N.   Y.   52,_67,  s.   c.   19 

stock  or  deposit  notes  by  mutual  com-  How.  Pr.   (N.  Y.)   61,  il.     See  Mu- 

pany  to  maker,  see  N.  Y.  Ins.  Law  tual  Fire  Ins.  Co.,  Matter  of,  161  N. 

1909,  c.  33,  c.  28  Consol.  Laws,  sees.  Y.  10,  16,  58  N.  E.  29;  Dickinson  v. 

113,  115  (Parker's  Ins.  Law  of  N.  Y.  Continental  Trust  Co.  52  N.  Y.  Supp. 


[ed.  1915]  pp.  206,  208). 


672,  673,  23  Misc.  489,  491. 


2  Lord  V.  Equitable  Life  Assur.  »  Ely  v.  Oakland  Circuit  Judcre,  62 
Soc.  96  N.  Y.  Supp.  10,  109  App.  :Micli.  466,  17  Det.  Leg.  N.  62,  125  N. 
Div.   252    {eiting  Union   Ins.   Co.   v.  W.  375,  127  N.  W.  769. 

Hose,  21  How.  [62  U.  S.]  35,  64,  16  As  to  cash  premium  in  addition  to 

L.  ed.   61)      The   principal  case  also  amount    of  note  to   be  given  by  in- 

appears  on  otlier  points  in  194  N.  Y.  sured  in  domestic  mutual  fire  insur- 

212,  22  L.R.A.(N.S.)   420,  87  N.  E.  ance   company.      See   N.   Y.   Ins.   L. 

443.  1909,  c.  33,  Consol.  Laws,  c.  28,  sec. 

3  Union  Ins.  Co.  v.  Hoge,  21  How.  113  (Parker's  Ins.  L.  of  N.  Y.  [ed. 
(62  U.  S.)  35,  16  L.  ed.  61.  See  1915]  pp.  206,  207);  and  as  to  de- 
Schwarzwalder  v.  Tegen,  58  N.  J.  posit  note  and  cash  payment  by  mem- 
Eq.  319,  321,  324,  43  Atl.  587.  bers  of  such  corporations,  and  as  to 

*  Spruance    v.    Farmers'    &    Mer-  relinquishment     by     corporation     to 

chants  Ins.  Co.  9  Coi.  73,  77,  78,  10  maker  of  such  note  after  expiration 

Pac.  285,  under  Col.  Gen.  Stat.  see.  of   insurance   term,   see   sec.   115   of 

1704.  same  law.     (Parker's,  pp.  208,  209). 

^  Hays  V.  Lycoming  Fire  Ins.  Co.  As  to  corporations  doing  business 

98   Pa.   St.   184;   Hummel's  Appeal,  on  the  advance  premium  plan  pur- 

78  Pa.  St.  320 ;  liehigh  Valley  Fire  suant  to  the  provisions  of  art.  IX.  of 

Ins.  Co.  V.  Schimpf,  13  Phila.^  (Pa.)  N.  Y.  Ins.  Law,  relating  to  Co-oper- 

515,  521,  .see  Schimpf  v.  Lehigh  Yal-  ative  Fire  Ins.  Corp.     See  N.  Y.  Ins. 

ley  Mutual  Ins.  Co.  86  Pa.  373,  376.  Law  1909,  c.  33,  Consol.  L.  c.  28,  sec. 

838 


PARTIES— MUTUAL  COMPANIES  §  343 

soLiri  statute.^  expose  itself  to  the  charge  of  doing  business  upon  the 
joint  stock  plan,  by  receiving  all  cash  premiums  on  all  policies 
running  less  than  six  years.^^  Nor  is  a  combined  premium  note, 
assessment,  and  cash  premium  plan  ultra  vires  where  the  company 
is  chartered  to  do  business  on  the  mutual  plan  only.^°  It  is  said  by 
the  court  in  a  Colorado  case  ^^  that  "the  principle  of  mutuality  ex- 
ists when  the  persons  constituting  the  company  contribute  either 
cash  or  assessable  premium  notes,  or  both,  as  the  plan  of  transact- 
ing business  may  provide,  to  a  common  fund,  out  of  which  each  is 
entitled  to  indemnity  in  case  of  loss,^^  though  where  cash  is  accept- 
ed for  premiums  the  insured  is  held,  in  Illinois,  not  to  thereby  be- 
come a  member."  And  under  an  Iowa  decision  one  who  insures 
his  property  in  a  specific  amount  for  a  certain  premium  does  not 
thereby  become  a  meml)er.^*  But  in  Michigan  the  holders  of  pol- 
icies issued  on  a  cash  premium  basis  become  members  of  the  com- 
pany.^^  Where  a  New  York  company  was  authorized  to  receive 
subscriptions  payaljle  in  cash,  and  give  receipts  therefor  bearing 
interest,  which  receipts  showed  that  the  cash  was  received  in  ad- 
vance for  premiums  only  of  insurance,  but  the  charter  did  not  pro- 
vide that  those  paying  such  cash  should  take  policies  of  insurance 
the  premiums  on  which  should  equal  the  cash  so  paid  in,  it  was  held 
that  such  plan  was  not  that  of  mutual  insurance  under  the  Illinois 
laws.^^  Persons  so  associated  are  said  to  be  members  of  the  com- 
pany. They  have,  or  may  have,  a  voice  in  the  management  of  its 
affairs,  and  are  practically  both  insurers  and  insured.  All  are  in- 
terasted  in  what  may  be  termed  the  profits  and  losses  of  the  associa- 
tion ;  for  if  the  assessable  note  system  in  any  of  its  forms  be  adopt- 
ed, the  demands  upon  each  member  to  meet  assessments  during  the 
life  of  his  policy  or  risk  are  large  or  small,  according  to  the  multi- 

267;    Parker's    N.    Y.    Ins.    L.    (ed,  Mygatt  v.  New  York  Prot,  Co.  21  N. 

1915)   pp.  384  et  seq.  Y.    52,   19   How.    Pr.    61;    White   v. 

9  Act   1877,   Rev.   Stat.   Mo.   1879,  Haight,  16  N.  Y.  310;  Ohio  Mutual 

sec.  5988.  Ins.  Co.  v.  Marietta  Woolen  Factory, 

3»  State    V.    Manufacturers'    Mut.  3  Ohio  St.  348;  May  on  Insurance, 

Fire  Ins.  Co.  91  Mo.  311,  318,  3  S.  sec.   548;   Angell   on   Insurance,  sec. 

W.  383.  413. 

1°  Lehigh  Valley  Fire  Ins.   Co.  v.  "  Illinois  Mutual  Fire  Ins.  Co.  v. 

Schimpf,^13  Phila.  (Pa.)  515;  Davis  Stanton,  57  111.  354. 

V.  Oshkosh  Upholstery  Co.  (Parcher  i*  Mutual  Guaranty  Fire  Ins.  Co., 

&  J.  &  A.  Stewart)  82  Wis.  488,  495,  In  re  (Alvord  v.  Barker)   107  Iowa. 

52  N    W.  771.     See  Runclle  v.  Ken-  143,  70  Am.  St.  Rep.  149  note,  77  N. 

nan,  79  Wis.  492,  497,  48  N.  W.  516.  W.  868,  28  Ins.  L.  J.  205. 

1^  Spruance  ex  rel.  v.  Farmers  &  ^^  Elv   v.    Oakland    Circuit   Judge, 

Merchants  Ins.  Co.  9  Col.  73,  77,  78,  162  Mich.  466,  17  Det.   Leg.  N.  62, 

10  Pac.  285.  125  N.  W.  375,  127  N.  W.  769. 

12  Citing  Union  Ins.  Co.  v.  Hoge,  ^^  Mutual  Fire  Ins.  Co.  v.  Swigert, 

21  How.  (62  U.  S.)  35,  16  L.  ed.  61;  120  111.  36,  44,  11  N.  E.  410. 

839 


344 


JOYCE  ON  INSURANCE 


plication  or  diminution  of  losses;  while  if  a  cash  premium  plan 
prevail,  each  member  has  an  interest  in  the  surplus  premium  fund 
remaining  after  payment  of  losses  and  expenses,  and  of  course  the 
amount  of  such  surplus  is  governed  by  the  extent  of  the  losses  suf- 
fered. The  policyholder  in  the  joint  stock  company  is  not  thus 
situated.  He  pays  a  certain  definite  sum  as  a  premium,  and  the 
company  agrees  therefor  to  pay  him  a  certain  specific  amount  in 
case  of  loss.  He  has  no  voice  whatever  in  the  management  of  the 
business,  and  whether  the  profits  or  losses  are  large  or  small  does  not 
concern  him.  provided  the  company  remains  able  to  liquidate  any 
lossas  contemplated  by  his  contract.  .  .  .  The  principle  of 
imituality  has  probably  been  more  often  recognized  and  enforced 
in  these  associations  through  the  assessable  note  system  in  some  of 
its  numerous  forms,  but  .  .  .  it  is  perfectly  consistent  with 
the  payment  of  cash  premiums."  ^'  In  case  of  deposit  notes,  con- 
tributions are  obtained  from  the  makers  for  losses  and  damages  by 
pro  rata  assessments  of  a  just  i3roportion  upon  each  member  liable 
thereon,   and  payments  thereof  are  required  upon   due  notice.^* 

Mr.  Niblack  ^^  makes  three  general  divisions  of  the  plans  of  in- 
surance in  mutual  benefit  societies,  as  follows:  ''1.  Where  the  so- 
ciety agrees,  upon  certain  conditions,  to  ])ay  a  certain  sum  of  money 
on  the  death  of  a  member;  2.  Where  the  society  agrees  to  pay,  on 
certain  conditions,  as  many  dollars  as  there  are  members  of  the 
society  in  good  standing  at  the  time  of  the  death  of  a  member; 
3.  Where  the  society  agrees,  upon  certain  conditions,  on  the  death 
of  a  member,  to  levy  an  assessment  uj^on  ite  members  of  a  certain 
Sinn  of  money,  and  to  pay  the  proceeds  of  such  assessment  to  the 
beneficiary  of  the  member."  This  division  is  at  once  concise  and 
comprehensive.^" 

§  344.  When  mutual,  etc.,  societies  or  associations  are  and  are  not 
insurance  companies. — When  a  mutual  benefit  society  or  association 
contracts  for  a  consideration  to  pay  a  sum  of  money  upon  the 
happening  of  a  certain  contingency,  and  the  prevalent  purpose  and 
.nature  of  such  society  or  association  is  that  of  insurance,  the 
organization  is  a  mutual  insvirance  company.  This  is  true  whether 
the  society  be  a  voluntai'y  one  or  incorporated,  and  whether  it  be 


n\ 


"As  to   the   government    and   or-  and  e.  33  of  1909,  as  am'd)  pp.  200 

ganization    of    mvitual    comi)anies   in  et  seq.,  342,  et  seq. 
New  York,  and  tlie  statutes  of  that        ^^  planters'  Ins.  Co.  v.  Comfort,  50 

state  down  to  and  including  that  of  Miss.  602,  668. 

1849,  as  well  as  the  relations  of  mem-       ^^  Niblaek's  Mutual  Benefit   Soeie- 

bers,  etc.,  see  opinion  of  Denio,  C.  ties,  see.  384. 

J.,  in  White  v.  Haight,  16  N.  Y.  310.        20  ggg    further    16    Am.    &    Eng. 

Nee  also   Parker's   N.   Y.  'Ins.   Laws  Ency.  of  Law,  17-19. 
(ed.  1915,  being  e.  28,  Consol,  Laws 

840 


PARTIES— MUTUAL  COMPANIES  §  344a 

known  as  a  relief,  benevolent,  or  benefit  society  or  by  some  similar 
name.  Nor  does  the  manner  or  mode  of  the  payment  of  the  con- 
sideration or  of  the  loss  or  benefit  aff'ect  the  question,  and  make 
the  conti-act  the  less  one  of  insurance.  The  test  is,  what  is  the 
real  purpose  and  nature  of  such  society,  and  if  the  prevalent 
purpose  is  to  make  contracts,  which  are  in  effect  contracts  of 
insurance  within  the  meaning  of  that  word,  they  are  insurance 
companies.  A'arious  facloi's  or  elements,  however,  enter  into  the 
consideration  of  this  question  as  will  appear  throughout  the  next 
following  sections.^  The  above  rule  is  also  especially  subject 
to  those  exceptions  which  arise  in  favor  of  such  companies  by 
reason  of  statutory  exemptions  in  some  of  the  states,  or  other 
statutory  provisions  defining  or  fixing  their  status.^  It  is  held 
in  Arkansas  that  the  rights  of  persons  claiming  under  a  con- 
tract nmst  be  fixed  thereby,  without  regard  to  the  character  of 
the  society,  where  the  statute  affords  no  aid  in  determining  whether 
it  be  an  insurance  contract  or  not.'  And  it  is  decided  in  JMaine  that 
if  the  prevalent  purpose  be  that  of  insurance,  its  benevolent  or 
charitable  featiu-es  do  not  afi'ect  its  legal  status  as  an  insurance  com- 
pany.'* But  a  company  may  be  substantially  an  old-line  life  com- 
pany and  neither  a  mutual  nor  fraternal  benefit  association  even 
though  annual  dues  instead  of  premiums  ai'e  collected  to  meet  obli- 
cations.* 

§  344a.  Same  subject:  pecuniary  profit  as  a  factor. — Under  a 
Missouri  decision  in  fraternal  benefit  associations  where  the  princi- 
pal object  is  social  and  benevolent  the  insurance  feature  is  merely 
an  incident.^  And  in  another  case  in  that  state  it  is  stated  in  the 
opinion  in  discussing  the  point  before  the  court  that  in  such  associa- 
tions the  insurance  feature  is  a  mere  incident  to  the  fraternal  pur- 
pose in  contradistinction  to  those  companies  the  one  purpose  of 

^  7s  a  benefit  association  an  insur-  ^  See  §§  340,  344a  et  seq.  herein. 

ance  companiif     I.  Where  the  ques-  ^  Block  v.  Valley  Mutual  Ins.  As- 

tion  is  as  to  ''other  iii.'^uraiice."     II.  sec.  52  Ark.  201,  20  Am.   St.   Rep. 

Where  the  construction  of  tlie  certif-  1G7,  12  S.  W.  477. 

icate    is    in    question.       III.  Where  *  Bolton  v.  Bolton,  73  Me.  2f)9. 

compliance  with   state  insurance  law  ^  p^'iHey  v.  Illinois  Life  Ins.  Co.  93 

is    recpiired    before    doing    business.  Kan.    2!)3,   144    Pac.    257.      See    this 

IV.  Where  the  question  is  in  regard  case  also  for  definitions  and  distine- 

to  juiisdiction.    V.  Under  statute  ex-  tion     between     the    above     ditferent 

empting    benevolent    .societies.       VI.  classes. 

Where  the  question  is  not  discussed.  ^  Umberger    v.    Modern    Brother- 

VII.   Some   definitions.      VIII.   Sum-  hood  of  America,  162  Mo.  App.  141, 

mary.     Note. 38  L.H.A.  33-57.     Com-  144  S.  W.  898,  considered  more  fully 

pare  Peterson  v.  ^Manhattan  Life  Ins.  under  §  344b  herein. 
Co.  244  111.  329,  18  Am.  &  Eng.  Ann. 
Cas.  96,  39  Ins.  L.  J.  817. 

841 


344a 


JOYCE  ON  INSURANCE 


which  is  to  make  a  profit  for  the  promoters,  and  one  feature  of 
which  is  the  payment  of  fixed  premimns  at  stated  times  by  the  in- 
sured, and  the  payment  of  a  sum  certain  by  the  company  to  the 
named  beneficiary^  upon  the  death  of  insured.'  It  is  declared  in 
Illinois  that  there  is  a  fundamental  distinction  between  life  insur- 
ance companies  and  those  organizations  generally  known  as  fra- 
ternal associations,  fraternal  beneficiary  societies,  or  mutual  benefit 
societies  requiring  separate  codes  for  the  management  and  regu- 
lation of  each,  which  difference  has  been  continuously  recognized 
by  the  courts  and  the  legislature  of  that  state.  The  court,  per 
Cooke,  J.,  said:  ''Life  insurance  companies  are  organized  to  engage 
in  the  business  of  insuring  the  lives  of  persons  for  profit.  They 
are  authorized  to  combine  and  frequently  do  combine,  with  the  con- 
tract of  insurance  other  features,  such  as  the  payment  of  annual 
dividends  to  the  insured,  and  the  payment  of  the  face  of  the  policy, 
together  with  dividends,  to  the  insured  in  case  he  survives  a  certain 
period.  The  whole  scheme  of  such  insurance  is  that  of  a  business 
transaction  between  the  company  and  the  insurant  in  which  the 
object  of  the  company  is  to  obtain  profit  from  the  transaction. 
.  The  primary  object  of  fraternal  associations  is  to  obtain 
social  intercourse  among  the  members  and  to  furnish  relief  and 
assistance  to  members  and  persons  dependent  upon  them— not  upon 
a  commercial  or  business  basis,  but  upon  the  broad  principle  of 
friendship  and  brotherly  love.  The  insurance  feature  is  but  an 
incident  to  the  main  purpose  of  organization.  It  is  limited  to  the 
payment  of  benefits  to  membei-s  and  to  persons  dependent  upon 
them,  and  is  conducted,  not  for  the  purpose  of  gain  or  profit  to  the 
association,  but  to  further  the  benevolent  purposes  of  its  organiza- 
tion." *  In  Iowa  mutual  insurance  companies,  with  certain  excep- 
tions, are  not,  under  the  statute  exempt  from  taxation  as  organiza- 
tions not  for  pecuniary  profit^-^-XJnder  the  Maryland  Code  a  cor- 
poration having  a  capital  stock  in  which  many  members  do  not 
share,  and  conducting  business  for  the  pecuniary  benefit  of  the 
stockholders,  is  not  acting  "for  the  sole  benefit  of  its  members  and 
their  beneficiaries,  and  not  for  profit,"  so  as  to  be  entitled  to  issue 
fraternal  beneficiarv  certificates.^"     And  though  by  the  plan  of  a 


'  Aloe  V.  Fidelity  Mutual  Life  As-       ®  Iowa  Mutual  Tornado  Ins.  Assoc, 

soe.  164  Mo.  675, "55  S.  W.  993,  29  v.  Gilbertsen,  129  Iowa,  658,  106  N. 

Ins.  L.  J.  679.  W.     153;     Code     Supp.     1902,    sec. 

As    to    fixed    premium-profit,    etc.,  1333d;  Code  sees.  1304,  1642. 
and  distinctions,  see  further,  §  346b        1°  International  Fraternal  Alliance 

herein.  v.  State,  86  Md.  550,  40  L.R.A.  187, 

8  People  V.   Commercial   Life  Ins.  39  Atl.  512. 
Co.  247  111.  92,  93  N.  E.  90,  40  Ins. 
L.  J.  163,  168,  169. 

842 


PAK TIES— MUTUAL  COMPANIES  5^  ;J44l) 

mutual  benefit  unincr)rporated  fire  association  the  accumulation 
of  profits  is  not  intended  it  may  be  for  mutual  protection  profit  and 
advantage  and  not  merely  one  for  benevolent,  etc.,  purposes." 

§  344b.  Same  subject:  pecuniary  profit  as  a  factor:  lodge  sys- 
tems.— In  Illinois  fraternal  beneficiary  societies  are  within  the  term 
"insurance  company"  in  its  broader  meaning;  but  such  orders  are 
not  included  within  that  term  in  a  restricted  sense  and  confining  it 
to  its  literal  meaning.  And  a  distinction  is  made  with  reference  to 
its  statutes,  between  fraternal  orders  or  beneficiary  societies  and  in- 
surance companies  in  that  the  former  are  not  organized  for  the'tjur- 
pose  of  profit,  and  their  certificates  cannot  be  used  for  business 
purposes  nor  can  their  members  receive  any  pecuniary  benefit 
therefrom.  Creditors  cannot  reach  such  certificates  and  the  only 
purpose  of  the  society  is  the  benefit  of  the  widows  or  orphans 
of  its  members  or  persons  within  the  other  classes  mentioned 
in  the  statute;  while  the  latter  are  ordinary  business  coiporations 
and  their  policies  are  obtained  for  ordinary  business  purposes, 
for  investment,  for  security,  and  for  the  benefit  of  credit,  as  well 
as  for  protection  of  the  family.^^  ^i^^j  {^  that  state  the  term 
"contract  of  insurance"  as  applied  to  a  mu1.ual  or  fraternal  bene- 
fit association  with  local  camps  embraces  the  application  for 
membership,  the  certificate,  and  the  constitution  and  by-laws 
of  the  association."  But  in  Missouri  under  a  statute  similar 
to  that  of  Illinois  relating  to  societies  having  a  lodge  system, 
etc.,  and  conducted  for  the  sole  benefit  of  its  members  and  their 
l^eneficiaries  the  certificate  of  incorporation  together  with  the 
facts  as  to  the  manner  of  conducting  business  determine  whether  an 
association  is  within  the  statute,  and  a  company  is  governed  by  in- 
surance laws  as  to  misrepresentations  rather  than  by  those  governing 
benevolent  associations  irrespective  of  the  fact  whether  it  is  a  life 
company  or  a  mutual  benefit  association  on  the  assessment  plan." 
Under  the  jNIissouri  statute  fraternal  beneficiary  associations  are 
voluntary  associations  organized  solely  for  the  benefit  of  their  mem- 
bers and  their  beneficiaries  who  are  named  and  not  one  of  the 
class  named  can  be  a  beneficiary,"  such  associations  have  for  their 


"  Sergeant      v.      Goldsmith      Dry  di.stinction   was  based   thereon.     See 

Goods  Co.  —  Tex.  Civ.  App.  — ,  15!)  CathoUc  Knig-hts  of  111.  v.  Board  of 

S    W.  1036.  Review    of    Etfing-ham    County,    198 

12  Peterson  v.  Manhattan  Life  Ins.  111.  441,  64  N.  E.  1104. 

Co.    244    111.    329,   15    Am.    &   Vjug.  "Love    v.    Modern    Woodmen    of 

Ann.  Cas.  96,  91  N.  E.  466,  39  Ins.  America,  250  111.  102,  102  N.  E.  183. 

L.  J.  817.     The  order  was  the  Mod-  ^^  Thompson  v.  Royal  Neighbors  of 

ern  Woodmen  of  America,  organized  America,  154  Mo.  App.  109,  133  S- 

under  the  statute  of  that  state  with  W.  146. 

a  lodge  system,  etc.,  and  the  above  ^^  Rev.  Stat.  1909,  sec.  7109. 

843 


§  344b 


JOYCE  OX  INSURANCE 


professed  primary  object  the  social  and  moral  benefit  of  the  member- 
ship and  so  take  the  form  of  an  organized  brotherhood  the  insur- 
ance feature  being  merely  an  incident.  They  are  esi^entially  be- 
nevolent ^^  and  aim  to  make  no  profit.  They  have  lodges,  ritual, 
and  a  representative  form  of  government.^"'  So  a  fraternal  benevo- 
lent association  is  not  conducted  for  profit  within  the  Missouri  stat- 
ute defining  a  fraternal  beneficiary  association,  where  its  charter 
declares  that  it  is  not  in  business  for  gain  and  a  uniformed  rank 
Knights  of  Pythias  is  a  fraternal  beneficiary  association  within  such 
statute  and  not  an  old  line  insurance  company."  And  where  a 
fraternal  organization,  with  a,  lodge  system  is  not  conducted  for 
profit  but  only  for  the  sole  benefit  of  its  members  and  their  bene- 
ficiaries it  is  within  a  statutory  definition  of  a  fraternal  benefit  so- 
ciety.^^  So,  a  fraternal  beneficiary  society  known  as  the  Modern 
Woodmen  of  America  organized  under  the  Illinois'  laws  is  not  a 
life  insurance  company .2°  Again,  an  association  organized  under 
a  general  act  and  reincorporated  under  a  special  one  and  designated 
as  the  Supreme  Lodge  Knights  of  Pythias  is  a  fraternal  beneficiary 
association  and  is  not  within  a  nonforfeiture  insurance  statute  which 
is  limited  to  regular  or  old-line  insurance  companies,  where  such 
association  is  not  conducted  for  profit  and  its  declared  charter  pur- 
pose is  fraternal  and  benevolent  with  no  lawful  power  to  engage  in 
the  general  life  insurance  business  or  to  issue  ordinary  life  policies 
to  its  members  for  gain  or  profit,  and  it  has  a  representative  form  of 
government  and  ritualistic  form  of  work.^  In  another  ca.^^e  the  as- 
sociation was  organized  under  the  laws  of  Iowa  and  licensed  to  do 
business  in  Missouri  as  a  fraternal  beneficiary  association  and  under 
the  statutes  of  the  former  state  it  could  issue  certificates  for  the  bene- 
fit of  legatees  and  legal  representatives  of  its  meml)ers  which  were 
classes  not  designated  by  the  laws  of  the  4tttter^  Sfate  and  it  was 
urged,  for  that  rea^^nn,  that  it  should  be  treated  as  an  old-line  insur- 
ance company,  but  the  court  decided  against  this  contention  as  the 
statute  of  Missouri  ^  did  not  include  the  above  class  of  persons  and 
defined  such  associations  as  those  formed  or  organized  and  carried 


^^  Uraberjjer  v.  Modern  Brother- 
hood of  Ameriea,  162  Mo.  A  pp.  141, 
144  S.  W.  898. 

^"^  See  State  (ex  rel.  Supreme 
Lodc^e  Kniohts  of  Pvthias)  v.  Yau- 
diver,  213  Mo.  187,  '200,  15  Am.  & 
En?.  Ann.  Cas.  283,  111  S.  W.  Pll. 

^^  Tice  V.  Supreme  Lodge,  123  Mo. 
App.  85,  100  S.  AY.  519,  aff'd  204  Mo. 
349.  102  S.  W.  1043,  Rev.  Stat.  sec. 
1408,  Ann.  Stat.  1906,  p.  1111. 

^^  Loyd    V.    Modern    Woodmen    of 


America.  113  Mo.  App.  19.  87  S.  W. 
530.  under  Rev.  Stat.  1890,  see.  1408, 
and  111.  Laws  1893,  p.  130,  sec.  1. 

2°  Almond  v.  Modern  AYoodmen  of 
America,  133  Mo.  App.  382,  113  S. 
W.   695. 

^  Westerman  v.  Supreme  Lodge 
Knights  of  Pythias,  196  Mo.  670,  94 
S.  W.  470,  5  L.R.A.(N.S.)  1114n. 

2  Rev.  Stat.  1899,  sec.  1408  (sec, 
7109,  R.  S.  1909). 


844 


PARTIES— MUTUAL  COMPANIES  §  344b 

on  for  tlie  ?ole  honofit  of  it^;  member?  and  tlieir  tjeneficiaries  and  not 
for  proiil,  and  provided  for  a  lodge  system,  sick  and  death  ))cnelits, 
etc.  It  was  declared  that  the  main  dividing  line  between  fraternal 
beneficiary  associations  and  old-line  insurance  companies  is  that 
the  former  are  organized  to  ]»rotect  their  members  and  such  other 
persf)ns  as  are  ])i'oj>er  siiljjects  of  their  benevolence,  and  not  for 
prop'f  to  the  jiersons  organizing  or  carrying  on  such  as.'^ociations; 
while  the  old-line  insurance  companies  are  organized  primarily  for 
profit  to  the  persons  who  own  the  corporate  stock  and  the  court,  per 
Brown,  P.  J.,  adds:  "We  do  not  think  the  mere  fact  that  a  member 
of  one  of  these  fraternal  organizations  may  procure  a  certiftcate 
payable  to  some  ])erson  not  specifically  designated  in  the  statute, 
should  have  the  effect  of  destroying  the  purposes  of  the  associa- 
tion and  putting  it  in  the  same  class  as  the  old-line  companies."'  ^ 
In  Colorado  it  is  held  to  be  the  settled  law  there  that  a  fraternal 
beneficiary  association,  engaged  in  the  business  of  insuring  its  mem- 
ber's lives  through  subordinate  lodges,  is  an  insurance  company, 
and  its  contract  of  indemnity  by  whatever  name  called,  a  life  in- 
surance policy,  and  the  holder  thereof  a  policy  holder,  and  that  such 
contract  is  subject  to  the  same  statutory  regulations  and  limitations 
as  those  issued  by  old  line  and  mutual  assessment  companies,  un- 
less expressly  exempted  therefrom  by  statute.*  And  under  a  Ne- 
l)raska  decision  such  an  association  is  in  effect  a  mutual  life  insvu'- 
ance  compan}'.*  The  Kentucky  statutory  definition  of  an  insur- 
ance company,  or  insurance  corpoi-ation ;  includes  any  corporation 
or  association  engaged  in  the  transactions,  in  any  manner,  of  in- 
surance business,  although  it  exce))ts  fraternal  orders  exclusively 
on  tlic  lodge  system.^  Under  an  Indiana  decision,  where  the  plead- 
ing showed  that  the  "plan  of  insurance"  of  a  fraternal  order  was 
carried  on  through  and  bv  means  of  subordinate  local  lodges  and 

^  Armstrong    v.    IModern    Brother-  diction    Woodmen    of    the    World    v. 

hood  of  America,  245  Mo.  153,  149  Sloss,  49  Colo.  177,  31  L.R.A.(N.S.) 

S.  W.  459,  41  Ins.  L.  J.  1544,  831n,  112  Pac.  49;  acts  1903,  c.  119, 

*]\bi(lern  Brotherhood  of  America  (act  April  11,  1903);  1  Mills'  Ann. 

V.  Lock,  22  Colo.  Api).  409,  125  Puc  Stat.  sec.  638. 

55G,  41  Ins.  L.  J.  L533;  Laws  1907,        ^  Modern  Woodmen  of  America  v. 

c.  193,  p.  73,  sec.  1,  d.  1   (Rev.  Stat.  Colman,  08  Neb.  000,  94  N.  W.  814, 

sees.  '3087,  3160),  reiving  upon  Head  96  N.  W.  854. 

Camp    Woodmen    of    the    World    v        6  Kentncky    Stat.    1903,    see.    641, 

Sloss,  49  Colo.  177,  112  Pac.  49,  31  construed   in    Grand   Lodge   Ancient 

L.R.A.(N.S.)    831n;    Supreme  Lodi-o  Order  United  Workmen  v.  Edwards, 

Kniglits  of  Honor  v.  Davis,  26  Colo.  27  Ky.  L.  Rep.  469,  85  S.   W.   701. 

252,  257,  58  Pac.  595;  Chartrand  v.  See  also  Sims  v.  Commonwealth,  114 

Brace,   16   Colo.   19,  12   L.R.A.   209,  Kv.  827,  24  Ky.  L.  Rep.  1591,  71  S. 

25   Am.   St.  Rep.  235,  26  Pac.   152.  W.  929 ;  Ky.  Stat.  sec.  641. 

See  also  Head  Camp  Pacific  Juris- 

845 


344c 


JOYCE  ON  INSURANCE 


the  complaint  showed  the  parties,  subject-matter,  insurable  interest, 
amount  of  insurance,  the  premium  or  fees  paid,  and  compliance 
with  conditions  requisite  to  obtaining  a  certificate,  although  none 
was  issued,  it  was  held  that  "an  oral  contract  of  insurance"  was 
valid  and  enforceable  and  the  cases  relied  upon  to  support  this 
point  were  those  of  insurance,  although  such  contract  being  one 
for  the  protection  of  its  members  and  their  beneficiaries  by  means 
of  indemnity,  and  the  organization  being  a  fraternal  mutual  one 
not  seeking  profit  it  was  also  held  that  the  constitution,  by-laws  and 
other  writings  afl'ecting  the  parties  rights  were  to  be  liberally  con- 
strued to  promote  the  benevolent  objects  of  the  corporation.  The 
question,  however,  whether  such  a  contract  was  one  of  insurance 
was  not  discussed.'  Under  a  Michigan  decision  a  statute  relating 
to  the  provisions  of  life  insurance  policies  does  not  apply  to  fra- 
ternal beneficiary  associations  carrying  on  the  business  of  life, 
health,  casualty  or  accident  insurance  for  profit  under  the  express 
provisions  of  another  enactment  in  that  state.' 

The  "Golden  Cross"  was  incorporated  for  the  general  welfai-e  and 
not  for  profit  as  an  insurance  order  based  upon  the  principle  of  mu- 
tual assessment  of  its  members  and  is  what  is  known  to  the  Tennes- 
see laws  as  a  fraternal  beneficiary  association,  and  such  associations 
have  neither  capital  stock,  stockholders,  nor  property  to  be  used  in 
business  for  individual  profit.  Those  having  an  interest  therein 
are  not  stockholder  but  members  and  are  so  styled  by  the  statutes 
of  that  state,  nor  have  such  associations  either  franchises  or  prop- 
erty which  are  susceptible  of  lease  or  sale,  so  as  to  be  used  and  oper- 
ated by  another  corporation.^ 

§  344c.  Same  subject:  lodge  system  continued. — Under  a  New 
York  decision  an  unincorporated  association  for  the  promotion  of 
fraternal  association  and  for  relief  and  benefits  in  which  money 
was  no  part,  and  known  as  the  grand  united  Order  of  Odd  Fellows, 
is  not  a  pecuniary  benefit  and  mutual  a.ssurance  society,  but  a  fra- 
ternal association,  although  provision  is  incidently  made  for  fi- 
nancial assistance  and  relief  derived  from  dues,  stated  contributions 
and  fines  and  also  for  a  specified  sum  in  case  of  death. ^°  Under 
the  AVisconsin  statute,  an  Odd  Fellows'  association  incorporated  un- 


'  Brotherhood  of  Locomotive  Fire- 
men &  Enginemen  v.  Corder,  52  Ind. 
App.  214,  97  N.  E.  125,  41  Ins.  L.  J. 
384. 

8  Knights  of  the  Modem  Maccabees 
V.  Barrv,  Comm'r,  155  Mich.  693,  118 
N.  W:585;  Pub.  acts  1893,  p.  186, 
No.  119;  acts  1907,  p.  243,  No.  180. 
See  Howell's  Mich.  Stat.  Annot.  (2d 


ed.)    sec.    9022,   am'd   1895,   act   No. 
150,  1901,  act  No.  226. 

9  Knapp  V.  Supreme  Commandery, 
United  Order  of  the  Golden  Cross  of 
the  World,  121  Tenn.  212,  118  S.  W. 
390;  acts  1875,  c.  142,  p.  232;  Shan- 
non's Code  see.  2524. 

10  Anthony  v.  Carl,  28  Misc.  200, 
58  N.  Y.  Supp.  1084. 


846 


PARTIES—MUTUAL  COMPANIES  §  344d 

der  the  laws  of  another  state  for  the  purpose  of  fraternal  benevolent 
insurance  uj^on  the  assessment  plan,  and  which  continas  its  member- 
ship to  persons  belonging  to  its  allied  order,  is  held  exempt  from  the 
state  insurance  laws  relating  to  life  insurance  companies,  and  is  one 
of  the  ^'charitable  and  benevolent  orders  of  .  .  .  Odd  Fel- 
lows," within  the  meaning  of  the  statute.^^  In  Nebraska  a  society 
or  order  with  a  lodge  system  whose  objects  are  social  and  to  furnish 
aid  in  case  of  accident  or  sickness;  to  provide  for  the  families  of  de- 
ceased members;  to  furnish  life  indemnity,  based  upon  a  mutual 
co-operative  or  assessment  plan ;  to  render  mutual  assistance,  and 
promote  benevolence  and  charity,  is  in  so  far  as  it  seeks  to  give  in- 
demnity to  those  holding  certilicates,  a  mutual  life  insurance  com- 
pany.^2  In  a  North  Carolina  case  a  benefit  order,  designated  as  the 
Order  of  Owls,  with  power  of  self-perpetuation,  and  having  a  head 
organization  with  subordinate  bodies  in  various  sections  of  the 
country  with  by-laws  providing  for  sick  and  death  benefits,  with  in- 
surance features,  is  a  fraternal  benefit  order  within  the  statutes  of 
that  state  defining  such  orders,  making  them  subject  to  the  same 
rules,  regulation  and  supervision  as  foreign  insurance  companies, 
with  certain  exceptions,  and  requiring  a  license  from  one  assuming 
to  act  as  insurance  agent  for  foreign  companies.  And  the  words  in- 
surance companies,  associations  and  orders,  used  in  such  statutes 
contemplate  both  incorporated  and  unincorporated  companies.^^ 
In  Pennsylvania,  a  benefit  society  which  does  business  through  the 
lodge  system  is  not  an  insurance  company  under  the  statute  of  that 
state.i*"^ 

§  344d.  Same  subject:  pecuniary  profit  as  a  factor:  masonic  be- 
nevolent or  relief  associations. — A  masonic  benevolent  association 
is  substantially  a  life  insurance  company,  even  though  not  engaged 
in  business  for  profit  and  without  capital  as  an  investment,  but  hav- 
ing for  its  general  purpose  mutual  protection  and  the  giving  of  aid, 
etc.,  to  widows  and  children  of  deceased  members,  and  the  contract 
is  unilateral  the  same  as  life  insurance  contracts."  So  in  the  United 
States  circuit  court  it  is  held  that  a  Masonic  life  indemnity  com- 
pany whose  business  is  on  the  assessment  plan,  but  which  has  no 

"  State  V.  Whitmoro,  75  Wis.  332,  2  Revisal,  c.  100,  sees.  4691,  4706, 
43  N.  W.  1133,  under  Laws  1883,  c.  4715  (3)  4794-4798,  2  Revisal,  c.  81, 
94;  Laws  1879,  c.  204.    See  al.so  Cal.   see.  3484. 

Stat.  1891,  c.  cxvi.  p.  126,  sec.  14,        i*  Donlevy      v.      Supreme     Lodge 
p.  130.  Sliield  of  Honor,  11  Pa.  Co.  Ct.  Rep. 

12  Home   Forum    Benefit    Order  v.    477,  49    I^s-    Intell.    145,   under   act 
Jones,  5  Okla.  598,  50  Pae.  165,  27   of  May  11,  1881. 
Ins.  L.  J.  8.  "  Clark,    Receiver,    v.    Seliromyer, 

Instate  V.  Arlington,  157  N.  C.  23  Ind.  App.  565,  56  N.  E.  785,  29 
640,  73  S.  E.  122,  41  Ins.  L.  J.  319,   Ins.  L.  J.  477. 

847 


§  344e 


JOYCE  ON  INSURANCE 


fraternal,  social,  or  like  purposes,  is  an  insurance  company.^*  In 
a  Pennsylvania  case,  however,  the  association  was  an  Illinois  cor- 
poration. It  was  not  organized  for  profit  or  gain,  but  its  purpose 
was  to  secure  pecuniary  aid  to  the  widows,  orphans,  heirs  and  de- 
visees of  deceased  members  of  said  association.  It  wa>s  incorporated 
under  a  statute  which  expressly  provided  that  associations  with  such 
a  [)urpose,  where  no  annual  dues  or  premiums  were  required  and 
where  the  members  were  to  receive  no  money  as  profit  or  otherwise 
should  "not  be  deemed  insurance  companies."  It  was  held,  there- 
fore, that  the  association  was  not  an  insurance  company,  nor  the 
certificates,  issued  by  it  in  Illinois,  contracts  of  insurance.  In  this 
case  the  distinction  is  made  between  contracts  of  insurance,  which 
are  purely  a  business  adventure  the  characteristic  feature  of  which 
is  granting  an  indemnity,  or  security  against  loss,  for  a  stipulated 
consideration,  and  benevolent  societies  of  a  purely  philanthropic 
or  benevolent  character  the  object  of  which  is  not  indemnity  or  se- 
curity against  loss,  but  the  accumulation  of  a  fund  bv  contributions 
of  members  for  aid  or  relief  in  case  of  sickness,  injury,  or  death. ^''' 
§  344e.  Same  subject:  rules  of  construction  as  a  factor. — The 
same  rules  of  construction  apply  to  death  benefit  certificates  as  are 
a])plical)le  to  contracts  of  insurance  as  such  certificates  are  held  to 
be  insurances-contracts.^®  And  in  the  absence  of  statutes  wherein 
nuitual  benefit  fraternal  and  like  societies  and  associations  are  de- 
clared not  to  be  insurance  companies,  it  is  determined  by  tlie  weight 


ft 


ft 


i 


i 


^^  Knights  Teuiplar  &  Masons' 
Life  Indemnity  Co.  v.  Berry,  50  Fed. 
511,  1  C.  C.  "a.  561,  4  U.  S.  App. 
353. 

That  such  Masonic  relief  associa- 
tions are  life  insurance  companies. 
See  also  the  following  cases: 

L'niled  States. — Knights  Templars' 
&  Masons'  Life  Indemnity  Co.  v. 
Jarman,  104  Fed.  638,  44  C.  C.  A. 
93,  30  Ins.  L.  J.  '230,  aft'd  187  U.  S. 
197,  47  L.  ed.  139,  23  Sup.  Ct.  108, 
32  Ins.  L.  J.  57  (holding  that  a  stat- 
ute forbidding  the  defense  of  suicide 
to  an  action  on  a  life  policy  ai) plied 
1o  certificates  issued  by  a  INIason's 
life  indemnity  company,  on  the  as- 
sessment ])lan)  ;  Jarman  v.  Kniglit.s 
Templars'  &  Masons'  Life  Indem- 
nity Co.  95  Fed.  70. 

Illinois. — Lehman  y.  Clark,  174  111. 
279,  43  L.R.A.  648,  51  N.  E.  222, 
27  Ins.  L.  J.  745,  rey'g  71  111.  App. 
366    (contract  expressly  held  one  of 


life  insurance),  quoting  from  Rock- 
hold  y.  Canton  Masonic  Benevolent 
Society,  129  111.  440,  2  L.R.A.  420. 
21  N.'E.  794,  aff'g  26  111.  App.  141 
(where  it  is  said  "That  the  undertak- 
ing evidenced  by  the  certificate  is  one 
of  insurance  .  .  .  cannot  be  seri- 
ously ([uestioned,"  etc.). 

loira. — Prader  y.  National  Masonic 
Accident  Assoc.  95  Iowa,  149,  63  N. 
W.   601. 

Maine. — Bolton  y.  Bolton,  73  Me. 
299  {considered  under  §  346  herein). 

Minnesota. — Lake  v.  Minnesota 
Masonic  Relief  Assoc.  61  Minn.  96, 
52  Am.  St.  Rep.  5.38n,  62  N.  W.  261. 

^'  Northwestern  Masonic  Aid 
Assoc.  V.  Jones,  154  Pa.  St.  99,  35 
Am.  St.  Rep.  810,  26  Atl.  253,  quot- 
ing from  and  apphjing  Common- 
wealth y.  Equitable  Beneficial  Assoc. 
137  Pa.  412,  18  Atl.  1112. 

18  Small  y.  Court  of  Honor,  136 
Mo.  App.  434,  117  S.  W.  116. 


i 


848 


PARTIES— MUTUAL  COMPANIES  §  344e 

of  authority,  in  so  far  as  the  construction  of  the  certificate  in  gen- 
eral and  as  to  forfeiture,  beneficiaries,  etc.,  are  concerned,  that  such 
societies  and  associations  are  to  be  treated  as  life  insurance  com- 
panies, and  their  certificates  as  life  insurance  contracts,  althbu.2;h 
under  some  of  the  decisions  the  certificates  dift'er  in  some  respects 
from  ordinary  insurance  policies  in  that  the  constitution  and  by- 
laws b9come  part  of  the  contract. ^^  So,  in  Colorado,  in  an  action 
upon  a  fraternal  benefit  policy,  the  court  held  that  in  order  to  ar- 
rive at  the  intention  of  the  parties,  the  same  rules  of  construction 
governed.^"  Again,  in  a  case  in  tlie  Federal  court  in  an  action 
founded  upon  a  certificate  in  a  Masonic  life  indemnity  company,  an 
assessment  association,  the  court  in  discussing  the  question  of  the 
company's  right  to  make  certain  amendments  declared  that:  "All 
contract^;,  notwithstanding  the  general  words  or  phrases  tliey  may 
contain,  should  receive  an  inter])retation  which  will  accord  with  the 
presumed  intention  of  the  contracting  parties,  and  will  not  work 
an  injustice  or  lead  to  absurd  consequences''  and  this  rule  of  con- 
struction was  applied.^ 

1^  See  also  the  following  eases:  defense  in  case  of  misrepresentations 

Arkansa-'^. — Brotherhood    of    Loco-  and  warranties). 

motive     Firemen     &     Enginemen     v.  Nebraska. — Modern    Woodmen    of 

Aday,  97  Ark.  425,  .S4  L.R.A.(N.S.)  America  v.  Coleman,  68  Xob.  660,  94 

126,"  134   S.   W.    928,   40   Ins.   L.    J.  N.  W.   814,  rehearing  denied   96   N. 

737'  (construed  like  any  other  insur-  W.  154  (governed  by  general  rules  of 

ance  policy,  according  to   plain  and  law  applicable  to  life  insurance  com- 

obvious  meaning  with  a  view  to  ac-  panies). 

complish  purpose  for  which  brother-  New  Tor  A-.— Weinberg  v.  Wood- 
hood  maintained).  ward,  67  ^Nlisc.  283,  124  N.  Y.  Snpp. 

Indiana. — ^Modern      Woodmen     of  480    (governed    by    principles    which 

America  v.   .Miles,  178  Ind.  105,  97  apply  insurance  contracts). 

N.   E.  1009    (construed  to  effect  in-  See  also  note  38  r..R.A.  34-40,  on 

tent)  ;     Brotherhood    of    Locomotive  whether  a  benefit  association  is  an  in- 

Firemen  &  Enginemen  v.  Corder,  52  surance  company  where  the  construc- 

Ind.  App.  214,  97  N.  E.  125  (liberal-  tion  of  tlie  certilicate  is  in  question; 

ly  construed).  §§  ^8^  ef  «'<l-i  -<J''  --'^  et  seq.  herein. 

iUmnesota.— Mady  v.   Switchmen's  20  ^f^^^t.^^  Woodmen  of  America  v. 

Union  of  North  America,  116  Minri.  International  Trust  Co.  25  Colo.  Ap|). 

147,  133  N.  W.  472  (cannot  be  given  26,  136  Pac.  806.     See  also  Supremo 

interpretation  at  variance  with  clear  Lodge   Knights   of   Honor   v.   Davis, 

.sense  and  meaning  of  language  em-  26    (Jolo.    252.    58    Pac.   595;    Grand 

ployed).  Circle     Women     of     Woodcraft      v. 

i/tssown.— Brittenham     v.     Sover-  Rauscli,  24  Colo.  App.  304,  134  Pac. 

eign  Camp  Woodmen  of  the  World,  141. 

180   Mo.   App.  523,  167   S.   W.   587  ^Knights     Templars'     &     Masons' 

(effect   should  be  given   to   all   parts  Life   Indemnity   Co.   v.  Jarman,  104 

printed  or  written.^    See  §§  212,  223  Fed.  638,  44  C.  C.  A.  93,  30  Ins.  L. 

herein)  ;  Evans  v.  Modern  Woodmen  J.  230,  case  is  aff'd  in  18/  L.  S.  197, 

of  America,  149  Mo.  App.  166,  129  47  L.  ed.  139,  23  Sup.  Ct.  108. 
S.   W.  485    (strict   interpretation   in 

Joyce  Ins.  Vol.  I.— 54.  849 


§  344f 


JOYCE  ON  INSURANCE 


So  the  rule,  applicable  to  regular  insurance  contracts,  that  the 
contract  should  be  construed  against  the  insurer  and  most  favor- 
ably to  insured  so  as  not  to  defeat  a  recovery  and  to  prevent  a  for- 
feiture, applies  likewise  to  mutual  and  fraternal  benefit  and  like  con- 
tracts.^ And  a  fraternal  beneficiary  association  on  the  lodge  sys- 
tem is  not  within  a  nonforfeiture  insurance  statute  which  is  limited 
to  old-line  insurance  companies,' 

§  344f.  Same  subject:  attachment  of  copy  of  application  or  by- 
laws.— A  fraternal  association  on  the  lodge  system  is  not  in  i\Iassa- 
chusetts  within  a  statute  requiring  attachment  of  an  application  to 
a  life  insurance  policy.*  But  in  Kentucky  a  society  is  a  "fraternal 
society"  under  a  statute  requiring  a  copy  of  the  application  to  be 

2  Arkansas. — ^Industrial  Mutual  In-  Woodmen  of  America,  236  Mo.  32G, 

demnity  Co.  v.  Hawkins,  94  Ark.  417,  139  S.  W.  151;  Simmons  v.  Modern 

29  L.R!a.(N.S.)  635n,  21  Am.  &  Eng.  Woodmen  of  America,  185  Mo.  App. 

Ann.    Cas.    1029,    127    S.    W.    457,  483,  172  S.  W.  492;  Wintergerst  j. 

quoted  from  in  Brotherhood  of  Loco-  Court  of  Honor,  185  J\Io.  App.  373, 

motive    Firemen     &     Enginemen    v.  170     S.     W.     346;     Brittenham     v. 

Aday,  97  Ark.  425,  34  KR.A.(N.S.)  Sovereign    Camp    Woodmen    of    the 

126,*134  S.  W.  928,  40  Ins.  L.  J.  737.  World,  180  Mo.  App.  523,  16/  S.  W. 

Illinois. — Zeman   v.   North   Ameri-  587;    Beile    v.    Travelers    Protection 

can  Union,  263  111.  304, 105  N.  E.  22 ;  Assoc,  of  America,  155  Mo.  App.  629, 

Mutual  Protective  League  v.  McKee,  135  S.  W.  497,  40  Ins.  L.  J.  1028. 

122  111.  Ap^.  376,  aff'd  223  111.  364,  New  Jersey.— Coghlan  v.  Supreme 

79  N.  E.  25.  Conclave  Improved  Order  of  Hepta- 

Indiana. — Modern     Woodmen     of  sophs,     86     N.     J.     Laws     41,     91 

America  v.  Miles,  178  Ind.   105,  97  Atl.   132;   Johnson  v.   Grand   Lodge 

N.  E.  1009   (liberally  in  favor  of  as-  Ancient  Order  United  Workmen,  81 

sured) ;  Supreme  Council  Benevolent  N.  J.  Law  511,  79  Atl.  333,  40  Ins. 

Legion   v.    Grove,   176   Ind.   356,   36  L.   J.   924    (forfeitures  not  favored, 

L.R.A.(N.S.)  913,  96  N.  E.  159.  etc.). 

Kentucky. — Brackett     v.     Modem  Tennessee. — Independent  Order  of 

Brotherhood    of    America,    154    Ky.  Foresters  v.  Cunningham,  127  Tenn. 

340,  157  S.  W.  690.  521,  156   S.  W.  192    (forfeiture  not 

Minnesota. — Geronime   v.    German  favored). 

Roman  Catholic  Aid  Assoc,  of  Min-  Tex«s.— Haywood  v.  Grand  Lodge 

nesota,   127   Minn.   291,   149   N.    W.  of  Texas  Knights,  —  Tex.  Civ.  App. 

291.  — ,  138  S.  W.  1194  (construed  in  fav- 

Mississippi. — Grand    Lodge     (col-  or  of  insured  to  prevent  forfeiture), 

ored)    Knights  of  Pythias  v.  Jones,  3 -Westerman    v.     Supreme    Lodge 

100  Miss.  469,  56  So.  458;  Masonic  Knights  of  Pythias,  196  Mo.  670,  94 

Benefit  Assoc,  v.   Hoskins,  99   Miss.  S.  W.  470,  5  L.R.A.(N.S.)  1114n. 

812,  56  So.  169,  40  Ins.  L.  J.  1671,  *  Attorney   Gen'l  v.   Colonial   Life 

quoting  from  Morgan  v.  Independent  Assoc.  194  Mass.  527,  80  N.  E.  455. 

Order  of  Sons  &  Daughters  of  Jacob,  See  §§  190,  190a  herein. 

90  Miss.  864,  44  So.  891,  which  cites  On  conflict  of  laws  as  to  necessity 

Murphy    v.    Independent    Order    of  of    attaching    application    or    copy 

Sons  &  Daughters  of  Jacob,  77  Miss,  thereof   to    policy,    see    notes    in    63 

830,  50  L.R.A.  Ill,  27  So.  624.  L.R.A.    867;    23   L.R.A.(N.S.)    982; 

i¥issoMri.— Mathews      v.      Modern  and  52  L.R.A. (N.S.)  285. 

850 


I 


PARTIES— MUTUAL  COMPANIES        §§  344g,  344h 

attached  to  the  policy,  except  as  to  such  societies,  where  it  operates 
under  a  lodge  sj^stem  and  does  not  pay  commissions  to  procure 
members.*  Although  it  ig  also  held  in  that  state  that  a  fraternal 
order  exclusively  on  the  lodge  system,  although  excepted  under  a 
statute  defining  an  insurance  company  is  within  a  statute  requiring 
the  attachment  of  the  application  or  a  copy  thereof  to  policies  issued 
by  assessment  or  life  insurance  companies.^  A  certificate  of  mem- 
bership of  a  beneficial  association  is  not  an  insurance  policy  under 
the  Pennsylvania  statute  so  as  to  make  its  by-laws  inadmissible  in 
evidence  although  not  attached  to  the  certificate.' 

§  344g.  Same  subject:  other  insurance  as  a  factor, — Certificates 
in  mutual  aid  societies  are  held  in  a  Federal  case  not  to  constitute 
insurance  within  the  meaning  of  a  question  in  an  application  blank 
of  an  insurance  company  as  to  "existing  insurance"  in  this  or  any 
other  company.*  This  decision  upon  the  point  of  other  insurance 
accords  with  other  decisions  where  the  question  was  directly  in- 
volved and  also  where  the  question  was  one  of  estoppel  and  the 
question  whether  such  associations  ai*e  insurance  companies  or 
not  is  not  discussed.^ 

§  344h.  Same  subject:  liability  as  a  factor. — In  a  case  in  Ar- 
kansas it  was  claimed  that  a  company  was  one  of  mutual  fire  insur- 
ance organized  under  the  laws  of  another  state,  and  that  by  virtue 
of  the  laws  thereof,  the  articles  of  incorporation,  and  the  by-laws 
of  the  company,  its  policy  holders  became  members  of  the  com- 
pany and  as  such  were  not  subject  to  certain  liabilities,  biit  it  was 

5  Yeomen  of  America  v.  Eott,  145  Chamberlain,  132  U.  S.  304,  33  L.  ed. 

Ky.  604,  140   S.  W.  1018.  341    (question  turned   on  estoppel)  ; 

^  Grand     Lodge,     Ancient     Order  McCollum   v.   Mutual   Life   Ins.    Co. 

United  Workmen  V.  Edwards,  27  Ky.  55    Hun    (N.   Y.)    103;    Peterson    v. 

L.  Rep.  469,  85  S.  W.  801.     See  also  Manhattan      Life      Ins.      Co.      244 

Supreme  Coramandery  of  the  United  111.    329,    91    N.    E.    466,    18    Am. 

Order   of   the   Golden    Cross   of   the  &    Eng.  Ann.    Cas.    96,    39    Ins.    L. 

AVorld  V.  Hughes,  114  Ky.   175,  24  J.    817     {citing    and    quoting    from 

Ky.  L.  Rep.  984,  70  S.  W.  405;  ex-  Ihe  Penn  :Mut.  Life  ease);  Kemp  v. 

amine  Corley  v.  Travelers  Protective  Good  Templars  ^lutual  Benefit  Assoc. 

Assoc.  105  Fed.  854',  46  C.  C.  A.  278.  46  N.  Y.   St.  R.  429;  White  v.  Na- 

•7  JMareus  v.  Heralds  of  Liberty,  241  tional   Life  Ins.    Co.   39   Ohio   L.   J. 

Pa.  429,  88  Atl.  678,  act  of  May  11,  23 <  ;     Equitable     Life     Ins.     Co.     v. 

1881,  Pub.  L.  20.  Hazlewood,   75    Tex.   338,   7  L.R.A. 

8  Penn    Mutual    Life    Ins.    Co.    v.  217    (question    turned   on   estoppel). 

Mechanics'    Savings    Bank    &    Trust  Examine     Clapp     v.     Massachusetl.s 

Co.  38  L.R.A.  33,  72  Fed.  413,  19  Benefit  Assoc.  146  Mass.  519,  16  N. 

C.  C.  A.  286,  37  U.  S.  App.  692,  73  E.  433  (where  question  not  discussed 

Fed.  653,  19  C.  C.  A.  316,  43  U.  S.  but  only  whether  under  the  evidence 

App.  75,  38  L.R.A.  33,  and  note  33-  jury  should  have  been  instructed  as 

57.    See  §§  2456a  et  seq.  herein.  for  a  nonsuit). 

3  Continental     Life     Ins.     Co.     v. 

851 


.§  34ii  JOYCE  OX  INSURANCE 

held  that  under  the  statutes  of  Arkansas  the  liabilities  of  a  foreign 
mutual  insurance  company  doing  business  therein  under  policies 
therein  issued  were  the  same  as  those  of  stock  fire  insurance  com- 
panies, therein'  placing  them  on  the  same  basis.  But  other  than  a,s 
above  stated  the  question  whether  or  not  such  mutual  companies 
are  insurance  com])anies  was  not  discussed. ^° 

§  3441.  Same  subject:  applicability  of  insurance  laws:  statutory 
exemptions. — Whether  or  not  or  to  what  extent  mutual  benelit, 
fraternal  benelit  and  like  associations  or  societies  are  within  the 
moaning  of  the  insurance  laws  must  depend  upon  the  terms  of  the 
diHerent  statutes,  and  the  various  circumstances  of  each  particular 
case,  must  also  be  considered  in  order  to  determine  whether  it  is 
within  the  intent  of  the  statute  or  statutes  involved.  No  govern- 
ing rule  can  be  stated  for  the  reason  that  there  is  no  common  ground 
upon  which  to  base  such  a  rule,  and  even  though  there  may  be  an 
underlying'  principle  it  is  difficult  to  apply  it.  This  undoubtedlv 
accounts  for  whatever  disagreement  exists  in  the  decisions.^^  In 
Colorado  a  voluntary  association  issuing  benefit  certificates  is  not  en- 
titled to  the  benefit  of  a  statute  providing  that  societies  founded  un- 
der it  shall  be  corporations,  and  if  intended  to  benefit  widows  and 
orjihans  of  members  shall  notjbe  deemed  insurance  companies.  -i 

And  a  benefit  certificate  in  which  the  beneficiary  may  be  anyone, 
even  a  stranger,  dependent  upon  the  holder,  is  not  within  a  statute 
providing  that  societies  intended  to  benefit  widows,  orphans,  heirs, 
and  devisees  of  members  shall  not  be  deemed  insurance  companies.^^ 

10  Federal  Union  Surety  Co.  v.  of  insurance  law,  or  to  particular 
Flenii.'^ter,  95  Ark.  389,  130  S.  W.  statutes  applicable  to  insurance  com- 
574,  ;i9  Ins.  L.  J.  1485;  acts  1905,  see.  panics,  where  such  association  is  not 
4,  p'.  772,  and  Kirl)y's  Dig.  sec.  4339,  an  insurance  company,  or  where  it  is 
as  to  giving  bond  as  prerequisite  to  declared  not  to  be  an  insurance  corn- 
doing  busines.';.  panv,   or   where   it   is   expressly   ex- 

As"   to    limitation    of    liability    of  empted  by  statute." 

members  of  mutual  or  assessment  tire  Note  38  L.R.A.  49-53. 

insurance  companies,  organized,  etc.,  See  §§  340,  346b  herein, 

under  Ky.   Stat.   c.   32,  subd.   5,  see  "Where   the   question  is  in   regard 

Ky.    act    approved    :\Iarch    24,    1910  to  jurisdiction.     It  is  generally  held 

(c.  93,  Stat.).  under  statutes  providing  for  jurisdic- 

11  "Under  statutes  exempting  ben-  tion  in  actions  against  life  insurance 
erolevt  socielies  from    the   operation  companies,    that    benevolent    associa- 
of  cerlain  insurance  laws,  some  cases  tions  are  controlled  by  the  general  in- 
notwithstanding  such  statute  have  de-  surance  laws,  but  there  are  exception- 
fined   such   associations   to   be   insur-  al  cases  in  lllinois.''_ 
ance    companies  owing  to    the    busi-  Note  38  L.R.A.  47-49. 
ness  carried  on  by  such  benevolent  i^  Head  Camp  Pacific  Jurisdiction 
societies.      .     .     .     But   other   eases  v.    Sloss,    49    Colo.    1/7,    31    L.R.A. 
iiold  that  most  benefit  companies  are  (N.S.)  831,  112  Pae.  49. 
not  subject  to  the  general  principles 

852 


PARTIES— MUTUAL  COMPANIES  §  344i 

In  Illinois,  a  society  which  sets  apart  a  fund  rai?ecl  by  voluntary 
contributinns  from  its  members,  and  which  pays  therefor  a  certain 
amount  to  designated  beneficiaries  of  deceased  members,  and  other 
sums  1()  living  members,  holding  numbers  just  above  or  just  below 
that  (»!'  the  deceased,  is  an  insurance  company,  and  is  not  exempt 
under  the  statute  providing  that  societies  shall  not  be  deemed  insur- 
ance companies,  the  purpose  of  which  is  to  benefit  widows,  orphans, 
heirs,  and  devisees  of  deceased  members  and  members  receiving 
permanent  disabilities.^^  in  an  Iowa  case  it  is  held  that  where  the 
prevalent  purpose  of  a  secret  order  is  to  create  a  benefit  for  sickness 
or  disability  of  members,  and  to  pay  a  certain  sum  to  a  designated 
[)erson  on  a  member's  death,  such  association  is  an  insurance  com- 
pany within  the  statutory  insurance  requirements  of  that  state,** 
and  in  Kansas  a  mutual  aid  association  whicli  does  business  with  its 
members  upon  a  iriutual  life  insurance  plan  is  subject  to  the  control 
of  the  insurance  department  and  to  the  laws  relative  to  insurance 
companies.*^  In  Kentucky,  a  mutual  life  association  which  has 
the  essential  elements  of  a  life  insurance  company  comes  within  the 
provisions  of  the  insurance  statute.*^  Under  a  Michigan  decision 
fraternal  beneficiary  societies  are  exempt  from  the  provisions  of  the 
general  insurance  laws.*'^  In  Missouri  fraternal  benefit  societies 
are  exempt  from  all  laws  governing  old-line  companies.**  And  a 
fraternal  society  which  issues  a  death  benefit  certificate  is  not  within 
the  general  insurance  laws  of  that  state.**     And  where  the  evidence 

*3  Golden  Rule  v.  People,  118  111.  *^  Sherman   v,    Coramonwealtli,   8"> 

492,  9  N.  E.  342,  7  West.  Rep.  219.  Ky.  102. 

Compare    Rockhold    v.    Canton    Ma-  ^''^  Knights   of  the  Modei-n    iMacca- 

sonic    Mutual    Beneht    Soe.    129    111.  bees    v.    Ban-y,    Commr.    155    Midi 

440,    2   L.R.A.    420,   21    N.    E.    794.  693,  118  N.  W.  585. 

Examine   Bastian    v.    Modern    Wood-  ■'^  Evans   v.    Modern   Woodmen    of 

men  of  America,  16G  ill.  595,  46  N.  America,  H9  i\Io.  App.  166,  129   S. 

E.  1090.  AV.  485.     Examine  Hudnall  v.  IStod- 

**  State  (ex  rel.  Graham)  v.  Nieh-  ern   Woodmen   of  America,  103   Mo. 

ols,  78  Iowa,  747,  41  N.  W.  4.     Ex-  App.  356;  Sliotlitf  v.  .Alodern  Wood- 

amine  Brown  v.  Modern  Woodmen  of  men  of  America,  100  Mo.  App.  138, 

America,   ]]5   Iowa,  450,   88   N.   W.  77  S.  W.  84. 

965;   Donald  v.   Chicago,  Burling-ton  The    Missouri    Statute    exem))ting 

&  Quiney  Ry.  Co.  93   Iowa,  284,  33  such  associations  from  general  insur- 

L.R.A.  492,  61  N.  W.  971;  State  (ex  ance  law.s   is  constitulidnal.     daudy 

rel.    Graham)    v.    Nichols,   78    Iowa,  v.  Roval  League,  259  Mo.  92,  168  S. 

747,  41  N.  W.  4;  State  v.  Iowa  Mn-  W.  593. 

tual    Aid    Assoc.    59    Iowa,    125,    12  See  also  as  to  exemptions,   Schil- 

N.  W.   782.  linger  v.  Boes,  85  Kv.  357,  9  Ky.  L. 

15  State   V.    National    A.s.s'n    of   the  Rep.  18,  3  S.  W.  427. 

Farmeis    &    Alechanics    Mutual    Aid  ^^  Claver     v.     Woodmen     of     the 

Assoc.  35  Kan.  51,  9  l^ic  956;  State  World,  152  Mo.  App.  155,  13;J  S.  W. 

V.  Yi-iilant  Ins.  Co.  30  Kan.  585,  2  153.     See    Aloe    v.    Fidelity    Mutuixl 

Pac.  840.  Life  Assoc.   164  Mo.  675,  55  S.  W. 

853 


§  344i 


JOYCE  ON  INSURANCE 


shows  a  license  to  do  business  as  a  mutual  benefit  or  benevolent  so- 
ciety and  also  that  the  form  of  government,  constitution  and  by- 
laws are  on  that  plan,  the  company  will  be  held  to  be  such  and  so 
not  subject  to  the  general  insurance  laws.^°  But  in  an  earlier  case 
in  that  state  a  society  known  as  the  Merchants'  Exchange  Mutual 
Benevolent  Society  had  executive  officers  and  a  board  of  trustees. 
It  divided  its  membership  into  classes,  in  each  of  which  the  fees 
paid  by  members  of  a  certain  class  were  kept  separately  and  exclu- 
sively for  its  benefit.  Assessments  and  the  inter&st  on  a  fund  raised 
by  initiation  fees  were  resorted  to  for  making  payments  and  fur- 
nishing aid  to  the  widows,  children,  etc.,  of  deceased  members.  It 
was  determined  that  the  society  was  a  mutual  insurance  company, 
subject  to  the  insurance  laws  of  that  state. ^  A  fraternal  benefit  as- 
sociation may,  however,  be  exempt  from  the  insurance  laws  and 
nevertheless  be  subject  to  an  ordinance  requiring  life  insurance 
agents  to  be  licensed.^  Again,  the  law  exempting  fraternal  bene- 
ficial societies  in  that  state  does  not  include  a  corporation  which 
transacts  its  business  through  the  lodge  system  by  assessments  and 
renders  aid  in  sickness,  etc.,  where  such  company  is  organized  solely 
for  the  transaction  of  insurance  businass.^  And,  although  a  fra- 
ternal beneficiary  corporation  may  not  be  exempt  from  the  general 
insurance  laws  it  may  be  subject  to  a  statute  prohibiting  life  in- 
surance companies  from  setting  up  the  defense  of  suicide.*  In 
Pennsylvania  a  mutual  aid  association  of  another  state  is  not  a  for- 
eign insurance  corporation  within  its  statute,  and  is  exempted  under 
the  statute  relating  to  beneficial  associations  from  the  control  of  the 
insurance  commissioner.^  In  Texas,  a  corporation  was  held  to  be 
an  insurance  company,  subject  to  the  provisions  of  the  insurance 
laws,  where  it  had  salaried  ofiicers  and  agents,  required  an  examina- 
tion by  a  physician  of  intending  insurers,  and  which,  in  considera- 
tion of  a  membership  fee  and  assessments,  agreed  to  provide  for 
members  during  life  and  the  payment  of  a  certain  sum  to  a  mem- 
ber's family  upon  his  decease.®    The  Ontario  insurance  act®''  does 


993,  29  Tns.  L.  J.  G79,  considered  un-       *  Ordellieide    v.    Modern    Brother- 
dcr  §  ;54(Jb  herein.  hood  of  America,  158  Mo.  App.  fi77, 

2o'Missey      v.       Snpreme      Lodge   139  S.  W.  269,  40   Ins.  L.  J.  1845; 


Knights  &  Ladies  of  Honor,  14/   Mo. 
App.  137,  126  S.  W.  o59. 

1  State   V.   Merchants'   Exeh.   Mat. 
Ben.  Soc.  72  Mo.  146,  159. 


2  City   of   Trenton   v.   Hnmel,  134   1876. 


Mo.  App.  595,  114  S.  W.  1131. 

'  National  Union  v.  Marlow,  74 
Fed.  775,  21  C.  C.  A.  89,  40  U.  S. 
App.  95. 


Rev.  Stat.  1909,  sees.  6945,  7109. 

^  Commonwealth  v.  National  Mu- 
tual Aid  Assoc.  94  Pa.  St.  481,  under 
act-s  of  April   4,   1873,   and  May  1, 


6  Farmer  v.  State,  69  Tex.  561,  7 
S.  W.  220,  under  Rev.  Stat.  Tex. 
title  20. 

6a  60  Vict.  c.  36,  sec.  144. 


854 


PARTIES— MUTUAL  COMPANIES  §  344j 

not  appl}^  to  certificates  to  an  unincorporated  society  of  workmen 
of  a  particular  class  on  the  lodge  system  whose  members  or  their 
representatives  are  entitled  to  certain  pecuniary  benefits  upon  com- 
pliance with  specified  conditions  and  payment  of  certain  assess- 
mentsJ 

§  344j.  Applicability  of  insurance  laws  continued:  right  to  do 
business  as  a  factor.'^ — In  a  Missouri  case  an  action  was  treated  as 
being  founded  on  an  ordinary  policy  of  life  insurance  where  the 
defendant,  a  fraternal  beneficiary  society,  failed  to  prove  that  at  the 
time  the  policy  was  issued  it  was  authorized  to  do  business  in  that 
state,  as  such  a  society.^  So  foreign  fraternal  beneficiary  societies 
while  not  insurance  companies  in  the  broad  sense  of  that  term, 
nevertheless  are  engaged  in  the  business  of  insurance  and  are  in  one 
sense  insurance  companies  within  a  statute  authorizing  them  to  do 
a  fraternal  life  business  upon  appointment  of  the  state  superintend- 
ent of  insurance  to  accept  process.^  But  the  mere  fact  that,  at  the 
time  a  foreign  fraternal  insurance  company  renewed  the  certificate 
of  a  member  for  the  purpose  of  increasing  his  benefit,  no  law  existed 
authorizing  it  to  do  business  in  the  state,  does  not  render  the  con- 
tract amenable  to  the  laws  governing  regular  policies  of  insurance 
issued  by  old-line  companies.^"  A  fraternal  benefit  association  con- 
ducts a  life  insurance  business,  within  the  terms  of  an  ordinance  re- 
quiring life  insurance  agents  to  be  licensed,  where  the  plan  set  forth 
in  its  prospectus  is  referred  to  as,  and  stated  to  be  that  of  life  in- 

''^  Wintemute     v.     Brotliei'hood     of  state  relatinof  to  insurance  companies 

Raih-oad  Trainmen  (Out.  S.  C.  J.  C.  before    transacting-    business    in    the 

A.)  20  Can.  Law  T.  0.  C.  C.  N.  347.  state,   and  some  go  further  and  de- 

"^^  See  §§  330,  330a  herein.  clare  that  such  mutual  benefit  eom- 

*  Conner  v.  Life  &  Annuity  Assoc,  panies    are    not    within    the    saving 

171  ]\lo.  App.   364,  157   S.   W.   814,  clause    of    a   statute    exempting    be- 

42  Ins.  L.  J.  1274,  citing  Schmidt  v.  nevolent    societies,    but    some    cases 

Supreme  Court  United  Order  of  For-  hold   that   some    of   these    companies 

esters,  228  Mo.  675,  129  S.  W.  653;  are    within    such    exemptions    while 

State  (ex  rel.  Supreme  Lodge  K.  of  some  cases  restrict  their  attempts  to 

P.)    V.    Vandiver,    213    Mo.    187,    15  such    unantlu)rized     business,     where 

Am.  &  Eng.  Ann.  Cas.  283,  111   S.  they  depart  from  the  benevolent  char- 

W.   91;    Newland  v.    Modern   Wood-  acter." 

men  of  America,  168  Mo.  App.  311,  Note  38  L.R.A.  40-47. 

153  S.  W.  1097;  Gruwell  v.  Natural  ^  Rodgers     v.      National      Councd 

Council  Knights  &  Ladies  of  Securi-  Junior    Order   United    America   Me- 

ty,  126  Mo.  App.  496,  104  S.  W.  884.  chanics    of   United    States,    172    Mo. 

Under   statutes    requiring    compli-  App.  719,  155  S.  W.  8/4,  under  Rev. 

ance  with  state  insurance  law,  a  large  Stat.  1909,  sees.  7109,  7112,  7114. 

number  of  cases  "define  mutual  bene-  ^°  Westerman    v.    Supreme    Lodge, 

fit   companies   to   be   insurance   com-  Kniglits  of  Pvlhias,  196  Mo.  670,  5 

panies.     Some  merely  hold  that  they  L.R.A. (N.S.)  1114,  94  S.  W.  470. 
must  comply  with  the  statutes  of  the 

855 


§  344j  JOYCE  ON  INSURANCE 

surance,  and  this  is  so  iiTCspective  of  the  name  by  which  it  is  called 
and  even  though  such  associations  are  exempt  from  the  provisions 
of  the  insurance  laws."  In  Connecticut,  it  is  held  that  although  a 
society,  organized  in  another  state  as  a  secret  and  fraternal  society, 
hafi  an  insurance  plan  as  one  of  it^  corporate  purposes,  consistins; 
in  the  participation  in  a  benetlt  fund  by  )nembers  of  local  branches, 
wlio  pay  assessments,  nevertheless  it  is  not  within  a  statute  requiring 
foreign  corporations,  organized  for  the  purpose  of  furnishing  in- 
surance on  the  assessment  plan,  to  obtain  authority  from  the  insur- 
ance commissioner,  in  order  to  do  business  within  the  state, ^^  but 
is  within  the  statute  excepting  from  such  requirement  every  ''secret 
and  fraternal  society.'"'  ^^  In  Iowa,  a  fraternal  benevolent  corpora- 
tion of  a  sister  state  which  provides  a  beneticiary  fund  for  the  pay- 
ment of  death  benefits  is  a  life  insurance  organization,  and  subject 
to  the  provisions  of  the  statute  requiring  a  guaranty  capital  as  a 
prerequisite  to  transacting  business  in  that  state. ^*  And  where  a 
foreign  fraternal  association  has  not  been  licensed  to  do  business  in 
a  state  as  required  by  statute  it  must  be  considered  a  regular  life 
company  so  far  a.'^  the  defense,  under  the  statute,  of  suicide  is  con- 
cerned.^^ A  contract  whereby  a  benefit  is  to  accrue  upon  the  death 
or  physical  disability  of  a  person,  which  benefit  is  or  may  be  condi- 
tioned upon  the  collection  of  an  assessment  upon  persons  holding 
similar  contracts,  is  a  contract  of  insurance  within  the  meaning  of 
Rhode  Island  laws  respecting  business  by  foreign  insurance  com- 
panies.^® In  A^irginia,  only  such  assessment  companies  are  entitled 
to  be  licensed,  without  making  the  deposit  of  bonds  required  under 
the  statute,  as  make  an  assessment  upon  surviving  members  in  order 
to  pay  losses."  The  character  of  a  benefit  insurance  association  as 
an  assessment  company  is  not  destroyed,  so  as  to  deprive  it  of  the 
privilege  of  doing  business  in  Wisconsin  on  compliance  with  the 
provisions  of  the  laws  of  that  state  ^^  by  the  facts  that  it  agrees  to 
pay  the  assured  a  definite  sum,  and  has  established  rates  of  pre- 
miums which  it  is  authorized  to  receive  in  advance,  if  it  has  no 
"legal  reserve,"  but  merely  an  ''emergency  fund."  and  its  contracts 
expressly  authorize  it  to  levy  assessments  beyond  those  designated 

"City  of  Trenton  v.  Humel,  134  lie  v.  McClanahan,  .50  Tex.  Civ.  App. 

Mo.  App.  59.3.  114  S.  AV.  1131.  256,  109  S.  W.  973. 

^2  (Jon.    Stat.    Conn.   see.   2892.  ^®  Lubrano  v.  Imperial  Couneil  of 

"Gen.  Stat.  Conn.  sec.  2903;  Faw-  Order  of  United   Friends,   20   R.   I. 

eett  V.  Supreme  Sittinu'  of  Order  of  27,   38   L.R.A.   546,   37   Atl.    345,   6 

Iron  Hall,  64  Conn.  170,  24  L.R.A.  Am.  &  Eng.  Corp.  Cas.  N.  S.  673. 

815,  29  Atl.  614.  i''^  ]\Iutual  Benefit  Life  Ins.  Co.  v. 

1*  State  v.  Miller,  66  Iowa,  26,  23  Mayro,  85  Va.  643.  8  S.  E.  481,  un- 

N.  W.  241.  der  Ya.  act.  ^May  18,  1887. 

15  Loyal  Araerieans  of  the  Repub-  is  Knws  1891,  c.  418. 

856 


PARTIES— MUTUAL  COMPANIES  §  344k 

in  its  table.^^  Asiain.  under  a  Mipsissip])!  deeisioii  a  niutnal  com- 
pany without  capital  stock,  incorporated  and  empowered  to  injure 
the  property  of  its  members  only,  which  is  not  subject  to  the  insur- 
ance department,  and  which  is  not  organized  under  the  statutory 
chapter  on  "Insurance,"  and  which  possesses  none  of  the  essentials 
required  by  the  statute  as  conditions  precedent  to  the  rioht  to  trans- 
act insurance  business  in  the  state  cannot  compel  the  issuance  to 
it  of  a  certificate  of  authority  to  carry  on  the  general  business  of  in- 
surance. The  statute  has  no  reference  to  tlie  restricted  right  of  a 
mutual  insurance  company  to  insure  the  property  of  its  own  mem- 
bership.'^'' 

§  344k.  Applicability  of  insurance  laws:  live  stock  association. — 
in  Xcbra>ka.  an  association  for  insuring  the  live  stock  of  members 
is  an  insurance  company,  and  subject  to  the  requirements  of  the  in- 
surance statutes.  In  this  case  the  membership  wa'^  unlimited, 
though  certificates  of  membership  were  issued  and  the  premium  was 
l»aid  as  an  admission  fee  and  l>y  assessments.'^  In  Texas  a  company 
incorporated  under  the  statute  for  that  purpose  is  a  live-stock  insur- 
ance company  on  a  mutual  or  co-operative  plan  without  capital 
stock,  and  not  a  "mutual  relief  association"  where  the  statute  ex- 
pressly excludes  such  associations.^ 

i»  State    (ex  rel.   Covenant  Mutual  109  S.  W.  922,  s.  c.  ^  Tex.  Civ.  App. 

Benefit  Assoc.)  v.  Root,  83  \Yis.  667,  — ,  107  S.  W.  366;  Rev.  Stat.  ISn."). 

]f»  L.R.A.  271,  54  N.  W.  33.  art.    642,   subd.   46.   art.    3096.      See 

20  Farmers  Mutual  Fire  Ins.  Co.  v.  Wriorht,  In  re,  18  L.R.A. (N.S.)  193, 

Cole,  90  Miss.  508,  43  So.  949.  157  Fed.  544,  85  C.  C.  A.  206,  s.  e. 

1  State  v.  Northwestern  Mut.  Live  177  Fed.  579,  under  Tex.  Rev.  Stat. 
Stock  Ass'n,  16  Neb.  549,  20  N.  W.  1895,  art.  642,  subd.  46,  when  Tex. 
852.  See  also  State  v.  Vigilant  Ins.  Laws  1907,  p.  291,  e.  150,  not  ap- 
Co.  30  Kan.  585,  2  Pac.  840.  plicable. 

2  State  V.  Burge.ss,   101   Tex.  524, 

857 


CHAPTER  XVIII. 

PARTIES— MUTUAL  COMPANIES,  BENEFIT,  ETC.,   SOCIETIES 

CONTINUED. 


§  345.     What  societies  or  associations  are  not  insurance  companies :  cases. 

§  346.     What  societies  or  associations  are  insurance  companies:  cases. 

§  346a.  Same  subject. 

§  346b.  Whether  co-operative  or  assessment  plan  or  old  line  company : 
distinctions. 

§  346c.  Whether  companj'  fraternal  beneficial  association  or  mutual 
assessment  company :  distinctions. 

§  346d.  Whether  sick  benefit,  burial,  and  beneficial  association  an  insur- 
ance company. 

§  346e.  Whether  railroad  relief  associations  are  insurance  companies. 

§  346f.  Stock  associations  with  beneficiary  fund  not  an  insurance  com- 
pany. 


§  345.  What  societies  or  associations  are  not  insurance  companies: 
cases. — It  is  held  in  Illinois  that  an  association  whose  policies  were 
payable  only  to  the  widow,  orphan,  heir,  or  devisee,  and  whose 
members  might  be  assessed  not  to  exceed  twenty  dollars  each  year, 
was  exempted  from  the  operation  of  the  statute  of  that  stale  requir- 
ing of  life  insurance  companies  a  guaranty  capital.^  In  Kentucky, 
it  is  decided  that  the  statute  regulating  "stock  or  mutual"  insurance 
companies  does  not  include  associations  organized  before  that  act 
without  capital  stock  or  premium  notes  to  indemnify  against  loss 
of  life,  the  performance  of  whose  obligations  is  .secured  by  a  pledge 
of  the  property  of  each  member  to  the  extent  of  his  own  insurance, 
the  entrance  fees  being  intended  only  as  a  fund  for  paying  the  exr 
penses.*  ^Vnd  in  Michigan  it  is  also  held  that  its  statute  forbids  the 
transaction  of  insurance  business  by  companies,  the  policies  of 
which  do  not  distinctly  show  the  amount  of  life  benefits  assured,  and 

^  Commercial     League     Assoc,     v.       *  Louisville  German  Mut.  Fire  Ins. 
People,  90   111.  166,  under  111.  Rev.    Ass'n    v.     Commonwealth,    9     Bush 
Stat.  1874,  c.  32,  see.  31,  exempting    (72   Ky.)    394,  under  act   of  March 
from  the  operation  of  act  of  March   12,  1870. 
26,  1869. 

858 


PARTIES— MUTUAL  COMPANIES  §  34G 

the  premiums  in  which  are  not  fixed  nor  contingent  on  losses.^  In 
Missouri,  the  term  ''insurance  purposes"  does  not  inchide  associa- 
tions which  aid  families  of  deceased  members.^  In  New  York,  a 
benevolent  association  organized  under  the  general  act,  and  which 
provides  for  the  paj-ment  by  the  members  of  one  dollar  each  for  the 
benefit  of  the  widow  or  minor  children  of  a  deceased  member,  is 
held  not  to  be  a  life  insurance  company,'  and  in  the  same  state  it  is 
decided  that  a  society  is  not  governed  by  the  general  insurance  law 
where  it  maintains  a  relief  fund  for  the  benefit  of  members  reach- 
ing a  certain  age,  or  when  they  shall  become  permanently  disabled 
by  disease  or  accident,  but  is  controlled  by  the  statute  regulating 
charitable,  benevolent,  and  beneficiary  associations  or  societies.' 

§  346,  What  societies  or  associations  are  insurance  companies: 
cases. — 111  Dakota,  where  the  principal  objects  and  })urposes  of  an 
association  organized  under  the  general  incorj^oration  laws  of  the 
state  is  to  secure  to  the  beneficiarj',  or  representative  of  each  mem- 
ber on  his  death,  the  payment  of  a  certain  sum  of  money  in  accord- 
ance with  the  conditions  and  requirements  of  the  charter  and  by- 
laws, such  association  is  a  life  insurance  company,  and  the  relations 
sustained  by  the  members  are  ba-=cd  upon  contract.^  In  Colorado 
the  ^Vncient  Order  of  United  Workmen,  so  far  as  it  is  engaged  in 
the  business  of  life  insurance,  is  to  be  treated  in  law  as  a  mutual  life 
insurance  company ;  and  a  certificate  of  membership  and  insurance 
tlierein  is  to  be  regarded  as  a  written  contract,  and,  so  far  as  it  goes, 

^  People  of  the  National  Life  Ins.  S.    W.    881    (held   to    be   assessment 

Co.  V.  State  Commissioner,  25  Mich,  plan    insurance). 

321,  under  Ins.  Law  1872,  p.  86.  Keiv  York. — Ronald  v.  Mutual  Re- 

^  Barbaro    v.    Occidental    Grove,    4  serve    Fund    Life    Ass'n,    132    N.    Y. 

Mo.  A  pp.  429.  378,  30  N.  E.  739,  21  Ins.  L.  J.  634 

'Durian    v.    Central    Verein    Her-  (organized   as   a   mutual   benefit   as- 

mann'.s  Soelune,  7  Daly  (N.  Y.)   168.  socialion    upon    co-o])eraLive    assess- 

'  Supreme  Council  Order  of  Chos-  ment  plan  and  so  not  entitled  to  no- 
en  Friends  v.   Fairman,  10  Abb.  N.  tice  of  due  date  of  dues). 
C.  (N.  Y.)  162,  62  How.  Pr.  (N.  Y.)  0/(/o.— State  v.  Mutual  Protective 
386.  Soc.  26  Ohio  St.  19. 

See  further  on   this   subject  what  Pevnsijlvania. — Ogle      v.      Barron 

societies   or   associations  are   not  in-  (Supreme  Council  of  the  Royal   Ar- 

surance  companies.  canum)    247    Pa.    19,   92    Atl.    1071; 

Minnesota. — State  (ex  rel.  Clapp)  Marcus   v.   Heralds   of   Liberty,   241 

V.  Federal  Invest.  Co.  48  Minn.  110,  Pa.   429,   88   Atl.    678;    Re   National 

50    N.    W.    1028     (held    not    a    life,  Indem.    &    Endowment    Co.    142    Pa. 

casualty  or  endowment  company  and  St.  450,  21  Atl.  879  (not  a  beneficial 

not   subject   to    the    provisions    of    a  association  under  the  act  of  1874  so 

statute     expressly     declaring     what  that  the  court  of  common  i)leas  had 

companies  are  included).  no  power  to  incorporate  it). 

Missouri. — Morrow      v.      National  ^Masonic  Aid  Assoc,  v.  Taylor,  2 

Life  Assoc.  184  Mo.  App.  308,  168  S.  Dak.  324,  50  N.  W.  93. 

859 


§  346a 


JOYCE  ON  INSURANCE 


it  is  the  measure  of  the  rights  of  all  parties.^"  Under  an  Illinois 
decision  the  term  "insurance  company"  includes  fraternal  benefici- 
ary associations,  but  not  so  in  its  restricted  sense.^^  In  Indiana,  a 
mutual  benevolent  society  which  provides  a  certain  sum  for  the  ben- 
eficiary in  the  event  of  a  member's  death,  to  be  paid  from  a  fund 
raised  by  assessment  on  the  surviving  member's  death  is  in  effect  a 
life  insurance  company. ^'^  In  Kansas  where  such  an  association 
contracts  to  pay  at  stated  periods  certain  sums  as  endowments  to 
living  members,  or,  in  case  of  a  member's  death,  then  to  pay  the 
benefit  to  designated  beneficiaries,  such  contracts  constitute  life  in- 
surance, both  as  to  the  endowments  and  the  benefits ;  ^^  so  in  Maine, 
in  the  case  of  Bolton  v.  Bolton,^*  which  was  that  of  a  Masonic  relief 
association,  the  court  declares  that  if  the  prevalent  purpose  be  that 
of  insurance,  such  purpose  controls,  whatever  may  be  the  associa- 
tion's name,  and  that  the  benevolent  or  charitable  results  to  the 
beneficiaries  will  not  change  its  legal  character,  and  that  the  a.ssoci- 
ation  and  others  of  like  nature  were  mutual  life  insurance  com- 
panies.^* In  Massachusetts,  a  contract  by  which  an  association,  for 
a  consideration,  engages  to  pay  money  upon  the  death  of  a  member 
to  one  Avho  has  an  interest  in  the  life,  is  not  the  less  a  contract  of 
insurance,  because  the  amount  to  be  paid  is  not  a  gross  sum,  but  is 
graduated  by  the  number  of  members  holding  similar  contracts; 
nor  because  a  portion  of  the  premiums  is^ to  be  paid  upon  the  un- 
certain periods  of  deaths  of  suchfnlembers ;  nor  because  it  provides 
no  means  of  enforcing  payment  of  the  assessments;  and  the  fact 
that  the  general  objects  of  the  association  are  benevolent,  not  spec- 
ulative, will  make  no  difference.  Such  an  association  is  within  the 
operation  of  a  statute  imposing  restrictions  upon  insurance  com- 
panies.^^ Under  a  Missouri  decision  it  is  held  that  the  company 
was  not  governed  by  the  laws  relating  to  benevolent  associations  but 
by  those  governing  life  insurance  companies." 

§  346a.  Same  subject. — In  Missouri  it  is  held  that  a  contract  of 
insurance  existed  where  there  was  a  promise,  based  upon  a  consid- 


i»  Cbartrand  v.  Brace,  16  Colo.  19, 

25  Am.  St.  Rep.  235,  12  L.R.A.  209, 

26  Pac.  ir)2. 

^^  Peterson  v.  Manhattan  Life  Ins. 
Co.  244  111.  329,  91  N.  E.  466,  rev'g 
lir,  III.  App.  421. 

12  Elkliart  Miit.  Aid  Benevolent  & 
Relief  Ass'n  v.  Iloushton,  103  Ind. 
286,  287,  2  N.  E.  763,  53  Am.  Rep. 
514,  1  West.  Rep.  284. 

1^  Endowment  &  Benefit  Assoe.  v. 
State,  35  Kan.  253, 10  Pac.  872.     7?./- 


amine  State  (ex  rel.  Supreme  Lodge 
of  Fraternal  Union  of  America)  v. 
Orear,  144  Mo.  157,  45  S.  W.  1081. 

1*73  Me.   299,   303. 

1*  See  §  344d  herein. 

1^  Commonwealth  v.  Wetherbee, 
105  Mas.-^.  349,  161. 

1'  Thompson  v.  Royal  Neighbors  of 
America,  154  Mo.  App.  109,  133  S. 
W.  146,  considered  more  fully  under 
§  344b  herein. 


860 


PARTIES— MUTUAL  COMPANIES  §  34Ga 

eration,  to  pay  upon  a  loss,  and  where  the  principal  object  and  pur- 
pose of  the  association  was  to  insure  the  members  under  sucli  con- 
tracts. In  this  organization  there  were  salaried  ofTicers,  and  anyone 
was  entitled  to  membership  upon  compliance  with  the  required  con- 
ditions as  to  age  and  health.  Commissions  were  also  paid  by  the 
society  to  its  members  on  risks  obtained  for  it.  It  was  also  decided 
that  the  contract  couhl  be  made  none  the  less  one  of  insurance  by 
the  organization  calling  itself  a  benevolent  society,  and  obtaining 
a  charter  as  such,  and  though  the  amount  payable  was  not  a  gross 
sum,  but  graduated  by  the  number  of  persons  in  a  given  class  at  the 
time  of  the  death  of  the  insured,  and  though  there  was  no  means  of 
comi)plHng  the  payment  of  an  assessment  made  upon  a  member's 
deatli,  and  though  the  insurer  was  not  liable  for  the  amount  ac- 
tually collected  from, members  upon  the  happening  of  the  loss,  the 
agreement  would  nevertheless  be  an  actual  contract  of  insurance 
under  the  above  facts. ^^  It  is  also  decided  in  that  state  that  an  or- 
ganization does  not  become  a  fraternal  association  by  the  designa- 
tion of  itself  as  such  nor  by  being  authorized  to  transact  business  as 
such,  where  it  is  not  within  a  statutory  definition  of  what  constitute^ 
these  associations,  but  it  is  an  insurance  company  within  a  stntulc 
as  to  misrepresentations.^^  And  where  a  fraternal  beneficiary  certif- 
icate is  assumed  by  a  corporation  and  a  policy  substituted  tlierefor 
it  w^ill  be  deemed  an  ordinary  life  policy  where  there  is  no  proof 
that  it  was  to  be  otherwise  treated.^"  So  the  statutes  relating  to  val- 
ued policies  govern  mutual  fire  companies,  not  town  companies,  in 
Missouri.^  Again,  an  association  of  railway  mail  clerks  is  not  a  luu- 
tual  benefit  association  but  an  accident  insurance  company  where 
its  members  are  furnished  accident  insurance  upon  payment  of  dues 
only,  without  initiation  or  ritual. ^  In  a  Nebraska  case  the  contract 
of  a  fraternal  beneficiary  association  is  construed  as  to  representa- 
tions and  warranties  as  an  insurance  risk.^  In  New  Jersey  the  au- 
thority conferred  upon  associations  incorporated  under  an  act  to 
incorporate  benevolent  and  charitable  associations  with  further  au- 
thority, under  sup])lementary  enactments  to  contract  with  members 

Instate  V.  Citizens'  Benefit  Ass'n,  Mutuat   Fire  Ins.   Co.   80  Mo.   App. 

G  Mo.  App.  163,  under  Mo.  acts  1874,  18,  2  IMo.  App.  Kep.  573. 
p.  81,  sees.  3,  5.  ^  Young    v.    Raifway    Maif    Assoc. 

19  Herzber"- V.  Modern  Brotlu  rhood  12()  Mo.  App.  32o,  103  S.  U.  .ru. 
of  America,  110  Mo.  Apj).  328,  85  S.        '  Goff    v.    Supre_me    Lodge    Royal 
W    986,  Rev.  Stat.  1899,  sees.  1408,  AcluUe.s,  90  Neb.o/S,  134  N.  W.  239, 
7890.  41   Ins.   L.   J.   375,   37  L.R.A.(N.S.) 

20  Lovvenstein  v.  Old  Cofunv  Life  1191n,  quoting  from  Aetna  Ins.  Co. 
Ins.  Co.  179  Mo.  App.  304,  166  S.  v.  Simmons,  49  Neb.  811,  69  N.  W. 
W.  889.  1-5,  135. 

1  Marshall   v.   American    Guavanly 

861 


§  346a 


JOYCE  ON  INSURANCE 


for  death  benefits,*  is  authority  to  make  contracts  in  the  nature  of 
life  insurance.  Such  supplementary  statutes  are  ineffectual,  how- 
ever, to  authorize  contracts  of  ordinary  life  insurance.  But  so  far 
as  they  provide  for  the  payment  of  death  benefits  as  a  gratuity  to 
those  entitled  it  is  a  life  insurance  having  a  benevolent  purpose.* 
In  New  Hampshire,  a  mutual  relief  association  which  makes  an 
assessment  on  surviving  members  of  one  dollar  each  for  the  pay- 
ment of  a  benefit  to  an  appointee  of  the  deceased  or  a  member  of  his 
family  is  a  life  insurance  company.®  So  in  that  state  an  ordinary 
contract  of  membership  in  a  mutual  benefit  association  is  a  policy 
of  life  insurance  within  the  New  Hampshire  laws  so  that  insol- 
vency of  the  estate  does  not  subject  the  sum  insured  to  payment  of 
debts.'  In  Pennsylvania,  it  is  said  that  a  beneficial  association  for 
mutual  assistance  in  sickness  or  inability  to  labor  is  virtually  a  mu- 
tual health  insurance  company.^  And  in  that  state  it  is  held  that 
throughout  the  insurance  laws  and  in  insurance  parlance  the  word 
"policy"  is  ordinarily  used  to  indicate  the  contract  of  insurance 
upon  which  there  is  a  fixed  premium.  It  does  not  usually' indicate 
a  contract  with  a  member  of  a  beneficial  association  or  mutual  in- 
surance company.  It  does  not  indicate  a  certificate  of  membership. 
A  "certificate  of  membership"  refers  only  to  the  contract  between 
a  mutual  company  or  a  beneficial  association  and  its  members.^  In 
Tennessee  if  a  certificate  obligates  a  fraternal  order  to  pay  a  certain 
sum  where  a  member's  death  results  from  accident  and  he  has  also 
the  right  to  change  his  beneficiary  the  contract  is  one  of  life  insur- 
ance.^" In  Texas  a  certificate  of  a  fraternal  benefit  society  is  so  far 
a  life  insurance  policy  as  to  be  a  chose  in  action.^^  In  Wisconsin,  a 
Ijenevolent  mutual  aid  society  was  held  subject  to  the  same  legal 
principles  in  determining  its  liability  for  a  loss  as  apply  to  mutual 
life  insurance  companies.^^ 


*  Act  jMarcli  2,  1883,  act  approved 
AprU  2,  1886. 

*  Goldeu  Star  Fraternity  v.  Mar- 
tin, 59  N.  J.  L.  207,  35  Atl.  908. 

6  Smith  V.  Bullard,  61  N.  H.  381, 
under  N.  H.  Gen.  Laws,  c.  175. 

7  Mellows  V.  iMellows,  61  N.  H.  137, 
139. 

^  Franklin  v.  Commonwealth,  10 
Pa.  St.  357,  359. 

^  Pennsylvania  Mutual  Life  Ins. 
Co.  (Atfv-Genrs  Opinion)  36  Pa. 
Co.  Ct.  Rep.  687. 

10  Littleton  v.  Sain,  126  Tenn.  461, 
150  S.  W.  423,  41  L.R.A.(N.S.)  1118. 

11  Coleman   v.    Anderson,   —    Tex. 

86 


Civ.  App.  — ,  82  S.  W.  1057,  aff'd  98 
Tex.  570,  86  S.  W.  730. 

i^Erdmann  v.  Mutual  Ins.  Co.  44 
Wis.  376,  379. 

See  further  the  following  cases  in 
which  the  company,  society,  etc.,  have 
been  held  to  be  life  insurance  com- 
panies : 

Alabama.— Supreme  Commandery 
Knights  of  the  Golden  Rule  v.  Ains- 
worth,  71  Ala.  436,  46  Am.  Rep:  332. 

CoJorado. — Head  Camp  Pacific 
Jurisdiction  Woodmen  of  the  World 
V.  Sloss,  49  Colo.  177,  31  L.R.A. 
(N.S.)  831n,  112  Pac.  49. 

Georgia. — Heralds    of    Liberty    v. 


PARTIES— MUTUAL  COMPANIES  §  346b 

In  the  following  appended  cases  such  societies,  etc.,  have  been 
held  life  insurance  companies  although  the  question  is  not  dis- 
cussed.^' 

§  346b.  Whether  co-operative  or  assessment  plan  or  old  line  com- 
pany: distinctions. — The  statute  may  exclude  the  application  of 
the  insurance  laws  to  mutual  insurance  companies  on  the  assess- 
ment plan.^*  And  under  a  Wisconsin  decision  an  insurance  corpor- 
ation furnishing  life  or  casualty  insurance  in  consideration,  in 
whole  or  in  part,  of  contributions  by  its  members  on  a  basis  of 
equality,  sufficient  to  meet  its  expenses  and  matured  memberships, 
as  the  necessities  therefor  arise,  is  a  benefit  or  beneficiary  corpora- 
tion furnishing  ca.<ualty  or  life  insurance  upon  the  mutual  assess- 
ment plan  within  the  statute  of  that  state  exempting  certain  insur- 
ance organizations  from  the  general  insurance  laws  of  the  state. ^^ 
Under  a  Missouri  decision,  it  is  decided  that  under  the  statute  of 
1887  assessment  companies  were  not  merely  exempt  from  the  laws 
relating  to  the  insurance  department  but  also  from  the  general  in- 
surance laws,  and  that  the  company  before  the  court  was  not  an 
assessment  company  but  a  regular  or  old  line  company,  as  the  pol- 
icy was  issued  for  a  fixed  sum,  and  the  payment  thereof  was  in  no 
degree  dependent  upon  the  collection  of  assessments  upon  persons 
holding  similar  policies,  but  in  consideration  of  a  fixed  premium  to 
be  paid  at  stated  intervals,  based  upon  the  mortality  experience  of 

Bowen,   8    Ga.   App.   325,   68    S.   E.  Pennsylvania. — Lane   v.    American 

1008.  Relief  Assoc.  25  Pa.  C.  C.  Rep.  129. 

Illinois. — Martin  v.  Stubbin2:s,  126  Texas. — JSIational  Life  Association 

111.  387,  9  Am.  St.  Rep.  620,  18  N.  E.  v.  Hagelstein,  —  Tex.  Civ.  App.  — , 

657.  156 'S.  W.  353. 

Iowa. — Grimes      v.      Northwestern  Virginia. — Cosmopolitan  Life  Ins. 

Leo'ion  of  Honor,  97  Iowa,  315,  327,  As.soc.  v.  Koegel,  104  Ya.  619,  52  S. 

64^N.  W.  806,  66  N.  W.  183.  E.  166. 

Missouri. — JMcPike  v.  Supreme  ^'  McClure  v.  Johnson,  56  Io.wa 
Rulino:  of  the  Fraternal  Mvstic  Cir-  620;  Expressmen's  Aid  Society  v. 
cle,  187  Mo.  App.  679,  173  S.  W.  71;  Lewis,  9  Mo.  App.  412;  Mutual  Ac- 
Edwards  V.  American  Patriots,  162  cident  &  Life  Assoc,  v.  Kavser,  14 
Mo.  App.  231,  144  S.  W.  1117;  Gru-  Wkly.  Not.  Cas.  (Pa.)  86:"risk  v. 
well  V.  National  Council  Knights  &  Equitable  Aid  Union,  20  Wkly,  Not. 
Ladies  of  Security,  126  Mo.^  App.  Cas.  (Pa.)  290. 
496,  104  S.  W.  884.  See  note  38  L.R.A.  53. 

New     York. — Alden     v.     Supreme  ^*  Ingle  v.   Batesville  Grocery   Co. 

Tent  of  the  Knights  of  Maccabees  of  89  Ark.  378,  117  S.  W.  241.     As  to 

the  World,  178  N.  Y.  535,  71  N.  E.  statutory  exemptions  see  §  344i  here- 

104;    Weinberg    v.    Woodward,    26  in. 

Misc.  283,  124  N.  Y.  Supp.  480.  ^^  state  v.  National  Accident   Soc. 

O/r/o.— State  v.  Standard  Life  As-  103  Wis.  208,  79  N.  W.  220,  28  Ins. 

soc.  38  Ohio  St.  281;  State  v.  Moore,  L.   J.   793,  Law.s  Wis.  1891,  c.  418. 

38  Ohio  St.  7.  "Benefit"   and   "beneficiary"   not   al- 

863 


§  :M6b  JOYCE  OX  INSURANCE 

life  insurnnoe  companies,  even  though  it  was  conditioned  that  if 
the  amount  specified  in  the  policy  was  not  suttlcient.  the  company 
reserved  the  right  to  increase  the  premium. ^^  In  a  Federal  case  it  is 
said:  "It  is  important  to  understand  distinctly  what  is  assessment 
insurance  or  insurance  on  the  assessment  plan.  A  general  state- 
ment of  this  proposition  is  that  it  is  an  assessment  insurance  where 
the  benefit  to  be  paid  is  dependent  upon  the  collection  of  such  as- 
sessments as  may  be  neces.sary  for  paying  the  amount  insured.  In 
other  words,  it  is  assessment  insurance  if  payments  to  be  made  by 
the  insured  are  not  fixed — unalterably  fixed — by  the  contract.  On 
the  contrary,  an  old  line  policy  is  a  contract  where  the  amount  to 
be  paid  by  the  insured  is  fixed,  the  premiums  to  be  paid  are  unalter- 
able, and  the  lialiility  incurred  l)y  the  defendant  company  is  also 
fixed,  definite  and  unchangeable.''  ^^  This  distinction,  thus  defined, 
is  adopted  in  a  Missouri  decision  as  accurate  and  comprehensive  and 
as  well  supported  in  the  courts  of  that  state.  And  the  court  adds  • 
"Tlie  character  of  the  i^olicy  is  to  be  determined  by  the  nature  of 
the  contract  it  expresses*.  If  the  benefit  to  be  paid  by  the  insurer 
is  fixed,  and  level  premiums  are  charged  with  no  provision  in  the 
contract  authorizing  a  raising  or  lowering  of  the  premiums  to  meet 
the  demands  of  changed  conditions,  the  policy  will  be  classed  as  an 
old  line  contract,  regardless  of  the  nomenclature  of  the  policy,  or 
the  character  and  avowed  purpose  of  the  company  that  issued  it." 
And  the  policy  in  issue  in  the  ca.se  was  held  an  old  line  policy.^* 

ways  used  in  same  sense  in  statutes  That  certifieate  of  assessment  com- 
as descriptive  of  insurance  corpora-  jjany  is  life  policy  under  Missouri 
tions  or  societies.    Id.  214.  statute  forbidding  suicide  as  defense, 

^^  Aloe  V.  Fidelitv  ^Mutual  Life  As-  see    Knights    Templars'    &    Masons* 

soc.  IG-t  Mo.  675,  Vo  S.  W.  993,  29  Life  Indemnity  Co.  v.   Jarman,   104 

Ins.   L.  J.   679.     See  also  Jacobs  v.  Fed.  638,  44  C.  C.  A.  93,  30  Ins.  L. 

Omalui  Life  Assoc.  146  Mo.  .")23,  48  J.  230,  aff'd  187  U.  S.  197,  47  L.  ed. 

S.     W.     462.       Examine     Jacobs     v.  139^  23  Sup.  Ct.  108,  32  Ins.  L.  J.  57. 

Onuilia   Life  Assoc.   142   Mo.   49,  43  ^yi,^^  cori>orations,  associations  or 

b.  \v .  oio.  .societies  are  deemed  to  be  engaged  in 

As   to   pecuniary   profit   as   factor,  ^j^^  business  of  life   or  casualty   in- 

^^^n^h     i'\  '"^  T,"^;    T  o"-  ^     ^  ^"^-an^e  on  the  co-operative  or  assess- 

"  Havdel  v.  Mutual  Iteserve  bund  4^     1       •     xt       v     1  i-  nnno 

T -4^  V  '  /TT  o  n  n  \  no  T?  1  onn  i^^^t  plan  m  New  York,  see  act  lf)09 
Life  Assoc.  (U.  S.  C.  C.)  98  led.  200,        -jo       oq    +-  r<         it  om 

»•  1    -I A 1   T.-'    1    '7^^Q     \\   n    n     a  <"•  ■><5.  c-  28  ot  Consol.  Laws,  sec.  201 ; 

case  attd.  104  led.   ^18,  44  C.  C.  A.  „     1      ,    t       t  *xt  ^r    /   j   ini-\ 

2QC)  Parkers  Ins.  Law  of  N.  Y.  (ed.  191.)) 

For  definition  of  assessment  insur-    P-  ''O*'-     ^^^  People   (ex  rel.  Mount) 
ance,  see  §  7a  herein.  "•'■     Chapter     General     of     America, 

18  Knott  V.  Security  Mutual  Life  Knights  of  St.  John  &  Malta,  198  N. 
Ins.  Co.  161  Mo.  App.  579,  592,  144'  Y.  15,  90  N.  E.  1134. 
S.  W.  178,  41  Ins.  L.  J.  842,  851,  Policy  to  indicate  a.ssessment  plan 
852.  See  Tice  y.  Supreme  Lodge  by  printing  on  face  of  policy  "assess- 
Knights  of  Pythias,  204  Mo.  349,  102  ment  system."  N.  Y.  Ins.  Law,  1900 
S.  W.  1013.    ■  c.  33,  Consol.  L.  c.  28,  see.  219;  L. 

864 


PARTIES— MUTUAL  COMPANIES  §  34Gb 

In  the  Michigan  case  of  Rensenhouse  v.  Seeley  "*  it  is  said  that 
mutual  benefit  and  co-operative  associations,  whether  corporations 
or  mere  voluntary  associations,  are,  strictly  speaking,  insurance  or- 
ganizations, whenever,  in  consideration  of  periodical  contributions, 
they  engage  to  pa}'  the  member  or  his  designated  beneliciary  a  ben- 
efit upon  the  happening  of  a  specified  contingency.  What  consti- 
tutes life  insurance  on  the  assessment  plan  within  the  meaning  of 
Ohio  Statute,  must  be  determined  by  the  laws  of  that  state;  and 
these  contemplate  that  such  insurance  must  be  for  the  sole  benefit 
of  the  policy  holders,  and  the  principal  source  of  revenue  must  arise 
from  post  mortem  assessments  intended  to  liquidate  specified  losses 
and  if  a  foreign  company  complies  with  the  statute  it  may  be  ad- 
mitted to  transact  business  in  the  state  even  though  it  may  have 
capital  stock  and  stockholders  for  whose  benefit  it  was  created. ^^ 

The  test  is  not  the  manner  or  mode  of  affording  insurance  but 
whether  the  company  undertakes  and  agrees  for  a  consideration  to 
indemnify  or  give  security  against  loss.  And  where  a  fire  insurance 
company  conducted  on  the  mutual  co-operative  plan,  relies  entirely 
upon  assessments  to  pay  losses,  and  owns  no  property  and  accumu- 
lates no  fund  therefor,  it  is  an  assessment  insurance  company.^" 
And  the  charter  powers,  by-laws  and  the  laws  of  the  state  where  the 
company  was  organized  do  not  determine  the  character  of  the  in- 
surance issued,  but  that  is  settled  by  the  terms  of  the  policy  and  the 
laws  of  the  state  where  the  foreign  company  takes  its  risk.^  So  un- 
der a  Missouri  decision  the  character  or  terms  of  the  policy  which 
a  company  issues  determinas  whether  or  not  it  is  an  a.ssessment  com- 
pany, and  not  the  certificate  issued  by  the  superintendent  of  insur- 
ance.'' In  Illinois  a  corporation  is  one  of  life  insurance,  though  or- 
ganized to  do  business  on  the  assessment  plan  under  the  name  of  a 
benevolent  society.^     Under  an  Iowa  decision  a  mutual  insurance 

1913,  c.  28,  sec.  219;  Parker's  N.  Y.  '^°  Lee    Mutual    Fire    Ins.    Co.    v. 

Ins.  L.   (ed.  1915)   p.  340.  State,  (50  IMis.s.  395. 

As  to  provisions  affectinj?  assess-  ^  Federal  Union  Surety  Co.  v. 
ment  corporations  only,  and  N.  Y.  Flemister,  9.")  Ark.  389,  130  S.  W. 
Ins.  Laws,  art.  IX.  relatin"-  to  Co-  ")74,  cilln;/  Minneapolis  Fire  &  Ma- 
operative  Fire  Ins.  Corp.  see  N.  Y.  rine  Mutual  Ins.  Co.  v.  Norman,  74 
Ins.  Law  1909,  c.  33,  Consol.  L.  c.  28,  Ark.  190,  85  S.  W.  229.  Eramine 
sec.  266;  Parker's  N.  Y.  In.s.  L.  (cd.  Travelers  Protective  Assoc,  of  Ainer- 
1915)  p.  383.  ica  v.  Sniitli,  —  Ind.  — ,  101  N.  E. 

"» 72   Mich.   603,   617,   40   N.    W.  817,  42  Ins.  L.  J.  780. 

765.  2]yfpX)onald    v.   Bankers'   Life    As- 

19  State  (ex  rel.  National  Life  As-  soc.  154  Mo.  618,  55  S.  W.  999,  29 

see.)  V.  Matthews,  58  Ohio  St.  1,  39  Ins.  L.  J.  780. 

Ohio  L.  J.  241,  40  L.R.A.  418,  49  N.  ^  Lehman  v.  Clark,  174  Til.  279,  43 

E.  1034,  27  Ins.  L.  J.  614;  Kev.  Stat.  L.R.A.  648,  51  N.  E.  222,  27  Ins.  L. 

sec.  3630e.                                          •  J.  745,  rev'g  71  III.  App.  sm. 
Joyce  Ins.  Vol.  I. — 55.            865 


§  34()b  JOYCE  ON  INSURANCE    , 

company  organized  under  a  statute  authorizing  an  a.ssociation  of 
persons  making  mutual  pledges  and  giving  valid  obligations  to  each 
other  for  their  own  insurance  on  the  av<sessnient  plan,  does  not  be- 
come a  stock  company  by  the  issuance  of  shares  to  the  subscribers 
of  a  guaranty  fund,  which  shares  are  secured  bv  obligations  of  the 
liolders,  and  are  subject  to  assessments  from  time  to  time  to  meet 
any  deficiency  that  might  arise  in  the  advancements,  assessments, 
and  pledges  made  to  pay  losses  and  expenses.  Therefore,  it  cannot 
do  business  on  the  stock  plan,  cannot  write  a  policy  for  a  fixed 
amount,  accept  premiums  as  such,  nor  declare  dividends.*  In  Kan- 
sas, an  insurance  association  organized  on  the  co-operative  plan,  is 
exempt  from  the  insurance  laws  where  payments  are  made  to  a  ben- 
eficiary by  assessments  on  living  members,  but  one  of  the  require- 
ments of  the  company  is  that  each  person,  before  becoming  a  mem- 
ber, shall  make  a  deposit  to  form  a  guaranty  fund  for  the  payment 
of  assessments.*  In  Michigan,  a  mutual  or  co-operative  association 
is  not  a  life  insurance  company,  under  the  statutes  of  that  state,  al- 
though it  has  initiation  fees  and  assessments,  and  pays  a  weekly 
amount  for  accidental  disability.^  So  a  co-operative  or  mutual  ben- 
efit associations  are  life  insurance  companies  and  are  likewise  with- 
in the  terms  of  an  anti-rebate  statute.'  The  Minnesota  courts  hold 
tliat  an  association  for  the  transaction  of  the  business  of  life  and 
casualty  insurance  on  the  co-operative  or  assessment  plan  is,  in 
effect,  a  mutual  benefit  society,*  and  that  an  association  which  raises 
a  fund  by  a.ssessment  of  one  dollar  each  on  all  the  members,  for  the 
endowment  of  the  wife  of  each  member,  is  not  a  "benevolent  soci- 
ety" under  the  state  statute  relating  to  the  incorporation  of  such 
societies.^  And  an  incorporated  association  for  the  purpose  of  ob- 
taining employment  for  its  members  while  living,  and  to  render 
pecuniary  assistance  in  a  stated  amount  to  the  families  of  deceased 
members  by  assessments  upon  the  survivors,  is  a  life  insurance  com- 
pany within  the  meaning  of  the  Minnesota  statute.^"  So  the  laws 
governing  life  insurance  are  held  to  apply  to  a  nuitual  benefit  com- 
pany on  the  assessment  plan  rather  than  the  laws  applicable  to  ben- 

*  Mutual    Guaranty   Fire   Ins.    Co.  sioner  of  Ins.  128  Midi.  85,  8  Det. 

(In  re  Assignment)"  v.  Barkor   (Al-  L.  N.  544,  87  N.  W.  126,  30  Ins.  L. 

vord   V.   Barker)    107   Iowa,   143,   70  J.  919. 
Am.  St.  Rep.  149,  77  N.  W.  868.  »  Hesinger  v.  Home  Benefit  Assn. 

5  State    v.    Bankers'    &    Meroliants'  41  Minn.  516,  43  N.  W.  481. 
Mutual  Ben.  As.soe.  23  Kan.  499,  un-        ^  State   v.   Critcliett,  37   Minn.   13, 

der  r.aws  1871,  p.  248.  32  N.  W.  787.     See  State  v.  Trubey, 

SRensenhonse  v.   Seelev,  72  Mieh.  37  Minn.  97,  33  N.  W.  554. 
603,  40  N.  W.  765,  under  How.  Stat.        ^^  Brown  v.  Balfour,  46  .Minn.  68, 

sec.  .4225,  Law.';  1877,  act  No.  29.  12  L.K.A.  373,  48  N.  W.  604,  Gen. 

'  Citizens  Life  Ins.  Co.  v.  Commis-  Slat.  1878,  c.  34,  sec.  368. 

866 


PARTIES— MUTUAL  COMPANIES  §  346c 

evolent  a^gociations  a.s  defined  by  the  Missouri  statute. ^^  Again,  a 
commercial  traveler'  association  which  has  not  complied  with  a 
statute  relating  to  fraternal  associations  is  a  niuUial  benefit  associa- 
tion on  the  assessment  plan  and  not  an  old  line  insurance  com- 
pany.^^ 

§  346c.  Whether  company  fraternal  beneficial  association  or  mu- 
tual assessment  company:  distinctions. — A  company  organized  in 
one  stale  as  a  fraternal  l)eneficial  association,  not  for  profit,  but  with 
power,  among  other  things,  to  establish  an  indenmity  fund  to  care 
for  disabled  meml>ers  of  families,  that  is  to  carry  certain  benefits  in 
the  nature  of  accident  insurance,  declares  itself  within  the  provi- 
sions of  the  statutes  of  another  state  governing  mutual  assessment 
insurance  companiCvS  by  applying  for  a  license  to  do  business  there 
as  such  an  assessment  company,  and  by  issuing  policies  authorizing 
assessments  of  policy-holders.^'  So  it  is  held  that  it  is  settled  by  the 
weight  of  authority  that  the  character  of  the  business- done  by  a  ben- 
eficiary association  is  to  be  determined  by  tlie  laws  of  each  state  in 
which  it  transacts  business  and  not  by  the  laws  of  the  state  of  dom- 
icil."  But  it  is  decided  that  if  all  the  allegations  in  the  answer  of 
a  fraternal  benefit  association  show  it  is  not  such,  and  the  policy  is 
held  to  be  an  assessment  one.  the  laws  of  the  state  where  it  was  or- 
ganized as  a  fraternal  insurance  company  are  admissible  to  show  the 
character  of  tlie  association.^*  ]n  (Jeorgia  an  assessment  fire  insiu-- 
ance  company  is  not  a  fraternal  benefit  order  under  a  statute  as  to 
such  orders. ^^  The  New  York  laws  malvc  a  distinction  between 
assessment  casualty  insurance  companies  and  beneficiary  or  fra- 
ternal societies." 

^1  Tlionipson  V.  Eoval  Neighbors  of  W.    002;    Knott   v.    Seeuritv  ^lutual 

America,  154  Mo.  App.  109,  133  S.  Lile  Ins.  Co.  101  Mo.  A  pp.  .',79,  144 

W.  146.  S.  W.  178;  Missey  v.  Supreme  Lodge 

^2  Western     Comnici-cial     Travelers  Knights  &  Ladies  of  Honor,  147  Mo. 

Assoc.  V.  Tennent,  128  Mo.  App.  541,  App.  i;{7,  120  S.  W.  .').')9.     Compare 

106  N.  W.  1073.    Association  was  or-  I\lcI)onald  v.  Bankers  Life  Assoc.  154 

ganized  under  laws  1878  but  did  not  :\Io.  018,  55  S.  W.  999,  29  Ins.  L.  J. 

comply    with    or   take   advantage    of  780. 

subsequent  statutes.  ^*  ^larcus    v.    Heralds    of   Liberty, 

13  Travelers    Protective    Assoc,    of  241  I'a.  429,  88  All.  678.     See  ^§  225 

America  v.  Smith,  —  hid.  — ,  101  N.  et  seq.  herein. 

E.  817,  42  Ins.  L.  J.  1197,  act  1897,  "  Easter  v.  Brotherhood  of  Amer- 

Burns    1908,    sees.    4739-4764.      See  ican  Yeomen.  154  Mo.  App.  456,  135 

Federal   Union   Surety   Co.  v.   Flem-  S.  W.  904. 

ister,  95  Ark.  389,  1*30  S.  W.  574;  i«  Pitryear  v.  Farmers  Mutual  Ins. 
Armstrong  v.  Modern  Brollici-liood  Assoc.  137  Ga.  579.  73  S.  E.  851,  Civ. 
of  America,  245  Mo.  153,  149  S.  W.  Code  1910,  sees.  2866-2877. 
459  (considered  under  §  344b  here-  i' People  (ex  rel.  Mount)  v.  Chap- 
in)  ;  Ea.ster  v.  Brotheihood  of  Amer-  ter  General  of  America,  Knights  of 
ican  Yeomen,  —  Mo.  App.  — ,  156  S.  . 

867 


§  346d  JOYCE  ON  INSURANCE 

r 

§  346d.  Whether  sick  benefit,  burial,  and  beneficial  association  an 
insurance  company. — Under  an  Indiana  decision,  a  contract  issued 
by  an  association  to  furnish  tlie  holder  with  burial  at  death,  at  a 
specified  cost,  the  money  to  be  raised  by  assessments  upon  members 
of  the  association  who  are  secured  by  solicitation  from  the  gen- 
eral public,  is  one  of  life  insurance  within  the  meaning  of  a 
statute  regulating  such  business. ^^  So  in  Missouri  although  the 
object  of  a  fraternal  benefit  association  is  to  furnish  old  age, 
sick  and  funeral  benefits  in  consideration  of  stipulated  pay- 
ments, still  the  nature  of  its  business  will  be  considered  irre- 
spective of  the  name  of  the  association  and  where  the  plan  set 
forth  in  its  prospectus  is  referred  to  as,  and  stated  to  be  that  of  life 
insurance,  it  conducts  a  life  insurance  business. ^^  And  in  Washing- 
ton the  business  of  a  corporation  is  that  of  life  insurance  where  its 
sole  agreement  is  to  furnish  funerals  and  accessories  even  though  no 
beneficiary  is  designated,  the  person  who  would  otherwise  be  obli- 
gated for  the  buriaf  expenses  being  the  beneficiary.^"  It  is  held  in 
New  Jersey,  however,  that  a  benevolent  society  the  aim  of  which  is 
to  help  sick  members,  furnish  burial  and  to  help  widows  and  other 
surviving  beneficiaries  is  not  an  insurance  company  even  though  the 
members  have  a  right  to  benefits  and  an  interest  in  all  the  property 
.  which  is  in  a  sense  impressed  with  a  trust  for  the  uses  of  the  associa- 
tion and  also  a  trust  for  all  the  members.  The  court  per  Stevens, 
V.  C.  said:  ''That  tlie  contract  of  a  beneficial  society  with  its  mem- 
bers is  not  ordinarily  a  contract  of  insurance  was  decided  by  the 
supreme  court  in  State  v.  Taylor.^  The  constitution  and  by-laws 
of  this  society  do  not  embody  the  elements  of  such  a  contract.  The 
amounts  paid  in.  in  fees  and  dues,  bear  very  slight,  if  any,  relation 
to  the  amount  to  be  paid  in  ca.se  of  sickness  or  death.  The  death 
payment  seeins  to  be  derived,  in  great  part,  from  a  special  assess- 
ment 'of  a  certain  sum'  in  the  case  of  a  member  and  of  'a  less  but 
certain  sum'  in  the  case  of  a  member's  wife.  ,  .  .  It  is  admitted 
that  the  fund  has  been  increased  by  means  of  picnics,  balls,  etc. 

St.  John  &  ^Falta.  lf)8  N.  Y.  1.'),  00        Definition  of  burial  insurance,  see 

N.  E.   1134,  I^ws   1903,  c.   4.')0,  sec.  §  7e  lierein. 

235 ;  Laws  1892,  c.  690,  sees.  207,  23.1 ;        As  to  burial,  etc.,  associations,  see 

Laws  1883,  c.  17.");  Laws  1881,  c.  2:)(),  Howell's  Mich.  Stat.  Annot.  (2d  ed.) 

sec.  1.     See  also  Ins.  Laws,  act  1909,  sees.  943.J,  9436 ;  ani'd  190-3,  act  No. 

e.  33,  p.  28,  Consol.  L.  sec.  201;  Park-  68;  ain'd  1911,  act  No.  126. 

er's  Ins.  Law  of  N.  Y.   (ed.  191.'))   p.        "  Citv  of  Trenton  v.   Humel,  134 

306.  Mo.  App.  .-39.-),  114  S.  \Y.  1131. 

18  State  V.  Willett,  171  Ind.  296,  23       20  state  (ex  rel.  Fishback)  v.  Cas- 

L.R.A.(N.S.)   197,  86  N.  E.  68.  ket  &  Undertakiii.s:  Co.  82  Wash.  124, 

On   burial   insurance   and   funeral  L.R.A.191.")B,  9/6,  143  Pac.  878. 
benefits,  see  notes  in  23  L.R.A.(N.S.)        ^  56  N.  J.  L.  49,  27  Atl.  797. 
197,  and  47  L.R.A.(N.S.)   299. 

868 


PARTIES— MUTUAL  COMPANIES  §  346e 

.  .  .  By  the  contract  itself,  .  .  .  the  amount  payable  for  sick 
and  death  benefits,  is  subject  to  annual  revision.  .  .  .  The  prop- 
erty of  the  association  is,  in  a  sense,  as  counsel  arguas,  impressed 
with  a  trust  for  the  uses  of  the  association,  but  the  trust  is  for  all  the 
members."  ^ 

§  346e.  Whether  railroad  relief  associations  are  insurance  com- 
panies.— The  question  whether  railroad  relief  associations  or  depart- 
ments are  insurance  companies  has  been  discussed  at  length  in  a 
case  in  New  Jersey  and  the  authorities  reviewed.  The  relief  fund 
scheme,  whereby  its  employees  might  enter  certain  contract  relations 
with  the  company,  based  upon  a  consideration  of  regular  payments, 
said  stipend  being  taken  from  their  wages  as  a  voluntary  contribu- 
tion, provided  for  payment  of  sick  and  accident  benefits  to  said  em- 
ployees, and  death  benefits  to  their  relatives  and  appointees.  In  case 
contributions  of  employees,  with  legacies,  gifts,  and  interest  on  in- 
vestments were  insufficient  for  the  company  to  make  the  required 
payments  under  its  contracts,  it  supplied  the  deficit  It  did  not  ap- 
pear that  the  employees  who  entered  into  the  offered  contract  be- 
came members  of  any  fraternal  organization  or  acquired  any  right 
to  govern  or  control  the  operations  of  the  relief  department,  or  the 
investment  or  expenditure  of  its  moneys.  The  contract,  in  the  ab- 
sence of  legislation  on  the  subject,  was  held  enforceable  between  the 
parties  whatever  might  be  the  relation  of  the  relief  depai'tment  to 
the  insurance  laws  of  the  state,  even  if  in  violation  thereof,  and  that 
a  trust  fund  was  exhibited  in  the  case  out  of  which  the  payments 
under  its  contracts  were  primarily  to  be  made  by  the  company.  In 
its  opinion  the  court,  per  Stevenson,  V.  C.  says:  "The  relations  of 
the  Voluntary  Relief  Department  established  by  the  Pennsylvania 
Railroad  Company  to  the  company  itself  and  to  the  employees  of 
the  company  who  become  members  of  this  department  are  disclosed 
to  some  extent  in  the  opinion  of  Vice  Chancellor  Bergen,  in  the  case 
of  Pennsylvania  R.  R.  Co.  v.  AVarren.^  The  scheme  which  seems 
to  be  a  combination  of  a  sick  benefit  society  and  a  life  insurance 
company,  has  been  ad()[)ted  by  several  of  the  larger  I'ailroads  of  the 
country.  In  some  states  the  courts,  probably  basing  their  decision 
upon  views  of  the  essential  nature  of  insm-ance  contracts  and  insur- 
ance business  which  do  not  obtain  in  this  state,  have  held  that  this 
scheme  in  its  entirety  does  not  involve  the  prosecution  of  insurance 
business.*    The  law  of  New  Jersey  in  regard  to  the  character  of  busi- 

2  Pirics  V.  First  Russian  Slavonic  railroad  employees  as  insurance  corn- 
Greek  Catholic  Benev.  Soc.  83  N.  J.  panies,  see  note  in  47  L.R.A.(N.S.) 
Eq.  29,  89  Atl.  1036.  299. 

3  69  N.  J.  Eq.  706,  60  Atl.  1122.  *  Citing   DonaM   v.    Chicago,   Bur- 
On  associations  providing  relief  for   lington  &  Quiney  R.  R.  Co.  93  Iowa, 

869 


§  346e  JOYCE  ON  INSURANCE 

ness  such  as  this  Relief  Department  is  organized  to  prosecute  may 
be  ascertained  from  the  following  cases:  State  v.  Taylor,*  Golden- 
star  Fraternity  v.  Martin.^  Holland  v.  SnjH-eme  Council  of  Order  of 
Chosen  Friends.''  No  legislation  in  New  Jersey  has  been  cited  which 
relieves  the  defendant  corporation  from  the  operation  of  our  general 
insurance  law.'  Whether  in  case  the  whole  scheme  of  the  Relief 
Department  of  the  defendant  corporation  is  violative  of  the  lettei- 
and  policy  of  our  insurance  laws  that  fact  can  in  any  way  affect  the 
equities  claimed  by  strangers  to  the  contract  between  the  defendant 
<-or|)oration  and  its  emj)loyees.  is  a  question  which  has  not  been 
raised  in  this  case,  and  will  not  be  considered.  Whatever  may  be  the 
relation  of  this  Relief  Department  to  the  insurance  laws  of  the  state, 
the  cojilract  witli  which  we  have  to  deal  is  plainly  enforceable  l>e- 
tween  the  parties,  and  will  be  regarded  as  enforceable  in  this  court 
at  the  suit  and  on  behalf  of  any  party  for  whose  benefit  the  contract 
was  made. 

"1.  The  contract  in  this  case  is  in  writing,  and  consists  of  the  ap- 
plication of  the  employee  of  the  defendant  corporation,  the  accept- 
ance of  the  superintendent  of  the  Relief  Department,  an  ofticer  of 
the  corporation,  and  the  regulations  of  the  Relief  Department  ap- 
proved by  the  board  of  directors  of  the  defendant  corporation.  The 
written  application  expressly  refers  to  the  regulations  and  incorpor- 
ates them  into  the  contract.  While  the  bill  alleges  that  the  object 
of  the  Relief  Department  as  expressed  in  the  regulations  is  the  es- 
tablishment and  management  of  a  fund  for  the  payment  of  accident 
and  sick  benefits  to  the  employees  of  the  Pennsylvania  Railroad 
Company,  and  death  benefits  to  'the  relatives  (of  such  employees) 
or  other  beneficiaries  specified  in  the  applications  of  such  employees,' 
onlv  two  of  the  regulations  and  a  portion  of  a  third  are  set  forth.  It 
may  be  that  no  more  liglit  would  be  thrown  on  this  ca.^^e  if  the  entire 
book  of  regulations  had  been  presented  to  the  court  in  the  bill  of 
complaint,  but,  if  any  doubts  arise  as  to  the  legal  or  equitable  rights 
of  any  of  the  parties  to  this  suit  on  account  of  the  difficulty  of  dis- 
covering the  exact  terms  of  the  contract,  the  solution  of  such  doubts 

284,  33  L.R.A.  492,  496  (1895)  61  N.  Life  Ins.   Co.  v.  i\refliaiiics'   Savings 

W    971;  Jolinson  v.  Philadelphia  R.  Bauk  &  Tiu.st  Co.  38  L.R.A.  33,  40, 

Co.  163  Pa.  127,  29  Atl.  854  (1894).  72  Fed.  413,  19  C.  C.  A.  286,  316,  37 

5  56  N.  J.  Law,  49,  27  Atl.  797,  .s.  o.  U.  S.  App.  692,  73  Fed.  653,  19  C. 

aft'M  56  N.  J.  I^w  715,  31  Atl.  771  C.    A.    316,  _43   U.    S.    App.    75,   38 

(189;!).  L.R.A.   33,    (0;   1   Bacon   on  Benefit 

659  N.  J.  Law,  207,  35  Atl.  908  Societies    and    Life    Insurance,   sees. 

(Errors  and  Appeals  1896).  50,  51,  52. 

754  N.  J.  Law,  490,  493,  25  Atl.       » Laws   1902,    pp.    445,   44G,   sees. 

367  (1892).   See  note  to  Penn  Mutual  88,  89. 

870 


PARTIES— MUTUAL  COMPANIES  §  346e 

I  think  must  be  in  favor  of  the  defendants.  'Omnis  presumptio  con- 
tra preferentem.' 

"2.  In  this  case  we  have  to  deal  with  contract  relations  pure  and 
simple,  unaffected  by  any  special  charter  from  the  state,  or  any  pro- 
visions of  a  statute  regulating  the  creation  and  operations  of  benev- 
olent associations,  or  quasi  benevolent  insurance  departments  of  cor- 
porations. No  legislation  has  been  cited  at  the  argument  qualifying 
the  above  statement.  This  characteristic  of  the  case  before  the  court 
distinguishes  it  from  numerous  cases  such  as  Britton  v.  Supreme 
Council  of  the  Royal  Arcanum,^  Supreme  Council  Order  of  Chosen 
Friends  v.  Bennett,^"  American  Legion  of  Honor  v.  Perry,^^  Grand 
Lodge  Ancient  Order  L^nited  Workmen  v.  Connolly.^^  On  account 
of  this  distinction,  these  cases  and  similar  ones  in  my  opinion  are 
destitute  of  a  large  part  of  the  force  attributed  to  them  by  counsel 
for  the  complainant  in  his  oral  argument  and  brief."  ^^ 

Under  an  Ohio  decision  an  association  established  by  a  railway 
company,  composed  of  some  or  all  of  its  employees  and  the  compa- 
ny, for  the  purpose  of  accumulating  and  maintaining  a  relief  fund 
created  by  voluntary  contributions  from  their  wages  by  employees 
who  apply  for  membership  in  said  fund  and  are  admitted :  the  rail- 
way company  to  take  charge  of,  and  be  responsible  for,  the  funds; 
make  up  deficiencies  in  the  same,  supply  facilities  for  conducting  the 
business,  and  pay  the  operating  expenses,  supply  surgical  attendance 
for  injuries  received  in  its  service  and  pay  the  members  or  their  des- 
ignated beneficiaries  the  stated  share  of  the  benefit  fund  retained  by 
the  company,  is  not  an  insurance  company  or  association;  and  in 
agreeing  to  perform  and  in  performing  each  and  all  of  said  acts,  said 
railway  company  is  not  engaged  in  the  transaction  of  insurance  bus- 
iness.^* In  an  Iowa  case  a  relief  department  of  a  railroad  company 
to  aid  employees  in  case  of  sickness,  accident  or  death,  from  a  fund 
raised  by  assessments  upon,  supplemented  by  contributions  from  the 
railroad  company,  resort  to  which  fund  shall  bar  an  action  against 
the  company,  or  be  barred  in  turn  by  such  an  action,  is  not  an  in- 

9  46  N.  J.  Eq.  102,  19  Am.  St.  Rep.  Co.  6.3  N.  J.  L.  2.T2,  76  Am.  St.  Rep. 

376,  18  Atl.  675.  211.  6  Am.  Ne^.  Rep.  601,  15  Am.  & 

1047   N.   J.   Eq.   39,   19   Atl.    785,  En?.  R.  Cas.  N.  S.  851,  4  Chic.  L.  J. 

rev'd  47  N.  J.  Eq.  563,  24  Am.  St.  Wklv.  370,  43  Atl.  DOS,  where  a  sim- 

Rep.  416,  14  L.R.A.  343,  22  Atl.  1055.  ilar  oontraet  is  held  not  one  of  insur- 

"  140  Mass.  590,  592,  5  N.  E.  634.  ance  within  the  meaning  of  the  New 

12  58  N.  J.  Eq.  180,  43  Atl.  286.  Jersey  law. 

^^  Wolfstern  v.  Pennsylvania  Rail-  ^*  State  (ex  rel.  Sheets)  v.  Pitts- 
road  Relief  Department,  76  N.  J.  Eq.  bursrh,  Cincinnati,  Chicago  &  St. 
78,  74  Atl.  533,  39  Ins.  L.  J.  137,  per  Louis  Ry.  Co.  68  Ohio  St.  9,  64 
Stevenson,  V.  C.  L.R.A.  40.5,  67  N.  E.  93,  96  Am.  St. 

Compare  Beck  v.  Pennsylvania  Rd.  Rep.  635. 

871 


§  346e  JOYCE  ON  INSURANCE 

surance  company.*^    And  under  an  Illinois  decision  an  association 
of  like  nature  is  not  required  to  comply  with  the  insurance  law.^^ 
In  New  York  a  railroad  relief  association  is  not  engaged  in  life  or 
casualty  insurance  business  upon  the  co-operative  or  assessment  plan 
so  as  to  be  subject  to  the  provisions  of  the  article  of  the  insurance  law 
relating  to  the  latter  class  of  corporations."    In  a 'Nebraska  case  a 
Voluntary  Relief  Department  in  connection  with  a  railroad  com- 
pany is  mentioned  in  the  syllabus  by  the  court  as  a  "relief  depart- 
ment in  the  nature  of  a  mutual  insurance  association"  and  in  the 
opinion  as  ''somewhat  in  the  nature  of  a  mutual  benefit  society." 
The  general  features  of  this  voluntary  association  were  as  follows: 
it  paid  to  its  members  stipulated  sums  during  disability  caused  by 
sickness  or  accident,  and  paid  to  designated  beneficiaries  certain 
sums  upon  the  death  of  members.    The  members  were  employees  of 
the  railroad  companies  operating  the  department.     The  employing 
railroad  company  contracted  to  make  up  deficiencies  in  the  relief 
fund  for  the  payment  of  losses  accruing  to  those  employees.    It  also 
furnished  clerks  and  other  employees  to  conduct  the  affairs  of  the 
department.    The  department  had  a  superintendent,  charged  with 
the  general  conduct  of  its  business,  but  subject  to  the  supervisory 
control  of  an  advisory  committee,  consisting  of  the  general  manager 
of  the  railroad,  certain  members  chosen  by  the  directors  of  that  road, 
and  other  members  chosen  by  employees  of  dift'erent  divisions  of  the 
road  who  were  members  of  the  department.    The  method  prescribed 
for  obtaining  membership  was  for  the  employee  to  make  an  appli- 
cation upon  a  form  prescribed  hj  the  by-laws,  and  submit  himself 
to  a  physical  examination  by  an  examiner  appointed  by  the  depart- 
ment.   His  application  was  then  passed  upon  by  the  superintendent, 
and,  if  approved,  a  certificate  of  membership  was  issued.    The  prin- 
cipal source  of  income  was  by  deducting  specified  amounts  monthly 
from  the  wages  of  the  members.    The  railroad  company  made  this 
deduction  and  retained  the  fund,  paying  interest  to  the  department 
upon  monthly  balances,  in  his  hands.    These  are  the  general  fea- 
tures.   The  court  per  Ervine,  C,  said:    ''While  the  authorities  are 
very  numerous  in  regard  to  contracts  of  mutual  insurance  and  in  re- 
gard to  benefit  associations,  but  little  light  is  derived  from  them  in 
the  solution  of  the  questions  here  presented.    The  cases  are  nearly 
all  inapplicable  because  of  the  pecuniary  constitution  of  this  associa- 

15  Donald  v.  Chicago,  Burlington  "  Colaizzi  v.  Pennsylvania  Rd.  Co. 
&  Quincy  Rd.  Co.  03  Iowa,  284,  33  208  N.  Y.  275,  101  N.  E.  859:  Consol. 
L.R.A.  492,  61  N.  W.  971.  Laws  1909,  e.  28,  sec.  201;  Parker's 

16  Eckman  v.   Chicago,  Burlington  N.  Y.  Ins.  Law  (ed.  1915)  p.  306. 
&  Quincv  R.  Co.  64  lU.  App.  444,  1 

Chic.  L.  J.  Wkly.  325. 

872 


PAKTIES— MUTUAL  COMPANIES  §  346f 

tion.  ]\Iost  of  the  mutual  benefit  associations  perform  social  func- 
tions, or  are  such  organizations  that  the  insurance  is  only  an  inci- 
dent of  the  membership.  There  the  question  as  to  whether  one  is 
or  is  not  a  member  must  be  solved  Avith  a  view  to  other  objects  of  the 
association.  In  the  case  of  mutual  insurance  companies  every  pay- 
ment is  voluntarily  made  by  the  member,  and  may  be  wdth  the 
express  or  implied  understanding  that  its  payment  is  merely  condi- 
tional. Here,  while  the  assessments  are  termed  'voluntary  contribu- 
tions,' they  are  only  voluntary  in  the  sense  that  an  employee  of  the 
railroad  may  enter  the  association  or  not,  as  he  sees  fit.  If  he  elect 
to  enter,  he  must  in  so  doing  give  to  his  employer  and  the  associa- 
tion the  power  to  seize  the  assessments  without  any  further  exercise 
of  his  own  volition."  ^®  In  an  Indiana  case  where  the  point  at  issue 
and  the  one  decided  was  the  right  to  change  benefieiarie:^.  it  was  held 
that  the  statute  of  that  state  relative  to  such  right  ^^  did  not  apply 
to  a  railroad  relief  association  which  was  unincorporated.  The  con- 
tract in  this  case;  which  was  with  a  number  of  railroad  companies, 
provided  for  the  creation  of  a  fund,  the  ratable  contributions  of  each 
company  and  its  employees  of  such  sums  as  might  be  necessary  to 
meet  the  expenses  of  administration  and  to  pay  such  benefits  as  be- 
came due.  It  was  also  provided  that  the  association's  affairs  should 
be  managed  by  a  joint  advisory  committee,  elected  in  part,  from 
time  to  time,  by  the  respective  employees  of  the  constituent  com- 
panies. Fixed  death  benefits  were  to  be  paid  to  the  relatives  of  the 
employee  or  to  other  designated  beneficiaries.  As  the  association 
had  no  capital  stock,  and  as  its  members  contributed  cash  to  a  com- 
mon fund,  out  of  which  benefits  were  paid,  and  as  the  contributing 
employees,  through  their  representatives,  participated  in  the  admin- 
istration of  the  association  it  was  declared  to  be  clearly  of  a  mutual 
character  and  not,  as  above  stated  and  for  the  reason  above  stated, 
within  the  terms  of  the  statute.  It  was  further  declared  that  the 
courts  recognize  a  difi'erence  between  ordinary  insurance  contracts 
and  the  certificates  of  mutual  insurance  companies  as  to  the  extent 
of  the  right  of  insured  to  change  l)eneficiaries.2° 

§  346f.  Stock  associations  with  beneficiary  fund  not  an  insurance 
company. — A  voluntary  unincorporated  association  combined  for 
the  purpose  of  facilitating  the  purchase  and  sale  of  its  stocks  and 
also  provides  for  the  creation  of  a  trust  fund  from  which  upon  death 
of  a  member  a  payment  of  a  certain  sum  is  directed  to  be  made  to 

18  Burlington  Voluntary  Relief  De-        "  Burns  1901,  see.  5050. 
partraent  of   Chicago,  Burlington   &       ^o  jyfjjg^jj  y    Mason,  160  Ind.  191, 
Quiney  Rd.  Co.  v.  White,  41  Neb.  547,    65  N.  E.  585. 
43  Am.  St.  Rep.  701,  59  N.  W.  747, 
751,  26  Ins.  L.  J.  224. 

873 


346f 


JOYCE  ON  INSURANCE 


such  person  or  objects  as  he  might  have  designated  in  writing,  or 
in  case  of  no  written  designation,  then  to  certain  specified  persons, 
such  paj'ment  to  be  deemed  an  absolute  donation  free  from  all  other 
claim  or  control  does  not  constitute  a  contract  of  insurance  nor  is 
such  association  doing  a  life  insurance  business,  but  such  provision 
merely  constitutes  a  beneficiary  fund  incidental  to  the  primary  ob- 
ject.^ 


^  Swift  V.  San  Francisco   Stock  &   those  organized  for  benevolent,  social, 
Exchange  Board,  67  Cal.  567,  8  Pac.   etc.  purposes  to  which  the  purpose  of 
94,    distinguishing    between    assoeia-   mutual  insurance  is  added  for  mutual 
tions   contracting   primarily   for  life   aid. 
insurance    with    their    members    and 

874 


CHAPTER  XIX. 

PARTIES— MUTUAL  COMPANIES,  BENEFIT,  ETC.,  SOCIETIES, 

CONTINUED  POWERS. 


§  350.     Power  of  mutual   companies,  societies,   or  aasoeiations   affecting 
the  contract :  ultra  vires. 

§  350a.  Same  sub  ject :  powers  as  to  membership. 

§  350b.  Same  subject:  power  to  classify  members:  discrimination  as  to. 

§  350c.  Same  subject:  power  to  restrict  or  extend  classes  of  beneficiaries. 

§  350d.  Same  subject:  limitation  of  amount  of  risk. 

§  350e.  Same  subject:  limiting  liability  as  to  premiums  and  assessments. 

§  350f.   Same  subject:  contract  to  return  dues. 

§  350g.  Same  subject:  paid-up  or  extended  insurance:  non-forfeitable  and 
incontestable  insurance. 

§  350h.  Same  subject:  waiver  by  association,  or  mutual  benefit  company. 

§  350i.    Same  subject:  estoppel:  defense  of  ultra  vires. 

§  350j.    Same  subject:  reinsurance. 

§  350k.  Same  subject:  power  as  to  other  business  or  risks. 

§  3501.    Same  subject:  contract  with  amusement  company  valid. 

§  350m.  Same  subject:   when  company  or  society  can   change  plan:  im- 
pairment of  obligation  of  contract. 

§  350n.  Same  subject:  when  company  or  society  cannot  change  plan. 

§  350o.  Same  subject:  when  change  from  mutual,  etc.,  to  joint-stock  or 
stock  plan  can  be  made. 

§  350p.  Same  subject :  when  change  from  mutual,  etc.,  to  joint-stock  or 
stock  plan  cannot  be  made. 

§  350q.  Right  to  convert  friendly  society  into  company:  injunction. 

§  350r.    Same  subject:  consolidation  or  merger. 

§  350s.   Same  subject:  reincorporation  or  reorganization  of  mutual  com- 
pany on  stock  plan. 

§  350t.   Same  subject:  reorganization  or  reincorporation:  impairment  of 
obligation  of  contract. 

§  351.     Same  subject :  guaranty  or  reserve  fund. 

§  35la.  Same  subject  :  guaranty  or  reserve,  "mortuary  reserve,"  "death 
benefit,"  "reserve  and  emergency,"  funds:  trust  funds. 

§  352.     Benevolent  and  fraternal  organizations  subject  to  laws  of  state 
and  jurisdiction  of  courts:  conditions  precedent  to  resort  to 

courts. 

875 


§  350  JOYCE  ON  INSURANCE 

§  352a.  Same  subject. 

§  352b.  Same  subject:   strict  construction  of  such  conditions  precedent. 

§  352c.  Same  subject :  Kelly  v.  Trimont  Lodge. 

§  353.  Absolute  right  to  become  member  under  charter  of  mutual  com- 
pany. 

§  354.  Contributions  by  subordinate  lodge  to  supreme  lodge :  specific 
purpose :  power  of  disposal  of  funds. 

§  354a.  Right  of  subordinate  circles  or  lodges  to  funds:  rights  of  member 
who  has  withdrawn. 

§  354b.  Funds  of  subordinate  circle  or  lodge:  trust  funds:  cannot  be  di- 
verted. 

§  354c.  Duty  of  association  to  protect  subordinate  circle's  funds  against 
diversion. 

§  355.     Effect  of  decision  by  official  body  created  by  constitution  of  order. 

§  356.     Delegation  of  power  by  supreme  lodge :  mutual  benefit  society. 

§  357.  Subordinate  association  cannot  be  deprived  of  charter  without 
hearing. 

§  358.  Member  or  officer  of  benevolent  association  cannot  be  expelled 
without  hearing. 

§  350.  Power  of  mutual  companies,  societies,  or  associations  af- 
fecting the  contract:  ultra  vires. — In  mutual  companies  or  societies 
or  associations  whether  they  be  incorporated  or  voluntary  organiza- 
tions, the  charter  or  articles  of  association  must  be  looked  to  as  the 
measure  of  their  powers,  as  these  constitute  their  fundamental  and 
organic  law,  the  compact  governing  their  acts  subject  to  the  consti- 
tution and  laws  of  the  state.^  So  in  Illinois  the  rule  is  applied  to  a 
fraternal  beneficiary  society  that  in  ascertaining  the  scope  of  the 
powers  of  a  corporation  organized  under  a  general  law,  the  court 

2  Chamberlain  v.  Lincoln,  129  Mass.  Ohio. — State  ex  rel.  v.  Monitor  Fire 
70.  Assoc.  42  Ohio  St.  555. 

See  also  the  following  cases:  Pennsylvania. — Commonwealth     v. 

/Z//no/s.— Golden  Rule  v.  People,  St.  Patrick's  Ben.  Soc.  2  Binn.  (Pa.) 
118  Jll.  492,  9  N.  E.  342.  441,  4  Am.  Dec.  453. 

Kansas. — State  ex  rel.  v.  Bankers'  Tennessee. — Knapp  v.  Supreme 
&  Merchants'  Mutual  Benefit  Assoc.  Commandory,  United  Order  of  the 
23  Kan.  499.  Golden  Cro.ss  of  the  World,  121  Tenn. 

Massachusetts.— GvosvenoT  v.  Unit-   212,  118  S.  W.  390. 
ed  Society,  118  Mass.  78.  See  also  1  Morawetz  on  Corpora- 

Minnesota. — Bergman  v.  St.  Paul  tioiis  (ed.  1882)  e.  vii.  (2d  ed.)  c.  xv. 
Mut.  Building  Assoc.  29  Minn.  275,  As  to  powers  of  regular  or  old-line 
13  N.  W.  120.  companies;    ultra   vires.     See    §    334 

Missouri. — Gibbs  v.  Knights  of  Py-  herein.  As  to  powers;  parol  con- 
thias,  173  Mo.  App.  34,  156  S.  W.  11.   tracts;  mutual   companies;   see  §  34 

Neiv  York. — Austin  v.  Searing,  16   herein. 
N.  Y.  112,  69  Am.  Dec.  69. 

876 


PARTIES— MUTUAL  COMPANIES  §  350 

loolcs  to  the  certificate  of  the  promoters  and  the  articles  of  incorpo- 
ration, and  its  powers  are  such  only  as  are  therein  specifically  enu- 
merated and  such  others  as  are  incidental  or  necessary  to  carry  the 
express  powers  into  effect.^  And  the  following  general  rule,  govern- 
ing cases  other  than  mutual  etc.,  companies,  is  followed  in  a  frater- 
nal beneficiary  association  case.  That  is,  that  a  corporation  has  pow- 
er to  do  such  business  only  as  it  is  authorized  by  its  act  of  incorpo- 
ration to  do  and  no  other.  It  is  not  held  out  by  the  govenrment,  nor 
by  the  stockholders,  as  authorized  to  make  contracts  which  are  be- 
yond the  purpose  and  scope  of  its  charter;  also  that  there  is  a  clear 
distinction  between  the  exercise  of  a  power  not  conferred  upon  it, 
varying  from  the  objects  of  its  creation  as  declared  in  the  law  of  its 
organization,  and  the  abuse  of  a  general  power,  or  the  failure  to  com- 
ply with  prescribed  formalities  or  regulations,  in  a  particular  in- 
stance, when  such  abuse  or  failure  is  not  known  to  the  other  con- 
tracting party,  and  it  was  declared  that  the  correctness  of  the  first 
propo,sition  was  not  doubted,  and  that  the  second  proposition,  a 
rightful  limitation  of  the  ap})lication  of  the  general  principle,  was 
no  less  firmly  established  both  in  sound  reason  and  authority,  and 
said  last  principle  was  held  decisive  in  the  case  before  the  court* 
Again,  in  Nebraska  in  the  case  of  two  mutual  fire  insurance  com- 
panies organized  under  the  laws  of  that  state  to  insure  city  and  vil- 
lage property  *  the  court,  per  Good,  C,  stated  the  rule  applicable  to 
and  governing  the  ca.se  as  follows:  "It  is  a  well-known  and  recog- 
nized principle  of  law  that  a  corporation  possesses  only  such  powers 
as  are  granted  to  it.  This  is  modified  to  the  extent  that  all  powers 
which  are  necessary  to  the  enjoyment  of  the  rights  and,^privileges 
granted  are  included  in  the  grant  of  powers.  This  is  upon  the 
theory  that  it  is  essential  that  the  corporation  shall  have  the  right  to 
carry  out  and  enjoy  the  rights  and  privileges  conferred  upon  it,  so 
that  any  right  or  power  which  is  essential  to  the  enjoyment  of  the 
powers  granted  is  imi)lied.  In  Smith  v.  Steele,^  it  is  said:  'But  a 
corporation  is  a  mere  creature  of  the  statute,  and.  being  such,  it  pos- 
sesses only  those  [)roi)erties  and  powers  which  the  charter  of  its  crea- 
tion confers  upon  it'     In  State  v.  Atchison  &  Nebraska  Kd.  Com- 

^  National  Union  V.  Keefe,  263  111.  liability    of    insurance    company    on 

453,  105  N.  E.  319,  44  Ins.  L.  J.  125,  contracts  of  another  comapiiy  wliicli 

citing   Rockhold   v.    Canton    Masonic  it   has  absorbed  or  attempted  to  ab- 

Benevolent  Soc.  129  111.  440,  2  L.R.A.  .sorb),  94  N.   E.   685,  40   Ins.  L.   J. 

240,  21  N.  E.  794.  1177. 

*  Timberlake     v.     Supreme     Com-       *  Session  Laws  1897,  p.  257,  c.  45; 

mandery,  United  Order  of  the  Gold-  Cobbey's  Ann.  Stat.  1903,  sees.  6525- 

en  Cross  of  the  World,  20S  Mass.  411,  6544. 
36  L.R.A.(N.S.)    597    (annotated  on       ^8  Neb.  115,  118. 

877 


§  350 


JOYCE  ON  INSURANCE 


pany''  it  is  held:  'The  powers  of  a  corporation  oroanizcd  under 
legislative  statute  are  such,  and  such  only,  as  the  statute  confers. 
The  charter  of  a  corporation  is  the  niea>-^ure  of  its  powers,  and  the 
enumeration  of  these  powers  implies,  the  exclusion  of  all  others.' 
And  in  the  hody  of  the  opinion'  the  following  language,  taken  from 
Thomas  v.  Railroad  Company^  is  quoted  with  approval :  'Conced- 
ing the  rule  applicable  to  all  statutes  that  what  is  fairly  implied  is 
as  much  granted  as  what  is  expre^'^sed,  it  remains  that  the  charter  of 
a  corporation  is  the  measure  of  its  powers,  and. that  enumeration  of 
{he.<e  powers  implies  the  exclusion  of  all  others.'  In  State  v. 
Nel)ra«ka  Distilling  Company^"  it  is  said:  'Unlawful  acts  of  a 
corporation  are  not  limited  to  those  which  are  mala  prohibita  and 
malum  in  se,  but  include  powers  which  the  corporation  is  not  au- 
thorized to  exercise,  and  contracts  which  they  are  not  empowered  to 
make.'"  11 

Such  corporations  have  the  right  'to  manage  their  own  affairs  and 
to  control  their  members, ^^  and  an  insurance  association  is  bound 
by  the  act  of  the  majority  in  the  absence  of  restrictions  in  the  articles 
of  association.!^  So  a  fraternal  society  has  power  to  make  rules  for 
payment  of  dues  and  assessments  and  for  forfeiture  in  ca.se  of  non- 
payment.^^ 

A  nmtual  insurance  company  may  borrow  money  to  pay  its  loss- 


'24  Neb.  143,  8  Am.  St.  Rep.  164 
n,  38  N.  W.  43. 

8  At  page  162  of  24  Nebraska. 

9  101  U.  S.  71,  25  L.  ed.  950. 

10  29  Neb.  700,  718,  46  N.  W.  155. 

11  Allison  V.  Fidelity  Mutual  Fire 
Ins.  Co.  81  Neb.  494,  129  Am.  St. 
Rep.  694,  116  N.  W.  274,  37  Ins.  L. 
J.  602. 

"For  tbe  purposes  of  this  case  we 
may  also  admit  the  entire  r-orrcptness 
of  the  appellee's  contention  (1)  that 
a  corporation  may  lawfully  exercise 
only  such  powers  as  are  expressly  or 
impliedly  granted  by  statute;  and  (2) 
that  as  between  a  corporation  and  the 
public  any  rea.sonable  doubt  as  to  tlie 
granting  of  a  corporate  power  will 
be  resolved  in  favor  of  the  public." 
Bankers  Mutual  Casualtv  Co.  v.  First 
National  Bank,  131  Iowa  456,  108  N. 
W.  1046,  36  Ins.  L.  J.  10. 

"A  corpoiation  has  power  to  do 
such  business  only  as  it  is  authorized 
by  its  act  of  incorporation  to  do  and 
no  other.     It  is  not  held  out  by  the 

8 


government  nor  by  the  stockholders, 
a.s  authorized  to  make  contracts  which 
are  beyond  the  purposes  and  scope 
of  its  charter-.  It  is  not  vested  with 
all  the  ca]>acities  of  a  natural  person, 
or  of  an  ordinary  partnership,  but 
v,ith  such  only  as  its  charter  confers." 
Davis  v.  Old  Colonv  Rd.  Co.  1.31 
Mas.s.  259,  41  Am.  "  Rep.  221,  per 
Gray,  C.  J.  quoted  with  approval  in 
^Memphis  Grain  &  Package  Elevator 
Co.  V.  Memi)his  &  Charleston  Rd.  Co. 
85  Tenn.  703,  4  Am.  St.  Rep.  791,  5 
S.  W.  52;  Knapp  v.  Supreme  Com- 
inandery  Fnited  Order  of  the  Gohl- 
en  Cross,  121  Tenn.  212,  118  S.  W. 
390. 

12  Anacosta  Tribe  v.  Murbach,  13 
Md.  911,  71  Am.  Dec.  625. 

13  Korn  V.  Mutual  Assur.  Soc.  of 
Va.  6  Cranch.  (10  U.  S.)  192,  3  L. 
ed.  195;  Dean  v.  Tucker,  2  Cranch 
(U.  S.  C.  C.)  26,  Fed.  Cas.  No.  3711. 

1*  Stone   V.    Grand    Lodge   Ancient 
Order  United  Workmen,  78  Mo.  App. 
546,  2  Mo.  App.  296. 
/'8 


PARTIES— MUTUAL  COMPANIES  §  3.30 

es,  and  nin}'  give  i(s  note  for  such  borrowed  money,  and  a  menil)er 
of  the  company  is  liable  to  an  assessment  to  pay  a  judgment  on  the 
note.^*  Rut  where  such  power  is  not  expressly  conferred  by  charter, 
and  is  not  necessary  to  the  exercise  of  its  express  powers  or  to  effect 
the  purpose  of  its  creation  an  incorporated  fraternal  insurance  cor- 
poration cannot  issue  promissory  notes. ^^ 

A  conti'act,  whereby  a  guaranty  life  a'^sociation  undertakes  to  pay 
losses  which  mav  accrue  or  have  accrued  against  another  and  similar 
association,  is  an  attempt  to  divert  the  funds  to  objects  not  author- 
ized by  its  charter,  and  is  therefore  ultra  vires  and  void."  Nor  can 
a  nnitual  association  appropriate  assessments  made  to  pay  losses, 
nor  the  annual  deposits  received  in  view^  of  assessments  to  the  pur- 
chase of  the  assets  of  another  like  corporation,  including  unneces- 
sary real  estate,  nor  may  it  devote  such  funds  to  the  payment  of  loss- 
es of  the  members  of  such  other  corporations,  as  such  act  constitutes 
a  misapplication  of  trust  funds. ^^  But  a  mutual  benefit  association 
may  purchase  real  estate  where  a  statute  in  force  Avhen  it  was  incor- 
porated empowers  it  so  to  do,  even  though  a  by-law  may  provide 
otherwise  as  to  tlie  disposition  of  its  funds. ^' 

Where  the  charier  of  an  insurance  company  permits  it  to  receive 
notes  for  premiums  in  advance,  subject  to  be  used  by  the  company 
in  payment  of  losses,  etc.,  and  requires  the  notes,  so  given,  to  be 
n)ade  ])nya]jle  within  twelve  months  from  date,"'  the  notes  must  be 
drawn  in  accordance  therewith,  and  used  for  the  purposes  men- 
lioned  therein.^"  Such  mutual  company,  or  its  receiver,  also  has 
))()wer  lo  allow  equitable  claims  for  losses,  though  no  actions  to  re- 
cover tlie  same  could  be  maintained  bv  reason  of  the  neglect  of  the 
chiimants  to  bring  them  within  the  time  prescribed  by  the  charter 
or  by-laws  of  the  company,  or  that  limited  by  statute;  and  actions 
uj^on  premium  notes  to  collect  money  to  pay  such  claims  cannot  be 
defeated  on  the  ground  that  payment  of  them  migiit  have  been 
avoided.^ 

iSQrrv.    Mercer   County    Mutual        ^^  Colaluca  v.   Soeieta  Cooperativa 

Fire  Iiis.  Co.  114  Pa.  St.  387,  ti  All.  Di  Mutuo  Socoorso  Fratelli  Bandiera, 

(i<)6.  30  R.  1.  304,  75  Atl.  2d5. 

^®  Sf'Olt   V.  Baiiker.s'  Union   of  th&       As    to    engaging    in    building;    and 

World,  73  Kan.  575,  85  Pac.  604.  loan  associalion  business,  see  §  350k 

^■"Tviss    V.    Guaranlv    Life    As.M)f*.  lierein. 
87  Iowa,  733,  43  Am.' Si.  Rep.  418,       20  Osg^ood  v.   Toplitz,  2  Lans.    (N. 

55   N.   W.   8.      See   §§  112b   et   seq.  Y.)  184.   See  §  1289  herein, 
herein.  ^  Sands  v.  Hill,  42  Barb.   (N,  Y.) 

^^  Slate  V.  Monitor  Fire  Assoc.  42  651. 
Ohio  St.  555. 

As  to  application  or  appropriation 
of  fund.'i,  see  §  1289  herein. 

879 


§§  330a- 350c 


JOYCE  ON  INSURANCE 


§  350a.  Same  subject:  powers  as  to  membership, — Under  a  New 
Jersey  decision  a  mutual  company  may  insure  city  corporations  as 
well  as  individuals  where  the  charters  of  the  company  and  city  both 
so  autliorize.^  But  assessment  fire  associations  or,£2;anized  under  the 
Ohio  statute  have  no  authority  to  accept  non-residents  as  members.' 

§  350b.  Same  subject:  power  to  classify  members:  discrimination 
as  to. — A  charter  of  a  mutual  insurance  company  may  provide  that 
the  corporation  can  divide  applications  for  insurance  into  two  or 
more  classes,  according  to  the  degree  of  hazard,  and  that  the  pre- 
mium notes  shall  not  in  such  case  be  assessed  for  any  losses,  except 
in  the  class  to  which  they  belong,  where  such  provision  does  not  con- 
flict with  the  terms  of  the  act  under  which  it  Was  formed.*  When 
so  empowered  by  statute  members  may  be  classified  by  fraternal  ben- 
eficiary societies  and  certificates  may  be  issued  in  conformity  with 
such  classification.^  But  a  cla.ssification  of  members  under  an 
amended  by-law  will  violate  a  member's  rights  when  his  contract 
antedates  such  amendment.^ 

A  mutual  company  cannot  in  a  single  instance  deal  with  one  of 
its  members  on  a  basis  different  from  that  on  which  all  others  are 
dealt  with.' 

§  350c.  Same  subject:  power  to  restrict  or  extend  classes  of  bene- 
ficiaries,— A  fralernal  beneficiary  society  may  restrict  the  object  of 
its  benevolence  to  classes  more  limited  than  those  which  the  statute 
authorizes  it  to  include,  and  in  such  cases  persons  not  within  the  re- 
stricted classes  specified  cannot  receive  the  benefits  of  the  association. 
It  cannot  under  the  statute  extend  rights  to  additional  classes,  unless 


2  French  v.  City  of  Millville,  66  N. 
J.  L.  392,  49  Atl.  465,  affd  (mem.) 
67  N.  J.  L.  349,  51  Atl.  1109.  See 
also  St.  Paul  Trust  Co.  v.  Wampach 
Manufacturing  Co.  50  Minn.  93,  52 
N.  W.  224. 

'  State  (ex  rel.  Richards)  v.  Manu- 
facturers Mutual  Fire  Assoc.  50  Ohio 
St.  145,  24  L.R.A.  252,  33  N.  E.  401; 
Rev.  Stat.  sees.  3686-3690. 

*  White  V.  Coventry,  29  Barb.  (N. 
Y.)   305. 

As  to  assessments  where  risks  are 
classified,  see  §  1298  herein. 

*  Ellison  V.  District  Grand  Lodge, 
No.  23,  Grand  United  Order  of  Odd 
Fellows,  11  Ala.  App.  442,  66  So. 
872;  Acts  1911,  pp.  701,  702,  716, 
sees.  5,  6,  9,  23a.  "The  conclusion  is 
that  the  society  had  the  right  to 
create  the  separate  class  of  members, 


of  which  particular  class  the  member 
on  whose  life  the  appellant  held  a 
beneficiary  certificate  was  not  a  mem- 
ber, and  to  maintain  for  the  benefit 
of  that  other  class  of  members  a  sep- 
arate mortuary  fund."  Id.  per  Pel- 
ham,  P.  J.  See  Roval  League  v. 
Shields,  251  111.  250,  36  L.R.A.  (N.S.) 
250,  96  N.  E.  45,  40  Ins.  L.  .1.  2100. 

®  Parks  v.  Supreme  Circle,  Broth- 
erhood of  America,  83  N.  J.  L.  131, 
89  Atl.  1042.     See  §  377a  hereui. 

On  validity  of  retrospective  by-law 
or  other  rule  of  benefit  association 
excluding  certain  class  of  members 
from  benefits,  or  reducing  benefits  of 
that  class,  see  note  in  24  L.R.A. 
(N.S.)   1030. 

'  Clevenger  v.  Mutual  Life  Ins.  Co. 
2  Dak.  114,  3  N,  W.  313.  See  §  370 
herein. 


880 


PARTIES— MUTUAL  COMPANIES  §  350cl 

the  articles  are  amended.'  And  an  association  organized  'Tor  the 
mutual  protection  and  relief  of  its  members,  and  for  the  payment 
of  stipulated  sums  of  money  to  the  families  or  heirs  of  deceased 
members,"  has  no  authority  to  issue  a  certificate  of  membership  pay- 
a,ble  to  the  beneficiary  "or  assigns,"  or,  in  the  event  of  his  death, 
payable  to  any  other  than  his  family  or  heirs.^  So  want  of  author- 
ity to  issue  certificates  to  a  class  of  beneficiaries  within  the  statute 
under  which  a  beneficial  society  is  organized  cannot  be  availed  of  by 
a  rival  claimant  of  the  benefit,  even  though  said  beneficiaries  are 
not  within  the  classes  specified  or  limited  under  the  society's  consti- 
tution and  by-laws.^°  But  where  the  general  purpose  of  such  society 
is  the  welfare  of  its  members  and  their  relief  in  times  of  sickness 
and  distress,  it  may  extend  its  benefits  to  the  families  of  members 
and  provide  for  widows  of  deceased  members. ^^ 

§  350d.  Same  subject:  limitation  of  amount  of  risk. — In  a  Mis- 
souri case  a  mutual  insurance  company  is  held  to  be  within  the  rule 
that  there  may  be  a  departure  from  the  particular  way  in  which  a 
thing  is  required  to  be  done  under  the  power  vested  in  a  corporation, 
and  where  such  departure  does  not  apply  to  the  method,  it  will  be 
good  up  to  the  authorized  limit,  extent  or  quantity,  but  void  as  to 
the  excess  and  this  applies  where  the  constitution  of  a  mutual  com- 
pany limits  the  amount  of  risk  which  can  be  taken,  and  the  act  of 
such  company  is  not  ultra  vires  and  the  entire  policy  made  void  if 
the  amount  of  indemnity  is  fixed  at  a  greater  sum,  but  the  excess 
will  be  deducted. ^^    But  policies  for  more  than  a  certain,  specified 

8  National  Union  v.  Keefe,  263  TU.  59  N.  J.  Eq.  321,  45  Atl.  111.  Soeietv 

453,  105  N.  E.  319,  44  Ins.  L.  J.  125,  was    organized    under    Mass.     Stat. 

revg-.  172  111.  App.  101.     Citing '^ot-  1877. 

wegian  Old  Peoples  Home  Society  v.  That  by-laws  must  not  contravene 

Wilson,  176  111.  94,  52  N.  E.  41.    See  terms  of  charter,  see  §  375  herein. 

Royal  League  v.  Shields,  251  111.  250,  ^^  Gundlach   v.   Germania   Meclian- 

36"L.R.A.(N.S.)  208,  96  N.  E.  45,  40  ic's  Assoc.  4  Hun    (N.   Y.)    :539,  49 

Ins.  L.  J.  2100;  Coulson  v.  Flynn,  86  How.  Pr.  190.     But  compare  Nation- 

N.  Y.  Supp.  1133,  90  App.  Div  613,  al  Union  v.  Keefe,  263  111.  453,  105 

affd.  181  N.  Y.  62,  73  N.  E.  507.  N.  E.  319,  rev'g  172    111.   App.   101 

As    to    statutes    limiting    benefici-  (first  ease  considered  under  this  sec- 

aries:  certain  classes:  when  no  waiv-  tion)  ;  Wagner  v.  St.  Francis  Xavier 

er   of  charter   provisions,   see  §   878  Ben.  Soc.  70  Mo.  App.  161. 

herein.  As  to  designation  of  beneficiaries: 

^  State  V.  People's  Mutual  Benefit  specified  classes :  equities,  see  §  728 

Assoc.   42   Ohio   St.   579    (organized  herein, 

under  Ohio  Rev.  Stat.  see.  3630).  Beneficiaries:  when  mode  of  exer- 

On  meaning  of  word  "family"  in  cising  corporate  power  prescribed  by 

by-laws,  see  note  in  3  L.R.A.(N.S.)  charter  differs  from  general  rule  of 

334.  law,  see  §  745  herein. 

^°  Tepper  v.   Supreme   Council   of  Where   designation    of   beneficiary 

Royal  Arcanum,  61  N.  J.  Eq.  638,  80  invalid,  see  §  752  herein. 

Am.  St.  Rep.  449,  47  Atl.  460,  rev'g  ^^  Boulwave  v.  Farmers'  &  Labor- 
Joyce  Ins.  Vol.  I.— 56.            881 


s  3oOe  JOYCE  ON  INSURANCE 


S 


amount  on  one  life,  when  they  are  policies  of  insurance  such  as  co- 
operative assessment  associations  issue,  and  not  certificates  such  as 
fraternal  beneficiary  a^^sociations  issue,  cannot  be  lawfully  issued  by 
a  corporation  subject  to  the  Maryland  Code,  although  its  charter 
provides,  not  only  for  insurance,  but  ''for  social  or  fraternal  benefi- 
cial purposes,  of  both."  " 

§  350e.  Same    subject:   limiting   liability   as   to   premiums    and 
assessments. — In  an  assessment  fire  association  in  Ohio  the  liability 
of  the  members  is  limited  only  by  the  amount  of  the  losses,  and  an 
attempt  to  limit  that  liability,  either  to  the  amount  of  cash  premium 
paid  when  the  policy  is  issued,  or  to  the  amount  of  three  or  five  an- 
nual premiums,  is  not  sanctioned  but  is  expressly  forbidden  by  stat- 
ute,^* and  mutual  insurance  companies  on  the  assessment  plan  have 
no  authority  to  provide  for  the  payment  of  an  agreed  annual  deposit 
during  the  life  of  a  policy,  by  which  the  holder  shall  be  exempt  from 
assessment  for  losses  during  the  year  of  the  prepayment,  as  such 
annual  deposit  is  in  fact  a  premium  for  carrying  the  risk,  and  not  a 
specific  assessment  authorized  by  the  statute;  ^^  and  an  attempt,  by 
contract,  of  a  mutual  insurance  company  to  limit  the  number  and 
amount  of  assessments  for  which  its  members  are  liable  is  ultra  vires 
and  void.    The  liability  of  a  member  is  a  continuing  one  so  long  as 
he  remains  a  member  and  he  must  respond  to  any  and  all  assess- 
ments, required  to  satisfy  the  company's  indel)tedness.^^    But  under 
a  Pennsylvania  decision,  it  is  not  ultra  vires  to  stipulate  in  the  con- 
tract that  the  premiums  and  assessments  shall,  during  the  life  or 
term  of  the  policy,  not  exceed  a  certain  sum.    The  court,  per  Purdy, 
P.  J.,  said:  ''With  reference  to  the  contentiou  that  the  officers  of  the 
company  have  no  authority  to  limit  the  liability  of  a  policy-holder, 
it  seems  to  us  that  this  question  would  largely  depend  upon  circum- 
stances.   It  may  be  true  that  the  officers  of  this  insurance  company 
would  have  no  authority  to  make  such  a  stipulation  in  a  few  isolated 
cases,  yet  if  this  course  of  dealing  with  its  policy-holders  is  sufficient- 
ly extensive  to  become  a  system,  known,  or  which  may  be  presumed 
to  be  known  to  members  of  the  company,  it  seems  to  us  only  equit- 

ers'    Co-operative    Ins.    Co.    77   Mo.   Ohio  St.  145,  24  L.R.A.  252,  33  N.  E. 
App.    639,   2   Mo.   App.   Repr.   128,   401,  Rev.  Stat.  sees. -3634,  3687. 
quoting  as  supporting  the  rule  first       On  liability  of  members  of  mutual 
above  stated,  from  Farmers  &  Trad-   insurance   company,  see  note  in   32 
ers  Bank  v.  Harrison,  57  Mo.  503,    L.R.A.  481. 
521,  ^*  State  V.  Monitor  Fire  Assoc.  42 

13  International  Fraternal  Alliance   Ohio  St.  555. 
V    State,  86  Md.  550,  40  L.R.A.  187,       ^^  Morgan  v.  Hog  Raisers'  Mutual 
39  Atl.  512 ;  Code  art.  26,  see.  128.   Ins.  Co.  62  Neb.  446,  87  N.  W.  145, 

"  State  (ex  rel.  Richards)  v.  Man-   Comp.  Stat.  1899,  c.  43,  sees.  130, 137, 
ufaeturers'    Mutual    Fire    Assoc.    50    140. 

882 


PARTIES— MUTUAL  COMPANIES         §§  350f,  350g 

?.ble  that  the  company  slioukl  be  estopped  from  denying  the  bind- 
ing force  of  this  limitation  as  against  those  who,  in  good  faith, 
relying  upon  this  provision  to  protect  them  from  a  liability  which 
otherwise,  they  might  be  unable  to  meet,  had  become  members  of 
the  company."  The  case  however  turned  upon  the  question  of  lia- 
bility of  insured  for  losses  after  surrender  of  his  policy.^''' 

§  350f.  Same  subject:  contract  to  return  dues. — While  an  associa- 
tion has  power  to  contract  to  pay  sick  benefits  still  it  is  ultra  vires  to 
stipulate  that  at  the  expiration  of  a  specified  time  the  amount  of 
dues  received  during  that  period  will  be  returned,  less  the  amount 
if  any  drawn  for  sick  benefits.^^ 

§  350g.  Same  subject:  paid-up  or  extended  insurance:  non-for- 
f citable  and  incontestable  insurance. — In  Missouri  it  is  not  lawful 
for  a  fraternal  beneficiarv  association  to  issue  life  insurance  under 
a  tM'enty-year.  paid  up  policy  plan,  nor  under  a  plan  making  the 
policy  non-forfeitable  after  payment  of  premiums  for  a  certain  num- 
Ijer  of  months. ^^  But, under  a  Pennsylvania  decision  an  insurance 
company  on  the  mutual  plan,  may  issue  paid  up  or  term  policies, 
instead  of  life  as  the  mutual  principle  is  not  affected  thereby,  and 
the  term  or  life  of  a  policy  is  not  a  determining  factor  in  respect  to 
the  principle  upon  which  insurance  is  carried  on,  nor  is  its  charter 
mandatory  on  the  company  as  to  the  manner  of  conducting  its  bus- 
iness.^" And  a  company  organized  and  doing  business  on  the  assess- 
ment plan,  under  the  Indiana  statute,  may  contract  for  extended  in- 
surance.^ But  an  incontestable  clause  with  an  exception  for  fraud 
in  a  certificate  of  a  fraternal  benefit  society  is  Hot  ultra  vires.^ 

^' Moore,  Receiver,  v.  Frey,  29  Pa.  As   to    endowment    policies:    ultra 

Co.    Ct.    Rep.   298.      There  were  six-  vires,  see  §  2r)18  herein, 

teen  other  policies  before  the  court  in  ^^  Commonwealth  v.  Provident  Life 

all  of  which  the  policies  contained  tlie  &  Trust  Co.  6  Lack.  Leg.  N.  140,  9 

same    provision    or    limited    liability  Pa.  Dist.  R.  479,  56  Leg.  Int.  339,  3 

clause.  Dauph.  Co.  Rep.  130. 

As  to   defense   to   actions:   assess-  As  to  right  to  issue  paid-up  insur- 

ments,  see  §  1311  herein.  ance,  see  State  (e.x  rel.  Grand  Frater- 

^^  Southern  Mutual  Aid  Assoc,  v.  nity)   v.  Lemert,  66  Ohio  Bull.  118; 

Watson,  154   Ala.   325,  45   So.   649;  Ohio  Laws  423,  art.  97,  sec.  9,  Gen. 

Southern  Mutual  Aid  Assoc,  v.  Cobb,  Code  94/0. 

60  Fla.  198,  53  So.  505.  ^  Federal  Life  Ins.  Co.  v.  Arnold, 

Instate    (ex    rel.    Supreme    Lodge  46  Ind.  App.  114,  90  N.  E.  493.  91  N. 

Knights  of  Pythias)  v.  Vandiver,  213  E.  357,  under  Laws  189/,  p.  318,  c. 

Mo.  187,  15  Am.  &  Eng.  Ann.  Cas.  195.      The   case   of    Mutual    Reserve 

283,    111    S.    W.    911.      Citing    (Id.  Life  Ins.  Co.  v.  Roth,  122  Fed.  853, 

202)    Western)an   v.   Supreme  Lodge  59  C.  C.  A.  63,  considered  and  held 

Knights  of  Pytliias,  196  Mo.  670,  5  in  nowise  parallel. 

L.r!a.(N.S.)  1114,  n.  94  S.  W.  470.  2  j^^yal  Americans  of  the  Republic 

As  holding  that  there  could  be  no  sucli  v.  Mayer,  137  111,  App.  574. 
thing  as  a  paid-up  policy  issued  by 
a  fraternal  society. 

883 


§§  330h,  350i  JOYCE  OX  INSURANCE 

§  350h.  Same  subject:  waiver  by  association,  or  mutual  benefit 
company, — A  waiver  by  a  fraternal  beneficiary  association  under  a 
by-law  is  not  an  ultra  vires  act,  where  the  code  provides  that  such  a 
society  shall  make  provision  for  payment  of  benefits  in  case  of  death 
or  disability  "subject  to  compliance  by  its  members  with  its  consti- 
tution and  by-laws."  Such  statutory  statement,  however,  adds  noth- 
ing to  the  general  law  governing  corporate  action.  The  by-law  was 
not  prescribed  by  statute,  and  such  a  provision  is  inherent  in  flie  law 
governing  corporate  obligations  to  members  of  all  corporations  hav- 
ing a  constitution  and  by-laws.^  And  a  corporation  itself  can  waive 
the  compliance  by  an  intended  member  with  any  of  its  requirements 
not  prescribed  by  its  charter  or  the  laws  of  the  state,  for  his  admis- 
siorr^  membership  and  the  conclusion  of  a  binding  contract  of 
insurance.*  If  a  fraternal  beneficiary  association  itself  has  made  a 
contract  within  its  general  powers,  knowing  it  to  have  been  made 
without  compliance  with  the  provisions  of  its  own  regulations,  and 
has  received  the  full  consideration  for  which  it  stipulated  it  cannot 
afterwards  avoid  its  contract  as  ultra  vires  by  reason  of  such  non 
compliance;  this  being  a  rightful  limitation  of  the  application  of 
the  general  principle  or  rule  as  to  the  powers  of  a  corporation  being 
limited  to  its  charter,  etc.*  And  a  town  or  county  co-operative  conj- 
pany  w411  be  precluded  from  contending  that  a  resolution,  under 
which  it  has  extended  its  limits  of  business  operations,  was  not  reg- 
ularly passed,  when  it  has  acquiesced  for  several  years  in  dealings 
with  agents  and  insurers  in  such  extended  limits.®  And  by  accept- 
ing and  retaining  the  dues  and  fees  of  a  member,  with  knowledge 
of  the  facts,  a  mutual  benefit  association  waives  all  irregularity  in 
the  organization  of  a  subordinate  lodge.'^ 

§  3501.  Same  subject:  estoppel:  defense  of  ultra  vires. — Mutual 
benefit  societies  are  estopped  from  defending  on  the  ground  of  ultra 
vires  against  one  of  its  contracts  where  it  has  received  assessments 

3  Johnson  v.  Modern  Brotherhood  Assoc.  73  Minn.  297,  76  N.  W.  37; 

of  America,  114  :Minn.  411,  131  N.  Morrison  v.  Odd  Fellows  Ins.  Co.  59 

W.  471,  40  Ins.  L.  J.  1424,  Code  sec.  Wis.  162,  18  N.  W.  13. 

2822.  *  Timberlake     v.     Supreme     Com- 

*  Timberlake     v.     Supreme     Com-  mandery,  United  Order  of  the  Gold- 

mandery,  United  Order  of  the  Gold-  en  Cross  of  the  World,  208  Mass.  411, 

en  Cross  of  the  World,  208  Ma&s.  411,  36  L.R.A.(N.S.)  597n,  94  N.  E.  683, 

36  L.R.A.(N.S.)  597n,  94  N.  E.  685,  40  Ins.  L.  J.  1177. 

94  N.   E.  1177,  40  Ins.  L.   J.  117/.  «  gi^a„eateles  Paper  Co.  v.  Amer- 

<The   above   rule  was  sanctioned   by  ican  Underwriters'  Fire  Ins.  Co.  114 

the  court  although  it  was  declared  not  N.  Y.  Supp.  200,  61  Misc.  457. 

necessarv  to   consider  the  question.)  'Ferine    v.    Grand    Lodge    of   An- 

Citing    Watts    v.    Equitable    INIutual  eient    Order    United    Workmen,    48 

Life  Assoc.  Ill  Iowa,  90,  82  N.  W.  :\Iinn.  82,  50  N.  W.  1022,  21  Ins.  L. 

441:  Wiberg  v.  Scandinavian  Relief  J.  213. 

884 


PARTIES— MUTUAL  COMPANIES  §  350i 

thereon.^  And  if  a  mutual  fire  insjurance  company  without  power 
so  to  do,  und-er  the  Hmitations  of  its  charter,  insures  country  i)roper- 
ty  and  receives  premiums  or  levies  assessments  therefor  it  is  estojiped 
to  plead  ultra  vires.^  Nor  can  an  assessment  company  defend  on 
the  ground  of  ultra  vires  an  action  on  an  old-line  policy,  issued  by 
it  without  authority,  where  it  has  received  premiums  thereon.^"  So, 
the  question  of  power  to  contract  for  an  endowment  policy  cannot  be 
raised  where  such  policy  has  been  issued,  and  premiums  and  assess- 
ments have  been  accepted  by  a  mutual  benclit  association.^^  So, 
where  a  fraternal  association,  consolidates  with  and  assumes  the  con- 
tracts of  another  association,  and  issues  to  one  of  the  members  of  the 
latter  company,  and  assumes  his  contract  and  accepts  his  assess- 
ments, said  member  being  over  the  age  limited  by  its  charter,  it  can- 
not avail  itself  of  the  defense  of  ultra  vires.^^  And,  the  relief  depart- 
ment of  a  railroad  company,  in  the  nature  of  a  mutual  insurance 
association,  organized  for  the  benefit  and -protection  of  railroad  em- 
'  ployees,  in  case  of  sickness  or  death,  and  which  ])laces  an  employee's 
name  upon  the  roll  of  its  members  at  his  solicitation,  and  deducts 
from  his  waees  his  assessment  for  benefits,  on  the  basis  of  member- 
ship,  with  knoAvledge  of  the  fact  that  no  formal  application  had  been 
made  and  no  physical  examination  had,  as  required  by  the  by-laAvs, 
is  estopped  from  disputing  such  employees  membership,  upon  the 
suit  of  a  widow  to  recover  a  death  Ijenefit,  notwithstanding  a  rule  of 
the  depai'tment,  defining  and  limiting  its  liability  in  cases  of  regular 
and  formal  application.^^  Again,  if  the  contract  sets  forth  verbatim 
a  charter  clause  purporting  to  authorize  such  insurance  a  beneficial 
association  is  estopped  to  deny  its  power  to  provide  in  its  con- 
tract for  payment  of  a  definite  specified  sum  in  case  of  permanent 
disability,  and  in  such  case  a  provision  is  not  applicable,  that  bene- 
fits should  be  due  until  disability  ceased.^* 

•Matt  V.  Roman  Catholic  Protee-  Benefit  Assoe.  8  Pa.  Dist.  Rep.  231, 

tive  Soc.  70  Iowa  455,  30  N.  W.  799.  56  Loo-.  Tnt.  102. 

On  estoppel  of  corporation  to  set  ^^  Edwards   v.    American    Patriots, 

up  plea  of  ultra  vires,  see  note  in  20  162  Mo.  App.  231,  144  S.  W.  1117. 

L.K.A.  705.  See    Wood    v.    Supreme    Ruling:    of 

9  Garner  v.   Mutual  Fire  Ins.   Co.  Fraternal  .Mystic  Circle,  212  111.  532, 

_  Iowa  — ,  86  N.  W.  289.  72  N.  E.  783,  rev'g-  Supreme  Ruling 

1°  Knott   V.    Security    Mutual   Life  of  Fraternal  Mystic  Circle  v.  Wood, 

Ins.   Co.  161  Mo.  App.  579,  144   S.  114  111.  A])p.  431. 

W.  178,  41  Ins.  L.  J.  842,  criticising,  ^^  Burlington  Voluntary  Relief  De- 

as  mere  dictum   and  opposed  to  the  partment  v.  White,  41  Neb.  547,  43 

unbroken  current  of  authority,  Smoot  Am.  St.  Rep.  701,  59  N.  W.  747,  751, 

V.  Bankers'  Life  Assoe.  138  Mo.  App.  26  Ins.  L.  J.  224.     See  this  ca.«e  un- 

438,  120  S.  W.  719.  der  §  346e  herein. 

11  Wa"iier     v.     Keystone     Mutual  i*  Binder  v.  National  Masonic  Ac- 

885 


§§  3-")0j,  350k  JOYCE  ON  INSURANCE 

Members  of  a  mutual  fire  and  marine  insurance  company  are  es- 
topped to  dispute  the  power  of  such  corporation  to  carry  on  two  sep- 
arate department's,  without  recourse  by  either  to  the  assets  of  the 
other,  where  such  act  has  been  fully  advertised  for  more  than  twenty 
years,  and  members  have  had  full  knowledge  of  the  arrangement.^* 

§  350j.  Same  subject:  reinsurance. — Where  the  purpose  of  the 
legislature  is  to  limit  the  risks,  and  to  confine  the  business  of  mutual 
fire  insurance  companies  to  the  insurance  of  tangible  property 
owned  by  their  members  a  contract  of  reinsurance  made  by  sucli 
company  is  ultra  vires  and  assessments  cannot  be  collected  on  ac- 
count of  such  policy.^^  But  where  it  is  beyond  the  power  of  mutual 
fire  insurance  companies  to  reinsure,  the  law  under  which  they  were 
organized  not  having  specifically  granted  such  authority,  but  on  the 
contrary  had  limited  the  risks  which  such  companies  might  write, 
so  that  none  but  owners  of  property  might  become  members  and 
non-members  property  could  not  be  insured,  and  such  contract  of 
reinsurance  is  not  executed,  the  reinsuring  company  is  not  estopped 
from  urging  the  defense  of  ultra  vires." 

§  350k.  Same  subject:  power  as  to  other  business  or  risks. — A 
casualty  company  on  the  assessment  plan  has  no  power  to  issue  sick 
benefit  certificates  where  it  is  restricted  by  statute  to  risks  of  acci- 
dental death  or  disability  from  accident."  So,  a  corporation  of  an- 
other state,  authorized  to  issue  policies  on  the  lives  of  members,  upon 
the  assessment  plan,  for  the  benefit  of  any  person  who  has  an  in- 
surable interest  is  not  entitled  to  carry  on  business  under  the  Ohio 
statutes,  which  allow  assessment  companies  to  insure  lives  of  mem- 

cident  Assoc.  127  Iowa  25,  102  N.  W.       As  to  contract   of  reinsurance  by 

190.  fraternal  benefit  .'societies  by  transfer 

^^  Doane   v.    Millville   Mutual   Ma-  etc.  of  entire  membership  or  funds  of 

ri.  e  &  Fire  Ins.  Co.  43  N.  J.  Eq.  522,  anotlier  .society,  see  N.   Y.  Ins.  Law 

11  Atl.  739.     See  also  Citizens'  Mu-  19U9,  e.  33,  Consol.  L.  c.  28,  sec.  23(5, 

tual  Fire  Ins.  Co.  v.  Sortwell,  8  Allen  L.  1911,  c.  198;  Parker's, N.  Y.  Ins. 

(90  Ma.ss.)  217.  L.  (ed.  1915)  p.  352. 

^^  Allison  V.  Fidelity  Mutual  Fire        As  to  diversion  of  funds,  and  ultra 

Ins.   Co.   81    Neb.   894,   129   Am.   St.  vires,  by  paying-  losses  of  another  as- 

Rep.  634,  116  N.  W.  274,  37  Ins.  L.  soeiation,  see  Twiss  v.  Guaranty  Life 

J.    602.      Ajjplies    to    mutual    com-  Assoc.  87  Iowa,  733,  43  Am.  St.  Rep. 

panies    organized    under    Neb.    Laws  418,  55  S.  W.  8,  considered  under  § 

Sess.  1897,  e,  45,  p.  257.    See  §§  115a,  350  herein. 
115b  herein.  "Allison  v.  Fidelity  Mutual  Fire 

As  to  reinsurance  by  life  or  cas-  Ins.   Co.   81   Neb.   494,  129   Am.   St. 

ualty  corporations  on  co-operative  or  Rep.  694,  116  N.  W.  274,  37  Ins.  L. 

assessment  plan,  see  N.  Y.  Ins.  Law  J.  602.     See  §§  115,  115a,  115b  here- 

1909,  c.  33,  Con.sol.  L.  c.  28,  sec.  209,  in. 

Parker's  N.  Y.  Ins.  L.  (ed.  1915)  p.       "  Knowlton,  Att'y  Gen.    (ex  rel.) 

321.  V.  Berkshire  Health  &  Accident  As- 

886 


PARTIES— MUTUAL  COMPANIES  §  3j0k 

bers  only  for  the  benefit  of  their  famiUes  and  heirs,  as  a  company 
cannot  carry  on  a  business  not  authorized  by  the  laws  of  the  state.^* 
And  a  corporation  authorized  by  its  charter  to  insure  against  fire, 
whether  caused  "by  accident,  lightning,  or  any  other  means,"  can- 
not insure  against  damage  by  lightning  not  resulting  in  fire,  al- 
though their  by-laws  provide  for  their  doing  so.^**  Nor  can  a  mutual 
fire  insurance  company,  organized  under  the  general  laws  of  Wis- 
consin, effect  insurances  on  property  other  than  that  mentioned 
therein.^  And  policies  issued  by  a  mutual  company  on  farm  prop- 
erty in  violation  of  the  express  proliibition  of  the  statute  are  ultra 
vires,  illegal  and  void.^  But  such  company  incorporated  in  New 
York,  and  having  a  general  power  to  insure  under  its  charter,  may 
issue  policies  on  personal  property  in  Canada  owned  by  parties 
there.' 

Under  the  Indiana  statute  a  mutual  life  company  cannot  engage 
in  the  business  of  a  building  and  loan  association  or  establish  a 
building  and  loan  department  and  enter  into  contracts  of  that  char- 
acter as  such  act  is  ultra  vires,  even  though  it  is  empowered  by  stat- 
ute to  loan  or  invest  its  funds,  and  so,  although  it  obtains  a  legaliz- 
ing act  from  the  legislature  where  such  act  contains  nothing  as  to 
the  above  ultra  vires  business.* 

But  where  the  code  authorizes  insurance  against  fire  or  other  cas- 
ualty and  by  an  amendment  burglary  insurance  is  authorized,  and 
prior  to  said  amendment  a  company,  the  general  nature  of  whose 
business  was  to  insure  the  property  only  of  members  against  loss  or 
damage  by  casualty  etc.,  adopted  articles  of  incorporation  expressly 
assuming  to  transact  the  business  of  burglary  insurance,  and  secured 

soc.   171   Mass.   458,  50   N.   E.   930;  business."     Id.  172,  per  Williams,  J. 

Stat.  1800,  c.  421,  s.  c,  171  Mass.  455,  See    Ordelheide   v.    .Modern    Brotlier- 

50  N.  E.  929.  liood  of  America,  158  Mo.  App.  077, 

Instate    (ex   rel.    Att'y    Genl.)    v.  139  S.  W.  2()9. 

Western  Union  Mutual  Life  Ins.  Co.  ^o  Andrews  v.  Mutual  Ins.  Co.  37 

47  Ohio  St.  167,  8  L.R.A.  129,  24  N.  Me.  256.     That  by-laws  must  not  con- 

E.  392,  under  Rev.  Stat.  sees.  :)630,  travene  terms  of  charter,  see  §   375 

3630e.     "Whatever  powers  sucli  com-  herein. 

panies  possess,  are  derived  exclusive-  On  nature  of  risk  under  insurance 

ly  from  the  laws  of  tliis  state,  and  the  against  loss  by  liglitning,  see  note  in 

limitations   and   lestrictions   imposed  26  L.R.A.  267. 

upon  them  by  those  laws,  both  with  ^  O'Neil   v.   Pleasant    Prairie   Mut. 

respect  to  the  classes  of  business  they  Fire  Ins.  Co.  71  Wis.  621,  38  N.  W. 

may  transact,  and  the  mode  of  doin<^  345. 

it  operate  upon  them  as  well  when  ^  Ely  v.  Oakland  Circuit  Judge,  62 

doing  business  outside  of  tlie  state,  Mich.  466,  17  Det.  Leg.  N.  62,  125  N. 

as  within  it.    Their  corporate  capac-  W.  375,  127  N.  W.  769. 

ity  in   these  respects  cannot  be   en-  '  Western   v.   Genesee  Mutual  Ins. 

larged  by  the  laws  of  any  other  state  Co.  12  N.  Y.  258. 

in   which   they   are   permitted   to   do  *  Huter   v.    Union    Trust    Co.    153 

887 


g.§  3501,  350m 


JOYCE  ON  INSUKANCE 


from  the  proper  authority  a  finding  that  such  business  was  author- 
ized by  the  statute,  and  that  its  organization  was  sufficient  for  said 
purpose,  and  its  right  to  do  sucli  busincvss  had  not  been  challenged 
for  ten  years,  the  insured  cannot  escape  liability  on  a  premium  note 
on  the  plea  of  ultra  vires.  Such  a  plea  is  not  favored  in  law  and  will 
not  be  sustained  except  when  required  by  the  utmost  considerations 
of  public  policy.^ 

§  3501.  Same  subject :  contract  with  amusement  company  valid. — 
A  contract  with  an  amusement  company  to  furnish  an  "amusement 
enterprise"  complete  at  their  own  cost  and  expense,  except  that  a 
suitable  location  and  license  were  to  be  supplied  by  the  beneficial  as- 
sociation may  be  validly  made  by  a  policemen's  beneficial  associa- 
tion, for  an  equal  division  of  the  revenue  above  a  given  sum.^ 

§  350m,  Same  subject:  when  company  or  society  can  change  plan: 
impairment  of  obligation  of  contract. — It  is  held  that  a  mutual 
benefit  society  may  change  its  plan  of  insurance,  and  such  change 
does^  hot  violate  its  prior  contracts.'''  So,  legislative  authority  to 
change  the  plan  of  the  business  done  by  a  life  insurance  company 
from  the  assessment  plan  to  the  legal  reserve  flat  premium  plan  of 
"old  line"  insurance  does  not  work  a  violation  of  the  contract  with 
those  certificate  holders  who  failed  to  change  to  the  new  plan,  al- 
though their  assessments  may  have  increased  because  of  the  lesser 
number  subject  to  the  assessment,  and  the  death  of  members,  where 
the  right  of  amendment  was  expressly  reserved  in  the  articles  of 
association.^     And  a  member  may  consent  to  a  change  of  plan, 

Ind.  204,  54  N.  E.  755,  51  N.  E.  1071,  '  Supreme  Lodge  Knights  of  Pyth- 

1  Repr.  303;  acts  1865   (R.  S.  1881,  ias     v.     Knight,     117    Ind.     489,     3 

sec.  3763,  Burns'  Rev.  St.  1894,  sees.  L.R.A.  409,  20  N.  E.  479. 

4884,4895)  Horner's  Rev.  Stat.  1897,  As  to  transfer  of  risks  by  life  or 

see.  3753;  acts  1893,  p.  192   (legal-  casualty  insurance  companies  on  the 

izing  act).  co-operative  or  assessment  plan,  see 

As   to   void   and   illegal   insurance  N.  Y.  Ins.  Law,  1909,  c.  33,  Consol. 

and  distinctions  to   be  observed,  see  L.  e.  28,  sec.  209 ;  Parker's  N.  Y.  Ins. 

§§  2506,  2507  herein.  L.   (ed.  1915)  p.  321. 

As  to  effect  of  subsequently  enact-  As  to  plans  of  mutual  insurance, 

ed  statutes  upon   void  or  illegal  in-  and  that  payment  of  cash  premni^ns 

surances,  see  §  2524  herein.  does  not  abrogate  the   mutual   prin- 

5  Bankers  Mutual   Casualty  Co.  v.  ciple,  see  §  343  herein. 

First  National  Bank,  131  Iowa,  456,  On  rights  of  a.ssessment  company 

108  N.  W.  1040,  36  Ins.  L.  J.  10 ;  to  change  plan  or  class  of  policies,  see 

McClains     Code,    sees.     1685,    1695,  note  in  1  L.R.A. (N.S.)  627. 

am'd  act,  28th   Gen.  Assemb.  c.   60,  «  weight  v.  Minnesota  Mutual  Life 

p.  44.  Ins.  Co.  193  U.  S.  657,  48  L.  ed.  832, 

6  Brindze  v.  Atlantic  City  Police-  24  Sup.  Ct.  549,  died  in  Polk  v.  Mu- 
men's  Beneficial  Assoc.  75  N.  J.  Eq.  tual  Reserve  Fund  Life  Assoc.  137 
405,  72  Atl.  435.  Fed.  273,  277;  Hinckley  v.  Schwartz- 

888 


PARTIES— MUTUAL  COMPANIES  §  350ra 

from  one  of  assessment  to  monthly  payments,  by  making  payments 
and  surrendering  his  certificate.^  It  is  declared  in  a  Federal  Su- 
preme Court  case  that:  ''It  is  not  every  change  in  the  charter  of 
articles  of  association  of  a  corporation  that  will  work  such  a  depart- 
ure from  the  puq^oses  of  its  creation  as  to  forfeit  obligations  in- 
curred to  it  or  prevent  the  carrying  on  of  the  modified  business.  A 
radical  departure  affecting  substantial  rights  may  release  those  who 
had  come  into  the  corporation  on  the  basis  of  its  original  charier. 
There  is  much  discussion  in  the  authorities  as  to  wdien  a  charter 
amendment  is  of  that  fundamental  character  that  a  majority  of  the 
members  or  stockholders  cannot  bind  the  minority  by  agreeing  to 
a  change  in  the  nature  of  the  business  to  be  carried  on  or  the  pur- 
poses or  objects  for  which  the  corporation  was  created.  Each  case 
depends  upon  its  own  circumstances,  and  how  far  the  right  of 
amendment  has  been  impliedly  or  expressly  reserved  in  the  crea- 
tion of  corporate  rights.  It  would  be  unreasonable  and  oppressive 
to  require  a  member  or  stockholder  to  remain  in  a  corporation  whose 
fundamental  purposes  have  been  changed  against  his  will.  On  the 
other  hand,  where  the  right  of  amendment  is  reserved  in  the  stat- 
ute or  articles  of  a.ssociation,  it  is  because  the  right  to  make  changes 
which  the  business  may  require  is  recognized,  and  the  exercise  of 
the  privilege  may  be  vested  in  the  controlling  body  of  the  corpora- 
tion. In  such  cases,  where  there  is  an  exercise  of  the  power  in  good 
f;iith  which  does  not  change  the  essential  character  of  the  business, 
])ut  authorizes  its  extension  upon  a  modified  plan,  both  reason  and 
authority  support  the  corporation  in  the  exercise  of  the  right. ^°  In 
the  })rcsent  case  we  have  by  express  stipulation  the  right  to  amend 
the  articles,  with  the  reservation  noted.  .  .  .  Nor  does  it  appear 
that  the  changes  were  arbitrarily  made  without  good  and  substan- 
tial reasons.  The  changes  of  1898  to  a  plan  of  issuing,  in  exchange 
for  certificates  and  upon  new  business,  a  policy  having  some  of  the 
features  of  old  line  insurance,  seems  to  have  been  fully  justitled  by 
the  state  of  the  company's  business.  And  the  subsequent  change  to 
a  policy  with  straight  premiums  and  fixed  indenniity  was  approved 
by  the  majority  of  the  members  upon  proceedings  had  under  the 
Minnesota  statute  and  has  resulted  in  a  successful  business  and  a 

Rchild    &    Sulzbe)-2cr    Co.    95    N.   Y.        ^^  Citing  Nugent  v.   The   Supcrvi- 

Supp.  :Vi7.  3G3,  i07  App.  Div.  470,  sors,  19  Wall.  (86  U.  S.)  '241,  251,  22 

478;  Green  v.  Hart  lord  Life  &  Fire  L.  ed.  83;  Picard  v.  Huohey,  58  Oliio 

Ins.  Co.  139  N.  C.  309,  311,  1  L.H.A.  St.  577,  51  N.  E.  133;  .Miller  v.  Amer- 

(N.S.)  625,  51  S.  E.  887.    See  §  350t  iean    Mutual    Accident    Ins.    Co.    92 

herein.  Tenn.  167,  185,  20  L.K.A.  765,  21  S. 

^Supreme     Ruling     of     Fraternal  W.  39;   Supreme  Lodge  Knights  of 

Mystic  Circle  v.  Ericson,  —  Tex.  Civ.  Pythias  v.   Knight,   117  Ind.  489,  3 

App.  — ,  131  S.  W.  92.  L.R.A.  419,  20  N.  E.  479. 

889 


§  350n  JOYCE  ON  INSURANCE 

considerable  change  of  the  members  to  the  new  and  more  stable 
plan.  .  .  .  The  business  is  still  that  of  mutual  insurance,  not- 
withstanding changed  methods  of  operation.  The  new  plan  has 
been  legally  adopted  and  approved  by  the  insurance  commissioner 
of  the  state.  The  ai'gument  for  appellants  in  that,  having  begun 
as  an  assessment  company,  the  plan  can  never  be  changed  without 
the  consent  of  all  interested.  But  we  have  seen  that  the  right  of 
amendment  was  given  in  the  original  articles  of  association.  There 
was  no  contract  that  the  plan  of  insurance  should  never  be  changed. 
On  the  contrary,  it  was  recognized  that  amendments  might  be  nec- 
essary. There  was  no  vested  right  to  a  continuation  of  a  plan  of 
insurance  which  experience  might  demonstrate  would  result  disas- 
trously to  the  company  and  its  members.  We  are  cited  to  the  stat- 
utes of  many  states  authorizing  similar  changes  and  transfer  of 
membership,  but  to  no  case  holding  legislative  authorization  of  a 
change  of  this  character  to  work  the  impairment  by  the  state  of  the 
obligation  of  a  contract.  The  courts  are  slow  to  interfere  with  the 
management  of  societies,  such  as  this  mutual  insurance  company. 
While  the  rights  of  members  will  be  protected  against  arbitrary  ac- 
tion, such  organizations  will  ordinarily  be  left  to  their  own  methods 
of  action  and  management.  The  changes  under  consideration  were 
made  in  good  faith  and  have  been  accepted  by  many  of  the  old 
members  as  well  as  those  who  have  taken  policies  since  the  changes 
in  plan  have  been  made.  In  our  view  of  the  case  the  law  of  Minne- 
sota did  not  impair  the  obligation  of  any  contract,  nor  were  the 
changes  in  the  method  and  plan  of  this  company  beyond  its  cor- 
porate powers.  There  is  much  testimony  in  the  record  as  to  the 
good  faith  of  this  proceeding  and  the  motives  of  the  complainants 
in  bringing  it,  which  we  do  not  deem  it  necessary  to  consider,  as  the 
conclusions  announced  dispose  of  the  case  in  favor  of  an  aftirmance 
of  the  judgment"  " 

§  350n.  Same  subject:  when  company  or  society  cannot  change 
plan. — Under  a  Mis.-ouri  decision  a  company  which  does  business 
on  the  assessment  plan  in  conformity  with  the  power  conferred  by 

11  Wright  V.  Minnesota  ]\rutual  Life        That  certifieate  of  insurance  com- 

Tns.  Co.  193  U.  S.  657,  664,  66.3,  48  missioner  not  conclusive  in  determin- 

L.  ed.  832,  24  Sup.  Ct.  549.    The  com-  ing  the  nature  of  the  bu.-iness  trans- 

pany  was  organized  under  Minnesota  acted  but  that  the  executive  officers 

laws  as  one  on  the  a-'sessment  life  in-  construction    entitled    to    weight,    se-J 

surance  plan.     Subsequently  the  pro-  Smoot  v.  Bankers'  Life  Association, 

visions  of  the  general  laws  IPOl,  c.  138  Mo.  App.  438,  120  S'.  W.  719. 
143  were  accepted  whereby  the  com-       As  to  vested  rights:  change  of  by- 

pany  changed  its  plan  to  a  regular  laws,  see  §  380  herein, 
reserve   company    with    certain    pre- 
miums and  fixed  amount. 

890 


PARTIES— MUTUAL  COMPANIES  §  350o 

the  statute  under  which  it  was  organized  cannot  engage  in  tlie  bus- 
iness of  life  insurance  or  any  other  plan  and  an  attempt  to  do  so  is 
ultra  vires.12  In  Michigan  a  mutual  life  insurance  company  can- 
not issue  a  policy  payable  upon  the  occurrence  of  total  disability 
where  its  articles  of  association  provide  only  for  payment  in  the 
event  of  death  of  insured  and  the  statute  under  which  it  was  organ- 
ized require  the  articles  of  association  to  state  definitely  the  object 
of  incorporation,  the  classification  of  members  and  the  purpose  of 
such  classification.^'  Under  the  insurance  laws  of  Pennsylvania 
no  insurance  company  can  be  licensed  to  do  more  than  one  class  of 
insurance  and  a  company  to  which  is  issued  a  license  to  insure  on 
the  level  premium  of  legal  reserve  plan,  is  not  entitled  to  a  certifi- 
cate of  authority  also  to  do  business  on  the  assessment  basis,  and 
without  such  certificate  it  cannot  legally  do  business.^*  And  an 
assessment  fire  association  under  the  Ohio  statute  cannot  do  busi- 
ness on  the  ''contingent  liability  plan."  ^^ 

In  Michigan  the  statute  prohibits  a  stock  company  from  trans- 
acting business  on  the  mutual  plan.^^ 

§  350o.  Same  subject:  when  change  from  mutual,  etc.,  to  joint- 
stock  or  stock  plan  can  be  made. — Tbe  statute  may  empowei-  mu- 
tual companies  to  change  to  joint  stock  companies  upon  giving  no- 
tice but  if  no  method  is  prescribed  for  such  change  other  than  by 
proceedings  in  conformity  with  charter  provisions,  corporate  action 
upon  special  notice  to  members  is  required  to  effect  the  change." 

i^Smoot   V.    Bankers    Life    Assoe.  401;  Rev.  Stat.  sec.  .3634.     See  also 

138  Mo.  App.  4.38,  120   S.  W.  719:  sefs.  36S6-:U)!)0. 

company  organized  under  Code  Iowa,  ^^  Ely   v.   Oakland    Circuit   Judge, 

sec.  1784  etc.  162  l\Iich.  466.  327  N.  W.  760,  s.  c. 

An  authority  to  do  ;ni;nne.s.=  on  the  125  N.  W.  375;  Comp.  L.  sec.  7256, 

assessment   plan  prtr-ludp?   the   mak-  Pub.   acts   1909,   No.   197. 

ing  of  insurance  contracts  or  the  Is-  "  Schwarzwalder  v.   Tegen,  58  N. 

suance  of  certificates  on  another  plan.  J.  Eq.  319,  43  Atl.  587,  afif'd  44  .\tl. 

Missey  v.  Supreme  Lodg*-  Kniulit.s  &  769;  Oinian  .Mutual  Fire  Ins.  Co.  v. 

Ladies  of  Honor,  147  Mo.  App.  137,  Schwarzwalder,  59  N.  J.  Eq.  589. 

126  S.  W.  559.  As  to  cash  premium  plan — mutual, 

^3  Preferred   Masonic   Mutual   Life  etc.  companies,  .see  §  343  herein. 

Assoc,  v.  Giddings,  112  Mich.  401,  4  When  mutual  company  is  not  made 

Det.  Lc.i,.  N.  82,  70  N.  W.  1026,  com-  a  stock  company,  see  IMutual   (luar- 

panv  was  incorporated   under   Midi,  anty  Fire  Ins.  Co.     In  re  (Alvord  v. 

Gen".  Laws  1887,  act  No.   187,  ani'd  Barker)    107   Iowa  143,  70   Am.   St. 

Oen.  Laws  1895,  act  No.  58.  Rep.  149  n,  77  N.  W.  868,  28  Ins.  L. 

1*  Pennsylvania    Mutual    Life    Ins.  J.  205,  con.s((?^r<?fi  under  §  341  herein. 

Co.    of    Philadelphia     (Att'y    Genl's  When    mutual    fire   insurance    c-jr- 

Opinion)     36    Pennsylvania    County  poration  may  amend  charter  so  as  to 

Court  Rep.  687.  convert  it  into  stock  corporation,  .see 

15  State  (ex  rel.  Richards)  v.  Man-  N.  Y.  Ins.  Law  1909,  c.  33,  Consoi. 

ufacturer's    Mutual    Fire    Assoc.    50  L.  c.  28,  sec.  125;  Parker's  N.  Y.  Ins. 

Ohio  St.  145,  24  L.R.A.  252,  33  N.  E.  L.  (ed.  1915)  p.  226. 

891 


i 


§  350p 


JOYCE  ON  INSURANCE 


But  a  mutual  insurance  company  is  not  changed  into  a  stock  com- 
pany by  raising  a  gTiaranty  fund  to  secure  temporarily  the  pay- 
ment of  losses  when  assessments  are  insufficient,  even  if  such  guar- 
anty fund  should  be  held  valid." 

§  350p.  Same  subject:  when  change  from  mutual,  etc.,  to  joint- 
stock  or  stock  plan  cannot  be  made. — Whatever  power,  if  any,  a  mu- 
tual company  possesses  to  change  into  a  joint  stock  company  must 
have  its  source  in  some  statutory  provision,  and  where  the  power 
must  be  exercised  by  the  corporation  iiself  in  accordance  with  the 
statute,  and  not  by  unauthorized  directors  it  could  not  be  exercised 
in  JSiew  Jersey  prior  to  the  statute  of  1899  against  any  members 
will  where  he  had  acquired  his  rights  as  such  prior  to  said  enact- 
ment.^^ So,  an  assessment  fire  association  has  no  authority  under 
the  Ohio  statute  to  do  business  on  the  joint-stock  plan  but  is  limit- 
ed to  business  in  whielr  its  members  insure  each  other  against  loss 
b^^  fire  and  other  casualties  and  agree  to  be  assessed  specifically  for 
payment  of  losses  and  for  incidental  purposes.*^"  And  if  a  mutual 
lire  insurance  company  issues  a  stock  policy  contrary  to  and  in  vio- 
lation of  an  express  statutory  prohibition  such  policy  is  non-en- 
forceable as  it  is  absolutely  void.^  Nor  can  a  mutual  company  by 
mere  force  of  a  by-law  change  from  a  corporation  having  no  capi- 
tal stock  to  one  which  has,^  and,  where  the  charter  of  a  mutual  fire 
insurance  company  contemplates  the  issuance  of  policies  not  mu- 
tual, for  a  cash  premium  it  has  no  power  to  issue  such  policies  when 
expressl}^  prohibited  by  the  statute  under  which  it  is  organized  upon 


New  York  laws  1896,  c.  850,  amd'g 
Laws  1892,  c.  690,  sec.  125,  as  to 
fliange  by  mutual  company  to  stock 
company  and  the  rights  of  members 
as  t9  stock  is  not  unconstitutional  be- 
cause some  members  do  not  avail 
themselves  thereof.  Grobe  v.  Erie 
('ounty  Mutual  Ins.  Co.  57  N.  Y. 
Supp."  290,  39  App.  Div.  183,  aff'd 
169  N.  Y.  613,  62  N.  E.  1096. 

When  domestic  mutual  marine  cor- 
poration may  change  its  busiuiess 
})]an  to  that  of  capital  stock  corpo- 
ration, see  N.  Y.  Ins.  Law,  1909,  c. 
33,  Con.sol.  L.  c.  28,  sec.  159;  Park- 
er's N.  Y.  Ins.  L.  (ed.  1915)  p.  279. 

Stock    life    insurance    corporation 

mutual    life    insurance. 

N.  Y.  Ins.  Law  1909, 

L.  c.  28,  sees.  16,  95; 

Ins.  L.  (ed.  1915)  pp. 


may    become 
corporation. 
c.  33,  Consol. 
Parker's  N.  Y. 
31,  163. 

"  Corey  v.  Sherman,  96  Iowa  114, 


32  L.R.A.  490,  60  N.  W.  232,  64  N. 
W.  828.  See  also  IMutual  Guaranty 
Fire  Ins.  Co.,  In  re  (Alvord  v.  Bar- 
ker) 107  Iowa,  143,  9  Am.  &  Eng. 
Corp.  Cas.  N.  S.  774,  77  N.  W.  8(i8, 
28  Ins.  L.  J.  205,  considered  under  § 
350p  lierein. 

^^  German  Mutual  Fire  Ins.  Co.  v. 
Schwarzwalder,  59  N.  J.  Eq.  589,  44 
Atl.  769,  afif'g  Schwarzwalder  v.  Te- 
gen,  58  N.  J.  Eq.  ;nn,  43  Atl.  587; 
2  Gen.  Stat.  p.  1744,  act  Apr.  9, 
1875,  am'd  P.  L.  1899,  p.  17,  act 
March  6,  1899. 

20  State  (ex  rel.  Richards)  v.  .Alan- 
ufacturer's  jMutual  Fire  Assoc.  50 
Ohio  St.  145,  24  L.R.A.  252,  33  N. 
E.  401;  Rev.  Stat.  sees.  3686-3690. 

^  Smith  V.  Sherman,  113  Iowa,  601, 
88  N.  W.  747;  Code  sec.  1159. 

2  State  v.  Utter,  33  N.  J.  L.  (4 
Vroom)  183. 


892 


PARTIES— MUTUxVL  COMPANIES  §  350ci 

tlie  mutual  plan.  But  policies  of  such  a  comj)any  in  the  standard 
form  containing  an  additional  assessment  liability  clause  are  sub- 
ject to  assessment  as  mutual  policies  although  those  issued  as  cash 
premium  stock  plan  policies  without  such  additional  clause  are 
ultra  vires  and  in  violation  of  the  statute  and  void.'  Again,  where 
the  powers  of  a  mutual  company,  organized  under  the  assessment 
plan  to  insure  each  other's  property  and  which  is  expressly  prohibit- 
ed from  doing  business  or  taking  risks  on  the  stock  plan,  they  do  not 
extend  to  the  insurance  of  property  of  -non-members  or  to  receiving 
premiums  or  declaring  dividends,  and  where  such  company  has  no 
stock,  except  the  shares  issued  to  sul)scribers  of  the  guaranty  fund, 
it  is  not  made  a  stock  company  by  the  issuance  of  such  shares  and 
the  creation  of  such  fund.  But  the  issuance  of  a  non-participating 
policy  for  a  specified  premium  to  a  non-member,  contrary  to  the 
statute,  was  held  ultra  vires  and  void.*  And  where  a  company  is 
organized  under  a  statute  which  authorizes  the  insurance  of  prop- 
erty of  meml^ers  only  and  prohibits  a  mutual  company  from  tak- 
ing risks  upon  the  stock  plan  and  it  issues  policies  for  spec i lie 
amounts  for  an  all  cash  premium  to  persons  who  are  not  bound  to 
pay  any  assessments  such  contracts  are  without  authority  of  law.^ 
§  350q.  Right  to  convert  friendly  society  into  company:  injunc- 
tion.— Where  a  registered  friendly  society,  in  avowed  exercise  of  the 
powers  of  Sec.  71  of  the  Friendly  Societies  act,  1806.6  passed  a 
special  resolution  to  convert  itself  into  a  company  under  the  com- 
panies acts,  with  a  memorandum  of  association  annexed  thereto, 
and  obtained  registration  of  itself  as  a  company,  and  a  member  of 
the  company,  who  had  been  a  member  of  the  friendly  society,  su- 
ing on  behalf  of  himself  and  all  other  members  of  the  company  for 
a  declaration  that  so  much  of  the  business  described  in  the  memo- 
randum of  association  as  was  larger  than  that  of  the  Friendly  So- 
cieties act  was  illegal  and  void  and  moved  for  an  injunction  to  re- 
strain the  company  from  carrying  on  such  business  or  exercising 
any  of  the  powers  enumerated  in  said  memorandum  of  association 
in  excess  of  those  allowed  by  the  Friendly  Societies  act,  1896.    It 

'  Ely  V.  Oakland  Cirr-uit  Judge,  suranre  eompanies — one  a  joint  stock 
162  Mich.  466,  127  N.  W.  769,  s.  e.  company  on  the  mutual  plan  and  one 
125  N.  W.  375;  Comp.  L.  see.  7256,  of  character  slated  in  the  above  text. 
Pub.  acts  1909,  No.  197.  Void  and  illegal  insurances,  see  § 

*  Mutual   Guaranty    Fire   Ins.    Co.   250(i  herein. 
In  re  (Alvord  v.  Barker)   107  Iowa,       *  Corey  v.  Sherman.  96  Iowa  114, 
143,  9  Am.  &  Eng.  Corp.  Cas.  N.  S.    32  L.K.A.  490,  60  N.  W.  232,  64  N. 
774,  77  N.  W.  868,  28  Ins.  L.  J.  205;    W.  828. 

Code  1873,  sec.  1160.     At  the  time       As  to  cash  premium  plan,  see  §  343 
this  company  was  organized  the  law   herein, 
authorized  two  kinds  of  mutual  in-        «  59  &  60  Vict.  c.  25. 

893 


§  350r 


JOYCE  ON  INSURANCE 


was  held  ^'  that  the  motion  for  an  injunction  was  misconceived  and 
should  be  refused.  But,  whether,  notwithstanding  the  certificate 
of  incorporation,  the  vahdity  of  the  special  resolution  and  of  the 
registration  could  have  been  successfully  impeached  by  a  member 
of  the  old  friendly  society  in  a  properly  constituted  action,  quaere,"' 
§  350r.  Same  subject:  consolidation  or  merger. — The  charter  of  a 
corporation  or  the  statute  under  which  it  is  created  is  the  source  of 
])ower  of  one  corporation  to  consolidate  or  merge  with  another,  and 
such  authority  must  be  expressly  so  granted,  for  otherwise  corpo- 
rations have  no  general  power  to  so  consolidate  or  merge.  And 
a  fraternal  beneficiary  association  which  is  organized  for  general 
welfare,  and  has  neither  capital  stock,  stockholders,  nor  property 
to  be  used  in  business  for  individual  profit,  and  no  franchises 
or  property  which  are  susceptible  of  lease  or  sale,  and  in  which 
association  those  interested  are  denominated  ''members"  not  "stock- 
holders," and  which  has  no  express  authority  under  its  chaiier 
and  no  power  under  the  statutes  to  enter  into  a  ''merger  or 
union"  contract  with  another  company,  cannot  lawfully  make 
such  contract  and  if  such  contract  is  made  it  is  ultra  vires  and 
void  and  cannot  be  enforced.®  So,  a  fraternal  beneficiary  asso- 
ciation incorporated  in  Massachusetts  cannot  consolidate  or  amal- 
gamate with  a  foreign  corporation  nor  can  it  transfer  its  membership 
to  a  subordinate  council  of  such  foreign  corporations,  such  at- 
tempt is  inefficacious  and  void  where  it  does  not  appear  that  it 
was  ''submitted  to  and  approved  by  a  two-thirds  vote  of  the  certifi- 
cate holders  of  each  corporation,  nor  that  other  statutory  require- 
ments were  complied  with."  ^  Again,  if  the  statute  law  of  one  state 
undertakes  to  regulate  the  consolidation  of  fraternal  beneficiary  as- 
sociations or  societies  such  fact  may  be  taken  as  a  recognition  of  the 
power  of  societies  organized  under  its  laws  to  make  such  an  agree- 
ment but  it  cannot  be  held  to  confer  such  power  upon  a  society 
organized  under  the  laws  of  a  foreign  state,  and  the  domestic  asso- 


6a  By  Eve,  J.  and  the  Court  of  Ap-  acts  1901,  p.  163,  c.  113;  acts  1905, 

peals.  p.  1021,  c.  480. 

'  (Per   Cozeus-Hardy,   M.   R.   and  As  to  merger,  or  transfer  of  sub- 

Bucivley,   L.    J.)    McGlade   v.    Royal  stautialiy  the   entire  membership   or 

London  Mutual  Ins.  Soe.  Ltd.  [1910]  funds   of   domestic   fraternal   benefit 

2   Chancerv,   Law   Rep.   169.      Com-  societies,   see  N.  Y.   Ins.   Law   1909, 

panies  (Consolidation)  act  1908  (8th  c.  33,  Consol.  L.  c.  28,  see.  236;  Laws 

Edw.  VII.  e.  69)  see.  17,  subsec.  1.  1911,  e.  198;  Parker's  N.  Y.  Ins.  L. 

8  Knapp  V.  Supreme  Commandery,  (ed.  191.5)   p.  352. 

United  Order  of  the  Golden  Cross  of  ^  Conseil  Rochambeau  No.  128,  de 

the  World,  121  Tenn.  212,  118  S.  W.  L'Union  Saint  Jeau  Baptiste  d'Amer- 

390 ;  acts  1875,  p.  232,  e.  142 ;  Shan-  ique  v.  Lafleur,  215  Mass.  347,  102 

non's  Code  sec.  2524 ;  acts  1887,  p.  N.  E.  412 ;  R.  L.  e.  119,  sec,  11,  am'd 

329,  c.  198;  acts  1897,  p.  144,  c.  19;  St.  1908,  c.  463;  St,  1911,  e.  628, 

894 


PARTIES— MUTUAL  COMPANIES  §  350r 

ciation  is  precluded  from  purchasing  the  business  and  assuming 
the  risks  of  the  foreign  company  and  not  having  the  legal  capacity, 
its  attempt  to  assume  said  obligation  is  void  in  both  states.^"  But 
any  insurance  corporation  organized  under  a  Pennsylvania  statute 
is  within  the  terms  of  the  enactment  of  that  state  providing  for  con- 
solidation and  merger  of  corporations." 

A  consolidation  contract  whereby  the  membership  of  a  mutual 
association  is  transferred  to  another  which  agrees  to  cai'ry  out  the 
former's  insurance  contracts,  does  not  constitute  an  agreement  to 
insure  and  so  does  not  release  the  latter  association  from  liability 
on  a  certificate  of  a  member  of  the  transferring  association  although 
he  was  at  the  date  of  such  transfer  agTeement  over  the  age  of  risk 
prohibited  by  statute.^*^  And  a  fraternal  beneficiary  corporation 
whose  attempted  consolidation  with  another  company  fails  because 
ultra  vires  cannot  avoid  liability  upon  the  certificates  of  the  mem- 
bers of  the  latter,  if  upon  its  invitation  they  accept  membership  in 
it,  pay  their  dues,  and  meet  their  other  obligations,  although  they 
do  not  follow  the  procedure  prescribed  by  its  rules  for  the  reception 
of  members."  If  a  transfer  of  risks  or  membership  is  made  by  one 
mutual  benefit  association  to  another  in  conformity  with  statutory 
requirements  providing  the  manner  in  which  such  transfers  may 
be  made,  the  legal  result  is  that  all  members  of  the  transferring 
association  become  ipso  facto  members  of  the  latter  association 
where  such  members  have  not  asked  in  writing,  as  provided  by 
statute,  to  be  transferred  to  some  other  a.ssociation.  But  nothinc: 
can  alter  the  express  terms  of  the  original  contracts  of  the  members 
of  such  transferring  association,  if  not  surrendered  and  exchanged 
for  certificates  in  the  transferee  association.^* 

^^  Starr  v.  Bankers'  Union  of  the  manderj',  United  Order  Golden  Cress 

World,  81  Neh.  377,  129  Am.  St.  Rep.  of    the' World,    208    Mass.    411,    36 

684,  116  N.  W.  01,  37  Ins.  L.  .1.  740.  T;.R.A.(N.S.)  597   (annotated  on  lia- 

As  to  rights  of  stockholders  upon  bility  of  insurance  company  on  con- 

con.solidation  or  merger  of  mutual  as-  tracts  of  another  company  which   it 

soeiations  or  companies  of  different  has  absorbed  or  attempted  to  absorb), 

states,  see  Southern  Mutual  Aid  As-  94  N.  E.  635. 

soc.  V.  Blount,  112  Va.  214,  70  S.  E.        i*  Robinson  v.  Mutual  Reserve  Life 

487,  40  Ins.  L.  J.  1091.  Ins.  Co.    (Scovill  v.  Mutual  Reserve 

"  Guardian  Fire  Ins.  Co.  In  re,  32  Life  Ins.  Co.  (U.  S.  C.  C.)  182  Fed. 

Pa.   Co.   Ct.  R^p.  494;  act  May  29,  850,  40  Ins.  L.  J.  190  (transfers  were 

1901.  made  under  Illinois  statute  regulat- 

*2  Cathcart    v.     Equitable    Mutual  ing   life   and    accident   insurance   on 

Life   Assoc,   of   Waterloo,   111   Iowa  assessment   plan.     Ilurd's  Rev.   Star. 

471,  82  N.  W.  9()4;  McClain's  Code,  111.  1909,  p.  1320,  Art.  245),  s.  c.  189 

sec.   1767,    prohibiting  such   associa-  Fed.  347,  111  C.  C.  A.  79,  40  Ins.  L. 

tion  from  insuring  a  person  over  six-  J.  2091,  s.  c.  (U    S.  C.  C.)  175  Fed. 

ty-tive  years  of  age.  624,  39  Ins.  L.  J.  442,  s.  e.  (U.  S.  C. 

"  Timberlake    v.     Supreme    Com-  C.)  175  Fed.  629.     As  to  incorpora- 

895 


; 


§§  330s,  350t 


JOYCE  ON  INSURANCE 


§  350s.  Same  subject:  reincorporation  or  reorganization  of  mutual 
company  on  stock  plan. — If  a  statute  provides  for  reincorporation 
or  reorganization  of  miitufil  fire  companias  on  the  stock  plan  and 
such  a  company  succeeds,  as  lo  form,  in  an  attempt  to  so  reorganize 
and  carries  on  the  business  ostensibly  as  such  new  creation  using  the 
old  company's  assets  and  good  will,  still,  if  such  attempt  is  ineffec- 
tual Ijecause  of  the  enabling  act  being  void,  such  continued  business 
will  be  regarded  as  really  that  of  the  old  coi-poration ;  that  is,  as  be- 
longing to  it.^^ 

§  350t.  Same  subject:  reorganization  or  reincorporation:  impair- 
ment of  obligation  of  contract. — In  a  Federal  Supreme  Court  case  it 
appeared  that  a  beneficial  association  was  originally  incorporated 
under  the  New  York  laws  of  1875/^  for  tlie  purpose  of  providing 
l)enetits  for  families  and  others  dependent  and  to  provide  a  fund 
for  the  common  and  exclusive  benefit  of  all  members.  It  reincor- 
porated under  the  laws  of  1883,"  which  provided  for  the  incorpor- 
ation and  regulation  of  co-operative  and  assessment  life  and  casual- 
ty insurance  corporations,  and  its  charter  declared  that  the  business 
was  to  be  conducted  as  upon  that  plan :  said  law  was  subject  to  alter- 
ation and  repeal.  Thereafter  said  association  accepted  the  provi- 
sions of  the  Insurance  Law  of  1892, ^^  which  repealed  previous  laws 
upon  the  subject,  and  was  expressed  to  be  applicable  to  all  corpo- 
rations authorized  by  law  to  make  insurances.  An  amendatory 
law  Avas  passed  in  1901,^^  providing  for  reorganizations  of  exist- 
ing corporations  and  amendment  of  certificates.^"  Said  associ- 
ation accepted  the  provisions  of  that  law,  amended  its  charter, 
changed  its  name  to  that  of  a  regular  company  and  also  the 
character  of  its  business  to  that  of  life  and  health  insurance  of 
every  kind.  One  of  the  questions  before  the  court  was  whether 
the  incorporation  of  the  company  and  the  transfer  to  it  of  the  as- 
sets, property  and  membership  of  the  association  impaired  any  con- 


tioii  and  reincorporation  of  same 
company.     See  §  350t  herein. 

15  lluber  V.  Martin,  127  Wis.  412, 
3  L.R.A.(N.S.)  653n,  115  Am.  St. 
Rep.  1023,  7  Am.  &  Eng.  Ann.  Cas. 
400,  105  N.  W.  1031,  35  Ins.  L.  J. 
334. 

As  to  reincorporation  as  a  stock 
corporation  under  existing  corporate 
name,  by  life  or  casualty  insurance 
corporations  upon  co-operative  or  as- 
sessment plan,  .see  N.  Y.  Ins.  Law 
1909,  c.  33,  Consol.  L.  c.  28,  sec.  217; 
Parker's  N.  Y.  Ins.  L.  (ed.  1915)  p. 
339. 


Existing  fraternal  benefit  societies, 
not  required  to  reincorporate,  see  N. 
Y.  Ins.  Laws  1909,  c.  33.  Consol.  L. 
c.  28,  see.  235;  L.  1911,  c.  198;  Park- 
er's N.  Y.  Ins.  L.  (ed.  1915)  p.  351. 

16  C.  267. 

"  C.  175. 

"  N.  Y.  Ins.  Laws,  1892 ;  Laws 
1892,  p.  1930. 

19  C.   722,   am'd   sec.   52,  L.    1892. 

20  See  also  N.  Y.  Ins.  Laws  1909, 
c.  33,  Consol.  L.  c.  28,  sec.  52;  Par- 
ker's N.  Y.  Ins.  L.  (ed.  1915)  p.  68. 


896 


PARTIES— MUTUAL  COMPANIES  §  351 

tract  obligation  between  the  association  and  its  policyholders,  pos- 
sibly implying  by  such  question  that  a  new  corporation  was  created 
by  said  reincorporation.  It  was  decided  that  the  corporation  was 
not  changed  to  a  stock,  hut  continued  as  a  nuitual  company,  that  the 
old  corporation  w;is  still  in  existence,  under  a  new  name,  and  with 
added  powers,  but  with  unchanged  memhei-ship,  and  was  hound 
to  perform  all  its  existing  obligations,  and  that  none  of  the  contract 
obligations  of  the  associations  to  its  meml)ers  were  impaired  by  the 
reorganization.  It  was  also  decided  that  the  law  which  authorized 
Ihe  reincorporation  did  not  impair  the  obligation  of  contracts  l>e- 
tween  the  association  and  its  policy  holders  or  de[)rive  them  of  their 
praperty  without  due  process  of  law  and  was  not  unconstitutional 
in  these  respects.^ 

§  351.  Same  subject:  guaranty  or  reserve  fund. — It  is  held  in 
Wisconsin  that  in  tlie  absence  of  a  charter  provision  tlierefor,  or  of 
a  general  power  to  raise  a  fund  for  losses  and  ex[)enses.  the  act  of  a 
mutual  company  in  contracting  with  its  members  for  establishing 
a  g-uaranty  fimd  for  its  existing  and  future  indebtedness  is  ultra 
vires  and  void.^  In  a  New  Jersey  case  a  nuitual  insurance  company 
without  authority  by  charter,  established  a  guaranty  fund  of  bonds 
secured  by  mortgages.  It  was  held  that  as  the  comjjany  had  no 
power  to  make  the  contract  with  the  guarantors,  it  was  absolutely 
void,  and  that  the  fund  could  not  be  reached  in  law  or  equity  by  a 
creditor  of  the  company  after  its  insolvency.^  But  it  is  held  in  oth- 
er states  that  an  insurance  company  has  inherent  j)Ower  in  the  ab- 
sence of  positive  restrictions  to  establish  a  guaranty  fund.*  and  to 
receive  a  promissory  note  from  one  of  its  trustees  as  a  part  of  such 
fund.  Such  note  is  a  valid  security  in  the  liands  of  a  receiver,  for 
the  heneht  of  the  company's  creditors,  'i'lie  act  of  the  comi)any  in 
undertaking  business  in  another  state,  under  an  act  of  the  legisla- 
ture thereof  requiring  other  and  special  security,  does  not  exoner- 

^  Polk    V.    Mutual     Reserve    Fund  '  Trenton  IVhitnal  Life  &  Fire  Ins. 

Life  Assoc.  207  U.  S.  310,  55  L.  ed.  Co.   v.    .McKclvvay,   12   N.   J.    Eq     (1 

222,     28     Sup.     Ct.     65     {following  Beas.)   13.!. 

Wright    V.    Minnesota    Mutual    Life  Wlien  iruo.stmoiit  of  part  of  bene- 

Ins.  Co.  193  U.  S.  657,  21  Su]).  Ct.  liciary   association's   emergency    fund 

549,  48  L.  ed.  832,  considered  under  may  be  legally  attached  by  creditor, 

§  350m  liereiii).     Tlie  power  to  alter,  see    Attorney    Cencral    v.    Massachu- 

amend    or    repeal    charters    was    re-  setts  Ben.  Liie  A.ssoc.  173  .Mass.  110, 

served    in    the    N.    Y.    Constitution,  53  N.  E.  879.;  Mass.  Pub.  acts  141, 

altliouoh  it  was  lield  that  the  legisla-  sec.  3. 

tive   power   to   alter,  amend   and   re-  *  Hope    Ahiluai    VaW-    Ins.    Co.    v. 

peal    charters    was    equally    effective  Perkins,  2  Abb.   Dec.  383,  38  N.  Y. 

whether  so  reserved  or  not.  404;   Hope   iMulual   Life  Ins.   Co.  ". 

Mvennan   v.   Kindle,  81    Wis.   212,  Weed,  28  Conn.  5L 
51  N.  W.  426. 

Joyce  Ins.  V'ol.  L— 57.  897 


§  3.31a 


JOYCE  OX  INSURANCE 


nte  the  signer  of  <\K-h  a  .cniiraiity  fioin  liability  thereon,  at  kast  in 
respect  to  policies  not  is-ucd  in  t^ucli  slale.  The  indneeuient  held 
out  to  the  public  to  insure  by  reason  of  the  security  afforded  by  the 
guaranty  is  a  sufUcient  consideration,  or  furnishes  the  ground  for 
an  esto]»i)el.^ 

§  351a.  Same  subject:  guaranty  or  reserve,  "mortuary  reserve," 
"death  benefit,"  "reserve  and  emergency,"  funds:  trust  funds. — If 
a  nnitual  lire  insurance  comiuuiy  is  expres-iy  so  autborizcd  l.y  its 
chai-ter  it  may  create  a  guaranty  fund  by  the  issuance  of  certificates 
for  money  loaned,  and  where  it  reserves  the  rights  to  i)ay  off  said 
loans  it  may  when  so  authorized  by  a  resolution  of  the  board  of 
directors  give  notes  to  certificate  holders,  and  the  execution  thereof 
by  the  comjiany  is  not  ultra  vires,  when  it  does  not  violate  the  stat- 
ute regulating  such  companies.^     A  fraternal  benefit  society,  the 
amended  charter  of  which  authorizes  the  creation  and  maintenance 
of  reserve  or  surplus  funds  in  support  of  its  certificates  has  power 
to  provide  for  a  '•Mortuary  Reserve  Fund"  and  also  a  further  re- 
serve or  suri)his  fund  as  a  "Death  Benefit  Fund,'"'  the  former  to 
meet  extraordinary  demands  and  the  latter,  ordinary  demands.' 
A  statute  construed  with  those  to  which  it  is  related  may  authorize 
the  creation  of  a  reserve  or  guaranty  fund  from  initial  cash  pay- 
ments, from  surplus  money  accruing  from  lawful  assessments  to 
luaintain  a  reserve  and  pay  expenses  and  losses,  and  interest  on  tho 
invested  reserve  and  such  other  lawful  sources  as  may,  with  those 
above  specified,  aid  in  accunudating  funds  which  it  may  not  be 
necessary  to  resort  to  to  recruit  the  reserve  or  pay  losses  and  expen- 
ses.^    A  mutual  life  insurance  company  on  the  assessment  plan, 
under  the  Indiana  statute,  is  not  limited  in  fixing  premiums,  to 
merely  a  sufficient  sum  to  create  a  death  benefit  fund  but  it  may 
create  an  unlimited  reserve,  and  contract  for  extended  insurance.^ 
In  construing  the  term  "reserve  and  emergency  fund,"  in  the 
Missouri  statute,  the  words  "reserve"'  and  •'emergency"  tii-e  there 
both  used  as  adjectives  qualifying  the  same  noun.  and.  as  such,  ai-e 
convertible  terms,  and  by  the  use  of  the  term  "reserve"  fund,  what 

5  Hope    :\Iuliuil    Life    Ins.    Co.    v.  Stat.  1900,  art.  5,  c.  :)5;   Gen.  Stat. 

tVrkin.s,  '2  Abb.  App.  Dec.  383,  38  N.  1900,   sees.  4216,  4227,  limiting  lia- 

Y.  404;  Russell  v.  Bristol,  49  Conn,  bility    to    a.ssessnients    on    premium 

251.  notes    (1)    lo   maintaining   a   reserve 

^  Ainley  v.  American  Mutual  Fire  fund  equal  to  a  certain  per  cent  of 

Ins.    Co.   113   Iowa    TOO,   84   N.    W.  notes    in    force;    (2)    to    pay   losses 

504:  Code  1873,  tit.  0,  c.  4.  which    may    accrue    and    defray    ex- 

'  Kane  v.  Knights  of  Columbus,  84  penses. 
(\inn.  9(1,  79  Atl.  (i3.  ^  Federal  Life  Ins.   Co.  v.  Arnold, 

8  Smith    V.    Republic    Countv    Mu-  4li  Ind.  App.  114.  90_N.  E.  493,  01 

tual  Fire  Ins.  Co.  82  Kan.  697.  109  N.  E.  357;  Laws  189/,  c.  195,  sees. 

Pac.   390,   39   Ins.   L.  J.   1323;   Gen.  4.   0. 

898 


PARTIES— MUTUAL  COMPANIES  §  Sola 

is  called  llie  roj^crve  in  its  strict,  tccliiiical  sense  of  life  insurance  was 
not  intended  by  the  legislature.  The  above  interpretation  ap}»lies 
to  fraternal  beneficiar}'  associations,  and  the  purpose  of  the  statute 
was  to  enable  tlieni  to  proV-ide  in  advance  and  hold  in  reserve  a 
fund  for  an  emergency  such  as  some  unusual  occurrence  which 
might  render  them  unable  to  meet  death  losses.^" 

Surplus  or  reserved  funds  established  by  a  fraternal  benefit  so- 
ciely  in  conformity  with  its  charter  and  ])y-laws  are  trust  funds  of 
which  the  society  is  trustee. ^^  An  emergency  fund  of  a  fraternal 
benehciary  association  is  a  trust  fund  and  when  the  beneficiary  has 
established  any  right  to  the  death  benefit  certificate  the  corporatif)n 
comes  under  a  fiduciary  relation  to  the  benefician^  as  one  of  the 
persons  entitled  to  share  in  the  emergency  fund.  But  that  does  not 
att'ect  the  relation  between  the  corporation  and  the  beneficiary 
named  in  the  certificate,  so  far  as  tlie  question  is  concerned  whether 
anything  is  due  under  the  certificate  as  a  contract  so  far  as  that 
question  is  concerned,  the  only  relation  between  the  two  is  that 
growing  out  of  contract  witli  the  member  for  the  payment  of  money 
which,  if  due,  is  due  to  the  beneficiary.^^  A  mortuary  reserve  fund 
of  a  fraternal  benefit  society,  created  for  extraordinary  purposes, 
must  be  preserved  to  answer  such  purjioses  until  it  definitely  ap- 
])ears  that  those  have  failed  or  that  tlie  fund  will  never  be  required 
therefor  when  it  may  be  distributed.^^  So,  where  a  mutual  insur- 
ance asociation  transfers  its  membership  to  another  association  un- 
der a  contract  entitling  the  transferred  members  to  full  rights  as 
members  of  such  transferee  and  the  transferring  company's  certifi- 
cates required  a  levy  of  a  per  cajiita  assft'^sment  at  a  member's  deatli 
and  the  api)lication  thereto  of  the  proceeds,  not  exceeding  a  certain 
specified  sum,  a  beneficiary  cannot  compel  said  transferee  to  ajiply 
property  transferred  to  it  in  trust  to  fulfill  the  terms  of  the  transfer 
contract  where  it  does  not  appear  that  such  application  was  neces- 

^•^  State  (ex  rcl.  Supreme  Lodge  ^^  Attorney  General  v.  Supreme 
Kiiiiihts  of  Pvlhias)  v.  Vandiver,  Council  American  Legion  of  lionoi-, 
L'1;]\Mo.  187,  15  Am.  &  Eng.  Ann.  '200  ]\lass.  158,  166,  92  N.  E.  130. 
("as.  283,  111  S.  W.  911;  Act  ISHT,  KnuMgoncy  fund  here  was  to  meet  an 
see.  1408;  Kev.  Stat.  ]8!)!l.  emergency  wliicli  )niglit  arise  if  as- 
Reserve  or  emergency  liiiid:  life  sessmenls  did  not  realize  enough  to 
cori)orations,  associations  or  socle-  jiay  death  benelits.  See  also  At- 
tics on  co-operative  or  assessment  loriiey  General  v.  American  Legion 
].lan,  see  N.  Y.  ins.  Laws  1009,  c.  of  Honor,  206  Mass.  131,  92  N.  E. 
:V.],  Consol.   L.  c.   28,  .sec   20.');   Par-  I'M. 

ker's    N.    Y,    Ins.   L.    (ed.    1915)    p.        ^^  Kane   v.    Ki:i<:lils  of   Columbus, 

3L3.  84  Conn.  96,  79  AtL  03. 

^^  Kane  v.   Kniiihts   of   Columbus, 
84  Conn.  90,  79  Atl.  63. 

899 


§  352 


JOYCE  ON  INSURANCE 


sary  to  pay  the  claim  of  the  l>eneficiary.i*  But  a  transferee  mutual 
insurance  association  which  has  drawn  from  its  mortuary  fund,  ac- 
quired before  consolidation,  to  pay  death  benefits  of  members  of 
the  transferring  association,  may  reimburse  said  fund  from  assess- 
ments levied  upon  said  members,  as  against  their  beneficiaries.^* 

If  no  authority  is  given  a  mutual  fire  insurance  company  to  levy 
a  direct  guaranty  fund  assessment  it  cannot  he  done;  and  an  assess- 
ment of  premium  notes,  not  necessary  to  maintain  the  reserve  fund 
at  the  per  cent  si)ecified  under  the  statute  and  not  necessary  to  f)ay 
losses  or  expenses,  l)ut  levied  merely  for  purposes  to  be  develoi)ed 
in  the  future  is  illegal. ^^  But  an  emergency  fund  cannot  be  created 
by  an  assessment  insurance  association,  by  deducting  a  certain  per 
cent  from  the  amount  agreed  to  be  paid  under  the  certificate,  even 
though  the  statute  authorizes  the  creation  of  an  emergency  fund, 
and  such  deduction  was  authorized  by  a  subsequently  enacted  by- 
law, and  the  promise,  under  the  certificate,  to  pay  was  based  upon 
a  consideration  of  compliance  with  existing  and  future  by-laws." 
A  mortuary  reserve  fund  of  a  fraternal  benefit  order,  created  to 
meet  extraordinary  demands,  cannot  be  transferred  under  a  new 
plan.  to.  or  merged  in,  the  connnon  fund  as  such  act  constitutes  an 
unwarranted  change  in  the  object  of  the  trust  and  an  illegal  diver- 
sion of  the  fund,  although  this  does  not  apply  to  a  surplus  death- 
benefit  fund,  created  for  ordinary  i)uri)oses.^* 

Although  a  contract  of  consolidation  between  a  foreign  fraternal 
beneficiary  society  and  a  domestic  association  is  ultra  vires  and  void 
the  latter  cannot  defend  an  action  for  conversion  of  the  former's 
funds  on  the  ground  that  its  acts  in  obtaining  such  funds  were  not 
within  its  corporate  power. ^' 

§  352.  Benevolent  and  fraternal  organizations  subject  to  laws  of 
state  and  jurisdiction  of  courts:  conditions  precedent  to  resort  to 
courts. — It  may  l)e  stated  generally  thai  all  benevolent  and  frater- 
nal organizations  or  a.-sociatious  are  .subject  to  the  laws  of  the  state, 
and  in  all  proper  cases,  where  pro})erty  rights  are  involved,  the 


1*  Cathf-art     v.     Equitable     :\rntnal  Mass.  Ill,  63  N.  E.  1,  31   Ins.  L.  J. 

Life  Assoc.  Ill  Iowa  471,  82  N.  W.  38!). 

964.  ^8  Kane    v.   Kni<;hts   of   Columbus, 

i^Cathcart     v.     Eciuitablo     Mutual  84  Conn.  96,  79  Atl.  63. 

Life  Assoc.  Ill  Iowa  471,  82  N.  W.  As  to  wrongful  transfer  or  diver- 

964.  sion   of  .safety    funds   of  assessment 

^6  Smith   V.   Republic    County    Mu-  company,  and  lial)ility  of  directions, 

tual  Fire  Ins.  Co.  82  Kan.  097,  109  see  Ridley  v.  Paillard,  20  Muse.  513, 

Pac.  390,  39  Ins.  L.   J.  1323;   Gen.  57  N.  Y.  Supp.  693. 

Stat.  1909,  art.  5,  e.  55;  Gen.   Stat.  ^^  Starr  v.    P,ankers  Union   of  the 

1909,  sees.  4216,  4227.  World,    81    Neb.    377,    129    Am.    St. 

"Newhall     v.     Supreme     Councd  Rep.  684,  116  N.  W.  61,  37  Ins.  L. 

American     Legion     of     Honor,     181  J.  740,  citing  National  Bank  v.  Gra- 

90U 


PARTIES— MUTUAL  COMPANIES 


§  352 


court's  may  entertain  jurisdiction  and  afford  relief'.'^"  And  a  stat- 
utory exemption  does  not  operate  to  exeini»t  an  assessment  com- 
pany from  all  laws,  decisions  and  rules  thereunder  but  relates  only 
to  the  business  of  said  company.^  So,  the  court  can  control  the  pay- 
ment of  funds,  for  beneficiaries,  in  accordance  with  the  rules  of 
law.2 

The  courts  will,  however,  take  into  consideration  the  objects  and 
purposes  of  the  organization  in  granting  relief.  They  will  further 
cor-ider  the  modes  provided  Ijy  the  charter,  constitution,  and  by- 
laws for  determining  the  rights  of  members.  Courts,  however,  or- 
dinarily leave  all  questions  involving  policy  or  discipline  to  be  .set- 
tled in  the  manner  pointed  out  by  the  regulations  of  the  order. 
These  organizations  are  formed  by  a  purely  voluntary  association 
of  individuals  for  the  accomplishment  of  agreed-upon  purposes. 
The  selection  of  the  ))urposes  intended  and  the  determination  of 
the  means  of  accomplishment  of  those  purposes  are  peculiarly  mat- 
ters within  the  decision  of  the  a.ssociation  alone.  And  it  is  an  es- 
tablished rule  that  the  courts  are  reluctant  to  interfere  with  a  mat- 
ter of  internal  management  of  a  bepetit  as.<ociation,  unle.ss  the  order, 
itself  refuses  or  neglects  to  perform  its  duty.'     Thus,  the  grand 


ham,  100  U.  S.  699,  25  L.  ed.  750;        ^Kaue  v.  Kniirlits  of  Columbus,  84 
Mendel  v.  Boyd,  3  Neb.  (unoff.)  473;    Conn.  96,  79   Atl.  63,  40   Ins.  L.   J. 


Cook  on  Corp.   (5th  ed.)   see.  15b. 

20  Reno  Lodjre  No.  99,  I.  0.  0.  F. 
V.  Gnind  Lodjre  I.  O.  0.  F.  54  Kan. 
73,  80,  26  L.R.A.  98,  37  Pae.  1003, 
per  Allen,  J.  Ciling  Bauer  v.  Samson 
Lodc:e  No.  32,  Knis'lits  of  Pythias, 
1(12  Ind.  262,  1  N.  E.  571;  Goodman 
V.  .ledidjah  Lodg'c,  No.  7,  67  ^Id. 
117,  9  Atl.  13,  13  Atl.  627;  Genest 
V.    L'Union    St.    Joseph,    141    Mass. 


8<4,  citing  Wrii^ht  v.  IMinnesota  Mu- 
tual Life'lns.  C'o.  193  U.  S.  657,  48 
L.  ed.  832,  24  Sup.  Ct.  549. 
See  also  the  following  cases: 
Kenlucliji. — Wallace       v.       Grand 
Lodtje  of'  United  Brothers  of  Friend- 
ship, 32  Ky.  L.  Rep.  1049,  107  S.  W. 
724  (case  of  expulsion  of  members). 
Missouri. — Stone   v.    Grand    Lod^re 
Ancient  Order  United  Workmen,  78 


417,   6   N.   E.   380:    Dolan   v.    Court    Mo.  App.  546,  2  Mo.  App.  296  (bene- 
Good  Samaritan.  No.  5910,  1.  O.  0.  '    ' 

F.  128  .Mas.^.  437;  Toricy  v.  Baker, 
1  Allen  (83  Mass.)  120;  Au.stin  v. 
Searing,  16  N.  Y.  112,  69  Am.  Dec. 
()65  and  note.  See  also  Patron's  Mu- 
tual Fire  Ins.   Co.  v.  Attornev  (Jen- 


tit  .societies  may  adopt  and  enforce 
leasoiiabie  I'ulcs,  etc.,  and  except  for 
most  ui'gent  reasons  courts  will  not 
interfere). 

Sortli  ('(troUiia. — See  Kellv  v.  Tri- 
mont     Lodge,     154     N.     C.  "  97,     52 


eral,  166  Midi.  438,  VM  N.  W.  111!).    L.R.A. (N.S.)   823,  67  S.  E.  764,  40 


As  to  .iurisdiction,  see  §§  3502, 
3520   herein. 

^  I\Iurrav  v.  Superior  Court  of 
Los  Angeles  County,  129  Cal.  628.  (i2 
Pac.  191.  As  to  statutory  exemp- 
tions, see  §§  340,  344i  lierein. 

2RovaI  Leao-ue  v.  Shields,  251  ill. 
250,  36  L.R.A.(N.S.)  208,  96  N.  E. 
45,  40  In.s.  L.  J.  21GG. 


ins.    L.    J.   768,   considered   under    § 
352c  herein. 

TeKis. — Lone  Star  Lodge  No. 
1,935,  Knis'ht.s  of  Ladies  of  Honor  v. 
Cole,  —  Tex.  Civ.  App.  — ,  131  S. 
W.  1180  (courts  cannot  decide,  di- 
rect or  control  as  to  questions  of 
internal  policy  or  of  discipline  of 
members)  ;  Thomp.son  v.  Grand  Inter- 


901 


§  352 


JOYCE  OX  IXSUKANX'E 


lodge  of  the  state  of  Kaiii^a.-  of  a  certain  order  liad  for  one  of  its- 
fmuUnDcnlal  (ihject-  llio  caro  of  orphans  of  deceased  members.  In 
order  to  make  use  of  certain  property  conveyed  to  it  in  trust,  it 
levied  an  assessment  of  so  much  per  (•a[)ita  on  all  the  suljorcUnate 
lodges  in  Kansas,  to  pay  oti'  an  indelftedness  and  make  certain  im- 
l>r(ivements  for  the  benefit  of  a  home  for  ihe  maintenance  and  (mIu- 
cation  of  orphans  of  deceased^  meinbers  of  the  order.  The  right  in 
do  this  wa.s  not  in  violation  of  any  law  of  the  state.  An  appeal  ex- 
isted from  the  grand  lodge  to  tlie  sovereign  grand  lodge,  either  with 
or  without  the  consent  of  tlie  grand  lodge,  and  such  sovereign  grand 
lodge  was  conceded  to  have  full  legislative  and  judicial  power  in 
determining  matters  relating  to  the  order.  No  appeal  was  taken 
to  the  latter  lodge,  and  an  injunction  was  sought  to  prevent  the 
levy  of  the  assessment,  which  was  refused,  it  being  held  that  the 
question  of  methods  and  amount  to  be  raised  was  a  matter  of  ]»ol- 
icy  for  the  association  to  determine,  and  that  courts  will  not  under- 
take to  direct  or  control  the  internal  policy  of  such  societies.* 

So  it  is  held  in  Connecticut  that  remedies  within  the  order  nuist 
first  be  exhausted  where  property  rights  are  not  involved,  and  that 
this  rule  is  universally  acce[)ted.^  The  circumstances  or  the  nature  of 


national   Brotherhood  of  Locomotive  23  L.R.A.  227,  27  Atl.  591,  ciling  and 

Enaineers,  41  Tex.  Civ.  App.  170,  91  considering   Hawes   v.    Oakland,   104 

S.  \V.  834  (courts  will  not  ordinarily  U.  8.  450,  26  L.  ed.  827;  Hall  v.  Su- 

interfere,  yet  under  facts  case  siiuuld  preme  Lodge  Knights  oi'  Honor,  24 


have  been  submitted  to  jury:  expul- 
sion of  member). 

Washiiirjton. — Ivelly  v..  Gra;id  Cir- 
cle Women  of  Woodcraft,  40  Wash. 
691,  82  I^ac.  1007  (expulsion  of  mem- 
ber: courts  will  not  inti'rfere  whore 
jurisdiction  regularly  and  lawfully 
exercised  except  laws  of  association 
invalid  or  procedure  irregular  and 
injustice  thereby  results). 

'4  Keno  Lodge  No.  99,  I.  0.  O.  F. 
V.  Grand  Lodge,  I.  O.  O.  F.  54  Kan. 
73,  2fi  L.R.A.  98,  37  Pac.  1003,  per 
Allen,  J.,  citing  Harrington  v.  Work- 
ingmen's    Benevolent    Assoc.    70    Oa. 
340;    Osceola    Tritie 
pendent     Order     of 
98; 
175, 


Fed.  450.;  Schmidt  v.  Abi-aiiam 
Lincoln  Lodge,  84  Ky.  490,  8  Ky. 
Law  R.  655,  2  S.  W.  156;  Oliver  v. 
Hopkins,  144  :\La.'^s.  175,  10  N.  E. 
776;  Chamberlain  v.  Lincoln,  129 
INIass.  70;  McAlees  v.  Supreme  Sit- 
ting Order  of  The  Iron  Hall  (Pa. 
1888)  13  Atl.  755,  12  Cent.  Rep.  415, 
10  Sad.  188.  See  Grand  Grove  of  the 
Unitetl  Ancient  Order  of  Druids  v. 
Duchein,  105  Cat.  219,  226,  38  Pac. 

acts  un- 
of     the 

are    not 


947,  per  Harrison,  J.,  that 
der    jurisdiction     by     rules 
order    properly    conferred 
sul)ject  to  review. 

The  following  decisions   also  sup- 
port the  text : 

Delauare. — King        v.        Wyneraa 
Council   No.  10,  Daughters  of  Poco- 
hontas  Imi)roved  Order  of  Red  Men, 
25  Del.  (2  Boyee's)  255,  78  Atl.  845. 
loira. — Byram  v.  Sovereign  Camp 
oieties,  sees.  79,  130 ;  Bacon's  Benefit    of  Woodmen  of  the  World,  108  Iowa, 
Societies,  sec.  94.  430,    79    N.    W.   144    (expulsion    of 

*Mead  v.   Stirling,  62   Conu.  580,   member). 

902 


Schmidt,  57  Md. 
kins,  144  Mass. 
Chamberlain    v.    Lincoln, 
70;    Lafoud    v.    Dcemes, 


No.  11,  Inde- 
Red  ^len  v. 
Oliver  v.  Hop- 
10  N.   E.  776; 


129    Mass. 
81    N.    Y. 


507;    Niblack's    Mutual^    Benefit    So- 


PARTIES— MUTUAL  COMPANIES  §  332 

the  case,  however,  may  be  such  that  a  resort  to  the  courts  may  be  had 
without  exhausting  in  the  first  instance  the  remedies  provided  for 
within  the  order.®  Even  though  a  beneficiaiy  under  a  certificate  in 
a  fraternal  a-^sociation  cannot  sue  in  court  until  remedies  prescribed 
by  its  constitution  ai'e  exhausted,  still,  where  an  attempt  to  do  this 


Kentucky. — Brotherhood     of     Rail- 
road   Ti'ainmen    v.    Sweaiiniieii,    101 


of  ^lutaal  Protection  v.  Meister,  204 
111.  527,  68  N.  E.  4-34  (beiu'Ciciary). 
Ky.  603,  171  S.  W.  455  (and  if  Indiana. — Voluntary  Relief  Dc- 
remedies  are  e.xhausted  may  appeal  partment  v.  Spencer,  17  Jud.  Ai)pw 
to  courts).  123,  4()  N.  E.  477. 

Michigan. — Allen  v.  Patrons'  Mu-  Maryland. — I)a<iue  v.  Grand  Lodge 
tual  Fire  Ins.  Co.  163  .Mich.  18,  130  Brolliorhood  of  Railroad  Trainmen, 
N.  W.  196,  40  In.s.  L.  J.  070;  Con-  111  Md.  93,  73  Atl.  735  (when  socie- 
ley   V.    Supreme    Court    Independent    ty  estopped) 


Order  of  Foresters,  158  Mich.  190, 
122  N.  W.  567,  39  Ins.  L.  J.  1112; 
Monger  v.  New  Era  Assoc.  156 
Mich.  645,  24  L.R.A.  1027n,  121  N. 
W.  823;  Fillmore  v.  Great  Carap  of 
Maccabees,  109  Mich.  13,  2  Det.  L. 
News,  1012,  66  N.  W.  675. 

Minnesota. — Kulberg  v.  National 
Council  of  Knights  &  Ladies  of  Se- 
curity, 124  Minn.  437,  145  N.  W. 
120  (expulsion  of  member)  ;  Marcus 
V.  National  Council  of  Knights  & 
Ladies  of  Security,  123  'SVnm.  143, 
143  N.  W.  265  (expulsion  of  mem- 
ber). 

Oregon. — Montour  v.  Grand  Lodge 
Ancient  Order  of  United  Workmen, 
38  Ore.  47,  62  Pac.  524  (expulsion 
of  member). 

Pennsylvania. — Wick  v.  Fraterni- 
ties Accident  Order,  21  Pa.  Sup.  Ct. 
Rep.  507;  Mustin  v.  Grand  Fraterni- 
ty, 50  Leg.  Inteil.  350,  12  Dist.  Rep. 
468. 

Texas. — Lone  Star  Lodge  No. 
1935,  Knights  &  Ijadies  of  Honor  v. 
Cole,  —  Tex.  Civ.  Ai)p.  — ,  131  S.  W. 
1180. 

Wisconsin. — Loefller  v.  IModern 
Woodmen  of  America,  100  Wis.  79, 
75  N.   W.   1012. 

On  necessity  of  exhausting  reme- 
dies within  order  a^^ainst  decision  ex- 
pelling or  suspending  a  member  from 
a  mutual  lionetit  association,  see  note 
in  .32  L.R.A. (N.S.)  817. 

*  Illinois. — Supreme   Lodge,   Order   courts) 

903 


Minnesota. — Malmsted  v.  Minne- 
apolis Aerie,  No.  34,  Fraternal  Or- 
der of  Eagles,  111  .Alinn.  119,  126 
N.   W.   486    (expulsion   of  member). 

Xew  York. — Brown  v.  Independent 
Order  of  Foresters,  72  N.  Y.  Sujip. 
8()(),  66  App.  Div.  259  (courts  will 
pi'otect  the  rights  of  such  meml)or 
wliere  an  unjust  and  unreasonai)lc 
burden  is  put  on  the  member  of  a 
fraternal  society  by  its  laws  or  con- 
stitution); HoUomany  v.  National 
Slavonic  Society,  57  N.  Y.  Su])p. 
720,  39  App.  Div.  573. 

Pennsi/lrania. — Tucker  v.  George 
Sliiftler  Council  Jr.  0.  U.  A.  M.  68 
Leg.  Intel).  18  (there  was  notliing  in 
the  constitution  or  by-laws  requiring 
ai)peal  and  nieinlx'r  was  entitled  to 
sue  witliout  appealing  to  society's 
tribunal). 

Tennessee. — Benson  v.  Grand 
Lodge  of  B.  of  L.  F.  —  Tenn.  Ch. 
— ,  54  S.  W.  132  (constitution  did  not 
prohibit  resort  to  courts). 

Texas. — St.  Louis  Southwestern 
Ry.  Co.  v.  Thompson,  —  Tex.  Civ. 
App.  — ,  108  S.  W.  453  (exi)nlsion 
of  member). 

Wisconsi)). —  State  (ex  rel.  Wein- 
gart)  V.  Board  of  Ofiicers  of  Gegen- 
seitig'e  Unterstuetzungs  Gesellscha  tt 
Germania,  144  Wis.  .316,  r29  N.  W. 
630,  40  Ins.  L.  J.  433  (when  oflicevs 
wrongfully  removed  not  required  to 
exhaust  remedies  within  society  as 
condition     pieccdent     to     resort     to 


352a 


JOYCE  ON  INSURANCE 


has  been  made  in  good  faith  in  accordance  with  the  rules  of  the  as- 
sociation and  it  arbitrarily  refuses  to  act  upon  the  claim  an  action 
may  be  brought  in  a  court  of  competent  jurisdiction  to  enforce  the 
claim  J  80,  the  certificate  of  membership  issued  to  a  member  of  a 
mutual  benefit  society  is  a  contract  of  insurance,  and  his  right  to 
recover  upon  it  does/Hot  dej^end  upon  the  action  of  the  oflicers  of 
the  society,  for  if  he  has  performed  his  part  of  the  contract  and  is 
totally  disabled  by  disease  or  accident,  he  has  a  complete  cause  of 
action.  A  refusal  by  the  officers  of  the  society  to  allow  the  claim 
will  not  defeat  a  recovery.*  And  a  beneficial  association  or  society 
cannot,  by  force  of  a  by-law  make  itself  a  judge  in  its  own  case  by 
requiring  that  all  claims  or  cases  shall  be  tried  by  its  board,  in  the 
first  instance.^  So,  a  beneficiary  may  resort  to  the  courts  without 
exhausting  liis  remedy  under  the  rules  and  by-laws  where  they  at- 
tempt to  make  an  ofiicer  or  officers  of  tlie  association  tlie  arbiter  or 
tribunal  to  whom  the  claim  shall  be  submitted  for  adjudication  as 
a  condition  precedent. ■^°  Nor  is  it  necessary  to  take  an  appeal  with- 
in the  society  before  resorting  to  the  courts  for  redress,  when  such 
appeal  would  be  unavailing  and  fruitless  because  it  could  not  be 
heard  in  time  to  att'ord  any  relief. ^^  And  a  beneficiary  may  seek  a 
remedy  in  the  courts  where  the  right  of  appeal  provided  for  by  the 
association  is  denied. -^^  Again,  remedies  need  not  be  exhausted 
within  the  order,  even  though  so  stipulated,  where  the  question  in- 
volved is  one  of  property  rights. ^^ 

§  352a.  Same  subject. — Resort  to  the  internal  tribunals  of  a  fra- 
ternal benevolent  a.-^sociation  may  be  validly  imposed  as  a  condi- 
tion precedent  to  resort  to  the  courts  against  the  association.^*     It 


'Brotherhood    of    Railroad    Train-  ^^  Rose  v.  Supreme  Court,  Order  of 

men  v.  Swoarin^en,  IGl  Ky.  665,  171  Patricians,  12()  ]\Iich.  577,  85  N.  W. 

S.  ^Y.  455;  Haa?  v.  Good,  7  Pa.  Sup.  107.3. 

Ct.    425,    42    Wkly.    Not.    Ca-s.    5.30.  13  Kelly  v.  Trimont  Lodge,  154  N. 

See  Caine  v.  Benevolent  &  Protective  Car.  97,  52  L.R.A.(N.S.)   823,  69  S. 

Order  of  Elks,  34  N.  Y.  Supp.  528,  E.  764,  40  Ins.  L.  J.  268;  see  Lone 

88  Hun  (N.  Y.)  154.  Star    Lodge    No.    1935,    Knights    & 

*  Supreme    Council    of   The    Order  Ladies  of  Honor  v.  Cole,  —  Tex.  Civ. 

of  Chosen  Friends  v.  Forsino:er,  125  App.  — ,  131  S.  W.  1180;  see  §§  372, 

Ind.    52,    21    Am.    St.    Rep.    196,    9  2503,  3502,  3520  herein. 


L.R.A.  501,  25  N.  E.  129. 


^*  Ocean    Castle,    Knights    of    the 


^  Placa    V.    Polizzi    Generosa    Soc.  Golden  lilagle  v.   Smith,  58  N.  J.  L. 

138  N.  Y.  Supp.  822.  545,  33  Atl.  498.     See  also  Cotter  v. 

1°  Great    Hive,   Ladies    of    Modern  Grand  Lodge  A.  0.  U.  W.  23  Mont. 

Maccabees  v.  Hodge,  130  111.  App.  1.  82,  57  Pac.  650. 

^^  State     (ex     rel.     Weingart)      v.        On  validity  of  requirement  by  mu- 

Board  of  Officers  of  Gegenseitige  Uu-  tual     benefit     society    that     remedies 

terstuetzungs  Gesellschaft  Germania,  within   the  order  must  be  exhausted 

144  Wis.  516,  129  N.  W.  636,  40  Ins.  before  resort  to  the  civil  courts,  see 

L.  J.  4.5.3,  note  in  8  L.R.A.  (N.S.)  916. 

904 


PARTIES— MUTUAL  COMPANIES         §§  3521),  352c 

is  alpo  competent  for  a  mutual  benefit  society  to  provide  for  tlie  pre- 
sentation of  claims  to  ofiicers  designated  in  it-^  by-laws,  and  it  may 
also  prescribe  a  mode  of  procedure,  provided  tliat  such  mode  is  not 
such  as  to  deprive  parties  of  property  rights."  Ho,  a  member  must 
exhaust  his  remedies  within  a  mutual  benefit  order  before  resorting 
to  the  courts,  where  he  has  voluntarily  submitted  himself  to  the  laws 
of  such  order  which  so  provide. ^^  And  a  person  voluntarily  sub- 
mits himself  to  the  society's  jurisdiction  so  long  as  it  does  not  ex- 
ceed its  authority,  where  he  accepts  membership.^'  Nor  will  equity 
aid  a  member  who  refuses  to  avail  himself  of  his  remedies  provided 
for  in  the  order  in  case  of  grievance.^® 

§  352b.  Same  subject:  strict  construction  of  such  conditions  pre- 
cedent.— A  restriction  upon  the  rights  of  members  of  fraternal  as- 
sociation to  resort  to  the  courts  must  be  imposed  in  the  clearest  and 
most  express  terms,  mere  inference  is  insufficient.^^  And  the  rule 
of  strict  construction,  even  to  a  strained  interpretation,  will  be  ap- 
plied to  the  constitution  or  by-laws  when  they  require  remedies  and 
an  appeal  within  the  society,  provided  therein,  to  be  exhausted  be- 
fore resorting  to  the  courts. ''° 

§  352c.  Same  subject:  Kelly  v.  Trimont  Lodge. — The  following 
extract  from  the  opinion  in  the  case  of  Kelly  v.  Trimont  Lodge  ^  is 
important  in  connection  wath  the  subject  under  consideration  here- 
in.^ The  court,  per  Manning,  J.,  said:  "It  is  contended  by  the 
defendant  that  the  stipulation  contained  in  the  application  for  mem- 
bership in  the  defendant  lodge  by  the  deceased,  that  he  would  seek 
the  remedy  for  all  his  rights  on  account  of  such  membership,  in  the 
tribunals  of  the  order,  precludes  any  resort  to  the  established  courts 
of  the  state  for  the  enforcement  of  any  right,  however  just  or  how- 
ever plainly  established  by  contract,  unless  the  tribunals  of  llic 
order  deliberately  refuse  to  act,  or  their  action  is  fraudulently  taken. 

^*  Supreme   Council   of   the   Order  ^^  Supreme  Lodge,  Order  of  Select 

of  Chosen  Friend.s  v.  Forsinger,  125  Friends  v.   Raymond,  57   Kan.   647, 

Ind.    52,    21    Am.    St.    Rop.    196,    0  4n  L.R.A.  :573n,  2  Chi.  L.  J.  Wklv. 

L.R.A.  501,  25  N.  E.  120.  128,  47  Pac.  5:53. 

^^  Cohen    V.    Superior    Lodge    No.  ^^  Brotherhood  of  Railroad  Train- 

516,  I.  0.  B.  A.  35  R.  1.  94,  85  Atl.  men  v.  Powell,  70  111.  App.  500. 

653.  U54    N.    C.   97,   52    L.R.A. (N.S.) 

1'  Holmes      v.      Royal      Fraternal  823,  69  S.  E.  764,  40  Ins.  L.  J.  268. 

Union,  222  Mo.  556,  26  L.R.A.  lOSOii,  On   conclusiveness   of  decisions  of 

121  S.  W.  100.  lril)unals  of  ai;s()ciations  or  corpora- 

^^  LoelHer  v.  Modern  Woodmen  of  lions,  see  notes  in  49  L.R.A.  35.3;  2 

America,  100  Wis.  79,  75  N.  W.  1012.  L.R.A. (N.S.)     672;    and    52    L.R.A. 

See  also  Finerty  v.  Supreme  Council  (N.S.)   806,  823. 

Catholic    Knights    of    America,    115  ^  5<^    352-352b.     See   also    §§    372, 

Iowa,  398,  88  N.  W.  834.    See  §  3520  ,3205,  3520  herein, 
lierein. 

905 


§  3.52c 


JOYCE  ON  INSURANCE 


Tlie  precise  question  was  considered  and  determined  by  the  Su- 
])reiiie  Court  of  Illinois,  in  the  ease  of  Ivaihvay  Passenger  &  Frci.^ht 
Condnetors'  Mutual  Aid  &  Benefit  Association  v.   Robinson  ^  in 
which  case  the  court  said :    'That  it  is  competent  for  memljers  of 
societies  of  this  character  to  so  contract  that  their  riohts  as  mem- 
bers shall  depend  upon  the  determination  of  some  tribunal  of  their 
own  choice,  may  be  conceded.     But  where  the  designated  tribunal 
is  the  society  itself,  one  of  the  parties  to  the  controversy,  or  what  is 
substantially  the  same  thing,  the  board  of  directors,  which  is  its 
oihcial  and  organic  representative,  the  courts  will  hesitate  and  even 
refuse  to  treat  its  decisions  as  final  and  conclusive,  unless  the  lan- 
guage of  the  contract  is  such  as  to  preclude  any  other  const' iiction. 
Tlie  judicial  mind  is  so  strongly  against  the  propriety  of  allowing 
one  of  the  parties,  or  its  special  representative,  to  be  judge  or  ar- 
l)itrator  in  its  own  case,  that  even  a  strained  interpretation  will  be 
resorted  to,  if  netessary  to  avoid  the  result."     In  Fears(»u  v.  Ander- 
burg,*  the  Supreme  Court  of  Utah  having  announced  the  same  con- 
clusion as  the  Illinois  court  said:    'To  hold  otherwise  would  l^e  an 
attempt  to  clothe  such  voluntary  association  with  power  lo  create 
judicial  tril)unals.  which  would  be  contrary  to  the  law  of  the  land.^ 
We  therefore  hold  that  plaintiff  was  not  required  to  exhaust  the 
remedy  provided  by  the  tribunals  of  the  association  as  a  condition 
[)rocedent  to  the  bringing  of  this  action.     We  have  no  doubt  of  the 
power  of  meml)ers  of  a  voluntary  association  to  restrict  themselves, 
as  to  matters  incidental  to  the  operation  of  the  a.ssociation,  to  reme- 
dies hefore  tril:»unals  created  by  the  association,  the  n.ature  and  kind 
of  which  we  need  not  here  consider.     We  are,  however,  of  the  opin- 
ion that  this  case  does  not  fall  within  such  rule.     The  right  to  the 
moneys  due  here  was  a  property  right,  and  was  created  by  and 
growing  out  of  a  contract.'     In  2  Bacon  on  Benefit  Societies  and 
Life  Insurance,^  the  learned  author,  after  quoting  from  many  cas- 
es, says:   'It  seems  to  us  that  the  reasoning  of  the  Supreme  Court  of 
Illinois  is  most  logical  and  in  accordance  witb   the  ])rinciples  of 
jn.-lice.     It  is  certainly  al)horrent  to  a  sense  of  justice  that  a  cor- 
poration should  be  judge  and  jury  when  defendant,  and  should  de- 
cide upon  the  validity  of  claims  against  itself,  to  the  exclusion  of 
the  civil  courts  of  any  rights  on  the  part  of  the  claimant  to  have  a 
review  Ijy  the  courts  of  such  judgment.'     Limiting  the  stipulation 
in  the  application  lo  an  agreement  to  submit  to  the  decisions  of  the 
tribunals  of  the  order  upon  all  (questions  of  a  legislative  or  admin- 


3 147  111    138,  159,  35  N.  E.  1G8,   Anr-ient  Order  of  United   \  'orkmen, 
17fi.  10  Utah,  110,  37  Par-.  24.3. 

*28  Utali,   40.5,   80  Pac   307. 
5  Citing  Danilier  v.  Grand   Lodge, 

906 


6  Sec,  400a,  p.  1016. 


PARTIES— MUTUAL  COMPANIES  §§  353,  354 

istrative  nature,  and  to  their  judi^nient  upon  controversies  of  mem- 
l)ers  with  one  anotlier  within  the  order,  we  think  the  stipulation  can 
be  sustained,  and  we  would  say  that  upon  a  question  involving  one 
of  the  above  matters,  the  member  had  by  such  stipulation  precluded 
himself  from  a  resort  to  the  court,  in  the  absence  of  charges  of  fraud 
or  misconduct.  lUit  where  the  question  involved  is  the  enforce- 
ment of  a  property  right,  such  as  is  presented  in  this  case,  we  hold 
that  the  courts  can  be  invoked  by  a  member  to  aid  him  in  the  en- 
forcement or  protection  of  such  righl-.  without  resorting,  in  the 
first  instance,  to  the  tribunal  of  (lie  order.  The  Sn])rciiic  Court  of 
Elaine,  in  Stephen.^on  v.  Insurance  Comi)any,'''  thus  ter.^ely  stated 
the  principle:  'The  law.  and  not  the  contract.  prcscril)os  the  reme- 
dy, and  parties  have  no  more  right  to  enter  into  stipulation  ugainst 
a  resort  to  the  courts  for  their  remedy  in  a  given  case,  tlmn  they 
have  to  provide  a  remedy  prohibited  by  law.'  ^  Our  court  has  uui- 
formily  held  to  the  doctrine  that  when  a  cause  of  action  has  arisen, 
the  courts  cannot  be  ousted  of  their  jurisdiction  by  agreements  pre- 
viously entered  into,  to  submit  the  liabilities  and  rights  of  the  par- 
ties to  the  determination  of  other  tribunals  named  in  the  agree- 
ment; but  it  has  been,  also,  generally  held  that  the  agreement  to 
submit  the  particular  question  of  the  amount  of  loss  or  dauiage  of 
the  assured  under  an  insurance  policy,  is  not  against  public  policy 
and  is  sustained.  That  is  simply  a  method  for  the  asceiiainment 
of  a  single  fact  and  not  the  determination  of  the  legal  liability  of 
the  insurer."  ^ 

§  353.  Absolute  right  to  become  member  under  charter  of  mutual 
company. — If  the  charier  of  a  mutual  in.-urance  comjjany  makes 
it  the  absolute  right  of  a  certain  class  of  persons  in  a  certain  locality 
to  become  members,  the  conditions  being  subscribing  the  articles 
and  applying  for  insurance  on  the  terms  and  requirements  of  the 
chiU'ter  and  by-laws.  u])on  compliance  with  the  conditions  such 
right  may  be  insisted  on,  and  cannot  be  cut  oft"  bv  an  officer  of  the 
corporation.  f(tr  he  has  no  option  on  the  subject.^" 

§  354.  Contributions  by  subordinate  lodge  to  supreme  lodge: 
specific  purpose:  power  of  disposal  of  funds. — If  the  su])rcme  lodge 
of  a  benevolent  society  receives,  in  resi)ouse  to  a  "distress  call," 
funds  by  way  of  contributions  from  suboi-dinate  lodges,  it  has  no 
power  to  withhold  any  part  of  such  fund  from  the  persons  for 
whom  intended,  even  though  the  approximation  of  the  persons  in- 

'54  Me.  55.  v.  Plioniiix'  Assurance  Company,  106 

8  Citing  Biaddy  v.  New  York  Bow-  N.  C.  28,  10  S.  E.  1057. 

erv  Fire  Insurance  Company,  115  N.        ^°  Gay  v.  Farmers'  Mutual  Ins.  Co. 

C'  354,  20  S.  E.  477.  "  51  Midi.  245,  16  N.  W.  392. 

^Citing    Manufacturing    Company 


!»07 


§§  3o4a,  3r)4b 


JOYCE  ON  INSURANCE 


jured  and  intended  to  be  benefited  is  of  a  greater  number  than 
actually  injured. ^^  In  this  case  the  court,  per  Bennett,  C.  J.,  said: 
"We  agree  that  when  contrilnitions  are  made  to  the  common  fund 
of  a  society,  oi^as  a  special  fund,  to  be  used  in  whole  or  in  part  by 
it,  at  itnS  discretion,  for  the  benefit  of  such  members  as  it  might  se- 
lect, or  in  such  proportion  as  it  might  agree,  a  court  of  equity  can- 
not control  its  judgment  either  as  to  the  amount  or  as  to  the  pro- 
portion of  the  donation  among  the  members.  But,  as  said,  the 
contributors  raised  a  fund  and  ])laced  it  in  the  hands  of  appellant, 
as  trustee,  for  a  specific  purpose,  and  the  trustee  was  not  given  the 
power  to  pay  the  money  or  withhold  it.  or  a  part  of  it,  at  its  discre- 
tion, but  the  only  discretion  given  it  was  the  power  to  distribute  it 
according  to  the  necessities  of  the  donees.  It  was  the  trustee  of  an 
express  trust  for  that  pur})ose  alone,  and  had  no  power  to  withhold 
any  part  of  the  fund  from  dis(ril)ution.  because  it  was  not  delegated 
to  it.  The  wlidlc  was  contributed  for  their  benefit,  and  they,  as  far 
as  the  ai)pellaii1  is  concerned,  are  entitled  to  it." 

§  354a.  Right  of  subordinate  circles  or  lodges  to  funds:  rights  of 
member  who  has  withdrav/n. — Under  a  Connecticut  decision,  where 
a  fraternal  beneficial  association  with  subordinate  circles,  incor- 
porated by  special  charter,^^  has  power  thereunder  to  establish  local 
circles  and  goverii  and  manage  them  by  laws  of  its  making,  and  re- 
quires said  circles,  under  the  constitution  prescribed  for  them,  to 
maintain  a  general  fund  for  sick  benefits  and  general  expenses  and 
a  mortuary  fund  for  death  and  funeral  benefits,  such  funds  so  ac- 
cunuilated  by  said  subordinate  body,  belong  to  it;  but  a  memljer 
wdio  ha«  withdrawn  therefrom  loses  his  interest  and  rights  over 
said  funds. ^^  The  above  decision,  however,  seems  to  be  in  conflict 
with  one  rendered  in  Toloi'ado.^* 

§  354b.  Funds  of  subordinate  circle  or  lodge:  trust  funds:  cannot 
be  diverted. — As  soon  as  paid  in  by  members  of  a  subordinate  circle 
of  a  fraternal  beneficiary  association,  the  general  fund  for  sick 
benefits  and  general  expenses  and  the  mortucuy  fund  for  death 

^1  Snproino  Lodsfo    Knicrlils   &  La-  Order  of  Tvon  Hall,  64  Conn.  170,  24 

dies  of  Honor  v.  Owens,  i)4  Kv.  ;!27,  L.K.A.    815,    29    Atl.    614;    Freund- 

20  L.R.A.  347,  22  S.  W.  327.  "  seliaft   Lodge,  No.   72,   D.   0.   H.   v. 

^2  Conn.    Special    Laws,    1007,    p.  Adilemberoer,  235  111.  438,  85  N.  E. 

402.  053.    K.tamiiie  (irand  Lodge  A.  0.  U. 

^^  National     Cir(4e,    Dauahters    of  W.  of  Conn.  v.  Grand  Lodge  A.  0.  U. 

Isabella  V.  Hines,  288  Conn.  676,  02  W.   of  Mass.   81   Conn.   180,  70  Atl. 

Atl.  401,  45  Ins.   L.  J.  132.     CUinij  017. 

as  to  rigbts  of  member  wlio  lias  witli-        ^*  Die  Gross-Loge  Des  Ordens  der 

drawn,   Grand   Lodge,   A.    0.   U.   W.  Heinianns-Soebne  v.  Wolfer,  42  Colo, 

of  Conn.  V.  Grand  Lodge,  A.  0.  U.  303,    04    Pae.   329,   considered   under 

W.  of  Mass.  81   Conn.'l89,  70  Atl.  §  350b  berein. 
617;  Faweett  v.  Supreme  Sitting  of 

908 


PARTIES— MUTUAL  COMPANIES  §  354c 

and  funeral  bene fil.s  become  ini})rer^ped  witli  a  trust  tbe  terms  of 
whicb  are  found  in  the  cluntiM'  of  the  association  aud  iu  the  con- 
stitutions and  laws  of  the  subordinate  body.^^  As  the  general  fund 
and  mortuary  fund  of  a  subordinate  circle  of  a  fraternal  beneficiary 
association  are  trust  funds  they  cannot  be  diverted  from  tbe  pur- 
poses of  the  trust  as  specified  by  the  charter  and  laws  of  the  associa- 
tion and  equity  will  enforce  tbe  trust  and  prevent  such  diversion. ^^ 
Nor  does  any  power  exist  in  such  subordinate  circle  nor  in  its  mem- 
bers, whether  a  majority  or  a  minority,  to  divert  said  funds  from 
the  purposes  of  the  trust  to  anotlier  ortiaiiization.  Said  funds  also 
remain  impressed  with  the  trust  which  innnediately  attaches  upon 
creation  of  the  fund."  Under  a  Colorado  decision,  the  funds  or 
assets  of  a  subordinate  lod,2,e,  even  though  incorporated,  are  held 
by  it  and  its  members  in  trust  for  the  benefit  of  the  grand  lodge 
and  may  be  followed  by  it  into  the  hands  of  officers  who  with  the 
members  have  diverted  and  a|)])ropriated  it.^* 

If  the  funds  of  a  fraternal  benelit  order  are  being  diverted,  con- 
trary to  law,  from  the  purposes  contemplated,  such  illegal  act  will 
be  restrained. ^^ 

§  354c.  Duty  of  association  to  protect  subordinate  circle's  funds 
against  diversion. — it  is  the  duty  of  a  fraternal  beneficiary  a.^socia- 
tion,  where  its  charter  under  a  special  statute  provides  for  the  es- 
taljlishment  of  subordinate  circles  and  the  creation  of  a  general 
fund  and  a  mortuary  fund,  to  protect  the  uiembers  of  said  circle  in 
their  right  to  such  funds  against  tlieir  diversion  to  uses  and  pur- 

^^  National     Circle,    Daugliters    of        "  National     Circle,    Daunliters    of 

Isabella  v.  Hines,  88   Conn.   ()7(),  92  Isabella    v.    I  lines,  88  Conn.   (576,  02 

Atl.    401,    45    Ins.    L.    J.    1:52    ritiiuj  All.    401,    45    Ins.    L.    J.    132,    cithig 

Grand  Lodge,  A.  O.  U.  W.  of  Conn.  Koernci-    Lodije,    No.    6,    Knijrlits    of 

V.    Grand    Lodge    x\.    O.    U.    \V.    of  Pythias  v.  Grand  Lodge,  Knigiils  of 

Mass.  81  Conn.  18!),  20;i,  70  Atl.  617;  Pvtiiias,   14(i  hid.  630,  nr^r,,  45  N.  E. 

note   47   L.R.A.(N.S.)    027,   !):;i,   on  li03;     McFadden     v.     .Murphy,    140 

right  to  i)roperty  of  local  brancli  by  Mass.  341,  342,  21  N.   E.  868. 
benefit  society  in  event  of  secession  or        A.s  to  want  of  power  of  directors 

attem])ted  secession.  of   a    benelit    association    to   transfer 

^^  National     Circle,     Daughters     of  from   reserve   to   mortuary   fund,   see 

Isabella   v.   Ilines,  88  Conn.   67(i,  02  Fai mers  Loan  &  Tiiist  Co.  v.  Aberle, 

Atl.   401,   45    Ins.   L.   J.    132,   rili)>fj  46  N.  Y.  Sui)p.  10,  IS)  .\pp.  Div.  7!), 

Grand  Lodge  A.  O.  U.  W.  of  Conn,  modifying  41   N.   Y.    Siipp.    63S,   18 

V.    Grand    Lodge    A.    O.    U.    W.    of  Misc.  257. 

Mass.  81  Conn.'l80,  203,  70  Atl.  617;        "Die  Gross-Loge  Des  Ordens  der 

Penfield  v.  Skinner,  11  Vt.  206,  208;  Hermanns-Soehne  v.  WoH'er.  42  Colo. 

High   on    Injunctions    (4tli   ed.)    .sec  303.  04   Pac.  320.     Cumpdre  ^  354a 

1192,  p.  no;!.  herein. 

As  to  ajtplication  or  appro|)riation        ^^  State   v.    P.ankers   Union   of   the 

of    funds    bv    society    or    lodge,    see  World,  71  Neb.  622,  99  N.  W.  531. 
§  1289  herein. 

909 


§§  355-357 


JOYCE  ON  INSUKAXCE 


poses  other  tlinn  tlio.-e  of  its  charter  and  laAv,  by  an  api")eal  to  equity. 
And  even  if  tlic  cliartcr  liad  not  conferred  such  power  it  would  exist 
by  reason  of  tlie  fact  thai  the  circle  owed  its  origin  to  the  associa- 
tion and  existed  under  its  laws  and  government  and  secured  and 
maintained  said  funds  for  purposes  prescribed  by  said  association.^" 

§  355.  Effect  of  decision  by  official  body  created  by  constitution  of 
order. — AVhere  ihe  endowment  rank  of  an  order  is  separate  from 
ihe  lodge,  and  is  for  insin-ance  purposes  only,  and  the  constitution 
creates  a  board  of  control  having  entire  control  over  the  endowment 
rank.  sul)ject  to  certain  restrictions  by  the  supreme  lodge,  with  au- 
tli(trity  to  hear  and  determine  all  appeals,  a  record  made  by  said 
board  in  pursuance  of  this  authority  and  consequent  upon  certain 
oti)er  acts  which  it  was  authorized  to  do.  operates  as  an  authoritative 
construction  of  its  regulations ;  the  courts  will  follow  its  ruling,  and 
it  is  not  a  decision  res  inter  alios  acta.^  A  member  of  an  unincor- 
porated Masonic  lodge  cannot,  while  he  Tias  fhe  right  of  redress 
within  the  order,  obtain  the  aid  of  the  state  courts.^ 

§  356.  Delegation  of  power  by  supreme  lodge:  mutual  benefit  so- 
ciety.— Although  the  supreme  lodge  of  a  nmtual  benefit  society 
may  have  the  fullest  ])ower  under  its  charter  to  pass  all  such  rea.<^on- 
able  laws  as  it  may  deem  proper  for  the  establishment  and  govern- 
ment of  an  endowment  rank,  and  to  enact  general  laws,  yet  where 
its  charter  vests  that  power  alone  in  the  supreme  lodge,  it  cannot 
abdicate  its  authority  and  delegate  the  power  to  a  board  of  control 
or  other  agency.^ 

§  357.  Subordinate  association  cannot  be  deprived  of  charter 
without  hearing. — If  a  corporation  passes  a  by-law  which  authoriz- 
es a  subordinate  association  to  be  de)»rived  of  it^:  charter  without  a 
hearing,  such  bj'-law  is  unreasonable  and  void.  The  opinion  of  the 
court  in  this  case  is  important  and  we  quote  therefrom  as  follows: 
"The  ])laintiff  is  the  supreme  tribunal  of  Druidism  in  California, 
and  the  defendant,  Garibaldi  (h-ove,  No.  71,  is  a  subordinate  grove 
of  Druids,  of  which  the  appellant.  Duchein.  is  the  trea.surer.  The 
relation  between  the  plaintifl'  and  the  subordinate  grove  is  estal> 
lished  by  the  constitution  and  liy-laws  of  the  order,  by  virtue  of 
which  the  grand  grove  is  given  'sole  right  and  full  power  to  grant 

20  National     Circle,    Dauuhtors    of  Pyihi;is  v.   Kalinski,   6  U.    S.   C.    C. 

Lsaljella  v.   Mines,  88   Conn.  U76,  02  :]73,  5<    Fed.  .348,  13  U.  S.  App.  574, 

Atl.   401,   45   Ins.   L.   J.   132,   citinr,  23  In.'^.  L.  J.  44. 

Ceneral  Hospital  See.  v.  New  Haven  ^  j^.j^v.«on   v.   Ilewell,  118   Cal.  613, 

Renderinij  Co.  79  Conn.  581,  585,  118  40  L.K.A.  400n,  50  Par.  7G3. 

Am.  St.  Rep.  173,  0  Am.  &  Eng.  Ann.  ^  Supreme  Lodge  Knights  of  Pyth- 

Cas.  168,  65  Atl.  1065.  ias  v.  La  Malta,  95  Tenn.  157,  158, 

1  Supreme      Lodge      Knights      of  30  L.R.A.  838,  31  S.  W.  493. 

910 


PARTIES— MUTUAL  COMPANIES  §  337 

cliartcrs  to  subordinate  groves,  to  receive  appeals  and  redress  griev- 
ances, and,  in  its  discretion,  for  good  cause  sliown,  to  susi)end 
groves,  arrest  cliarters'.  etc.  By  section  15  it  is  provided  that  when 
any  subordinate  grove  sliall  violate  the  terms  of  its  charter,  or  refuse 
or  neglect  to  ol)ey  the  direction  and  laws  of  the  grand  grove,  or  the 
general  laws  of  the  order,  charges  thereof  may  be  pi-eferred  in  writ- 
ing to  the  grand  grove,  and  a  copy  thereof  shall  be  furnished  to 
the  grove  complained  of.  and  notice  when  and  where  to  appear  for 
trial.  The  grand  grove  holds  an  annual  session  on  the  third  Tues- 
day of  June  in  each  year,  and  it  is  provided  in  section  9  of  article 
20  that  'during  the  recess  of  the  grand  grove  the  noble  grand  arch 
may.  whenever  he  shall  deem  it  necessary,  suspend  a  delinquent 
or  offending  grove,  such  suspension  to  hold  good  until  annulled  by 
the  grand  gTOve.'  On  the  5th  of  September,  1802,  the  noble  grand 
arch  of  the  plaintiff  susjiended  Garibaldi  Grove,  No.  71,  for  the  rea- 
son that  he  considered  it  was  an  'offending  grove,'  and  issued  a 
proclamation  of  this  fact  to  the  other  subordinate  groves  within  the 
state.  Article  19  of  the  rules  of  the  order  provides  that  the  trustees 
shall  be  the  custodians  of  the  property  of  the  grand  grove,  and  that 
'it  shall  be  their  duty  to  execute  all  orders  of  the  noble  gTand  arch, 
to  receive,  by  legal  process  or  otherwise,  all  moneys,  papers,  and 
other  property  of  dissolved  or  suspended  groves  in  this  jurisdiction,' 
etc.  In  December,  1892,  the  noble  grand  arch  reported  this  sus- 
pension to  the  trustees  of  the  plaintiff',  and  directed  them  to  com- 
mence the  present  action  for  the  possession  of  the  books  and  records 
of  the  suspended  grove,  and  for  the  moneys  l>elonging  to  it.  The 
court  found  that  the  appellant.  Duchein.  as  treasurer  of  Gtribaldi 
Grove,  had  in  his  possession  nine  hundred  and  lifty-four  dollars 
and  liftecn  cents,  moneys  belonging  to  .said  grove,  which  he  re- 
fused to  deliver  upon  the  demand  of  the  trustees  therefor,  and  ren- 
dered judgment  directing  him  to  pay  the  said  money  to  the  plain- 
tiff' herein  or  to  its  trustees.  From  this  judgment  and  an  order 
denving  a  new  trial  Duchein  has  a])pealed.''  As  to  the  law  the  court 
says:  "It  is  a  principle  of  natural  justice  that  no  one  shall  be  con- 
deumed  without  an  oi)])ortunily  to  be  heard  in  his  defense.  Who- 
ever would  claim  the  right  to  deprive  another  of  property  or  i)rivi- 
lege,  without  giving  him  an  op])ortuiiity  to  defend  the  same,  must 
show  some  consent  on  his  j)art  to  such  action  .  .  .  .  ;  there 
is  no  distinction  in  princii)le  between  expelling  a  member  from  a 
subordinate  grove  and  I'cvoking  the  charter  of  the  grove  itself  or 
suspending  its  charter We  are  of  the  opinion,  how- 
ever, that  the  rules  of  the  plaintiff  do  not  authorize  an  arbitrary 
suspension  of  the  grove  by  him  (the  noble  grand  arch"),  but  that 
whenever  he  propo.-;es  to  take  such  action  the  grove  which  is  charged 

911 


§  358 


JOYCE  ON  INSURANCE 


with  an  offen«e  for  which  he  is  authorized  to  suspend  it  has  the 
right  to  be  informed  of  sucli  charge,  and  to  be  heard  in  its  defense 

before  he  can  act The  Hniitation  upon  the  power  of 

the  grand  grove  to  itself  suspend  a  subordinate  grove  'for  good  cause 
shown'  implies  that  formal  charges  must  be  presented  and  sus- 
tained, and  the  provision  in  section  15,  that  when  charges  are  made 
against  a  subordinate  grove  a  copy  of  the  charges  shall  be  furnished 
to  it,  and  an  opportunity  given  to  be  heard,  show  that  the  general 
principles  under  which  a  suspension  may  he  had  require  such  notice 
and  liearing.  The  power  of  suspension  which  is  conferred  upon 
the  noble  grand  arch  is  to  be  exercised  l)y  him  only  during  the  re- 
cess of  the  grand  grove,  and,  in  the  absence  of  express  terms,  ought 
not  to  be  construed  as  greater  than  that  of  the  grand  grove  itself, 
or  to  be  exercised  in  any  other  mode  than  4hat  provided  for  the 
grand  grove.  The  authority  given  to  this  officer  is  not  limited  to 
a  suspension  until  the  next  session  of  the  grand  grove,  but  holds 
good  'until  annulled'  by  the  grand  grove.  This  provision  indicates 
tbat  it  is  to  have  the  same  effect  as  if  the  suspension  had  l)een  made 
by  the  grand  grove,  since  unless  some  action  in  the  nature  of  an 
appeal  is  taken  from  the  act  of  the  noble  grand  arch,  the  gTcUid 
grove  is  never  required  to  exercise  its  will  upon  the  subject. 
.  .  .  .  We  hold,  therefore,  that  the  action  of  the  noble  gTand 
arch  in  suspending  C^aribaldi  Grove,  No.  71,  was  not  in  accordance 
with  the  rules  of  the  order."  * 

The  charter  of  a  subordinate  lodge  cannot  be  revoked  without  a 
hearing  and  if  there  is  an  unauthorized  revocation  of  the  charter 
of  a  subordinate  lodge  a  recourse  to  the  courts  may  be  had  without 
exhausting  a  remedy  by  appeal  where  the  charter  of  the  association 
does  not  provide  for  an  appeal  by  such  lodge.^ 

§  358.  Member  or  officer  of  benevolent  association  cannot  be  ex- 
pelled without  hearing. — It  is  well  settled  that  a  member  of  a  be- 
nevolent a.ssociation  cannot  be  expelled  without  being  given  notice 
or  a  hearing,  and  that  a  by-law  which  authorizes  such  a  course  is 
unreaiionable  and  void.^     This  rule  is  qualified,  however,  under  a 


*  Grand  Grove  Ancient  Order  of 
Druids  v.  Duchein,  10.')  Cal.  210,  38 
Pac.  947,  per  Harrison,  J.  See  Su- 
preme Sitting  of  the  Order  of  Iron 
Hall  V.  Moore,  47  111.  App.  251.  As 
to  power  of  subordinate  lodge  of  be- 
nevolent society  to  appropriate  funds 


5  Golden  Star  Lodge  No.  1  v.  Wat- 
tersou,  158  Mich.  696,  133  Am.  St. 
Rep.  404,  123  N.  W.  610.  See 
Swain  v.  Miller,  72  Mo.  App.  446; 
St.  Patricks  Alliance  of  America  v. 
Byrne,  59  N.  J.  Eq.  20,  44  Atl.  716. 

^  Grand  Grove  United  Ancient  Or- 


for  support  of  lodge  under  the  same  der  of  Druids  v.  Duchein,  105  Cal. 
jurisdiction,  see  Lady  Lincoln  Lodge  219,  225,  38  Pac.  947,  per  Harrison, 
No.  702,  Knights  &  Ladies  of  Honor  J.,  citing  Fritz  v.  Muck,  62  How.  Pr. 
V.  Faist,  52  N.  J.  Eq.  510,  28  Atl.  555.    (N.  Y.)    69;  Wachtel  v.  Noah  Wid- 

912 


PARTIES— MUTUAL  COMPANIES 


§  3.58 


New  Jersey  deci.-^ion  to  the  extent  that  unless  tlie  member  would 
be  deprived  of  a  possible  benefit  from  the  hearin<2;.  a  by-law  is  not 
invalid  which  autliorizes  a  member's  expulsion  without  an  opj»or- 
tunity  to  defend.'  And  under  a  Wisconsin  decision  if  a  certiticate 
of  insurance  issued  by  an  order  to  one  of  its  members  provides  tliat 
no  liability  shall  accrue  unless  the  member  shall  in  everj^  particu- 
lar, while  a  member,  comply  with  all  tlie  by-laws  of  the  order,  and 
he  is  afterward  iiuiUy  of  an  otfense  against  the  by-laws,  for  which 
he  might  have  been  expelled,  his  right  to  insurance  is  forfeited, 
though  no  i)roceeding  was  taken  for  his  expulsion.^  An  arbitrary 
exercise  by  the  ruler,  of  the  power  of  removal  of  ofhcers  is  not  justi- 
fied when  made  witliout  notice  or  an  opportunit}'  to  appear  and  be 
heard. ^ 


ows'  &  Orpliau's  Beneficial  Soc.  84  E.  4G9,  33  Ins.  L.  J.  778  (notice  re- 
N.  Y.  28,  tiO  How.  Prac.  424,  ;]8  Am.  quii-od  but  none  g-iven). 
Rep.  478;  People  v.  Musical  Mutual  Minnesota.- -Kiilherg  v.  National 
Protective  Union,  118  N.  Y.  101,  108,  Council  Kniolits  &  Ladies  of  Honor, 
2.3  N.  E.  109;  Bacon's  Benefit  Socie-  124  Minn.  4:-i7,  145  N.  W.  120  (ex- 
ties,  sec.  101.  See  SS  14.56,  3.502,  pulsion  without  opportunity  to  be 
3520  herein.  heard,  invalid). 

See  also  the  following  case.s:  Missouri. — See  Wanek  v.  Supreme 

Indiana. —  Federal  Life  Ins.  Co.  v.  Lodge  of  Bohemian  Slavonic  Benevo- 

Risinger,  46  Ind.  Ai)p.  146,  01  N.  E.  lent   Soc.  84   Mo.  Apj).  185    (service 

.533  (member  with  privileges  or  prop-  of  notice  of  expulsion  required), 

erty  rights  must  lia\e  notice  and  jiri-  Wushinglini. — Dui)eich     v.     Grand 

vilege  of  a  hearing).  Lodge  A.  0.  U.  W.  ;!3  Wasii.  ()51,  74 

Iowa. — Finerty  v.   Supreme  Conn-  Pac.  832  (member  entitled  to  be  rep- 

cil  Catholic  Knights  ol'  America,  115  resented    by    conipelent    authority    to 

Iowa,  3.58,  84  N.   W.  !)!)!),  88  N.   W.  protect  right.s). 


834  (notice  necessary):  I'>yram  y. 
Sovereign  Camp  Woochnen  of  the 
World,  108  Iowa,  430.  70  N.  W.  144 
(charges  in  writing  rc(|iiireil  to  !>« 
preferred  and  served  on  accused,  ex- 
pulsion by  vote  on  motion  alone, 
void). 

Kentuckij. — Rogers  v.  Union  Be- 
nevolent Soc.  No.  2,  111  Kv.  .598,  55 
L.R.A.  605,  64  S.  \V.  444  (fail-  and 
impartial  trial  reijuireil). 

ilia.s'.scr.(7/«.sc//.s-.  - Ilorgan  v.  Meti'O- 
politan  Mutual  Aid  Assoc.  202  Mass. 
524,  88  N.  E.  890  (entitled  to  notice 
and    hearing)  ;    Kidder    v.    Supreme 


'  Bei'kiioul  y. 
Koval  Arcanum, 
All.  1. 

*  Langneckcr 
Grand  Lodge  A. 


Supreme     Council 
62  N.  .T.  L.  103,  4.3 


v.  Trustees  of 
().  U.  W.  Ill  Wis. 
279,  87  Am.  St.  Rep.  860,  ,55  L.R.A. 
185,  87  N.  W.  293. 

^  Caine  v.  Benevolent  &  Protective 
Ordei-  of  Elks,  34  X.  Y.  Supp.  ,528, 
88  II im    (\.  Y.)    154. 

As  to  rights  of  ollicei-s  wrongfully 
expelled  without  a  hearing;  need  not 
exhaust  lemedies  within  order  before 
resort  to  courts,  see  State  (ex  rel. 
Weingart)  v.  Boai-d  of  Ollicei-s  of  Ge- 
genseitige      Unterstuetzungs      Gesel" 


Coramandery    United    Order    of    the   schafl   Germania,  144  AVis.  516,  120 
Golden   Cross,  192  Mass.  326,  78  N.   N.  W.  630,  40  Ins.  L.  J.  453. 


Joyce  Ins.  Vol.  I. — 58. 


913 


CHAPTER  XX. 
MUTUAL   COMPANIES— BENEFIT,   ETC.,    SOCIETIES— BY-LAWS. 


§ 

364. 

§ 

365. 

§ 

365a. 

§ 

365b. 

§ 

365c. 

§ 

366. 

§ 

367. 

§ 

368. 

§ 

369. 

§ 

369a. 

§ 

369b. 

§ 

369c. 

§ 

369d 

§ 

370. 

§ 

371. 

§ 

371a 

§ 

371b 

i^ 

371c. 

§ 

372. 

§ 

372a 

§ 

372b 

§ 

373. 

§ 

374. 

§ 

375. 

§  376. 


Definition  of  by-laws. 

Power  to  enact  by-laws  inherent:  how  exercised. 

Same  subject. 

When  statutory  power  to  adopt  by-laws  is  exclusive. 

Association    may    be    estopped    to    assert    by-law    not    properly 

adopted. 
Charter  provisions  concerning  by-laws. 
Adoption  of  by-laws  by  custom  or  usage. 
Incorporated  societies:  unreasonable  by-laws. 
Unincorporated  societies :  unreasonable  by-laws. 
When  by-laws  reasonable :  continued. 
Same  subject:  police  power. 
When  by-laws  unreasonable :  continued. 
When  member  bound  by  unreasonable  by-laws. 
By-laws  must  not  be  unequal:  discrimination. 
By-laws,  rules,  and  regulations:  when  valid. 
By-law  providing  wedding  gift  valid :  ultra  vires. 
When  by-laws  invalid. 
By-laws  valid  in  part  and  void  in  part. 

By-laws  excluding  resort  to  civil  courts :  constitutional  provisions. 
Same  subject :  when  courts  will  not  intervene :  decisions. 
Same  subject:  when  courts  wall  intervene:  decisions. 
By-laws  must  not  be  contrary  to  laws  of  state  or  United  States. 
By-laws  against  public  policy  are  void. 
By-laws  must  not  contravene  terms  of  charter,  constitution,  or 

articles  of  association. 
Enforcement  of  by-laws:  penalty. 


§  364.  Definition  of  by-laws. — r.y-laws  are  tlie  rule:5  and  regula- 
tions for  the  <iovci'niiuMil  and  coiKluci  of  tlic  alVairs  of  the  society, 
association,  or  corporation  enacted  within  ihe  liiiuts  and  by  virtue 
of  the  power  conferi'cd  hv  llie  cliaiier  or  arlicles  of  association. ^° 

i°See  Smoot  v.  Bankers  Life  Users'  Assoc.  68  Ore.  402,  137  Pac. 
Assoc.  138  Mo.  App.  438,  465,  120  S.  22();  1  Morawetz,  Private  Corp.  (2d 
W.  719;  GrifTith  v.  Klamath  Water   ed.)  sees.  491,  et  seq.;  Id.  (ed.  1882) 

914 


MUTUAL  COMPANIES— BY-LAWS 


§  364 


Wliere  a  subordinate  branch  or  order  of  a  beneficial  society  is  in- 
corpoialcd  and  the  certificate  of  incorporation  does  not  recognize 
any  oI)li,a,alion  to  or  dei)endence  iijion  or  connection  with  the  order 
at  large,  the  constitnlion  and  laws  of  said  order  so  far  as  adopted  by- 
said  branch  arc  only  by-laws.  It  is  in  legal  contemplation  an  in- 
dependent entity  and  its  by-laws  must  stand  or  fall  upon  that  as- 
sumption.^^ 

see.  3GG;  1  Thomp.^on  on  Corp.   (2(1   of  the  corporate  powens."     Colaluea 

V.  Societa  Co-operativa  tli  jNIutuo 
Socoororio  Fratelli  Baiuliera,  30  R. 
I.  304,  307,  75  All.  265. 

"The  term  'by-law'  has  a  well 
known  but  limited  and  peculiar 
meaning.  It  is  used  to  designate 
Ihose  regulations  which  as  one  of  its 
lesal   incidents  a  corporation  is  em- 


ed.)  sec.  976;  8  Id.  (White's  Supp.) 
sec.  975;  1  Words  &  Phrases,  pp. 
936-938;  8  Id.  p.  594;  1  Id.  (2d 
series)  p.  548. 

"By-laws  of  a  corporation  are  the 
laws  for  the  regulation  of  its  atfairs 
and  the  management  of  its  property. 
They  have  much  the  same  force  and 
effect  when  applied  to  the  members  powered  to  make  affecting  the  man- 
and  olhcers  in  the  conduct  of  the  af-  agement  of  its  business,  the  control 
fairs  of  the  corporation  that  a  public  of  its  officers  and  agents,  and  the 
statute  has."  J.  P.  Lamb  &  Co.  v.  rights  and  duties  of  members  of  the 
Merchants  National  Mutual  Fire  Ins.  corporation."  Cheney  v.  Canfield, 
Co.  18  N.  Dak.  253.  259,  119  N.  W.    158   Cal.   342,  348,  32  L.R.A.(N.S.) 


1048,  1050,  per  Spalding,  J, 

"  *A  by-law  is  a  rule  or  law  adopt- 
ed by  a  corporation  or  association  for 
the  regulation  of  its  own  action  and 
concerns,  and  of  the  rights  and  du- 
ties of  its  members  among  them- 
selves.' Am.  &  Eng.  Ency.  of  Law 
vol.  5,  p.  87.  'This  term  (by-law) 
has  a  peculiar  and  limited  signitiea- 
tion,  being  nsed  to  designate  the  or- 
ders and  regulations  which  a  corpora- 


16,   111   Pac.   92,   93,   94,   per  Lori- 
gan,  J. 

"Angell  &  Ames,  sec.  110,  recites 
that  by-laws  are  considered  as  pri- 
vate statutes  for  the  government  of 
the  corporate  body.  2  Blackstone, 
475,  describes  them  in  the  .same  way. 
Cook,  6th  edition,  speaks  of  them  as 
'a  permanent  rule  of  action.'  Thomi)- 
son,  sees.  935,  936,  937,  broadly  dis- 
tinguishes them  from  resolutions  and 


tion,  as  one  of  its  legal  incidents,  has  regulations.  Bouvier's  definition  runs 
power  to  make,  and  whicli  is  usually  tlirougliout  in  the  same  line.  In  no 
exercised  to  regulate  its  own  actions  way  can  they  be  held  analogous  to 
and  concerns,  and  the  rights  and  du-  the  hasty  proceedings  of  the  e.xecu- 
ties  of  its  members  among  them-  tive  committees  or  of  the  directors 
selves.'  Per  Sliaw  C.  J.,  in  Common-  whicli  have  been  laid  before  us."  Per 
wealth  V.  Turner,  55  Mass.  493.  Putnam,  Cir.  J.,  in  Hayes  v.  Canada 
.  Again,  the  l)V-laws,  rules  and  Atlantic  &  Plant  Steam.ship  Co.  181 
^ulations  of  a  coi'poration  are  es-  Fed.  289,  296,  104  C.  C.  A.  271,  278. 
sentially  legislative  in  their  char-  ii  Grand  Court  Foresters  of  Amer- 
acter"  Haves  v.  German  Beneficial  ica  v.  Court  Cavour  No.  133,  Forest- 
Union,  35   Pa.    Super.   Ct.   142,  148,  ers  of  America,  82  N.  J.  E^.  89,  88 


resri 


149,  per  Head,  J 
"By-laws  are  on 


Atl.  191,  aft''d  83  N.  J.  Eq.  343,  91 
ly  a  means  of  regu-    All.      1068.     See      Supreme      Lodge 


lating  the  corporate   powers,  not  of    Knights  of  Pythias  v.  Kutscher,  179 

surrendering     or    suspending    them.    111.  349,  70  Am.  St.  Rep.  115,  53  N. 

.     .     By-laws     are     pro])erly     re-    E.  620,  s.  e.  72  111.  A  pp.  462;  Domes 

strictions  on  the  manner  of  the  use  v.  Supreme  Lodge  Knights  of  Pythias 

915 


§§  3fi5,  365a 


JOYCE  ON  INSURANCE 


§  365.  Power  to  enact  by-laws  inherent:  how  exercised. — The 
power  to  enact  by-laws  is  inlierent  in  every  private  corporation  or 
association, ^2  for  it  cannot  Ije  otherwise  than  rea.sonable  that  the 
power  to  prescrilje  rules  and  regulations  as  to  the  manner  in  which 
the  corporate  powers  shall  he  exercised  sliould  reside  in  the  corpora- 
lion  or  association,  subject  to  such  limitations  a.s  exist  in  the  charter 
or  articles  of  association  and  the  constitution  and  laws  of  the  state. ^^ 

Such  power  is  generally  exercised  by  the  majority  in  the  absence 
of  a  provision  in  the  charter  or  articles  of  association,  or  some  gen- 
eral statute  to  which  the  charter  is  subject,  providing  otherwise.^* 
If  the  president  and  directors  are  empowered  to  make  by-laws,  the 
power  may  be  exercised  by  the  president  and  a  majority  of  the  di- 
rectors; ^*' but  where  neither  the  statute  mir_chartei-  gives  the  ex- 
elusive  right  to  the  directors  to  make  by-laws,  they  may  ])e  duly 
passed  by  the  members  at  a  proper  meeting.^® 

§  365a.  Same  subject.— This  power  to  adopt  a  constitution  and 
by-laws  and  to  provide  reasonable  rules  and  by-laws  for  relief  with- 
in the  association  also  exists  in  unincorporated  secret  fraternal  Ijene- 
hciary  association  or  societies.^''     And  such  association  may  validly 

of  the  World.  75  Miss.  466,  1  Miss.  (ed.  1882)   sec.  366;  1  Id.    (2d  ed.) 

Dec.  (No.' 14)   106,  23  So.  1.91.  sec.  491;  Angell  &  Ames  on  Corpora- 

When   resvlutiuns   of  a   benevolent  tions,  (9tlied.)  see.  32 (. 

society  constitute  by-laws  under  a  by-  ^^  Calnll  v.  Kalamazoo  ]Mutnal  Ins. 

law  making-  such  resolutions  1)incliii2:  Co_.  2  Doug'.  (Mich.)  124,  43  Am.  Dec. 

as  bv-laws,  see  Flalierty  v.  Portland  45 <. 

Longshoremen's    Benevolent    Soc.    99  "To  pass  and  make  efl'ectne  such 

Me.  "253,- 59  Atl.   58.     See  quotation  by-laws  the  consent  of  all  parties,  as 

from  Hays  Ca.^^e,  181  Fed.  in  note  10  in  actual  and   ordinary   contracts,  is 

herein  under  this  section.  not  necessary,  as  a  bare  ma.iority  of 

12  Supreme  Lodge  Knight.^  of  Py-  the  stockholders  of  the  corporation 
thia.s  V.  Knight,  117  In<l~  489,  20  N.  may  do  so.  Civ.  Code,  sec.  301. 
E.  479,  3  L.K.A.  409;  1  Blackstone's  While  in  a  general  sense  the  by-laws 
Commentaries,  496;  "By-laws,"  3  witii  tiie  article?^  of  incorporation 
Salk.  76;  Morawelz  on  Private  Corp.  constitute  a  contract  under  which  the 
<ed.  1882)  sec.  366;  1  Id.  (2d  ed.)  reciprocal  rights  and  duties  of  the 
sec.  491;  Angell  &  Ames  on  Corp.  corporation  and  its  stockholders  are 
<9t"h  ed.)  sec?  345;  8  Thompson  on  measured,  the  by-laws  themselves  do 
Corp.  (White's  Supp.)  sees.  965,  967,  not  constitute  such  a  contract  so  as 
985;  Cook  on  Corp.  (6th  ed.)  sec.  4a.  to  make  the  provision  with  reference 

As  to  power  to  amend  bv-laws,  etc. :  to   directors'    meetings   an   act   to   be 
How     exercised,     see     §§    378-378d  performed    under   a   contract   within 
herein.  the    contemplation    of    the    code    see- 
As    to    delegation    of    power,    see  tion.''     Cheney  v.  Can  held,  158  Cal. 
§  378c  herein.  342,   .348,   .32   L.R..A.(N.S.)    16,   111 

13  See    Commonwealth    v.    St.   Pat-  Pac.  92.  93,  94,  per  Lorigan,  .). 
rick's  Benevolent  Soc.  2  Binn   (Pa.)         is  Bogards  v.  Farmer's  Mutual  Ins. 
441,  4  Am.  Dec.  453.  Co.  79  Midi.  440,  44  N.  W.  856. 

i*See  Morawetz  on   Corporations,       "Brotherhood  Railroad  Trainmen 

916 


JIUTUAL  COMPANIES— BY-LAWS  §§  365b-36S 

iinpo.-e  rules,  teiins  and  conditions,  and  ma}'  provide  for  suspen- 
sion and  i-einstatenienl.  and  a  member  will  be  bound  llierel)y  wliere 
such  rules  etc.  are  not  contrary  to  law.^^  And  a  resolution  of  a 
mutual  benefit  society  adopted  by  unanimous  vote  may  be  abro- 
gated by  a  majority  vote  of  the  members  where  it  constitutes  no 
part  of  the  contract  of  a  member. ^^ 

§  365b.  When  statutory  power  to  adopt  by-laws  is  exclusive. — 
The  sole  power  to  adopt  by-laws  for  the  manaj;ement  of  a  mutual 
insurance  corporation  may  be  vested  by  statute  in  the  policy  hold- 
ers and  the  prescril)ed  mode  must  be  followed.'^" 

§  365c.  Association  may  be  estopped  to  assert  by-law  not  properly- 
adopted. — A  nuitual  beneiit  association  may  be  estopped  to  assert 
that  certain  of  its  by-laws  have  not  been  approved  by  the  supreme 
council  and  properly  adopted.^ 

§  366.  Charter  provisions  concerning  by-laws. — Where  the  char- 
ter prescribes  the  mode  of  enactment  of  by-laws,  that  mode  must  be 
followed.^  The  charter  may,  however,  restrict  legislative  power  to 
the  supreme  lodge  and  thereby  limit  the  power  of  a  mere  minis- 

V.  Swearinger,  161  Ky.  (itio,  171  S.  oate  insiirino-  liis  life  for  $2,000, 
W.  455.  Examine  al.so  §§  352-35'2c  which  contained  a  single  covenant,  as 
licrcin.  i'ollows:     'Tliis    ccitificate    is    issueil 

^^  (iiffurd  V.  Workmen's  Ben.  uixm  the  express  condition  that  the 
Assoc.  105  Me.  17,  72  Atl.  680.  said  Michael  Dowdall  shall,  in  every 

^^McKean  v.  Biddle,  181  Pa.  361,  particular  while  a  member  of  said 
37  Atl.  528.  association,  comply  with  all  the  laws, 

^^  Empire  State  Supreme  Lodge  rules  and  requirements  thereof.'  Tlie 
of  Degi-ee  of  Honor,  In  re  (Seymour  (Id'cndant  also  delivered  to  the  plain- 
V.  Bcldeii)  103  N.  Y.  Supp.  465,  118  lift  a  jniuted  book  or  pamphlet  con- 
App.  Div.  616,  53  Misc.  344,  aftVl  laining-  the  constitution  and  by-laws 
(mem.)  103  N.  Y.  Supp.  1124;  JS.  of  the  association.  Section  6  of  ar- 
Y.  Insurance  Law,  sec.  209,  Laws  tide  3  of  the  constitution  provided, 
18!)2,  p.  2013,  c.  690;  Parker's  N.  Y.  in  substance,  tliat  all  members  should 
Tns.  L.  (ed.  1905)  pp.  321-323,  un-  be  assessed  according-  to  their  age 
der  art.  VI.  relating  to  life  or  ca.sual-  when  admitted.  The  defendant 
ty  insurance  corf)orations  upon  the  asked  the  trial  court  to  find  that  said 
co-operalive  or  assessment  plan.  See  section  6  of  article  3  so  appearing  in 
§  373  herein.  the  printed  constitution  had  not  been 

As  to  amendments  under  same  adopted,  nor  had  it  been  approved 
statute,  see  Robinson  v.  Mutual  He-  by  the  Supreme  Council,  and  its  pub- 
serve  Life  Ins.  Co.  (II.  S.  C.  C.)  159  lication  in  said  pamphlet  was  unau- 
Fed.  564  under  ^  378b  herein.  thorized.     This     request     was     very 

^Dowdall  V.  Supreme  Council  of  properly  refused  in  view  of  tlic  fact 
Catholic  Mutual  Benefit  Assoc.  196  that  some  thousands  of  the  pamphlet 
N.  Y.  405,  31  L.R.A.(N.S.)  41 7n,  89  bad  been  sent  to  members." 
N.  E.  1075,  3i)  Ins.  L.  J.  87,  rev'g  As  to  amended  by-laws — Waiver 
122  N.  Y.  Supp.  1130,  123  App.  Di\-.  and  Estoppel,  see  §§  380f  et  seq. 
913.     In  the  principal  case  the  court,   herein. 

per  Bartletf,  J.  said:  "The  plaintiff  ~  Dunslon  v.  Imperial  Gas  Co.  3 
received  from  the  defendant  a  certifi-    Barn.  &  Adol.  125. 

917 


§  367 


JOYCE  ON  INSURANCE 


terial  committee  of  an  endowment  lod.^e  with  administrative  func- 
tions only.^  And  a  cliarter  provision  l)inds  a  member  under  a  con- 
tract issued  after  its  amendment.'*  But  a  charter  wliich  authorizes 
by-laws  which  give  an  association  an  entirely  iiidefmite  power  of 
expulsion  over  members  cannot  be  sustained  in  that  respect  al- 
thoujih  it  is  common  to  found  the  right  of  expulsion  upon  the  re- 
sult of  a  trial  in  court. ^ 

§  367.  Adoption  of  by-laws  by  custom  or  usage. — Where  an  as- 
sociation or  corporation,  or  its  otticers  and  agents,  have  invariably 
and  uniformly,  for  a  sufhcient  length  of  time  pursued  a  certain 
course  of  procedure  in  a  matter  which  could  properly  have  l)een 
regulated  by  a  valid  by-law,  such  custorn  and  usage  of  the  society 
is  evidence  of  the  adoption  of  a  by-law,  ahdj^hile-iT  might  not 
strictly  be  construed  into  a  by-law.  yet  it  may  have  the  force  and 
effect  of  one  in  determining  the  rights  of  members  or  the  obliga- 
tions of  the  organization,^  although  a  b^'-law  will  not  be  assumed  to 
exist  from  a  custom  to  pursue  a  particular  course  in  regard  to  sus- 
pensions.''^ But  the  adoption  of  a  code  of  by-laws  in  the  regular 
manner  excludes  any  presumption  as  to  the  existence  or  adoption 
of  by-laws  from  custom  or  usage:  *  and  in  case  the  by-law  provides 
for  the  specific  manner  of  payment  of  assessments,  payment  in  ac- 
cordance with  this  requirement  is  sufficient  even  though  there  be  a 
custom  contrary  thereto,  inasmuch  as  the  company  cannot  avail 
itself  of  a  custom,  as  against  a  by-law,  to  declare  a  forfeiture.' 
Again,  a  usage  of  a  mutual  benefit  association,  constituting  a  part 


^  Supreme  Lodge  Knis'hts  of  Py- 
tliia.s  V.  Stein,  7')  Miss.  107,  37  L.I^.A. 
775,  65  Am.  St.  Rep.  589,  21  So.  559, 
26  Ins.  L.  J.  557.  See  also  Supreme 
Lodge  Knights  of  Pvthias  v.  Kutsi-h- 
er,  179  111.' 340,  70  Am.  St.  Rep.  115, 
53  N.  E.  620,  s.  c.  72  111.  App.  462. 

*  Harrison  v.  Philadelphia  Con- 
tributionship  for  Insurance  of  Hous- 
es from  Loss  bv  Fire,  171  Fed.  178, 
afif'd  176  Fed.  323,  99  C.  C.  A.  613. 

^  Butfhers'  Beneficial  Assoc.  No.  1, 
In  re  38  Pa.  St.  298;  Butchers'  Bene- 
ficial A.SS0C.  In  re,  35  Pa.  St.  151; 
Roehler  v.  Mechanics'  Aid  Soc.  22 
Mich.  86,  89;  Queen  v.  Saddlers'  Co. 
10  H.  of  L.  Cas.  404. 

8  State  V.  Curtis,  5  Nev.  325 ;  An- 
gell  &  Ames  on  Corporations,  9th  ed. 
sees.  328,  329 ;  Moravvetz  on  Private 
Corporations,  see.  369. 

See  also  the  following  eases: 

918 


Georgia. — Georgia  ^Masonic  Mutual 
Life  Ins.  Co.  v.  Whitman,  52  Gg. 
419. 

irii)iois. — District  Grand  Lodge  v. 
Cohn,  20  111.  App.  335,  344. 

Marjjland. — Union  Bank  of  Md.  v. 
Ridgely,  1  Har.  &  G.   (Md.)  413. 

New  York. — American  Ins.  Co.  v. 
Oakley,  9  Paige  Ch.  (X.  Y.)  496,  38 
Am.  Dec.  561. 

Pennsylvania. — Hamilton  v.  Ly- 
coming Mutual  Ins.  Co.  5  Pa.  St.  339, 
344. 

Vermont. — Henry  v.  Jackson,  37 
Vt.  431,  432. 

'  District  Grand  Lodge  v.  Cohn,  20 
Bradw.   (111.)   335. 

*  District  Grand  Lodge  v.  Cohn,  20 
111.  App.  335. 

^  As  to  custom  relating  to  payment 
of  assessment,  see  §  1361  herein. 


MUTUAL  COMPANIES— BY-LAWS  §§  3G8,  3(ji) 

of  the  contract  with  each  of  its  members,  that  Masonic  questions 
shall  be  dec-ided  by  Masonic  tribunals,  with  respect  to  whetlier  the 
members  are  Masons  or  not  under  the  requirements  of  the  by-laws 
of  the  association,  is  as  conclusive  on  the  assqciation  as  though  it 
provided  in  terms  that  the  question  of  being  or  continuing  to  be  a 
Mason  in  good  standing  should  be  decided  by  the  Masonic  officers.^" 

§  368.  Incorporated  societies:  unreasonable  by-laws. — In  incor- 
porated societies  by-laws  will  not  be  upheld  which  are  oppressive, 
vexatious,  unequal,  or  arbitrary,  and  contrary  to  the  provisions  of 
its  charter,  for  by-laws  in  such  societies  must  be  reasonable,  and  the 
power  to  enact  them  be  exercised  with  discretion,  and  not  in  a  man- 
ner manifestly  detrimental  to  corporate  interest,"  for  by-laws 
which  are  unreasonable  are  void.^^  In  determining  the  reasonable- 
ness of  a  by-law.  the  objects  and  purposes  of  the  society  must  l)e 
considered,  as  this  constitutes  an  important  factor,  for  what  might 
be  reasonably  necessary  to  effectuate  the  corporate  purposes  of  one 
society  and  promote  its  welfare,  might  l^e  unreasonable  as  outside 
the  general  purposes  of  another  organization,  and  detrimental  to 
its  interest. ^^ 

§  369.  Unincorporated  societies:  unreasonable  by-laws. — The 
rule  that  by-laws  must  be  reasonable  does  not  ap[>ly  to  unincorpo- 
rated societies  or  voluntary  a.^^sociations.  The  question  of  their  rea- 
sonableness will  not  be  inquired  into  by  the  courts,  nor  will  the 

^"Connelly     v.     Masonic     Mutual  Michigan. — Samberg  v.  Knis^hts  of 

Benefit  Assoc.  58  Conn.  5.')2,  9  L.R.A.  Modern    :Maccabees,    158    Mich.    568, 

428,  20  Atl.  671.  133  Am.  St.  Rep.  396,  16  Det.  Leg! 

"  People  ex  rel.  Stewart  v.  Young  N.  677,  123  N.  W.  25,  39  Ins.  L.  J. 

Mcn*s    leather  Matthew   Total  Ab_sti-  34;     People     (ex     rel.     Stewart)     v. 

nence  Benevolent  Soc.  41  Mich.  6<,  1  Young  Men's  Father  Matthew  Total 

N.  W.  931;  Angell  &  Ames  on  Cor-  Abstinence  Benevolent  Soc.  41  Mich. 

I)orations,  sec.  347;  Cartan  V.  Father  67,   1   N.   W.   931;    Allnutt   v.   High 

Matthew    United    Benevolent    Soc.    3  Court  of  Foresters,  62  Mich.  110,  28 

Daly   (N.  Y. )   20.     But  see  Coleman  N.  W.  802. 

v.  Supreme  Lodge  Knights  of  Honor,  3//s,so?<r/.— Mulroy      v.       Supreme 

18  Mo.  App.  189,  ''By-laws  must  be  Lodge    Knights    of    Honor,    28    Mo. 

reasonable,  and  all  which  are  uuga-  App.  463. 

tory  and  vexatious,  unequal,  oppres-  New    York. — Kent    v._  Quicksilver 

sive,  or  manifestly  detrimental  to  the  Mining  Co.  78  N.  Y.  159. 

interests     of     the     corporation,     are  North  Carolina. — Duffy  v.  Fidelity 

void;  "    Angell  &  Ames  on  Corpora-  Mutual  Life  Ins.  Co.  142  N.  Car.  103, 

tions  (9th  ed. )  sec.  347;  Morawelz  on  7  L.R.A.  (X.S.)   238,  55  S.  E.  79. 

Private  Corporations,  sec.  368.  That    amended    by-laws    must    be 

That  amendments  of  by-laws  must  reasonable,  see  §§  379k  et  seq.  here- 

be    reasonable,    see    §§    379k   et   seq.  in. 

lierein.  ^^  Commonwealth   v.    St.    Patrick's 

^^  Kenincl-ii. — Schmidt  v.  Abraham  Benevolent    Soc.   2   Binn.    (Pa.)    441. 

Lincoln  Lodge,  84  Kv.  490,  8  Ky.  L.  449,   4   Xm.   Dec.  453;   Dickenson  v 

Rep    655,  2  S.  W.  1*56.  Chamber  of  Commerce,  29  Wis.  49 

919 


§  369a  JOYCE  ON  INSURANCE 

court  declare  invalid  a  by-la^A-  of  a  voluntary  association,  agi'eed 
upon  by  its  members,  even  though  in  the  opinion  of  the  court,  it 
is  unreasonable :  ^*  and  a  member  is  bound  by  all  by-laws  which  are 
legal,  so  long  as  he  remains  in  the  society.  The  act  is  considered 
as  voluntary  on  his  part,  and  the  terms  of  the  contract  his  own  to 
the  extent,  at  least,  that  he  may  withdraw  at  any  time  and  deter- 
mine his  ]-elations  with  the  society.''^ 

§  369a.  When  by-laws  reasonable:  continued. — By-laws  have  been 
held  reasonable  under  the  following  decisions:  A  by-law  which  re- 
quires an  initiation  of  the  member  in  addition  to  a  proposition  fee 
and  being  elected,  notwithstanding  that  the  initiation  ceremony  is 
secret;  ^*  a  constitutional  ])rovision  of  a  local  lodge  precluding  ad- 
mittance to  membership  of  a  person  engaged  in  retailing  intoxicat- 
ing liquors  as  a  beverage ;  ^'  a  by-law  which  provides  that  a  mem- 
l)er  who  has  not  paid  his  dues  may  be  suspended  without  notice 
other  than  said  by-laws ;  ^*  which  provides  for  forfeiture  where 
death  is  caused  by  intemperance :  ^^  for  forfeiture  when  member  en- 
gages in  a  prohibited  occupation :  ^°  prohibiting  as  an  occupation 
the  sale  at  retail  of  intoxictiting  liquors  as  a  beverage  and  provid- 
ing for  expulsion  or  suspension  of  members  engaging  therein  after 
a- certain  date,  and  that  the  forfeiture  would  be  self-executing  and 
could  not  be  waived  by  thereafter  receiving  assessments ;  ^  provid- 
ing that  misstatement  as  to  age  is  an  offense,  and  also  fixing  the 
penalty  as  expulsion  and  the  procedure  for  trial  and  appeal;  ^  when 
the  intent  is  to  prevent  fraud,  as  where  a  period  of  six  months  is 
required  to  elapse  after  paying  up  dues  in  arrears  before  benefits 
can  be  claimed ;  ^  that  benefits  cannot  be  had  for  six  months  after 
reinstatement,  where  by-laM-  limits  new  members  benefits  to  same 
period ;  *  which  limits  relief  in  a  benefit  society  from  the  time  of 

"  Kehlinbeck  v.  Logeman,  10  Daly  20  Qninn  v.  North  American  Union, 

(N.  Y.)  44/.  _  111.  App.  —    42  Nat.  Corp.  Rep. 

^^  Grosvenor  v.  United   Society   of  593. 

Believers,  118  Mass.  78 ;  Kehlinbeck  As  to  clause  prohibiting  change  of 

"'•  i^^'/r^"^^'"'  -^^  ^^'x  ^^-  ^^-^  "^^'-^        occupation— construction       of,  ^    see 
^^  Matkm       v.       Supreme      Lodge    «  ooSQ  herein 

Knights  of  Honor,  82   Tex.   ;101,  27  1x11.              n        i  t    ^        a      •     <- 

A        e*.    T>        OOP    10  o    ^\T    on,'  ^  Wickum  v.  Grand  Lodge  Ancient 

Am.  St.  Rep.  880,  18  S.   W.  .30 1.  ^    -,      ^j   xx^   .3-  „      ^      /-.i.   -d        m/i 

17  XT-  1              r<        1  T     1       A      •     i.  Order  N.  V\  .  3/  Pa.  Co.  Ct.  Rep.  104. 
^' Mickum  V.  brand  Lodge  Ancient  oat                   xt  ^-       1    /-.          1      ^ 

Order  N.  W.  37  Pa.  Co.  Ct.  Rep.  ,/.^  ^"'"Z  ;•  .^''^^^TL  ^""T  .no 
2Q^  Knight-s   &   Ladies   or    Security,   123 

18  Nelson   v.    Modern    Brotherhood   Minn..  145,  143  N.  W.  265. 

of  America,  78  Neb.  429,  110  N.  W.  .    Stanton    v.    Eccentric    Assoc,    of 

]008  Firemen,  Local  Union   No.  56,  of  I. 

19  St.    Mary's    Benevolent    Soc.    v.  B.  of  S.  F.  114  N.  Y.  Supp.  480,  130 
Buri'ord.  70  Pa.  St.  321 ;  Harrington  App.  Div.  129. 

V.  Working  Men's  Benevolent  Assoc.  ■*  Hart  v.  Adams'  Cylinder  &  Webb 
70  Ga.  340.  Press  Printers'  Assoc.  No.  51,  75  N. 

920 


MUTUAL  COMPANIES— BY-LAWS  §  369b 

the  application  therefor;'  which  provides  for  the  investigation  by 
a  committee  of  the  condition  of  a  member  who  applies  for  such 
benefits;®  requiring  the  presentation  of  claims  to  subordinate  of- 
ficers, and,  in  case  of  a  decision  adverse  to  the  claimant,  that  an 
appeal  be  taken  to  the  governing  body  of  the  society,  and  such  by- 
law is  not  invalidated  by  a  further  distinct  invalid  provision  assum- 
ing to  make  the  decision  on  such  appeal  final  and  conclusive;  "^  pro- 
viding that  members  of  a  railroad  relie'f  association  shall  release 
the  railroad  from  damages  before  claiming  relief  from  the  society  ;  * 
a  time  limitation  of  six  months,  by  a  fraternal  society,  for  giving 
notice  of  death :  ^  providing  for  arbitration,  and  that  award  shall 
be  final  and  precluding  resort  to  law  or  equity;^"  limiting  the 
amount  of  benefits  in  case  of  suicide ;  ^^  and  a  by-law  or  rule  of  a 
board  of  fire  underwriters,  a  voluntaiy  unincorporated  association, 
prohibiting  any  member  from  taking  an  agency  of  a  company  with 
an  existing  agency  represented  in  the  city.^^ 

§  369b.  Same  subject:  police  power. — A  by-law  is  reasonable 
which  is, within  what  has  been  denominated  by  the  court  as  the 
police  power  of  a  beneficial  association,  as  where  expulsion  is  pro- 
vided for  doing  certain  acts,  such  as  defamation,  causing  dissension, 
etc.i3 

Y.    Supp.    110,    69    A  pp.    Div.    578,  Mutual  Fire  Ins.  Co.  of  Mich.  Ltd. 

cited  as  to  by-law   bein.i^'  reasonable,  v.  Attorney  General,  166  Mich.  438, 

^Brennau  V.    Franklin    Beneficial  131  N.  W."  1119. 

A.SSOC.  3  Watts  &  S.  (Pa.)  218.  As  to  by-laws  excludinc:  resort  to 

®  Van    Poucke    v.    Nefherland    St.  civil  courts,  see  §i^  372  et  seq.  herein. 

Vincent  de  Paul   Soc.   63   Mich.  378,  As  to  arbitration  and  award  daus- 

29  N.  W.  86;>.     See  Lucas  v.  Tliomp-  es  and  validity;  generally,  see  §§  3731 

.son,   146    Pa.    St.   31.'),   23   Atl.    321;  et  seq.  herein. 

Harrington  v.  VVorkingnien\s  Benevo-  ^^  Scow  v.  Roval  League,  223  111. 

lent  Assoc.  70  Oa.  :!40.  32,  79  N.  E.  42. 

'Supreme       Council       Order      of  As  to  suicide  clauses,  see  §§  2635, 

Chosen     Friends    v.     Forsinger,    125  et  seq.  herein. 

Ind.    52,    21    Am.    St.    Rep.'^  196,    9  ^2  Louisville  Board  of  Fire  Under- 

L.R.A.    501,    25    N.    E.    129,   see    §§  v.riters  v.  Johnson,  133  Ky.  797,  24 

372  et  seq.  herein.  L.R.A.(N.S.)    153   (annotated  on  le- 

^  State    V.    l->aUimore    &    Ohio    Rd.  gality  of  combination  among  under- 

Co.  36  Fed.  655.     See  also  Fuller  v.  writers),  119  S.  W.  153. 

Baltimore  &  Ohio  Employees'  Relief  ^^  Del  Ponte  v.  Soeieta  Italiana  Di 

Assoc.  67  IVld.  433,  10  Atl.  237.  M.  S.  Guglielmo  Marconi,  27  R.  I.  1, 

9  Ilalas     v.     Narodni     Slovenssky  70  L.R.A.  188,  114  Am.  St.  Rep.  17n, 

Spolok,  —  111.  App.  — ,  43  Nat.  Corp.  60  Atl.  237.     The  court  per  Dubois, 

Repr.  286.  J.  said:    "The  power  of  expulsion  in 

A.s  to  by-laws  as  to  notice  of  death,  a  corporation  is  included  in  wliat  may 

etc.  see  §  3298  herein.  be     denominated    its    police    power, 

^°  Russell  v.  Nortli  American  Bene-  which  is  derived  from  tlie  law  of  self- 
fit  Assoc.  116  Mich.  699,  5  Det.  Leg.  preservation." 

N.  113,  75  N.  W.  127.     See  Patrons  As  to  expulsion   of  member:   ter- 

921 


§§  369e-370 


JOYCE  ON  INSURANCE 


§  369c.  When  by-laws  unreasonable:  continued. — A  by-law  i?  un- 
reasonable whicli  provides  that  the  mailing  of  notices  of  assessments 
may  be  conclnsively  shown  by  the  certificate  of  an  officer  of  the  cor- 
poration who  is  not  required  to  be  personally  cognizant  of  the  fact ;  " 
which  precludes  member  from  benefits  of  order  when  he  is  sick 
after  he  is  in  arrears  even  though  he  makes  payment  thereof  and 
the  association  thereafter  continues  to  accept  his  dues :  ^^  which 
limits  the  time  of  commencing  action  to  six  montlis  after  death  of 
insured  where  the  company's  final  determination  as  to  payment  of 
the  claim  is  not  made  until  within  a  few  days  of  the  expiration  of 
said  limited  period. ^^  So  provisions  of  the  constitution  and  by- 
laws are  unreasonable  where  they  deny  the  right  to  resort  to  civil 
courts  until  remedies  within  the  order  are  exliausted  and  the  next 
meeting  of  the  tribunal  to  which  an  ai)i)eal  can  lie  made,  is  in  a 
foreign  country  at  a  date  three  years  after  the  claim  in  question 
accrues.^' 

§  369d.  When  member  bound  by  unreasonable  by-laws. — It  is 
held  that  an  unreasonable  by-law  may  be  good  as  a  contract. ^^  So,, 
by-laws  existing  when  a  person  becomes  a  member  may  obligate 
liini,  notwithstanding  they  are  unreasonable,  where  he  voluntarily 
agrees  to  be  bound  liy  becoming  a  member.^^ 

§  370.  By-laws  must  not  be  unequal:  discrimination. — A  by-law 
must  apply  equally  and  he  capable  of  like  o[)eration  as  to  all  mem- 
bers. By-laws  which  discriminate  against,  or  in  favor  of,  certain 
members,  to  the  exclusion  of  others,  are  invalid.^"     J>iit  members 

raination    of    risk:    jurisdiction,    see  see  notes  in  4!)  L.K.A.  38'J;  8  L.R.A. 

§§  14.56,  3502,  3520  herein.  (N.S.)    Olti;    and    52    L.R.A.(N.S.) 

i^DuttV    V.    Fidelity    Mutual    Life  840. 

Ins.    Co."  142   N.    C.    103,    7    L.R.A.  ^^Pi^rdv    v.    Banker.s    Life    As.soc. 

(N.S.)  238,  55  S.  E.  79.  104  Mo.  App.  91,  74  S.  W.  486. 

IS  Phoenix   Council   No.  85,  Junior  ^^  Stanton  v.  Eccentric  Association 

Order  United  Ameri^-au  Mechanics  v.  of  Firemen,  Local   Union  No.   56  of 

Bennett,  26  Ohio  Cir.  Ct.  Rep.  110;  I.  B.  of  S.  F.  114  N.  Y.  Supp.  480, 

Bennett   v.   Plurnix    Council    No.   85,  130  App.  Div.  129. 

Junior  Order  United  American  Me-  20  p^^^pie      (ex     rel.     Stewart)     v. 

chanics,  14  Ohio  Dec.  593.  Young:  Men's  Father  JNLatihew  Total 

i6]\Iaoner    v.    ^lutual    Life    Assoc.  Abstinence  Benevolent  Soc.  41  Mich. 

44  N.   Y.   Supp.  862,  17  App.   Div.  67,  1  N.  W.  931;  Taylor  v.  Griswold, 

13,  aff'd  in  162  N.  Y.  657,  57  N.  E.  14  N.  J.  L.  223.     See  Clevenijer  v. 

1116.  Mutual  Life  Ins.  Co.  2  Dak.  114,  3 

1'^  Lindahl  v.  Supreme  Court,  Inde-  N.  W.  313. 

pendent     Order    of     Foresters,     100  Powe^  of  mutual,  etc.,  companies 

Minn.  87,  8  L.R.A. (X.S.)   916n,  117  or  associations  to  classify  members: 

Am.  St.  Rep.  666,  110  N.  W.  87.  discrimination,  see  §  350b  herein. 

On  the  validity  of  requirement  that  As     to     amended     by-laws,     etc.: 

remedies    within    the    order   must   be  classification:       discrimination,      see 

exhausted  before  resort  to  civil  courts,  i^  380e  herein. 

922 


MUTUAL  COMPANIES— BY-LAWS  §  371 

may  be  classified  by  fraternal  benefit  societies  where  the  statute  so 
provides.^ 

§  371.  By-laws,  rules,  and  regulations:  when  valid. — A  by-law  is 
not  invalid  which  is  fairly  within  the  scope  of  the  general  purposes 
of  the  organization,  and  it  has  been  held  that  in  determining  what 
are  the  purposes  of  an  association  the  courts  will  liberally  construe 
its  articles,  especially  if  the  provisions  are  meritorious ;  ^  and  a  by- 
law of  a  fraternal  order  is  not  void,  even  though  not  adopted  in 
conformity  with  prescribed  rules  of  procedure  Avhere  it  is  otherwise 
lawfully  enacted.^  So,  a  mutual  insurance  company,  unless  pre- 
vented by  the  terms  of  its  charter,  may  enact  a  by-law  that  if  an 
assessment  on  a  premium  note  is  not  paid  within  thirty  days  after 
demand,  the  policy  for  which  said  note  is  given  shall  be  void  until 
the  assessment  is  paid.* 

By-laws  are  also  valid  which  provide  a  self-executing  rule  for  sus- 
pending a  member  in  case  of  failure  to  promptly  pay  assessments 
and  dues ;  ^  which  give  procedure  for  expulsion  of  members  when 
such  rules  and  regulations  are  not  so  grossly  unfair  as  to  be  con- 
trary to  public  policy;  ^  by-laws  of  a  fraternal  order  providing  that 
misstatement  as  to  age  is  an  oftense,  also  fixing  the  penalty  as  ex- 
pulsion, and  the  procedure  for  trial  and  appeal;"^  which  provide 
for  notice  of  a.ssessment  by  mail ;  ^  that  remedies  within  the  order 
be  exhausted  before  resorting  to  the  courts  ;9  for  arbitration,  that 
award   shall   be   final,   and   wholly   precluding   resort   to   law   or 

1  Ellison  V.  District   Grand  Lodge    Knights   &   Ladies   of   Security,   12-1 
No.   23,   United   Order   of   Odd   Fel-   Minn.  iSi,  145  N.  W.  120. 
lows,  11  Ala.  App.  442,  66  So.  872;       '^Marcus    v.    National    Council    of 
acts  11)11,  pp.  701,  702,  716,  sees.  5,    Knights   &   Ladies   of   Security,  123 
Q^  9^  23a.  Minn.  145,  143  N.  W.  265. 

'  2  Gundlack  v.  Germania  Mochan-  ^  Dudley  v.  Fidelity  Mutual  Life 
ics'  Assoc.  4  Hun  (N.  Y.)  339,  .341,  Ins.  Co.  142  N.  Car.  103,  7  L.R.A. 
49  How.  Pr.  (N.  Y.)  190.  (N.S.)   238,  55  S.  E.  79,  s.  c.  143  N. 

3  Supreme  Lodge  Knights  of  Pyih-    Car.  69/,  55  S.  E.  1047. 
ias  V.  Kutscher,  l79  111.  340,  53  N.        As  to  service  of  notice  by  mail,  see 
E.  620,  rev'g  72  HI.  App.  462.  §  1336  herein. 

*  Foo'el  V.  Lycoming-  Ins.  Co.  3  ^  King  v.  Wynema  Council  No.  10, 
Grant  ll^as.   (Pa.)   77.  Daughters  of  Pocohontas,  Improved 

^Gifford  V.  Workmen's  Benefit  Order  of  Red  Men,  25  Del.  (2 
'  Assoc.  105  Me.  17,  72  Atl.  080;  Old-  Boyce's)  255,  78  Atl.  845;  Supreme 
ham  V.  Supreme  Lodge  Modern  Council  of  the  Order  of  Chosen 
Brotherhood  of  America,  110  :\Io.  Friends  v.  Forsinger,  125  Ind.  52,  9 
App.  564,  157  S.  W.  92.  Compare  L.K.A.  501,  21  Am.  St.  Rep.  196,  25 
§§  1261,  1264  herein.  N.    E.    129;    Cotter  v.   Grand  Lodge 

'  On  necessity  for  compliance  with    Ancien]  Order  U.  N.  23  Mont.  82,  57 
by-laws  as  to  payment  of  assessment,   Pac.  650. 
see  note  in  38  L.R.A.(N.S.)  571.  On    validity    of    requirement    that 

6  Kulbero-     v      National     Council,    remedies  within  the  order  must  he  ex- 

923 


§§  371a,  371b 


JOYCE  ON  INSURANCE 


equity ;  ^°  that  a  decision  of  a  tribunal  created  by  a  mutual  benefit 
a.«<ociation  .«liall  be  final  and  shall  bar  a  suit  in  law  or  equity  to  re- 
cover claims;  ^^  and  prescribing  a  rule  necessitating  proof  of  actual 
death,  irrespective  of  time  of  absence  or  disappearance  of  member.^^ 
Again,  a  by-law  or  rule  of  a  board  of  fire  underwriters,  a  voluntary 
association  which  prohibits  a  member  from  taking  an  agency  witli 
an  existing  agency  represented  in  the  city  is  neither  arbitrary,  op- 
pressive nor  illegal. ^^ 

§  371a.  By-law  providing  wedding  gift  valid:  ultra  vires. — A 
by-law  which  provides  for  a  specified  sum  of  rfioney  as  a  wedding 
gift,  after  the  continuance  of  membership  for  one  year,  upon 
marriage  between  persons  of  a  certain  faith,  if  necessary,  to  pay 
the  wedding  gifts  or  presents  according  to  the  circumstances  of 
the  society,  is  valid  and  not  ultra  vires,  and  is  within  one  of  the 
objects  of  the  society  '^to  elevate  the  moral-  and  social  standing  of 
its  members,"  and  is  also  valid  upon  the  ground  that  its  purpose 
was  to  encourage  marriage  on  the  part  of  its  members  in  accord- 
ance with  such  forms  and  ceremonies  as  would  tend  to  promote  the 
religious  faith  of  its  members.^* 

§  371b.  When  by-laws  invalid. — As  stated  elsewhere  herein  un- 
reasonable by-laws  are  void,^^  as  are  also  by-laws  or  amendments 
thereto  which  impair  contract  obligations  or  vested  rights. ^^     So, 


hausted  before  resort  to  the  eourts,  ^^  Kelly    v.    Supreme    Council    of 

see  notes, in  49  L.R.A.  382;  8  L.K.A.  Catholic    Mutual    Benefit    Assoc.    46 

(N.S.)    916;    and    52    L.R.A. (N.S.)  App.  Div.   79,  61  N.  Y.   Supp.  394. 

840.  Contra,  Samberg  v.  Knights  of  Mod- 

Compare  §§  352-332c  herein.  ern   Maccabees,   158   Mich.   568,   133 

lORuscell  V.  North  American  Bene-  Am.   St.  Rep.   396,  16  Det.  Leg.  N. 

fit  Assoc^  116  Mich.  699,  5  Det.  Leg.  677,  123  N.  W.  25,  39  Ins.  L.  J.  34. 

N.  113,  to  N.  W.  137.     See  also  Pa-  On   validity   of  by-law   of  mutual 

Irons'  Mutual  Fire  Ins.  Co.  of  Mich,  benefit  society  refusing  to  pay  indem- 

Ltd.  V.  Attorney  General,  166  Mich,  nity  upon  presumption  of  death  from 

438,  131  N.  W.  1119.  seven    years'    absence,    see    note    in 

As  to  arbitration  and  award  elaus-  L.R.A.1915B,  793. 


es    and    validity ;    generally,    see    §§ 
3731  et  seq.  herein. 

^^  Hembeau    v.     Great     Camp     of 


As  to  presumption   of  death :  evi- 
dence, see  §  3772  herein. 

^^  Loui.-^ville  Board  of  Fire  Lander- 


Knights  of  Maccabees,  101  Mich.  161,  writers  v.  .lohnson,  133  Kv.  797,  24 

49  L.R.A.  59_2,  45  Am.  St.  Rep.  400,  L.R.A. (N.S.)   153   (annotated  on  le- 

59  N.  W.  41y.  gality  of  combination  among  under- 

On   conclusiveness   of  decisions  of  wiiters),  119  S.  W.  153. 

tribunals  of  a.ssociations  or  corpora-  ^*  Pterin   v.  ^liusker  Young  Men's 

tions,  see  notes  in  49  L.R.A.  353;  2  Commercial    Aid    Assoc.    147   N.   Y. 

L.R.A. (N.S.)    672;    and    52    L.R.A.  Supp.  440. 


(N.S.)  SOU,  823. 

But  compare  as  to  by-laws  exclud- 
ing resort  to  civil  eourts,  §  372  here- 
in. 

924 


^*  See  §  368  herein. 

^^  See  §§  380  et  seq.  herein. 


MUTUAL  COMPANIES— BY-LAWS  §  371c 

amendments  to  Ijy-laws  even  nnder  a  reserved  power  to  adopt 
the  same  mu^^t  1)0  reasonable  to  be  valid. ^"^ 

By-Unvs  which  prohibit  a  mutual  benefit  organization  from  doing 
that  which  it  has  power  to  do.  as  in  case  of  waiver  of  its  by-laws,  are 
void.^^  So,  a  by-law  of  a  beneficial  association  is  held  invalid  where 
it  attempts  to  invest  an  ofhcer  thereof  with  powers  which  usm-p  ju- 
dicial functions  of  government  by  autliorizing  him  to  construct  a 
law  as  to  limitation  of  .tlic  association's  liahiHty  and  making  such 
construction  binding  u])on  a  member. ^^  And  a  by-law  is  invalid 
which  ])r<)vi(lcs  that  Ibe  recei))t  and  retention  of  unpaid  delinquent 
dues  and  assessments  in  case  a  susj)ended  member  is  not  in  good 
health  shall  not  liavc  the  effect  of  reinstating  such  meml^er  or  en- 
title him  or  his  beneliciarics  to  any  rights  under  his  certificate; 
especially  so  where  such  delinquent  dues  and  assessments  are  re- 
ceived and  retained  by  the  association.^"  .\  by-law  is  also  void 
which  provides  thiil  the  members  of  an  insurance  company  shall 
bring  a  suit  in  a. certain  county  where  theii-  claims  are  disallowed 
by  the  directors.^  So,  a  provision  of  a  l)y-law  as  to  proximity  of 
risks  will  be  rejected  where  it  is  meaningless  and  unintelligible  as 
to  what  risks  it  intends  to  prohibit,^  and  a  by-law  is  void  wliich 
limits  the  number  of  daj^s  within  wbich  an  assessment  nuist  l)e 
paid  to  one-tenth  the  period  required  for  notice  thereof  under  the 
constitution.^ 

§  371c.  By-laws  valid  in  part  and  void  in  part. — A  by-law  which 
consists  of  several  distinct  and  independent  [)arts  may  be  valid  as 
to  one  part,  though  void  as  to  the  otliers:  ■*  but  it  is  otherwise  where 
the  by-law  constitutes  an  entirety,  each  part  of  whieh  depends  ui)on 
the  other  j)art-.  for  it  is  void  as  to  the  whole  if  void  in  a  matei'ial 
part^  A  by-law  providing  for  expulsion  wilhoiil  any  right  on  the 
part  of  the  meml)er  to  be  heai'd  in  defense  is  void  only  to  the  ex- 

"  See  S  37!)k  lieiein.  Co.  (i  Gray  (72  Mans.)  174.    Wliether 

Incline  v.  Sovereign  Camp  "Wood-  by-law    is   void,   see    Matt    v.    Roman 

men  of  tlie  World,  111  Mo.  App.  (iOl,  Catliolic      Mutual      ProU-clive      Soe. 

8t)  S.  W.  501.  TO   Iowa,  4.55,  :;0  N.  W.   /O!). 

13  Fraternal    Aid    As.soc.   v.   Hitch-  ^  p„,^i^yj,j.^,  ^.    [,^^^.„^p^.j.;•  ^^^  Iial)orers' 

cock,  121   HI.  App.  402.  Co-operative    Ins.    Co.   77   Mo.    App. 

20(iodwin      V.      National      Council  (i.iO,  2  Mo.  App.  Repr.  128.  ^ 

Kni"-lil.s   &    Ladies    of    Securitv,    Kili  ^  Illinois  Conuncrcial   .Men's  A.ssoc. 

Mo.'  App.    289,   148   N.    W.    OSO,   41  v.  Walil,  ()8  III.  Apj).  411. 

Ins.  L.  J.  139;j    ((lue.stit)n  of  waiver  As  to  validity  of  i)rovisions  as  (o 

of  forfeiture   was   also   involved,    at-  assessments,  see  ^  1240  herein, 

thous'li  the  i)oint  in  tiie  text  as  to  m-  *Anicsl)ury    v.     Bowiliu-li     .Mutual 

validitv    was    directly    adjudicated);  Fire  Ins.  Co.  ()  Gray  {  (2  .Mass. )  5i)(i. 

Schuster  v.  Ivnislits  &  Ladies  of  Se-  *  State  v.  Curtis,  9  Nev.  ;;25;  An- 

ourity,  fiO  Wash.  42.  110  Pac.  680.  gell    &    Ames   ou    Corporations,   see. 

1  Nute    v.    Hamiltoa    Mutual    Ins.  358. 

925 


§  372 


JOYCE  ON  INSURANCE 


tent  that  it  deprives  him  of  a  right  which  might  resuU  to  his  bene- 
fit.« 

§  372.  By-laws  excluding  resort  to  civil  courts:  constitutional 
provisions. — Tluit  by-laws  may  not  by  their  provisions  wholly  ex- 
clude members  from  resorting  to  the  civil  courts  for  remedies  under 
contracts  of  insurance  is  substantially  and  by  analogy  held  in  sev- 
eral cases.''^  although  cases  to  the  contrary  are  numerous.*  A  dis- 
tinction, however,  should  be  made  between  those  by-laws,  or  consti- 
tutional provisions  which  have  reference  to  disputes  of  members 
among  themselves,  and  those  which  apply  to  contests  with  the  order 
over  payment  of  losses  under  the  contract.^     In  Indiana,  it  is  lield 


^  Berkhout  v.  Supreme  Council 
Royal  Arcanum,  62  N.  J.  L.  103,  43 
Atl.   1. 

'  California. — Grimbley  v.  Ilar- 
rold,  125  Cal.  24,  73  Am.  St.  Rep. 
19,  .37  Pac.  0.38. 

Indiana. — Sui)reme  Council  Cath- 
olic Benevolent  Legion  v.  Grove,  176 
Jnd.  356,  36  L.R.A.(N.S.)  913,  96 
N.  E.  159;  Supreme  Council  Order 
of  Chosen  Friends  v.  Gan-iaus.  104 
Ind.  133,  54  Am.  Rep.  298,  ^^3  N.  E. 
818;  Bauer  v.  Sampson  Lods-e,  102 
Ind.  262,  1  N.  E.  571;  Elkhart  M\\- 
tual  Aid  Benevolent  &  Relief  Assoc. 
V.  Houghton,  98  Ind.  149;  Kestler  v. 
Indianapolis  &  St.  Louis  R.  R.  Co. 
88  Ind.  460;  Voluntar>-^  Relief  De- 
jiartment  v.  Spencer,  17  Ind.  App. 
123,  46  N.  E.  477. 

Maine. — Stejilien.^on  v.  Piscataqua 
Fire  &  ]\larine  Ins.  Co.  .54  Me.  70. 

Massachusetts. — Wood  v.  Humph- 
rey, 114  .Alass.  185. 

Michigan. — Russell  v.  North  Amer- 
ican Benefit  Assoc.  116  ]\Iich.  699,  5 
Det.  Ijeg.  N.  113,  75  N.  W.  137. 

Missouri. — ]\IcAIahon  v.  Su]ireme 
Tent  Knights  of  jMaccabees,  151  Mo. 
522,  52  ^S.  W.  384;  Mulroy  v. 
Kniglits  of  Honor,  28  Mo.  App.  463. 

Pennsijlvania. — Sweeney  v.  Rev. 
Huiili  AlcLauglilin  Benevolent  Soc.  14 
Wkly.  N.  Cas.  (Pa.)  466;  Myers  v. 
Fritchman,  6  Pa.  Super.  Ct.  580. 

Tihofle  Island. — Pepin  v.  Societe  St. 
Jean  Baptiste,  23  R.  I.  81,  49  Atl. 
387. 

West   Virgini a. -^K'mney  v.   Balti- 

9 


more  &  Oliio  Emplovees'  Relief 
Assoc.  35  W.  Va.  385,  1.5  L.R.A.  142, 
14  S.  E.  8,  21  Ins.  L.  J.  176. 

As  to  jurisdiction  of  tribunals  of 
mutual  l)eneHt,  etc.,  societies  or  as- 
sociations, see  §§  3502,  3520  herein. 

*  California. — Robinson  v.  Templar 
Lodge  No.  17,  Independent  Order  of 
Odd  Fellows,  117  Cal.  370,  49  Pac. 
170. 

Man/lavd. — Anacosia  Tribe  v. 
Murbach,  13  Md.  911,  71  Am.  Dec. 
625. 

Michigan. — Hembeau  v.  Great 
Camp  of  Knights  of  Maccabees.  101 
:\lich.  161,  45  Am.  St.  Rep.  400,  49 
L.R.A.  592,  59  N.  AY.  417;  Canheld 
V.  Great  Camp  of  Knights  of  Macca- 
bees, 87  Mich.  626,  24  Am.  St.  Rep. 
186,  13  L.R.A.  62.5,  49  N.  \Y.  875;  21 
Ins.  L.  J.  3. 

Minnesota. — Rigler  v.  National 
Council  Knights  &  Ladies  of  Securi- 
ty, 128  Minn'.  51,  150  N.  AY.  178  (ex- 
pulsion: tinaUty  of  judgment). 

Xew  York. — Wilcox  v.  Supreme 
Lodge  Roval  Arcanum,  210  N.  Y. 
370,  .52  L.R.A. (N.S.)  806,  104  N.  E. 
624,  att'g  136  _N.  Y.  Supp.  377,  151 
App.  Div.  29/  (when  judgment  of 
expulsion  not  reviewable). 

Ohio. — Cincinnati  Lodge  No.  3,  In- 
dependent Order  Odd  Fellows  v. 
LittUburv,  6  Cin.  L.  Bui.  237,  8  Ohio 
Dec.  194,"  8  Wkly.  L.  Bui.  237. 

England. — Scott  v.  Avery,  5  H.  of 
L.   Ca.<.  811. 

^  Bukofzer  v.  Fnited  States  Grand 
Lodsre,  Independent  Order  Sons  of 
26 


MUTUAL  COMPANIES— BY-LAWS  §  372a 

that  a  by-law  of  a  mutual  benefit  society  which  provides  that  a 
member  claiming  Ijcnelits  must  make  proof  of  loss  before  certain 
subordinate  officers,  and,  if  their  decision  is  against  him,  appeal  to 
higher  officers,  whose  decision  shall  be  final,  is  valid  in  so  far  as  it 
requires  such  an  appeal  to  be  taken  before  suit  may  be  brought  on 
the  membership  certificate,  and  void  in  so  far  as  it  declares  the  de- 
cision of  the  appellate  tribunal  final  so  as  to  bar  a  resort  to  the 
courts.^" 

§  372a.  Same  subject:  when  courts  will  not  intervene:  decisions. 
— A  provision  of  the  laws  of  a  mutual  benefit  society  formed  by  the 
\oluntury  association  of  its  memljers,  that  the  determination  of  the 
tribunals  of  the  society  upon  an  endowment  certificate  payable  on 
the  death  of  a  memljer  shall  be  conclusive,  and  that  no  suit  at  law 
or  in  equity  shall  be  commenced  by  any  member  or  beneficiary,  is 
not  invalid  as  against  public  policy,  in  ousting  the  courts  of  juris- 
diction." And  where,  in  conformity  with  the  associations  by-laws 
making  its  finding  final,  a  claim  is  voluntarily  submitted  to  such 
association's  tribunal  the  party  submitting  said  claim  is  bound 
where  the  decision  is  made  in  good  faith. ^^  80,  it  is  held  that 
where  the  plaintift'  in  pursuance  of  a  judgment  of  the  state  court 
has  presented  his  demands  to  the  courts  of  the  defendant  order,  he 
is  not  permitted  to  take  the  judgment  of  these  tribunals,  and  there- 
after, the  judgment  being  adverse  and  in  fraudulent  conduct  being 
charged  or  relied  on,  pursue  his  remedy  in  the  state  courts. ^^  Nor 
will  the  state  court  interfere  in  a  direct  attack  by  a  local  council  to 
vacate  the  judgment  whether  final  or  not,  of  the  state  council  on 
appeal  regularly  taken  and  decided  a,s  provided  by  the  rules  of  the 
order.^*     Again,  where  a  by-law  of  a  beneficial  association,  consti- 

Benjamin,   15  N.   Y.   Supp.   922,  40        "  Canfield     v.     Great     Camp     of 

N.  Y.  Lt.  R.  6r)3,  aft'd    (mem.)    139  Kiii.fflits  of  Mar-cabees,  87  Midi.  626, 

N.  Y.  612,  35  N.  E.  204.     See  also  13    L.R.A.    625n,    24   Am.    St.    Rep. 

Patrons'  Mulual  Fire  Ins.  Co.  v.  At-  186,  49  N.  W.  475.     See  also  Ilem- 

lorney   General,'  166  Mu-h.  438,  131  beau   v.  Great   Camp  of  Knialits  of 

N.  W.  1119  (considered  under  §  372a  Maccabee.s,  101  Mieh.  161,  49  L.R.A. 

berein)  ;  Kelly  v.  TrinionI  Lodce  Xo.  592,  45  Am.  St.  Rep.  400,  59  N.  W. 

249;  Independent  Order  Odd  Fellows,  417. 

154  N.  Car.  97,  52  L.R.A. (N.S.)  823,        12  Derrv  v.  Great  Hive,  Ladies  of 

()9  S.  E.  764,  40  Ins.  L.  J.  268.     See  Modt'vn    Maecabees,    135   Micb.   494, 

§  352c  herein.  98  S.  W.  23 ;  Barker  v.  Great  Hive, 

1°  Supreme    Council    of    Order    of  Ladies    of    Modern    Maccabees,    135 

Cbosen  Friends  v.  Forsinijer,  125  Ind.  Mi,.],    499    98  N    W    '^4 

52,  9  L.R.A.  501,  25  N.  E.  129.  13  lir      '  xt    '  t^^       a  1-1 

'r\  1     •  ^    1     •  ■  P       13  Alonffer  v.  New  Era  Assoc.  1^1 

On    fonclusiveness   ot   decisions  or  ,,.  ,     rtA    -10-7  xr   wr   ro-i    ai  t        t 

.   •,        ,      ,.         ,^11        (>(         .^,;„  Mu'b.  614,  137  N.  W.  631,  41  Ins.  L. 

tribunal    ut    mutual    Ijeneiit    aasoeia-  _     -,^00      o       ■\t  -\t        -c^ 

,.  ^  f       u       Ri  J  J.   1/88.     See   Monsrcr   v.   New   Era 

tions  upon   claims   tor   benents,   and  .  -ic^    tvi-  1       ^-i-     o  1     t  r>  a 

J   ,      ,  ^     ,        ,  -i-  n  •      „  As.soc.    156    Micb.    64o,    24    L.R.A. 

dutv  to  e.xbaust  remedies  witbin   as-  ...^^  j^  ,    moT    101   xt    tit    qoq 

•    ,  -  ,      •      -o  T    r>    A    /  XT  c  %      (iN.o.)    lU.i/,   IZl   JN.    Vy  .   o_0. 

sociation,  see  note  in  o2  L.K.A.(N.b.)     ^  '  '  '  . 

823.  •  *  Lincoln    Council    No.    1,    Junior 

927 


Oi 


2b 


JOYCE  ON  INSURANCE 


tilting  part  of  tlie  contract  between  the  council  of  the  a.ssociation 
and  assured  provides  that  should  any  person  feel  aggrieved  at  the 
action  of  the  council  for  failing  to  pay  Ijenefits  claimed  to  be  due, 
such  ])erson  may  appeal,  upon  notice  given,  etc.  and  if  such  person 
still  feels  aggrieved  lie  may  appeal  to  the  Ijoard  of  appeals  and  if  he 
fails  to  do  so  the  action  of  the  council  shall  Ijc  linal  and  conclu- 
sive, includes  and  binds  both  members  and  beneficiaries,  and  must 
be  complied  with  before  resorting  to  the  coiu'ts  for  relief.^^  And  a 
beneficiary  is  precluded  from  obtaining  the  aid  of  the  courts  where 
tlie  deceased  had  been  suspended  and  was  not  in  good  standing  at 
the  time  of  his  decease,  and  an  appeal  had  not  been  prosecuted  by 
his  representative  or  said  beneficiary  and  the  latter  had  failed  to 
appeal  from  the  rejection  of  her  claim;  and.  therefore,  the  reme- 
dies provided  for  under  the  by-laws  have  not  been  exhausted  the 
decision  of  the  order  was  final. ^®  So,  by-laws  of  a  mutual  fire  in- 
surance company  providing  for  a  board  of  arbitration  to  report  on 
the  loss  and  claim  of  assured  and  providing  that  its  jurisdiction 
shall  be  exclusive  and  its  decision  final  are  valid  and  do  not  conflict 
with  a  statute  authorizing  suits  in  sixt}'  days  from  the  date  a  claim 
shall  become  due.  And  as  no  claim  can  become  due  until  such 
board  awards  it,  the  by-law  does  not  oust  the  courts  of  jurisdiction, 
and  the  board's  decision  is  final  when  there  is  no  bad  faith  in  its 
decision.  80  it  is  declared,  per  Bird,  J.,  that:  "The  doctrine  is 
well  established  in  this  state  that  members  of  a  voluntary  society 
may  set  up  a  tribunal  to  adjust  the  diiferences  tliat  arise  between 
the  association  and  its  members,  and  make  its  decision  final  in  the 
absence  of  bad  faith  or  a  refusal  to  act  or  to  pay  after  an  adjudica- 
tion has  taken  place."  ^' 

§  372b.  Same  subject:  when  courts  will  intervene:  decisions. — • 
A  provision  of  a  by-law  for  reference  to  the  directors  for  final  ad- 
justment where  the  adjuster  and  assured  disagree  does  not  have  the 
effect  of  making  such  director's  decision  final  so  as  to  preclude  a 
resort  to  the  courts, ^^  and  if  the  right  of  appeal  within  the  order 
is  denied,  resort  may  be  had  to  the  civil  courts. ^^     So,  "valid  rea- 


Orcler  United  American  Mer-hanics  v.  l'^  Patrons'  Mutual  Fire  Ins.  Co.  v. 

State    Council    Junior   Order   United  Attornev  General,  IGG  .Mich.  438,  1?A 

American  Mechanics,  78  N.  J.  L.  Ill,  N.  W.  1119. 

73  Atl.  24").  On   conclusiveness^   of  decisions   of 

^^  King"   v.    Wynema    Council,   No.  tribunals  of  associations  or  corpora- 

10,  Dauoliters   of  Pocohontas,  I.   O.  tions,  see  notes  in  49  L.R.A.  353;  2 

of  R.  M.  2.-)  Del.  (2  Bovee's)  255,  78  L.R.A.(N.S.)     072;    and    52    L.R.A. 

Atl.  845.  (N.S.)  800,  823. 

^^  Conlev  v.  Supreme  Court  Inde-  ^*  Downing-    v.     Farmers'     Mutual 

pendent   Order  Foresters,  158   Mich.  Fire  Ins.  Co.  158  Iowa,  1,  138  N.  W. 

100,   122   N.   W.  507,  38   Ins.   L.   J.  917. 

1112.  ^^  Ruterbuseh.   v.    Supreme    Court 

928 


MUTUAL  COMPANIES— BY-LAWS  §  373 

sons"  for  which,  under  his  contract,  a  person  may  be  reinstated  in 
a  benefit  association  after  faihire  to  pay  an  assessment,  are  not  to 
be  arbitrarily  determined  by  its  officers,  but  their  determination  is 
subject  to  review  in  tlic  conrt'*.^" 

In  a  Nebraska  case  involving  a  relief  department  in-  the  nature 
of  a  mutual  insurance  association  maintained  in  connection  with  a 
railroad  company,  its  employees  being  the  members,  the  court,  per 
Irvine,  C,  said :  ''A  section  of  the  rules  of  the  department  provides 
that  all  questions  or  controversies  of  whatsoever  character  arising  in 
any  manner  or  between  any  parties  or  persons  in  connection  with 
the  relief  department,  or  operation  thereof,  whether  as  to  the  con- 
struction of  language  or  the  meaning  of  the  regulations  of  the  re- 
lief department,  or  as  to  any  right,  decision,  instruction,  or  acts  in 
connection  therewith,  shall  be  submitted  to  the  determination  of 
the  superintendent  of  the  department,  whose  decision  shall  be  final 
and  conclusive,  subject  to  the  right  of  appeal  to  the  advisory  com- 
mittee. Based  upon  this  rule,  the  defendant  requested  an  instruc- 
tion that  if  the  jury  believed  that  the  superintendent  had  passed 
upon  this  claim,  and  rejected  the  same,  such  decision  was  conclu- 
sive, unless  an  appeal  had  been  taken  to  the  advisory  committee. 
This  instruction  was  properly  refused.  We  have  no  doubt  of  the 
power  of  members  of  voluntary  associations  to  restrict  themselves, 
at  least  as  to  matters  incidental  to  the  operation  of  the  association, 
to  remedies  before  tribunals  created  by  the  association.  It  is  only 
to  this  extent  that  the  rule  seems  to  apply."  And  it  wa.s  held  that 
such  rule  did  not  preclude  an  action  to  enforce  payment  of  a  death 
benefit.^ 

§  373.  By-laws  must  not  be  contrary  to  laws  of  state  or  United 
States. — All  by-laws  must  be  consistent  with  the  constitution  and 
laws  of  the  state  and  of  the  United  States,  as  well  as  with  particular 
statutes  which  relate  to  the  corporation  and  which  do  not  imj)air  the 
charter  obligation.^  And  where  a  statute  empowers  mutual  hene- 
.  fit  associations  to  make  regulations  for  their  own  government  not 
contrary  to  United  States  or  state  laws,  the  Federal  and  state  con- 
stitutions are  included  within  the  term  ''laws."  '     So,  the  charter 

Inde{5enclent    Order    Forresters,    162  ^  y^,  j.q  Butfher.s'  Beneficial  Assor. 

Mich.  213,  127  N.  W.  288.  3.')    I'a.    St.    lol;    Lange    v.    Royal 

20  Dennis    v.     xMassachiisetts     Ben.  Hisililanders,  7o  Neb.   188,  121   Am. 

Assoc.  120  N.  Y.  496,  9  L.R.A.  189,  SI.   Kep.   786,  10  L.K.A.(N.S.)    666, 

24  N.  E.  843.  106    N.    W.    224,   110   N.    W.    1110; 

^  Burlington  Voluntary  Relief  De-  Angell  &  Ames  on  Corporations  (9tli 

partraent    of   Chicago,   Burlington   &  ed.)  sees.  332  et  seq. 

Quincv    Raihoad    Co.    v.    Wliite,    41  ^  Kern  v.  Arheiter  Unterstuetzungs 

Neb.  547,  43  Am.   St.   Rep.  701,  59  Verein.   139   Mich.   233,   102   N.    W. 

N.  W.  747.  751,  26  Ins.  L.  J.  224.  746;  Fed.  Const,  art.  1,  see.  10;  14tli 
Jovce  Ins.  Vol.  I— 59.              929 


§  373  JOYCE  ON  INSURANCE 

and  by-laws  of  a  fraternal  benefit  society  must  be  in  harmony  with 
the  statute  law  of  the  state  where  it  is  located.*  And  in  case  of 
conflict  the  by-laws  must  yield  to  the  statute.^  A  hy-law  which  is 
against  the  laws  of  the  state  or  government  is  void  and  totally  in- 
operative, and  an  act  relative  to  the  contract  cannot  be  permitted 
under  a  by-law  when  such  act  would  contravene  the  laws  of  the 
state.^  Nor  can  the  powers  of  an  association  be  extended  by  a  by- 
law, and  the  powers  derived  from  the  statute  may  be  limited  but 
not  increased  by  articles,  of  association  J 

A  by-law  is  therefore  void  which  requires  that  a  member  shall 
take  part  in  a  strike.*  And  a  by-law  is  void  which  renders  nuga- 
tory a  statute  as  to  presumption  of  death  from  seven  years  ab- 
sence.^ Nor  can  insured  be  deprived  of  his  guaranteed  and  valu- 
able statutory  rights  by  a  by-law  inconsistent  with  the  statute  and 
which  in  effect  operates  to  repeal  it,  as  in  case  of  provisions  as  to 
venue. ^°  Again,  it  is  held  that  a  mutual  insurance  company  creat- 
ed without  any  capital  stock  cannot  create  a  capital  stock  by  virtue 
of  a  by-laAV  passed  for  that  purpose,  and  thereby  withdraw  from  the 
class  of  mutual  corpora,tions  without  capital  stock  to  which  it  be- 
longs; "  and  where  a  mutual  insurance  company  in  Massachusetts 
was  authorized  to  do  business  as  a  stock  company,  a  by-law  which 
prohibited  the  continuance  of  the  stock  department  and  makes  a 
division  of  the  surplus  accumulated  thereunder  is  contrary  to  the 
general  insurance  laws  of  that  state,  and  void.^^ 

By-laws,  however,  as  to  adjustment  and  arbitration  are  held  not 
to  conflict  with  a  statute  as  to  prosecution  of  claims  by  a  suit  at 
law.^2     Nor  do  by-laws  limiting  the  time  during  which  sick  bene- 

amd't  Mich.   Const,   art.   4,  sec.   43-,  Society  of  Operative  Masons,  3  Him 

Howell's  Stat.  164,  sec.  4.  (N.  Y.)  36L     See  Snow  v.  Wheeler, 

*  Supreme  Colony  United  Order  of  113  Mass.  179. 
the    Pilsrira    Fatlicrs    v.    Towne,   87       ^  Bamber":  v.  Knights  of  the  Mod- 
Conn    644,  89  Atl.  264.  ern   ]\la.-cal)ees,   158   Mich.   568,  133 

5  Finnell  v.  Franklin,  55  Colo.  156,  Am.   St.   Kep.   396,  16  Det.  Leg.  N. 

134  Pac.  122.  677,  123  N.  W.  25,  39  Ins.  L.  J.  34. 

« Price  V.  Supreme  Lodge  Knights  But     compare     Kelly     v.     Supreme 

of  Honor,  68  Tex.  361,  4  S.  W.  633.  Council      Catholic     Mutual     Benefit 

See  also   Briggs  v.  Earl,  139   Mass.  Assoc.  61  N.  Y.  Supp.  394,  46  App. 

473,  1  N.E.  847;  Angell  &  Ames  on  Div.  79. 
Corp    sees.  333  et  seq.  ^°  Eaton  v.  International  Travelers 

■7  National  Union  v.  Keefe,  263  111.  Assoc,  of  Dallas  (1911)  —  Tex.  Civ. 

453,  105  N.  E.  319,  44  Ins.  L.  J.  125.  App.  — ,  136  S.  W.  817. 
See  Cerney  v.   Sesterka  Podpornjici        ^^  State    (ex    rel.    Mutual    Benefit 

Jednota,  146  111.  App.  590;   Cerney  Life  Ins.  Co.)   v.  Utter,  34  N.  J.  L. 

V.  Jednota  Cesky  Dam,  146  111.  App.  489. 

.518-   ^Vao•ner  v.   St.  Francis   Xavier       12  Traders  &  Mechanics'  Ins.  Co.  v. 

Benefit  Soe.  70  Mo.  App.  161.  Brown,  142  Mass.  403,  5  N.  E.  134. 

8  People  v.  New  York  Benevolent       "  Pajrons'     Mutual     Benefit    lire 

930 


MUTUAL  COMPANIES— BY-LAWS  §  374 

fits  shall  lie  paid  conflict  with  a  statute  requiring  every  policv  or 
certiticate  to  specify  the  exact  sum  of  money  which  is  promised  to 
be  paid  upon  the  happening  of  the  contingency  insured  against.^* 
If  the  statute  of  incorporation  of  mutual  benefit  societies  empowers 
them  to  establish  rules  for  the  regulation  of  the  corporate  affairs  not 
contrary  to  the  Federal  or  state  laws  and  to  decide  the  necessary 
qualifications  of  membership,  such  societies  may  prohibit,  by  a  by- 
law, members  from  being  connected  with  other  societies  not  ap- 
proved by  a  particular  church. ^^ 

§  374.  By-laws  against  public  policy  are  void. — That  a  by-law 
which  is  contrary  to  public  policy  is  void,  is  well  settled.  So,  rules 
and  regulations  as  to  expulsion  of  members  must  not  be  so  grossly 
unfair  as  to  be  against  public  policy.^^  And  a  provision  in  a  mu- 
tual benefit  certificate  making  conclusive  the  decision  of  the  as- 
sociation upon  the  question  whether  or  not  a  member  is  entitled  to 
the  benefit  provided  is  void  as  against  public  policy,  under  an  In- 
diana decision.^'''  But  a  constitutional  provision  of  a  benefit  so- 
ciety, that  decisions  of  its  tribunals  as  to  claims  for  benefits  are 
conclusive,  is  held  not  contrary  to  public  policy  in  California. ^^ 
And  a  by-law  is  held  not  contrary  to  public  policy  where  it  pre- 
cludes resort  to  the  civil  courts  until  remedies  within  the  order  are 
exhausted,  and  also  prescribes  a  time  limitation  for  suing  after  a 
claim  is  rejected. ^^  80.  a  by-law  is  held  not  to  be  against  public 
policy  although  it  contravenes  the  rule  as  to  presumption  of  death 
from  absence,  etc.^"  Again,  a  rule  or  by-law  of  a  board  of  fire  un- 
derwriters prohibiting  a  member  from  taking  an  agency  of  a  com- 
pany already  represented  in  the  city  and  which,  while  it  denies  cer- 
tain ]:)rivi leges  to  and  imposes  certain  restraints  upon  members  is 
not  arbitrary  or  oppressive  or  injurious  to  the  public,  is  not  against 

Ins.  Co.  of  Midi.  Ltd.  166  Mich.  438,  Berlitski  v.  St.  Peter  &  St.  Paul  So- 

131  N.  W.  1119.                    •  ciety  (Pa.)  21  Lancaster  L.  Rev.  62. 

1*  Courtney  v.  Fidelity  Mutual  Aid  Compare  §§  372-372b  herein. 

Assoc.  120  Mo.  App.  110,  94  S.  W.  ^^  Timmerlioff  v.  Supreme  Tent  of 

768;  Rev.  Stat.  Mo.  1899,  sec.  7903.  tlie    Kniulils    of    IMaccabees    of    the 

15  Mazurkiewicz   v.    St.   Adelbcrtus  World.   155  111.   Ap]).   395,  40   Natl. 

Soe.  127  iVlich.  145,  54  L.R.A.  727,  86  Corp.  Repr.  337.     Compare  §§  352- 

N.  W.  543.  352c,  355  heroin. 

1^  Kulberg  v.  National  Council  of  ^o  x^'Uy    v.    Supreme    Council    of 

Knights   &   Ladies   of   Security,   124  Catholic  Benevolent  Assoc.  46  App. 

Minn.  437,  145  N.  W.  120.  Div.  79,  61  N.  Y.   Supp.  394.     Bat 

"^"^  Supreme    Council    Catholic    Be-  compare  Samberg  v.  Knights  of  Mod- 

nevolent  Legion   v.   Grove,   176   Ind.  ern    Maccabees,   158   i\Iich.   568,   133 

356,  36  L.R.A.(N.S.)   913,  96  N.  E.  Am.   St.  Rep.  396,  16  Det.  Leg.  N. 

159.  677,  123  N.  W.  25,  39  Ins.  L.  J.  34. 

1^  Robinson  v.  Templar  Lodge  No.  As  to  presumption  of  death;  evi- 

17,  Independent  Order  Odd  Fellows,  dence,  see  §  3772  herein, 
117  Cal.  370,  49  Pac.  170.     Examine 

931 


3r5 


JOYCE  ON  INSURANCE 


public  policy.^     And  a  by-law  of  a  railroad  relief  association  which 
requires  the  release  of  the  railroad  from  any  claim  for  damaoes 
before  a  member  can  apply  to  the  association  for  relief  is  not  in 
valid  as  against  pubhc  policy.^ 

§  375.  By-laws  must  not  contravene  terms  of  charter,  constitu- 
tion, or  articles  of  association. — By-laws  are  not  vaUd  which  con- 
flict with  the  charter  or  articles  of  association,  for  to  acknowledge 
the  power  to  enact  such  Ijy-laws  would  admit  the  power  of  a  cor- 
poration to  re-create  itself  on  such  basis  and  for  such  purposes  as- 
it  mi.uht  desire,  and  wholly  defeat  the  object  of  its  original  crea- 
tion ;  3  nor  is  a  member  bound  by  his  consent  to  by-laws  which  are 
invalid  for  the  above  reasons.*  So,  by-laws  only  regulate,  but  do 
not  surrender  or  suspend  corporate  powers.^  And  if  a  statute  of 
the  state  of  a  fraternal  association  is  in  effect  an  amendment  to  the 
charter  subsequent  contracts  must  conform  thereto.^  So,  a  by-law 
which  materially  conflicts  with  the  constitution  of  an  unincorporat- 
ed society  is  invalid,  and  must  yield  to  the  constitution^  Where  a 
particular  mode  for  obtaining  funds  for  the  payment  of  losses  and 
expenses  is  provided  by  charter,  a  by-law  is  void  which  changes  such 
specific  provision  and  provides  an  entirely  different  mode  therefor.' 
But  the  courts  will  not  sustain  an  action  by  a  member  of  a  cor- 
poration to  restrain  it  from  enforcing  against  him  a  by-law  of  a 

^  Louisville  Board  of  Fire  Under-  ]Minn.  278 ;  Angell  &  Ames  on  Corpo- 

writers  v.  Johnson,  133  Kv.  797,  24  rations  (9th  ed.)  sees.  343  et  seq.   See 

L.R.A.(N.S.)    153n,  119   S.   W.  153.  also  Cerney  v.  Sesterska  Podpornjici 

2  Owens  v.  Baltimore  &  0.  R.  R.  Jednota,  146  111.  App.  599;  Cerney 
Co.  35  Fed.  715,  1  L.R.A.  75;  State  v.  Jednota  Cesky  Dam,  146  111.  App. 
v.  Baltimore  &  Ohio  R.  Co.  36  Fed.  590;  Roulo  v.  Schiller  Bund,  172 
655;  Fuller  v.  Baltimore  &  Ohio  Em-  Mich.  557,  138  N.  W.  244;  Lange  v. 
ployees'  Relief  Assoc.  67  Md.  433,  10  Roval  Higlilanders,  75  Neb.  1S8,  10 
Atl.  237.          ■  L.R.A. (N.S.)   666,  121  Am.  St.  Rep. 

On  contracts  requiring  servant  to  786,  106  N.  W.  224,  110  N.  W.  1110 ; 

elect  between   acceptance  of  benefits  Wagner  v.   St.   Francis  Xavier  Ben. 

out  of  a  relief  fund,  and  a  prosecn-  Soc.  70  J\lo.  App.  161. 

tion   of  his  claims  in  an   action   for  *  People    v.     Benevolent     Soc.    24 

damages,    see    notes    in    11    L.R.A.  How.  Pr.  (N.  Y.)  216. 

(N.S.)     182,    and    48    L.R.A.(N.S.)  ^  Qoialuca  v.  Societa  Co-operativa 

440.      On    validitv    of    provision    in  Di  Mutuo  Soccorso  Fratelli  Bandiera, 

contract    of    railroad    relief    depart-  30  R.  I.  304,  75  Atl.  265. 

ment    for    forfeiture    of    benetlts    in  ^  Finnell  v.  Franklin,  55  Colo.  156, 

case    of    suit    against    company    for  134  Pac.  122. 

damages,  see  note  in  10  L.R.A.  (N.S.)  "^Sherry    v.    Operative    Plasterer.'^' 

198.  :Mutual  Union,  1.39   Pa.   St.  470,  20 

3  Diligent  Fire  Co.  v.  Common-  Atl.  1062;  Powell  v.  Abbott,  9  Week, 
wealth.  75  Pa.  St.  291;  Presbvterian  Not.  Cas.  231.  See  Roulo  v.  Schiller 
Assurance  Fund  v.  Allen,  106  Ind.  Bund,  172  Mich.  557,  138  N.  W.  244. 
593,  7  N.  E.  317;  Bergmann  v.  St.  «  gt^te  (ex  rel.)  v.  Monitor  Fire 
Paul     Mutual     Building    Assoc.     20  A.ssn.  42  Ohio  St.  555. 

932 


MUTUAL  COMPANIES— BY-LAWS 


§  376 


imidiiil  society  wliieli  provides  that  it  shall  be  the  duty  of  eyery 
niciuKer  to  refuse  to  perform  in  any  orchestra  in  which  are  any  per- 
sons not  members  in  good  standing,  and  that  it  shall  be  deemed  a 
bi-each  of  good  faith  between  members  to  employ  a  suspended  or 
noiniiember,  or  to  ass^ist  in  a  public  performance  given  wholly  or  in 
l)art  by  amateurs,  and  which  impose  a  penalty  for  their  violation;® 
and  a  bv-law  cannot  limit  or  extend  benefits  beyond  the  chailor  i)j-o- 
visions  prescribing  the  class  entitled  to  benefits.^"  But  a  by-law 
which  provides  for  forfeiture  for  non])ayment  of  an  assessment  doe.s 
not  contravene  a  charter  provision  thai  the  ofiicers  may  declare  a 
policy  forfeited  for  a  like  cause.^^  ♦ 

§  376.  Enforcement  of  by-laws:  penalty. — The  power  to  enact  a 
bj'-law  carries  with  it  necessarily  the  power  to  enforce  the  same  by  a 
reasonable  penalty,  within  the  scope  of  the  corporate  purposes,  and 
upon  due  notice  and  hearing.^^  ^q^  ^  member  may  be  suspended 
for  nonpayment  of  assessments;  ^^  but  a  by-law  which  subjects  the 
member  to  a  (juasi  ])enalty  of  deprivation  of  l)enefits  for  three 
months' after  he  has  ])aid  dues  in  arrears  for  a  certain  time,  is  un- 
reasonable, oppressive,  and  detrimental  to  the  interests  of  the  cor- 
poration.^* And  an  amendment  of  the  constitution  which  is  ex 
post  facto  in  its  effect,  in  that  it  enforces  a  penalty  not  existing  at 
the  time  of  default  in  payment  of  dues  by  a  member,  is  not  valid." 


®  Daniels,  J.,  dis.senting;  Thomas  v.    50  Pae.  7(J3;  AugoU  &  Ames  on  Cor- 
Musical     Mutual     Prolcctive     Union,    poi'ations  (Otli  etl.)  sees.  360  et  seq. 
121  N.  Y.  45,  8  L.R.A.  175,  24  N.  E.        ^3  jlansen      v.      Supreme      Lod-e 
24,  reversing  49  Hun  (N.  Y. )  171.         Knights  of  Honor,  140  111.  301,  29  N. 

^°  Hicks    Su)).     Council    American    E.  1],21. 
Legion  of  Honor  v.  Periy,  140  Mass.        ^*  Cartan  v.  Father  Matthew  Unit- 
580,  5  N.  E.  634;  Kentucky  Masonic    ed   Benevolent   Soc.  3  Daly    (N.   Y.) 
Mutual  Life  V.  iAjillci',  13  Busli  (Kv.)    20.     See  ConnoUv  v.   Shamrock  Be- 
489. 

^^  Equitable  Lilc  Assui'.  Soc.  v. 
McLennon  (Tenn.  Sup.  Ct.  1876)  6 
Ins.  L.  J.  124. 

^^  See  Beadle  v.  Cliennnso  Co.  Ins. 
Co.  3  Hill  (N.  Y.)  Kil:  "Lawson  v. 
Hewell,  118  Cal.  613,  49  L.K.A.  400, 

933 


nevolent  Soc.  43  Mo.  App.  283;  Ca- 
liill  V.  Kalamazoo  Ins.  Co.  2  Doug. 
(Mich.)  12-1.  4:!  Am.  Dec.  4.57. 

nH'ord  V.  Fire  Department,  31 
159.      See   sections   herein   on 


15 
Mich' 


loileiture,  etc. 


CHAPTER  XXI. 

MUTUAL  COMPANIES,  BENEFIT,  ETC.,  SOCIETIES— CHANGE  OF 
BY-LAWS,   ETC.— CONSTRUCTION. 


§  377.     Power  to  alter  or  change  bj'-laws. 

§  378.     By-laws,  constitutions,  etc.:  changes,  how  made. 

§  378a.  Same  subject. 

§  378b.  Same  subject :  requirements  as  to  notice. 

§  378c.  Same  subject:  delegation  of  power. 

§  378d.  Same  subject:  adoption  of  committee's  report:  validating  unau- 
thorized by-laws. 

§  378e.  Same  subject:   right   to  exercise  powers  outside  state  of  incor- 
poration. 

§  379.     By-IaAvs :  statutory  or  charter  power  to  repeal,  change,  etc. 

§  379a.  By-laws,  constitution,  etc.:  amendments,  changes,  or  repeal  under 
reserved  power  or  agreement. 

§  379b.  Same  subject:  decisions  holding  amendments,  etc.,  binding. 

§  379c.  Same  subject:  decisions  holding  amendments,  etc.,  not  binding. 

§  379d.  Same  subject:  prohibiting  extra-hazardous  occupation. 

§  379e.  Same  subject :  proiiibitiog  engaging  in  liquor  or  saloon  business. 

§  379f.  Same  subject :  prohibiting  use  of  intoxicating  liquors  or  drugs. 

§  379g.  Same  sul)jef't :  accidental  injuries:  total  disability. 

§  379h.  Same  subject:   deficiency  or  reserve  assessments:  delinquent  as- 
sessments. 

§  379i.  Same  subject:  time  limitation  for  suing. 

§  379j.  Same  subjec-t :  as  to  remedies  within  association. 

§  379k.  Amendments,  changes,  or  repeal  must  be  reasonable  even  under 
reserved  power  or  agreement. 

§  3791.  Reasonable  amendments,  etc.,  binding. 

^  379m.  When  amendments,  etc.,  are  reasonable. 

§  379n.  When  amendments,  etc.,  are  unreasonable. 

§  379o.  Amejulments  or  changes  must  not  operate  retroactively:  reserved 
right  or  agTeement  to  amend  or  change :  vested  rights. 

§  379p.  Same  subject. 

§  379q.  Same  subject :  instances. 

§  380.     Change  of  by-laws,  etc.:  vested  right. 

§  380a.  Same  subject. 

934 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  377 

§  380b.  Same  subject :  instances. 

§  380c.  Same  subject :  changes  in  by-laws,  etc. :  increasing  assessments  or 
dues  or  reducing-  amount  payable. 

§  380d.  Same  subject :  changes  in  by-laAvs,  etc.,  to  prevent  financial  disas- 
ter or  dissolution. 

§  380e.  Same  subject :  classification  6f  risks :  discrimination. 

§  380f.  Right  of  member  or  beneficiary  to  object  to  amendments:  waiver 
or  estoppel. 

§  380g.  Same  subject :  wljen  waiver  or  estoppel  not  applicable. 

§  380h.  Waiver  by  or  estoppel  against  association,  society,  etc.,  or  officers 
thereof :  amendments. 

S  381.     Construction  of  bv-laws. 

§  377.  Power  to  alter  or  change  by-laws. — A  mutual  insiiranoe 
corporation  or  association  may  clian,u;o  its  rules,  or  dispense  with 
their  literal  and  rigorous  enforcement,  when  hy  so  doing  no  sub- 
stantial rights  of  the  company  or  the  insured  will  be  impaired. ^^ 
And  wliere  a  change  is  regiilarly  made  in  tlio  by-laws  and  the  mo- 
tive which  influences  the  change  is  honestly  exercised  to  promote 
the  society's  welfare  and  all  the  members  have  an  opportunity  to 
avail  themselves  of  tlie  change,  neither  members  nor  beneficiaries 
suffer  any  actionable  wrong.^'  The  right  of  a  corporation  to  alter, 
modify,  or  change  its  by-laws  is  generally  reserved  in  tJie  charier 
or  articles  of  association,  but  aside  from  the  reservation  of  such 
power  it  is  said  to  be  incident  to  the  Very  nature  and  purposes  of 
such  organizations  that  they  should  have  the  right  to  make  changes 
in  their  laws.^*  This  principle  is. undoubtedly  true,  but  in  its  ap- 
plication the  courts  widely  diverge.  An  attempt  has  been  made  by 
some  of  the  decisions  to  reconcile  the  cases  on  the  common  groimd 
of  vested  rights,  but  here  again  the  question  of  what  constitute  vest- 
ed rights  has  been  the  subject  of  much  discussion,  and  the  decisions 
are  far  from  unanimous,  nor  is  the  question  settled  as  to  what  ex- 
tent such  societies  are  authorized  to  change  their  by-laws,  where  the 
power  so  to  do  is  reserved  in  the  charter  or  articles  of  association. 
We  have  seen  that  the  fundamental  law  of  organization  of  such 
societies,  and  the  charter  and  by-laws  constitute  a  part  of  the  con- 
tract of  each  member,^^  and  it  would  seem  as  if  neither  a  corpora- 
tion nor  association  would  have  the  inherent;  power  to  enact  a 
by-law  which  materially  and  radically  changes  the  contract  with 

i«See  Protection  Life  Ins.   Co.  v.        "  Fugure  v.  Mutual  Society  of  St, 
Foote,  79  111.  361.  Joseph,  46  Vt.  369. 

1^  Supreme  Lodge  Knights  of  Py-       ^^  See  §§  188  et  seq.,  380  et  seq. 
thias    v.    Knight,    117    Ind.    489,    3    herein. 
L.R.A.  409,  20  N.  E.  479,  483. 

935 


§  378 


JOYCE  OX  IXSUKAXCE 


members;  such  societies  can  certainly  have  no  inherent  power  to  ar- 
bitrai'ily  abrogate  the  provisions  of  a  contract  which  members  have 
entered  into  in  good  faith,  nor  may  it  divest  members  of  rights 
Avliich  liave  become  vested  under  their  contracts.  And  a  charter  res- 
ervation of  the  right  to  modify  and  cliange  by-laws,  and  to  which  a 
party  consents  by  becoming  a  member,  ought  not  to  be  construed 
to  warrant  the  passing  of  a  by-law  which  would  operate  to  annul  a 
member's  contract  and  abrogate  vested  rights,  or  which  would  in 
effect  be  a  repudiation  of  its  obligations  by  the  society.^"  The  fol- 
lowing extract  from  the  opinion  in  a  Federal  case  is  pertinent  here. 
The  court  per  Ray.  D.  J.,  said:  ''It  is  not  questioned  in  the  New 
York  cases,  to  which  attention  has  been  called  at  some  length,  that 
imder  such  general  language  the  by-laws  of  a  corporation  or  of  an 
association  may  be  amended  in  those  respects  which  go  to  the  gen- 
eral management  and  control  of  the  company  and  the  government 
of  its  internal  affairs.  When  it  comes  to  so  amending  the  by-laws 
as  to  materially  affect  and  change  the  obligations  of  such  contract 
and  destroy  rights  or-  seriously  impair  rights  vested  we  have  a  dif- 
ferent question."  ^ 

§  378.  By-laws,  constitutions,  etc.,  changes,  how  made. — Altera- 
tions, changes  or  repeal  of  by-laws  etc.,  must  be  made  in  the  man- 
ner prescribed  by  statute,  the  charter,  or  articles  of  association  and 
by-laws  and  subject  to  the  restrictions  imposed  ^  and  where  a  by-law 
prescribes  the  time  when  such  alteration  can  be  made,  and  the  num- 
l)er  of  votes  required  therefor,  such  provision  must  be  followed.^ 
AVhere  the  articles  of  a  corporation  provide  for  the  management  of 
its  business  by  a  board  of  directors,  and  for  meetings  of  that  lx)ard, 
but  do  not  provide  for  meetings  of  the  corporation,  and  the  first 
by-laws  were  adopted  by  the  directors,  the  latter  have  power  to 


■  ^^  Supreme  Commandery  Kniglits 
of  the  Golden  Rule  v.  Ainswoith,  71 
Ala.  436,  46  Am.  Rep.  332;  Fire  Ins. 
Co.  V.  Connor,  17  Pa.  St.  136;  Stew- 
art V.  Lea  Mutual  Fire  Ins.  Assn.  64 
Miss.  499,  1  So.  743.  See  Korn  v. 
Mutual  Assur.  Soc.  6  Crancli  (10  U. 
S.)  192,  3  L.  ed.  19.5.  See  sections 
next  ensuing  herein.  See  §§  380  et 
seq.  herein. 

^  Smvthe  V.  Supreme  Lodge 
Knights  of  Pvthias  (U.  S.  D.  C.)  198 
Fed.  967,  42  Ins.  L.  J.  6,  ease  aff'd 
Smyth  V.  Supreme  Lodee  Kniahts  of 
Pythias,  220  Fed.  438,' 137  C.^  C.  A. 
32.    See  §§  380  et  seq.  herein. 

2  Thibert  '  v.  Supreme  Lodge 
Knights  of  Honor,  78  Minn.  448,  47 


L.R.A.  136,  79  Am.  St.  Rep.  412,  81 
N.  W.  220;  Lange  v.  Roval  High- 
landers, 75  Neb.  188,  10  L.R.A. 
(X.S.)  666,  121  Am.  St.  Rep.  786, 
106  N.  W.  224  (cannot  change  stat- 
utory mode  of  exercise  of  power.  If 
amendment  is  in  contravention  of 
statute  it  is  void) ;  Farmers'  Mutual 
Ins.  Co.  v.  Kinney,  64  Neb.  808.  90 
N.  W.  926  (by-law  must  be  adopted 
in  conformity  with  authority'  con- 
ferred) :  Deuble  v.  Grand  Lodge,  An- 
cient Order  V.  W.  72  N.  Y.'  Supp. 
75.5,  66  App.  Div.  323,  aff'd  172  N.  Y. 
665,  65  N.  E.  llKi. 

3  Tony    V.    Baker,    1    Allen     (83 
Mass.)  120. 


936 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  378a 

amend  the  by-laAvs.*  An  amendment  of  a  by-law  made  in  pursu- 
ance of  a  by-law  ])ermitting  it  and  which  is  in  existence  when  a 
person  becomes  a  member  is  binding  as  a  part  of  the  contract.^ 

An  attempted  amendment  of  the  by-laws  of  a  mutual  benefit  so- 
ciety is  not  binding  on  a  member  who  did  not  attend  the  meeting, 
unless  it  is  aflirmalively  shown  to  have  been  called  and  conducted 
as  provided  by  the  constitution.^  And  parol  evidence  of  officers  and 
members  then  present  is  competent  to  prove  the  enactment  of 
amendments  to  by-laws  at  the  time  and  in  the  manner  prescribed.' 
A  presumption  also  exists,  when  there  is  no  evidence  to  the  contrary, 
that  an  amendment  was  voted  on  by  all  the  members  present  and 
that  it  was  properly  adopted  where  the  record  shows  the  votes  for 
and  against  at  a  regulai'  meeting  and  its  adoption.* 

An  association  em])owered  by  charter,  and  undertaking  by  its  by- 
laws, to  acciuuulate  a  fund  for  the  benefit  of  persons  dependent  up- 
on members  at  the  time  of  their  death,  cannot  so  amend  its  by-laws 
as  to  distribute  the  accumulated  fund  among  the  living  members 
and  thereby  bind  dissenting  members.^  And  the  governing  body 
of  a  fraternal  benefit  association  wliich  has  not  adopted  a  represen- 
tative form  of  government  as  required  by  statute  is  without  power 
to  adopt  a  by-law  changing  the  terms  and  obligations  of  a  certificate 
theretofore  issued  to  one  of  its  members.^" 

§  378a.  Same  subject. — Under  a  Mississippi  decision  a  constitu- 
tion adopted  by  an  incorporated  fraternal  benefit  society  and  not 
embodied  in  its  charter  has  no  greater  force  than  any  by-law,  and 
it  may  itself  be  amended  or  repealed  the  same  as  any  other  by-law 
without  following  the  mode  prescribed  by  such  constitution,  and  the 
adoption  of  an  amendment  in  a  difl'erent  mode  is  valid  provided 
that  it  does  not  contravene  the  terms  of  the  charter  and  is  not  con- 
trary to  laws  of  the  land.^^  So  in  Illinois  although  by-laws  of  a  sub- 
ordinate order  are  called  its  "constitution"  they  are  nevertheless  of 

^Heinizehnan     v.     Druids'     Relief  » Parish  v.  New  York  Prod neo  Ex- 

Assoe.  38  Minn.  138,  3(i  N.  ^V.  100.  cliano-e,  169  N.  Y.  34,  50  L.H.A.  140, 

SHass  V.  Mutual  Kelief  Assoc.  118  Gl  N.  E.  977.     See  Pokrefky  v.  De- 

Cal    6    40   Pac    lOoO,  'JO   Ins.  L.   J.  troit  Kiieniens  Fund  Assoc  121  Midi. 

992.    See  also  Lawson  v.  iiewell,  118  450,  0  Dot.  Lc<,^  N.  240,  80  N.  W.  240 

Cal.  013,  49  L.K.A.  100,  50  Pao.  703.  (contract  cannot  be  changed  against 

s  Metropolitan    Safety    Fund    Acci-  nienil)er's  protest.     See  also  §§  380  et 

dent  Assoc,  v.  Windovei',  137  111.  417,  seq.  herein). 

o-  \j   Yj   538                  '  ^°  Lange  v.  Royal  Highlanders,  75 

"  'Ma-sonic  Mutual  Benefit  Assoc,  v.  Neb.  188,  10  L.R.A.tN^S.)    060,  121 

Severson,  71  Conn.  719,  43  Atl.  192.  Am.  St.  Rep.  780,  106  N.  W.  224. 

8  Cowan  V.  New  York-  Caledonian  ^^  Domes      v.       Supreme      Lodge 

Club,  01  N.  Y.   Supp.  714,  46  App.  Knights  of  Pythias  of  the  ^Yorld,  75 

Div.  288  (a  purely  charitable  organ-  J\Iiss.  400,  1  Miss.  Dec.  (No.  14)  10(i, 

ization  in  respect  to  funeral  benctits).  23  So.  191. 

937 


§  378b 


JOYCE  ON  mSURANCE 


no  greater  force  than  by-laws,  and  by  employing  such  a  term  said 
order  cannot  extend  its  power  to  the  adoption  of  by-laws  of  a  char- 
acter which  it  is  solely  j\'ithin  the  power  of  the  supreme  lodge  to 
enact,  even  though  such  subordinate  body  has  power  by  the  laws  of 
the  order  to  adopt  certain  laws  and  regulations.^^ 

AVliere  the  executive  committee  is  empowered  to  rerate  members 
the  objection  is  immaterial  that  such  rerating  power  was  not  exer- 
cised by  the  supreme  legislative  authority  of  the  society  ^^  and  a 
beneficiary  cannot  object  that  amendments  to  articles  of  association 
are  invalid  because  the  resolution  referring  the  same  to  the  subor- 
dinate councils  provided  only  for  a  reference  of  certain  proposed 
amendments  to  the  constitution  where  it  is  shown  that  tlie  amend- 
ments to  said  articles  were  properly  submitted  and  adoj)ted.^*  And 
wliere  an  amendment  contains  an  illegal  provision  which,  from  its 
importance,  may  have  contributed  more  than  any  one  of  the  others 
to  secure  the  small  majority  of  votes  by  which  it  was  adopted,  it 
will  fall  entirely. ^^ 

An  amendment  to  an  in  validly  enacted  amendment  and  not 
adopted  in  conformity  with  the  original  provisions  as  to  the  man- 
ner of  amending  by-laws  are  not  binding.^^  And  the  simultaneous 
repeal  and  re-enactment,  in  terms  or  in  substance,  of  parts  of  a  by- 
law of  a  fraternal  association,  preserve  without  interruption  the  re- 
enacted  provisions  of  the  original  by-law.^'' 

§  378b.  Same  subject:  requirements  as  to  notice. — If  notice  of 
amendments  or  additions  to  Ijy-laws  is  required  it  must  be  given 
in  the  prescribed  manner  ^^  for  the  specified  jmrpose,  and  it  must 
not   be   insufiicient.^^      So    the   rule   that   statutory    requirements 


^^  Supreme  Lodge  Kuights  of  Pv-  ^"^  Quick   v.   Modern   "VVooduien    of 

thias    v.- Kutscher,   179    111.   340,   70  Amerk-a,  91  Neb.  10(i,  135  N.  W.  43:5. 

Am.  St.  Rep.  115,  53  N.  E.  G20,  rev'g  i^  Morris  v.  Farmers'  :Mutual  Fire 

72  111.  App.  462.  Ins.  Co.  63  Minn.  420,  65  N.  W.  655; 

^^  Supreme    Ruling    of    Fraternal  Allen  v.  Merrimack  County  Odd  Fel- 

Uystk-   Circle   v.   Ericson    (1910)    —  lows  ^lutual  Relief  Assoc'.  72  N.  H. 

Tex.  Civ.  App.  — ,  131  S.  W.  92.  525,  57  Atl.  922.     Comi>are  McCabe 

^*  Fold  v.  Nortli  American  Union,  v.  Young-  Men's  Father  Matthew  To- 

180  111.  App.  448,  case  afiP'd  261  111.  tal  Abstinence  Ben.  Soc.  24  Hun  ( N. 

433,  104  N.  E.  4.  Y.)  149,  considered  under  §  379  here- 

As   to   beneficiaries   and   effect   of  in. 

subsequent    change    of    by-laws,    see  ^^  Mutual   Fire  Ins.   Co.   of  Mont- 


5§  748  et  seq.  herein. 

^^  Parish  v.  New  Y^ork  Produce  Ex- 
change, 169  N.  Y.  34,  56  L.R.A.  149, 
61  N.  E.  977. 


gomerv  County  v.  Farquhar,  86  Md. 
668. 

When     presumption     exists     that 
member  of  fraternal   beneficiary  as- 


^^  Deuble  v.  Grand  Lodge  Ancient  sociation  had  notice  of  change  in  bv- 
Order  U.  W.  72  N.  Y.  Supp.  755,  66  law,  see  Attorney  General  v.  Su- 
App.  Div.  323,  att'd  172  N.  Y.  665,  preme  Council  American  Legion  of 
65  N.  E.  1116.  Honor  (Dunlevy,  In  re;  Clement,  In 

938 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  378c 

as  to  notice  must  be  complied  with  is  intci'i)retcd  to  mean  rea- 
sonable notice  with  reference  to  time,  sufficiency,  the  complex 
nature  of  the  amendments,  and  the  widely  separated  location  of 
the  members.^"  And  resolutions  passed  by  the  board  of  directors 
of  a  mutual  insurance  company  suspendino-  the  policy  of  a  member 
does  not  affect  a  policy  holder  having  no  notice  of  their  passage. ^^ 
But  if  power  is  expressly  conferred  npon  the  directors  by  the  arti- 
cles of  incorporation  notice  need  not  be  given  each  member  of  the 
intention  to  exercise  said  power.^ 

§  378c.  Same  subject:  delegation  of  power. — Where  no  statutory 
authority  therefor  exists  the  ixiwer  to  amend  by-laws  vested  by 
charter  in  the  board  of  directors  cannot  be  delegated  to  the  mem- 
bers.^  Nor  can  power  be  delegated  by  a  supreme  lodge  to  a  subord- 
inate order  to  adopt  a  by-law  whereby  the  endowment  rank  is  ex- 
empted from  liability  for  a  member's  death  from  specified  causes 
such  by-law  is  not  void,  however,  even  though  not  adopted  in  con- 
formity with  prescribed  rules  of  jirocedure  where  it  is  otherwise  law- 
fully enacted.^  And  although  the  supreme  lodge  has  power  under 
its  fundamental  law  to  enact  all  such  reasonable  laws  as  may  Ije 
deemed  proper  for  the  establishment  and  government  of  an  endow- 
ment rank  and  may  also  create  a  board  of  control  or  any  other  like 
agency  for  the  management  of  the  business  of  that  rank  it  cannot 


re;  Osterliout,  In  re;  Tuska,  In  re)  for  stated  meetings."   This  Art.  (VI.) 

206  Mass.  168,  92  N.  E.   140.     For  relates  to  life  or  casualty  insurance 

citations  of  the  several  cases  involved  corporations  upon  the  co-operative  or 

in  this  litigation  see  *^  3801'  herein.  assessment  plan.     See  §  3()5b  herein. 

As  to  estoppel  Ivom  laches  and  ac-       ^^  .Martin  v.  Mutual  Fire  Ins.  Co. 

quiescence  to  assert   waul    of  noiice,  of  ^iontgomery  Co.  43  Md.  51. 
see  Kane  v.  Kniglits  of  Columbus,  84        ^  Farmers'   Mutual   Hail  Assoc,  of 

Conn.   96,  79  All.   63,  40  Ins.   L.  J.  Iowa  v.   SUittery,  115  Iowa,  410,  88 

874,  considered  under  ^  ."iSOf  lierein.  N.  W.  949. 

20  Robinson  v.  IMutnal  Reserve  Life        ^  Farmers    Loan    &    Trust    Co.    v. 

Ins.  Co.  (U.  S.  C.  C.)   ir)9  Fed.  .Kil,  Aberle,  41  N.  Y.  Supp.  638,  18  .Misc. 

N.  Y.  Ins.  Law  1892,  p.  2013,  e.  690,  257,  case  modilied  46  N.  Y.  Supp.  10, 

sec.  209;  Parker's  N.  Y.  Ins.  L.   (ed.  19  A.  D.  79. 

1915)    p.  321,   providing  tliat  "evory        ^  t^^upi-gn^e   Lodge   Kniglds  of  Py- 

such  association,   corporation   or  so-  thias  v.  Kutsciier,  179  111.  340,  53  N. 

eiety,  other  than  secret  fraternal  so-  E.  620,  rev'g  72  111.  App.  462.     The 

cielies  now  authorized  to  do  business  court  said:    *'We  regard  the  question 

in  this  state,  must  hereafter,  before  as    settled    that    the    supreme    lodge 

the  adoption  of  any  by-law  or  amend-  could   not   delegate  to  a  subordinate 

ment   thereto,   cause   the   same   to   be  body  the  power  to  enact  laws  of  this 

mailed  to  the  members  and  directoi-s  character  and  that  said  board  of  con- 

of   such    association,   society   or   cor-  trol  had  no  power  to  enact  said  law." 

poration,   together   with   a   notice   of  Id.    343.      See    also    Supreme    Lodge 

the  time   and   place   when   the   same  Knight_s  of  Pythias  v.  .McLennan,  171 

shall  be  considered,  which  notice  shall  111.  41/,  49  N.   E.  530,  affg  69  III. 

be  the  same  as  hereinbefore  required  App.  599. 

939 


§§  378d,  378e 


JOYCE  ON  INSURANCE 


legall}'  delegate  its  power  to  a  board  of  control  to  pass  a  general  law 
affecting  the  entire  endowment  rank.  "It  could  not  abdicate  its 
liigli  position  and  transfer  its  law-making  power  t.o  such  board  or 
other  agency."  *  But  it  is  decided  that  empowering  the  board  of 
directors  to  make  effective  and  put  in  force  by-laws  or  amendments 
enacted  by  the  association,  delegates  only  the  power  to  determine 
when  such  laws  shall  go  into  effect,  not  the  power  to  make  them.* 
It  is  declared  in  a  North  Dakota  ca.'^e,  relying  upon  the  code,  that : 
"By-laws  can  only  be  repealed  or  amended  in  the  manner  provided 
by  statute,  which  in  this  state  to  a  cori)oration  like  the  appellant  is 
by  \ote  of  the  members,  or  by  directors  when  this  power  to  do  so 
lias  been  delegated  to  them  by  the  same  proportion  of  members  as 
may  make  amendments  themselves.'"  ^ 

§  378d.  Same  subject:  adoption  of  committee's  report:  validating 
unauthorized  by-law. — A  revision  and  codification  of  the  constitu- 
tion and  laws  of  a  benefit  society  may  be  validly  adopted  and  the 
old  laws  repealed  upon  a  report  of  a  committee  appointed  and  act^ 
ing  in  conformity  with  the  requirements  of  the  constitution  of  the 
society.'  And  where  a  board  of  control,  a  body  with  no  power  to 
enact  certain  by-laws,  reports  its  action  in  passing  such  a  law  Avith 
a  copy  thereof  to  the  supreme  lodge  at  its  regular  session,  and  that 
body  referred  said  report  to  one  of  its  committees  which  reported 
back  favorably,  approving  the  action  of  the  board  and  recommend- 
ing adoption  of  the  report  and  it  was  adopted  by  the  supreme  lodge 
and  published  as  one  of  the  laws  of  the  order  said  unauthorized 
by-law  is  validly  adopted.® 

§  378e.  Same  subject:  right  to  exercise  powers  outside  state  of 
incorporation. — A  benevolent  society's  supreme  legislative  depart- 
ment, composed  of  delegates  from  head  camps  and  when  assembled 
denominated  the  sovereign  camp,  has  power  at  a  meeting  outside 
the  state  of  incor])oration,  to  adopt  in  the  manner  required  by  the 
by-laws  an  amendment  to  the  constitution,  and  such  enactment  is 
a  proper  exercise  of  the  corporate  power  to  make  ii*;  own  constitu- 
tion and  to  exercise  general  legislative  authority,  although  an  ex- 
ecutive council  composed  of  the  othcers  of  the  sovereign  camp  may 
exercise  legislative  authority  under  certain  conditions  and  limita- 


*  Supreme  Lodge  Knights  of  Pv- 
thias  V.  La  Malta,  95  Tenn.  (11  Pick.) 
157,  .31  S.W.  493,  30  L.R.A.  838. 

*  Evans  v.  Sontliern  Tier  i\Iasonic 
Relief  Assoc.  78  N.  Y.  Supp.  611,  76 
App.  Div.  151.  See  §§  380  et  seq. 
herein. 

^  J.  P.  Lamb  &  Co.  v.  Merchants 
.  National  Mutual  Fire  Ins.  Co.  18  N. 


940 


Dak.  253,  259,  119  N.  W.  1048,  1050, 
per  Spalding,  J.;  Rev.  Codes  1905, 
sees.  4'.201,  4204.  ' 

'  Supremo  Council  American  Le- 
gion of  Honor  v,  Adams,  68  N.  H. 
230.  44  Atl.  380. 

*  Supieme  Lodge  Knights  of  Py- 
thias v.  Kutscher,  179  111.  340,  53  N. 
E.  620,  rev'g  72  111.  App.  462. 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  379 

tions  and  the  power  to  liold  such  meetings  ont.^ide  the  state  of  in- 
corporation arises  by  iiii|)hcation  where  the  corporation  constitutes 
said  department  to  be  established  by  it  with  power  to  orsianize  sul> 
ordinate  bodies  throu.uliout  the  United  States  and  Canada.^  And 
where,  by  autliority  of  the  statute  under  which  a  fraternal  l)onefi- 
ciary  association  is  incorporated,  power  is  conferred  to  so  amend  or 
alter  its  by-laws  as  to  provide  for  holding  the  meetings  of  its  legis- 
lative body  in  any  state  or  territory  where  it  has  subordinate  lodges 
its  decision  on  this  question  is  final,  and  a  resolution  of  its  govern- 
ing bod}'  to  meet  in  another  state,  at  a  place  other  than  that  stated 
in  the  by-laws  authorizes  such  meetings  and  its  proceedings  regular- 
ly had  are  not  void.^° 

§  379.  By-laws:  statutory  or  charter  power  to  repeal,  change, 
etc. — It  is  undoubtedly  true  that  a  right  niay  exist  to  repeal  or 
amend  by-laws,  where  provision  is  made  therefor  in  the  charter, 
act  of  incorporation,  or  fundamental  law  of  the  corporation  or  as- 
sociation. Thus  in  the  case  of  Stohr  v.  San  Francisco  Musical  Fund 
Society  "  the  defendant  was  incorporated,  and  both  the  general  laws 
of  the  state  and  the  by-laws  of  the  society  gave  it  the  right  to  repeal, 
alter,  or  amend  its  laws.  After  a  menil)er's  sickness  a  by-law  was 
passed  limiting  the  allowance  to  which  he  was  entitled  to  a  certain 
amount,  unless  otherwise  ordered  by  the  board  of  directors,  and  the 
by-law  was  declared  to  be  valid.  So  it  is  held  in  New  York  that 
where  the  constitution  provides  that  the  by-laws  may  be  amended, 
the  society  may  alter  tliem.  even  after  a  member  ha.s  been  taken 
sick,  and  reduce  the  amount  of  his  benefits. ^^  It  is  declared  in  an- 
other case  m  the  same  state  that  the  constitution  and  by-laws  may 
be  changed,  and  the  member  becomes  bound  where  the  amendment 
is  made  in  accc^rdance  with  the  constitution  and  laws,  even  without 
notice  to  the  member,  in  the  absence  of  a  provision  therefor  in  the 
constitution  or  l)y-la\vs.^3  Again,  it  is  held  that  where,  by  statute, 
insurance  companies  have  the  right  to  amend  their  charters,  a  per- 
son who  takes  a  policy  from  a  company,  the  charter  of  which  pro- 
vides for  the  surrender  of  policies  and  compensation  thereupon,  can- 

3  Sovereio-n  Camp  Woodmen  of  the  Kuight.s    &    Ladies    of    Security,    69 

World   V.    Fralev,    94    Tex.    200,    51  Kan.  2;i4,  76  Pac.  8.30. 

L.R.A.  898,  59   S.  W.  879,  aWg  --  ^^  82  (  al.  557,  22  Pac  1125. 

Tex.   Civ.   Api).  — ,   59    S.   W.   905.  ^^  Poultney   v.   Badnnan,   31   Hun 

The    court    makes    a    distinction    be-  (N.  Y.)   49,  overrulinii-  62  How.   Pr. 

tween   the  rule   as  above  stated  and  (N.    Y.)    466.      See    §§    380    et    seq. 

the  rule  conli'a  with  regard  to  ordi-  herein. 

nary     corporations.       Id.     205,     per  "  McCabe  v.  Young  Men's  Father 

Brown   Assoc.  J.  JNlatthew  Total  Abstnieuce  Ben.  Soc. 

10  Miller      v.      National      Council  24  Hun  (N.  Y.)  149. 

941 


§  379a. 


JOYCE  ON  INSURANCE 


not  be  heard  to  complain  of  a  subsequent  abrogation  of  this  provi- 
sion.^* And  where  there  is  an  express  provision  in  the  constitution 
of  an  association  that  the  society  may  alter  or  change  its  by-laws, 
and  the  manner  of  doing  it  is  specifically  pointed  out,  such  amend- 
ment may  be  made.^*  It  is  also  held  that  a  total  nonobservance  of 
a  by-law  operates  as  a  repeal  thereof.^^  And  where,  under  the  char- 
ter of  a  mutual  fire  insurance  association,  the  incorporators  are  au- 
thorized to  make  such  by-laws  as  they  may  deem  advisable  for  the 
management  of  their  corporate  affairs,  such  by-laws  can  have  no 
effect  to  modify  contracts  entered  into  between  the  corporation  and 
the  assured."  A\'here  the  charter  restricts  legislative  power  to 
the  supreme  Lodge,  a  mere  ministerial  committee  such  as  the  Board 
of  Control  of  the  Knights  of  Pythias,  vested  with  administrative 
functions  in  relation  to  the  endowment  rank,  has  no  power  to  pass 
a  law  providing  a  new  condition  which  will  avoid  a  benefit  certifi- 
cate in  case  of  suicide. ^^ 

§  379a.  By-law^s,  constitution,  etc.:  amendments,  changes,  or  re- 
peal under  reserved  power  or  agreement. — If  a  power  is  reserved  to 
amend,  change  or  repeal  the  constitution  or  articles  of  association, 
by-laws,  rules  and  regulations,  or  there  is  a  valid  agreement  between 
the  parties  that  the  assured  or  members  shall  conform  to,  aV)i(lo  by, 
or  in  effect  be  bound  by,  such  changes  or  repeal  the}-  may  be  made 
and  will  be  binding.  Provided:  (1)  That  they  are  within  the 
powers  of  the  company,  society,  association  or  order  to  enact,  liav- 
ing  also  in  view  the  limitations  and  restrictions  imposed  by  statute, 
the  charter,  constitution  or  articles  of  associations  and  by-laws:  (2) 
That  they  are  validly  enacted:  (3)  That  all  conditions  precedent 
to  said  enactment  or  adoption  of  such  changes  are  complied  with :  ^* 


^*  Allen  V.  Life  Assn.  of  America, 
8  Mo.  App.  52.     See  §  189  herein. 

^^  Fugure  v.  Mutual  Society  of  St. 
Joseph,  46  Vt.  369.  See,  also,  Poult- 
ney  v.  Bachman,  31  Hun  (N.  Y.) 
49,  overruling  6'2  How.  Pr.  (N.  Y.) 
466,  and  10  Abb.  N.  C.  (N.  Y.)  252. 

^^  Attorney  General  v.  Middleton, 
2  Ves.  Sr.  328. 

"  Stewart  v.  Lee  Mutual  Fire  Ins. 
Assoc.  64  Miss.  499,  1  So.  743. 

^^  Supreme  Lodge  Knights  of  Py- 
thias V.  Stein,  75  Miss.  107,  37  L.R.A. 
775,  65  Am.  St.  Rep.  589,  21  So.  559, 
26  Ins.  L.  J.  557.  See  Supreme 
Lodae  Knishts  of  Pvthias  v.  Kut- 
scher,  179  111.  340,  70  Am.  St.  Rep. 

94 


115,  53  N.  E.  620,  s.  c.  72  111.  App. 
462. 

As  to  adoption  of  by-law,  §  2532. 
As  to  suicide  after  contract  made,  see 
§  2647  herein. 

^^  See  §§  377  et  seq.  herein. 

Where  a  board  of  control  of  the 
endowment  rank  Knights  of  Pythias 
has  no  power  to  enact  a  certain  by- 
law, as.sured  is  not  bound  thereby 
where  he  only  agrees  to  be  bound  or 
"controlled  by  all  the  laws,  rules  and 
regulations  of  the  order  governing 
said  rank,  now  in  force  or  that  may 
liereafter  be  enacted  by  the  Supreme 
Lodge"  as  such  contract  obligation 
cannot  be  extended  to  include  bj'-laws 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAAVS,  ETC.    §  379a 

(4)  That  the  power  is  exercised  in  good  faith  and  without  fraud :  ^^ 

(5)  That  Federal  and  State  laws  are  not  violated  thereby:^  (6) 
That  they  are  not  against  public  policy:  ^  (7)  That  they  are  rea- 
sonable:^ (8)  That  they  are  not  arbitrary:*  (9)  That  they  are 
necessary  to  effect,  and  are  consistent  with,  the  purposes  of  the  com- 
pany, society,  association  or  order  and  for  its  general  welfare :  ® 
(10)  That  they  do  not  operate  retroactively,^  or  (11)  impair  the 
obligation  of  contracts  or  impair  or  divest  vested  rights.'' 

In  applying  the  above  rule,  however,  it  may  be  stated  that  each 
case  depends  to  some  extent  upon  its  own  circumstances  and  how 
far  the  right  to  amend,  change  or  repeal  has  been  expressly  or  im- 
pliedly reserved  or  agreed  upon. 

Again,  inasmuch  as  these  reservations  or  agreements  are  made 
either  by  statute,  the  charter  or  articles  of  association,  constitution, 
by-laws,  application  or  certificate,  or  two  or  more  of  them  together 
as  parts  of  or  as  constituting  in  this  respect  the  original  contract, 
the  rules  which  we  have  given  elsewhere  as  governing  what  consti- 
tutes a  ]:)art  of  the  contract  and  to  what  extent  they  apply  should  be 
considered.*     We  will  state  here,  however,  that  it  is  held  that  the 


enacted  by  any  law  making  body  otli-    pendent  Order  of  Odd  Fellows,  182 


cr  than  said  supreme  lodge.  Supreme 
Lodge  Knishts  of  Pythias  v.  INIc- 
Lennan,  171  111.  417,  49  N.  E.  5.30, 
afifg.  69  111.  App.  599. 

A  fraternal  benefit  certificate  al- 
though requiring  compliance  with 
thereaftei'  enacted  laws  by  the  board 
of  control  of  the  endowment  rank  as 


Mich.  :^66,  148  N.  W.  703.  Consti- 
tution and  by-laws  when  not  against 
public  policy  are  part  of  contract. 
West  V.  Grand  Lodge  Ancient  Order 
United  Workmen,  14  Tex.  Civ.  App. 
471,  37  S.  W.  966.  See  §  374  herein. 
A  change  may  he  made  in  by-laws 
or  rules  under  a  reserved  power  to 


a  condition  })recedent  to  benelits  does  amend  where  such  change  accords 
not  authorize  an  amendment  which  with  jiublic  policy.  Knights  of  Mac- 
such  board  has  no  power  to  make,  eabees  of  the  World  v.  Nelson,  77 
Supreme  Lodge  Knights  of  Pvthias  Kan.  629,  95  Pac.  1052,  37  Ins.  L.  J. 
V.  I^utscher,  179  111.  340,  53  N.  E. 
620,  rev'g  72  111.  App.  462. 

^^  See  Clarkson  v.  Sui)reme  Lodare 
Knights  of  Pvthias,  99  S.  Car.  134, 
82  S.  E.  1043. 

^  Amendment  must  not  violate  laws 
of  state.  Frateinal  Union  of  Amer- 
ica V.  Zeigler,  145  Ala.  287,  39  So. 
751;  Eaton  v.  Liternational  Travel- 
ers' Assoc.  —  Tex.  Civ.  App.  • — ,  136 


986. 

3  See  §§  379k-379n  herein. 

*  Clarkson  v.  Supreme  Lodge 
Knights  of  Pvthias,  99  S.  Car.  134, 
82  S.  E.  1043. 

It  is  not  arbitrary  to  change  a 
system  of  rates  which  would  better 
promote  the  ability  of  the  order  or 
association  to  fulfil  its  contract  obli- 
a'ations.    Kane  v.  Knights  of  Colum- 


S.  W.  817.     Must  not  be  contrary  to    bus,  84  Conn.  96,  79  Atl.  63,  40  Ins. 
law.     Kane  v.  Knights  of  Columbus,    L.  .1.  874. 
84  Conn.  96,  79  Atl.  63,  40  Ins.  L.  J. 
874.     See  §  375  herein. 

^Chicago,  Burlington  &  Quincv  Ry. 
Co.  v.  Hendricks,  125  HI.  App.' 580; 
De    Graw    v.    Supreme    Court    Inde- 

943 


^  See  §  379k  herein. 
^  See  i^§  379o  et  seq.  hei'ein. 
"^  See  §§  380  et  seq.  herein. 
*  See  §§  188  et  seq.  herein. 


§  379b  JOYCE  ON  INSURANCE 

power  of  a  fraternal  benefit  society  granted  in  its  charter  to  alter 
and  repeal  its  constitution,  by-laws,  rules  and  regulations,  enters 
into  and  forms  part  of  its  contracts  with  its  membei-s  when  the  lat- 
ter agrees  to  abide  not  only  by  the  existing  constitution  and  laws 
but  also  by  amendments  thereto.  In  other  words,  that  the  terms 
of  the  contract  between  a  fraternal  benefit  society  and  its  members 
are  determined  by  the  constitution  and  laws  of  the  society  as  they 
exist  at  the  beginning  of  the  membershij)  and  as  they  may  be  law- 
fully amended  from  time  to  time,  and  the  agreemen-is  made  there- 
under between  the  incoming  members  and  the  society.^  So  a  re- 
served charter  power  to  change  or  repeal  the  constitution,  by-laws, 
rules  and  regulations  coupled  with  an  agreement  of  the  applicant 
for  membership  to  conform  to  and  abide  l»y  the  same  as  they  then 
exist  or  as  they  may  be  thereafter  changed  or  amended,  is  also  de- 
cided to  constitute  the  contract  between  the  society  and  its  mem- 
bers.^" 

§  379b.  Same  subject:  decisions  holding  amendments,  etc.,  bind- 
ing.— Under  the  folloAving  decisions  the  rule  stated  under  the  pre- 
ceding section  has  been  fully  sustained,  whether  the  reservation  or 
agreement  was  made  by  statute,  the  charter  or  articles  of  association, 
constitution,  by-laws,  application  or  certificate,  or  two  or  more  of 
them  together.  In  a  Federal  case  where  the  stipulation  was  that  the 
contract  should  be  governed  by  all  the  laws,  rules  and  regulations  of 
the  order  governing  the  rank  ''now  in  force  or  that  may  hereafter 
be  enacted.''  and  there  was  also  a  condition  requiring  "full  com- 
pliance with  all  the  laws  governing  this  rank  now  in  force  or  that 
liereafter  may  be  enacted,''  it  was  declared  that  the  right  so  reserved 
was  well  recognized  as  authorizing  the  association  to  subject  mem- 
Ijers  to  further  requirements  and  conditions  of  future  liability  l)y 
reasonable  enactments  within  the  ol)jects  and  for  the  general  wel- 
fare of  the  association,  and  to  ap])ly  the  regulations  to  prior  i'on- 
trncts.  but  to  the  extent  only  that  the  conditions  thus  imposed  arise 
after  the  enactment,  and  the  insurer  could  not  repudiate  obligations 
already  vested  under  the  contract  and  that  a  by-law  could  not  im- 
pose a  new  condition  or  exempt  froai  liability,  nor  be  made  retro- 
active to  impair  or  destroy  oi  exempt  from  liability  for  a  pre-exist- 
ing cause  which  arose  under  the  contract.^^  In  Alabama  a  provi- 
sion in  the  certificate  that  assured  shall  comply  Avith  all  its  terms 

9  Kane  v.  Knisjlits  of  Columbus,  84  "  Llovd  v.  Supreme  Lodge 
Conn.  96,  79  Atl.  63,  40  Ins.  L.  J.  Knights  of  Pytliias,  98  Fed.  66,  38 
874.  C.  C.  A.  654,  29  Ins.  L.  J.  744. 

^^  Hines  v.  IModern  Woodmen  of 
America,  41  Okla.  135,  L.R.A.1915A, 
264,  137  Pac.  675. 

944 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  379b 

and  those  of  the  constitution  and  that  the  policy  will  be  liable  to 
forfeiture  where  existing-  and  future  adopted  by-laws  and  rules  are 
not  complied  with  is  a  1>inding  contract  embracing  future  amend- 
ments of  laws  or  rules. ^^  In  California  a  member  and  his  ])cnefi- 
ciaries  are  bound  where  he  agrees  in  his  certificate  to  aliide  by  and 
conform  to  the  by-laws  then  in  force  or  sul^sequently  adopted. ^^  In 
Colorado  if  articles  of  association  of  a  b'^neficiary  society  raserve  a 
right  to  modify,  amend  or  adopt  a  new.  constitution  etc.,  a  change 
in  the  fundamental  law  binds."  In  Connecticut  where  an  amend- 
ment to  the  charter  of  a  fraternal  beneficial  order  empowered  it  to 
alter  and  repeal  its  constitution,  by-laws,  rules,  and  regulations, 
and  this  was  re-enacted  in  later  amendments  and  there  was  also  an 
agreement  in  the  apjjlication  to  conform  to  and  abide  by  the  con- 
stitution and  rules  of  the  council  which  were  then  in  force  or  might 
thereafter  be  ado])tcd  by  the  proper  authoi'ity,  and  it  was  further 
recited  in  the  certificate  that  it  was  i.^sued  upon  condition  of  com- 
pliance with  present  or  future  laws,  it  was  decided  that  such  re- 
served power  of  amendment  authorized  the  order  to  change  its  laws 
and  such  changes  became  a  part  of  the  contract  of  in.surance,  since 
the  contract  was  determined  by  the  constitution  and  laws  of  the 
corporation  as  amended  from  time  to  time  and  the  agreements 
made  thereunder  between  the  parties. ^^  It  is  likcwi.<e  decided  in 
that  state  that  where  a  member  agrees  to  sul)ject  himself  to  the 
constitution  and  laws  of  the  order  the  terms  of  his  contract  are  de- 
termined not  only  by  those  existing  when  he  became  a  member, 
but  also  by  amendments  made  from  time  to  time.^^  And  under 
another  decision  in  the  same  state  where  there  is  an  agreement  on 
becoming  a  member  to  be  bound  V)y  l)y-laws  in  force  or  to  be  enact- 
ed, a  sub.sequently  validly  adopted  by-law  binds. ^'  In  Illinois  a 
benefit  society  may  amend  its  by-laws  imder  a  reserved  jiower  so  to 
do,  and  if  the  applicant  expressly  agreed  at  the  time  the  certificate 
was  issued  that  rvdes  subsequently  adopted  should  be  applicable, 
such  reservation  or  agreement  is  Ijinding  upon  both  member  and 
beneficiary.^*    fSo  a  member  of  an  as.-ociation  who  agrees  to  abide 

12  Fraternal  Union   of  America  v.  84  Conn.  96,  79  Atl.  63,  40  Ins.  L.  J. 

Zeigler,  14.5  Ala.  287,  .31)  So,  751.  874. 

1^  Caldwell     V.     Grand     Lodo-e     of        ^^  Coshliii  v.  Knitjlits  of  Colnnibu.s, 

United  Workmen,  148  Cal.  195,  113  79  Conn.  218.  04  Atl.  22.?.  3(i  In.-^.  L. 

Am.    St.   Rep.   219,   2    L.R.A.(N.S.)  .J.  44. 

653n,   82   Pac.    781,   7    Am.    &    Eng.        ^^  Masonic    Mutual    Benefit    Assoc. 

Annot.  Cas.  3.5G.  v.    Sover.-<on,   71    Conn.    719,   43    Atl. 

1*  Head  Camp  Pacific  .Jurisdiction,  192. 
Woodmen  of  the  World  v.  Woods,  :?4        ^^  Murpliv  v.  Nowak.  223  111.  .101, 

Colo.  1,  81  Pac.  2(51.  7  L.R.A.(N.S.)  393n,  79  N.  E.  112. 

1^  Kane   v.   Kniohts    of   Columbus. 

Joyce  Ins.  Vol.  1.— 60.  945 


§  379d 


JOYCE  ON  INSURANCE 


by  and  be  governed  by  subsequently  adopted  by-laws  is  bound  by 
them  unless  they  are  unreasonable.^^     So  an  amendment  may  be 
enacted  where  the  certificate  is  accepted  subject  to  all  subsequently 
adopted  laws  and  rules.^"     So  an  acceptance  of  a  certificate  by  a 
member  constitutes  a  sufficient  reservation  of  a  right  to  amend  by- 
laws where  the  certificate  contains  an  express  provision  giving  the 
association  such  power.^    And  acceptance  of  a  certificate  obligating 
a  member  a.s  to  rules  which  might  be  subsequently  enacted  govern- 
ing the  council  and  funds  of  a  fraternal  association  constitutes  a 
reserved  power  to  amend  the  laws  of  such  society.^    And  a  require- 
ment in  a  certificate  of  a  fraternal  order  that  right  to  benefits  is  con- 
ditioned upon  compliance  with  existing  and  future  enacted  laws  ob- 
ligates the  member  and  his  beneficiary.^     So,  a  reserved  power  in 
the  by-laAvs  and  an  agreement  in  the  policy  to  be  bound  by  subse- 
quently enacted  by-laws,  is  binding.*     So,   also,  where  right  to 
change  by-laws  is  expressly  reserved  under  the  certificate  or  con- 
tract "the  insurer  may  make  such  change  and  an  agreement  that 
such  changes  may  be  made  is  valid.^    And  in  other  cases  in  that 
state  a  contract  to  be  bound  by  after-enacted  by-laws  or  new  laws 
is  binding  upon  members  and  beneficiaries.^     In  Indiana  if  the 
constitution  clearly  and  expressly  reserves  the  right  to  amend,  a 
member  is  bound  to  take  notice  thereof.'    And  a  member  is  bound 
by  laws  thereafter  ado])ted  when  he  so  agrees  in  his  certificate.^   In 
loiva  it  is  settled  law  that  a  contract  is  valid  and  binding  whereby 
the  insured  agrees  to  be  bound  by  the  constitution  and  by-laws  and 
by  those  w^hich  may  thereafter  be  enacted,  and  that  members  are 
bound  to  take  notice  of  by-laws  whether  adopted  prior  or  subse- 
quent to  the  contract.^     And  a  reservation  in  the  certificate  of  a 

"  Scow  V.  Supreme  Council  of  the  Maccabee.s    of   the   World    v.    Stens- 

Roval  League,  223  111.  32,  79  N.  E.  land.  10r>  111.  App.  267;  Grand  Lodge 

40;             °  Ancient  Order  of  U.  W.  139  111.  App. 

20Pold  V.  North  American  Union,  4. 

261  111.  433,  104  N.  E.  4,  aff'g  180  '  Supreme  Lodge  Knights  of  Pyth- 

111    App    488  ias  v.  Knight,  117  Ind.  489,  3  L.R.A. 

i  Covenant   Mutual  Life  Assoc,  v.  409,  20  N.  E.  479,  483. 

Tuttle,  87  111.  App.  309.  ^  Supreme  Lodge  Knights  of  Hon- 

2  Supreme  Council  of  Roval  Area-  or  v.  Bieler,  58  Ind.  App.  550,  105 
num  V.  McKnight,  238  111.  349,  87  N.  N.  E.  244. 

E.  299.  ^  Norton  v.  Catholic  Order  of  For- 

3  Supreme  Lodge  Knights  of  Pvth-  esters,  138  Iowa  464,  24  L.R.A. 
ias  V.  Kutscher,l79  111.  App.  340,  (N.S.)  1030n,  114  N.  W.  893.  Agree- 
53  N.  E.  620,  rev'g  72  111.  App.  462.  ment  in   certificate  was   that   it  was 

*  Smith  v.  ^Mutual  Reserve  Fund  issued  upon  condition  that  the  mem- 
Life  Assoc.  140  111.  App.  409.  ber    complied    in    future    "with    the 

5  Covenant  Mutual  Life  Assoc,  v.  laws,  rules  and  regulations,  now  gov- 
Tuttle,  87  111.  App.  309.  erning  said  order,  or  tliat  may  here- 

6  Supreme     Tent    of    Knights    of  after  be  enacted  by  said  high  court." 

946 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  379b 

right  to  aiuciid  is  valid  and  binding.^"  And  in  tlmt  state  if  insured 
agrees  to  be  bound  by  and  subject  to  the  ^jrovisions  of  all  duly  en- 
acted laws  as  they  are  or  hereafter  may  be  changed  or  amended,  he 
is  bound  by  amendments  made  subsequent  to  his  contract."  In 
Kamas  provisions  in  the  application  and  certificates  obligating  the 
member  to  conform  to  and  be  governed  by  by-laws  thereafter  on- 
acted  are  binding  upon  assured  and  his  beneliciary.^^  And  suljse- 
quent  enactments  are  binding  under  an  agreement  made  in  the  cer- 
tificate and  bj^-laws.^^  Tn  Louisiana  subsequciilly  enacted  by-laws 
are  held  valid  and  binding,^*  In  a  Mamackuiietts  case  where  the 
contract  found  in  the  application,  certificate,  the  statute  constituting 
the  charter  and  the  constitution  and  laws  of  the  order,  provided  for 
future  changes  or  amendments  it  was  held  that  the  members  would 
be  bound  by  amendments  regularly  made  even  if  there  were  no  ex- 
press stipulation,  in  regard  to  the  by-laws,  in  the  application  or  in 
the  certificate,  but  that  full  authority  to  amend  the  laws,  rules  and 
regulations  also  existed  under  an  express  agreement,  made  when 
joining  the  society  to  conform  to  and  abide  by  bj^-laws  thereafter 
adopted  and  also  under  the  certificate  which  made  com])liance  with 
the  laws,  rules  and  regulations  "now  go^■erning  the  sui)reme  council 
and  fund,  or  that  may  hereafter  be  enacted  by  the  supreme  council 
to  govern  said  council  and  fund"  a  condition  precedent  to  payment 
under  said  certificate.-^^  In  Michigan  a  member  when  joining  may 
validly  agree  that  changes  may  be  made  in  the  constitution  and  laws 
in  order  to  enable  it  to  carry  out  its  contracts  especially  when  aufhor- 


^^  House  V.  Modern  Woodmen  of 
America,  165  Iowa,  007,  146  N.  W. 
817. 

"  Elliott  V.  Home  Mutual  Hail  As- 
soc. 160  Iowa  105,  140  N.  W.  431. 
Citing  Jordan  v.  Iowa  IMutual  Tor- 
nado Ins.  Co.  151  Iowa,  I'.i,  Ann.  Cas. 
1913A,  266,  130  N.  W.  177;  Fort  v. 
Iowa  Lesion  of  Honor,  146  Iowa 
183,  123  N.  W.  224;  Sieverts  v.  Na- 
lional  Benevolent  Assoc.  95  Iowa, 
710,  64  N.  W.  671;  Hobbs  v.  Iowa 
Mutual  Benelit  Assoc.  82  Iowa,  107, 
11  L.R.A.  299,  31  Am.  St.  Rep.  466, 
47  N.  W.  983.  The  court  in  the  prin- 
cipal case  (160  Iowa,  105)  per  Ladd, 
J.,  said :  "The  authorities,  however, 
are  quite  as  conclusive  thai  where  tlie 
assured  agrees  to  be  bound  by  amend- 
ments to  the  by-laws  or  articles  sub- 
sequently adopted,  he  must  take  no- 
tice   thereof,    and    is    as    efl'ectuallv 


bound  thereby  as  by  those  existing 
at  the  time  of  the  issuance  of  the  cer- 
tificate or  policy  of  insurance."  Cit- 
ing Norton  v.  Catholic  Oi'der  of  For- 
esters, 138  Iowa,  464,  24  L.R..V. 
(N.S.)  1030,  114  N.  W.  803;  Ross  v. 
]\Iodern  Brolherhood  of  America,  120 
Iowa,  692,  95  N.  W.  207. 

^2  Knights  of  IMaccabee.s  of  the 
World  V.  Nelson,  77  Kan.  629,  95 
Pac.  1052,  37  Ins.  L.  J.  986. 

^^  Miller  v.  National  Couiicil 
Kniuhts  &  Ladies  of  Security,  69 
Kan.  234,  76  Pac.  830. 

^^Dousrhertv  v.  Knichts  of  Pv- 
thias,  48"l^i.  Ann.  1203,  20  So.  712. 

^*  Reynolds  v.  Supreme  Conn<il 
Royal  Arcanum,  192  INIass.  150,  7 
L.R.A.(N.S.)  1154n,  7  Am.  &  Eng. 
Ann.  Cas.  776,  78  N.  E.  129,  35  Ins. 
L.  J.  673. 


947 


at 


9b 


JOYCE  ON  INSURANCE 


ized  by  statutory  amendment  of  the  charter.^^  And  an  agreement 
is  valid  which  binds  the  parlies  to  a  mutual  benefit  c-ertificate,  to  by- 
laws to  be  adopted  in  the  future.^''  In  Minnesota  the  rights  of  mem- 
bers in  beuelit  insurance  associations  depend  upon  the  articles  of  as- 
sociation and  by-laws  which  have  been  adopted;  and,  generally 
speaking,  the  body  authorized  to  make  by-laws  may  change,  amend, 
or  repeal  those  already  in  existence,  subject,  however,  to  the  restric- 
tions and  limitations  of  the  charter  or  articles  of  association,  and 
of  the  l)y-laws  themselves,  and  also  subject  to  the  implied  condition 
that  such  change,  amendment,  or  repeal  must  be  reasonable.^^  In 
Nebraska  an  agi-eement  by  a  member  of  a  fraternal  benefit  associa- 
tion to  be  bound  by  subsequently  enacted  by-laws  will  be  upheld 
when  such  by-laws  are  reasonable  in  their  nature  and  legally 
enacted.^^  And  an  agreement  in  the  application  to  be  bound  by  l)y- 
laws  now  in  force  or  hereafter  adopted  is  binding  as  to  sulisequent- 
ly  enacted  by-laws.^°  In  Neiu  Hampshire  an  agreement  in  the  ap- 
plication and  in  the  certificate  issued  on  condition  that  the  member 
conform  to  the  by-laws,  rules  and  usages  in  force  or  thereafter  en- 
acted is  binding  as  to  suljsequent  amendments  changing  rules.' 
Under  a  Xcir  Yorl-  decision  although  the  statute  of  organization  of 
a  fraternal  beneficiary  association,  the  constitution  and  the  certifi- 
cates authorize  amendments  as  to  the  l)enefit  fund  the  association 
may  not  enact  amendments  reducing  the  amount  of  said  fund,  or 
increasing  assessments.^  So  changes  in  by-laws  though  made  after 
the  issuance  of  a  certificate  are  lield  binding  as  a  part  of  the  con- 
tract where  the  member  of  an  jissessment  association  has  agreed  in 
his  application  to  be  bound  by  by-laws  thereafter  enacted.^  In 
Oregon  mutual  benefit  societies  have  the  right  to  alter,  amend  or 
rei)eal  their  laws,  or  to  enact  others  consistent  with  the  purpose  for 
which  they  are  organized.*  In  Pennsiilvania  a  by-law  may  bo 
changed  under  a  reserved  power  in  the  certificate  stipulating  that 

15  De  Giaw  v.  Supreme  Court  In-  gion  of  Honor  v.  Adams,  68  N.  H. 

dependent  Order  of  Odd  Fellows,  182  236,  44  Atl.  380. 

Midi.  366,  148  N.  W.  703.  ^  Green    v.    Supreme    Council    of 

I'Wiiieland  v.  Kuiahts  of  Macca-  Royal  Arcanum,  206  N.  Y.  591,  100 

bees  of  the  World,  148  i\Iich.  608,  14  N.  E.  411,  rev'-  129  N.  Y.  Supp.  791, 

Det.  Leo-.  N.  345,  112. X.  W.  096.  144  App.  Div.  761.    But  compare  §i? 

18  Thibert  v.  Supreme  Lodge  K.  of  380c  et  seq.  herein,  where  this  point 

H.   78   Minn.  448,  79  Am.    St.   Rep.  is  fully  considered. 

412,  47  L.R.A.  136,  81  N.  W.  220.  ^  ji^-g^g  ^    Southern  Tier  :\Lasonic 

i^Lani^e  v.  Royal  Highlanders,  75  Relief  As.soc.  78  X.  Y.  Supp.  61,  76 

Neb.  188,  10  L.li.A.(N.S.)   066,  100  App.  Div.  151. 

N.  W.  224.  *  Wist    V.    Grand    Lodge    Ancient 

20  Farmers  Mutual  Ins.  Co.  v.  Kin-  Order  of  United  Workmen,  22  Ore. 

ney,  64  Neb.  808,  90  N.  W.  926.  271,  29  Am.   St.  Rep.  603,  29   Pac. 

1  Supreme    Council    American    Le-  610.      Agreement    in    application   to 
i                                                                 948 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  379c 

members  shall  comply  with  the  laws  of  the  order  then  in  force  or 
thereafter  t«  l)e  enacted.^  And  a  member  is  bound  where  the  con- 
stitution and  by-laws  authorize  making  changes  in  the  law  of  or- 
ganization of  a  beneficial  association.^  So  an  application  may  rea- 
sonably provide  that  the  certificate  issued  is  accepted  subject  to  laws 
in  force  or  which  may  "hereafter  be  adopted."  '  In  Tennessee  an 
agreement  to  conform  to  laws  in  force  or  which  may  "hereafter" 
be  enacted  binds  the  member  by  a  validly  enacted  by-law  where 
such  agxeement  is  contained  in  his  a[)plication  and  the  issuance  of 
his  certificate  is  conditioned  thereon.*  In  Texas  it  is  held  that  laws, 
rules,  and  regulations  for  the  government  of  mutual  benefit  socie- 
ties ai-e  equally  obligatory  upon  members  whether  such  laws  eic, 
exist  when  a  person  becomes  a  member  or  are  thereafter  enacted, 
provided  they  are  not  arbitrary  or  unreasonable  and  are  lawfully 
enacted  in  pursuance  of  such  society's  inherent  power.^  And  if 
a  member  agrees  that  by-laws  and  regulations  may  thereafter  be 
enacted  he  is  bound. ^°  In  Wisconsin  a  stipulation  in  the  certificate 
binding  the  member  to  future  enacted  by-laws  is  valid  where  the 
change  relates  only  to  matters  of  necessary  detail  and  does  not  nul- 
lify the  contract  as  it  existed.^^  Under  an  English  decision  rules  of 
a  friendly  society  may  be  altered  without  the  consent  of  one  who 
was  a  member  at  the  time  Avhen  the  rules  provided  for  changes  and 
although  said  altered  rules  deprive  him  in  ca.«e  of  a  breach  thereof, 
of  a  benefit  to  which  ho  was  cnlitlod  he  is  bound  thorcby-^^ 

§  379c.  Same  subject:  decisions  holding  amendments,  etc.,  not 
binding. — If  there  is  no  rescrvalion  in  the  articles,  by-laws  or  certifi- 
cate«,  an  amendment  with  certain  conditions  precedent  affecting  as- 
sured's  rights  is  held  not  to  apply."  So  under  a  Mississippi  decision 
a  provision  in  the  certificate  that  any  failure  to  comply  strictly  with 
the  laws  and  regulations  of  the  association  as  prescribed  by  tho 
grand  lodge  will  forfeit  membership,  is  not  an  express  reservation 

comply    with    laws,    regulations    and  Mystic  Circle  v.  Erieson,  —  Tex.  Civ. 

requiroments  thereafter  enacted.  App.  — ,  131  S.  W.  02. 

*  Chamhers  v.  Supreme  Tent  ^^  West  v.  Grand  Lodge  Ancient 
Kniolits  ol'  Maccabees  or'  llie  Wodd,  Order  United  Workmen,  14  Tex.  Civ. 
200 >a.  244,  8G  Am.  St.  Rep.  716,  49  App.  471,  37  S.  W.  966.  ^ 

j^ll    784  ^^  Curtis   v.    ^lodern    WoodmoM    of 

e'staik   V.   Byers,   24   Pa.   Co.    Ct.    America,   159  Wis.   303,  150   N.   W. 

Rep.  517.  "  ^1'- 

'Nickum  v.  Grand  Lodge  Ancient        ^^  c;,iiit]i  y    Galloway   (1898)   1  Q. 

Order  United  Workmen,  37  Pa.  Co.  B.  71,  7<  Law  T.  Rep.  469,  67  L.  J. 

Ct.  Rep.  104.  Q.  B.  N.  S.  15. 

*  Supreme  Lodse  Kniijhts  of  Pyth-  ^^  McNeil  v.  Southern  Tier  :\lasonie 
ias  V.  La  Malta,  9.')  Tenn.  (11  Pick.)  Relief  Assoc.  58  N.  Y.  Supp.  119,  40 
157,  30  L.R.A.  838,  31  S.  W.  493.  App.   Div.  581,  a  case  of  conditions 

3  Supreme     Ruling     of     Fraternal    precedent  to  reinstatement. 
[  949 


§  379d 


JOYCE  OX  INSURANCE 


that  a  member  shall  lie  ])Ound  by  all  the  regulations  in  force  or 
thereafter  to  be  enacted.  The  court  per  Whitfield,  C,  declared :  ''It 
is  further  to  be  said  that  the  overwhelming  weight  of  authority  is 
to  the  efl^ect  that  in  tho.<e  provisions  which  purport  to  bind  the  in- 
sured, if  there  is  no  express  provision  that  he  shall  be  bound  by  laws 
to  be  enacted  in  the  future,  then  such  laws  so  enacted  in  the  future 
do  not  bind  the  insured."  ^*  So  where  a  by-law  was  endorsed  upon 
the  back  of  a  policy  providing  that  it  should  have  tire  same  force  and 
effect  as  if  it  appeared  on  the  face  thereof,  and  said  by-law^  emjiow- 
ered  the  board  of  directors  to  change  by-laws  at  any  time  and  there 
are  subsequent  changes  therein  by  the  board,  assured's  rights  are  not 
controlled  thereby,  but  only  the  by-laws  appearing  on  his  policy 
govern,  when  assured  has  not  agreed  that  by-laws  so  changed  should 
become  a  part  of  the  contract.^^  Nor  can  the  contract  of  insurance 
be  changed  at  will  under  a  constitutional  provision  of  the  society 
that  persons  becoming  members  shall  be  subject  to  said  society's 
power  to  change  by-laws. ^^ 

§  379d.  Same  subject:  prohibiting  extra-hazardous  occupation. — 
Under  a  reserved  power  so  to  do  a  fraternal  benefit  society  may 
amend  a  list  of  prohibited  occupations  and  enlarge  the  same  so  as 
to  include  as  extra-hazardous  the  occupation  of  switchman.^'''  And 
a  reserved  right  in  the  certificate  to  amend  authorizes  an  amend- 
ment specifying  the  occupation  of  lineman  as  extra-hazardous. 
And  recovery  is  precluded  where  such  occupation  is  engaged  in  by 
a  member  after  the  enactment  of  said  amendment  and  his  death 
results  from  an  accident  while  so  employed. ^^  Again,  although  cer- 
tain risks  are  classified  as  hazardous  at  the  time  the  certificate  was 
issued  still  a  subsequent  by-law  may  reasonably  classify  one  of  said 
risks  as  extra-hazardous,  where  assured  has  agreed  to  be  bound  by 
the  constitution  and  bv-laws  then  in  force  or  thereafter  enacted. ^^ 


^*  Masonic  Benefit  Assoc,  v.  Hop- 
kins, 99  Miss.  112,  56  So.  169,  40  Ins. 
L.  J.  1671.  Citing  to  tlie  above  quo- 
tation, Hobbs  v.  Iowa  Mutual  Bene- 
fit Assoc.  82  Iowa,  107,  31  Am.  St. 
Rep.  466,  11  L.R.A.  299,  47  N.  W. 
983;  Miller  v.  Tattle  (Kan.)  73  Pac. 
88;  Startling-  v.  Supreme  Council 
Roval  Templars  of  Temperance,  108 
Mich.  440,  62  Am.  St.  Rep.  709,  66 
N.  W.  340;  Morrison  v.  Wisconsin 
Odd  Fellows  Mutual  Life  Ins.  Co.  59 
Wis.  162,  18  N.  W.  13,  29  Cyc.  77; 
1  Coolev's  Briefs  on  In.s.  709. 


Knights  &  Ladies  of  Honor,  128  N. 
Car.  354,  54  L.R.A.  602,  38  S.  E.  905- 

^"^  Gilmore  v.  Knights  of  Colum- 
bus, 77  Conn.  58,  107  Am.  St.  Rep. 
17,  1  Am.  &  Eng.  Ann.  Cas.  715,  58 
Atl.  223. 

As  to  clauses  prohibiting  change  of 
occupation,  see  §  2236  herein. 

^^  House  v.  Modern  Woodmen  of 
America,  165  Iowa,  607,  146  N.  W. 
817. 

^^  Norton  v.  Catholic  Order  of  For- 
esters, 138  Iowa,  464,  24  L.R.A. 
(N.S.)    1030    (annotated  on  validity 


15  Annan    v.    Hill    Union    Brewery    of  retrospective  by-law  or  other  rule 

Co.  59  N.  J,  Eq.  414,  46  Atl.  563.  of  benefit  association  excluding  eer- 

V.      Supreme      Lodge    tain  class  of  members  from  benefits 

950 


1^  Bragaw 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.        §  379e 

But  even  though  insured  has  agreed  in  his  application  to  abide  Ijy 
the  con.^titution,  by-laws,  rules  and  regulations  of  the  society  and 
the  latter  prior  thereto  had  adopted  a  by-law  or  regulation  making  a 
certain  occupation,  in  which  assured  thereafter  engaged,  extra-haz- 
ardous, a  suit  on  the  certificate  will  not  be  defeated  where  it  does 
not  ai)pear  that  said  member  had  actual  knowledge  of  such  a  by- 
law or  that  anything  was  ever  done  at  the  time,  or  after,  the  certifi- 
cate was  obtained  by  which  he  could  be  constructively  charged  with 
knowledge  that  the  occupation  in  which  he  was  engaged  was  extra- 
hazardous and  it  also  appeared  that  a  list  of  occupations  deemed  ex- 
tra-hazardous or  prima  facie  hazardous,  printed  on  the  back  of  his 
application,  signed  by  him  and  referred  to  in  said  application  did 
not  mention  the  occupation  in  question.  Assured's  agreement  in 
his  application  must  be  deemed  to  have  been  made  with  reference 
to  the  information  given  him  in  such  case.^" 

§  379e.  Same  subject:  prohibiting  engaging  in  liquor  or  saloon 
business. — Where  the  agreement  in  the  application  to  a  fraternal 
society  requires  compliance  with  future  enacted  laws,  regulations, 
etc.,  as  a  condition  precedent,  and  the  certificate  is  expressed  to  be 
issued  on  condition  that  the  member  shall  comply  with  all  the  laws 
rules,  etc..  while  a  memljer,  he  is  bound  by  a  subsequently  enacted 
by-law  forfeiting  benefits  for  engaging  in  the  retail  liquor  business.^ 
And  under  the  same  agreement  in  the  application  and  certificate  as 
that  last  above  stated  a  member  was  held  bound  by  a  subsequently 
enact!  .1  general  law  providing  that  any  meml)er  who  should  after 
a  specified  date  enter  into  the  business  of  selling  by  retail  intoxicat- 
ing liquors  as  a  beverage  should  be  expelled  from  the  order,  and 
also  })roviding  in  such  case  for  suspension  from  any  and  all  rights 
to  i)articipate  in  the  beneficiary  fund  and  that  his  beneficiary  cer- 
tificate should  become  null  and  void  from  and  aft«r  the  date  of  his 
so  engaging  in  said  occupation  with  a  further  provision  that  said 

or  rfdncino-  benefit  of  that  class),  114  ^  Grand  Lodge  Ancient  Order  U. 
N.  W.  8!):!  W.  v.  Burns,  84  Conn.  356,  80  Atl. 

20Gienty  v.  Kniohts  of  Columbus,  157,  40  Ins.  L.  J.  ItiTli.  Citing  Gil- 
]9!)  N.  y.  103,  92  N.  E.  Ill,  rev'si-  more  v.  Knights  of  Columbus,  77 
(mem.)  110  N.  "  Y.  Supp.  1129,  Conn.  58,  61,  107  Am.  St.  Rep.  17,  1 
(mem.)  126  App.  Div.  934,  which  Am.  &  Eng.  Ann.  Cas.  715,  58  Atl. 
aff'd  105  N.  Y.  Supp.  244,  55  Misc.  223;  Pain  v.  Societe  St.  John  Bap- 
98.  In  this  same  case  upon  a  second  tiste,  172  Mass.  319,  70  Am.  St.  Rep. 
trial  of  the  action  judgment  was  en-  287,  52  N.  E.  502;  State  (ex  rel. 
tered  upon  the  verdict  of  the  jury  for  Schrempp)  v.  Grand  Lodge  Ancient 
the  plaintiff  and  this  was  aflirmed  in  Order  United  Worknuin,  vO  IMo. 
131  N.  Y.  Supp.  792,  146  App.  Div.  App.  456.  Citing  and  considering, 
497,  aff'd  (mem.)  205  N.  Y.  577,  Coughlin  v.  Knights  of  Columbus,  79 
98  N.  E.  1103.  Conn.  218,  220,  64  Atl.  22.^ 

951 


§  379e         .  JOYCE  OX  INSURANCE 

law  should  be  self-executing,^  So  the  acceptance  of  a  certificate  with 
a  requirement  that  the  member  comply  with  thereafter  adopted  by- 
laws in  order  to  prevent  forfeiture,  binds  him  by  a  subsequently 
adopted  by-law  prohiljiting  engaging  in  the  liquor  business  after 
becoming  a  member  and  providing  a  forfeiture  of  membership 
therefor.^  And  a  by-law  enacted  after  a  person  becomes  a  member 
of  a  fraternal  society,  prohibiting  members  not  so  engaged  from 
engaging  in  the  saloon  business  is  obligatory  under  an  express  pro- 
vision of  the  membership  contract  that  members  shall  comply  with 
laws,  regulations,  etc.,  thereafter  enacted.*  Again,  a  resolution  of 
the  masonic  order  which  denies  membership  to  saloon  keepers  ap- 
plies to  existing  members  who  continue  thereafter  in  said  business.^ 
And  a  member  whose  existing  contract  is  expressly  subject  to  ''such 
by-laws  and  rules  as  are  or  may  be  adopted  by  the  supreme  lodge 
or  local  lodge  of  which  he  is  a  member,''  is  obligated  by  an  amend- 
ment of  the  constitution  of  the  order  providing  that  any  memlx-r 
who  should  thereafter  enter  upon  the  manufacture  or  sale  of  malt, 
spirituous  or  vinous  liquors,  to  be  used  as  a  beverage,  in  the  capacity 
of  proprietor,  stockholder,  agent  or  employee  should  ip.so  facto  for- 
feit all  his  rights  as  a  member  either  social  or  beneficial  and  his 
certificate  should  thereby  become  absolutely  null  and  void.  The 
constitution  before  amendment  prohibited  such  occupation.^ 
But  in  New  York  payment  of  a  certificate  of  life  insurance  issued 

2  State  (ex  rel.  Strang)  v.  Cam-  172  ]\rass.  319,  72  Am.  St.  Rep.  287, 
den  Lodge,  Ancient  Order  United  52  N.  E.  502.  Compare  Brown  v. 
Workmen,  73  N.  J.  L.  500,  64  Atl.  Great  Camp  of  Knights  of  Modern 
93,  35  Ins.  L.  J.  858.  Citmg  and  Maccabees,  167  Mich.  123,  132  N.  W. 
considering,   Gilmore  v.   Knights   of   562. 

Columbus,  77  Conn.  58,  107  Am.  St.  ^  Loeffler  v.  Modern  Woodmen  of 
Rep.  17,  1  Am.  &  Eng.  Ann.  Cas.  America,  100  Wis.  79,  73  N.  W. 
715,  58  Atl.  223;  Moerschbaecher  v.    1012. 

Supreme  Council  Royal  League,  188  *  State  (ex  rel.  Schrempp)  v. 
111.  9,  52  L.R.A.  281,  59  X!  E.  17;  Grand  Lodge  Ancient  Order  U.  W. 
State  (ex  rel.  Schremp)  v.  Grand  70  Mo.  App.  456. 
Lodge  Ancient  Order  United  Work-  ^  Ellerbe  v.  Faust,  119  Mo.  653,  25 
men,  70  Mo.  App.  456;  Langnecker  L.R.A.  149,  25  S.  W.  390.  See  also 
V.  Trustees  of  Grand  Lodge  Ancient  MaeDowell  v.  Aekley,  93  Pa.  277;  St. 
Order  United  Workmen,  111  Wis.  Patrick's  ^lale  Benevolent  Soc.  v. 
279,  55  L.R.A.  185,  87  Am.  St.  Rep.  McVey,  92  Pa.  510. 
860,  87  N.  W.  293 ;  Loeffler  v.  ]\Iod-  6  Supreme  Lodge  of  Fraternal 
ern  Woodmen  of  America,  100  Wis.  Union  of  America  v.  Light,  195  Fed. 
79,  73  N.  W.  1012.  Citing  Fullin-  903,  115  C.  C.  A.  591.  Considered 
wider  v.  Supreme  Council  Royal  and  explained  in  Smythe  v.  Supreme 
League,  180  111.  621,  72  Am.  St.  Rep.  Lodge  Knights  of  Pythias  (U.  S.  D. 
239,  54  N.  E-.  485;  Messer  v.  Grand  C.)  198  Fed.  967,  981,  which  case  is 
Lodge  Ancient  Order  United  Work-  aff'd  in  Smyth  v.  Supreme  Lodge 
men^  180  Mass.  321,  62  N.  E.  252;  Knights  of  Pythias,  220  Fed.  438. 
Pain   v.    Societe    St.    John   Baptiste.    137  C.  C.  A.  32. 

952 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  379f 

by  a  "mutual  benefit  fraternity,"  or  society,  upon  which  dues  had 
been  paid  by  the  assured  and  accepted  by  the  society  to  the  time  of 
his  death,  cannot  be  avoided  upon  the  ground  that  the  assured,  at 
the  time  of  his  death,  was,  and  for  a  few  months  prior  thereto  had 
been,  engaged  in  the  hotel  business,  in  violation  of  a  by-law  adopt- 
ed by  the  society,  without  notice  to  the  assured,  many  years  after 
his  certificate  was  issued,  prohibiting  any  certificate  holder  of  the 
society  from  selling  liquors  at  retail,  and  declaring  the  certificate 
of  any  one  engaging  in  such  business  void  for  a  violation  thereof, 
nor  the  by-laws  under  which  the  certificate  was  issued,  contained 
any  restriction  as  to  the  business  in  wliich  the  assured  might  en- 
gage.' Ho  it  is  decided  in  Kansas  that  the  adoption,  by  a  fraternal 
insurance  order,  of  a  by-law  declaring  that  no  person  shall  be  ad- 
mitted or  retained  as  a  member  who  is  engaged  in  the  sale  of  intox- 
icating liquors,  does  not,  in  the  absence  of  a  specific  provision  to 
that  effect,  avoid  the  beneficiary  certificate  of  a  member  who  is  al- 
ready engaged  in  that  business  in  a  state  where  it  is  not  unlawful, 
who  continues  therein,  and  against  whom  no  action  is  taken.  And 
a  by-law  of  a  fraternal  insurance  order,  which  provides  that  any 
member  who  shall,  after  the  date  of  its  adoption*  have  entered,  or 
who  sliall  thereafter  enter,  into  the  business  of  selling  intoxicating 
liquors,  shall  stand  suspended  from  his  rights  to  participate  in  the 
beneficial  fund,  and  that  his  certificate  shall  become  void  from  the 
date  of  his  engaging  in  such  occupation,  does  not,  in  terms,  apply 
to  a  member  who,  before  the  adoption  of  such  by-law,  was  engaged 
in  such  business,  and  who  has  remained  in  it  continuously  there- 
after.^ And  under  an  Illinois  decision  a  member  who  was  engaged 
in  the  liquor  business  before  the  enactment  of  a  by-law  prohibiting 
such  o(cui»atIon  and  providing  for  forfeiture  for  non-compliance, 
is  not  thereby  precluded  from  thereafter  re-engaging  in  the  same 
business  after  being  forced  to  temporarily  abandon  it.^ 

§  379f.  Same  subject:  prohibiting  use  of  intoxicating  liquors  or 
drugs. — A  reserved  ))ower  in  the  original  contract  to  amend,  author- 
izes an  amendment  relieving  the  society  from  liability  in  case  of 

■^  Ayres  v.  Order  of  United  Work-  Lods^e  Ancient  Order  United  Work- 
men, "  188  N.  Y.  280,  281,  80  N.  E.  men.  72  N.  Y.  Siipp.  7_55,  66  App. 
220,  aff'g  109  App.  Uiv.  919.  Div.  32;?,  alfd  (mem.)  1/2  N.  Y.  665, 

8  Grand   Lodge  'Ancient   Order   of  65  N.  E.  1116 ;  Langnecker  v.  Trus- 

United    Workmen    v.     Haddock,    72  tees  of  Grand  Lodo-e  Ancient   Order 

Kan.    35,    1    L.K.A.(N.S.)    1064,   82  United  Workmen,  111  Wis.   2/9,  5.1 

Pae.    583.      Citing    and    considering  L.R.A.  185,  87  Am.  St.  Rep.  860,  87 

Steinert    v.    United    Brotlierliood    of  N.  W.  293. 

Carpenters  &  Joiners  of  America,  91       ^  (hand  Lodge  Ancient  Order  Unit- 
Minn.  189.  97  N.  W.  668;  Ellerbe  v.  ed  Workmen  v.  Oetzel,  139  111.  App. 
Faust,  119  Mo.  653,  25  L.R.A.  149,  4. 
25    S.    W.    390;    Deuble    v.    Grand 

953 


379g  JOYCE  ON  INSURANCE 


'o 


death  resulting  from  the  use  of  intoxicating  liquors  and  is  applic- 
able to  pre-existing  members.^"  If  the  intemperate  use  of  intoxicat- 
ing liquors  forfeits  the  certificate  under  existing  by-laws  a  subse- 
quently enacted  by-law  may  provide  for  forfeiture  in  case  of  death 
from  said  cause  applying  the  same  to  existing  members  as  well  a,? 
to  future  ones  where  the  certificate  also  provides  for  the  enactment 
thereafter  of  amendments  to  by-laws."  But  a  by-law  of  fraternal 
insurance  society,  which  provides  that,  if  any  member  heretofore 
or  hereafter  adopted  shall  become  intemperate  in  the  use  of  drugs, 
the  benefit  certificate  held  by  such  member  shall,  by  such  acts,  be- 
come and  be  al)sohitcly  void  as  to  benefits,  and  all  payments  made 
thereon  shall  be  thereby  forfeited,  does  not  apply  to  the  case  of  a 
member  who,  prior  to  the  enactment  of  such  by-law,  had  become 
intemperate  in  the  use  of  drugs,  and  continued  so  thereafter. ^^ 

§  379g.  Same  subject:  accidental  injuries:  total  disability. — 
"Where  it  appeared  that  the  member  of  a  mutual  ]»cnelit  society,  or- 
ganized to  provide  for  social  enjoyments  and  also  pecuniary  bene- 
fits in  case  of  injury  or  death  from  accidental  means,  had  read  the 
constitution  which  provided  for  a  faithful  observance  of  laws,  rules, 
etc.,  in  force  or  thcJse  ''added^to  this  constitution,  by-law,  and  rules," 
and  in  taking  the  obligation  of  membership  necessary  to  admit- 
tance, the  member  agreed  in  writing  to  ''abide  by"  the  constitution 
''as  it  now  is  or  may  be  hereafter  amended,"  it  was  determined  that 
"to  observe"  and  "to  abide  by"  meant  "to  obey"  and  "to  accept  the 
consequences  of"  and  did  not  relate  merely  to  disciplinary  and 
social  regiilations,  concerning  which  no  ]iower  of  amendment  was 
needed,  and  therefore  amendments  defining  more  clearly  what  ac- 
cidents were  and  were  not  within  the  benefits  of  the  common  fund 
bound  the  member.^' 

But  a  member  of  a  benefit  association  who  receives  an  injury  is 
entitled  to  recover  under  a  by-law  then  in  force  where  such  injury 
is  fairly  within  the  intendment  of  its  provisions,  although  the  by- 
laws were  thereafter  amended  before  the  injury  became  permanent 
or  the  cause  of  action  complete.     The  amendment,  however,  de- 

10  xjrv    V.    Modern    Woodmen     of  ern  Woodmen  of  America  v.  Tavlor, 

America,  149  Iowa,  706,  127  N.  W.  67  Kan.  ;568,  71  Pae.  806,  rev'd  be- 

66.3.  cause  of  want  of  certain  alleo-ations 

As   to   excepted    risks    and   losses:  and  proof,  upon  second  trial  peremp- 

use  of  intoxicants,  see  §§  2612  et  seq.  tory  instructions  were  uiven   to  find 

herein.  for  defendant  and   plaintiff  brous'lit 

^^  Curtis   V.   Modern   Woodmen    of  }:roceedino's  in  error  (.5  L.R.A.(N.8.) 

America,   159   Wis.   303,  150   N.   W.  283,  72  Kan.  443). 
417.  ^3  Order  of   Commercial   Traveleis 

^2  Tavlor  v.  Modern   Woodmen  of  of  America  v.  Smith,  192  Fed.  102, 

America,    72    Kan.    443,    5    L.R.A.  112  C.  C.  A.  442,  41  Ins.  L.  J.  770? 
(N.S.)  283,  83  Pac.  1099,  s.  c.  Mod- 

954 


MUTUAL  C0MPANIP:S— CHANGE  OF  BY-LAWS,  ETC.      §  3791i 

fined  or  made  clearer  the  meaning  of  the  former  by-law.^*  And  a 
contract  providing  foi-  Ijenelit.s  in  cane  of  total  disability  cannot  be 
changed  by  a  by-law  thereafter  adopted,  even  though  the  a^^sured 
has  agTeed  under  the  terms  of  his  certificate  to  observe  the  rules, 
etc.,  of  the  society.^*  So  the  liability  of  an  accident  a.ssociation  to- 
wards its  members  is  held  to  be  fixed  by  its  constitution  and  by-laws 
as  they  exist  at  the  time  of  issuance  of  the  certificate  of  membership, 
and  not  by  those  in  force  at  the  death  of  the  member,  when  such 
constitution  does  not  authorize  amendments  thereof  nor  of  the  l)y- 
laws,  binding-  the  member  to  any  change  in  the  contract  without  his 
consent.^^  Again,  if  a  mutual  benefit  society  issues  to  a  member  a 
certificate  of  insurance,  it  cannot,  by  the  subsequent  adoption  of  :i 
by-law,  modify  or  change  the  contract  without  the  consent  of  the 
member.  Therefore,  if  when  a  certificate  is  issued,  it  defines  what 
shall  be  deemed  a  total  disability,  and  declares  the  member  to  be 
entitled  to  a  sum  specified  on  the  suff"ering  by  him  of  such  disabili- 
ty, the  society  cannot,  without  his  consent,  afterward  reduce  tlie 
classes  of  total  disability. ^'^ 

§  379h.  Same  subject:  deficiency  or  reserve  assessments:  delin- 
quent assessments. — A  deficiency  or  reserve  assessment  with  a  crea- 
tion of  a  lien  on  policies  is  authorized  under  a  reserved  power  in 
the  by-laws  and  certificate.^'  And  under  an  agreement,  made  when 
joining  an  order  to  conform  to  changes  thereafter  made  in  the  con- 
stitution and  laws  thereof,  a  member  may  be  assessed  under  an 
amended  law  to  make  up  a  deficiency  in  funds  of  the  order,  where 
rates  have  been  inadequate,  when  also  so  authorized  by  a  statutory 
amendment  of  the  charter  of  organization.^'  So,  where  the  by-laws 
provide  that  amendments  subsequently  enacted  shall  be  binding 
upon  the  member  he  is  obligated  by  an  amendment  relieving  the 
association  from  liability  while  said  member  is  delinquent  in  assess- 
ments.^" Again,  neither  the  obligation  of  a  member's  contract  nor 
a  beneficiary's  vested  right-s  are  impaired  by  a  repeal  of  a  by-law 

1*  Maynard    v.    Locomotive    Engi-  ^"^  Starfing-     v.     Supreme     Connoil 

neers'  Mutual  Life  &  Accident  Ins.  Royal  Templars  of  Temperance,  108 

AS.SOC.  16  Utah,  145,  47  Am.  St.  Rep.  Mich.  440,  62  Am.  St.  Rep.  709,  66 

602,  5  Pac.  2.19,  27  Ins.  L.  .1.  208,  s.  N.  W.  340. 

c.  14  Utah,  458,  47  Pac.  1030,  26  Ins.  ^^  yn^itii   v.   :MuLuaI  Reserve  Fund 

L.  J.  579.  Life  Assoc.  140  111.  App.  409. 

^5  Starling     v.     Supreme     Council  ^'  Do  Graw  v.  Supreme  Court  In- 
Royal  Templars  of  Temperance,  108  dependent   (Jrder   Odd   Fellows,   182 
Mich.  440,  62  Am.   St.   Rep.  709,  2  Mich.  366,  148  N.  W.  703. 
Det.  Leg.  N.  893,  66  N.  W.  340.  ^o  KHiott  v.  Home  ^Mutual  Hail  As- 

^6  Carnes  v.  Iowa  State  Traveling  soc.  of  Cherokee,  160  Iowa,  105,  140 

Men's  Assoc.  106  Iowa,  281,  68  Am.  N.  W.  431. 
St.  Rep.  286,  76  N.  W.  283,  28  Ins. 
h,  J.  345. 

955 


§§  379i-379k  JOYCE  ON  INSURANCE 

and  an  amendment  enacted  under  a  reserved  right  in  the  certificate 
providing  for  self-executing  forfeitures  for  nonpayment  of  assess- 
ments on  a  specified  day.^  But  even  though  the  articles  of  associa- 
tion expressly  confer  upon  the  directors  tlie  power  to  enact  by-laws 
and  the  member  has  agreed  to  be  governed  by  said  articles  and  by- 
laws lie  is  not  bound  by  changes  in  the  latter  providing  for  suspen- 
sion of  members  delinquent  in  meeting  assessmentSj  where  the  by- 
laws when  he  became  a  member,  were  silent  as  to  any  such  condi- 
tion.^ 

§  379i.  Same  subject:  time  limitation  for  suing. — An  agreement 
in  the  application  to  conform  to  thereafter  enacted  laws  and  rules 
is  held  binding  upon  a  member  under  an  amended  by-law  provid- 
ing a  time  limitation  for  suing.^ 

§  379j.  Same  subject:  as  to  remedies  within  association. — It  is 
held  that  where  the  certificate  provided  for  compliance  with  condi- 
tions in  the  constitution  and  laws  thereafter  enacted  a  change  there- 
in concerning  the  presentation  of  claims  against  the  association  to 
tribunals  of  tlie  society  is  binding  upon  a  beneficiary  even  though 
no  such  condition  existed  when  insured  became  a  member.'*  It  is 
also  held  error  to  charge  the  jury,  in  an  action  for  sick  benefits, 
that  only  the  constitution  and  laws  in  force  when  the  certificate  was 
issued  bound  the  plaintiff',  where  there  was  a  defense  of  non-com- 
pliance with  the  required  procedure  as  to  remedies  within  the  so- 
ciety, and  there  was  also  an  express  agreement  to  comply  with 
changes  which  might  thereafter  be  adopted  in  the  constitution, 
laws,  etc.^ 

§  379k,  Amendments,  changes,  or  repeal  must  be  reasonable  even 
under  reserved  power  or  agreement.^'^ — It  is  well  settled  as  one  of 
the  essentials  that  an  amendment  change  in  or  repeal  of  the  consti- 
tution or  articles  of  association,  by-laws,  rules  and  regulations,  must 
be  reasonable  to  be  binding,  even  though  the  power  to  make  the 

^  Brown  v.  Knights  of  the  Protect-  ation   a.s   to  manner   of  establishing 

ed  Ark,  43  Colo.  ^Si),  fl()  Pac.  450.  claim),   121   N.    W.    823.      Compare 

2  Farmers'  Mutual  Hail  Assoc,  v.  Monger  v.  New  Era  Assoc.  171  Mich. 
Slattery,  115  Iowa,  410,  88  N.  W.  614,  137  N.  W.  631,  41  Ins.  L.  J. 
940.  1788. 

3  Arold  V.  Supreme  Conclave  Im-  As  to  exhausting  remedies  within 
proved  Order  of  Heptasoph.^,  123  association  and  by-laws  excluding  re- 
Md.  G75,  91  Atl.  679.  sort  to  civil  courts.    See  §§  352-3o2c, 

As   to   limitation   clauses   affecting  372-372b  herein, 

actions,  see  §§  3181  et  seq.  herein.  ^  Union  Fraternal  League  of  Bos- 

*  Monger  v.   New   Era  Assoc.  156  ton  v.  Johnston,  124  Ga.  902,  53  S. 

Mich.  645,  24  L.R.A.(N.S.)  1027  (an-  W.  241. 

notated  on   validity  of  retrospective  ^a  gee  §§  368,  369,  377-380  herein, 

by-law  or  other  rule  of  benefit  associ-  , 

956 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  379k 


f^ame  is  reserved  or  is  agreed  to  in  the  contract  of  the  assured  or 
member  with  a  imilual  company,  society,  association  or  order.^ 

And  although  the  power  to  aher  a  by-law  is  reserved,  that  power 
cannot  be  exercised  to  enact  unreasonable  by-laws,  even  though  the 
by-law  is  substantially  an  enactment  of  another  on  the  same  su]> 
ject.'''  So,  a  sul)sequent  amendment  must  be  reasonable  and  not 
one  which  radically  departs  from  the  fundamental  plan  and  scheme 
of  insurance  and  this  applies  even  though  the  certificate  makes  the 
contract  subject  to  the  by-laws  of  the  association  and  amendments 
thereafter  to  be  made.*  And  a  power  reserved  in  general  terms  in 
the  charter  and  by-laws  does  not  authorize  a  material  alteration  of 
the  contract,  but  only  such  amendments  as  are  reasonable,  in 
furtherance  of  the  contract,^  and  consistent  with  the  purpose  for 
which  the  society  was  organized.^"     So  amendments  to  the  consti- 


^  United  States. — Llovd  v.  Supreme 
Lodo-e  Knights  of  Pythias,  98  Fed. 
66,  38  C.  C.  A.  654,  29  Ins.  L.  J. 
744. 

Connecticut. — Kane  v.  Knit>bts  of 
Columbus,  84  Conn.  96,  79  Atl.  63, 
40  Ins.  L.  J.  874. 

Illinois. — Scow  v.  Supreme  Coun- 
cil of  the  Roval  League,  223  111.  32, 
79  N.  E.  42;  Smith  v.  ]\hitual  Re- 
serve Fund  Life  Assoc.  140  111.  App. 
409;  Supreme  Tent  Knights  of  Mac- 
cabees V.  Hammers,  81  111.  App.  560. 

Indiana. — Supreme  Lodge  Knights 
of  Honor  v.  Bieler,  58  Ind.  App.  550, 
105  N.  E.  244. 

Iowa. — Ury  v.  Modern  Woodmen 
of  America,  149  Iowa,  706,  127  N. 
W.  665. 

Kansas. — Knights  of  Maccabees  of 
the  World  v.  Nelson,  77  Kan.  629,  95 
Pac.  1052,  37  Ins.  L.  J.  986. 

Mar  I/land. — Arold  v.  Supreme 
Conclave  Improved  Order  of  Ilep- 
tasophs,  123  Md.  675,  91  Atl.  829. 

Mimiesota. — Rosenstein  v.  Court 
of  Honor,  122  Minn.  310,  142  N.  W. 
331;  Olson  v.  Court  of  Honor,  100 
Minn.  117,  8  L.R.A.(N.S.)  521,  117 
Am.  St.  Rep.  676,  10  Am.  &  Eng. 
Ann.  Cas.  622,  110  N.  W^  374;  Thi- 
bert  v.  Supreme  Lodge  Knights  of 
Honor,  78  Minn.  448,  47  L.R.A.  136, 
79  Am.  St.  Rep.  412,  81  N.  W.  220. 

Missouri. — Claudy  v.  Royal  League, 
250  Mo.  92,  168  S."  W.  593;  Lewine 

95 


v.  Supreme  Lodge  Knights  of  Pyth- 
ias of  the  World,  122  Mo.  App. 
821;  Smitli  v.  Supreme  Lodge 
Knights  of  Pythias,  83  Mo.  App.  512. 

Nebraska. — Lange  v.  Royal  Iligli- 
landers,  75  Neb.  l88,  121  Am.  St. 
Rep.  786,  10  L.R.A.(N.S.)  666,  110 
N.  W.  1110;  Farmers  Mutual  Ins. 
Co.  V.  Kinney,  64  Neb.  808,  90  N.  W^ 
926. 

A^ew  Ham psJiire.— Supreme  Coun- 
cil American  Legion  of  Honor  v. 
Adams,  68  N.  H.  236,  44  Atl.  380. 

New  Jersey. — O'Neill  v.  Supreme 
Council  American  Legion  of  Honor, 
70  N.  J.  L.  410,  57  Atl.  463. 

Texas. — Eaton  v.  Internatiotml 
Travelers'  Assoc.  —  Tex.  Civ.  App. 
— ,  136  S.  W.  817;  Supreme  Ruling 
of  Fraternal  Mystic  Circle  v.  Va-'w- 
son,  —  Tex.  Civ.  App.  — ,  131  S.  W. 
92. 

On  reasonableness  of  new  by-laws 
as  imj)lied  condition  of  con.sent  lo 
change  of  by-laws,  see  note  in  8 
L.R.A.(N.S.)'521. 

'  Kent  v.  Quicksilver  Mining  Co. 
78  N.  Y.  159. 

'  Smith  V.  Supreme  Lodge  Knights 
of  Pythias,  83  Mo.  App.  512. 

^  Parks  V.  Supreme  Circle,  Broth- 
erhood of  America,  83  N.  J.  Eq.  l.'U, 
89  Atl.  1042. 

I"  Claudv  V.  Royal  League,  250  Mo. 
92,  168  S.  W.  593. 


§  379k  JOYCE  ON  IXStRANCE 

tution  and  by-laws  must  be  reasonable  and  within  the  scope  of  the 
original  purpose.^^  And  a  reserved  power  in  the  certificate  where- 
by the  member  agrees  to  comply  with  all  the  laws,  rules  and  regula- 
tions thereafter  enacted  only  authorizes  reasonable  changes  in  the 
manner  and  mode  as  to  details  of  carrying  on  the  scheme  of  insur- 
ance, and  a  right  to  modify  any  essential  feature  of  the  contract  is 
not  authorized  by  such  reservation.^^  But  amendments  within  the 
scope  of  the  original  design,  and  one  in  which  the  members  gen- 
erally are  alike  interested  will  be  upheld. ^^  Again,  when  the  ex- 
ercise of  judgment  and  discretion  is  vested,  either  by  law  or  con- 
tract, in  an  individual  or  governing  body,  a  reservation  is  implied 
that  it  must  be  exercised  in  good  faith  and  reasonably.  In  de- 
termining whether  it  has  been  so  exercised  the  court  will  not  sub- 
stitute its  judgment  for  that  of  the  individual  or  body  in  whom  the 
discretion  has  been  vested.  In  such  a  case,  the  inquiry  is:  Does 
the  action  under  consideration  fail  to  mea.sure  up  to  any  fair  test 
of  reason?  If  the  facts  or  circumstances  are  such  that  reasonable 
men  may  dift'er  as  to  the  wisdom  and  expediency  thereof,  the  judg- 
ment and  discretion  of  those  vested  with  authority  to  decide  must 
be  upheld.  It  follows  that  a  very  clear  cause  of  abuse  of  discretion 
must  be  made  out  to  warrant  judicial  interference.^* 

Changes  or  amendments  in  existing  by-laws  may  be  unrea.son- 
al)le  and  invalid  as  to  those  who  were  members  prior  to  the  adop- 
tion tliereof  and  who  have  not  consented  thereto,  although  they 
may  be  reasonable  and  valid  as  to  those  who  became  members  after 
the  enactment  of  said  laws  and  who  will  be  deemed  to  have  assented 
thereto  by  becoming  members.^^ 

It  is  held,  however,  in  a  New  York  case,  that  in  purely  voluntary 
associations  the  constitution  and  by-laws  constitute  the  contract  and 
if  their  provisions  are  not  illegal,  immoral  or  contrary  to  public 
policy  they  will  be  upheld,  whether  reasonable  or  not  as  parties 
have  the  right  to  enter  into  unreasonable  and  unwise  contracts,  so 
long  a5  thev  are  not  illegal  and  are  fairlv  made;  and  therefore  the 
court  has  nothing  to  do  with  the  reasonableness  or  unreasonable- 
ness of  an  amendment  to  a  by-law. ^^     But  this  deci-sion  is  cited  in 

^^  Strauss  v.  Mutual  Reserve  Fund  ^^  Clarkson     v.      Supreme     Lodge 

Life    Assoc.    126    N.    Car.    971,    54  Knights  of  Pvthias,  99  S.  Car.  134, 

L.R.A.  C05,  36  S.  E.  352,  128  N.  Car.  82  S.  E.  1043,  per  Hydriek,  J. 

465,  39  S.  E.  55.  ^^  Thibort      v.       Supreme      Lodge 

12  Stirn  V.  Supreme  Lodge  of  Bo-  Kniglits  of  Pythias,  78  Minn.  448,  47 
hemian  Slavonian  Benevolent  Soc.  L.R.A.  136,  81  N.  W.  220.  See  tliis 
150  Wis.  13,  136  N.  W.  164,  41  Ins.  case  under  §  379n  herein.  The  above 
L.  J.  1130.  statement  is  also  in  accord  with  the 

13  Matliieu    v.    Mathieu,    112    Md.  ca.se-s   throughout   this   chapter. 

625,  77  Atl.  112,  .39  Ins.  L.  J.  1413.  ^^  Maxwell   v.    Theatrical   Mechan- 

958 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.        §  3791 

another  case  in  that  state  and  the  court  declares  and  so  decides  that 
with  res)3ect  to  reasonableness  or  unreasonableness  of  a  by-law  there 
is  no  difference  between  the  rules  respecting  incorporated  or  un- 
incorporated societies."  And  the  rights  and  obligations  of  a  mem- 
ber of  a  produce  exchange,  organized  for  strictl}"  commercial  pur- 
poses, do  not  rest  upon  his  contract  alone  but  upon  his  contract  as 
interpreted  by  the  charter  and  by  laws  under  which  it  was  made 
and  the  corporation  may  in  such  case  alter  the  by-laws  by  any  rea- 
sonable amendment,  that  is  one  which  does  not  impair  vested 
rights.^* 

If  the  facts  are  undisputed  the  question  whether  a  by-law,  rule, 
or  regulation  is  reasonable  is  one  of  law  for  the  court. ^^ 

§  3791.  Reasonable  amendments,  etc.,  binding. — AVe  will  also 
state  here  that,  subject  to  the  rules  hereinbefore  given,^°  a  legally 
enacted,  amended  by-law  which  is  reasonable  will  be  upheld,^  and 
a,  member  of  a  fraternal  beneficiary  association  who  so  agrees  is 
bound  by  subsequent  by-laws  when  they  are  reasonable.^  So,  where 
the  applicant  agrees  to  conform  to  and  comply  with  the  laws,  rules 
and  usages  thereafter  to  be  enacted  by  the  society,  he  is  bound  where 
they  are  reasonable  and  within  the  laws  of  the  society.^  A  member 
will  also  be  held  to  have  assented  to  amendments  which  are  rea.son- 
able  and  which  are  within  the  associations  power  to  make  where 
such  power  is  reserved,  fairly  advising  one  applying  for  member- 
ship of  the  terms  of  his  intended  contract.'*  So,  an  agreement  made 
while  a  member  of  a  fraternal  benefit  order  to  comply  with  all  the 
laws,  rules  and  requirements  thereof  obligates  him  to  comply  with 
all  reasonable  rules  and  regulations  thereafter  enacted  in  the  as- 
sociation's interest  and  this  applies  to  a  new  law  increasing  his  rate 
of  monthly  assessments.^  It  is  also  determined  that  if  there  is  re- 
served in  the  contract  a  power  of  amendment  of  the  laws  governing 

ical  Assoc.  104  N.  Y.  Supp.  815,  54  ^  Theorell    v.  >  Supreme    Court    of 

Misc.  619.     See  §§  368  et  seq.  herein.  Honor,  115  111.  App.  313.     See  also 

^'Stanton  v.  Eccentric  Association  Supreme  Lodijc  of  Fraternal  Union 

of  Firemen,  etc.  114  N.  Y.  Supp.  480,  of  America,  195  Fed.  903,  115  C.  C. 

130  App.  Div.  129.  A.  591. 

^*  Paiisli  V.  New  York  Produce  Ex-  ^  Sujireme    Council    American    Le- 

chano-e,  169  N.  Y.  34,  56  L.R.A.  149,  gion  of  Honor  v.  Adams,  68  N.  H. 

61  N.  E.  977,  aff'o-  69  N.  Y.  Supp.  236,  44  All.  380. 

764,  60  A))p.  Div.  IL  *  Green    v.     Supreme    Council    of 

^^  Clarkson     v.      Supreme     Lodge,  Roval    Arcanum,    129    N.    Y.    Supp. 

Kniffhts  of  Pvtliias,  99  S.  Car.  134,  791,  144  App.  Div.  761. 

82  S.  E.  104.].  ^  Miller       v.       National       Council 

^°  See  §  379a  herein.  Knights    &    Ladies    of    Security,    69 

^  I^ange  v.   Royal   Hiuldanders,  75  Kan.  234,  76  Pac.  830.     Compare  §§ 

Neb.  188,  10  L.R.A. (N.S.)    666,  121  380c  et  .seq.  herein. 
Am.  St.  Rep.  786,  106  N.  W.  224. 

959 


§  379m 


JOYCE  ON  INSURANCE 


such  associations,  reasonably  designating  the  subjects  thereof,  so 
that  a  person  when  he  makes  application  for  membership  is  fairly 
advised  that  the  terms  of  the  contract  in  which  he  is  about  to  enter 
may  be  altered  in  the  respects  thus  referred  to,  sul>sequent  changes 
in  such  laws  when  reasonably  made  by  the  proper  authorities  of  the 
organization  are  within  their  power  and  must  be  deemed  assented  to 
by  hiin.^  Again,  a  stipulation  of  the  application  to  conform  to 
and  ixh'ide  by  the  constitution,  by-laws  and  regulations  of  the  as- 
sociation thereafter  adopted  by  the  proper  authorities,  constitutes 
an  assent  in  advance  to  all  reasonable  changes  properly  made  there- 
in and  an  amendment  which  is  intended  to  effect  a  modification  of 
the  benefit  plan  or  policy  of  the  association,  that  is  within  the  scope 
of  the  original  design,  and  one  in  which  the  members  generally  are 
alike  interested,  will  be  upheld.' 

As  to  mutual  benefit  societies  with  social  and  indemnity  pur- 
poses, if  consent  to  amendment  is  exacted,  it  should  be  attributed  to 
the  matter  in  respect  to  which  consent  is  necessary  and  not  to  those 
concerning  which  no  reservation  of  power  to  amend  is  needed.^ 

A  member  of  a  produce  exchange  will  be  l)ound  l)y  reasonal)le 
amendments  to  the  laws  where  the  charter  amendment  and  by- 
laws enacted  pursuant  thereto  as  well  as  the  contract  among  the 
mcinl)ers  must  be  looked  to  in  determining  the  member's  rights, 
and  where,  by  the  contract,  the  assessments  to  which  he  is  liable 
and  the  payments  to  his  beneficiaries  are  to  be  determined  by  the 
by-laws.^ 

§  379m.  When  amendments,  etc.,  are  reasonable. — An  agreement 
or  reservation  that  the  certificate  is  accepted  subject  to  such  laws, 
rules,  and  regulations  as  now  exist  or  may  hereafter  be  adopted  is 
reasonable.^"  An  amendment  or  change  is  held  rea,sonable:  which 
provides  as  to  classification  of  members ;  ^^  which  alters  a  system  of 
rates  so  as  to  better  promote  the  ability  of  the  order  or  association 
to  carry  out  its  contracts ;  ^^  which  provides  for  an  increase  of  as- 
sessments under  an  agreement  in  the  certificate  or  contract  to  com- 


6  Green    v.     Supreme    Council    of  ^  Parish  v.  New  York  Produce  Ex- 

Roval    Arcanum,    143    N.    Y.    Supp.  change,  169  N.  Y.  34,  56  L.R.A.  149, 

1119,  158  App.  Div.  945,  40  In.s.  L.  61  N.  E.  977. 

J.   414a.      Citing   Beach   v.   Supreme  ^°  Nickum  v.  Grand  Lodge  Ancient 

Tent   Knights    of    Maccabees   of    the  Order   Cnited  Workmen,  37  Pa.   Co. 

Worhl,  177  N.  Y.  100,  69  N.  E.  281.  Ct.  Rep.  104. 

^  Mathieu  v.  Mathieu,  112  Md.  625,  "  French  v.  Now  York  IMercantile 

77  Atl.  112,  39  Ins.  L.  J.  1413.  Exchange,   80  N.   Y.   Supp.  312,  80 

*  Order     of      United      Commercial  App.  Div.  131. 

Travelers  of  America  v.   Smith,  192  As  to  power  to  classify  members: 

Fed.  102,  112  C.  C.  A.  442,  41  Ins.  discrimination,  see  S  350b  herein. 

L   J    779  ^^  Kane   v.  Knights   of   Columbus, 

960 


MUTUAL  COMPANIES— CHAXGE  OF  BY-LAWS,  ETC.      §  379nl 

ply  willi  subsequent  enactments;  ^^  which  reratcs  existing  members 
as  well  as  those  becoming  members  thereafter,  where  a  mutual  bene- 
fit s(;cicty  under  its  constitution  is  empowered  to  rerate  members 
taken  over  by  it  from  another  society  where  such  members  arc 
permitted  to  retain  their  certificates,  or  their  rates  were  lower  than 
those  of  said  receiving  association :  ^^  which  provides  against  lia- 
bility while  a  member  is  in  default  of  the  payments  of  a  valid  as- 
sessment;^® which  defines  an  injury,  to  indemnify  which  the  cer- 
tificate was  issued ;  ^^  which  enlarges  the  list  of  prohibited  occupa- 
tions and  includes  that  of  switchman  as  extrahazardous ;  ^'  which 
classifies  as  extrahazardous  an  occupation  which  had  been  cla.«sed 
only  as  a  hazardous  risk  at  the  time  the  certificate  was  issued,  and 
as  such  was  not  then  prohibited;  ^^  which  tends  to  enhance  the  dig- 
nity and  influence  of  a  fraternal  order  as  well  as  diminish  the  risk 
of  mortality,  as  where  it  provides  for  forfeiture  of  benefits  for  en- 
gaging, while  a  member  thereof,  in  the  retail  liquor  business;^* 
which  makes  null  and  void  member's  certificates  where  they  en- 
gage in  prohibited  occupations;  where  the  by-laws  exclude  persons 
engaged  in  the  sale  of  intoxicating  liquors  from  becoming  mem- 
bers and  power  was  vested  in  a  committee  to  suspend  permanently 


84  Conn.  9G,  79  Atl.  63,  40  Ins.  L.  J. 
874. 

As  to  amendments  or  changes  in- 
creasin<?  assessments  or  reducing  ben- 
efits, see  >^S  'iSOc  et  seq.  herein. 

^^  Supreme  Lodge  Knigtits  of  Hon- 
or V.  Bieler,  58  Ind.  App.  550,  105 
N.  E.  244. 

On  the  riglit  of  mutual  insurance 
companv  to  increase  rates,  .see  notes 
in  7  L."R.A.(N.S.)  1154,  31  L.R.A. 
(N.S.)  417. 

^*  Supreme  Ruling  of  Fraternal 
Mystic  Circle  v.  Ericson,  —  Tex.  Civ. 
App.  — ,  131  S.  W.  92  (case  where 
member  was  held  to  have  consented 
to  change  of  plan  from  as.sessment 
to  one  of  periodical  payments). 

^*  Farmers  Mutual  Ins.  Co.  v.  Kin- 
ney, 64  Neb.  808,  90  N.  W.  926. 

■^^  Ros.s  V.  Modern  Brotlierhood  of 
America,  120  Iowa,  692",  95  N.  W. 
207. 

^■^  Gilmore  v.  Knights  of  Columbus, 
77  Conn.  58,  107  Am.  St.  Rep.  17.  58 
Atl.  223,  1  Am.  &  Eng.  Annot.  Cas. 
715.      See  House  v.    INlodern    \Yood- 


men  of  America,  165  Iowa,  607,  146 
N.  W.  817.     See  S  379d  herein. 

^^  Norton  v.  Catholic  Order  of  For- 
esters, 138  Iowa,  464,  24  L.R.A. 
(N.S.)  1030  (annotated  on  validity 
of  retrospective  by-law  or  other  rule 
of  benefit  association  excluding  cer- 
tain class  of  members  from  benctits  or 
reducing  benehts  of  that  class),  114 
N.  W.  893. 

^^Orand  Lodge  Ancient  Order 
United  Workmen  v.  Burns,  84  Conn. 
356,  80  Atl.  157,  40  Ins.  L.  J.  1676. 
Citinr/  State  (ex  rel.  Strang)  v.  Cam- 
den Lodge  Ancient  Order  U.  W.  73 
^^  .1.  L.'500,  64  Atl.  93;  Ellerbe  v. 
Faust,  119  Mo.  653;  25  L.R.A.  149, 
25  S.  W.  390;  State  (ex  rel. 
Schrempp)  v.  Grand  Lodge  A.  0.  U. 
W.  70  Mo.  Ap|i.  456;  Langnecker  v. 
(hand  Lodge  A.  O.  U.  W.  Ill  Wis. 
279,  55  L.R.A.  185,  87  Am.  St.  Rep. 
860,  87  N.  W.  293;  LoelHer  v.  Mod- 
ern Woodmen  of  America,  100  Wis. 
79,  75  N.  W.  1012;  Schmidt  v.  Su- 
preme Tent  (it  Knights  of  Maccabees 
of  the  World,  97  Wis.  528,  73  N.  W. 


•)•) 


Joyce  Ins.  Vol.  L— Gl. 


961 


§  379m 


JOYCE  ON  INSURANCE 


members  engaged  in  prohibited  occupations;  ^^  and  an  amendment 
to  the  constitution  which  prohibits  members  from  thereafter  enter- 
ing upon  the  manufacture  or  sale  of  intoxicating  liquors  in  the  ca- 
pacity of  stockholder,  proprietor,  agent  or  employee  binds  a  member 
whose  certificate  was  issued  prior  thereto ;  ^  which  limits  the  amount 
up  to  which  sick  benefits  may  be  received,  and  increases  the  amount 
of  death  benefits  at  the  same  time ;  ^  which  limits  the  amount  of 
benefits  in  case  of  suicide ;  ^  which  limits,  or  more  definitely  fixes, 
the  time  of  expiration  of  the  policy  or  termination  of  the  risk ;  * 
and  which  provides  that  the  beneficiary's  not  the  member's  admin- 


2°  Brown  v.  Great  Camp  of  Mod- 
ern Maccabees,  167  Mich.  123,  132 
N.  W.  562. 

^  Supreme  Lodge  of  Fraternal 
Union  of  America  v.  Light,  195  Fed. 
903,  115  C.  C.  A.  591.  The  court  per 
Adams,  Civ.  J.,  said :  "We  think  the 
true  rule  is  this :  That  a  member  of  a 
fraternal  beneficial  organization  who 
accepts  membership,  subject  to  such 
by-laws  and  rules  as  the  Supreme 
Lodge  may  thereafter  adopt,  is 
bound  by  any  reasonable  legislation 
thereafter  adopted.  The  following 
authorities  sustain  this  proi^osition : 
Hall  V.  Western  Travelers  Accident 
Assoc.  69  Neb.  601,  96  I^.  W.  170; 
Head  Camp  Pacific  Jurisdiction 
Woodmen  of  the  World  v.  Woods,  34 
Colo.  1,  81  Pac.  261 ;  Court  of  Hon- 
or V.  Hutchens,  43  Ind.  App.  321,  82 
N.  E.  89;  Union  Benevolent  Soc.  v. 
Martin,  113  Ky.  25,  67  S.  W.  38; 
Daughtry  v.  Knisrhts  of  Pvthias,  48 
La.  Ann.  1203,  55  Am.  St.  Rep.  310, 
20  So.  712 ;  Pain  v.  Societe  St.  Jean 
Baptiste,  172  Mass.  319,  70  Am.  St. 
Rep.  287,  52  N.  E.  502;  Domes  v. 
Supreme  Lodge  Kniglits  of  Pvthias 
of  the  World,  75  Miss.  466,  23  So. 
191;  Supreme  Council,  American  Le- 
gion of  Honor  v.  Adams,  68  N.  H. 
236,  44  Atl.  380:  Tisch  v.  Protected 
Home  Circle,  72  Ohio  St.  233,  74  N. 
E.  188;  Chambers  v.  Supreme  Tent 
Kniohts  of  ]\Iaccabees,  200  Pa.  244, 
86  Am.  St.  Rep.  716,  49  Atl.  784; 
Eversberg  v.  Supreme  Tent  of  Mac- 
cabees, 33  Tex.  Civ.  App.  549,  77  S. 
W.   246;   Fuaure  v.   Mutual   Societv 

96 


of  St.  Joseph,  46  Vt.  362;  Loeffler  v. 
Modern  Woodmen  of  America,  100 
Wis.  79,  75  N.  W.  1012;  Supreme 
Lodge  Knights  of  Pythias  v.  La  ]\Iat- 
ta,  95  Tenn.  157,  30  L.R.A.  838,  31 
S.  W.  493;  Louisa  Moersehbaecher  v. 
Royal  League,  188  111.  9,  52  L.R.A, 
281,  59  N.  E.  17 ;  Supreme  Command- 
ery  of  the  Knights  of  the  Golden 
Rule  V.  Ainsworth,  71  Ala.  436,  46 
Am.  Rep.  332;  O'Neill  v.  Supreme 
Council,  70  N.  J.  Law  410,  420,  57 
Atl.  463,  1  Ann.  Cas.  422." 

2  Berg  V.  Baden.ser  Understuetz.- 
ungs  Verein  von  Rochester,  86  N.  Y. 
Supp.  429,  90  App.  Div.  474  (change 
in  constitution). 

^  Scow  V.  Supreme  Council  of  Rov- 
al  League,  223  111.  32,  79  N.  E.  42; 
Streeper  v.- Mutual  Protective  League, 
186  III.  App.  535.  See  also  Knights 
of  Maccabees  of  the  World  v.  Nel- 
son, 77  Kan.  629,  95  Pac.  1052,  37 
Ins.  L.  J.  986,  holding  that  a  by-law 
limiting  the  amount  recoverable  m 
case  of  suicide  is  binding  when  an 
amendment  is  enacted  under  a  re- 
served power  to  amend  or  change  by- 
laws or  rules.  Compare  cases  under 
§  379n  herein. 

On  subsequent  by-law  excluding  or 
reducing  liabilitv  in  case  of  suicide, 
see  notes  in  46  L.R.A.(N.S.)  308,  and 
L.R.A.1915D,  1095. 

As  to  ado'ption  of  by-law  against 
suicide  after  contract  made,  see  § 
2647  herein. 

*  Flakne  v.  Minnesota  Farmers' 
Mutual  Ins.  Co.  105  Minn.  479,  117 
N.  W.  785. 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  379n 

istrator  is  entitled  to  the  proceeds  of  the  certificate  where  the  bene- 
ficiary dies  before  tlie  member.^  And  a  new  by-law  is  also  reason- 
able which  excludes  from  the  lodge  meetings  those  who  do  not 
comply  therewith,  and  it  binds  existing,  as  well  as  future,  members 
where  such  new  law  creates  a  compulsory  insurance  department 
with  certain  fixed  periodical  payments  applicable  to  all.  with  cer- 
tain exceptions  based  on  age  and  disability,  and  the  mode  or  man- 
ner of  adopting  the  same  is  that  prescribed  by  existing  by-laws.^ 
§  379n.  When  amendments,  etc.,  are  unreasonable. — If  a  member 
of  a  beneficial  association  is  entitled  under  existing  by-laws  to  a  writ- 
ten or  printed  notice,  at  a  specified  time  of  a^^ssessments  or  levies 
due,  as  a  prerequisite  to  suspension  and  consequent  loss  of  rights 
in  the  benefit  fund  for  nonpayment  of  such  assessment",  a  subse- 
quent change  of  such  by-laws  providing  that  notice  shall  be  at  the 
option  of  each  subordinate  lodge,  and  that  no  failure  on  the  part  of 
the  lodge  to  give  notice,  or  failure  to  receive  it  shall  relieve  mem- 
bers from  the  penalty  of  absolute  and  unqualified  suspension  if  as- 
sessments are  not  paid,  is,  as  to  such  member,  unreasonable  and 
void  a.s  he  is  thereby  virtually  deprived  of  all  right  to  any  notice, 
either  directly  or  indirectly,  and  the  giving  of  notice  is  rendered 
wholly  immaterial,  especially  so  where  said  member  is  not  shown 
to  have  had  any  knowledge  of  such  change,  although  a  newspa}ier 
notice  of  assessments  was  mailed  to  him.'  An  amendment  or 
change  is  also  held  unreasonable:  which  increases  assessments  and 
dues  in  violation  of  pre-existing  rights ;  *  which  is  contrary  to  and 
renders  nugatory  the  provisions  of  a  statute  as  to  presumption  of 
death  from  absence:  ^  which  provides  for  forfeiture  of  the  certificate 
of  membership  for  engaging  in  an  occupation  in  which,  prior  to 
said  amendment,  members  had  a  right  to  engage,  and  no  notice 

5  O'Brien     v.      Supreme      Council   MLsc  558,  1151,  119  App.  Div.  014, 
CatlioHf  Benevolent  Lecion,  80  N.  Y.   s.  c.  196  N.  Y.  391,  89  N.  E.  1078,  39 
Sup  p.    776,    Si    App.    Div.    1,    aff'd   Ins.  L.  J.  95. 
(mem.)  176  N.  Y.  597,  68  N.  E.  1120.       As  to  amendments  or  chancres  in- 

^  Ward     V.     David     &     Jonathan    creasing-  assessment  and  dues  or  re- 
Lodge,  No.  1,976  Grand  United  Ord-   ducing^  benefits,    see    §§    380c,    380d 
er  of  Odd  Fellows,  90  Miss.  116,  43    lierein. 
So.  302.  ^  Samberg  v.   Knights   of  ]\Iodern 

''^  Thibert  v.  Supreme  Lodge  ^laccabees,  158  i\Iich.  568,  133  Am. 
Knights  of  Pvthias,  78  Minn.  448,  47  St.  Rep.  396,  16  Det.  Leg-.  W.  6/7, 
L.R.A.  136,  79  Am.  St.  Rep.  412,  81  123  N.  W.  25,  39  Ins.  L.  J.  34.  The 
N.  W.  220.  amendment  was  adopted  fifteen  years 

As  to  notice  of  a.ssessments  and  after  insured  became  a  member,  four 
dues,  see  §§  1320  et  sen.  herein.  years   after   his    disappearance,    and 

As  to  assessments  and  suspension  three  years  before  the  beneficiary 
of  member,  see  §§  1260  et  seq.  herein,   cea.sed  to  pay  assessments. 

'  Wright  V.  Knights  of  IMaccabees  On  validity  of  by-law  of  mutual 
of  the  World,  95  N.  Y.  Supp.  996,  48    benefit  society  refusing  to  pay  indem- 

963 


§  379o 


JOYCE  ON  INSURANCE 


of  said  change  was  provided  for,  or  had  by  the  member ;  ^°  when  it 
impairs  the  ol)li,2;ati()n  of  contract  or  divests  vested  rights:  ^^  which 
diverts  the  fund  of  an  association,  organized  for  strictly  coromer- 
cial  objects,  from  the  purj)oses  specified  in  the  cliarter;^^  which 
voids  a  designation  of  a  beneficiary  made  before  marriage  of  a  mem- 
ber, but  authorizes  a  re-designation  thereafter.^^  Again,  an  amend- 
ment of  the  by-laws  of- a  mutual  fraternal  benefit  society,  limiting 
the  hencfit  in  case  of  suicide  to  a  certain  per  cent  of  the  face  of  the 
certificate  for  each  year  the  meml)er  has  been  continuously  a  mem- 
ber of  the  society,  is  unreasonaljle  and  void  as  to  existing  members, 
although  the  riglit  to  change  its  by-laws  is  reserved  by  the  society. ^^ 
So,  a  change  in  by-laws  may  be  unreasonable  as  to  a  member  where 
he  is  afflicted  with  a  disease  of  such  a  character  as  to  preclude  its  ap- 
plication to  him.^^ 

§  379o,  Amendments  or  changes  must  not  operate  retroactively: 
reserved  right  or  agreement  to  amend  or  change:  vested  rights. — 
The  rule,  outside  of  any  constitutional  governing  provisions,  that 
a  statute  will  be  construed  to  have  a  prospective  operation  only  and 
not  to  operate  retrospectively  unless  the  legislative  intent  that  it 
shall  be  retroactive  is  so  clearly  expressed  that  no  other  meaning 
can  be  given  to  the  language  used,^^  has  been  expressly  applied  in 


nity  upon  presumption  of  death  from  of  Honor,  79  N.  Y.   Supp.   68-4,  78 

seven    vears'    absence,    see    note    in  App.  Div.  746.    Compare  cases  under 

L.R.A.i915B,  7i)3.  §  379n  herein. 

1°  Tebo    v.     Supreme    Council    of  As  to  adoption  of  by-laws  against 

Royal  Arcanum,  89  Minn.  3,  93  N.  suicide    after   contract    made,    see    § 

W.  513.  2647  herein. 

^^  Hines   v.   Modern   Woodmen   of  As  to  suicide  amendment  and  vest- 
America,  41  Okla.  135,  137  Pae.  675 ;  ed  rights,  see  §  2647  herein. 
Kane    v.    Knights    of    Columbus,    84  15  Grossraaver    v.    District    No.    1 
Conn.  96,  79  Atl.  63,  40  tn.^.  L.   J.  Independent " Order  B'nar  B'rith,  70 
874.     See  §§  380  et  seq.  herein.  n.  Y.  Supp.  393,  34  Misc.  577,  aff'd 

12  Parish    V.    New    York    Produce  74  n.  Y.  Suppl.  1057,  70  App.  Div. 

Exchange^^  169  K  Y.  34^  5^6  L.R.A.  gQ^  ^ffVl   (mem.)   174  N.  Y.  550,  67 


149,   61   N.    E.   977,   aff'g   69   N.   Y 
Supp.  764,  60  App.  Div.  11. 

i3M3ti  l^^f^^'    112    Md.    cal.  62i;65"Am.  D;r54 

020,  .  i  Atl.  112,  39  Ins.  L.  J    1413         ^oZorar/o.-Edelstein  v. 

On  retrospective  by-law  or  benent 
association  in  relation  to  beneficiaries, 
see  note  in  L.R.A.1915A,  264 
v 


^^  Colifornia. — ^Grimes  v.  Norris,  6 

Carlile,  33 
Colo.  54,  78  Pac.  680. 

Connecticut. — Lane's     Appeal,     57 


1*  Olson    v.    Court    of   Honor,    100  Conn.  182,  4  L.R.A.  4o,  14  Am.  St. 

Minn.  117,  8  L.R.A. (N.S.)   521,  117  Kep.    94,    17    Atl.    926;    Goshen    v. 

Am.    St.   Rep.   676,   10   Am.   &   Eng.  Stonington,  4  Conn.  209,  K)  Am.  Dec. 

Ann.  Cas.  622,  110  N.  W.  374.     See  121. 

Smith  v.  Supreme  Lodge  Knights  of       District    of    Columbia. — Brown    v. 

Pythias,  83   Mo.   App.  512;   Bottjer  Grand    Fountain    United    Order    of 

V.  Supreme  Council,  American  I<egion  True  Reformers,  28  App.  D.  C.  200; 

964 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  379o 
construing  by-laws  of  fraternal  beneficiary  associations  in  actions 


Oliio  National  Bank  v.  Berlin,  26 
App.  D.  C.  218. 

Illinois. — Conway  v.  Cable,  37  111. 
82,  87  Am.  Dec.  240;  Bruce  v. 
Schuyler,  4  Gilm.  (111.)  221,  46  Am. 
Dec.  447;  Brennan  v.  Electrical  In- 
stallation Co.  120  111.  App.  4C1. 

Indiana. — Lewis  v.  Brackenridge,  1 
Blacki'.  (hid.)  220,  12  Am.  Dee.^228. 

Keniuckif. — Hes.s'  AdmiiiLstrator, 
(]\Ioi'5'an)  V.  Sefjenfelter,  127  Ky. 
348,  14  L.R.A.(N.S.)  1172,  105  S.  W. 
476,  32  Kv.  L.  Rep.  22.5;  Lawrence 
V.  Louisville,  96  Ky.  59.5,  27  L.R.A. 
560,  49  Am.  St.  Rep.  309,  29  S.  W. 
450. 

Maine. — Carr  v.  Judkins,  102  Me. 
506,  67  Atl.  569. 


Oregon. — Seton  v.  Hovt,  34  Ore. 
266,  43  L.R.A  634,  75  Am.  St.  Rep. 
641,  55  Pac.  967. 

Pemisylvaiiiu. — Martin  v.  Green- 
wood, 27  Pa,  Super.  Ct.  245. 

Tennessee. — Slover  v.  Union  Bank, 
115  Tenn.  347,  1  L.R.A.  (N.S.)  528, 
89  S.  W.  399;  Dugger  v.  Mechanics 
&  Trader.s  Ins.  Co.  95  Tenn.  245,  28 
L.R.A.  796,  32  S.  W.  5. 

Vermont. — Richardson  v.  Cook,  37 
Vt.  599,  88  Am.  Dec.  622. 

West  Virginia. — Stewart  v.  Van- 
dervort,  34  W.  Va.  524,  12  L.R.A. 
50,  12  S.  E.  736;  Murdock  v.  Frank- 
lin Ins.  Co.  33  W.  Va.  407,  7  L.R.A. 
572,  10  S.  F.  777. 

United   Stales. — Compare   McDou- 


Stock    Co.    132 
570,  67  L.R.A. 


Maryland. — Williams    v.    Johnson,   gal  v.  New  York  Life   Ins.   Co.   146 

Fed.  674,  77  C.  C.  A.  100;  I^mb  v. 
Powder    River    Live 
Fed.  634,  65  C.  C.  A. 
558. 

Colorado.- — British  American  As- 
sur.  Co.  V.  Coloiado  Southern  Rail- 
road Co.  52  Colo.  589,  41  L.R.A. 
(N.S.)  1202.  125  Pac.  508. 

Georgia. — Washington  v.  Atlantic 
Coast  Line  R.  R.  Co.  136  Ga.  638,  38 
L.R.A. (N.S.)    8tH,  71   S.  E.   1066. 

Illinois. — Aultman  &  Taylor  Ma- 
chinery Co.  V.  Fish,  120  ill.  App. 
314. 

Indiana. — Connecticut  Mutual  Life 
Co.  V.  Talbot,  113  Ind.  373,  3 
St.  Rep.  655,  14  N.  E.  586. 

Maine. —  Leavitt  v.  Canadian  Pa- 
cific R.  R.  Co.  90  Me.  153,  38  L.R.A. 
152,  37  Atl.  886. 

Marijland. — Bauglier  v.  Nelson,  9 
Gill.  (Md.)  299,  52  Am.  Dec.  694. 

OJiio. — Commis-sitnicrs  of  Hamilton 
County  V.  Rnsche,  50  Ohio  St.  103, 
19  L.R.A.  584,  40  Am.  St.  Rep.  653, 


30  Md.  500,  96  Am.  Dec.  61d. 

Massachusetts. — City  of  Haverhill 
V.  City  of  Marlborough,  187  Mass. 
150,  72  N.  E.  743;  Murphy  v.  Com- 
monwealth, 172  Mass.  264,  43  L.R.A. 
154,  52  N.  E.  505. 

Minnesota. — Stein  v.  Hanson,  99 
Minn.  387,  109  N.  W.  821. 

Mississippi. — Givens  v.  Southern 
Railroad  Co.  94  Miss.  830,  22  L.R.A. 
(N.S.)  971,  49  So.  180. 

New  Hampshire. — Leavitt  v.  Love- 
rin,  64  N.  H.  607,  1  L.R.A.  58,  15 
Atl.  414. 

New  Jersey. — Coghlan  v.  Supreme 
Conclave     Improved     Order    Hepta-    Ins. 
sophs,  86  N.  J.  Law  41,  91  Atl.  132.    Am 

New  York. — Rhodes  v.  Sperry  & 
Hutchinson  Co.  193  N.  Y.  223^  34 
L.R.A. (N.S.)  1143,  127  Am.  St.  Rep. 
945,  85  K  E.  1097;  Liiidlaw  v.  Sage, 
158  N.  Y.  73,  44  L.R.A.  216,  52  N. 
E.  679;  People  v.  O'Brien,  111  N. 
Y.  1,  2  L.R.A.  2.55,  7  Am.  St.  Rep. 
684,  18  N.  E.  692. 


North   Carolina. — Lowe  v 
112  N.   Car.  472,  22  L.R.A.  379,  17 
S,  E.  539. 

North  Dakota. — Adams  &  Freose 
Co.  v.  Kenoyer,  17  N.  Dak.  302,  16 
L.R.A. (N.S.)  681,  116  N.  W.  98; 
Blakemore  v.  Cooper,  15  N.  Dak.  5,  4 
L.R.A.(N.S)   1074,  106  N.  W.  56, 


Harris,   3.3  N.  E.  408. 


Tennessee. — Shields  v.  Clifton  Ho- 
tel Land  Co.  94  Tenn.  123,  26  L.R.A. 
509,  45  Am.  St.  Rep.  700,  28  S.  W. 
668. 

Virginia. — Smith  v.  Northern  Neck 
Mutual  Fire  Assoc.  112  Va.  192,  38 
L.R.A.(N.S.)  1016n,  70  S.  E.  482. 


965 


§  379o  JOYCE  ON  INSURANCE 

in  the  civil  courts  in  which  they  have  been  involved.^'  Tlie  same 
line  of  reasoning  is  also  followed  in  an  Oregon  case  and  it  is  there 
decided  that  a  new  law  will  not  be  construed  as  retroactive  in  opera- 
tion, unless  l)y  its  terms  it  is  clearlv  intended  to  be  so,  on  the  con- 
trary it  will  be  interpreted  as  operating  only  on  causes  or  facts 
which  come  into  existence  after  its  enactment. ^^  It  is  likewise  de- 
cided in  a  Federal  case  that  although  a  member  may  agree  to  abide 
by  the  constitution,  rules,  and  regulations  of  the  company  "as  they 
now  are  or  may  be  constitutionally  changed  hereafter,"  still  if 
there  is  nothing  to  indicate  that  such  amendments  were  intended  to 
have  a  retrospective  operation  and  no  evidence  to  that  eii'ect,  but 
on  the  contrary  the  evidence  does  indicate  that  thev  were  intended 
to  operate  prospectively  on  policies  thereafter  to  be  issued  it  will  be 
so  held  in  accord  with  the  rule  of  construction  by  which  statutes 
are  given  a  prospective  operation  unless  it  is  manifest  that  they 
were  intended  to  operate  retrospectively.  The  court  said  that  there 
was  no  reason  why  the  same  rule  of  statutory  construction  '"should 
not  apply  to  the  legislative  acts  of  a  private  corporation.  If  it  as- 
sumes to  amend  its  constitution  or  by-law,  and  the  amendment  is 
in  such  form  that,  if  given  a  retrospective  effect,  it  will  alter  obli- 
gations which  the  company  has  assumed  by  existing  contracts,  it 
should  be  presumed  unless  there  are  imperative  reasons  to  the  con- 
trary, that  it  was  not  intended  to  have  such  an  effect,  but  was  only 
intended  to  prescribe,  a  rule  of  action  for  the  future."  "  It  is  also 
declared  that  this  acknowledged  rule  of  construction  has  -been  gen- 
erally applied  to  the  by-laws  and  regulations  of  corjiorate  bodies. 
But  that  the  courts  have  frequently  held  that  by-laws  of  mutual 
benefit  and  similar  societies,  in  view  of  tlie  nature  of  the  associa- 
tions adopting  them  and  the  character  of  the  by-laws  themselves, 
operated  upon  and  controlled  the  relations  of  existing  members 
to  the  society  and  their  right  to  future  benefits,  although  such  laws 

Wisco7isin. — Seamans  v.  Carter,  15        ^^  Knifjlits    Templars'    &    Mason.s' 

Wis.  548,  82  Am.  Dec.  696.  Life  Indemnity   Co.   v.   Jarman,   104 

1"^  Coghlan    V.    Supreme    Conclave  Fed.  638,  44  C.  C.  A.  93^  30  Ins.  L. 

Improved   Order  Heptasophs,   86  N.  J.  230,  case  is  aff'd  in  18/   U.  S.  197, 

J.    Law   41,    91    Atl.   132;    Roxbury  47  L.  ed.  139,  23   Sup.  Ct.  108,  .32 

Lodge   No.   184,   Independent   Order  Ins.  L.  J.  57,  where  the  court  said: 

Odd   Fellows   v.   Hocking,   60   N.   J.  "This  agreement  could  liave  no  o])ora- 

Law,  439,  64  Am.   St.  Rep.  536,  38  lion  upon  changes  which  upon  their 

Atl.  693.  lace  indicated  that  they  applied  ontv 

^^  Wist    v.    Grand    Lodge    Ancient  to    policies    thereafter   to    be    issued. 

Order  United  Workmen,  22  Ore.  271,  To    cover    this    case    he"     (insured) 

29  Am.   St.   Rep.   603,  29  Pac.   610,  "should   have  promised   to   abide  by 

cited  in  Norton  v.  Catholic  Order  ot  amendments  thereafter  made,  tliough 

Foresters,    138    Iowa,    464,    469,    24  thev  were  intended  to  apply  only  to 

L.R.A.(N.S.)  1030n,  114  N.  W.  803.  future  policies." 

966 


MUTUAL  COJMPAXIES— CHANGE  OF  BY-LAWS,  ETC.       §  379p 

were  not  expressed  in  retroactive  terms,  and  that  such  has  generally 
been  held  to  be  the  rule  where  the  member  has  agreed  to  be  bound 
by  such  laws  as  might  thereafter  be  enacted.^"  By-laws  or  changes 
are,  therefore,  not  retrospective  unless  no  other  meaning  can  be 
given  and  cannot  affect  the  validity  of  a  prior  contract  not  in  har- 
monv  therewith.^  And  this  is  so  decided  even  though  the  member 
lias  agreed  in  his  certificate  to  comply  with  future-enacted  laws, 
regulations  and  requirements.^  80,  it  is  held  in  Illinois  that  a  by- 
law enacted  after  the  issuance  of  a  benefit  certilicate  will  not  be 
held  retroactive  as  to  certificates  in  force  unless  the  intention  that 
it  shall  be  retroactive  is  expressly  declared  or  necessarily  implied 
from  the  language  used,  and  this  rule  applies  even  though  a  nicni- 
ber  agrees  to  he  l)ound  by  thereafter  enacted  by-laws.^ 

§  379p.  Same  subject. — Under  a  New  York  decision  the  insured's 
right  under  his  original  contract  cannot  be  divested  by  an  amend- 
ment to  the  by-laws  which  is  retrospective  in  its  operation,  even 

^OMathieu    v.    Matliieu,    112    Md.  Lodo-e  Kniglits  of  Pvtliias.  98  Fed. 

023,  77  Atl.  112,  39  Ins.  L.  J.  1413,  66,  38  C.  C.  A.  eil,  29  Ins.  L.  J.  744. 
per  Sohmucker,  J.,  citing:  Georgia. — Ancient     Order     United 

Connecticut. — Gilmore    v.    Knishts  Workmen  v.  Brown,  112  Ga.  595,  37 

of  Columbus,  77  Conn.  58,  107  Am.  S.  E.  890. 

St.  Rep.  17,  58  Atk  223;  Kniahts  of       Illinois. — Zeman   v.   North    Ameri- 

Columbus  v.  Rowe,  70  Conn.  550,  40  can  Union,  263  111.  304,  105  N.  E.  22, 

Atl.  551.  aft'g-  181  HI.  App.  551;  Haley  v.  Su- 

Illinois. —FnWenwider   v.    Supreme  preme  Court  of  Honor,  139  111.  App. 

Council    of    Roval    League,    180    111.  478;      Cigar     Makers     International 

261,  72  Am.  St.  Rep.  239,  54  N.  E.  Union   of  America  v.   Huecker,  123 

485.  111.  App.  336. 

Indiana. — Supreme  Lodge  Knights        Minnesota. — Ruder      v.      National 

of  Pythias  v.  Knight,  117  Ind.  489,  Council  Knights  &  Ladies  of  Securi- 

3  L.R.A.  409,  20  N.  E.  479.  ty,  124  Minn.  431,  145  N.  W.  118. 

Massachusetts. — Pain  v.  Societe  St.        il//.s.s/,s\s/>/j/.— Grant    v.    Independ- 

John    Baptiste,    172    Mass.    319,    70  ent  Order  Sons    Daughters  of  Jacob, 

Am.  St.  Rep.  287,  52  N.  E.  502.  97  Miss.  182,  52  So.  698. 

New   YorA:.— Parish   v.    New   York        ^'eio    Yor/r.— Bolt jer    v.    Supreme 

Produce  Exchange,  169  N.  Y.  34,  56  Co"""^,/™^^if'^'Vif  °^^"  f  11«"°^' 

L.R.A.  149,  61  N.  E.  977.  ^.9  ^'-  Y-  Supp    681    '8  App.  Div 

Tennessee.    -    Supreme        Lodge  '46;  Spencer  v.  Grand  Lodge  Ancient 

T-   •   1  4        i.-  -n  i-u-  T    AioUo     0-,  Order  United    \\  orkmen,    48    N.    Y. 

Knights   or   Pvthias   v.    LaMalta,   9;j  ^^  _„„     „„    ,^.         ,'         a,,,    ^. 

=■  „^-v  ^   .     oj«    01   Q    w  ^»PP-  »90,    22    Misc.    14/,    aftd    60 

lenn.  lo7,  30  L.R.A.  838,  31  S.  W .  ^     ^  g^^^^p     ^^^g^    53    ^p^     pj^, 

493.  rjoj 

Texas.— ^xersherg      v.       Supreme  '2  Ancient   Order  United  Workmen 

Tent   Knights   of   Maccabees   of   the  ^   Brown,  112  Ga.  545,  37  S.  E.  890. 

World,   33   Tex.    Civ.   App.   549,  77  3  ]\Xarshall     v.     Modern     American 

S.  W.  246,  29  Cyc.  75n,  55,  82n,  75.  Fraternal  Order,  184  111.  App.  231. 

1  Coghlan     V.     Supreme     Conclave  Qn  effect  of  adoption  of  by-laws  by 

Improved   Order  Heptasophs,   86  N.  fraternal  insurance  order  upon  bene- 

J.  L.  41,  91  Atl.  132.     See  also:  fit  certificates  already  issued,  see  note 

United  States.— Uoyd  v.  Supreme  in  1  L.R.A. (N.S.)  1065. 

967 


§  379p  JOYCE  ON  INSURANCE 

though  he  agrees  to  comply  with  by-laws  thereafter  enacted.*  So, 
amendments  made  under  a  reserved  power  or  agreement,  apply  to 
prior  contracts  to  the  extent  only  that  the  conditions  imposed  arise 
after  the  enactment  and  do  not  repudiate  vested  rights  of  existing 
obligations,  and  such  changes  should  not  operate  retroactively.* 
And  an  amendment  of  the  charter  will  not  have  a  retroactive  effect 
where  such  intent,  or  an  intention  to  acquiesce,  does  not  appear.' 
So,  amendments  to  the  constitution  which  imply  a  prospective  op- 
eration upon  pre-existing  policies  are  not  retroactive  and  do  not  ap- 
ply to  policies  already  issued.'  An  amended  by-law  is  also  prosi)ec- 
tive  only  and  not  retroactive  where  it  does  not  expressly  apply  to 
existing  contracts  even  though  the  api)lication  provides  that  the 
constitution  and  by-laws  then  existing  or  thereafter  adopted  shall 
form  part  of  the  certificate  issued  thereon.*  It  is  further  decided 
,  that  an  agreement  in  an  application  for  a  policy  of  insurance  is- 
sued on  the  assessment  plan,  to  abide  by  the  constitution,  rules,  and 
regulations  of  the  company,  as  they  then  were  or  might  be  con- 
stilutiondly  changed  thereafter,  does  not  amount  to  a  consent  to 
such  changes'  which  on  their  face  indicated  they  applied  only  to 
policies  thereafter  to  be  issued.^  And  if  a  mutual  benefit  society 
issues  to  a  member  a  certificate  of  insurance,  it  cannot,  by  the  sub- 
sequent adoption  of  a  by-law,  modify  or  change  the  contract  with- 
out the  member's  consent,^"  nor  can  by-laws  be  validly  enacted 
Avhich  are  retroactive  and  ex  post  facto."  Again,  a  by-law  which 
acts  retrospectively  impairs  the  obligation  of  contract  of  a  member 
and  the  provisions  of  such  by-law  constitute  no  defense  to  an  action 
on  the  certificate  even  though  it  and  the  application  obligated  the 
member  as  to  future  or  amended  by-laws.^^ 

*  Shipman  v.  Protected  Home  Cir-  *  Iladley  v.  Queen  City  Camp  No. 

ele,  73  N.  Y.  Supp.  594,  U(J  Ajjp.  Div.  27,  Woodmen  of  the  World,  1  Tenn. 

448.     Judgment  modified  in  Sliipman  Ch.  Apj).  413. 

V.  Protected  Home  Circle,  174  N.  Y.  » Knights     Templars'     &     Masons 

398,  63  L.R.A.  347,  67  N.  E.  83.  Life  Indemnity  Co.   v.   Jarman,  187 

5  Lloyd  v.  Supreme  Lodge  Knights  U.  S.  197,  47  L.  ed.  139,  23  Sup.  Ct. 
of  Pvtinas,  98  Fed.  66,  38  C.  C.  A.  108,  32  Ins.  L.  J.  57,  s.  e.  104  Fed. 
654,  29  Ins.  L.  J.  744.  638,  44  C.  C.  A.  93,  30  Ins.  L.  J.  230. 

6  Brown  v.  United  Order  True  Re-  i°  Starling  v.  Supreme  Council 
formers,  28  App.  D.  C.  200.  Royal  Templars  of  Temperance,  108 

'Knights     Templars'     &     Masons'  Mich.  440,  82  Am.  St.  Rep.  709,  66 

Life  Inderanitv  Co.  v.  Jarman,  187  N.  W.  340. 

U    S    197,  47  L.  ed.  139,  23  Sup.  Ct.        "  Kent  v.  Quicksilver  Mining  Co. 

108,  32  Ins.  L.  J.  57,  aff'g  104  Fed.  78  N.  Y.  159;  Pulford  v.  Fire  De- 

638,  44  C.   C.  A.  93,  30  Ins.   L.   J.  partment,   31    Midi.    4.)8;    Angell    & 

230;    Jarman   v.    Knights    Templars'  Ames  on  Corporations  (9th  ed.)  see. 

&   Mason.s'   Life   Indemnity    Co.    (U.  339  et  seq. 

S   C   C  )  95  Fed  70  ^^  Zimmerman  Jr.  v.  Supreme  Tent 

968 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  379q 

§  379q.  Same  subject:  instances. — By-laws  are  not  retroactive 
which  ])rolnljit  the  de.-^ignation  of  heneficiarie;^  without  an  insurable 
interest  where  such  a  beneficiary  has  been  legally  designated,  and 
this  applies  even  though  assured  has  agTeed  to  abide  by  thereafter 
enacted  by-laws.^'  So,  a  by-law  authorizing  a  change  of  beneficiaries 
ha.s  no  retroactive  effect.^*  Nor  are  amendments  retroactive  which 
exclude  as  risks  certain  hazardous  occupations.^*  And  an  amended 
by-law  which  in  form  and  terms  is  present  and  future  and  not  in- 
tended to  be  retroactive  will  be  held  to  be  prospective  merely  and 
so  not  applicable  to  a  contract  with  a  mutual  benefit  association, 
under  a  by-law,  for  benefits  in  case  of  certain  injuries  resulting  from 
accident,  made  prior  to  such  amendment,  especially  so  when  the 
changed  by-law  by  fair  intendment  simply  makes  clearer  the  true 
meaning  of  the  former  law.^^  Again,  a  subsequently  enacted  by- 
law limiting  liability  in  case  a  member  dies  by  suicide,  alcoholism, 
etc.,  is  not  retroactive  and  cannot  affect  rights  acquired  under  the 
contract,^^  A  subsequently  enacted  by-law  limiting  the  time  for 
suing  is  also  invalid  as  to  pre-existing  certificates.^^ 

But  amendments  with  conditions  precedent  as  to  reinstatement  do 
not  apply  to  existing  certificates  in  the  absence  of  a  reserved  right  to 
amend  under  the  articles  of  association,  by-laws  or  certificate.^^ 
And  it  is  held  that  an  agTeement  in  the  application  to  be  bound  by 
thereafter  enacted  by-laws  is  held  binding  although  its  terms  are 
not  retroactive.^"     Again,  a  change  in  by-laws  may  be  retroactive 

of  the  Knights  of  Maccabees  of  llie  ^^  Bottjer     v.      Supreme     Council 

World,  122  Mo.  App.  591,  99  S.  W.  American  Legion  of  Honor,  79  N.  Y. 

817.  Supp.  684,  70  App.  Div.  740. 

13  Grant   v.   Tndcpondcnt   Order  of  As  to  retroactive  effect  of  resolu- 

Sons  &  Daughters  of  Jacob,  97  Miss,  tion    or  by-law   of  mutual   insurance 

182,  ry2  So.  098;  see  Ancient  Order  company     changing     period     during 

of   United   Workmen   v.  Brown,  112  Avliich   policy   may   be   contested   for 

Ga.  54.3,  37  S.  E.  890.  suicide,    see    note    12    L.R.A.(N.S.) 

i*Pittinger  v.   Pittinger,   28   Colo.  504. 
308,  89  Am.   St.   Rep.   193,  04  Pac  On  .subsequent  by-law  excluding  or 
ig-,^  reducing  lia1)ility  in  case  of  suicide, 
On  retrospective  by-law  of  benefit  see  notes  in  40  L.R.A.(N.S.)  308,  and 
association  in  relation  to  beneficiaries,  L.R.A.191.)D,  109.). 
see  note  in  L.K.A.19L')A,  204.  is  attorney     General     v.     Supreme 
iMIalevv.  Supreme  Court  of  Hon-  Council  American   Legion  of  Honor, 
or,  139   ill.   App.  478.     See   §   379d  19(i  Mass.  151,  81  N.  K.  960. 
\ieve\n.  19  McNeil  V.  Soutliern  Tier  Mason- 
's Maynard    V.    Locomotive    Engi-  ic  Relief  A.s.soc.  5S  N.  Y.  Supp.  119, 
neers  Mutual   Life   &    Accident   Ins.  40  App.  Div.  58L 
Assoc.  10  Utali,  145.  47  Am.  St.  Rep.  ^o  j^y^]^  y.  Supreme  Conclave  Im- 
602,  51  Pac.  259,  27  Ins.  L.  J.  208,  proved    Order    of    Heptasophs,    123 
s.  c.  14  Utah,  458,  47  Pac.  1030,  20  Md.  075,  91  Atl.  829. 
Ins.  L.  J.  .579. 

969 


§  380  JOYCE  ON  INSURANCE 

as  to  a  member  where  he  is  afflicted  with  a  disease  of  such  a  charac- 
ter as  to  prechide  it^^  application  to  him.^ 

§  380.  Change  of  by-laws,  etc.;  vested  right. — It  is  the  rule  that 
by-laws  cannot  disturb  a  vested  right  ;^  but  members  may  assent 
to  a  by-law  which  would  not  bind  strangers  or  nondissenting  mem- 
bers, and  such  by-law  would  be  good  as  a  contract  as  to  assenting 
parties.^ 

But  what  constitutes  a  vested  right  is  a  question  upon  which  the 
courts  differ.  Supposing  the  contingency  has  arisen  which  the  con- 
tract provides  against,  and  upon  the  happening  of  which  the  bene- 
fit is  to  accrue  or  the  loss  to  be  paid.  The  contract  is  to  be  inter- 
preted like  one  of  insurance,  and  it  would  reasonably  seem  that  a 
power  to  abrogate  the  provision  of  the  agreement  would  not  exist, 
for  the  express  terms  of  a  contract  of  insurance  cannot  be  changed 
by  a  by-law  without  the  consent  of  the  insured.*  So  where  a  provi- 
sion of  the  charter  and  a  by-law  of  an  insurance  company  consti- 
tute part  of  a  contract  of  insurance,  it  is  held  that  their  alteration 
without  the  consent  of  the  insured  cannot  affect  the  contract.^ 
Again,  it  is  decided  that  a  by-law  cannot  be  amended,  after  the 
right  to  benefits  has  accrued,  so  as  to  reduce  the  amount  it  would 
otherwise  be  obligated  to  pay.^ 

There  are  decisions,  however,  which  not  only  hold  that  where  a 
member  has  no  vested  right  in  a  fund  the  society  may  change  the 
disposition  of  the  fund,'^  but  also  that  a  by-law  in  existence  when 
a  member  claims  relief,  and  not  the  one  in  existence  jat  the  time  he 

1  Grossraayer  v.  District  No.  1,  In-  Odd  Fellows'  Mutual  Life  Ins.  Co. 
dependent  Order  B'nai  B'ritli,  34  59  Wis.  162,  18  N.  W.  13.  Examine 
Misc.  577,  70  N.  Y.  Supp.  393,  74  Reynolds  v.  Supreme  Council  Royal 
N.  Y.  Supp.  1057,  70  App.  Div.  90,  Arcanum,  192  Mass.  150,  /  L.R.A. 
174  N.  Y.  550,  07  N.  E.  1083.  (N.S.)  1154,  7  Am.  &  Eng.  Ann.  Cas. 

2MoiTison  v.  Wisconsin  Odd  Fel-  776,  78  N.  E.  129;  Connor  v.  Su- 
lows'  Mutual  Life  Ins.  Co.  59  Wis.  preme  Commandery  Golden  Cro.ss, 
162,  18  N.  W.  13.  But  see  Fugnre  117  Tenn.  549,  97  S.  W.  306;  Hicks 
V.  jMutual  Society  of  St.  Joseph,  49  v.  Northwestern  Aid  Association,  117 
Vt.  362.  See  next  following  sections  Tenn.  203,  96  S.  W.  262. 
herein.  ^  Morrison  v.  Wisconsin  Odd  Fel- 

3  Stet.son    v.    Kempton,    13    Mass.   lows'  Mutual  Life  Ins.  Co.  59  Wis. 
282.     "What  may  be  bad  as  a  by-law   162,  18  N.  W.  13. 
as  against  common  right  may  be  good       ^  Becker  v.  Berlin  Benefit  Soc.  144 
as  a  contract :  "  AnffcU  &  Ames  on   Pa.  St.  232,  27  Am.  St.  Rep.  624,  22 
Corporations  (9th  ed.)  sec.  342.  Atl.  699.     See  §  3/9  herein. 

*  (ireat  I'alls  Mutual  Fire  Ins.  Co.  On  riglit  of  mutual  benefit  society 
V.  Harvey,  45  N.  H.  292;  Becker  v.  to  decrease  benefits,  see  note  in  31 
Farmers'  Mutual  Ins.  Co.  48  Mich.  L.R.A. (N.S.)  423. 
610,  12  N.  W.  874;  Gundlach  V.  Ger-  '^  ToiTey  v.  Baker,  1  Allen  (83 
mania  Mechanics'  Ass'n,  49  How.  Pr.  Mass.)  120.  Compare  §  379  herein. 
(N.  Y.)   190;  Morrison  v.  Wisconsin 

970 


MUTUAL  COMPANIES— CHxVXGE  OF  BY-LAWS,  ETC.  §  380 

became  a  member,  is  the  one  under  which  he  is  entitled,  as  the  so- 
ciety has  the  right  to  amend  such  a  by-law.^  It  is  further  held  that 
if  a  member  has  deceased,  the  society  may  amend  its  by-laws  limit- 
ing the  amount  of  recovery  to  which  his  widow  would  have  been 
entitled  before  the  alteration.^  So,  in  a  California  case  ^°  it  is  de- 
cided that  a  by-law  limiting  the  amount  of  recovery,  enacted  after 
the  right  to  claim  relief  has  accrued,  does  not  impair  vested  rights, 
since  it  is  not  retroactive.  The  commissioner's  opinion  adopted  l^y 
the  court  is  as  follows:  "It  is  contended  for  the  respondent  that  the 
by-law  giving  a  right  to  benefits  constituted  a  contract,  which  could 
not  be  changed,  and  the  question  presented  is,  whether  the  defend- 
ant had  power  to  change  said  by-law  in  the  way  it  did.  Undoubt- 
edly, when  the  plaintiff  complied  with  what  was  required  of  him  as 
a  member,  the  by-laws  constituted  a  contract;  and  unless  the  con- 
tract itself  otherwise  provided,  it  could  not  be  changed  without  the 
consent  of  all  the  parties.  But  here  the  contract  itself  does  provide 
otherwise;  ....  there  is  an  express  provision  that  the  l)y- 
laws  may  be  changed;  ....  the  law  provides  that  the  by- 
laws may  be  changed.     This  provision  must  be  held  to  enter  into 

and  form  a  part  of  tlie  contract In  view  of  this  ])Ower 

to  alter  the  contract,  it  cannot  be  said  that  the  defendant  could  not 
alter  its  by-laws  in  any  respect.  The  respondent  argues,  however, 
that  it  had  no  power  to  alter  them  so  as  to  impair  a  vested  right. 
This  must  be  conceded,  but  we  do  not  think  that  the  new  by-law 
purported  to  impair  a  vested  right.  The  term  'vested  right'  is  of- 
ten loosely  used.  In  one  sense  every  right  is  vested.  If  a  man  has 
a  right  at  all,  it  must  be  vested  in  him;  otherwise,  how  could  it  be 
a  right?  The  moment  a  contract  is  made,  a  right  is  vested  in  each 
party  to  have  it  remain  unaltered  and  to  have  it  performed.  The 
term,  however,  is  frequently  used  to  designate  a  right  which  has 
become  so  fixed  that  it  is  not  subject  to  be  divested  without  tlie  con- 
sent of  the  owner,  as  contradistinguished  from  rights  which  are 
subject  to  be  divested  without  his  consent.  Now,  a  right,  whether 
it  be  of  such  a  fixed  character  or  not,  must  be  a  right  to  something; 
and  when  a  man  talks  vaguely  of  his  vested  right,  it  conduces  to 
clearness  to  ask:  'A  vested  right  to  what?  '  In  the  present  case  the 
plaintiff  can  have  no  right  to  liave  the  contract  remain  unchanged, 
because,  as  we  have  seen,  the  contract  itself  provides  tliat  it  may  be 
changed.     Nor  has  he  a  right  to  remain  unaffected  by  any  change 


*  St.   Patrick's  Male  Ben.   Soc.   v.        ^"^  Stohr  v.  San  Francisco  Musical 
MeVey,  92  Pa.  St.  510.  Fund  Soc.  82  Cal.  557,  22  Pac.  1125. 

^  Fugure  v.  Mutual  Society  of  St. 
Joseph,  46  Vt.  362.  Compare  §  379 
herein. 

971 


§  380  JOYCE  ON  INSURANCE 

tliat  may  be  made;  for  if  sncli  right  be  common  to  all  the  members, 
it  is  merely  another  way  of  saying  that  no  change  can  be  made,  and 
if  the  right  be  not  common  to  the  other  members,  it  would  be  to 
assert  a  privilege  or  superiority  over  them,  of  which  there  is  no  pre- 
tense. If  the  plaintiff  has  any  right  which  is  so  fixed  that  it  is  not 
subject  to  change,  we  think  it  can  only  be  to  the  fruits  which  rip- 
ened before  the  change  was  made;  in  order  words,  to  such  sums  as 
became  due  before  the  new  by-law  was  adopted.  To  express  it  dif- 
ferently, the  change  could  not  be  retroactive.  This  is  all  that  we 
think  can  be  meant  by  'vested' right,'  in  a  case  like  the  present. 
Now,  nnder  the  contract,  nothing  was  due  before  the  sickness  actual- 
ly took  jjlace.  Benefits  do  not  accrue  for  future  sickness.  The 
right  of  the  plaintiff  to  benefits  for  future  sickness  is  not  different  in 
its  nature  from  tbe  right  of  the  well  members  to  benefits  for  future 
sickness.  In  the  one  case  the  members  have  a  right  to  future  pay- 
ment in  case  they  become  sick;  in  the  other,  the  plaintiff  has  a 
right  to  future  payments  in  case  he  continues  sick,  and  if  there  was 
no  power  to  change  the  by-law  in  the  one  case,  there  was  no  power 
to  change  it  in  the  other;  which  is  equivalent  to  saying  that  there 
was  no  power  to  change  it  at  all.  The  cases  where  a  specific  sum 
becomes  due  upon  the  happening  of  a  certain  event,  a.s  upon  death, 
are  not  like  the  present.  In  such  cases  an  alteration  in  the  contract 
cannot  be  made  after  the  fact;  for  that  would  be  to  make  that  not 
due  which  had  already  become  due.  It  might,  perhaps,  be  argued 
that  the  foregoing  would  apply  if  the  by-law  under  consideration 
had  specified  that  the  weekly  payments  were  to  continue  as  long  as 
the  sickness  continued.  But  it  does  not  so  specify.  The  time  dur- 
ing which  the  payments  were  to  continue  is  left  indelinite.  The 
substance  of  tlie  contract  is,  in  our  opinion,  that,  in  case  of  sickness, 
the  member  is  to  receive  weekly  payments  for  an  indefinite  period 
of  sickness,  subject  to  the  power  of  the  defendant  to  change  the  pro- 
vision authorizing  such  payments,  so  far  as  future  payments  are 
concerned.'"'  So  in  New  York,  articles  of  association  which  ]U'o\-ide 
for  the  payment  to  widows  of  a  certain  sum  a  month  may  be  amend- 
ed so  as  to  change  the  amount  of  benefits,  but  such  change  is  not 
retroactive,  and  the  beneficiary  will  be  entitled  to  the  benefits  under 
the  original  provision. ^^  So  a  society  may  limit  the  payments  of 
l)enefits  until  there  shall  be  a  certain  sum  in  the  treasury  by  a  by- 
law enacted  after  tbe  party  claiming  to  be  entitled  to  benefits  had 
become  a  member. ^^ 

^*  Gundlaf  h  v.   Geritiania  Median-       ^^  St.  Patrick's  Male  Ben.   Soc.  v. 
ics'  Atisoc.  4  linn   (N.  Y.)  341.     See   McVey,  92  Pa.  St.  510. 
§§  379o,  380a  et  se(].  herein. 

972 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  380a 

§  380a.  Same  subject. — T1)p  rule  undoubtedly  is  that  vested 
rights  cannot  be  divested  or  the  obligation  of  contracts  l)e  impaired 
by  amendments,  changes,  or  repeal  of  the  articles  of  association, 
constitution,  by-laws,  rules,  and  regidations  of  companies,  associa- 
tions or  orders  of  the  nature  or  character  here  under  consideration. 
And  this  rule  applies  notwithstanding  a  reserved  right  or  agreement 
in  the  contract  that  such  amendments,  changes  or  repeal  may  be 
made.  The  application  of  this  rule  ha.s  however,  been  the  sub- 
ject of  much  discussion  covering  the  vexed  question  of  what,  as 
stated  in  the  last  preceding  section,  constitutes  a  vested  right,  and 
also  the  construction  of  the  terms  of  such  a  reserved  i)owcr  or  agree- 
ment and  tiie  extent  to  which  it  applies."  The  words  of  the  court 
in  a  Federal  case  are  pertinent.  They  are:  "I  dissent  entirely  from 
all  the  cases  holding  that  the  terms  and  obligations  of  a  contract  of 
insurance  between  one  of  these  fraternal  corporations  and  one  of 
its  members  can  in  any  manner  be  changed  by  an  amendment  to 
its  constitution  or  by-laws,  unless  the  power  is  specified  in  and 
granted  by  the  law  creating  the  corporation,  under  a  general  con- 
sent in  the  contract  to  be  bound  by  all  by-laws  then  in  existence  or 
that  may  thereafter  be  adopted.""  It  is  also  declared  in  a  Con- 
necticut case  that  a  reserved  poNver  of  amendment  or  re])eal  and  an 
agreement  with  the  members  of  a  fraternal  benefit  society  does  not 
authorize  an  adoption  of  a  by-law  which  divests,  impairs,  or  dis- 
turbs vested  rights  as  such  a  by-law  woidd  be  unreasonal>le,  as  ex- 
isting or  future  enacted  by-laws  should  carry  out  the  purposes  of 
the  order  or  help  fulfil  its  contract  obligations.^*  So,  under  an 
Illinois  decision  the  law  does  not  undertake  to  make  or  modify 

^3  Sehack  v.  Supreme  Lodge  of  the  oontrac-t  riglits  but  only  sudi  as  are 

Fraternal   Brotherhool,   9    Cal.    App.  in  aid  of  contract)  ;  Iliiies  v.  Modern 

584,  99  Pae.  989'  (cannot  impair  con-  Woodmen  of  America^  41  Okla.  135. 

tract  rights  without  memher.s'  consent  L.K.A.1915A,  2(54,  I'Ai    Pac.  G75   (an 

although     contract     conditioned     for  amendment   cannot    impair   the   obli- 

compliance  with  subsequently  enacted  gation   of  contract  or  impair  vested 

by-laws);   Mathieu   v.    Matliieu,    112  rights). 

I\id.  625,  77  Atl.  112,  39  Ins.  L.  J.        As  to  change  of  beneficiary:  vest- 

1413   (vested  rights  must  not  be  im-  ed  interest,  see  §§  730,  731-743,  881 

paired)  ;  Supreme  Lodge  Kniglils  of  herein. 

Pvthias  v.  Stein,  75  Miss.  107,  (15  Am.        i*  Smythe      v.       Supreme      Lodge 

St.  Rep.  589,  37  L.R.A.  775,  21  So.  Kniglits   of   Pythias    (U.    S.   D.   C.) 

559  (a  condition  adopted  by  a  benefi-  198  Fed.  967,  990,  per  Ray,  Dist.  J., 

dal  a-ssociation  after  issuing  a  cerliti-  case    aff'd    in    Smytlie    v.     Supreme 

cate  of  insurance  cannot  affect  riglit  Lodge  Kniglit.^^  of  Pythias,  220  Fed. 

of    the    holder    of    such    certilicate)  ;  438,  137  C.  C.  A.  .32. 
Parks  v.  Supreme  Circle  Brotlu-rhood        ^^  Kane   v.   Knights   of    Columbus, 

of  America,  83  N.  J.  Eq.  131,  89  Atl.  84  Conn.  96,  79  Atl.  63,  40  Ins.  L. 

1042    (power  to  amend  does  not  an-  ,].  874. 
tliorize     material     changes     violating 

973 


§  380a  JOYCE  ON  INSURANCE 

contracts,  whether  relating  to  insurance  or  to  some  other  subject, 
but  it  enforces  contracts  as  tlie  parties  themselves  have  made  them 
and  there  is  no  presumption  that  a  meijiber  of  a  benefit  association 
contemplated  a  change  in  the  terms  of  his  contract,  although  he  is 
presumed  to  have  contemplated  such  by-laws  as  are  passed  for  the 
purpose  of  regulating  the  business  and  general  affairs  of  the  associa- 
tion.^^ And  the  existing  constitution  and  by-laws  and  not  subse- 
quent changes  therein  depriving  the  member  of  his  contract  rights, 
are  within  a  provision  in  the  certificate  requiring  compliance  with 
the  constitution  and  by-laws  a  copy  of  which  is  attached  to  the  cer- 
tificate, and  this  applies  even  though  the  constitution  provides  for 
amendment.^'  In  Iowa  an  insurance  company  has  no  power  to 
change  any  contract  rights  without  the  consent  of  the  members  or 
policy  holders  and  cannot,  therefore,  by  amendment  of  its  by-laws 
introduce  new  terms  and  conditions  into  the  original  contract  which 
will  have  such  an  effect  even  though  insured  agrees  to  be  governed 
by  the  articles  of  incorporation  and  rules,  in  force  when  the  policy 
is  issued  or  which  might  thereafter  be  made  by  the  association  and 
the  amendment  is  not  of  the  articles  or  rules  but  of  the  by-laws. ^^ 
And  a  constitutional  provision  giving  the  right  to  amend  the  in- 
strument by  a  certain  vote  at  any  time  and  a  requirement  of  the 
certificate  that  insured  comply  with  the  constitution  and  by-la\vs 
does  not  constitute  an  assent  to  an  amendment  divesting  contract 
rights,  but  onlj'  designates  the  manner  of  exercising  the  power 
granted.-'^  It  is  decided,  however,  in  that  state  that  where  a  mem- 
ber's contract  requires  compliance  with  by-laws  then  in  force  or 
thereafter  enacted  he  and  his  beneficiary  became  thereby  obligated 
by  a  subsequently  properly  adopted  by-law  especially  so  when  under 
the  general  power  of  the  association  to  make  contracts  for  death 
benefits  the  power  exists  to  insert  certain  clauses  for  forfeiture  wlien 
such  clause  was  authorized  by  a  by-law  regularly  adopted.^"  In 
New  Jersey  a  subsequently  enacted  by-law,  which  by  its  terms  is 
prospective  in  its  operation  and  which  is  not  in  aid  of  a  pre-existing 

^^  Covenant  Mutual  Life  Assoc,  v.  380c  herein.  Examine  Seiverts  v.  Na- 
Kentner,  188  111.  431,  440,  58  N.  E.  tional  Benev.  Assoc.  95  Iowa,  710,  64 
966.  N.  W.  601. 

1'  Peterson  v.  Gibson,  191  111.  365,  ^^  Peterson  v.  Gibson,  191  111.  365, 
54  L.R.A.  836,  61  N.  E.  127.  54  L.R.A.  836,  61  N.  E.  127. 

^^  Jordan  v.  Iowa  Mutual  Tornado  ^^  Pold  v.  North  American  Union, 
Ins.  Co.  151  Iowa,  73,  Ann.  Cas.  261  111.  433,  104  N.  E.  4,  aff'g  180  111. 
1913A,  266,  130  N.  W.  177,  40  Ins.  App.  448.  Examine  Norton  v.  Cath- 
L.  J.  1065.  See  also  Wasson  v.  Amer-  olic  Order  of  Forresters,  138  Iowa, 
ican  Patriots,  148  Iowa,  142,  126  N.  464,  24  L.R.A.{N.S.)  1030n,  114  N. 
W.  778.  Fort  v.  Iowa  Legion  of  W.  893.  Considered  under  §  380b 
Honor,  146  Iowa,  183,  123  N.  W.  224,  herein. 
39  Ins.  L.  J.  3,  quoted  from  under  § 

974 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  380a 

contract,  cannot  impair  or  avoid  it  even  though  there  is  an  agree- 
ment in  the  appHcation  or  certificate  to  comi)ly  with  future  en- 
acted law^;,  etc.i  It  is  said  in  a  New  York  case  that:  "^Much  has 
been  written  in  various  jurisdictions  upon  the  subject  of  amend- 
ments to  by-laws,  but  we  shall  confine  our  review  to  our  own  deci- 
sions, which  we  regard  as  conclusive  in  principle.  They  show  de- 
termined and  consistent  progression.  More  than  thirty  years  ago 
it  was  held  by  this  court,  in  a  carefully  considered  case,  that,  even 
when  the  power  to  amend  is  reserved  by  the  charter  of  a  business 
corporation,  a  by-law  could  not  be  repealed  so  as  to  impair  rights 
which  had  been  given  and  had  become  vested  by  virtue  of  such  by- 
law.""  2  It  is  also  further  declared  and  so  held  in  that  state  that  it 
is  well  established  by  the  authorities  therein,^  "  'that  a  general 
power  reserved  either  by  statute  or  by  the  constitution  of  a  society 
to  amend  its  by-laws  does  not  authorize  an  amendment  impairing 
the  vested  rights  of  members.'  An  amendment  of  by-laws  which 
form  part  of  a  contract  is  an  amendment  of  the  contract  itself,  and, 
when  such  a  power  is  reserved  in  general  terms,  the  parties  do  not 
mean,  as  the  courts  hold,  that  the  contract  is  subject  to  change  in 
any  essential  particular  at  the  election  of  the  one  in  whose  favor 
the  reservation  is  made.  It  would  be  not  reasonable  and  hence 
not  Avithin  their  contemplation,  at  leafet  in  the  absence  of  stipula- 
tions clearly  specifying  the  subjects  to  be  affected,  that  one  party 
should  have  the  right  to  make  a  radical  change  in  the  contract,  or 
one  that  would  reduce  its  pecuniary  value  to  the  other.  A  contract 
which  auihorizes  one  party  to  change  it  in  any  respect  that  he 
chooses  would  in  effect  be  binding  upon  the  other  party  only  and 
would  leave  him  at  the  mercy  of  the  former,  and  we  have  said  that 
human  language  is  not  strong  enough  to  place  a  person  in  that 

1  Sautter  v.  Supreme  Conclave  Im-  American  Legion  of  Honor,  174  N. 
proved  Order  of  Heptasophs,  72  N.  Y.  266,  269,  66  N.  E.  932;  Weber  v. 
J  L  325,  71  Atl.  232.  Cited  in  Fort  Supreme  Tent,  Knights  of  ^Maccabees 
V.  Iowa  Leg-ion  of  Honor,  146  Iowa,  of  the  World,  172  N.  Y.  490,  65  N.  E. 
183,  123  n!;  W.  224,  39  Ins.  L.  J.  3.  258 ;  Deuble  v.  Grand  Lodge  Ancient 

2  Wright  V.  Knights  of  IMaccabees  Order  United  Workmen,  72  N.  Y. 
of  the  ^Vorld,  196  N.  Y.  391,  31  Supp.  755,  66  App.  Div.  323,  327, 
L.R.A.(N.S.)  423,  89  N.  E.  1078,  39  aff'd  172  N.  Y.  665,  65  N.  E.  1116; 
Ins.  L.  J.  95,  citing  Kent  v.  Quick-  Parish  v.  New  York  Produce  Ex- 
silver  ]\Iining  Co.  78  N.  Y.  159,  182.  change,  169  N.  Y.  34,  48,  56  L.R.A. 

^Citing:   Evans  v.   Southern   Tier  149,    61    N.    E.    977;    Englehardt    v. 

Ma.sonic  Relief  Assoc.  182  ^\  Y.  453,  Fifth  Ward  Permanent  Dime  &  Sav- 

75  N.  E.  317;  Beach  v.  Supreme  Tent,  ings  Loan  Assoc.  148  N.  Y.  281,  29*, 

Knights  of  Maccabees  of  tiie  World,  35  L.R.A.  289n,  42  N.  E.  710;  Mat- 

177 'N    Y    100    69  N    E.  281;  Ship-  thews   v.    Associated    Press   of   New 

man  V.  Protected  Home  Circle,  174  York,  136  N.  Y.  333,  342,  32  N.  E. 

N.  Y.  398,  63  L.R.A.  347,  67  N.  E.  981;  Kent  v.  Quicksilvei- Mining  Co. 

83;     Langan     v.     Supreme     Council  78  N.  Y.  159. 

975 


380a 


JOYCE  ON  INSURANCE 


situation.*  Wliile  the  defendant  may  doubtless  so  amend  its  by- 
laws, for  instance,  as  to  make  reasonable  cliances  in  the  methods  of 
administration,  the  manner  of  conducting  its  business,  and  the  like, 
no  change  can  be  made  which  will  deprive  a  memljer  of  a  sul)stan- 
lial  right  conferred  expressly  or  impliedly  by  the  contract  itself. 
That  is  beyond  the  power  of  the  legislature  as  well  as  the  associa- 
tion, for  the  obligation  of  every  contract  is  protected  ■  from  state 
interference  by  the  Federal  Constitution.'"  *  So.  under  another  deci- 
sion in  the  same  state  a  member's  acquired  rights  under  his  con- 
tract, consisting  of  the  charter  and  by-laws,  cannot  be  taken  away 
by  a  subsequent  amendment  of  the  by-laws,  especially  so  as  to  bj'- 
laws  which  are  inconsistent  with  the  charter.^  And  an  amend- 
ment of  laws  enacted  under  an  illegally  adopted  and  invalid  amend- 
ment cannot  operate  to  divest  a  member  of  his  contract  rights.' 
In  Kortli  Carolina  although  a  power  is  reserved  in  the  policy  to 
change  the  by-laws  it  does  not  permit  the  corporation  to  change  at 
will  its  contract  with  its  members;  *  nor  can  the  value  of  a  member's 
contract  be  destroyed  by  a  mere  general  consent  that  the  constitu- 
tion and  by-laws  may  be  amended.^  In  Oregon  a  right  to  alter, 
amend  or  repeal  the  laws  of  a  mutual  benefit  society,  exercised  un- 
der an  agreement  in  the  application  does  not  authorize  a  repudia- 
tion of  obligations  or  work  a  forfeiture  of  rights  previously  granted 
to  its  members.^"  And  in  A\'isconsin  a  stipulation  in  a  certificate 
that  a  member  shall  be  bound  by  future  amendments  to  laws,  etc., 
does  not  authorize  a  substantial  change  abrogating  the  existing  con- 
tract."    But  notwithstanding  these   decisions  it  is   held  that   an 


*  Citing  Industrial  &  General  Trust, 
Ltd.  V.  Tod,  180  N.  Y.  21.5,  225,  73 
N.  E.  7. 

5  Avres  v.  Ancient  Order  of  Unit- 
ed Workmen,  188  N.  Y.  280,  80  N.  E. 
220,  36  Ins.  L.  J.  891,  per  Vann,  J.. 
artg  9.5  N.  Y.  Supp.  1112,  109  App. 
Div.  919  (U.  S.  Const,  art.  1,  sec. 
10)  quoted  in  Fort  v.  Iowa  Legion 
of  Honor,  140  Iowa,  183,  123  N.  W. 
22-1,  39  Ins.  L.  J.  3. 

^Sinclair  v.  Fitzpatrick,  (8  Misc. 
GO,  138  N.  Y.  Supp.  272,  -12  Ins.  L. 
J.  227  (case  of  right  to  de.signate 
beneficiaries).  Citing:  Wright  v. 
Knights  of  Maccabees  of  the  World. 
196  N.  Y.  391,  31  L.R.A.(N.S.)  423. 
134  Am.  St.  Rep.  838,  89  N.  E.  1078, 
39  Ins.  L.  J.  95;  Roberts  v.  Cohen, 
70  N.  Y.  Sup'V.  57,  GO  App.  Div.  259; 
Spencer  v.  Grand  Lodge  Ancient  Or- 

97 


der  United  Workmen,  48  N.  Y.  Supp. 
590,  22  Misc.  147. 

'  Deuble  v.  Grand  Lodge  Ancient 
Order  of  United  Workmen,  72  N.  Y. 
Supp.  755,  66  App.  Div.  323,  aff'd 
172  N.  Y.  mb,  65  N.  E.  IIIG. 

^  Bragaw  v.  Supreme  Lodge, 
Knights  &  Ladies  of  Honor,  128  N. 
Car.  354,  54  L.R.A.  602,  38  S.  E. 
905. 

^  Strauss  v.  Mutual  Reserve  Fund 
Life    Assoc.    126    N.    Car.    971,    54 
L.R.A.    605,    36    S.    E.    352, 
Car.  465,  39  S.  E.  55. 

^<'  Wist  v.  Grand  Lodge 
Order  of  United  Workmen, 
271,  29  Am.  St.  Rep.  603, 
610. 

1^  Curtis  V.   Modern   Woodmen  of 
America,  159  Wis.  303,  150  N.  W. 
417. 
6 


128  N. 

Ancient 
22  Ore. 
29  Pac. 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  380b 

amendinont  does  not  impair  tlie  oblio;ation  of  contracts  where  com- 
pliance with  future  enacted  law?,  etc.  is  required  l>y  tiie  certificate :  ^^ 
and  a  certificate  of  a  fraternal  beneficiary  association  is  held  not  to 
confer  vested  rights  and  that  where  a  certificate  in  a  fraternal  bene- 
ficiary association  creates  no  vested  interest  it  may  be  validly  agreed 
that  tlie  terms  thereof,  may  be  changed ;  "  and  that  the  contract  or 
vested  rights  of  a  member  of  a  mutual  benefit  society  who  has 
agreed  to  be  bound  by  future  by-laws  are  not  impaired  by  a  by-law 
requiring  that  all  claims  against  the  society  must  be  submitted  for 
adjustment  to  the  tribunals  established  within  the  association.^* 

§  380b.  Same  subject:  instances. — Trustees  cannot  exceed  their 
powers  in  ad(Ji)ting  by-laws  which  affect  prior  contracts  with  mem- 
bers ])y  materially  changino  such  by-laws.^*  And  members  can- 
not be  deprived  of  vc^^led  rights  in  a  reserve  fund  by  an  amend- 
ment which  in  effect  makes  an  essentially  new  contract  by  changing 
an  absolute  and  definite  one.^^  Nor,  under  an  English  decision, 
can  a  company  alter  their  regulations  so  as  to  abrogate  the  con- 
tract rights  of  a  policy-holder  to  have  the  entire  profits  of 
the  mutual  life  assurance  department  divided  among  those 
holding  ]:>olicies  therein,  where  the  company  was  registered  with 
unlimited  liability  under  ihe  companies  act  prior  to  assured's 
application  for  a  policy,  and  he  was  influenced  so  to  do  by  the 
terms  of  a  prospectus  guaranteeing  such  division  of  profits  with- 
out deductions,  which  was  referred  to  as  a  part  of  the  policy." 
And  amendments  of  by-laws  are  invalid  which  defeat  the  funda- 
mental pur])0se  of  benefits  or  which  are  opposed  to  public  policy, 
or  whicli  are  vexatious. ^^  Nor  can  a  member  be  deprived  of  his 
right  to  sick  benefits  without  his  consent  by  an  amendment  of  by- 
laws."    And  where  changes  in  the  articles  of  association  are  not 

12  Fraternal   Unirtn   of  America   v.        ^^  Gutlirie       v.       Supreme       Tent 
Zeigler,  145  Ala.  287,  39  So.  751.         Knisflits  of  Macc-abee.s  of  tlie  World, 

13  Claudv    v.    Roval    League,    250   4  Cal.  App.  184,  87  Pac.  405. 

Mo.  92,  168  S.  W.  rJ93.  i^  Farmers    Loan    &    Trust    Co.    v. 

1*  Monger  v.  New  Era  Assoc.  l.')0  Aberle,  41  N.  Y.  Supp.  033,  18  Misc. 

Mich.  645,  24L.R.A.(N.S.)  1027  (an-  25/,   case  raodiHed  46   N.   Y.   Supp. 

notated   on   validity  of  retrospective  10,  10  App.  Div.  79. 

by-law  or  other  rule  of  benefit  associ-  "  Bally  v.  Brili.sli  Equitable  Assur. 

ation   as   to   manner  of   establishing  Co.  1 1904J  L.  K.  Ch.  Div.  374. 

claim)   121  N.  W.  823.     See  Monger  ^^  Chicago,    Rurlinglon    &    Quincy 

V.  New  Era  Assoc.  171  Mich.  614,  137  IJy.  Co.,  v.  Hendiicks,  125   ill.  App. 

N.  W.  631,  41  Ins.  L.  J.  1788.     See  580. 

§§  352-352c,  372-372b  herein.  ^^  Zinna  v.  Saveria  Friscia  Soc.  88 

When  company,  society  or  associa-  N.  Y.  Supp.  404. 
tion   can   chanse   iilan    of  insurance: 
Impairment  of  obligation  of  contract, 
see  §  350m  herein. 

Joyce  Ins.  Vol.  T— 62.  977 


§  380b  JOYCE  ON  INSURANCE 

made  in  the  manner  expressly  provided  therefor  they  cannot  oper- 
ate to  deprive  a  member  of  his  contract  right  to  sick  benefits.'^"  Nor 
can  restrictions  as  to  liability  for  accidental  injury,  which  are  not 
in  the  certificate,  be  imposed  by  a  new  law  so  as  to  imjDair  a  mem- 
ber's contract.^  So,  where  a  member  is  entitled  to  benelits  for  an 
injury  he  cannot  be  deprived  thereof  by  amendments  to  the  con- 
stitution adopted  after  said  injury  is  sustained. ^  Again,  the  adoption 
of  a  new  article  of  incorporation  by  a  mutual  benefit  association, 
making  certificates  void  where  the  holders  engage  in  extra-haz- 
ardous occupations,  does  not  become  part  of  the  contract  with  a 
member  to  whom  a  certificate  had  been  previously  issued,  or  de- 
stroy a  right  which  he  previously  had  to  change  his  occupation  with- 
out making  his  certificate  void.^  But  an  amendment  made  under  a 
contract  in  which  assured  agrees  to  be  bound  by  the  laws,  rules,  and 
regulations  then  in  force  or  thereafter  to  be  enacted,  does  not  de- 
prive him  of  an}^  vested  right  by  a  subsequent  classification  of  a  risk 
as  extra-hazardous,  which  risk  was  onlv  classed  as  an  extra-hazard- 
ous  one  when  the  certificate  was  issued  and  was  not  then  prohibited, 
nor  is  such  an  amendment  unreasonable  when  applied  to  switch- 
men in  railroad  yards  although  brakemen  who  also  do  switching, 
are  not  excluded,  especially  so  where  said  change  was  made  while 
insured  was  still  a  brakeman,  and  after  the  occupation  of  switch- 
man was  placed  in  the  prohibited  class  he  voluntarily  engaged 
therein.*     Again,  a  member  holding  an  endowment  certificate  in 

2°  Mutual   Aid   &  Instruction    Soc.  bound    by    the     cliange.     Hobbs    v. 

V.   Monti,  59  N.   J.  L.   341,  36  Atl.  Iowa  Mutual  Benefit  Assoc.  82  Iowa, 

666.  107,  31  Am.  St.  Rep.  460,  11  L.R.A. 

1  Young  V.  Railway  Mail  Assoc.  299,  4<  N.  W.  983;  Ross  v.  Brotber- 
126  Mo.  App.  325,  103  S.  W.  557.  hood  of  America,  120  Iowa,  692; 
See  Order  of  United  Commercial  (lilmore  v.  Kniglits  of  Columbus,  77 
Travelers  of  America  v.  Smith,  192  Conn.  58,  107  Am.  St.  Rep.  17,  58 
Fed.  102,  112  C.  C.  A.  442,  clistin-  Atl.  223.  In  Parish  v.  New  York 
guished  and  held  not  in  point  in  Produce  Exchanoe,  169  N.  Y.  34,  56 
Smythe  v.  Supreme  Lodge  Knights  L.R.A.  149,  61  N.  E.  977,  relied  upon 
of  Pythias,  198  Fed.  967,  987  and  by  appellants,  it  is  held  that  a  rea- 
held  not  in  point.  sonable    change    in    by-laws    may    be 

2  Brotherhood  of  Painters,  Deco-  made,  but  not  so  as  to  destroy  vested 
rators  &  Paperhangers  v.  IMoore,  36  rights  or  make  a  new  contract.  There 
Ind.  App.  580,  76  N.  E.  262.  was   no   agreement   for   a  change   in 

2  Hobbs    v.    Iowa    Mutual    Benefit  that  case,  and  the  rule  announced  is 

Assoc.  82  Iowa,  107,  11  L.R.A.  299,  undoubtedly  correct.     In  Tebo  v.  Su- 

31  Am.  St.  Rep.  466,  47  N.  W.  983.  preme  Council  of  Royal  Arcanum,  89 

*  Norton  v.  Catholic  Order' of  For-  .Alinn.  3,  93  N.  W.  513,  it  was  held, 

testers,    138    Iowa,    464,    24    L.R.A.  that  a  change  in  the  by-laws  without 

(N.S.)   1030n,  114  N.  W.  893.     The  actual  notice  to  the  insured  was  un- 

court,    per    Sherwin,   J.,   said :     "We  reasonable  and  void.     No  other  point 

are   of   the   opinion   that   no   vested  was  decided.    Olson  v.  Court  of  Hon- 

right  was  impaired,  and  that  he  was  or,   300   :\Iinn.   117,   8  L.R.A. (N.S.) 

978 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.        §  380b 

a  fraternal  order  is  not,  even  tbono;h  he  has  agreed  to  be  governed 
by  thereafter  enacted  by-laws,  bound  by  a  by-law  enacted  without 
his  knowledge  or  consent,  iii'iposing  a  condition  of  forfeiture  for 
engaging  in  active  military  service,  it  also  appearing  that  the  cor- 
jjoration  before  its  charter  expired,  obtained,  without  assured's 
knowledge,  a  special  charter  from  Congress  and  the  old  company's 
iissets  and  obligations  including  said  member's  certificate  were  trans- 
ferred to  the  re-incorporated  company  and  dues  were  paid  on  such 
certificate  until  the  member  died.^  Nor  can  the  [)re-existing  contract 
rights  of  a  member  under  the  laws  of  the  order  concerning  his  oc- 
cupation or  business  of  selling  liquor  be  arbitrarily  destroyed  by  a 
forfeiture  amendment.®  And  a  member  cannot  be  deprived  of  his 
rights  under  his  certificate,  and  in  the  benefit  fund,  by  the  adop- 
tion of  a  by-law,  the  terms  of  which  do  not  apply  to  him ;  as  where 
it  prohibits  engaging  in  a  certain  ])usiness  thereafter  and  the  mem- 
ber had  before  its  adoption  and  subsequently  thereto  been  engaged 
therein  continuously.'  Nor  can  a  member  be  deprived  of  such 
rights  even  though  a  by-law  prohibits  indulging  in  intemperate 
habits  before  its  adoption  or  thereafter,  where,  prior  to  the  enact- 
ment of  such  by-law  he  had  been  addicted  to  such  habits  and  con- 
tinued so  thereafter.*  And  vested  rights  must  not  be  impaired  by 
a  reduction  of  the  certificate  amount  in  case  of  death  from  intox- 
icating liquors  even  though  there  is  a  policy  agreement  to  comply 
with  thereafter  enacted  by-laws.^  And  a  time  limitation  for  suing 
cannot  be  imposed  by  a  subsequently  enacted  by-law  where  no  no- 

521,  110   N.   W.   374,  relates  to  the  429,  117  N.  Y.  Supp.  12.5.    Examine 

question   of   notice   and   follows   the  Supreme  Lodge  of  Fralcnial  Union 

Tebo  case.    Wist  v.  Grand  Lodge,  22  of  America  v.  Leight,  195  Fed.  903, 

Ore.   271,   29   Am.    St.   Rep.  603,   29  considered  and  e.i plained  in   Smyllie 

Pac.  610,  was  determined  on  the  point  v.  Supreme  Lodge  Knights  of  Pyth- 

that  by  the  language  of  the  changed  ias,  198  Fed.  967,  981. 
law  itself,  it  was  prospective  only."        '  Grand    Lodge    Ancient    Order    of 

See  also  House  v.  Modern  Woodmen  Union  Workmen  v.  Haddock,  72  Kan. 

of  America,  165  Iowa,  607,  146  N.  35,  1  L.R.A.(N.S.)   1064   (annotated 

W.  817.  on  effect  of  adojition  of  by-laws  by 

^  Richter       v.       Supreme       Lodge  fratei'nal  insurance  order  upon  bene- 

Knights  of  Pythias,  137   Cal.  8,  69  fit    certificates    already    is.sued)     82 

Pac.  483.  Pac.  583.    Cited  in  Fort  v.  Iowa  Le- 

As   to   prohibition   as   to   entering  gion  of  Honor,  146  Iowa,  183,  123  N. 

military  or  naval  service,  see  §  2237  W.  224,  39  Ins.  L.  J.  3. 
herein.  '  Taylor  v.   I\rodern   Woodmen    of 

®  Deuble  v.   Grand  Lodge  Ancient  America,  72  Kan.  443,  5  L.R.A.  283 

Order  of  United  Workmen,  72  N.  Y.  (annot.)   83  Pac.  1099. 
Supp.  755,  66  App.  Div.  323,  aff'd       ^  Llovd  v.  Supreme  Lodge  Knichts 

172  N.  Y.  665,  65  N.  E.  1116.    See  of  PytJiias,  98  Fed.  (Hi,  38  C.  C.  A. 

also  Barrett  v.  Grand  Lodg  •  Ancient  654,  29  Ins.  L.  J.  744. 
Order    United    Workmen,    63    Misc. 

979 


§  380e 


JOYCE  ON  INSURANCE 


tice  of  said  enactment  is  given  and  the  certificate  contains  no  time 
limitation  within  which  suit  may  he  brought.^"  And  pre-existing 
relief  fund  certificates  are  not  affected  by  by-laws  prohibiting  their 
transfer  and  prescribing  a  limited  time  after  their  maturity  for  the 
payment  of  the  same."  A  by-law  adopted  by  a  mutual  benefit  so- 
ciety that  all  claims  against  it  must  be  adjudicated  in  its  own  tribu- 
nal,^ applies  to  holders  of  existing  certificates.^^  ^^(i  where  power 
to  alter,  amend  and  repeal  charters  is  reserved  in  a  statute.  mcm])ers 
of  a  co-operative  or  asse.ssmont  comi)any  have  no  such  vested  rights 
as  will  prevent  such  an  association  to  reincorporate  under  the  law 
as  a  regular  life  insurance  company.  Therefore,  the  obligation  of 
contract  existing  between  such  members  and  the  original  company 
is  not  impaired  by  such  reincorporation ;  ^^  nor  can  a  member  1)0 
deprived  of  vested,  valuable  statutory  rights  under  a  by-law  chang- 
ing venue  contrary  to  statutory  provisions.^*  But  the  burden  of 
proof  to  show  that  the  rights  of  one  claiming  under  a  benefit  certif- 
icate have  been  impaired  is  upon  said  party." 

§  380c.  Same  subject:  changes  in  by-laws,  etc.:  increasing  assess- 
ments or  dues  or  reducing  amount  payable. — Although  there  is  an 
irreconcilal)le  confiict  between  the  decisions  in  certain  jurisdictions, 
and  although  varying  circumstances  necessarily  so  aftect  the  adju- 
dications that  no  absolutely  governing  rule  can  be  applied  to  all  the 
cases,  and  although  it  is  difiicult  to  determine  what  constitutes  the 
weight  of  authority,  nevertheless  the  rule,  outside  of  any  statutory 
provision  to  the  contrary,  seems  to  be  settled  that  an  amendment 
or  change  in  the  constitution,  articles  of  association,  by-laws,  rules 
and  regulations,  which  increases  the  dues  or  rate  of  assessment  to 
which  a  member  is  subject  under  his  original  contract  with  the  so- 
ciety, association,  or  order,  or  which  reduces  the  amount  payable 


1"  Rcsenstein  v.  Court  of  Honor, 
122  jMinn.  .JIO,  142  N.  W.  331.  FoU 
loued  in  Ruder  v.  National  Council 
Knisjhts  &  Ladies  of  Security,  124 
.Minn.  431,  145  N.  W.  118. 

^^  Wheeler  v.  Supreme  Sittin2:  Or- 
der of  Iron  Hall,  110  Midi.  437,  3 
Det.  Leg.  N.  446,  G8  N.  W.  229. 

^2  Monger  v.  New  Era  Assoc.  156 
Mich.  645,  24  L.R.A.(N.S.)  1027,  121 
N.  W.  823.  See  :Mouger  v.  New  Era 
Assoc.  171  Mich.  614,  137  N.  W.  631, 
41  Ins  L.  J.  1788. 

As  to  conditions  precedent  to  re- 
sort to  courts,  see  §§  352-352c  herein. 

As  to  conditions  excluding  resort 
to  civil  courts,  see  §§  372-372b  here- 


in Polk  v.  Mutual  Reserve  Fund 
Life  Assoc.  207  U.  S.  310,  28  Sup. 
Ct.  65,  52  L.  ed.  222,  quoted  from 
and  distinguished  in  Siuythe  v.  Su- 
preme Lodi;e  Knights  of  Pythias, 
108  Fed.  9()7,  flF6,  but  held  not  to 
support  defendant's  contention  in 
that  case. 

^^Ealou  v.  International  Travel- 
ers' Assoc,  of  Dallas,  —  Tex.  Civ. 
App.  — ,  136  S.  W.  817. 

As  to  effect  of  stipulation  limiting 
action  to  particular  forum,  see 
§§  3194,  3195  herein. 

^5  United  Moderns  v.  Ratbbun,  104 
Va.  736,  52  S.  E.  552. 


in. 


980 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  380c 

under  his  certificate,  impairs  the  obligation  of  said  contract  and  di- 
vests his  vested  riglits,  notwithstanding  a  general  reservation  or 
agi-eenient  in  the  constitution,  by-laws,  etc.,  or  in  any  or  all  of  them, 
that  changes  therein  may  thereafter  be  made.  If  a  power  is  vested 
by  said  general  reservation  or  agreement  to  repudiate  a  part  of  the 
contract  by  such  an  increase  or  reduction,  logically  the  exercise  of 
the  same  power  authorizes  a  repudiation  in  toto  of  all  the  insurer's 
obligations  and  the  insured  would  be  bound  thereby.  It  seems  un- 
reasonable that  such  a  conclusion  could  be  deduced  as  being  the 
intent  of  the  parties  in  entering  into  the  original  contract  of  mem- 
bership. If  it  was  intended  that  changes  increa.«ing  assessments  or 
dues,  or  reducing  the  amount  payable,  or  both,  should  l)ind  the 
member,  it  would  seem  that  the  terms  of  the  consent  should  have 
been  so  clearly  and  ex})licitly  expressed  that  no  room  would  be  left 
for  construction.  The  reasoning  and  deductions  of  the  courts  are, 
however,  set  forth  in  the  following  pages.^^ 

Under  a  Federal  Supreme  Court  decision  an  agreement  in  the  ap- 
plication, made  a  part  of  the  contract,  to  abide  by  changes  in  the  con- 
stitution, rules  and  regulations  of  the  society,  does  not  authorize 
amendments  of  the  constitution,  reducing  the  amount  of  indemnity, 
Avhich  amendments  imply  a  prospective  operation,  and  not  retroact- 
ive." So  it  is  decided,  in  the  Federal  Circuit  Court  of  Appeals  that 
where  a  member  of  a  fraternal  beneficiary  society  contracted,  upon 
printed  representations,  that  a  constitution  of  a  certain  date  was  the 
basis  of  the  contract  governing  the  amount  of  assessments  to  be  paid 
he  is  not  bound  by  a  constitution  of  a  later  date  even  though  ado))ted 
].rior  to  the  contract,  which  increa.<ed  the  amount  of  assessments, 
nor  is  he  bound  even  though  under  a  stipulation  in  the  application 
1he  contract  was  to  be  governed  by  thereafter  enacted  l)y-laws.^^Vnd 
it  wa.'^  held  in  the  same  case  in  the  court  below  that  if  power  is  re- 
served to  increase  assessments,  as  such  a  beneficial  association  or 
society  has  the  right  to  do,  it  must  be  expressly,  explicitly  and  clear- 

18  As  to  vested  rights  and  changes  44  C.   C.  A.  93,  30   Ins.  L.   J.   230. 

in  by-laws,  etc.  reducing  Ijcnctits  or  But    see    Mutual    A.ssnrauce    See.    v. 

Jorli-iting   them    in    case    of    suicide,  Korn,  7  Cranch  (11  U.  S.)  39G,  3  L. 

see  §§  2647  et  seq.  herein.  ed.  383.     Quoted  from  with  ai)provaI 

On  riglit  of  mutual  benefit  societv  in   Whitfield  v.  vKtna  Life  Ins.   Co. 

to  decrease  benetits,  see   note  in   31  205  U.  S.  480,  493,  51  L.  ed.  895,  27 

L.R.A.(N.S.)  423.     On  right  of  mu-  Sup.   Ct.   578    (rev'g  144  Fed.   3.i0) 

tual  insurance  company  to   increase  where  the  same  Missouri  statute  was 

rates,   see   notes   in   7  "L.1\.A.(N.S.)  passed  upon. 
1154.  and  31  L.R.A.(N.S.)   417.  "Smythe      v.      Supreme      Lodge 

17  Knights    Templars'    &    ?^lason.s'  Knights   of   Pythias,   220    Fed.   438, 

Life  Indemnitv  Co.  v.  Jarman,  187  U.  137  C.  C.  A.  32,  atit'g  Smythe  v.  Su- 

S   197,  47  L.  ed  139,  23  Sup.  Ct.  108,  preme  Lodge  Knights  of  Pythias,  198 

32  Ins.  L.  J.  57,  aff'g  104  Fed.  638.  Fed.  907,  42  Ins.  L.  J.  6. 

981 


§  380e  JOYCE  ON  INSURANCE 

ly  stated  in  such  a  manner  as  to  constitute  a  part  of  the  contract  so 
as  to  fully  inform  and  advise  the  memljer  that  such  increase  may  be 
made  and  the  contract  so  changed. ^^  Again,  contract  obligations 
cannot  be  impaired  by  a  reduction  of  the  amount  specified  as  pay- 
able in  the  certilicate  of  a  member.^^ 

In  California  an  association  cannot  even,  though  power  is  reserved 
to  amend,  destroy  witliout  assured's  special  consent  his  cvintracl 
rights  by  reducing  death  benefits.^  And  a  subsequent  resolution 
classifying  risks  and  increasing  assessments  violates  a.-^^sured's  con- 
tract.^ 

But  it  is  also  held  in  that  state  that  an  amendment,  enacted  after 
a  person  becomes  a  member,  providing  that  the  balance  of  the 
amount  of  certificates,  over  and  above  the  number  of  members,  shall 
be  payable  out  of  the  reserve  fund  only  when  there  is  a  sufficient 
excess  over  a  specified  sum  to  meet  such  further  payment,  is  not 
detrimental  where  such  amendment  was  made  in  pursuance  of  a 
by-law  permitting  changes  to  be  thereafter  made,  and  in  addition 
no  reserve  fund  was  created  under  any  by-law  or  rule  although  all 
the  net  assets  were  treated  as  belonging  to  that  fund  which  was  not 
specially  devoted  to  other  purposes.^ 

In  Georgia  the  agreement  in  the  certificate  to  pay  a  certain  sum 
constitutes  a  contract  which  cannot  be  repudiated  iDy  the  association 
by  a  subsequently  enacted  by-law  reducing  said  amount  even  though 
the  certificate  made  the  payment  conditional  upon  compliance  with 
all  existing  or  future  enacted  by-laws.^ 

In  Illinois  a  member's  contract  riglits  cannot  be  impaired  by  a 
change  of  by-laws  increasing  assessments  where  there  was  no  agree- 
ment to  be  bound  by  subsequent  changes  except  such  as  might  be 
implied  from  his  being  charged  with  knowledge  of  by-laws  provid- 

^^  Smythe      v.      Supreme      Lodse  ^  Benjamin      v.      Mutual     Reserve 

Knights   of   Pythias    (U.    S.   D.    C.)  Fund  Life  Association,  146  Cal.  34, 

198  Fed.   967,"  980,  42  Ins.  L.  J.  6,  79  Pac.  517,  34  Ins.  L.  J.  614,  con- 

aif'd     Smythe     v.     Supreme     Lodse  sidered  more  fully  under  §  380c  here- 

Kniohts   of   Pythias,   220   Fed.   438,  in. 

137  C.  C.  A.  32.  3  Hass  v.  Mutual  Relief  Assoc,  of 

2°  Supreme  Council  American  I^e-  Petaluma,  118  Cal.  6,  49  Pac.  1056, 

gion  of  Honor  v.  Champe,  127  Fed.  26  Ins.  L.  J.  992.     The  point  of  vest- 

541,  63  C.  C.  A.  282.  ed    interest,    however,    was    not    dis- 

^  Bornstein      v.      District      Grand  cussed  by  the  court,  except  in  so  far 

Lodge    No.    4,    Independent     Order  as  it  was  stated  that  the  contention 

B'nai  B'rith,  2  Cal.  App.  624,  84  Pac.  was    tluit    the    contract    wa.s    one    for 

271.  the  payment  of  an  absolute,  specified 

As  to  right  to  sick  benefits  not  be-  sum. 

ing  subject  to  change  of  by-law  re-  *  Supreme    Council    American    Le- 

ducing    same,    see    Berlin    v.    Eureka  gion   of   Honor   v.    Jordan,  117    Ga. 

Lodge  No.  9,  Knights  of  Pythias,  132  808,  45  S.  E.  33. 
Cal.  294,  64  Pac.  "'254. 

982 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.        §  380c 

ing  therefor  at  the  time  of  the  issuance  of  his  certificate.^  Assess- 
ments may  be  increased  by  a  change  in  by-laws  under  a  provision 
of  the  certificate  obligating  the  member  to  comply  with  by-laws 
thereafter  enacted,  as  insured  has  no  vested  right  to  have  the  former 
rate  continued.^ 

In  Indiana  the  amount  of  assessments  may  be  increa.sed  under 
a  reserved  power  or  agreement  that  changes  may  thereafter  be 
made.' 

In  an  lo-wa  case  the  association  by  amendments  to  its  constitu- 
tion not  only  increased  the  annual  assessments  and  made  other 
clianges  therein  but  it  also  scaled  down  the  amount  of  assured's 
certificate,  that  is  reduced  the  amount  of  his  policy,  said  constitu- 
tion when  assured  became  a  member  provided  that  it  could  not  be 
amended  except  in  a  certain  specified  manner  and  a  form  of  con- 
stitution for  the  government  of  subordinate  lodges  contained  a  pro- 
vision for  the  enactment  and  alteration  or  amendment  of  by-laws 
and  the  mode  for  adoption  and  approval  thereof,  but  a.'^sured's  cer- 
tificate did  not  expressly  provide  for  any  changes  or  amendments 
of  the  articles  of  incorporation,  constitution  or  by-laws  nor  did  the 
subordinate  lodges  of  which  assured  was  a  member  make  any 
clianges  in  the  by-laws.  Assured  had  ratified  a  prior  change  by 
paying  assessments  thereunder  without  protest,  l)ut  under  the  later 
amendments  a  claim  of  ratification,  by  the  suljordinate  lodge  or 
lodges  of  which  he  was  a  member  sending  a  representative  to  the 
grand  lodge  and  who  agreed  to  the  amendment  wa.s  not  sustained. 
Other  than  as  al)ove  appears  there  was  no  consent  by  assured  to 
said  changes  and  he  elected  to  rescind  the  contract  and  ])rought 
suit  for  its  breach.  It  was  held  that  by  said  unlawful  amendments, 
without  assured's  consent,  the  association  repudiated  the  contract 
and  so  justified  rescinding  it  and  bringing  suit  for  its  breach  and 
also  that  he  was  not  obligated  to  tender  assessments  under  the  old 
rate.^  The  opinion  of  the  court,  per  Deemer,  .].,  is  of  importance 
and  so  much  thereof  as  applies  to  the  question  here  under  consid- 
eration is  as  follows:     ''It  will  thus  be  seen  that  plaintiff  nowhere 

5  Covenant  Mutual   Life  Assoc,  v.  C.)   108  Fed.  967,  983,  case  aff'd  in 

Kentner,  188  111.  431,  58  N.  E.  960.  Smvtlie  v.    Su])reme   Lodue   Kniuhts 

See   Covenant  Mutual  Life  Ins.   Co.  of  Pytliian,  220  Fed.  4:;8,  137  C.  C. 

v.  Tuttle,  87  111.  App.  309.  A.  32. 

^  Fullenwider  v.   Supreme  Council  '  Supremo  Lod<i-e  Kniijlits  of  Hon- 

Roval  Leao-ue,  180  HI.  621,  72  Am.  or  v.  Bieler,  58  Ind.  App.  .5.50,  105 

St."  Rep.  239,  .54  N.  E.  485,  31  Cliic.  X.  E.  244.     See  opinion  in  tliis  case 

Leo^.   N.    382,   73   111.   App.    321,   30  un.lcr  §  380d  lierein. 

Cliic.    Leg-.    N.    187,    considered    and  *  Fort   v.    Iowa  Leaion    of   Honor, 

qnoled  from  in   Smythe  v.   Supreme  146    Iowa    183,   123   N.    W.    224,    39 

Lodsje  Knights  of  Pythias  (U.  S.  D.  In.s.  L.  J.  3. 

983 


§  380c  JOYCE  ON  INSURANCE 

expressly  agreed,  as  in  man^y  of  the  cases  cited  and  relied  upon  by 
ap])ellant.  to  conform  to  and  abide  by  any  amendments  that  might 
thereafter  be  adoi»tcd.  Doubtless  the  association,  in  the  absence  of 
such  an  agreement,  had  the  right  to  change  its  by-laws.^  But  such 
amendments  cannot  be  made  of  the  by-laws  as  will  in  any  manner 
affect  the  promise  of  the  society  to  pay  a  particular  sum  to  a  mem- 
ber as  an  insured.  As  to  this  the  member  has  the  right  to  rely  up- 
on the  terms  of  liis  contract.^"  As  said  by  the  Supreme  Court  of 
Massachusetts  "  'Most  of  the  cases  relied  on  by  the  plaintiffs,  when 
rightly  analyzed,  turn  on  the  distinction  between  an  attempted 
amendment  of  the  by-laws  directly  affecting  the  promise  to  the  cer- 
tificate holder,  as  an  insured  person  and  an  amendment  affecting 
his  duties  as  a  member  of  the  corporation  bound  to  perform  his  part 
in  providing  means  or  otherwise  as  one  of  the  association  of  insur- 
ers'— citing  many  authorities.  The  changes  and  amendments  of 
which  plaintiff'  complains  were  of  the  constitution  itself,  and  they 
not  only  increased  the  amount  of  the  assessment  which  the  member 
was  to  pay,  but  they  scaled  down  the  amount  which  the  association 
was  to  pay  him  as  an  insured,  and  in  legal  effect  reduced  the  amount 
of  his  policy  from  $2,000  to  $1,070  without  his  personal  consent. 
That  this  may  not  be  done  under  an  implied  agreement  to  be  bound 
by  subsequent  amendments  of  the  constitution,  which  is  the  funda- 
mental law  of  the  society,  is  well  settled  by  authority.^^  Even 
though  the  constitution  contains  provisions  for  amendment,  this 
does  not  authorize  a  change  of  the  contract  made  with  the  assured 
which  affects  his  liability  as  such.^^  Moreover,  many  courts  have 
held  that,  even  where  there  is  an  agi'eement  on  the  part  of  the  as- 
sured to  be  bound  by  subsequent  changes,  the  society  cannot  make 
essential  amendments  affecting  the  rights  of  the  insured  as  the  hold- 

^Ciiing:  Durfee  v.  Old  Colony  &  Royal  Arcanum,  193  Mass.   158,  78 

Fall    Kiver   R.    R.   Co.   5   Allen  "(87  N.    E.    129,    reprinted   in'  7   Am.    & 

Mass.)  230;  Pain  v.  Soeiete  St.  Jean  Eng.  Ann.  Cas.  7/9. 

Baptiste,  172  Mass.  319,  70  Am.  St.  ^^Ciling:   Hobbs  v.   Iowa  Mutual 

Kep.  287,  52  N.  E.  502;  Wrio-ht  v.  Benefit    Assoc.     82    Iowa,     107,    11 

Minnesota  Mutual  Life  Ins.  Co.  193  L.R.A.  299,  31  Am.  St.  Rep.  466,  47 

IT.  S.  657,  48  L.  ed.  832,  24  Sup.  Ct.  N.   W.   983 ;    Farmers'   Mutual   Hail 

549;     Supreme    Lodge    Knights    of  Soc.  of  Iowa  v.   Slattery,  115  Iowa, 

Pythias  v.- Knight,  117  Ind.   489,  3  410,  88  N.  W.  949;  Field  v.  Eastern 

L.R.A.  409,  20  N.  E.  479.  Building   &   Loan   Assoc.    117   Iowa 

^°  Citing:     Newhall     v.     Supreme  185,  90  N.  W.  717,  and  cases  cited. 

Council  American  Legion  of  Honor,  ^^  See  eases  above  cited,  and   Po- 

181  Mass.  Ill,  63  N.  E.  1;  Langan  krefky    v.    Detroit    Firemen's    Fund 

V,    Supreme    Council    American    Le-  Assoc.  121  Mich.  456,  80  N.  W.  240, 

gion  of  Honor,  174  N.  Y.  266,  66  N.  and  Peterson  v.  Gibson,  191  111.  365, 

E.  932.  54  L.R.A.  836,  85  Am.  St.  Rep.  263, 

^^  Reynolds  v.  Supreme  Council  of  61  N.  E.  127. 

984 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  380c 

er  of  a  benefit  certificate,"  **  The  court  also  said  that  the  certificate 
issued  to  plaintiff  was  a  contract,"  that  the  amendment  to  the 
constitution  affected  the  amount  to  be  paid  plaintiff  or  his  benefi- 
ciary.^^ The  court  then  continues  as  follows:  "With  practical 
unanimity  the  courts  seem  to  hold  that  the  general  power  to  amend 
by-laws  reserved  to  a  society  does  not  authorize  an  amendment 
which  impairs  the  vested  rights  of  the  members."  .  .  .  The 
reason  for  this  rule  is  so  well  stated  in  Ayres'  case,"*  .  .  . 
that  Ave  quote  the  following  therefrom :  'An  amendment  of 
by-laws  Avhich  form  part  of  a  contract  is  an  amendment  of 
the  contract  itself,  and.  when  such  a  power  is  reserved  in  gen- 
eral terms,  the  parties  do  not  mean,  as  the  courts  hold,  that  the 
contract  is  subject  to  change  in  any  essential  particular  at  the  elec- 
tion of  tlie  one  in  whose  favor  the  reservation  is  made.  It  would 
be  not  reasonable,  and  hence  not  within  their  contemplation,  at 
lea.st  in  the  absence  of  stipulations  clearly  specifying  the  subjects 
to  be  affected,  that  one  party  should  have  the  right  to  make  a  radi- 
cal change  in  the  contract,  or  one  that  would  reduce  its  pecuniary 
value  to  the  other.  A  contract  which  authorizes  one  party  to  change 
it  in  any  re-spect  that  he  chooses  would  in  effect  be  binding  upon  the 
other  party  only,  and  would  leave  him  at  the  mercy  of  the  former, 
and  we  have  said  that  human  language  is  not  strong  enough  to 

"  Citing:      Morton     v.      Supreme  Trotter  v.  Iowa  Legion  of  Honor,  132 

Council   of   Roval   League,   100   Mo.  Iowa,  513,  7  L.R.A.(N.S.)   569,  109 

App.    76,    73    S.    W.    259;    Hale    v.  N.  W.  1099. 

Equitable  Aid  Union,  168  Pa.  377,  ^^  Citing:  Supreme  Council  of 
31  Atl.  1066;  Olson  v.  Court  of  Hon-  American  Legion  of  Honor  v.  Getz, 
or,  100  Minn.  117,  8  L.I^A.(N.S.)  112  Fed.  119,  50  C.  C.  A.  153;  Shep- 
521,  117  Am.  St.  Rep.  676,  110  N.  perd  v.  Bankeis  Union  of  the  World, 
W.  374;  Strau.ss  v.  Mutual  Reserve  77  Neb.  85,  108  N.  W.  188;  Johnson 
Fund  Life  Assoc.  128  N.  C.  465,  39  v.  Bankers'  Union  of  the  World,  83 
S.  e!  55;  O'Neill  v.  Supreme  Council  Neb.  48,  118  N.  W.  1104;  Pokrefky 
American  Ledon  of  Honor,  70  N.  J.  v.  Detroit  Firemen's  Fund  Assoc.  121 
Law,  410,  57  Atl.  463;  Supreme  Mich.  456,  80  N.  W.  240. 
Council  of  American  Legion  of  Hon-  ^''Citing:  Scow  v.  Supreme  Conn- 
or V.  Getz,  112  Fed.  119';  50  C.  C.  A.  oil  Royal  League,  223  til.  32,  79  N.  E. 
153.  42;   Grand  Lodge  Ancient  Order  of 

^^  Citing:   Brown   v.    Towa   Legion  United    Workmen    v.     Haddock,    72 

of  Honor,  107  Iowa,  439,  78  N.  W\  Kan.    35,    1   L.R.A.(N.S.)    1064,    82 

73;    Smail   v.    Court  of   Honor.   136  Pac.  583;  Ayres  v.  Grand  Lodge  An- 

Mo.  App.  434,  117  S.  W.  117;  Born-  cient  Order  United  Workmen,  188  N. 

stein  V.  District  Grand  Lodge  No.  4,  Y.   280,  80  N.   E.   1020;    Sautter  v. 

Independent    Order    B'nai    B'rith,    2  Supreme  Conclave  Independent  Ord- 

Cal.    App.    624,   84   Pac.    271;    Van  er  of  Ileptasophs,  72  N.  J.  Law,  325, 

Norman   v.    Modern   Brotherhood   of  62  Atl.  529. 

America,  134  Iowa,  575,  111  N.  W.        "^  Avres  v.  Grand  Lodge  Ancient 

992 ;   Underwood  v.  Iowa  Legion  of  Order  U.  W.  188  N.  Y.  280,  80  N.  E. 

Honor,  66  Iowa,  134,  23  N.  W.  300;  1020. 

985 


§  380c  JOYCE  ON  INSURANCE 

place  a  person  in  that  situation. ^^  While  the  defendant  may  doubt- 
less so  amend  its  by-laws,  for  instance,  as  to  make  reasonable 
changes  in  the  methods  of  administration,  the  manner  of  conduct- 
ing its  business,  and  the  like,  no  change  can  be  made  which  will 
deprive  a  member  of  a  substantial  right  conferred  expressly  or  im- 
pliedly by  the  contract  itself.  That  is  beyond  the  power  of  the  Leg- 
islature, as  well  a.s  the  association,  for  the  obligation  of  every 
contract  is  protected  from  state  interference  by  the  Federal  Consti- 
tution.^^ The  courts  are  not  agreed,  however,  as  to  what  constitutes 
an  impairment  of  the  contract.  Some  of  them  hold  that  an  amend- 
ed by-law  which  increases  the  amount  annually  assessed  against  a 
member  is  not  an  impairment  of  vested  rights,^"  while  other  courts 
hold  exactly  to  the  contrary.^  We  need  not  pass  upon  this  trouble- 
some question  now,  for  it  seems  to  be  universally  held,  as  already 
indicated,  that  a  benefit  society  cannot  diminish  the  amount  pay- 
able to  a  member  or  his  beneficiary  under  his  certificate  by  the  en- 
actment of  a  subsequent  by-law,  resolution,  or  amendment  to  the 
constitution  without  the  consent  of  the  insured.^  Save,  then,  as 
plaintiff'  consented  to  or  ratified  the  different  amendments  made  by 
the  defendant,  he  is  not  bound  thereby.  That  the  subordinate 
lodge  or  lodges  of  which  he  w^as  a  member  sent  a  representative  to 
the  Grand  Lodge  of  which  he  wa.*^  a  member,  and  Avho  agreed  to 
the  amendments,  is  of  no  moment.  Such  representative  had  no 
right  to  bind  the  plaintiff  or  to  agree  to  a  change  of  his  contract 
rights."'  3 

In  Kansas  a  fraternal  aid  association  has  power  to  change  the 
benefits  to  accrue  under  the  certificate  especially  so  where  they  are 
made  to  conform  to  the  chai'ter  of  the  association  and  state  laws 
where  the  member  agrees  in  his  application  that  his  contract  shall 
be  controlled  by  all  orders,  rules  and  regulations  of  the  association 
or  order  in  force  or  which  may  be  thereafter  enacted  by  the  general 
council  and  to  submit  to  all  penalties  therein  contained,  and  that 

iMndnstrial  &  flenoral  Trust  Ltd.  Rep.  558,  95  N.  Y.  Snpp.  996;  Hieks 

V.    Tod,   180   N.   Y.   215,   225,   73  N.  v.     Northwestern     Aid     Assoc.     117 

E.  7.  Tenn.  203,  96  S.  W.  962. 

^^  Article  1,  sec.  10.  ^  Evans  v.  Southern  Tier  iMasonic 

^^  Citing:     Reynohls     v.     Supreme  Relief  Assoc.  182  N.  Y.  453,  75  N. 

Council  Royal   Arcanum,  192   Mass.  E.  317.     See  also  eases  cited  in  note 

150,  7  L.R.A.(N.S.)   1154,  78  N.  E.  to  Gilmore  v.  Knights  of  Columbus, 

129,  7  Am.  &  Eng.  Ann.   Cas.   776;  77  Conn.  58^,  58^A_tl.  223,  1  Am.  & 

Conner     v.     Supreme     Commandery  Eng.  Ann.  Cas.  717. 
Golden   Cross,  117  Tenn.  549,  97   S.        ^Citing:    Hill    v.    Mutual    Reserve 

W.  306;  Gaines  v.  Supreme  Couilcil  Fund  Life  Assoc.  128  N.  C.  463,  39 

(C.  C.)  140  Fed.  978.  S.   E.   56;   Supreme  Council  Ameri- 

^  Citing:    Wright    v.    Kniglits    of  can    Legion    of    Honor    v.    Jordan, 

Maccabees   of   the   World,   48    Misc.  117  Ga.  808,  45  S.  E.  33;  Supreme 

986 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  3S0c 

the  application  sliall  constitute  a  part  of  the  contract.^  And  where 
the  certificate  and  by-laws  construed  together,  show  that  tlie  mem- 
ber agreed  to  be  1)ound  by  subsequently  enacted  by-laws  he  is  ob- 
ligated by  a  new  law  which  changes  and  increases  his  monthly  as- 
ses^-^ments  provided  such  amendment  is  necessary  to  accomplish  the 
purpa«es  of  the  society,  and  also  reasonable.^ 

In  Louisiana  a  clause  in  a  membership  certificate  in  an  insurance 
benefit  society  by  which  the  member  agTees  to  comply  with  all  of 
the  by-laws  of  the  society  then  existing  or  thereafter  adopted,  does 
not  authorize  the  society  to  reduce  the  amount  stipulated  in  the  cer- 
tificate to  be  paid,  without  the  consent  of  the  member.^ 

In  a  Maryland  case  it  is  declared  by  the  court,  per  Rurkc.  •!., 
that:  "There  appears  to  be  a  general  concurrence  of  authority  in 
support  of  these  two  propositions:  First  tliat  a  general  power  to 
amend  the  laws  reserved  either  by  the  constitution  or  by-laws  of  a 
fraternal  benefit  society  does  not  authorize  an  amendment  wliicli 
impairs  the  vested  rights  of  the  members.  Secondly,  that  where  a 
member  of  a  fraternal  benefit  society  agrees  in  his  application  for 
membership  to  be  Ijound  by  the  rules  or  laws  then  in  force,  or  wliicli 
might  be  thereafter  adopted,  the  society  after  he  has  become  a  mem- 
ber, may  enact  reasonable  rules  and  amendments  and  bind  him  to 
their  observance."  ' 


Council  American  Legion  of  Honor 
V.  Getz,  112  Fed.  119,  50  C.  C.  A. 
.153. 

*  Kirk  V.  Fraternal  Aid  Assoc.  95 
Kan.  707,  149  Pad  400. 

5  Miller  v.  National  Council  of  the 
Knig-hts  &  Ladies  of  Security,  69 
Kan.  234,  76  Pac.  830,  followed  as  to 
right  to  make  reasonable  changes  and 
construction  of  by-laws  as  part  of 
contract,  in  Moore  v.  Life  &  Annuity 
Assoc.  95  Kan.  591,  149  Pac.  400. 

^  Russ  V.  Supreme  Council  Ameri- 
can Legion  of  Honor,  110  La.  588,  98 
Am.  St.  Rep.  469,  34  So.  697. 

'  Supreme  Conclave  Independent 
Order  of  Heptasophs  v.  Rehan,  119 
Md.  92,  85  Atl.  1035,  42  Ins.  L.  J. 
631. 

Citing:  Alabama. — Fraternal  Un- 
ion of  America  v.  Zeigler,  145  Ala. 
287,  30  So.  75. 

District  of  C olumh ia .^Brown  v. 
Grand  Fountain  of  U.  O.  of  True  Re- 
formers, 28  App.  D.  C.  200. 

Indiana. — Court      of      Honor      v. 

98' 


Hutchens,  —  Ind.  App.  — ,  79  N.  E. 
409. 

Man/land. — Mathieu  v.  iVLithieu, 
112  iMd.  625,  77  Atl.  112. 

Minnesota. — Olson  v.  Court  of 
Honor,  100  Minn.  117,  8  L.R.A. 
(N.S.)  521,  117  Am.  St.  Rep.  676, 
10  Am.  &  Eng.  Ann.  Cas.  622,  110  N. 
W.  374. 

Missouri. — Zimmerman  v.  Supreme 
Tent  of  Knights  of  Maccabees  of  tlie 
World,  122  Mo.  App.  591,  99  S.  W. 
817. 

Nehraslm. — Lange  v.  Royal  High- 
landers, 75  Neb.  188,  10  L.R.A. 
(N.S.)  660,  121  Am.  St.  Rep.  786, 
106  N.  W.  224,  110  N.  W.  1110. 

New  Jersey. — Strang  v.  Camden 
Lodge  Ancient  Order  United  Work- 
men, 75  N.  J.  L.  500,  64  Atl.  9:5; 
Sautter  v.  Supreme  Lodge  Independ- 
ent Order  Hepta.sophs,  72  N.  J.  L. 
325,  62  Atl.  529. 

New  York. — Avers  v.  Grand  Lodge 
Ancient  Order  United  Workmen,  188 
N.  Y.  280,  80  N.  E.  1020. 


§  38Ge  JOYCE  ON  INSURANCE 

In  Massachiisrfts,  increasing  the  rate  of  assessment  on  a  member 
of  a  mutual  benefit  society  by  change  of  by-h\ws  does  not  impair 
his  contract,  where  tlie  by-laws  to  which  he  agreed  required  him  to 
conform  to  the  hiws  then  in  force,  or  which  might  thereafter  be 
adopted.^  In  this  case  the  court,  per  Knowhon,  C.  J.,  said:  "An- 
other question  is  whether  the  amendments  are  in  violation  of  the 
contract  rights  of  members.  It  is  stated  in  the  record  that  'the 
agreements  between  the  plaintiff  and  the  defendants  concerning 
assessments  and  benefits  are  not  contained  in  any  one  specific  instru- 
ment, but  are  found  in  the  application  for  membership,  the  bene- 
fit certificate,  the  laws  of  Massachusetts  constituting  the  charter  and 
the  constitution  and  laws  of  the  order.'  If  there  Avere  no  express 
stipulation  in  regard  to  the  by-laws  in  the  application  for  member- 
ship or  in  the  certificate,  all  members  of  the  corporation  would  be 
bound  by. by-laws  regularly  made  or  amended.^  iMery  member  of 
this  corporation,  at  the  time  of  joining  it  enters  into  an  express 
agreement  to  Vonform  to  and  abide  by  the  constitution,  laws,  rules 
and  usages  of  the  said  council  and  order,  now  in  force  or  which  may 
hereafter  be  adopted  by  the  same.'  The  certificates  promise  pay- 
ment only  on  condition  that  the  member  complies  Svith  the  laws, 
rules  and  regulations  now  governing  the  said  council  and  fund,  or 
that  hereafter  may  be  enacted  by  the  Supreme  Council  to  goNern 
the  said  council  and  fund,'  etc.  Here  in  the  contract  is  full  author- 
ity to  amend  the  laws,  rules  and  regulations.  In  regard  to  a  similar 
provision  under  which  a  mutual  fire  insurance  company  changed 
its  by-laws,  so  as  to  increase  the  assessments  upon  certain  policy 
holders,  the  Supreme  Court  of  the  United  States  uses  this  language: 
'The  liability  of  members  of  this  institution  is  of  a  twofold  nature. 
It  results  both  from  an  obligation  to  conform  to  laws  of  their  own 
making  as  members  of  the  body  politic  and  from  a  particular  as- 

*  Reynolds     v.     Supreme     Council  oisive  except  in  so  far  as  it  interprets 

Royal   Arcanum,    192   Mass.    150,    7  those  laws  and  determines  the  rights" 

L.R.A.(N.S.)    1154,    7   Am.   &   Ens.  of  the  parties  under  them. 
Ann.  Cas.  776,  78  N.  E.  129,  35  Ins.        ^Citing:  Wright  v.  Minnesota  Mu- 

L.   J.   673.      Cited  in   Fort   v.   Iowa  tual  Life  Ins.  Co.  193  U.  S.  657 ;  Su- 

Legion  of  Honor,  146  Iowa,  183,  123  preme  Lodge  Knights  of  Pvthias  v. 

N.  W.  224,  39  Ins.  L.  J.  3.     ConMd-  Knight,  117  Ind.  489,  3  L.R.A.  .409, 

ered  in   Smythe   v.    Supreme   Lodge  20   N.   E.   479;   Pain   v.    Societe   St. 

Knights   of   Pvthias,   198   Fed.   967,  Jean  Baptiste,  172  Mass.  319,  70  Am. 

984   (case  aff'd  Smythe  v.   Supreme  St.  Rep.  287,  52  N.  E.  502;  Spilman 

Lodge  Knights  of  Pythias,  220  Fed.  v.  Supreme  Council  Home  Circle,  157 

438,'  137   C.   C.  A.  72)    and  held  in  :\rass.   128,  31  N.  E.  776;  Oliver  v. 

point  "if  good  law,"  but  "at  variance  Hopkins,   144   Mass.   175,   10  N.   E. 

with  the  New  York  eases"  and  to  have  776 ;    Durf ee   v.    Old    Colony   R.    R. 

been  determined  largely  by  force  of  Co.  5  Allen,  87  Mass.  230,  242. 
Massachusetts  statutes  and  "not   de- 

988 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  380c 

sumption  or  declaration  which  every  individual  signs  on  becoming 
a  member.'  "  The  latter  is  remarkably  comprehensive.  "We  will 
abide  by,  observe  and  adhere  to  the  constitution,  rules  and  regula- 
tions which  are  already  established  by  a  majority  of  the  a.ssured 
or  which  are  or  may  hereafter  be  established  by  the  presi- 
dent and  directors  of  the  societv."  ...  As  to  what  is  contended 
to  be  a  material  alteration  in  their  charter,  we  consider  it  merely 
as  a  new  arrangement  or  distribution  of  their  funds,  and  whether 
just  or  unjust,  reasonable  or  unreasonable,  beneficial  or  otherwise 
to  all  concerned,  was  certainly  a  mere  matter  of  speculation  proper 
for  the  consideration  of  the  society,  and  which  no  individual  is  at 
liberty  to  complain  of  as  he  is  bound  to  consider  it  as  his  ovyn  in- 
dividual act.  Every  member  stands  in  the  peculiar  situation  of 
being  party  on  both  sides,  insurer  and  insured.  Certainly  the  gen- 
eral submission  which  they  have  signed  will  cover  their  lial)ility  to 
submit  to  this  alteration.^"  Tliis  part  of  the  present  case  is  covered 
in  principle  by  the  decisions  of  this  court  in  Messer  v.  Grand  Lodge 
Ancient  Order  United  Workmen, ^^  and  Pain  v.  St.  Jean  Baptiste,^^ 
in  which  cases  changes  similar  to  those  made  by  the  defendant  were 
upheld  under  like  contracts.  The  same  general  doctrine  has  been 
stated  in  many  cases  in  other  courts.^^  There  are  many  cases  in 
which  it  is  held  that  the  amount  expressly  promised  to  be  paid  in 
a  certificate  like  those  issued  by  the  defendant  cannot  be  cut  down 
by  an  amendment  of  the  by-laws."  r)ut  in  many  of  the.se,  as  in 
the  case  from  this  court  last  cited,  a  distinction  is  made  between  the 


^°  Quoting  from  Korn  v.  Mutual 
Assur.  Co.  ()  Cranoh  (10  U.  S.)   192. 

"  180  Ma&s.  321,  62  N.  E.  252. 

12  172  Mass.  310.  70  Am.  St.  Rep. 
287,  Wl  N.  E.  502. 

^^  Citing :  United  States. — Wri2:lit 
v.  Mitmesota  Mutual  Life  Ins.  Co. 
193  U.  S.  6r)7;  Gaines  v.  Supreme 
Council  Roval  Arcanum  (U.  S.  C.  C.) 
140  Fed.  978;  Gant  v.  Mutual  Reserve 
Fund  Life  Assoc.  (U.  S.  C.  C.)  121 
Fed.  403,  409;  Ilaydel  v.  Mutual  Re- 
serve Fund  Life  Assoc.  104  Fed.  718, 
44  C.  C.  A.  169. 

Georgia. — Barber  v.  IMutual  l\e- 
serve  Fund  Life  Assoc.  100  Ga.  681, 
28  S.  E.  498. 

Illinois. — Fullenwider  v.  Supreme 
Council  Roval  Arcanum,  73  111.  App. 
321,  30  Chic.  Le£?.  N.  187,  aff'd  180 
111.  621,  31  Chic.  Le^.  N.  382,  72  Am. 
St.  Rep.  239,  54  N.  E.  485. 


Taylor,   99   Va.   208, 


«89 


Indiana. — Supreme  Lod<4e  Kniirlits 
of  Pvthias  v.  Kniyiit,  117  Ind.  489. 
3  L.R.A.  409,  20  N.  E.  479. 

Missouri. — Riclunoud  v.  Supreme 
Lo(l<ie  Order  of  Mutual  Protection, 
10(1 'Mo.  App.  8.  71  S.  W.  736. 

Vermont. —  Fusyuro  v.  Society  of 
St.  Jo.-^epli,  46  Vt.  362. 

Virginia. — Mutual     Reserve    Fund 
Life   Assoc,   v, 
37  N.  E.  854. 

England.-  Bartram  v.  Supreme 
Council  Roval  Arcanum,  6  Ont.  W. 
R.  404. 

^'^  Citing:  Supreme  Council  of 
American  Legion  of  Honor  v.  Getz, 
112  Fed.  119,  50  C.  C.  A.  153;  New- 
hall  v.  American  I^esifion  of  Honor, 
181  Mass.  Ill,  63  N.  E.  1,  31  Ins.  L. 
J.  389;  Langan  v.  American  Su])reme 
Council  Legion  of  Honor,  174  N.  Y. 
266,  66  N.  E.  932. 


§  380c  JOYCE  ON  INSURANCE 

express  stipulation  of  the  corporation  to  pay  a  certain  sum  and  oth- 
er provisions  relating  to  the  methods  of  the  corporation,  and  the 
duties  of  the  certificate  holders,  which  properly  may  be  a  subject 
for  regulation  of  the  by-laws,  even  though  they  affect  the  rights  of 
the  parties  under  their  contract.  The  assessments  to  be  paid  for 
death  benefits  in  this  case  are  provided  for  by  the  by-laws,  while  the 
promise  in  writing  to  pay  a  certain  sum  to  a  particular  person  is,  as 
to  that  person,  a  matter  out«ide  of  those  corporate  rules  which  may 
be  expected  to  be  changed  by  an  amendment  of  the  by-laws.  This 
promise  on  the  one  side  is  set  over  against  the  promise  of  the  mem- 
ber on  the  other.  The  promise  of  the  member  is  to  do  what  may  be 
called  for  by  the  by-laws  then  existing  or  that  may  afterwards  be 
adopted.  The  promise  of  the  corporation  is  stated  expressly,  with- 
out mention  of  the  by-laws.  The  memljer  occupies  a  dual  posi- 
tion, as  an  insurer  and  the  insured.  As  one  of  the  association 
agreeing  to  provide  for  the  payments  that  may  become  due  to 
members,  he  agrees  to  be  subject  to  the  by-laws.  As  the  in- 
sured person  to  whom  a  particular  sum  of  money  is  promised, 
he  has  a  right  to  stand  on  the  terms  of  the  promise.  That  the 
duties  of  members  prescribed  by  the  by-laws  remain  subject  to  mod- 
ification has  often  been  decided. ^^  Most  of  the  cases  relied  upon  by 
the  plaintiffs,  when  rightly  analyzed,  turn  on  the  distinction  be- 
tween an  attempted  amendment  of  the  by-laws  directly  affecting 
the  promise  to  the  certificate  holder  as  an  insured  person,  and  an 
amendment  affecting  his  duties  as  a  member  of  the  corporation 
bound  to  perform  his  part  in  providing  means  or  otherwise  as  one 
of  the  association  of  insurers. ^^    Other  cases  cited  by  the  plaintiff 

^^Ciiing:  Lawson   v.   Hewell,   118  Council,  Roval  Arcanum,  89  Minn.  3, 

Cal.    61;?,   49   L.R.A.   400n,   50    Pac.  93  N.  W.  513. 

763;   Gilmore  v.  Knights  of  Colum-  New  Jerseij. — Sautter  v.   Supreme 

bus,  77  Conn.  58,  107  Am.  St.  Rep.  Conclave  Independent  Order  Hepta- 

17,  58  Atl.  223;  Ellerbe  v.  Faust,  119  sophs,  72  N.  J.  L.  325,  62  Atl.  529. 

Mo.  653,  25  L.R.A.  149n,  25   S.  W.  New     Tor/w— BeAch     v.     Supreme 

390;  Lansmeeker  V.  Grand  Lodge  An-  Tent  of  Knights  of  Maccabees,  177 

cient    Oriler   United    Workmen,    111  N.  Y.  300,  69  N.,  E.  281;  Rol)erts  v. 

Wis.  279,  55  L.R.A.  185,  87  Am.  St.  Grand  Lodge,  Ancient  Order  United 

Rep.  860,  87  N.  W.  293;  Loeffler  v.  AVorkmen,  173  N.  Y.  580,  65  N.  E. 

Modern    Woodmen    of  America,   ]00  1122;    Deuble    v.    Grand   Lodge    An- 

Wis.  79,  75  N.  W.  1012.  cient    Order    United    Workmen,    1^2 

^^  Citing:      7Z//no/s.— Peterson      v.  N.  Y.  665,  65  N.  E.  1116;  Weber  v. 

Gibson,  191  111.  365,  54  L.R.A.  836,  Supreme  Tent  of  Knights  of  Macca- 

61  N.  K.  127.  bees,  172  N.  Y.  490,  do  N.  E.  258; 

Michiqan. — Startling    v.    Supreme  Fa)'go  v.   Supreme  Tent  of  Knights 

Council' Roval  Temi)hir.>^  of  Temper-  of  Maccabees,  89  N.  Y.  Supp.  65,  96 

ance,  108  Mich.  440,  62  Am.  St.  Rej).  App.    Div.    491;    Deuble    v.    Grand 

709,  66  N.  W.  340.  Lodge  Ancient  Order  United  AVork- 

Minnesota. — Tebo       v.       Supreme  ment,  72  N.  Y.  Supp.  755,  66  App. 

990- 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.       §  380c 

nre  clearly  adverse  to  the  views  we  take."  ''On  })riiici])le  and  on  the 
weight  of  authority  we  are  of  opinion  that  there  is  nothing  in  this 
contract  that  prevents  the  corporation  from  amending  its  by-laws 
in  a  reasonable  way,  to  accomplish  the  purposes  for  which  it  was  or- 
ganized, even  though  the  change  increases  the  payments  to  be  made 
by  certificate  holders.  Such  changes  necessarily  involve  some  hard- 
ship to  certain  individual  members,  but  the  corporation,  under  tlie 
law,  should  do  that  which  will  bring  the  greatest  good  to  the  great- 
est number."'  In  another  decision  in  the  same  state  it  is  also  de- 
cided that  under  a  reserved  right  to  change  the  by-laws  no  vested 
rights  are  impaired  by  an  amendment  reducing  sick  benefits  or  the 
time  during  which  they  might  be  received  under  the  member's  con- 
tract, as  such  right  could  not  be  construed  to  cover  a  period  contin- 
uing as  long  as  the  disability,  but  merely  a  right  to  receive  them 
under  such  limitations  and  changes  as  the  society  might  prescribe 
by  future  enacted  by-laws  or  amendments.^^  But  it  is  also  held  in 
tiiat  state  that  the  court  cannot  by  an  amended  by-law  cut  down  an 
express  promise  to  pay  the  amount  stipulated  to  be  paid  although 
the  promise  in  the  certificate  was  to  comply  with  all  existing  and 
tliereafter  adopted  by-laws,  and  that  the  words  '•'full  compliance  with 
all  the  by-laws"  existing  or  thereafter  to  be  enacted,  specified  as  a 
consideration  in  the  certificate,  mean  doing  what  the  by-laws  may 
require  the  member  to  do,  not  submission  to  a  change  in  a  by-law 
after  i.'^suance  of  the  certificate  diminishing  the  sum  promised  to  be 
paid  thereunder."    And  where  an  attempt  Avas  made  to  reduce  the 

Div.  ;52.3;  Robert.s  v.  Cohen,  70  N.  T.  Assoc.   126   N.    Car.   971,   54  L.R.A. 

Su)))..  :)7,  m  App.  Div.  259;  Spencer  605,  36  S.  E.  352. 
\.  (xrand  Lod^e  Ancient  Order  Unit-       ^*  Pain  v.  Societe  St.  Jean  Baptiste, 

ed  Workmen,^  65  N.  Y.  Supp.  1146,  172  Mass.  319,  70  Am.  St.  Kep.  28/, 

53  App.  Div.  627.  52  N.  E.  502. 

Oregon. — Wist  v.  Grand  Lodge  An-       "  Newball     v.     Supreme     Council 

cicnt  Order  United  Workmen,  22  Ore.  American     Legion     of     Honor,     181 

271,  29  Am.   St.   Rep.   603,  29  Pac.  Mass.  Ill,  63  N.  E.  1,  31  Ins.  L.  J. 

610.  389.     The  court,  per  Holmes,  C.  J., 

Pennsylvania. — Hale   v.    Equitable  said:    "The   ])laintifl's  rights  do  not 

Aid  Union.  168  Pa.  377,  31  Atl.  1066.  stand  upon  the  by-laws  alone.     They 

Tennessee. — Hadley  v.  Queen  City  stand    also    upon    e.xpress    contract. 

Camp  No.  27,  W.  0.  W.  1  Tenn.  Ch.  The  promise  to  pay  $5,000,  is  eon- 

App.  413.  ditioned  by  the   by-laws  only  to  the 

Texas. — Grand  Lodge  Ancient  Or-  extent   that   has   been  .stated.      Even 

der  United  Workmen  v.  Stumpf,  24  if  the  'full   compliance  with   all  the 

Tex.  Civ.  App.  309,  58  S.  W.  840.  by-laws'  which  is  mentioned  as  a  con- 

'^''  Citing:  Benjamin  v.  Mutual  Re-  sideration  for  tlic  promise  is  not  in- 
serve  Fund  Life  A.ssoc.  146  Cal.  34,  terpreted  and  limited  by  the  more 
79  Pac.  517;  Ebert  v.  Mutual  Reserve  specific  provisions  of  the  express  con- 
Fund  Life  Assoc.  81  Minn.  116,  83  ditions,  'compliance'  in  this  direction 
N.  W.  506,  834,  84  N.  -W.  457;  means  doing  what  the  by-laws  may 
Strauss  v.  Mutual  Reserve  Fund  Life  require  the  member  to  do,  not  sub- 

991 


§  380c  JOYCE  ON  INSURANCE 

amount  of  l^enefit  payable,  and  the  certificate  stipulated  that  amend- 
ments might  thereafter  be  made,  and  the  society  refused  to  receive 
assessments  for  more  than  would  be  due  as  based  upon  the  reduced 
amount,  it  was  held  that,  under  the  Massachusetts  law,  the  refusal 
to  perform  amounted  merely  to  notice  of  an  intended  breach  of  the 
contract  in  the  future  and  therefore  no  present  right  of  action  ex- 
isted.2" 

mission  to  seeing  his  only  induce-  Council  of  the  Royal  Arcanum,  192 
ment  to  do  it  destroyed.  The  case  is  INIass.  150,  7  L.R.A.(N.S.)  1154n,  7 
not  like  Daley  v.  People's  Building,  Am.  &  Eng-.  Ann.  Cas.  776,  78  N.  E. 
Loan  &  Savings  Association,  172  129  (which  holds  that  assessments 
Ma.ss.  533,  52  N.  E.  1090,  and  Moore  may  be  increased  by  amendment  of 
V.  Union  Fraternal  Accident  Assoc,  the  by-laws  under  provisions  of  the 
103  Iowa  424,  72  N.  W.  645,  where  statute  Rev.  Laws  Mass.  c.  119,  sec. 
the  promise  to  pay  a  fixed  sum  was  6.  The  court  also  distinguishes  Lan- 
qualitied  by  reference  to  a  fund  from  gan  v.  Supreme  Council,  American 
whicli  the  payment  was  to  come  and  Legion  of  Honor,  1*4  N.  Y.  266,  66 
which  might  turn  out  inadequate  N.  E.  932;  Supreme  Council,  Ameri- 
from  causes  over  wliieh  the  defendant  can  Legion  of  Honor  v.  Getz,  112 
had  no  control.  Stating  our  opinion  Fed  119)  cited  in  Fort  v.  Iowa  Le- 
in  a  diti'erent  form,  whatever  compli-  a,ion  of  Honor,  164  Iowa,  183,  123 
ance  with  by-laws  may  be  construed  N.  W.  224,  39  Ins.  L.  J.  3;  Tuttle  v. 
to  mean,  it  does  not  mean  absolute  Iowa  State  Traveling  Glen's  Assoc, 
submission  to  whatever  may  be  en-  132  Iowa  652,  661,  104  N.  W.  1031, 
acted  in  good  faith,  and  it  "^does  not  7  L.R.A.(N.S.)  222,  230;  Morse  v. 
extend  to  permitting  a  direct  dedue-  Fraternal  Accident  Assoc.  190  Mass. 
tion  from  the  sum  which,  on  the  face  417,  419,  112  Am.  St.  Rep.  337,  77 
of  the  certificate,  any  ordinary  man  N.  E.  491  (holdinsc  that  the  amount 
would  be  led  to  suppose  secure.  With  of  insurance  could  not  be  reduced, 
reference  to  him  the  by-law  is  a  plain  The  policy  was  not  in  terms  subject 
abuse."  Gaut  v.  American  Legion  of  to  future  alterations  in  the  rules); 
Honor,  107  Tenn.  603,  55  Ij.R'.A.  Porter  v.  Supreme  Council  American 
465,  64  S.  W.  1070;  Langan  v.  Legion  of  Honor.  183  Ma^s.  326,  327, 
American  Legion  of  Honor,  34  Misc.  328,  67  N.  E.  238. 
629,  70  N.  Y.  Supp.  663,  665;  ^o  po^^pj.  y  Supreme  Council 
Knights  Templars'  &  ^lasons'  Life  American  Legion  of  Honor,  183 
Indemnity  Co.  v.  Jarraan,  104  Fed.  Mass.  326,  67  N.  E.  238. 
638,  44  C.  C.  A.  92,  99;  Pokrefky  v.  Fepudiation  and  rescission  of  con- 
Detroit  Firemen's  Fund  Assoc.  121  tract:  anticipatory  breach.  Al- 
Mich.  456,  80  N.  W.  240;  ^Yist  v.  though  under  the  Massachusetts  rule 
Grand  Lodge  A.  U.  U.  W.  22  Ore.  as  above  stated  it  seems  that  there 
271,  281,  29  Am.  St.  Rep.  603,  29  may  be  an  anticipatory  breach  of  an 
Pac.  610.  "Another  bj^-law  under-  executory  contract  resulting  from  an 
take.*;  to  deduct  five  per  cent  from  absolute  refusal  to  perform  by  one 
the  face  value  of  certificates  for  an  party  and  that  the  other  party  may 
emergency  fund.  Whatever  may  be  at  his  option  treat  the  contract  as 
the  right  to  assess  for  this  purpose,  terminated  for  all  purposes  of  per- 
it  follows  from  what  we  have  said  formance  and  maintain  action  at  once 
that  the  attempt  to  cut  down  the  for  damages  occasioned  by  such  re- 
amount  to  be  paid  by  the  defendant  pudiation  without  awaiting  the  time 
under  its  contract  must  fail.''  Dis-  fixed  by  the  contract  for  performance 
tingiiished  in  Reynolds   v.    Supreme  is  well  settled  and  is  applicable  to  in- 

992 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.     §  380c 

In  Michigan  it  is  held  that  an  amendment  cannot  have  tlie  effect 
of  changing  a  pre-existing  contract  by  reducing  the  amount  of  ben- 
efits and  that  the  trustees  under  a  general  authority  to  change  the 
by-laws  cannot  adopt  such  a  by-law  against  the  member's  protest.^ 
But  it  was  subsequently  decided  in  the  same  case  that  the  assent 
of  a  member  to  an  alteration  of  the  by-laws  increasing  certain  ben- 
efits and  reducing  others  was  not  without  consideration  and  thai 
assent  authorized  a  change,  and  that  there  was  such  consideration. 
It  appeared,  however,  that  assured  had  paid  his  assessments  and  in- 
creased dues  without  protest.  The  question  of  assent  was  held  prop- 
erly one  for  the  jury.^ 

In  Missouri  it  is  decided  that,  although  both  the  application  and 
policy  contained  an  agTeement  or  reservation  that  assured  abide  by 
subsequent  changes  in  the  constitution,  rules  and  regulations  a^ 
they  might  be  constitutionally  changed  thereafter,  that  an  assess- 
ment association  could  not  materially  change  the  assured's  contract 
by  increasing  his  assessments;  and  also  that  it  could  not  in  the  ab- 
sence of  a  reserved  right  so  to  do,  levy  additional  assessments  to 
cover  an  obligation  whereby  assessments  paid  were  to  be  added  to 
the  policy  amount  to  constitute  the  sum  to  be  paid  to  the  benefici- 
ary ; '  and  that  the  agreed  upon  compliance  with  thereafter  enacted 
laws  and  usages  of  the  society  reserved  in  the  certificate  referred 

surance   contracts,   see   Indiana   Life  25    Sup.    Ct.    841     (may    rescind)  ; 

Endowment  Co.  v.  Carnilhan   (1915)  Henderson      v.      Supreme      Council 

—  Ind.  App.  — ,   109  N.   E.   851,  a  American    Legion    of   Honor    (IT.    S. 

case  fully  considering  the  authorities.  C.  C.)  120  Fed.  585;  Supreme  Coun- 

See  further  as  to  right  of  member  to  cil    American    Legion    of    Honor    v. 

re-scind    and    sue    on    contract    when  Jordan,  117   Ga.   808,  45   S.   E.   33; 

benefits     reduced.     Supreme     Coun-  O'Neill   v.   Supreme   Council   Ameri- 

cil  American  Legion  of  Honor  v.  Lip-  can   Legion  of  Honor,   70   N.   J.   L. 

pincott,  69  L.R.A.  803,  134  Fed.  824,  410,  1  Am.  &  Eng.  Ann.  Cas.  422,  57 

67  C.  C.  A.  650,  rev'g  Lippiucott  v.  Atl.  463;  Makely  v.  Supreme  Council 

Supreme  Council  American  Legion  of  American  Legion  of  Honor,  133  N. 

Honor,  130  Fed.  483;  McAlarney  v.  C.  367,  45  S.   E.   649    (may  recover 

Supreme  Council  American  Legion  of  after  repudiation)  ;  Supreme  Council 

Honor,  131  Fed.  538,  33  Ins.  L.   J.  American  Legion  of  Honor  v.  Batte, 

906,  rev'd  135  Fed.  72,  67  C.  C.  A.  34   Tex.   Civ.   App.   456.     As  to   re- 

546;  Supreme  Council  American  Le-  scission  and  cancelation,  see  §§  1634 

gion  of  Honor  v.  Daix,  130  Fed.  101,  ct  .'seq.   herein. 

64  C.  C.  A.  435  (may  rescind)  ;  Daix        ^  Pokrefky  v.  Firemen's  Fund  As- 

V.  Supreme  Council  American  Legion  soc.  121  Mich.  452,  80  N.  W.  240,  6 

of  Honor  (U.  S.  C.  C.)  127  Fed.  374;  Det.  Leg.  N.  527. 
Supreme  Council  American  Legion  of        ^  Pokrefky      v.      Firemen's     Fund 

Honor   v.   Black,   123    Fed.    650,   59  Assoc.  131  Mich.  38,  96  N.  W.  1057- 
C.  C.  A.  414,  aff'g  Black  v.  Supreme       ^  Pearson   v.   Knights  Templars  & 

Council  American  Legion  of  Honor,  Masons  Life  Indemnity  Co.  114  Mo. 

120     Fed.     580;     Certiorari     denied  App.  283,  89  S.  W.  588. 
(mem.)  191  U.  S.  568,  48  L.  ed.  305, 

Joyce  Ins.  Vol.  I.— 63.  993 


§  380c  JOYCE  ON  INSURANCE 

only  to  future  regulations  governing  assured's  duties  as  member  and 
did  not  cover  a  reduction  in  the  amount  payable  made  under  a  sub- 
sequently enacted  by-law.*  But  it  is  also  decided  that  a  reduction 
of  the  amount  paj'able  under  the  certificate  conditioned  upon  the 
amount  of  assessments  paid  in,  would  be  sustained  under  a  provi- 
sion making  the  beneficiar3''s  rights  determinable  by  the  charter, 
constitution,  laws,  etc.,  in  force  when  the  sum,  which  was  the 
amount  of  one  assessment  not  exceeding  that  specified  in  the  certifi- 
cate, became  payable.* 

In  New  Jersey  a  general  reserved  power  to  alter  or  amend  the 
laws  of  the  order  does  not  authorize  an  increase  in  dues  beyond  the 
amount  specified  in  the  contract  and  so  impair  the  obligation  there- 
of, especially  so  where  the  contract  limited  the  amount  up  to  which 
they  might  be  increased  when  the  receipts  were  insuflicient  thereby 
impliedly  precluding  an  additional  increav^e.  In  the  case  so  decid- 
ing the  court  per  Walker,  V.  C,  said:  "  'But  it  is  very  generally, 
if  not  universally,  held  that  these  benefit  certificates,  like  other  con- 
tracts, confer  a  vested  interest  upon  the  member  which  may  not  be 
impaired  by  a  subsequent  amendment,  even  though  the  power  to 
amend  be  resened  in  general  terms.  If  the  member's  stipulation 
to  comply  with  all  by-laws  thereafter  enacted  could  be  construed 
to  relate  to  a  by-law  that  reduced  the  benefit  from  $5,000  to  $2,000, 
it  must  also  relate  to  a  by-law  canceling  the  benefit  certificate  en- 
tirely— a  result  wholly  unjust  and  absurd.  This  stipulation  must 
be  construed  as  referring  only  to  reasonable  by-laws  and  amend- 
mentei  adopted  in  furtherance  of  the  contract,  and  not  to  such  as 
would  overthrow  it  or  materially  alter  its  terms.'  ^  ...  If  this 
increase  is  to  be  held  good,  then  it  would  appear  that  the  complain- 
ant and  those  in  the  class  with  him  are  at  the  mercy  of  the  supreme 
circle  with  reference  to  any  impairment  of  tlieir  contracts  of  mem- 
bership in  the  death  benefit  fund  which  that  circle  may  see  fit  to 
make."  ' 

In  Ne-w  York  in  a  case  decided  in  1912.  a  change  was  made  in 
the  rate  of  assessment  to  which  assured  agreed,  subsequently  another 
change  therein  was  made  without  notice  to  as.surcd,  without  his 
consent  and  against  his  objection  and  protest.  He  had  agreed  in  his 
application  and  certificate  to  conform  to  and  comply  with  thereafter 

*  Morton  v.  Supreme  Council  Council  American  Legion  of  Honor, 
Royal  League,  100  Mo.  App.  76,  73  70  N.  J.  L.  410,  420,  1  Am.  &  Eng. 
S.  W.  259.  Ann.  Cas.  422,  57  All.  463,  467. 

*  Richmond  v.  Supreme  Lodge,  Or-  '  Poole  v.  Supreme  Circle  Brother- 
der  of  ]\Iutual  Protection,  100  Mo.  hood  of  America,  80  N.  J.  Eq.  259, 
App.  8,  71  S.  W.  736.  85  Atl.  821,  42  Ins.  L.  J.  482. 

^  Quoting  from  O'Neill  v.  Supreme 

994 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  380c 

adopted  laws,  rules,  reg:ulations  and  usages.  It  was  held  that  said 
last  amendment  of  the  laws  was  not  authorized.  The  Appellate 
Division  had  decided  that  the  contract  had  so  effectually  ravened 
said  right  to  amend  as  to  bind  the  assured  to  such  increa.se  in  rates. 
"This  conclusion  was  based  upon  the  assumption  that  there  is  a 
distinction  between  this  case  and  the  cases  in  which  we  have  held 
that  a  membership  contract  in  a  mutual  benefit  as.sociation  in  which 
the  member  agrees  to  complj'  with  the  laws  of  the  order  'now  in 
force  or  that  may  hereafter  be  adopted,'  does  not  authorize  a  sub- 
sequent amendment  of  the  by-laws  without  the  member's  consent 
if  the  effect  of  such  amendment  is  t«  increase  the  rate  of  assessment 
or  to  reduce  the  amount  of  the  benefit,  as  fixed  by  the  contract. 
.  .  .  We  think  there  is  no  distinction."  It  was  further  declared 
that  the  reservation  in  the  certificate,  if  intended  to  bind  the  mem- 
ber, should  be  explicit  in  providing  that  the  jiayments  therein 
specified  should  be  subject  to  such  modification  as  to  amount,  terms 
and  conditions  of  payment  and  contingencies  in  which  the  same 
were  payable  as  the  order  might  from  time  to  time  provide,  and 
that  nothing  less  explicit  would  be  binding.  It  was  further  decided 
that  the  fact  that  the  defendant  was  a  Ma.ssachusetts  corporation 
did  not  authorize  such  an  amendment  under  its  statute,  nor  apply 
to  a  member  who  had  entered  into  and  completed  his  contract  in 
New  York  with  the  association.^  It  is  said  in  another  New  York 
case,  per  Rartlett,  J.,  that:  "There  is  a  conflict  of  judicial  decisions 
in  the  various  states  on  the  point  now  presented,  but  a  careful  ex- 
amination of  the  cases  shows  that  the  great  weight  of  autliority  is 
in  favor  of  the  position  that  the  original  contract  cannot  be  im- 
paired. It  would  be  quite  impo.«sible  to  harmonize  the  conflicting 
views  of  the  learned  judges,  and  it  remains  to  be  considered  wheth- 
er the  decisions  of  this  court  have  not  laid  down  the  rule  of  law 
which  must  now  govern,  to  the  efl'ect  that  the  contract  of  insurance 
cannot  be  changed  by  any  act  of  the  defendant.  We  have  on  the 
one  hand  the  plaintiff'  standing  upon  the  plain  letter  and  spirit  of 
his  contract,  and  on  the  other  the  in.sistence  of  the  defendant  that 
unless,  under  its  construction  of  the  contract,  it  is  vested  with  the 
power  to  increase  the  amount  of  a  single  assessment,  as  the  exigen- 

8  Green  v.  Supreme  Council  Roval  Fed.  967,  987,  but  court  declared  that 

Arcanum,  206  N.  Y.  591,  100  N.  E.  "benefit    certificate    expressly    stated 

411,  42  Ins.  L.   J.  3,  335,  rev'g  129  that  the  member  should  comply  with 

N.  Y.  Supp.  791,  144  App.  Div.  701,  the  laws  'that  might  thereafter  be  en- 

40  Ins.  L.  J.  414a,  which  rev'd  124  acted  to  govern  the  relief  fund.'  This 

N.  Y.  Supp.  398,  39  Ins.  L.  J.  1087,  the    court    construed    as    sufficiently 

case  in  129  N.  Y.  Supp.  791  is  quoted  providing  for  an   amendment   which 

from  in   Smythe  v.   Supreme  Lodce  increiised  the  assessments  to  make  the 

Knights  of  Pythias  (U.  S.  D.  C.)  198  relief  fund." 

995 


§  380c  JOYCE  ON  INSURANCE 

cies  of  the  company  may  require,  it  will  be  unable  to  continue  its 
financial  life  and  pay  its  death  losses."  ^  And  a  general  power  to 
amend  without  specifying  in  what  respects,  reserved  in  the  appli- 
cation and  certificate  does  not  authorize  an  amendment  reducing 
benefits  or  increasing  assessments.  So  the  power  resented  by  a  mu- 
tual benefit  society  to  amend  its  laws  does  not  authorize  it  to  de- 
crease the  benefits  to  which  a  member  is  entitled  by  the  terms  of 
his  contract,  such  as  the  right  to  relief  from  assessments  upon  reach- 
ing a  specified  age  or  in  case  of  disability,  and  to  advance  payments 
on  the  ])olicy  under  certain  conditions.^"  The  court  considers  at 
length  the  several  cases  in  New  York  and  says:  ''These  cases  estab- 
lish the  rule  that  l)enefits  cannot  be  reduced,  or  new  conditions 
forfeiting  the  benefits  added  by  an  amendment  of  the  by-laws,  even 
when  the  general  right  to  amend  is  expressly  reserved.  They  are 
controlling,  therefore,  so  far  as  all  the  amendments  now  in  question 
are  concerned,  except  that  providing  for  an  increase  in  the  rate  of 
assessments.  Tollowing  the  authorities  cited  we  hold  that  the 
amendments  which  assume  to  cut  down  the  benefits  to  which  the 
plaintiff  became  entitled  by  his  contract  with  the  defendant,  are 
void  and  of  no  effect.  I  am  personally,  of  the  opinion  that  the 
amendment  increasing  the  rate  of  assessments  is  also  void,  for  I  can 
see  no  difference  in  principle  between  reducing  1)enefits  and  increas- 
ing the  amount  to  be  paid  for  benefits.  The  plaintiff  entered  into 
the  contract  on  the  faith  of  the  promise  by  the  association  that  he 
should  'pay  at  the  same  rate  thereafter  so  long  as  he  remains  con- 
tinually in  good  standing  in  the  order,'  which  he  had  the  right  to 
assume  and  the  defendant  knew  that  he  would  assume,  was  a  cove- 
nant not  to  increase  the  rate.  The  certificate  states  that  'he  is  en- 
titled to  all  the  rights,  benefits,  and  privileges'  provided  by  the  laws 
of  the  order,  which  are  thus  made  a  part  of  the  certificate.  Hence 
the  right  to  pay  at  the  old  rate  was  one  of  the  rights  provided  for 
and  that  he  contracted  for.  It  was  a  vested  right,  immune  from 
change  by  amendment  in  the  absence  of  a  specific  reservation  of 
power  to  amend  in  that  particular.    On  the  average,  such  contracts 

9  Dowdall  V.  Supreme  Council  112  N.  Y.  Suiip.  1150,  128  App.  Div. 
Catholic  Mutual  Benefit  Assoc.  196  883  {quoted  from  in  Sraytlie  v.  Su- 
N.  Y.  405,  31  L.R.A.(N.S.)  417n,  89  preme  Lode^e  Knio-hts  of  Pythias  [U. 
N.  E.  1075,  39  Ins.  L.  J.  87,  rev'g  S.  D.  C]  198  Fed.  967,  977,  978) 
122  N.  Y.  Supp.  1130,  123  App.  cited  in  dissenting  opinion  in  Hannes 
Div.  913,  39  Ins.  L.  J.  87,  rev'g  108  v.  Nederland  Israelitish  Sick  Fund, 
N.  Y.  Supp.  11.30,  123  App.  Div.  913.  136  N.  Y.  Supp.  742,  152  App.  Div. 

10  ^Yright  v.  Knights  of  Maccabees  140,  41  Ins.  L.  J.  1685,  to  point  that 
of  the  World,  196  N.  Y.  391,  134  Am.  law  is  well  settled  that  subsequent 
St.  Rep.  838,  31  L.R.A.(N.S.)  423,  amendments  cannot  decrease  benefits. 
89  N.  E.  1078,  39  Ins.  L.  J.  95,  rev'g 

996 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  3S0c 

would  be  impaired  b}'^  doubling  assessments  to  the  same  extent  as 
by  cutting  off  one-half  of  the  benefit.  The  price  to  be  paid  by  the 
plaintiff'  for  insurance  is  as  essential  a  part  of  his  contract  as  the 
amount  of  insurance  to  be  paid  to  him  by  the  defendant  on  the 
maturity  of  the  policy.  Whether  the  one  is  increased  or  the  other 
proportionately  decreased  makas  no  difference  in  principle,  or  in 
the  final  result.  By  either  method  the  pecuniary  value  of  the 
contract  which  is  property,  would  be  reduced  one-half."  ^^  So  the 
fact  that  in  the  application,  upon  which  the  certificate  was  issued, 
the  assured  agreed  to  comply  with  all  laws,  regulations  and  require- 
ments of  the  society  which  were  then,  or  might  thereafter  be,  en- 
acted, there  being  no  reservation  in  the  by-laws  of  the  specific  right 
to  amend  them  so  as  to  restrict  the  occupation,  or  business,  of  the 
assured,  did  not  permit  an  amendment  in  that  respect  without  the 
consent  of  the  assured,  and  the  attempt  made  without  his  consent 
was  beyond  the  power  of  the  society  and  absolutely  void ;  since  the 
effort  was  not  to  reduce  the  amount  of  insurance,  but  to  destroy  it 
altogether,  unless  the  assured  would  conform  to  a  by-law  passed  in 
violation  of  a  vested  right,  for  the  privilege,  allowed  because  not 
forbidden,  of  engaging  in  any  lawful  business  was  a  vested  right 
of  which  the  assured  could  not  be  deprived  without  his  consent. ^^ 

11  Wright  V.  Knights  of  INIaccabees  comply  with  all  the  laws,  rules,  and 

of    the    World,    IDG    N.    Y.    i)!)!,    31  requirements    of    the    order.     In    his 

L.R.A.(N.S.)  423,  89  N.  E.  1078,  39  application   for  membership   tlie   in- 

Ins.  L.  J.  95.  surcd  agreed  Ho  strictly  comply  with 

^2  Ayres  v.   Grond   Lodge   Ancient  the  constitution,  laws,  and  regulations 

Order  of  United  Workmen",  188  N.  Y.  which  are,  or  may  hereafter  be,  en- 

280,  80  N.  E.  220,  all'g  109  App.  Div.  acted  by  the  supreme,  grand,  or  sub- 

919.     Principal     case     is     quoted    in  ordinate    lodge.'     Sometime    between 

Smythe  v.  Supreme  Lodge  Knights  of  1898  and  1902  the  defendant  adopted 

Pythias,  220  Fed.  438,  441,  137  C.  C.  a    by-law    wliich    provided,    in    sub- 

A.    32,   and   in    Smythe   v.    Supreme  stance,  that  any  member  who  should 

Lodge  Knights  of  Pythias  (U.  S.  D.  thereafter  enter  into  the  business  or 

C.)  198  Fed.  967,  980.  .  occujiation    of   selling   by    retail    in- 

This  decision  is  considered  in  an-  toxicating  liquors  as  a  beverage 
other  New  York  case,  Dowdall  v.  Su-  should  be  suspended  from  any  and 
preme  Caholic  Mutual  Benefit  Assoc,  all  rights  to  participate  in  the  bene- 
190  N.  Y.  405,  31  L.R.A.(N.S.)  417n,  ticiavy  fund.  Previous  to  January 
89  N.  E.  1075,  39  Ins.  L.  J.  87,  rev'g  1,  1904,  the  insured  had  never  en- 
122  N.  Y.  Supp.  1130,  123  App.  Div.  gaged  in  the  busine.ss  of  selling  li- 
913,  where  the  court  per  Bartlett,  J.  <|Uors,  but  on  that  day,  in  connection 
said:  "In  March  1885,  one  Emory  D.  with  one  Hanchctt,  his  copartner,  he 
Fuller,  became  a  member  of  a  local  began  to  carry  on  a  liotel  at  Weeds- 
lodge  of  the  defendant,  a  domestic  port.  The  firm  employed  a  bartend- 
corporation,  and  was  to  participate  er,  who  sold  liquor  in  the  usual  way 
in  tlie  beneticiary  fund  of  the  order  over  the  bar.  In  June  of  the  same 
in  the  amount  of  $2,000  at  the  time  year  the  insured  died  and  the  defend- 
of  his  death.     The  insured  agreed  to  ant   refused   to   pay   on    the   ground 

097 


§  380c 


JOYCE  ON  INSURANCE 


And  the  amount  of  benefits  specified  in  a  member's  certificate  can- 
not be  reduced  so  as  to  take  away  vested  rights  by  amendments  to 
the  by-laws  adopted  after  the  issuance  of  the  certificate  even  though 


that  he  had  engaged  in  the  business  Ltd.  v.  Tod,  180  N.  Y.  215,  225,  73 
of  selling  intoxicating  liquors  at  re-  N.  E.  7.  "While  the  defendant  may 
tail.  The  contract  of  insurance  had  doubtlass  so  amend  its  by-laws,  for 
been  in  force  for  more  than  twelve  instance  as  to  make  reasonable 
j'ears  at  the  time  of  the  amendment  changes  in  the  methods  of  adminis- 
of  the  by-laws  as  to  the  sale  of  in-  tration,  the  manner  of  conducting  its 
toxicating  liquors.  The  defendant  business,  and  the  like,  no  change  can 
having  refused  to  pay  the  amount  al-  be  made  which  will  deprive  a  member 
leged  to  be  due  on  the  certificate,  an  of  a  substantial  right  conferred  ex- 
action was  brought  to  recover  the  pressly  or  impliedly  by  the  contract 
same.  The  trial  court  and  the  Ap-  itself.  That  is  beyond  the  power  of 
peltate  Division  decided  in  favor  of  the  Legislature  as  well  as  the  associa- 
the  plaintiff,  and  this  court  attirmed  tion,  for  the  obligation  of  every  con- 
the  judgment.  Vann,  J.,  writing,  tract  is  protected  from  state  inter- 
stated:  'This  case  cannot  be  distin-  ference  by  the  Federal  Constitution, 
guished  in  principle  from  a  long  line  Article  1,  sec.  10.  .  .  .  The  reser- 
of  cases  decided  by  this  court.  .  .  .  vation  of  a  general  power  to  amend 
It  is  well  establi.siied  by  these  author-  the  by-laws,  without  reserving  the 
ities.  "that  a  general  power  reserved  specific  right  to  so  amend  them  as  to 
either  by  statute  or  by  the  const itu-  restrict  the  occupation,  did  not  per- 
tion  of  a  society  to  amend  its  by-laws  mit  an  amendment  in  that  respect, 
does  not  authorize  an  amendment  ira-  and  the  attempt  made  without  the 
pairing  the  vested  rights  of  mem-  consent  of  the  assured  was  beyond  the 
bers."  '  An  amendment  of  by-laws  power  of  the  defendant  and  absolute- 
whieh  form  part  of  a  contract  is  an  ly  void  as  to  him.    The  etiort  was  not 


amendment  of  the  contract  itself,  and 
when  such  a  power  is  reserved  in  gen- 
eral terms  the  ]^arties  do  not  mean, 
as  the  courts  hold,  that  the  contract 
is  subject  to  change  in  any  essential 


to  reduce  the  amount  of  insurance, 
but  to  destroy  it  altogether,  unless 
the  assured  would  conform  to  a  by- 
law passed  in  violation  of  a  vested 
right,   for  the  ])rivilege,  allowed  be- 


particular  at  the  election  of  the  one  cause  not  forbidden,  of  engaging  in 

in    whose    favor    the    reservation    is  any    lawful    business    was    a    vested 

made.      It   would   be    not    reasonable  right."     Citing  pages  285,   286,  287, 

and  hence  not  within  their  eontempla-  of  188   N.  Y.   p.   1021  of  80   N.   E. 

tion,  at  least  in  the  absence  of  sti])u-  The  court  also  said  in   the  Dowdall 

lations  clearly  specifying  the  subjects  case    just    cited    that    it    was    much 

to  be  affected,  that  one  party  should  stronger  in  favor  of  the  plaintiff  than 

have    the    right    to    make    a   radical  the  Avres  ease  in  regard  to  the  agree- 


change  in  the  contract,  or  one  that 
would  reduce  its  pecuniary  value  to 
the  other.     A  contract  which  author- 


ment  in  the  application  as  to  compli- 
ance with  existing  and  future  by-laws, 
rules,    and    regulations    of    the    as- 


izes  one  party  to  change  it  in  any  re-   sociation   and   continues,   after   com- 
spect  that  he  chooses  would  in  effect    i^aring   the   same,    in    regard    to    the 


be  binding  upon  the  other  party  only 

and  would  leave  him  at  the  mercy  of 

the   former,   and   we   have   said   that 

human  language  is  not  strong  enough 

to  place  a  person  in  that  situation."    as  to  affect  the  contract. 

Citing    Industrial    &    General    Trust 

998 


Dowdall  case  that:  "There  is  no  sug- 
gestion that  the  laws,  rules,  and  re- 
quirements could  at  any  future  time 
be  amended,  or  new  ones  enacted,  so 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.     §  380c 

the  member  had  agreed  in  his  application,  upon  which  the  certifi- 
cate was  issued,  to  comply  with  by-laws,  rules,  regulations  in  force 
or  thereafter  adopted  and  this  is  so  notwithstanding  the  certificate 
of  incorporation  provided  for  the  payment,  under  the  certificates 
issued  to  members,  ''of  such  sum  as  the  by-laws  of  such  association 
from  time  to  time  prescribe."  "    Finally  as  to  New  York,  it  is  held 


^'  Evans  v.  Southern  Tier  Masonic 
Relief  Assoc.  182  N.  Y.  453,  75  N. 
E.  317,  rev'g  88  N.  Y.  Supp.  162,  94 
App.  Div.  541,  and  following  Beach 
v.  Supreme  Tent  of  the  Knights  of 
Maccabe&s,  177  N.  Y.  100,  69  N.  E. 
281.  The  Evans  case  is  cited  in  Han- 
nes  v.  Nederland  Israelitish  Sick 
Fund,  136  N.  Y.  S.  742,  152  A.  D. 
140,  41  I.  L.  J.  1685,  in  dissenting 
opinion  per  McLaughUn  J.,  to  point 
that  "agreement  to  be  'guided'  by  the 
by-laws  which  might  thereafter  be 
adopted  had  reference  to  matters  of 
administration  and  not  to  his  rights 
which  were  then  fixed  and  vested." 
Evans  case  is  also  cited  in  Fort  v. 
Iowa  Legion  of  Honor,  146  Iowa, 
]83,  123  N.  W.  224,  30  Ins.  L.  J.  3. 
The  Evans  decision  is  also  considered 
in  another  New  York  case,  Dowdall 
v.  Supreme  Catholic  Mutual  Benefit 
Assoc.  196  N.  Y.  405,  31  L.R.A. 
(N.S.)  417n,  89  N.  E.  1075,  39  Ins. 
L.  .L  87,  rev'g  122  N.  Y.  Supp.  1130, 
123  App.  Div.  913,  where  the  court 
per  Bartlett  J.,  said:  "It  was  held 
that  the  beneficiai'y  named  in  a  cer- 
tificate issued  by  a  fraternal  benefit 
or  life  insurance  association  to  a  de- 
ceai?ed  member  thereof,  upon  which 
all  dues  and  assessments  required  by 
the  by-laws  of  the  association,  have 
been  paid,  cannot  be  deprived  of  the 
benefit  specified  in  tlie  certificate  by 
amendments  to  the  by-laws  adopted 
subsequent  to  the  issuance  of  the  cer- 
tificate, notwithstanding  that  the  aji- 
plication  for  membership,  upon  wliicli 
the  certificate  was  issued,  contained  a 
clause  in  which  the  applicant  agreed 
to  conform  in  all  respects  to  the  by- 
laws, rules,  and  regulations  of  the  as- 
sociation then  in  force,  or  which 
might  thereafter  be  adopted  by  it« 
board  of  directors.     The  fact  that  the 


999 


certificate  of  incorporation  of  the  as- 
sociation contains  a  clause  to  the  ef- 
fect that  the  payment  to  the  benefi- 
ciaries under  the  certificates  of  the 
association  shall  be  'of  such  sum  as  the 
by-laws  of  such  association  may  from 
time  to  time  prescribe,'  does  not  dis- 
tinguish the  present  case  from  the 
rule."  The  court  also  said,  in  the 
Dowdall  case  just  cited,  tliat  it  was 
much  stronger  in  favor  of  the  plain- 
tiff than  the  Evans  case  in  regard  to 
the  agreement  in  the  application  as 
to  compliance  with  existing  and  fu- 
ture by-laws,  rules,  and  regulations  of 
the  association  and  continues  after 
comparing  the  same  in  regard  to  the 
Dowdall  case  that :  "There  is  no  sug- 
gestion that  the  laws,  rules,  and  re- 
quirements could  at  any  future  time 
be  amended,  or  new  ones  enacted,  so 
as  to  affect  the  contract." 

Other  New  York  decisions  are: 
Beach  v.  Supreme  Tent  Knights  of 
Maccabees  of  the  World,  177  N.  Y. 
100,  60  N.  E.  281  {covs^idered  and 
quoted  from  in  Dowdall  v.  Supreme 
Catholic  Mutual  Benefit  Assoc.  196  N. 
Y.  405,  31  L.R.A. (N.S.)  417n,  89  N. 
E.  1075,  39  Ins.  L.  J.  87;  cited  m  dis- 
senting opinion  per  McLaughlin,  J., 
in  Hannes  v.  Nederland  Israelitish 
Sick  Fund,  136  N.  Y.  Supp.  742,  152 
App.  Div.  140,  41  Ins.  L.  J.  1685,  to 
point  that  ''agreement  to  be  'guided' 
by  the  by-laws  which  might  tliereaft- 
er  be  adopted  has  reference  to  mat- 
ters of  administration,  and  not  to  his" 
[the  member's]  "rights  wliich  were 
then  fixed  and  vested."  Quoted  from 
in  Smythe  v.  Supreme  Lodge  Knights 
of  Pythias  [U.  S.  D.  C]  198  Fed. 
967,  980);  Shipman  v.  Protected 
Home  Circle,  174  N.  Y.  398,  63 
L.R.A.  347,  67  N.  E.  83;  Langan  v. 
Supreme  Council  American  Legion  of 


§  380o 


JOYCE  ON  INSURANCE 


that  the  amount  agreed  to  be  paid  under  a  certificate  issued  by  a 
fraternal  beneficiary  society  cannot,  by  an  amendment  thereafter 
made,  be  reduced,  even  under  a  reserved  power  to  amend  the  by- 
laws and  although  the  insured  paid  the  reduced  assessment,  where 
it  did  not  appear  that  sucli  payments  were  made  with  knowledge 
of  said  reduction  amendment.^* 


Honor,  174  N.  Y.  266,  66  N.  E.  932,  York   Safety  R&serve  Fund,  125  N. 

rev'g  75  N.  Y.  Supp.  1127,  09  App.  Y.  Supp.  852,  afi'd  (mem.)  129  N.  Y. 

Div.  616   {cited  in  Fort  v.  Iowa  Le-  Supp.  1126,  69  Misc.  452;  Rockwell 

gion  of  Honor,  146  Iowa,  183,  123  v.  Kniglits  Templars  &  Masonic  Mu- 

N.  W.  224,  39  Ins.  L.  J.  3) ;  Weber  v.  tual  Aid  Assoe._119  N.  Y.  Supp.  515, 

Supreme  Tent  Knishts  of  Maccabees  134  App.  Div.  736,  39  Ins.  L.  J.  105 

of  the  World,  172  N.  Y.  490,  494,  92  (amendment  of  by-laws  not  stipulat- 

Am.  St.  Rep.  753,  65  N.  E.  258.    (Tliis  ed  for.     Case  quoted  from  in  Smythe 

decision  is  considered  in  anotlier  New  v.    Supreme   Lodge    Knights   of    Py- 

York  ease,  Dowdall  V.  Supreme  Cath-  thias    (U.   S.   D.   C.)    198   Fed.   967, 

olie  Mutual  Benetit  Assoc.  196  N.  Y.  979)  ;  Mock  v.   Supreme   Council  of 

405,  31  L.R.A.(N.S.)  417n,  89  N.  E.  Royal  Arcanum,  106  N.  Y.  Supp.  155, 

1075,  39  Ins.  L.  J.  87,  rev'g  122  N.  Y.  12i  App.  Div.  474  (does  not  interfere 

Supp.  1130,  123  App.  Div.  913,  where  with  vested  rights) ;  Wiedynska  v. 
the  court  per  Bartlett,  J.,  said:    "An -Pulaski  Polish  Benev.  Soc.  97  N.  Y. 

action  was  brought  upon  a  certificate  Supp.  413,  110  App.  Div.  932  (can- 

of  insurance.    The  defense  interposed  not  divest  vested  rights)  ;  McCloskey 

Ava-s   that   the   insured   took   his    own  v.  Supreme  Council  American  Legion 

life,  and  hence  a  recovery  could  not  of  Honor,  96  N.  Y.  Supp.  347,  109 

be  had,   because   at   the  time  of  his  App.   Div.   309    (can   reduce   assess- 

death,  the  by-laAvs  and  rules  of  the  ments  when  power  reserved  case  also 

order  provided  that  should  an  insured  of  waiver  or  estoppel)  ;  Williams  v. 

commit  suicide  within  five  years  from  Supreme  Council  American  Legion  of 

the  time  of  admission  into"  the  order,  Plonor,  80  N.  Y.  Supp.  713,  80  App. 

whether  sane  or  insane,  the  contract  Div.  402. 

should  be  void.  Weber's  contract  of  ^*  Smith  v.  Supreme  Council  Auier- 
insurance  provided  that  it  sliould  be  ican  Legion  of  Honor,  88  N.  Y.  Supp. 
void  if  the  insured  committed  suicide  44,  94  App.  Div.  357.  The  court,  per 
within  one  year  whether  sane  or  in-  Hatch,  J.,  said :  "We  think  the  learn- 
sane.  During  Weber's  lifetime,  after  ed  court  was  correct  in  the  conclusion 
the  issuance  of  the  certificate,  the  de-  which  it  reached.  It  is  settled  by  in- 
fendant  amended  its  by-laws  and  dubitable  authority  that  the  reserved 
rules  so  as  to  extend  the  time  from  right  to  amend  the  laws  which  consti- 
one  year  to  five  in  the  suicide  clause,  tute  a  part  of  the  contract  between 
The  opinion  of  the  court  near  the  the  insured  and  the  defendant  does 
close  states:  'This  contract  insured  not  confer  authority  to  destroy  vest- 
Weber  against  unintentional  self-de-  ed  rights,  and  without  the  consent  of 
struetion  after  one  year,  and  defend-  the  holder  of  the  certificate  to  such 
ant  had  not  the  power  to  take  away  change  it  is  inoperative  and  void, 
the  right  thus  secured  without  his  This  wa.s  so  held  in  respect  to  the 
consent.'  ")  ;  Parish  v.  New  York  Pro-  amendment  now  under  consideration. 
duce  Exchange,  169  N.  Y.  34,  56  Langan  v.  Supreme  Council  Ameri- 
L.R.A.  149,  61  N.  E.  977;  Hannes  v.  can  Legion  of  Honor,  174  N.  Y.  266, 
Nederlaiid  Israelitisli  Sick  Fund,  136  66  N.  E.  932;  Williams  v.  Supreme 
N.  Y.  Supp.  742,  152  App.  Div.  140,  Council,  80  N.  Y.  Supp.  713,  80  App. 
41  Ins,   L.   J.  1685;   Heath  v.   New  Div.   402.     And  also   as  applied   to 

1000 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  380c 


In  a  North  Carolina  ca.«e  it  se^ms  to  be  settled  that  a  member's 
vested  rights  cannot  be  destroyed  by  changes  or  amendments  of  the 

other  similar  contracts  sought  in  like  sumed  to  know  them ;  but  it  is  evident 
manner  to  be  so  changed.  Parish  v.  from  a  reading  of  the  entire  section, 
New  York  Produce  Exchange,  169  N.  to  which  reference  is  made,  that  it 
Y.  34,  56  L.R.A.  149,  61  N.  E.  977 ;  has  regard  to  laws,  and  by-laws  exist- 
Weber  v.  Supreme  Tent  Knights  of  ing  at  the  time  when  the  insured  be- 
Maccabees  of  the  World,  172  N.  Y.  comes  a  member.  By  the  provisions 
490,  92  Am.  St.  Rep.  753,  65  N.  E.  of  sees.  79,  80,  which  discuss  the  au- 
258.  We  should  not  deem  this  dis-  thority  to  make  and  change  laws,  it 
cus.sion  necessary  were  it  not  for  a  is  shown  that  the  laws,  to  be  binding 
decision  of  the  third  Department  in  upon  all  members,  must  be  perfectly 
Evans  v.  Southern  Tier  Masonic  Re-  adopted,  and  must  be  such  laws  as  the 
lief  Association,  78  N.  Y.  Supp.  611,  coritoration  has  the  power  to  make. 
76  App.  Div.  151,  decided  by  a  divid-  Tlierein  it  is  said :  *Tf  the  charter,  or 
ed  court.  Therein  it  was  held,  upon  the  fundamental  agreement  of  the 
a  state  of  facts  quite  similar  to  the  meml)ers  prescribe  the  mode  in  which 
present,  that  the  payment  of  the  re-  the  by-laws  shall  be  made  and  adopt- 
duced  assessment  was  notice  to  the  ed  in  order  to  insure  their  validity, 
insured  of  a  change  in  the  by-laws  that  mode  must  be  strictly  pursued.' 
and  that  by  such  payment  he  acqui-  And  further,  'No  by-laws  can  be  re- 
esced  therein.  There,  as  here,  such  pealed  so  as  to  impair  or  affect  vested 
change  operated  to  destroy  vested  rights,  for  the  members  have  the  right 
rights.  The  decision  proceeded  upon  to  rely  upon  the  by-laws,  wliich,  as 
the  ground  that  the  insured  was  pre-  between  themselves,  are  contracts.  A 
sumed  conclusively  to  have  knowledge  by-law  that  will  destroy  a  vested 
of  the  by-laws  of  the  association,  and,  right  is  unreasonable.'  The  cases 
eon.sequently,  of  this  amendment,  at  cited  fully  support  the  text.  There 
the   time    when    he    was    making   the    can  be  no  presumption  that  a  member 


payment,  and  that,  aside  from  this 
presumption,  the  change,  in  the  meth- 
od of  assessment  was  actual  notice  to 
him  of  the  change  in  the  by-laws.  We 
hesitate  in  disagreeing  with  the  learn 


has  notice  of  a  law  which  is  invalid 
and  which  destroys  his  vested  prop- 
erty right.  The  member  is  only  pre- 
sumed to  know  of  the  existence  of 
such  laws  and  rules  as  the  corporation 


ed  court  who  made  this  decision,  but,  has  authority  to  make.     Indeed,  the 

with  all  deference  thereto,  we  are  of  presumption  is  that  the  corporation 

opinion  that  it  is  in  conflict  with  the  will  not  pass  a  law  which  is  illegal, 

law  as  announced  in  the  Second  De-  unreasonable  and  void;  otherwise,  by 

partment     in     Simons     v.     Supreme  a  presumption,  a  member  would  be 

Council  American  Legion  of  Honor,  bound    by    an    illegal    act    which    de- 

81  N.  Y.   Supp.  1014,  82  App.  Div.  stroyed  his  property  right.     11  is  evi- 

617,  and   with  the  law   of  the   case,  dent  that  surh  a  rule  ot  law  does  not 

Nor  do  we  think  the  authorities  cited  exist,  and  may  not  be  invoked  as  a 

by  the  learned  court  in  support  of  its  protection  for  an  illegal  act  const  it  ut- 

condusion     decide    the    question     as  ing  a  breach  of  contract  and  which 


therein  announced.  For  the  first 
proposition,  the  court  relies  upon  Ba- 
con on  Benefit  Societies  Life  Insur- 
ance, sec.  81,  wherein  it  is  stated  as  a 


works  a  destruction  of  vested  rights. 
Nor  do  the  case.s  cited  sujij^ort  the 
doctrine  of  acquiescence.  In  Koeth 
V.  The  Kniglits  Templars  and  Mason- 


general  proposition  that  the  by-laws  ic  Life  Indemnity  Company,  55  N.  Y. 
of  a  society  are  binding  upon  all  the  Supp.  768,  37  App.  Div.  146,  the  sole 
members,  and  all  are  conclusively  pre-   question  involved  was  whether  it  was 

1001 


580c 


JOYCE  ON  INSURANCE 


constitution  and  by-laws  reducing  the  amount  of  indemnity  even 
though  there  is  a  general  consent  of  a  member  that  changes  may  be 


competent  for  tlie  defendant  when  worked  a  forfeiture  of  his  contingent 
sued  upon  its  indemnity  certificate,  rights.'  Therein  it  appeared  that  the 
to  show  that  an  amendment  was  member  had  the  right  to  participate 
adopted  to  its  laws  without  opposi-  in  the  change  in  the  constitution,  and 
tion,  and  tliat  the  certificate  holder,  the  subject-matter  of  it  constituted  a 
as  a  member  of  the  organization,  regulation  having  regard  to  a  com- 
voted  in  favor  of  such  amendment,  pliance  by  the  member  with  the  terms 
This  proof  having  been  excluded  on  of  his  contract.  The  court  held  that, 
the  plaintiff's  objection,  who  was  as  the  member  had  failed  to  comply 
.seeking  to  hold  the  certificates  held  with  the  term  of  his  contract  his  ben- 
by  the  person  who  had  voted  in  favor  eficiary  ceased  to  have  any  interest  in 
of  the  amendment,  the  court  held  such  the  fund  upon  his  death.  Two  things, 
ruling  to  be  error,  sustained  the  de-  therefore,  concurred :  One  that  the 
fendant's  exception,  and  ordered  a  amendment  to  the  constitution  was  by 
new  trial.  The  court  speaking  the  body  it'^elf,  had  relation  to  a  sub- 
through  Judge  FoUett,  said:  'It  was  ject  over  which  it  had  the  power  to 
competent  for  the  defendant  to  show  legislate,  and  in  legislating  it  the  ef- 
that  the  insured  expressly  assented,  feet  which  followed  neglect  upon  the 
January  14,  18f)6,  to  a  change  of  the  part  of  a  member  to  comply  with  the 
contract,  existing  between  him  and  terms  of  his  contract.  In  Bogards  v. 
the  defendant,  as  to  the  manner  of  Farmers  Mutual  Insurance  Company, 
giving  notices  of  as.sessments  and  79  Mich.  440,  44  X.  W.  8oG,  the  plain- 
wlien  such  assessments  became  paya-  lift  was  the  holder  of  a  policy  of  in- 
ble.'  Therein  also  the  question  pre-  surance  issued  by  the  defendant 
sented  was  not  only  to  show  the  af-  which  wa.<^  organized  under  an  act  au- 
firmative  act  and  the  express  assent  thorizing  tlie  incorporation  of  mutual 
of  the  certificate  holder  to  the  change  fire  insurance  companies.  Policies 
in  the  laws,  but  the  law  itself  was  were  i.ssued  to  the  members,  and  mem- 
such  a  one  as  the  society  was  author-  bership  was  maintained  by  the  pay- 
ized  to  change.  In  McDowell  v.  Ack-  ment  of  certain  fees  and  1  mill  per 
ley,  93  Pa.  277,  the  amendment  to  the  cent,  on  the  amount  insured  at  the 
law  was  made  by  all  the  members  of  time  of  i.'^suing  the  policy,  with  the 
the  association  and  provided  that  a  assessment  made  therefor.  In  the 
suspended  member  who  should  fail  charter  of  the  company  power  was 
for  three  months  to  pay  in  full  all  expressly  conferred  upon  the  mem- 
credits,  dues,  and  assessments  should  bers  to  pass  by-laws,  at  any  annual 
forthwith  cease  to  be  a  full  member  or  si)ecial  meeting,  which  should  be 
of  the  association;  that  he  might  binding  alike  upon  the  corporation 
thereafter  be  restored  to  full  member-  and  the  directors.  The  policy  was 
ship  by  favorable  report  of  the  stand-  issued  and  received  under  an  express 
ing  committee  and  by  paying  in  full  agreement  to  be  subject  to  all  changes 
all  arrears  of  gratuities,  dues  and  as-  which  should  thereafter  be  made  by 
sessments.  The  court  held  that  the  the  charter  and  by-laws  and  the  char- 
members  of  the  associations  had  the  ter  provided  that  at  the  annual  meet- 
power  to  make  such  a  change  in  the  ing  members  present  might  determine 
laws,  and  that  they  were  binding  up-  among  other  things,  a  single  hazard, 
on  the  members.  The  sole  point  in  At  a  regular  meeting  the  company 
the  case  was  whether  the  failure  of  adopted  a  by-law  that  it  should  not 
the  member  'to  pay  his  dues  and  as-  be  liable  for  loss  by  fire  from  steam 
sessments,  and  his  second  suspension,    ]iower  used  on  or  about  the  premises 

1002 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.     §  380c 

made  therein."  The  court  per  Douglas,  J.,  declares  after  citing 
prior  decisions  in  that  state  that  "with  one  exception  the  principles 
governing  the  case  at  bar  are  so  nearly  identical  and  have  l^een  so 
fully  discussed  in  those  cases  that  it  seems  useless  for  us  either  to 
repeat  or  enlarge  upon  what  we  have  said.  We  must  adhere  to  what 
may  now  be  considered  the  settled  ruling  of  this  court,  that  'what- 
ever may  be  the  power  of  a  mutual  association  to  change  its  l)y-laws, 
such  changes  must  always  l>e  in  furtherance  of  the  essential  objects 
of  its  creation,  and  not  destructive  of  vested  rights.'  While  relying 
upon  our  own  decided  cases  we  are  not  without  authoritias  in  well 
considered  cases  in  other  jurisdictions''  and  the  claim  will  not  be 
sustained  that  a  stipulation  was  not  to  pay  a  fixed  sum  but  only  an 
agreement  to  pay  some  indefinite  sum  not  exceeding  said  amount 
as  such  a  stipulation  is  in  legal  effect  one  for  the  full  amount  so 
specified  where  the  company  receives  premiums  in  full  based  on 
said  amount. 

In  Ohio  tlie  reservation  of  a  right  to  alter  or  change  a  by-law  does 
not  enable  the  society  to  repudiate  a  debt  and  reduce  the  amount 
to  which  a  member  is  entitled  for  benefits  by  a  by-law  enacted  after 
the  right  of  the  claimant  has  accrued. ^^ 

In  Tennessee  where  the  increase  in  rates  is  not  unreasonal)le  the 
member  is  bound  if  the  policy  is  conditioned  for  compliance  with 
the  laws,  rules  and  regulations  thereafter  enacted  "by  the  supreme 
commandery  to  govern  said  comniandery  and  fund,  and  that  if  the 

of  any  member  of  tlie  company,  and  tempted  modification  was  field  to  be 
a  copy  of  tbis  by-law  wa.s  given  iin-  a  destruction  of  vested  rigbts.  Tbese 
mediatefy  to  the  plaintiff.  It  was  are  all  tbe  cases  relied  upon  by  tbc 
lield  tbai  a  loss  suffered  by  reason  oE  learned  court  in  announcing  tbe  doc- 
tbe  exception  contained  in  this  by-  trine,  save  one  which  seems  to  be  not 
law  created  no  liability  ag'ainst  the  reported.  These  cases  simply  serve 
company.  This  case  was  clearly  well  to  slu)\v  the  distiiu-tioii  which  exists 
decided,  for  tbe  chartered  power  in  between  an  authorized  and  unautbor- 
express  terms  gave  the  right  to  make  ized  change  in  the  laws  governing 
the  limitation;  the  plaintiff  had  the  such  contracts,  and  as  we  recall  them, 
right  to  participate  in  its  action;  it  instead  of  supporting  tbe  doctrine  of 
related  to  a  subject  which  was  clearly  acquiescence  and  estoiipel,  they  con- 
within  tbe  power  of  the  corporation  lirm  the  views  which  we  have  hereto- 
to  regulate.  Notice  was  given,  and  fore  expressed.  See  also  Morawetz 
consequently  compliance  was  had  with  on  Corp.  (2d  ed.)  sees.  500,  .")08; 
the  terms  of  the  contract  which  had  Smith  v.  Supreme  Coiitu-il  American 
been  made;  and  there  was  no  inter-  Legioji  of  Honor,  88  N.  Y.  Supp.  44, 
ference  with  vested  rights.  The  court  45,  4<,  48,  94  Ajjp.  Uiv.  357. 
took  occasion  to  distinguish  that  de-  "  Makely  v.  American  Legion  of 
cision  from  Becker  v.  Farmers  Mu-  Honor,  133  N.  Car.  367,  45  S.  E.  649. 
tual  Insurance  Company,  48  IMich.  ^6  Pellazino  v.  Ccrman  Catholic  St. 
618,  12  N.  W.  874,  where,  there  being  Josephs'  Soc.  16  \Ykly.  L.  Bull, 
no  such  reserved  power  and  no  au-  (Cin.)  27. 
tbority  to  make  such  a  change,  tbe  at- 

1003 


§  380<?  JOYCE  ON  INSURANCE 

member  failed  to  pay  his  assessments  when  due  he  should  ipso  facto 
stand  disconnected  with  the  order,"  and  the  rule  was  extended  to 
include  one  insane  at  the  time  the  amendment  was  adopted.  The 
point,  however,  of  waiver  and  estoppel  existed.^''^  But  it  is  also  de- 
cided in  that  state  that  an  agreement  by  the  holder  of  a  mutual  ben- 
efit certificate  to  be  governed  by  by-laws  subsequently  enacted  does 
not  authorize  the  reduction  of  the  benefit  called  for  by  his  certifi- 
cate, after  he  has  for  years  paid  assessments  on  its  original  value, 
such  a  by-law  is  ultra  vires  and  void.  The  reserved  right  is  one  of 
preservation  and  not  of  destruction  of  the  contract.^* 

In  Texas  it  is  held  that  by-laws  cannot  be  amended  so  as  to  in- 
crease assessment  rates.  So  rerating  may  apply  to  existing  members 
as  well  as  to  those  becoming  members  thereafter  and  Avliere  an  as- 
sociation which  takes  over  meml>ers  from  another  association,  and 
the  certificate  is  conditioned  that  the  member  comply  with  the  rules 
and  regulations  thereafter  enacted,  existing  members  will  be  bound 
by  subsequent  rerating  by-laws  increasing  the  assessments  where  it 
is  necessary  for  the  association  to  meet  certificate  obligations  and 
such  increa-^e  of  rates  does  not  impair  contract  or  vested  rights  of  a 
member.^^  .Vnd  an  amendment  increasing  the  amount  of  benefits 
and  reducing  dues,  and  also  permitting  certain  members  by  declara- 
tion in  writing  to  remain  under  the  former  plan,  binds  members 
not  availing  themselves  of  such  permission,  and  also  obligates  ben- 
eficiaries.^" 

In  Wisconsin  even  though  the  member  agrees  in  his  certificate 
to  comply  with  the  laws,  rules  and  regulations  of  the  society  or  or- 
der as  they  may  be  enacted  or  amended  from  time  to  time  in  the 
future  the  society  is  not  empowered  to  make  changes  which  mate- 
rially alter  the  contract  relations  between  the  society  and  its  mem- 
Ijcrs  as  expressed  in  the  contract,  in  the  absence  of  consent  or  waiver 
or  of  some  statutory  rule  of  public  policy  to  the  contrary.  Such 
reservation  or  stipulation  relates  only  to  the  conduct  and  govern- 
ment of  the  society  in  relation  to  its  members,  and  while  it  may 
authorize  a  change  in  the  details  of  transacting  business  with  the 
members  it  cannot  thereunder  force  a  different  contract  upon  the 
member  from  that  entered  into  when  the  certificate  was  issued  and 

^"^  Conner  v.  Supreme  Commanderv  Mystic  Circle  v.  Ericson,  —  Tex.  Civ. 

Golden  Cross,  117  Tenn.  540,  97  S.  App.  — ,  131  S.  W.  92.     Case  where 

W.  306.     Cited  in  Fort  v.  Iowa  Le-  member  was  held  to  have  consented 

gion  of  Honor,  146  Iowa,  183,  123  N.  to  change  of  plan  from  assessment  to 

W.  224,  39  Ins.  L.  J.  3.  one  of  periodical  payment. 

^^  Gaut  v.  Supreme  Council  Amer-       ^^  Duer  v.  Supreme  Council  Order 

ican  Legion  of  Honor,  107  Tenn.  603,  of  Chosen  Friends,  21  Tex.  Civ.  App. 

55  L.R.A.  465,  64  S.  W.  1070.  493,  52  S.  W.  109. 

^^  Supreme    Ruling    of    Fraternal 

1004 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.   §  380d 

accepted.^  Nor  can  a  fraternal  benefit  order  by  amendment  to  the 
by-laws,  even  though  assured  agrees  in  his  certificate  to  com[)ly  with 
subsequently  enacted  by-laws,  charge  a  deficiency  in  dues  or  rates 
created  thereby  against  the  member's  certificate  by  advancing  mem- 
bers to  their  attained  age  at  a  certain  dale  and  charging  an  advanced 
rate  up  to  said  date  from  the  time  of  initiation  of  a  member.^  And 
even  though  a  power  is  reserved  to  make  changes  in  the  by-laws, 
rul&s  and  regulations  a  mutual  benefit  order  cannot  by  a  subsequent 
amendment  of  the  constitution  or  by-laws  change  assured's  contract 
by  making  payable  thereunder  an  indefinite  sum  probably  much 
less  than  that  contracted  for  especially  where  the  member  has  paid 
assessment*!  for  a  long  time,  contributed  to  meet  maturing  obhga- 
tions  of  a  specified  sum  for  each  member  as  the  principle  that  vest- 
ed interests  cannot  be  disturbed  by  retroactive  laws  applies.' 

§  380d.  Same  subject:  changes  in  by-laws,  etc.,  to  prevent  finan- 
cial disaster  or  dissolution, — Under  a  United  States  decision  a  right 
of  amendment  reserved  in  the  articles  of  association  coupled  with 
a  statutory  authorization  of  a  change  of  plan  of  insurance  from  a 
fraternal  co-operative  assessment  association  to  a  policy  with  straight 
premiums  and  a  fixed  indemnity  does  not  impair  any  vested  rights 
of  the  original  members,  even  though  assessments  are  thereby  in- 
creased as  there  exists  no  vested  right  to  a  continuation  of  a  plan  of 
insurance  which  would  result  disastrously  to  the  company  and  its 
members.*  But  in  the  Federal  Circuit  Court  where  reconstruction 
was  actually  necessary  to  continue  the  existence  of  the  corporation 
and  prevent  a  necessary  dissolution  and  where,  in  order  to  render 
more  equitable  the  premium  paid  for  insurance  at  different  ages 
bv  different  classes  of  members  of  a  fraternal  beneficiary  association 
it  became  necessary  to  change  the  system  of  assessment  from  one 
based  upon  the  age  of  admission  of  members  to  a  system  based  upon 


mi 


1  Stirn  V.  Supreme  Lodge  of  Bolie-  0S5    (case  aff'd   Smythe  v.   Supreme 

iau  Slavonian  Benev.  Soe.  150  Wis.  Lodge  Knights  of  Pytliias,  220   Fed. 

13,  136  N.  W.  164,  41  Ins.  L.  .1.  1130.  438,  137  C.  C.  A.  32),  but  declared 

'  2  Jaeo-er  v.  Grand  Lodge  of  Order  not  to  sustain  defendant's  contention, 

of  Hermann's  Sons,  149  Wis.  3.54,  39  that  "on  the  contrary  the  facts  show 

L.R.A.(N.S.)  494,  133  N.  W.  869.  that  every  right  of  all  the  old  niem- 

3  Wuerfler  v.  Trustees  Grand  Giove  bers    was    protected    and    preserved, 

of    Wisconsin    of   the    Order   of   the  and  that,  in  effect,  they  were  allowed 

Druids,  116  Wis.  10,  96  Am.  St.  Rep.  to  continue  to  i)ay  in  the  old  way,  and 

340,  92  N.  W.  433.  that    their    beneticiaries    were    to    be 

*  Wright  V.  Minnesota  Mutual  Life  paid  on  the  basis  of  the  original  plan 

Ins.  Co.  193  U.  S.  657,  48  L.  ed.  832,  or   contract.     .     .     .     The   court    re- 

24  Sup.  Ct.  549,  33  Ins.  L.  J.  542.  peatedly  states  that  the  existing  con- 

Considered     and     qtiolcd     from     in  tracts    were    not    changed,    and   that 

Smythe  v.  Supreme  Lodge  Knights  of  contract    rights   were   not   interfered 

Pythias  (U.  S.  D.  C.)  198  Fed.  967,  with." 

1005 


§  380d 


JOYCE  ON  INSURANCE 


the  actual  attained  age  on  a  certain  day,  and  such  change  increased 
markedly  the  assessments  against  older  members,  and,  as  no  fraud 
or  bad  faith  was  charged  or  insisted  upon,  the  question  was  whether 
the  new  system  impaired  the  obligation  of  the  original  contract  with 
the  members  and  whether  the  certificate  of  membership  completed 
a  contract  for  assessments  on  that  basis  during  life.  It  was  decided 
on  motion  for  preliminary  injmiction  that  said  question  was  not 
sufliciently  clear  so  as  to  justify  a  Federal  court  in  another  state 
than  that  of  the  creation  and  domicil  to  interfere  by  injunction 
with  the  internal  management  and  operation  of  the  association; 
that  the  law  of  the  state  of  domicil  governs  and  should  be 
there  interpreted.  The  injunction  was  denied  and  bill  dis- 
missed.^    In  Connecticut  it  is  held  that  it  is  neither  unreasonable 


5  Gaines    v.    Supreme    Council    of   that  the  courts  of  the  forty-three  or 
Royal  Arcanum    (U.   S.   C.   C.)    140   forty-four     different     states     where 
Fed.  978,  35  Ins.  L.  J.  207.       (Cited   members  may  be,  can  exercise  similar 
in  Fort  v.  Iowa  Legion  of  Honor,  146   power   and  authority.     If  this  were 
Iowa,   183,  123  N.   W.   224,  39   Ins.    done,  it  would  speedily  bring  about 
L.  J.  3).     The  court,  per  Clark,  D.  J.,   such  a  situation  as  would  make  em- 
said:   "It  must  be  apparent  that  it  is   phatie  the  proposition  that  the  court 
an  extremely  delicale  question  for  the    of  any  state  other  than  Massachusetts 
court.s  of  any  jurisdiction  other  than    should  only  exercise  authority  to  in- 
Massachusetts,   the  state   of   defend-   terfere  by  injunction  with  the  inter- 
ant's    creation    and    the    state    of    its    nal  manag'ement  and  operation  of  the 
domicil,    to    interfere    by    injunction    association     ui)on    the    clearest    and 
with  the  internal  regulation  and  man-    most  cogent  grounds.     For  these  rea- 
agement  of  the  affairs  of  this  benevo-    sons,  and  because  in  it.>^  last  analysis, 
lent  association.     The  contract  is,  of   as  I  have  said,  the  single  practically 
course,   found   not    only   in   the   cer-    determinative  (juestiou  is  one  of  con- 
lificate    of    membership,    but    in    the   tract  impairment,  in  violation  of  the 
))roperly  adopted  by-laws  and  regula-    Constitution,  and  notwithstanding  the 
tions  or  the  laws  of  Massachusetts  un-    magnitude  of  the  case,  its  disposition 
der   which    the    association    is   incor-   on  the  present  occasion  and  for  the 
poratcd,  and  it  is  obvious  enough  that    purjjose  of  the  issue  now  presented 
the   law   of    Massachusetts    furnishes    does  not  seem  to  require  any  elabo- 
the  rule  for  the  decision  of  the  ques-   rate  oi)inion,  although  it  has  received 
tion  now  up  for  disposition,  and  all    careful  and  extended  study.     I  con- 
similar  questions  relating  to  this  as-    elude,   as   already   plainly   intimated, 
sociation  and  its  powers  and  authori-   that    tlie   law   of   Massachusetts   fur- 
ty.     If  the  court  may  interfere  by  in-   nishes   the   rule   for   the   decision    of 
junction  in  a  case  like  this,  it  must  be   this  question,  and  I  farther  conclude, 
distinctly  upon  the  closely  drawn  is-    that  under  the  law  of  Massachu-setts, 
sue  whether  vested  and  constitution-   in  accordance  with  the  exposition  of 
ally  protected  rights  are  being  inter-   its  court  of  highest  authority,  the  de- 
fered  with  or  impaired.  If  the  courts   fendant   might,   in   view   of   its   con- 
of  any  state  may  exercise  jurisdiction    tract,  make  the  change  which  it  has 
for  such  purposes  outside  of  the  state    made,  notwithstanding  the  question  is 
in    which    the    defendant    association    close   and    that   the   change    is   quite 
was  created  and  has  its  principal  of-   fundamental,  and  has  resulted  to  a 
fice   and   domicil,   it   is   equally   true   large  extent,   not   merely   in   amend- 

1006 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  380(1 

nor  arbitrary  to  change  a  system  of  rates  which  would  better  promote 
the  society's  ability  to  carry  out  its  contracts  where  the  plan  was  to 
secure  thereby  surplus  funds  for  paying  death  benefits  thus  adding 
to  the  financial  stability  of  the  order  even  though  a  reserved  power 
to  change  or  amend  the  laws  of  the  society  did  not  give  it  the  right 
to  divest,  impair  or  disturb  vested  rights.^  In  Indiaiui  it  is  decided 
that  if  it  became  necessary  to  increase  assessments  to  provide  funds 
to  meet  the  society's  obligations  or  prevent  financial  disaster  it  may 
do  so  where  the  certificate  agreement  or  contract  stipulates  that  the 
laws,  rules,  and  regulations  for  its  government  may  thereafter  be 
enacted.'     In  Massachusetts  a  mutual  benefit  society  has  power  to 


ment  or  modificalion,  but  in  recon- 
struction, by  which  a  practically  new 
system  is  brought  about.  It  seems 
that  such  reconstruction  as  this  was 
actually  necessary  to  continue  the  ex- 
istence of  this  association,  and  to  pre- 
vent a  necessary  wind-up  in  the  court 
or  otiierwise.  At  all  events,  it  is  not 
sufficiently  clear,  under  the  law  of 
Massachusetts,  that  this  plan  of  as- 
sessment, and  the  effect  on  members, 
impairs  the  obligation  of  the  con- 
tract, and  unless  it  did  so  appear  ob- 
viously this  court  should  not  inter- 
fere." 

^  Kane  v.  Knights  of  Columbus,  84 
Conn.  96,  79  Atl.  63,  40  Ins.  L.  J. 
874. 

'  Supreme  Lodge  Knights  of  Honor 
v.  Bieler,  58  Ind.^App.  550,  105  N.  E. 
244.  The  court  fully  considers  the 
points  involved  and  says:  "(1)  Coun- 
sel for  appellant  contends  that  for 
several  reasons  this  complaint  is  in- 
suflficient.  The  first  of  these  is  that 
it  airirmatively  appears  therefrom 
that  the  insured  had  failed  to  pay  the 
assessment  made  in  April,  1907,  and 
there  is  no  averment  tending  in  any 
way  to  show  that  the  assessment  pro- 
vided for  by  the  amended  by-laws  and 
the  amount  demanded  after  such 
amendment  was  unauthorized  or  un- 
reasonable, or  that  the  society  did  not 
have  the  right  to  demand  the  pay- 
ment of  such  asses-sment,  except  that 
portion  of  the  pleading  consisting  of 
a  copy  of  applicant's  by-laws  in 
force    when    the    insured    became    a 

1 


member,  which  fixed  the  amount  of 
assessment  of  members  of  the  same 
age  at  $3.50  for  each  assessment,  and 
because  he  failed  to  pay  the  Apiil, 
1908,  assessment,  which  was  for  a 
larger  sum,  appellee's  decedent  was 
not  a  member  of  the  order  at  good 
standing  at  the  time  of  his  death,  and 
therefore  no  cause  of  action  existed 
in  favor  of  any  one  on  his  certificate. 
It  is  the  evident  theory  of  the  plead- 
er that,  Avhen  Thieme  became  a  mem- 
ber of  appellant  society,  his  rate  of 
assessment  was  fixed  by  its  by-laws, 
and  that  amount  could  not  thereafter 
be  increa-sed,  so  as  to  affect  him  by 
any  change  in  the  by-laws.  Broadly 
stated  the  contention  is  that,  having 
once  fixed  the  rate  of  assessments  re- 
quired to  be  paid  by  him  to  remain  in 
good  standing  in  the  order,  no  power 
existed  in  it  to  modify  or  change  its 
by-laws  so  as  to  affect  the  vested 
rights  of  its  pre-existing  members 
without  their  consent.  Such  is  gen- 
erally held  to  be  the  correct  rule  in 
the  absence  of  a  provision  in  the 
laws  of  the  order  or  in  the  certificate 
issued  to  the  member,  permitting  the 
increase  of  assessments.  The  (pies- 
tion  in  this  case  is:  What  should  be 
the  rule  when  there  is  an  express  pro- 
vision in  the  certificate  of  insurance 
by  which  the  member  agreed  to  abide 
by  laws,  rules,  and  regulations  of  the 
order  after  enacted. 

"This  particular  question  has  never 
been    determined    by    the    courts    of 
this  state,  and  an  examination  of  the 
(107 


§  380d 


JOYCE  ON  INSURANCE 


amend  its  by-laws  so  as  to  increase  the  assessments  on  its  members, 
where  the  existing  rate  has  proved  inadequate,  under  charter  author- 
eases  in  other  jurisdictions  reveals  contributing  according  to  the  risk  as- 
the  fact  that  they  are  not  in  harmony,  sumed  in  carrying  each,  witliout  ar- 
but  follow  two  lines  of  decisions,  one  bitrary  discrimination,  and  does  not 
holding  that  under  a  general  reserva-  affect  any  vested  rights  possessed  by 
tion  of  the  right  to  change  by-laws,  any  such  members.  Whether  this 
assessments  may  be  raised,  the  other  reasoning  is  strictly  correct  we  need 
denying  that  power,  as  an  infringe-  not  decide,  for  here  we  have  an  ob- 
ment  of  the  obligation  of  contracts,  jeeting  member,  who  on  his  own  ac- 
We  believe,  however,  that  the  cases  count  has  agreed  not  only  to  conform 
which  support  the  right  under  such  to  the  present  laws  of  the  order,  but 
provisions  to  raise  assessments,  are  also  to  such  future  laws  as  may  be 
founded  on  the  best  reasoning  and  from  time  to  time  enacted  by  the 
supported  by  the  weight  of  authority.  oCficial  body  governing  the  same,  and 
"Indeed  there  are  some  cases  as  to  such  contracts  the  better  rea- 
wliich  go  so  far  as  to  hold  that,  soned  cases  hold  that  assessments 
when  tlie  purposes  of  an  organiza-  may  be  raised  by  such  societies  un- 
tion  such  as  appellant  are  con-  der  such  reserved  power  to  amend 
sidered,  the  right  to  amend  its  by-  by-laws.  Fullcnwider  v.  Supreme 
laws  by  fair  and  reasonable  increase  Council  Royal  League,  180  III.  G21, 
of  assessment  rates  to  enable  it  to  72  Am.  St.  Rep.  239,  54  N.  E.  485; 
accumulate  funds  out  of  which  its  Messer  v.  Grand  Lodge  Ancient  Or- 
legilimate  contracts  may  be  paid  is  der  of  United  Workmen,  180  Mass. 
but  one  of  the  powers  incident  to  its  321,  62  N.  E.  252;  Reynolds  v.  Su- 
corporate  exi.stence.  Else,  it  is  rea-  preme  Council  Royal  Arcanum,  102 
soned,  how  can  the  life  of  such  so-  Mass.  150,  7  L.R.A.(N.S.)  1154,  78 
cieties  be  preserved  when  it  becomes  N.  E.  129,  7  Am.  &  Eng.  Ann.  Cas. 
evident  that,  by  reason  of  the  chang-  776;  Ebert  v.  Mutual  Reserve  Fund 
ing  conditions  of  its  membership,  Life  Assoc.  81  Minn.  116,  83  N.  W. 
previous  methods  of  raising  funds,  506,  834,  84  N.  W.  457;  Wineland  v. 
and  at  that  time  sufficient,  have  Knights  of  Maccabees,  148  Mich.  608, 
proved     inadequate?     Before     there  112  N.  W.  696. 

can  be  a  fund  out  of  which  the  death  "These     cases    and    many    others 

claims    can    be    paid,    there    miist    be  which    might    be    cited    to    support 

such  a  rate  of  assessment  against  the  the    same    doctrine    are    based    upon 

members  as  will  produce  such  fund,  the    rule    of    necessity.       Fraternal 

A  less  amount  can  only  result  in   a  benefit  societies  are  said  to  be  mutual 

dissolution  of  the  society  and  serious  in    character,    each    member    theroot: 

damage  to  all  its  members.     So  that  occupying  the  dual  relation  of  insur- 

in  instances  where  the  funds  are  in-  er    and    insured,    and    the    contracts 

sufficient  under  present  rates  of  as-  which  he  has  made  with  the  society, 

sessment   to   meet    the    death    claims  containing  a  reserved  right  to  amend 

against  it,   although    considered   suf-  by-laws,  will  be  construed  in  such  a 

ficient  when  made,  there  is  an  inher-  manner  as  to   enable   the   society   to 

ent   power  resting  in  such  fraternal  mature  its  contracts   rather   than   to 
benefit   societies    to   so    amend    their  cause  them  to  be   repudiated,   upon 

by-laws   as   to   increase   the   rate   of  the  ground  that  a  change  of  the  rate 

assessment  for  the  purpose  of  matur-  of  assessment  is  necessary   to  fulfill 

ing  its  contracts  so  long  as  such  rate  the  purpose  of  its  organization.     It 

of  interest  is  reasonable  and  propor-  certainly  is  not  the  policy  of  the  law 

tional,  the  young   and   old   members  to  create  these  beneficial  societies  and 

1008 


n 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  380d 

ity  to  provide  for  the  payment  of  a  certain  death  benefit,  to  be  se- 
cured by  assessment,  and  to  provide  for  the  amendment  of  its  by- 


yet  not  to  permit  them,  by  reason-  like  those  issued  by  the  defendant, 
able  provisions  of  tlieir  by-laws,  to  cannot  be  cut  down  by  an  amend- 
acqnire  the  necessary  funds  honestly,  ment  of  the  by-laws.  .  .  .  But 
fairly,  and  justly  to  administer  Ihera  in  many  of  these  ...  a  distinc- 
so  as  to  result  in  the  greatest  benefit  tion  is  made  between  the  express 
to  the  greatest  number  of  their  mem-  stipulation  of  the  corporation  to  pay 
bers.  a  certain  sum  and  other  provLsions 
"  (2)  In  opposition  to  this  view,  relating  to  the  motliods  of  tlie  cor- 
appellee  has  cited  a  number  of  poration,  and  the  duties  of  the  cer- 
cases,  some  of  which  hold  that  it  is  tificate  holders,  which  properly  may 
an  interference  with  contract  rights  be  a  subject  for  regulation  by  by- 
for  a  fraternal  benefit  society  by  a  laws,  even  thougli  they  affect  the 
subsequent  by-law  to  raise  tlie  amount  rigiits  of  the  parties  under  their  con- 
of  an  assessment,  others  which  hold  tract.  The  assessments  to  be  paid 
that  a  subsequent  by-law  which  re-  for  death  benefits  in  this  case  are 
duces  the  amount  of  the  benefit  cer-  provided  for  by  the  by-laws,  while 
tificate  is  illegal  and  void.  As  we  the  promise  in  Avriting  to  pay  a  cer- 
view  the  proposition,  there  is  a  clear  tain  sum  to  a  particular  person  is,  as 
distinction  between  the  cases  wherein  to  that  person,  a  matter  outside  of 
the  effect  of  the  change  in  the  by-  these  corporate  rules  which  may  be 
laws  is  to  entirely  alter  the  promise  expected  to  be  changed  by  an  amend- 
of  the  society  made  with  one  of  its  ment  of  the  by-laws  .  .  .  then 
members  so  as  to  reduce  t!ie  promised  existing  or  tliat  may  afterwards  be 
benefits,  and  those  cases  where  the  aflopted.  The  promise  of  the  cor- 
changes  are  made  in  the  rate  of  as-  poration  is  stated  expressly,  without 
sessment  for  the  express  purpose  of  mention  of  the  by-laws.  The  mem- 
enabling  such  society  to  provide  a  ber  occupies  a  dual  position,  as  the 
fund  sufficient  to  pay  the  certificates  insurer  and  the  insured.  As  one  of 
which  it  has  legally  issued  as  each  the  association  agreeing  to  provide 
matures.  So  far  as  we  are  able  to  for  the  payments  that  may  bwo'me 
discover,  all  the  courts  are  agreed  due  to  members,  lie  agrees  to  be  sub- 
upon  the  proposition  that,  under  a  ject  to  the  by-laws.  As  the  insured 
reserved  power  to  amend  by-laws  person  to  whom  a  particular  sum  of 
similar  to  that  contained  in  the  pres-  money  is  promised,  he  has  a  right  to 
ent  certificate,  no  amendment  can  stand  on  the  terms  of  the  promise.' 
be  sustained  which  will  in  any  man-  "An  examination  of  many  of  the 
ner  affect  the  promise  of  the  society  cases  relied  on  by  appellee  will  dis- 
to  pay  a  stipulated  sum  to  one  of  its  close  that  they  are  those  where  the 
insured  members,  for  as  to  such  a  by-laws  were  amended  so  as  to  af- 
promise  the  insured  has  a  vested  feet  the  fixed  promise  made  to  the 
right  and  may  rely  upon  its  strict  certificate  holder  as  the  person  in- 
performance.  This  sulriect  is  fully  sured,  and  have  no  reference  to  his 
discussed  in  the  case  of  Reynolds  v.  duties  as  a  member  of  the  society. 
Supreme  Council  Royal  Arcanum,  which  had  made  the  specific  promise 
192  Mass.  150,  7  L.R.A.(N.S.)  ll.')4,  to  each  certificate  holder  that  the 
78  N.  E.  129,  7  Am.  &  Eng.  Ann.  several  amounts  called  for  therein 
Cas.  776.  In  that  case  the  court  would  be  paid  in  full.  In  some  of 
said:  'There  are  many  cases  in  which  the  cases  which  deny  the  right  to 
it  is  held  that  the  amount  expressly  raise  the  assessments,  the  amount  of 
promised  to  be  ]iaid  in  a  certificate  the  assessment  was  provided  for  in 
Joyce  Ins.  Vol.  I.— G4.           1009 


§  380d  JOYCE  ON  INSURANCE 

laws.     It  cannot  be  limited  to  a  plan  of  assessments  that  would  bring 


the  certificate.  However,  it  would 
be  useless  to  ignore  the  fact  that  there 
are  two  lines  of  authority,  and  that 
there  is  very  respectable  recent  au- 
thority which  seems  to  liavo  been  fol- 
lowed by  the  lower  court,  and  we 
would  have  to  hold,  were  Ave  to  fol- 
low it,  that  the  raise  in  amount  of 
assessment  by  appellant  was  an  in- 
fringement of  contract  rights.  The 
law  in  New  York  seems  to  ))e  settled 
on  tills  point,  and  other  states  follow 
the  same  rule.  Wright  v.  Knights  of 
Maccabees,  196  N.  Y.  391,  31  L.R.A. 
(N.S.)  423,  143  Am.  St.  Rep.  838, 
89  N.  E.  1078;  Green  v.  Supreme 
Council  Roval  Arcanum,  206  N.  Y. 
591,  100  N".  E.  411;  Smythe  v.  Su- 
preme Lodge  Knights  of  Pythias  (D. 
C.)  198  Fed.  967;  Ericson  v.  Su- 
preme Ruling  Fraternal  Mystic  Cir- 
cle, 105  Tex.  170,  146  S.'W.  161; 
Poole  V.  Supremo  Circle  Brotherhood 
of  America,  —  N.  J.  Ch.  — ,  85  Atl. 
821. 

"All  the  authorities  are  agreed  on 
tAvo  general  rules:  First,  that  un- 
der the  reserved  power  to  amend 
laws,  rules,  and  regulations,  the  bene- 
tit  societies  may  not  make  an  amend- 
ment which  will  impair  vested  con- 
tract rights;  second,  that  under  said 
reserved  power,  the  benefit  societies 
may  make  reasonable  and  necessary 
ameiulments  to  its  by-laws,  rules,  and 
regulations.  The  conflict  arises  in 
the  class  of  cases  to  which  one  court 


the  laws,  rules,  and  regulations  now 
governing  this  order  or  that  may  be 
hereafter  enacted  for  its  government.' 
This  provision,  we  believe,  distin- 
guishes the  case  from  some  of  those 
relied  upon  by  appellee.  See  Norton 
V.  Catholic  Order  of  Foresters,  138 
Iowa,  464,  24  L.R.A. (N.S.)  1030,  114 
N.  W.  893.  Quest ion.s  analogous  in 
general  i^rinciple  to  the  case  under 
consideration  have  been  passed  upon 
by  the  Supreme  Court  of  the  Unit- 
ed States,  and  its  decisions  support 
our  conclusions.  See  Covington  v. 
Kentuckv,  173  U.  S.  231,  43  L.  ed. 
679,  19  Sup.  Ct.  383,  and  eases  cited. 
That  portion  of  the  constitution 
and  laws  of  the  order  in  force  wlien 
deceased  became  a  member,  which 
provides,  'each  and  every  member, 
except  honorary  members,  upon  pre- 
senting himself  to  receive  the  Third 
or  Degree  of  Manhood,  shall  pay  to 
the  financial  reporter  the  following 
rates  into  the  widows  and  orphans' 
benefit  fund,  and  the  same  amount 
on  each  assessment  thereafter,  whilst 
he  is  a  member  of  this  order,'  means, 
in  our  view,  that  the  specified  assess- 
ment siiould  remain  the  amount  to 
be  paid  by  the  member  on  such  cer- 
tificate so  long  as  he  remained  in  good 
standing  in  the  ordei',  provided  that 
assessment  should  be  sufdcient  to  en- 
able the  society  to  pay  to  the  bene- 
ficiary of  the  members  the  amounts 
stipulated  in  their  contracts  as  they 


applies  one  of  the  above  rules,  whde    matured,  not  in  part,  but  in  full.     If 


other  courts  apply  the  other  rule; 
that  is,  the  courts  do  not  agree  as  to 
what  are  vested  rights  under  bene- 
fit contracts,  or  as  to  wdiat  are  rea- 
sonable amendments  to  by-laws.  The 
cases  which  we  have  cited  to  support 
our  position  all  hold  that  a  reason- 
able, necessary,  and  impartial  in- 
crease in  rates  is  a  reasonable  amend- 
ment of  by-laws,  under  the  reserved 
power  of  amendment.  The  certificate 
sued  on  contains  an  express  stipula- 
tion that  it  is  'payable  upon  condi- 
tion that  said  member  complies  with 


conditions  arose  in  the  future  which 
clearly  made  it  impossible  1o  meet 
such  demands,  then  the  meud)ers  had 
consented  that  the  by-laws  miglit  be 
so  amended  as  to  enable  the  society 
to  realize  sufticient  funds  from  all 
the  members  to  pay  all  obligations 
resting  on  it  as  expressed  in  the 
several  certificates  which  had  been 
properly  issued.  In  this  case  the 
society  was  not  limited  as  to  the 
numlier  of  assessments,  and  even  if 
we  were  to  hold  that  it  had  no  right 
to    increase    the    amount    of    assess- 


1010 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.     §  380d 

about  its  ppecdy  dissolution.*  P>ut  a  pcrccntae;e  cannot,  by  subse- 
quently enacted  by-laws,  be  directly  deducted  from  tbe  face  of  ex- 
istino-  certilicates  for  an  emergency  fund,  even  tbougb  the  statute 
authorizes  the  creation  of  such  a  fund  by  assessment  companies.^ 
Under  a  Mlchigmi  decision  it  appeared  that  a  fraternal  insurance 
association  organized  under  the  laws  of  the  Dominion  of  Canada, 
and  a  mnuber  of  years  after  the  issuance  of  the  certificate  in  ques- 
tion, obtained  a  new  charter  from  the  parhament  of  Canada  chang- 
ing its  name  and  authorizing  it  to  make  a  change  against  policies 
issued  prior  to  a  certain  date  and  affecting  the  policy  in  suit.     The 

ments,  it  might  afoomplish  the  same  must  appear  that  there  was  an  abuse 
results  by  increasing-  the  number  of  of  power,  or  tliat  the  by-laws  as 
assessments.  It  may  also  be  well  to  amended  were,  .so  unieasonable  as  to 
remember  that  from  the  assessments  be  \oid,  before  an  amendment  is  un- 
levied  by  benefit  associations  no  re-  authorized.  Supreme  Lodge  Knights 
serve  is  created  to  take  care  of  an  in-  of  Pythias  v.  Knight,  117  Ind.  489, 
creasing  risk,  that  the  member  simply  497,  3  L.R.A.  408,  20  N.  Vj.  479. 
pays  for  insurance  from  assessment  (4)  Although  the  complaint  shows 
to  assessment,  and  if  he  fails  to  pay  that  deceased  was  paying  a  \ery  high 
an  assessment,  is  entitled  to  no  ex-  rate  of  assessment,  and  discloses  a 
tended  insurance  from  a  reserve  ere-  sudden  very  large  increase  in  that 
ated  by  former  payments,  that  each  rate,  in  the  absence  of  an  averment 
assessrnent  is  merely  a  payment  for  that  they  were  unreasonable,  we  can- 
protection  for  the  time  for  which  not  say,  from  these  facts  alone,  that 
the  assessment  is  levied,  and  that,  the  increase  in  rates  was  unreason- 
having  lived  ]iast  that  time,  the  mem-  able  as  a  matter  of  law.  These  facts 
ber  has  no  right  in  the  proceeds  of  would  be  circumstances  for  tiie  con- 
any  past  assassment.  Tiierefore,  if  side-ration  of  the  jury  in  determining 
assessments  become  higher  than  a  whetiier  the  increase  was  unreason- 
member  cares  to  pay,  lie,  having  re-  able.  It  is  a  que'^tion  of  fact  to  be 
eeived  the  full  consideration  for  his  determined  from  all  i  lie  circumstances 
past  payments,  may  at  any  time  re-  of  the  case  as  to  whether  the  increase 
sign  from  the  order  without  losing  was  reasonable  and  necessary,  and 
anything.  He  who  contracts  for  as-  therefore  binding-  on  ap])ellce's  de- 
sessment  insurance  must  be  consider-  cedent,  if  he  wished  to  remain  insured 
ed  to  have  had  in  mind  when  the  under  his  certificate  issued  by  appel- 
contract  was  made  that  there  are  dis-  hint." 

advantages  as  well  as  advantages  in  *  Reynolds     v.     Supreme     Council 

this  form  of  insurance  as  contrasted  Koyal    Arcanum,    192    Ma.ss.    l.'iO,    7 

with  other  forms.      (3)   There  is  no  L.]x.A.(N.S.)    1154,    7   Am.   &   Eng. 

averment   in   the   comi)laint   that   the  Ann.  Cas.  77(5,  78  N.  E.  129,  35  Ins. 

amendments    of    appel hint's    by-laws  L.   J.   673.     Under   Rev.    Slat.  IMass. 

increasing  the  rate  of  assessment  of  e.  125,  sec.  6,  c.  119,  sec.  2.     Cited  in 

deceased    were    not    adojited    legally  Fort  v.  Iowa  Legion  of  Honor,  14G 

and  honestly,  nor  is  there  any  aver-  Iowa,  183,  123  N.  W.  224,  39  Ins.  L. 

ment  that  the  increase  was  not  a  rea-  J.  3. 

soiiable  one  to  carry  out  the  purposes  ^  Newhall      v.      Supreme      Council 

and   olijects   of   the   society,   or   lliat  American     Legion  ^  of     Honor,     181 

there  was  an  abuse  of  the  power  re-  Mass.  Ill,  03  N.  E.  1,  31  Ins.  L.  J. 

served  to  it  in  the  certificate  issued  389. 
to  deceased.     In  cases  such  as  this  it 

1011 


§  380d 


JOYCE  OX  INSURANCE 


insured  agreed  in  his  certificate  that  amendments  might  be  made 
in  relation  to  the  constitution  and  laws  of  the  order  fixing  the  pre- 
miums and  rate  of  asses^^ments.     It  was  decided  that  it  was  not 
against  public  policy  or  an  infringement  upon  vested  rights,  to 
agree  that  such  changes  might  be  made  as  to  assessments  as  would 
enable  the  association  to  carry  out  its  insurance  agreements.     The 
assessment  was  ])roportioned  to  a  valuation  deficiency  existing  as  to 
the  class  of  policies  in  question,  which  were  paying  less  than  the 
cost  of  insurance.^"     In  New  Jersey  an  increase  cannot  be  made  in 
assessments  even  under  a  general  raserved  power  to  alter  or  amend 
or  a  stipulation  to  comply  with  thereafter  enacted  by-laws,  as  the 
members  contract  rights  cannot  be  imi)aired  and  ''It  is  not  an  an- 
swer to  say  that  the  increase  is  necessary  to  the  prosperity  of  the 
order.     The  plea  of  necessity  is  never,  as  I  understand  it,  a  valid 
defense  against  the  performance  of  a  contract."  "     In  a  New  York 
case  it  is  declared  by  the  court  that:    ''Referring  to  the  statement 
of  defendant's  counsel  that  unless  it  is  invested  with  the  power  to  in- 
crease the  amoimt  of  a  single  assessment,  as  the  exigencies  of  the 
situation  may  require,  it  will  be  unal)le  to  continue  its  financial  life 
and  pay  its  death  losses.    .    .     .    This  court  said,  under  a  different 
state  of  facts,  in  Vought  v.  Eastern  l^uilding  &  Loan  Association:  ^^"^ 
^It  is  contended  that  if  the  construction  we  have  given  this  contract 
is  to  prevaiL  it  will  affect  the  responsibility  of  the  defendant,  if  it 
does  not  result  in  its  bankruptcy.     If  that  be  true,  yet  it  affords  no 
proper  reason  why  we  should  disregard  the  plain  and  unqualified 
terms  and  provisions  of  the  contract.     Nor  does  it  furnish  any  ex- 
cuse for  us  to  disregard  well  established  principles  of  law  to  liold  it 
unenforceable.'  "    The  court  then  considers  certain  reports  concern- 
ing the  company's  status  and  concludes:   "This  very  severe  arraign- 
ment of  the  business  methods  of  the  defendant  coming  as  it  does 
from  its  officials  in  high  position,  goes  far  to  establish  the  fact  that 
the  peril  of  coming  insolvency  is  due  to  a  failure  to  ol)serve  the 
fundamental  principles  of  life  insurance."  ^^     In  another  case  in 
that  state  it  is  also  said:   "The  defendant  seeks  to  sustain  its  action 
in  increasing  .the  rate  of  assessment  by  invoking  the  general  power 
to  amend  and  pleading  that  the  exercise  thereof  was  essential  to 
its  existence.     The  court  did  not  find,  as  matter  of  fact  or  law,  that 
a  reduction  of  benefits  was  necessary,  nor  did  it  find  as  a  fact  that  an 
increase  in  the  rate  of  assessments  was  necessary,  but  found  that  'the 


i°De  Graw  v.  Supreme  Court 
Independent  Order  of  Foresters,  182 
Mich.  366,  148  N.  W.  703. 

11  Poole  V.  Supreme  Circle  Brother- 
hood of  America,  80  N.  J.  Eq.  259,  85 


Atl.  821,  42  Ins.  L.  J.  482,  quotation 
from  opinion,  per  Walker,  V.  C. 

"a  172  N.  Y.  508,  518,  92  Am.  St. 
Rep.  761,  65  N.  E.  496,  499. 

12  Dowdall    V.     Supreme     Catholic 


1012 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.     §  3S0d 

increase  in  the  rate,  or  the  number  of  assessments,  was  necessary 
for  tlie  continued  existence  of  the  defendant.'  Necessity  bears  only 
on  the  question  whether  the  amendments  are  reasonable.  While 
they  were  desirable  as  a  matter  of  policy,  they  were  not  necessary, 
for  the  old  by-laws  gave  the  defendants  power  to  raise  all  the  money 
needed  for  every  purpose  by  simply  increasing  the  number  of  assess- 
ments. It  is  true  that  a  great  increase  in  this  respect  might  reduce 
the  membership,  still  that  did  not  make  an  increase  in  the  rate  of 
assessments  necessaiy,  for  it  cannot  be  necessary  for  a  corporation 
to  violate  its  contract  in  order  to  preserve  its  existence."  Moreover 
the  existence  of  the  defendant,  according  to  the  findings,  is  not  now 
threatened,  nor  will  it  be  until  after  the  lajDse  of  from  eighteen  to 
twenty-five  years,  and  no  one  can  foresee  the  changes  that  will  take 
place  in  the  meantime.  If  the  wonderful  growth  of  the  defendant 
as  stated  by  its  counsel  continues,  the  danger  now  apprehended  as 
to  what  may  take  place  a  quarter  of  a  century  hence,  may  wholly 
disappear  before  that  period  expires."  "  Again,  an  amended  by- 
law which  discriminates  against  female  members  by  reducing  their 
weekly  sick  benefits  is  illegal  and  void  even  though  their  dues  are 
correspondingly  reduced.  Nor  is  such  an  amendment  justified  by 
the  claim  that  the  society  would  become  bankrupt  by  payment  of 
the  benefit,  and  there  is  no  possible  legal  ground  for  sustaining  such 
amendment  as  against  one  who  refuses  to  acquiesce.^^  In  Tennessee 
where  an  increase  in  rates  was  held  binding  upon  a  meml)er  under 
a  reserved  power  or  agreement  to  amend  it  ai)pearod  that  the  old 
plan  was  a  failure  and  that  some  change  was  necessary  to  accom- 
plish the  purposes  of  the  order  and  save  it  from  dissolution.^*  So 
in  Texas  an  increase  of  assessments  which  was  necessary  to  enable 
the  society  to  meet  its  obligations  was  held  not  unrea.sonable.  The 
change  of  plan  was,  however,  consented  to  by  the  member." 

Mutual  Benefit  Assoc.  196  N.  Y.  405,  prenie  Cor.it  I.  O.  F.  130  N.  Y.  Supp. 

31    L.R.A.(N.S.)     417n,    89    N.    E.  803,   71   Mise.   535  rev'd   136   N.   Y. 

1075,  39  In.s.  L.  J.  87,  rev'g  122  N.  Snpp-  527,  152  A  pp.  Div.  892;  Rock- 

Y.   Supp.  1130,  123  App.  Div.  913,  ^vell  v.  Knights  Templars  &  .Alason- 

l-er  Baltic tt,  J.  i«-  -"^•i^t.  Aid  Assoc.  179  N.  Y.  Supp. 

^^  Citing  Vought  v.  Eastern  Build-  515,  134  App.  Div.  736,  39  Ins.  L. 

ing     Loan  Assoc.  172  N.  Y.  508,  92  J.    105;    Mock    v.    Supreme    Councd 

Am.  St.  Rep.  761,  65  N.  E.  496.  Royal    Arcanum,   106    N.   Y.    Supp. 

"Wright  V.  Knights  of  Maccabees  155,  121  App.  Div.  474. 
of    the    World,   196   N.    Y.    391,    31       i6  Conner  v.  Supreme  Coramandery 

LRA  (NS.)  423,  89  N.  E.  1078,  39  Golden  Cross,  117  Tenn.  540,  97  S. 

Ins.  L.  J.  95.  W.  306. 

iSFeldblum  v.  Coneresation  Bikur       "Supreme  Ruling  Iraternal  My.s- 

Cholim  of  Brooklvn,  il6^N.  Y.  Supp.  tic    Circle   v.   Ericson,   —   Tex.    Civ. 

289,  131  App.  Div.  854.     See  further  App.  — ,  131  S.  W.  92. 
on    this    point    Simmerbuick    v.    Su- 

1013 


§  380e  JOYCE  ON  INSURANCE 

§  380e.  Same  subject:  classification  of  risks:  discrimination. — 
Wliore  amendments  to  by-laws  classify  members  and  provide  for  a 
aradiiation  of  dues,  a  division  of  funds  between  said  divisions  and 
for  sei)arate  trusts  limited  to  each  division,  said  amendments  cannot 
be  enforced  where  the  contract  rights  of  members  are  violated.^* 
Nor  can  a  member's  contract  on  which  he  has  paid  large  sums  of 
money  be  destroyed  in  value  without  his  consent  by  a  resolution 
which  j)laces  him  in  a  class  and  assesses  that  class  in  a  manner  dif- 
ferent from  the  rule  applied  to  newer  members.^^  And  where  the 
contract  of  a  meml)er  of  a  co-operative  or  assessment  company  calls 
for  the  payment  of  assessments  for  existing  death  claims  and  said 
contract  and  t,he  company's  constitution  provides  that  the  ratio, 
upon  which  the  assessment  shall  be  based,  shall  be  upon  the  entire 
membership  in  force  when  the  liability  of  the  assessment  accrued, 
it  constitutas  a  violation  of  said  contract  to  provide  by  a  subsequent 
resolution  that  members  be  classified  and  assessments  apportioned 
among  them  according  to  the  age  of  each  member  and  to  assess 
him  at  his  attained  age,  and  other  members,  of  the  same  age.  as  of 
the  age  of  their  entry,  and  said  resolution  is  therefore  void.^"  So 
an  amended  by-law  which  discriminates  as  to  weekly  sick  benefits 
by  depriving  female  members  thereof  contrary  to  their  original 
contract  is  illegal  and  void,  especially  so  as  to  a  female  menil)er 
who  protested  against  enactment  of  said  by-law.^  Again,  where 
there  was  a  new  classification  as  to  hazardous  occupations  under  an 
accident  policy  it  was  held  that  the  association  could  not  thereby 
cut  down  or  reduce  the  amount  of  indemnity  contracted  for,  al- 
though if  the  original  contract  had  provided  as  it  did  not  in  terms 
so  provide,  that  changes  might  be  made  in  the  rules  or  by-laws 
which  would  have  bound  the  assured.^ 

But  it  is  also  held  that  the  classification  of  members  of  a  mutual 
benefit  society  according  to  age,  in  a  by-law  readjusting  methods  of 

18  Parks  V.  Supreme  Circle,  Broth-  ^o  Benjamin  v.  ]\Iutual  Reserve 
erhood  of  America,  83  N.  J.  Eq.  l;!l,  Fnud  Life  Assoc.  146  Cal.  34,  79 
89  Atl.  1042,  s.  c.  81  N.  J.  Eq.  330,  Pac.  517,  34  Ins.  L.  J.  614.  See 
86  Atl.  432.  Gaines   v.    Supreme   (.'ouncil    (U.   S. 

On    validitv    of    retrospective    by-  C.   C.)    140  Fed.  978,  35  Ins.  L.  J. 

law  or  other 'rule  of  benetit  associa-  207;  Kane  v.  Knights  of  Columbus, 

tion  excluding  certain  class  of  mem-  84  Conn.  96,  79  Atl.  63,  40  Ins.  L. 

bers  from  benefits  or  reducing  ])ene-  J.  874. 

fits  of  that  class,  see  note  in  24  L.R.A.       ^  Fef(ff)fum  v.  Congregation  Bikur 

(N.S.)   1030.  Chofim  of  Brooklyn,  116  N.  Y.  Supp. 

19  Strauss  v.  IMutual  Reserve  Fund  289,  131  App.  Div.  854. 

Life  Assoc.  126  N.  Car.  971,  54  2  ^^f^rse  v.  Fraternal  Accident 
L  R  A.  605,  36  S.  E.  352,  128  N.  Assoc.  190  Mass.  417,  112  Am.  St. 
Car.  465,  39  S.  E.  55.  Rep.  337,  77  N.  E.  491. 

1014 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.     §  380f 

a-si^c-sment,  is  not  illegal.^  And  a  mutual  }>enefit  society  wliose  laws 
bind  a  member  to  those  thereafter  enacted  may,  after  the  death  of 
a  member  whose  certificate  was  payable  out  of  the  general  mortuary 
fund,  reclassify  or  create  a  new  class  of  members  and  a  separate 
mortuary  fund  from  receipts  from  their  certificates,  without  im- 
pairing the  obligation  of  contracts  or  interfering  with  a  benefi- 
ciary's vested  riglits.'*  x'\gain,  a  recla.ssification  of  risks  as  to  hazard- 
ous occupations  is  held  not  to  impair  vested  rights.^  And  under  a 
Texas  decision  a  rerating  and  increase  of  assessments  under  [i  new 
by-law,  the  insured  having  agreed  to  comply  with  rules  and  regu- 
lations thereafter  enacted,  is  not  an  arbitrary  change,  where  such 
change  imposes  an  equal  l)urden  on  meml)crs  of  the  same  cbiss.^ 
Where,  subsequent  to  a  change  in  a  merchants  exchange  charter, 
the  members  are  divided  into  participating  and  nonparticipating 
classes,  an  amendment  of  the  by-laws  authorizing  members  in  tlie 
former  class  to  change  to  tlie  latter  is  within  the  power  of  the  cor- 
poration where  its  charter  of  incorporation  authorized  changes  in 
the  by-laws  and  it  was  stipuhited  in  the  application  for  member- 
ship that  future  ameiiduienls  might  be  made.' 

§  380f.  Right  of  member  or  beneficiary  to  object  to  amendments: 
waiver  or  estoppel. — The  doctrine  of  waiver  and  of  estojtpel  ap- 
plies in  determining  the  riglits  of  members  or  their  beneficiaries 
under  amended  constitutions,  by-laws,  etc.,  of  the  company,  associa- 
tion or  society.  The  following  decisions  sufficiently  illustrate  the 
principle:  A  member  who  continues  to  pay  aa-;cssments  after  a 
change  in  the  by-laws  in  relation  thereto  is  generally  estopped  to 
deny  the  power  to  amend  such  by-laws.*  And  a  member  joining  a 
beneficial  association  before  the  adoption  of  a  new  cliartcr  is  bound 
by  the  later  charter  and  the  constitution  and  by-laws  thereunder 
where  assured  had  knowledge  that  it  was  obtained  and  that  it  acted 
under  the  same  for  years,  where  the  subordinate  lodges  had  like 
knowledge,  and  assured  had  also  agreed  in  his  application  to  comply 
with  subsequent  regulations.^     80  a  member  of  a  mutual  benefit 

3  Rewiolds    v.     Supreme     Council,  Mvstic  Circle  v.  Ericson,  —  Tex.  Civ. 

Royal"  Aminnm,    192    I\Iass.    I.IO,    7  App.  —   131  S.  W.  92. 

L.R.A.(N.S.)   ll.')4,  78  N.  E.  120.  '  Frencli   v.   New  York   Mercantile 

*  Ellison  V.   District   Grand  Lod^e  Exchange,  80   N.   Y.   Sui^p.   312,  80 

No.   23,   United   Order   of   Odd    Fel-  App.   Div.   l-U. 

lows,  11  Ala.  App.  442,  (iO  So.  872.  *  Slnive  v.  Grand  Lodue  Ohio  An- 

5  Norton  v.  Catholic  Order  of  For-  cient   Order  of  United    Workmen,  5 

rasters,    138    Iowa,    404,    24    L.R.A.  Oiiio   C.   C.  471,  2(i   Week.   L.   Bull. 

(N.S.)  1030n,  114  N.  W.  893.     Con-  471. 

sidered    more    fully    under    §    380b  ^  Boll  man      v.       Supreme      Lodire 

herein.  Knii^lit.^  of  Honor,  —  Tex.  Civ.  Ap[». 

^Supreme    Ruling    of    Fraternal  — ,  53  S.  W.  722, 

1015 


§  380f  JOYCE  ON  INSURANCE 

society  is  bound  by  a  new  by-law,  by  estoppel,  where  he  makes  per- 
sonal inquiry  concerning  the  same  of  the  society's  secretary,  and 
acquiesces  by  paying  new  assessments  thereunder  for  over  two  years 
without  protest  and  with  the  understanding  that  the  society's  lia- 
bility would  be  reduced  by  th^  reduction  of  assessments  under  said 
new  laws.^°  It  may  also  be  shown,  upon  the  point  whether  a  pre- 
existing policy  or  contract  is  within  the  terms  of  an  amendment  to 
the  constitution  of  the  company,  that  the  member  whose  policy  is  in 
quCvStion  voted  therefor  and  that  it  was  adopted  unanimously.^^ 
And  an  estoppel  arises  from  knowledge  by  the  member  of  the  adop- 
tion of  the  amended  by-laws  of  the  circumstances  under  which 
adopted,  and  by  paying  assessments  thereunder  without  dissenting. ^'^ 
And  this  applies  to  an  amendment  of  the  constitution  of  a  mutual 
benefit  order  on  the  assessment  plan.^^  There  is  also  a  waiver  or 
estoppel  where  the  member  has  knowledge  of  an  amendment  to  the 
constitution  providing  that  sick  benefits  should  not  be  paid  in  excess 
of  a  certain  sum  and  also  increasing  death  benefits,  and  said  mem- 
ber had  received  such  benefits  up  to  the  specified  amount,  had  at- 
tended the  meetings  of  the  association  and  had  acquiesced  therein 
for  several  years.^*  So  a  member  who  surrenders  his  original  cer- 
tificate and  takes  a  new  one  under  amended  by-laws  submits  to  said 
amendments  and  accepts  them  as  they  then  existed.^*  So  assured 
assents  to  an  amendment  reducing  the  certificate  amount  where 
he  changes  his  beneficiary  thereafter  and  accepts  a  policy  payable 
to  such  newly  designated  beneficiary.^^ 

Again,  in  case  of  a  reduction  of  benefits  by  an  amendment  to  a 
by-law  a  settlement  with  the  beneficiaries,  acceptance  of  a  reduced 

lOAnkele  v.  Workin -men's  Relief  146   Iowa,  183,  123  N.   W.   224,  39 

Societies,  A.  U.  V.  0.  182  111.  App.  Ins.  L.  J.  3. 

470,  citing  Clymer  v.  Supreme  Coim-  ^*  Berg   v.    Badenser   Understuetz- 

cil  American  Legion  of  Honor  (U.  S.  "»gs  Verein  von  Rochester,  86  N.  Y. 

C.  C.)  138  Fed.^470;  Supreme  Coun-  Supp.  429,  90  App.  Div.  474. 

cil    American    Legion    of    Honor    v.  Breslow    y.    Southern    Tier    Ma- 

McAlarney,  135  Fed.  72,  67  C.  C.  A.  f J"^"  ^V'^'^f  ^^''?^'-  ^\^o    \  ^"E^" 

-.^     e                n         -1    \        •         T  /86,    10^    App.    Div.   123.     S*e    Su- 

d46;  Supreme  Council  American  Le-  '       ^        '  ^1^                *  -n  ^i  • 

.           r.    TT                  T  •■       4.^     en  preme  Lodge  Knights  oi  Fythias  v. 

f^A  «n.  ?';?'t.'i  t'FT'r  /^  f  Clement,  113  Tenn.  40,  81  S.  W. 
LR.A.  803,  134  Fed.  824,  6/  C.  C.  A.    -^..^g.  ^(^^^^^  ^.   q^.^^^  ^^^^^  United 

S^-  ,      ,    ^  Workmen,  180  Mass.  321,  62  N.  E. 

"  Koeth    V.   Knights    Templars    &  252,  considered  in  Smvthe  v.  Supreme 

Masons'   Life   Indemnity   Co.   55   N.  L^dge  Knights  of  Pvthias  (U.  S.  D. 

Y.  Supp.  768,  37  App.  Div.  146.  c.)   198  Fed.  967,  984,  but  held  not 

^2  Allen  V.  Merrimack  County  Odd  in  point. 
Fellows'  Mutual  Relief  Assoc.  72  N.        16  jaeger  v.  Grand  Lodge  Order  of 

H.  525,  57  Atl.  922.  Hermann's  Sons,  149  Wis.  354,  135 

"Fort  v.  Iowa  Legion  of  Honor,  N.'W.  869,  39  L.R.A.(N.S.)   494. 

1016 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  380f 

amount  and  a  release  obligates  them."  Consent  to  amended  by-laws 
reducing  the  amount  payable  under  the  certificate  is  al^o  held  to 
have  been  given  where  the  member  had  agreed  to  fully  comply  with 
thereafter  enacted  by-laws  of  the  supreme  council  and  had  paid  a 
number  of  the  reduced  assessments.^^  And  a  right  to  object  to 
amended  by-laws  increasing  dues  is  waived  where  the  member  is 
present  when  such  laws  are  read,  pays  increased  dues  without  dis- 
sent, and  also  expresses  himself  as  satisfied  with  the  change.^^  And 
where  the  contention  was  that  a  separate  plan  of  assessment  under 
an  amended  by-law  was  not  legally  adopted  it  did  not  appear  that 
there  was  any  provision  of  the  laws  of  the  order  requiring  notice, 
but  it  was  held  that  even  if  such  a  provision  had  exi^^ted  laches  es- 
topped complainants  from  seeking  the  aid  of  a  court  of  equity  where 
they  had  continued  their  membership  for  several  years,  actively 
shared  in  such  new  plan  and  had  done  nothing  in  denial  of  it  except 
to  enter  an  occasional  ]!"()test  for  the  failure  to  ap])orlion  the  reserve 
funds  in  reduction  of  assessments.^"  So  where  payments  have  been 
made  of  assessments  on  an  illegally  reduced  amount  of  a  certificate 
under  an  invalid  by-law  the  effect  as  an  estoppel  is  not  avoided  by 
the  fact  that  insured  was  ill  at  the  time- the  by-law  was  enacted.^ 


"  Simons  v.  Supreme  Council 
American  Lesion  of  Honor,  178  N. 
Y.  263,  70  xr  E.  776. 

^^  McCloskey  v.  Supreme  Council 
American  Lesion  of  Honor,  96  N.  Y. 
Supp.  347,  109  App.  Div.  309.  But 
examine  Gaut  v.  Supreme  Council 
American  Lesion  of  Honor,  107 
Tenn.  603,  55'  L.R.A.  765,  64  S.  W. 
1070. 

As  to  right  to  increase  assessments 
or  reduce  amount  of  benefits,  see 
§§  380c,  et  seq.  herein. 

^^  Pokref  ky  v.  Detroit  Firemen's 
Fund  Assoc."  131  Mich.  38,  90  N.  AV. 
689,  96  N.  W.  1057. 

2°  Kane  v.  Knislits  of  Columbus, 
84  Conn.  96,  79  Atl.  63,  40  Ins.  L.  J. 
874.  See  also  Voss  v.  Northwestern 
National  Life  Ins.  Co.  137  Wis.  492, 
118  N.  W.  212  (prompt  election 
necessary :  delay  of  four  years  cou- 
pled with  knowledge  and  payment  of 
increased  premiums  without  protest- 
ing estops  member). 

Association  estopped  to  assert  by- 
law not  properly  adopted,  see  §  365e 
herein. 


^  Attorney  General  v.  Supreme 
Council  American  Lesion  of  Honor 
(Hackett,  In  re)  207^.Ma.ss.  586,  93 
N.  E.  797,  40  Ins.  L.  J.  444.  See 
further  as  to  this  litigation  Attorney 
General  v.  Supreme  Council  Ameri- 
can Legion  of  Honor  (Newton,  In  re) 
206  Mass.  193,  92  N.  E.  151,  39  Lis. 
L.  J.  1212;  Same  v.  Same  (Weiss,  In 
re)  206  Ma.ss.  190,  92  N.  E.  150,  39 
Ins.  L.  J.  1209;  Same  v.  Same  (Cor- 
(iehl,  in  re)  206  Mass.  186,  92  N.  E. 
148,  39  Ins.  L.  J.  1205;  Same  v. 
Same  (Law,  In  re;  ]\landeville,  In 
re)  206  Mass.  183,  92  N.  E.  147,  39 
Ins.  L.  J.  1202;  Same  v.  Same  (Drey- 
lus.  In  re;  Jolmson,  In  re)  206  Mass. 
180,  92  N.  E.  145;  Same  v.  Same 
(Doleac,  In  re;  Bullock,  In  re;  Skin- 
ner, Jn  re;  Stone,  In  re)  206  Mass. 
175,  92  N.  E.  143;  Same  v.  Same 
(Uunlavy,  In  re;  Clement,  In  re; 
Osterhout,  In  re;  Tuska,  In  re)  206 
Mass.  168,  92  N.  E.  140;  Hackett  v. 
American  Legion  of  Honor,  206 
Mass.  139,  92  N.  E.  133. 


1017 


§  380g  JOYCE  ON  INSURANCE 

In  the  case  of  a  member  of  a  benefit  society  who  is  bound  by  a 
new  by-law  by  estoi)pel,  the  reduction  of  the  society's  liability,  and 
llie  reductions  of  his  assessments  are  held  to  constitute  a  sufficient 
consideration  for  a  new  agreement  that  the  new  by-laws  should  be 
binding.^ 

§  38bg.  Same  subject:  when  waiver  or  estoppel  not  applicable. — 
In  the  following  decisions  it  is  determined  that  there  is  no  waiver 
or  estoppel  although  some  of  said  decisions  are  not  in  harmony  with 
those  considered  under  the  last  preceding  section.  So  a  payment 
of  illegal  assessments  to  avoid  a  risk  of  forfeiture  constitutes  no  es- 
toppel against  a  member  or  his  beneficiary  to  assert  the  illegality  of 
a  subsequently  attempted  invalid  assessment.^  Nor  is  a  member 
estopped  from  claiming  his  rights  under  his  original  contract,  even 
though  he  makes  payments  of  assessments  under  a  changed  plan  in- 
creasing them,  where  said  contract  does  not  authorize  any  amend- 
ment of  the  by-laws  of  such  a  character,  as  such  payments  are  il- 
legally exacled.'*  And  where  the  contract  rights  of  a  member  are 
violated  by  a  subsequently  enacted  resolution  classifying  members 
and  assessing  tlicm  thereunder,  and  said  amendment  is  therefore 
void,  a  claim  that  an  estoppel  arises  to  assert  the  invalidity  of  a  call 
for  assessments  under  such  amendment,  by  reason  of  payments 
without  complaint  for  several  years  prior  thereto  of  similar  calls 
which  were  subject  to  the  same  claim  of  invalidity  will  not  be  sus- 
tained.^   It  is  also  determined  that  assured  in  a  mutual  benefit  order 

2  Ankele  v.  Workin,2men's  Relief  wliich  would  be  tlie  result  if  its  claim 
Societies,  A.  U.  V.  0.  182  111.  Ai)p.  of  estoppel  were  sustained.  All 
470.  these  prior  calls,  if  levied  upon  the 

3  Covenant  Mutual  Life  Assoc,  v.  same  theory  and  at  the  same  ratio  as 
Tuttle,  87  111.  App.  ;!09.  See  also  that  of  call  !)8,  were  equally  illegal 
Covenant  Mutual  Life  Assoc,  v.  with  it,  and  it  was  wrong  for  the  as- 
Kentcr,  188  111.  431,  58  N.  E.  966.  .sociation  to  have  levied  them,  or  to 

*  Rockwell  V.  Knights  Templars'  &  have    insisted    upon    their    payment. 

Masons'   Mutual  Aid   Assoc.  119  N.  They  were  demanded   under  an  im- 

Y.    Supp.   515,   134   App.   Div.   736.  ])lied    threat    that,    unless    paid,    his 

See  also  Williams  v.  Sui)reme  Conn-  i)olicy  would  be  forfeited,  and  were 

oil  American  Legion  of  Honor,  80  N.  paid     under     a     moral     compulsion. 

Y.  Supp.  713,  80  App.  Div.  402.  And,  as  said  in  Duggans  v.  Covenant 

As  to  right  to  increase  as.sessments  Mutual  Life  Assoc.  8/   111.  App.  41(i, 

or    reduce    amount    of    benefits,    see  quoting    approvingly    from    a    prior 

§§   380c,  et  seq.  herein.  decision  of  that  court :    'It  certainly 

5  Benjamin  v.  Mutual  Reserve  cannot  be  said  that  Tuttle,  in  pay- 
Fund  Life  Assoc.  146  Cal.  34,  79  ing  previous  illegal  assessments,  act- 
Pac.  517,  34  Ins.  L.  J.  614.  The  ed  fraudulently,  or  that  he  wilfully 
court  per  Lorigan,  J.,  said:  '-'It  af-  did  anything  calculated  to  mislead 
fords  no  ground  for  invoking  an  others  to  their  injury.  When  he 
estoppel,  for  at  least  two  reasons.  ])aid  illegal  as.sessments  he  did  so 
In  the  first  place,  the  appellant  can-  under  a  moral  compulsion  and  a 
not  take  advantage  of  its  own  wrong,  threat  implied,  at  least,  that  if  he  did 

1018 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC. 


380g 


on  the  assessment  plan  is  not  estopped  to  assert  the  invahdity  of  sul> 
sequently  enacted  illegal  bv-huvs  even  though  he  has  consented  to 
prior  amendments  by  paying  assessments.^  So  where  a  change  in 
the  by-laws  decreases  the  amount  payable  and  so  repudiates  the  con- 
tract a  continued  payment  of  assessments  after  the  enactment  of 
said  amendment  made  with  the  expectation  of  the  repeal  of  the 
amendment  does  constitute  an  election  to  treat  the  contract  as  in 
force  and  preclude  rescission  by  estoppel.''^  And  a  mcmljer  who  pro- 
tests against  the  reduction,  by  amendment  of  the  by-laws,  of  death 
benelits  with  a  reduction  of  premiums  or  assessments,  and  continues 
to  pay  the  old  rates  for  a  year  is  not  estopj^ed  to  recover  back  sucli 
part  of  the  amount  so  paid  as  represents  the  canceled  insurance.'^ 
And  if  a  benefit  society  arljitrarily  reduces  the  amount  of  insurance 
stipulated  in  a  membership  to  be  paid,  payment  of  the  assessments 
on  the  reduced  Ijasis  cannot  be  construed  as  a  consent  by  the  mem- 
ber to  the  reduction  when  made  under  protest  and  with  tender  of 
the  full  amount  due  without  such  reduction.^  It  is  further  deter- 
mined that  an  estoppel  cannot  be  based  upon  the  mere  fact  of  pay- 
ing reduced  assessments  without  knowledge  or  notice  of  or  consent 
to  or  ratilication  of  tlie  by-law  reducing  the  amount  of  the  certificate 


not  pay  his  certifieate  would  be  for-  v.  Mutual  Keserve  Fund  Life  Assoc, 

feited,  and  the  provisions  made  for  146  »Cal.  34,  79  Pac.  517;  Covenant 

his  wife  in  ease  of  his  death  he  there-  Mutual  Life  Assoc,  v.  Kentucr.  188 

by  lost.     Can  appellant  he  i)eriuitted  111.   431,   38   N.    E.    !)tiU;    Schultz   v. 

to  take  advantage  of  its  own  wrong?  Citizens    Mutual    Life    Ins.    Co.    59 

We    sav    it    cannot.'     In    the    second  ]\Iinn.  308,  (il  N.  AV.  331. 


place,  and  independent  of  the  propo- 
sition that  the  association  could  not 
take  advantage  of  its  own  wrong,  the 
rule  is  general  that  the  fact  of  prior 


"^  Supreme  Council  American  Le- 
gion of  Honor  v.  Ratte,  M  Tex.  Civ. 
App.  456.  70  S.  W.  629.  Compare 
\'oss  V.  Northwestern  National    Life 


illegal  demands  having  been  i)aid  im-  Ins.    Co.    137    Wis.   492,   118    N.    W. 

poses  no  legal  obligation  to  continue  212    (where  there  was  held  to  be  an 

to  pay  theni.     The  doctrine  of  estop-  estoppel  to  deny  validity  of  amend- 

pel  has  no  application  to  such  a  case:  ment  increasing  premiums). 

Schultz  v.  Citizens'  Mutual  Life  Ins.  ^  ;\j.,)^,.ipy      ^       Supreme      Council 

Co.    59    Minn.    308,    315,    61    N.    W.  American   Legion   of  Honor,  133  N. 

331;  Farmers'  Mutual  Fire  Ins.  Co.  Car.  :)67,  45  So.  649.     See  also  Su- 

of  Palmyra  v.  Knight,  162    III.  470,  jireme    Council    American    I^egion   of 

44  N.  E.834."  Honor  v.  Champe,  127  Fed.  541,  63 

^  Fort  V.   Iowa  Legion   of   Honor,  C.  C.  A.  282. 

146  Iowa,  183,  123  N.  W.  224,  39  Ins.  As  to  return  of  premiums  and  as- 

L.    J.   3.     "That    plaintiff   agreed    to  sessmeuts,  see  SS  139(1  et  .seq.  herein, 

prior    amendments     is    no    evidence  ^  Russ  v.  Supreme  Council  Ameri- 

that    he   agreed    to   subsecjuent    ones,  can  Legion  of  Honor,  110  La.  588.  f>8 

and  having  agreed  to  prior  ones  does  Am.   St.   Hep.  469,  34  So.  697.     See 

not  estop  hiin  from   challenging  the  Williams  v.  Supreme  Council  Ameri- 

validity  of  illegal  subsequent   ones."  can  Legion  of  Honor,  80  App.   Div. 

Id.  per  Deemer,  J.,  Citing  Benjamin  402,  80  N.   Y.  Supp.  713. 

1019 


§  380h  JOYCE  ON  INSURANCE 

or  death  benefit.*"  And  where  a  power  is  reserved  in  the  certificate 
to  amend  or  change  the  constitution,  etc.,  the  assured  does  not  there- 
by consent  to  a  change  in  his  certificate,  because  he  continues  to 
pay  his  assessments  for  many  years  after  he  had  notice  of  a  change 
in  the  by-laws  especially  where  the  answer  to  a  complaint  contains 
no  such  allegation  of  consent,  but  on  the  contrary  admits  on  its  face 
that  he  never  consented  to  such  change.  In  addition  assured  had  a 
right  to  continue  said  payments  of  assessments  in  order  to  keep  the 
certificate  in  force  and  was  under  no  obligation  to  surrender  it  for 
cancelation.^^  Nor  is  acquiescence  to  be  deduced  from  the  facts 
that  a  member  remains  silent  although  he  has  notice  of  an  amended 
by-law,  providing  for  suspension  of  members  for  delinquency  in 
meeting  assessments  where  such  notice  does  not  mention  his  suspen- 
sion, and  no  condition  of  that  character  was  in  the  by-laws  when  he 
became  a  member,  and  this  is  so  held  even  though  the  articles  of 
association  expressly  conferred  upon  the  directors  the  power  to  enact 
by-laws,  and  he  had  agreed  to  be  bound  by  changes  in  the  latter.^^ 
Again,  a  representative  of  the  subordinate  lodge  or  lodges  who  is 
sent  as  a  representative  to  the  grand  lodge  has  no  power  to  bind  a 
member  of  the  former  by  agreeing  to  illegal  amendments  to  the  con- 
stitution changing  his  contract  rights. ^^ 

§  380h.  Waiver  by  or  estoppel  against  association,  society,  etc., 
or  officers  thereof:  amendments. — An  association  waives  the  enforce- 
ment of  a  by-law  and  is  estopped  from  enforcing  it  against  the  ben- 
eficiary by  receiving  assessments  at  the  rate  rec[uired  at  the  time  the 
certificate  was  issued,  where  the  insured  has  no  information  of  the 
terms  of  said  amendment."  And  a  society  which  wrongfully  re- 
fuses to  accept  assessments  from  a  member  on  the  ground  that  he 
was  engaged  in  the  prohibited  occupation  of  selling  liquor  waives 
the  right  to  a  tender  of  further  assessments  and  to  forfeit  the  cer- 
tificate  for  nonpayment  thereof.^*    So  the  knowledge  and  acts  of  a 

^•^  Smith  v.  Supreme  Council  Amer-  Supreme    Council    of   American    Le- 

iean  Lesjion  of  Honor,  94  App.  Div.  gion   of  Honor   v.   Jordan,   117   Ga» 

357,  88^N.  Y.  Supp.  44.  808,  45  S.  E.  33;  Hill  v.  Mutual  Re- 

^^  Stirn  V.  Supreme  Lodge  of  Bo-  serve  Fund  Life  Assoc.  128  N.  Car. 

hemian    Slavonian    Benevolent    Soe.  463,  39  S.  E.  56.     See  also  Farso  v. 

150  Wis.  13,  136  N.  W.  164,  41  Ins.  Supreme  Tent  of  Knishts  of  lAlacea- 

L.  J.  1130.  bees  of  the  World,  96  App.  Div.  491, 

^2  Farmers'  Mutual  Hail  Assoc,  v.  89  N.  Y.  Supp.  65. 

Slatterv,   115   Iowa,  410,   88  N.   W.  "  Boman  v.  Bankers'  Union  of  the 

949.  World,  76  Kan.  198,  11  L.K.A.(N.S.) 

13  Fort  v.  Iowa  Legion  of  Honor,  1048,  91  Pac.  49. 

146   Iowa,   183,  123   N.   W.   224,   39  ^^  Barrett  v.  Grand  Lodge  Ancient 

Ins.  L.  J.  3.     CUing  Supreme  Coun-  Order  of  United  Workmen,  63  Misc. 

cil  of  American  Legion  of  Honor  v.  429,  117  N.  Y.  Supp.  125. 
Getz,  112  Fed.  119,  50  C.  C.  A.  153 ; 

1020 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.    §  3801i 

local  union  of  a  fraternal  order,  and  of  the  president  and  financial 
secretary  and  all  the  officers  and  members  of  said  union,  that  an  in- 
tending member  was  about  to  change  his  occupation  to  a  more  haz- 
ardous one,  and  that  such  change  was  made,  constitutes,  when 
coupled  with  the  receipt  of  assessments  and  dues  thereafter,  a  waiver 
by  said  association  of  any  nghts  it  might  otherwise  have  had.^^  In 
Kansas  a  fraternal  beneficiary  association  on  the  lodge  system  was 
organized  prior  to  the  statute  of  1909  rehiting  to  such  societias." 
Tlie  members  application  stipulated  that  it  was  subject  to  amend- 
ments which  miglit  thereafter  be  made  to  the  constitution  and  by- 
laws of  the  order.  Subsequent  to  the  issuance  of  the  certificate 
amended  by-laws  provided  for  a  plan  less  favorable  to  members  and 
beneficiaries,  but  did  not  refer  to  or  provide  for  outstanding  certifi- 
cates, and  the  association  continued  to  accept  unconditionally  and 
without  objection,  payments  as  provided  for  in  one  of  the  old  cer- 
tificates, until  it  became  fully  paid  up  and  the  holder  under  the 
terms  thereof  became  entitled  to  a  new  paid-up  certificate.  A  year 
and  a  half  after  said  completion  of  payments  tlie  association  for  the 
first  time  adopted  a  by-law  providing  a  new  plan  for  the  old  out- 
.  standing  certificates  reclassifying  them  and  materially  reducing  the 
benefits  stipulated  for  therein.  The  association  was  held  estopped 
from  making  such  changes  and  reduction  and  that  the  holder  was 
entitled  to  the  paid-up  certificate  according  to  his  contract  under  the 
certificate  and  by-laws  in  foree  when  it  was  issued  although  amend- 
ments were  stipulated  for  and  that  delay  in  suing  did  not  i)reclude 
maintaining  the  action,  even  though  the  plan  was  found  imprac- 
ticable, as  the  contract  was  not  unconscionable.^^ 

16  Brotherhood   of   Painters,   Dec-o-  Neu-   Jersei/.—0'^oi\\   v.    Supreme 

raters  &  Paperhatigcrs  v.  Moore,  30  Council,  American  Legion  oi;  Honor, 

Ind.  App.  580.  70  N.  J.  L.  410,  1  Am.  &  Eng.  Ann. 

On     waiver     of    provision     as     to  Cas.  422,  57  All.  1()3. 

change    of   occupation    by    continued  New  To r/r.— Wright  v.  Knights  of 

receipt  of  dues,  see  notes  in  27  L.R.A.  Maccabees  of  the  World,  106  N.  Y. 

(N.S.)   440,  and  L.R.A.IOIGF,  755.  391,  31   L.R.A. (N.S.)    42:5,  134  Am. 

"Stat.  1909,  sees.  4303-4318.  St.  Rep.  838,  89  N.  E.  1078;  Langan 

18  ILirt  V.  Life  &  Annuity  Assoc,  v.  Supreme  Council  American  Legion 

82  Kan.  318,  120  Pac.  303.     Citinu  of  Honor,  174  N.  Y.  200,  06  N.  E. 

or  considering :  932. 

Kansas.— Boman  v.  Bankers  Un-  Oregon.— ^yist  v.  Grand  Lodge  An- 
ion, 76  Kan.  198,  11  L.R.A. (N.S.)  cient  Order  United  Workmen,  22 
1048,  91  Pac.  49;  Grand  Lodge  An-  Ore.  271,  29  Pac.  (ilO. 
eient  Order  United  Workmen  v.  Had-  Pennsijlvania.—hcvkuT  v.  Berlin 
dock,  72  Kan.  35,  1  L.R.A.(N.S.)  Beneficial  Soc.  144  Pa.  St.  232,  22 
1064,  82  Pac.  583.  Atl.  099. 

M/.s,soMr/.— Smith       v.        Supreme  Tennessee.— Gaut  v.  American  Le- 

Lodge   Knights   of   Pythias,   83   Mo.  gion   of   Honor,   107   Tenn.    003,   55 

App.  512.  L.R.A.  465,  64  S.  W.  1070. 

1021 


§  381  JOYCE  ON  INSURANCE 

But  a  receipt  of  assessments  by  the  recorder  of  insured's  local 
lodge  does  not  operate  as  a  waiver  of  a  forfeiture  of  membership  for 
engaging  in  the  liquor  business  contrary  to  the  provisions  of  an 
amended  law,  or  e^stop  the  society  from  claiming  a  forfeiture  where 
it  is  expressly  provided  by  a  by-law,  that  receipt  of  assessments  after 
forfeiture  shall  not  constitute  a  waiver.  In  addition  it  was  no  part 
of  said  recorder's  duty  when  not  engaged  in  oflicial  duties  to  concern 
himself  with  the  matter  of  annulment  of  contracts  or  the  business 
of  the  jnember,  nor  w^as  it  any  part  of  his  duty  to  record  the  fact  or 
to  notify  the  grand  recorder  that  the  member  was  engaged  in  the 
prohibited  busiriess.^^  And  the  officers  of  a  mutual  benefit  associa- 
tion cannot  waive  provisions  of  by-laws  relating  to  the  substance  of 
the  contract  between  the  individual  memljer  and  his  associates,  in 
their  corporate  capacity,  where  the  appointment  of  officers  and  the 
scope  of  their  powers  and  duties  is  limited  by  the  constitution  and 
by-laws  which  forbid  the  alteration  and  amendment  thereof  except 
by  the  governing  body  in  the  mode  provided,  and  where  the  mem- 
bers of  the  association  have  agreed  as  part  of  their  membership  eon- 
tract  to  strictly  comply  with  its  laws,  rules  and  regulations.^ 

If  the  enforcement  of  a  new  by-law  is  waived  it  cannot  be  availed 
of  against  a  surviving  member  under  a  joint  certificate  even  though 
both  members  have  agreed  to  be  bound  by  subsequently  adopted  by- 
laws.'^ 

§  381.  Construction  of  by-laws, — In  construing  by-laws,  they 
will  be  given  effect  as  far  a.s  possible.^    They  should  also  be  con- 

Wisconsin. — Wuerfler  v.   Trustees,  As  to  waiver  where  agent  fails  to 

Grand    Grove   of    Wisconsin   of   the  take    advantage    of    forfeiture,    see 

Order   of   Druids,   116   Wis.    Ifl,   96  §  541  herein. 

Am.  "St.  Rep.  940,  92  N.  W.  233  and  As    to    waiver    and    estoppel    and 

notes  31  L.R.A.(N.S.)   417;  83  Am.  isnowledge  iiot  obtained  in  course  of 

St.  Rep.  706;  10  Am.  &  Eng.  Ann.  cmph^vnient ;    or    what    agent    might 

Cas.  62.");  1  Id.  427.  liave  learned;  or  knowledge  obtained 

^'  Grand     Lodge     Ancient     Order  in   individual   capacity,   see   §§   544- 

United  Workmen  v.  Burns,  84  Conn.  546   herein. 

356,  80  Atl.  157,  40  Ins.  L.  J.  1676.  On  waiver  by  subordinate  lodge  of 

The  court  per  Hall,  C.  J.  said :    "But  right  of  benefit  association  to  insist 

the  general   law   by  wliich  an   officer  upon  forfeiture  of  benefit  because  of 

of  a   corporation   in    the   transaction  violation  of  laws  of  a.ssociation,  see 

of  official  business  may  be  treated  as  note  in  10  L.R.A.(N.S.)  136. 

the  ])rincipal  does  not  apply  with  the  ^  Kocher  v.  Supreme  Council  Cath- 

same  force  to  the  oHicers  of  tlie  de-  olic  Benevolent  League,  6'i  N.  J.  L. 

fendant  corporation  under  its  consti-  649,  52  L.R.A.  861,  48  Atl.  544. 

tufion  aiul  laws  as  it  does  to  officers  ^  Boman   v.  Bankers  Union  of  the 

of  ordinary  corporations."  World,  76  Kan.  198,  11  L.R.A. (N.S.) 

As  to  payment  of  dues  and  assess-  1048,  91  Pae.  49. 

ments    to    officers,    etc.,    see    §    1278  ^  Elsev  v.  Odd  Fellows'  Assoc.  142 

herein.  ^lass.  224,  7  N.  E.  844.     They  should 

1022 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.      §  381 

strued  in  connection  with  the  certilicate  or  policy.*  They  will  also 
be  construed  to  sustain  the  contract,  rather  than  ui)hold  a  forfei- 
ture; *  and  a  reasonable  construction  will  be  given,  due  regard  being 
had  to  the  rights  of  members  and  the  purpose  of  such  enactment; 
trivial  reasons  will  not  warrant  tlieir  being  held  invalid,  nor  will 
they  be  closely  scrutinized  with  tliat  intent.^  Again,  laws  of  mutual 
benefit  societies  will  not  be  construed  so  as  to  render  it  impossible 
to  comply  with  their  requirements  where  such  a  result  can  be  avoid- 
ed, especially  so  where  such  a  construction  would  operate  to  com- 
pletely destroy  member's  rights  and  also  as  a  repudiation  of  the  so- 
ciety's obligations  and  this  npi)lies  likewise  to  changes,  etc.,  in  said 
laws.''  Tbey  nmst  be  liberally  and  reasonably  interj>rcted,  and  if 
susceptible  of  two  interpretations  that  construction  should  be  adopt- 
ed which  will  effectuate  as  nearly  as  possible  the  objects  or  purposes 
of  the  association  or  society  and  in  favor  of  a.ssured  as  forfeitures  of 
rights  of  members  or  of  their  beneficiaries  are  not  favored.'    And 

be  construed  liberallv:  Morawetz  on  PaeiHe  Coast  v.  Bristol,  17  Cal.  App. 

Corporations   (ed.  1882)  sec.  369;  1  576,  120  Pac.  787,  41  Ins.  L.  J.  704. 

Id.  2d  ed.  sec.  497.  Georgia. — Starnes    v.    Atlanta   Po- 

*  Brashears  v.  Pen-y  County  Far-  lice  Assoc.  2  Ga.  App.  2:!7,  ."iS  S.  E. 

mers'  Protective  Assoc.  51  Ind.  App.  481. 

8,  98  N.  E.  889.  IlUnols.—Kuh-hts  Templars'  &  Ma- 
Construction:  What  is  part  of  the  sons'  Life  Indemnity  ("o.  v.  Vail,  206 

policy:  Efl'ect  of  sub.sequent  amend-  111.    404,   68   N.    E.    1103;    Su])remc 

ment  of  by-laws  or  enactment  or  new  Lodge  Order  of  Mutual  Protect idu  v. 

by-laws.    'See  §§  189,  189a  herein.  Meister,  105  111.  App.  471,  all'd  68 

5  Evans  v.   Plinmix   Mutual   Relief  N.   E.  454. 

Assoc.  9  Lane.  Law  Rev.   (Pa.)   59;  Kansas. — Grand     Lodge     Ancient 

49   Leg.   Intell.   15;    Schmick   v.   Ge-  Order  United  Workmen  v.  Smith,  76 

genzeiter,  44  Wis.  369;  Erdmann  v.  Kan.  509,  92  Pac.  710. 

Mutual   Ins.   Co.  44   Wis.  376.     See  Mississippi.— Masonic            Mutual 

§  220a  herein.  Benetit    Assoc,   v.   Hoskins,   99    Mis.>^. 

6  St.  Marv's  Beneficial  Soc.  v.  Bur-  ll->  ^6  So.  169,  40  Ins.  L.  J.  1671. 
ford,    70    Pa.    St.    321;    Genest    v.  New  York —Graxes  x.  Kuighis  ot 

L'Union  St.  Joseph,  141  Ma.s.  417,  ^^/-^^'^  m' ^J  '-no  ST  '  T  T  ^r^M" 
6  N.  E.  380;  Fritz  v.  Mu.-k,  62  How.  ^^i:,f,^-  ^-  '?,f  '^  '  ^"^-  ^-  'l  ^^^,^- 
P      /\r    V  \   ro    ^9  Oidahoma. —  Woodmen        ot        the 

t},..\     >   7^'  '"",    T     1         A      •     .    World  V.  Gilliland,  11  Okla.  384,  67 
'  \\  ist    v.    Grand    Lodge    Ancient    p    ,   _,q- 

Order  United  Workmen.  22  Ore.  271,       ^^al' CaroVnm.-l.a^-one  v.  Tim- 

29  Am.  St.  Re]).  603,  29  Pac.  610.  n^erman,   46    S.    Car.   372,   3   Am.   & 

8  Maynard  v.  Locomotive  Engineers  i.^,,^^    (-^j-p    e^s.  N.  S.  510,  24  S.  E. 

Mutual    Life   &   Accident    Assoc.    16  200,  26  Ins.  L.  15. 
Utah,  145,  47  Am.  St.  Rep.  602,  51        Te.ra.s.— Havwood  v.  Grand  Lodge 

Pac.  259,  27  Ins.  L.  J.  208,  26  Ins.  of  Texas  Knights  of  Pvthia.'^,  —  Tex. 

L.  J.  579.  Civ.  App.  — ,  138  S.  W.  1194;  Su- 

See  also  the  following  cases:  preme  Ijodge  National  Reserve  Assoc. 

California. — Journeymen  Butchers'  v.    Alondrowski,    20    Tex.    Civ.    App. 

Protective  &  Benevolent  Assoc,  of  the  322,  49  S.  W.  919. 

1023 


§  381  JOYCE  ON  INSURANCE 

a  provision-  for  forfeiture  will  be  construed  strictly  against  the  asso- 
ciation.^ And  this  applies  to  waiver  of  forfeitures.^"  So  a  by-law 
enacted  by  a  fraternal  benefit  a.ssociation  subsequent  to  the  issuance 
of  a  fraternal  bcnetit  certificate  will  be  strictly  construed  against  the 
dissociation. ^^  But  such  liberal  construction  does  not  mean  that  the 
obvious  or  plain  intent  should  be  controlled  by  a  strained  construc- 
tion ;  ^2  for  a  liberal  construction  in  view  of  the  common  and  ordi- 
nary use  of  words  should  be  given. ^^  So  a  by-law  which  attempts 
to  prohibit  proximity  of  risks  should  clearly  state  such  intention, 
and  a  by-law  which  is  meaningless  and  unintelligible  as  to  such  pro- 
hiljition  will  be  rejected.^* 

Where  the  pohcy  and  by-laws  conflict  the  latter  govern,  since  a 
corporation  cannot  contract  in  violation  of  its  laws  but  this  rule  does 
not  apply  where  the  policy  as  required  by  statute  specifies  the  exact 
amount  of  indemnity  in  which  case  a  conflicting  recital  in  the  policy 
controls  the  by-laws. ^^  And  a  provision  in  the  certificate  as  to  the 
time  of  payment  will  control  a  dift'erent  stipulation  in  a  by-law 
where  the  charter  provides  for  payment  as  specified  either  by  the 
certificate  or  by-laws.^^  So  an  amendment  to  a  by-law  as  to  acci- 
dental injury  may  be  so  construed  as  to  make  the  true  meaning  of 
the  original  by-law  clearer  or  more  apparent  instead  of  conflicting 
therewith.^''  And  if  tliere  is  any  doubt  as  to  which  of  two  benefi- 
ciaries is  entitled  to  the  fund  the  interpretation  should  favor  the 
one  having  the  natural  right  as  legal  heirj 


18 


9  Bri?2:s  V.  Royal '  Highlanders,  84  ^^  Courtney  v.  Fidelity  Mutual  Aid 

Neb.  83I,  122  N.  W.  69.  Assoc.  120  Mo.  App.  110.  91  S.  W. 

"Montano  v.  jNIissanellese  Society  768,  Rev.  Stat.  1899,  see.  7903. 

of  Mutual  Aid,  72  Misc.  515,  130  N.  On    conflict   between   by-laws   and 

Y.  Supp.  155.  certificate  or  policy,  or  mutual  benefit 

"Lange  v.  Royal  Highlanders,  75  society    or    insurance    company,    see 

Neb.  188^  10  L.R*.A.(N.S.)  1066,  121  note  in  4<   L.R.A.  681. 

Am    St.   Rep.  786,  108  N.  W.   224,  i^  Failey   v.    Fee,   83    Md.    83,    32 

no  N:  W.  1110.  L-R-A.  Sll,  34  Atl.  839. 

12  Grand     Lodge     Ancient     Order  i' Maynard    v.    Locomotive    Engi- 

United    Workmen    v.    Crandall,    80  neer's  Accident  Assoc.  16  Utah,  145, 

Kan   332,  102  Pae.  843.  47  Am.  St.  Rep.  602,  51  Pac.  259,  27 

i3Mund  V.  Rehaume,  51  Colo.  129,  tns.  L.  J.  208,  26  Ins.  L.  J.  o/9. 
Ann.  Cas.  1913A,  1243,  117  Pac.  159.  ^^  Journeymen     Butchers'     Protec- 
Graves  v.  Knights  of  Maccabees  of  tive  &  Benevolent  Assoc,  of  the  Ra- 
the World,  199^  N.  Y.  397,  92  N.  E.  cific    Coast,   17   Cal.   App.   576,   120 
792.  39  Ins.  L.  J.  1664.  Pac    787,   41    Ins.    L.    J.    704.     See 

1*  Boulware  v.  Farmers'  &  Labor-  Mund  v.  Rehaume,  51  Colo.  129,  Ann. 

ers'    Co-operative    Ins.    Co.    77    Mo.  Cas.  1913A,  1243,  117  Pae.  159. 

App.  639,  2  Mo.  App.  Repr.  128. 

1024 


MUTUAL  COMPANIES— CHANGE  OF  BY-LAWS,  ETC.         §  381 

The  reasonableness  of  a  by-law  is  a  question  of  construction  for 
the  court.^^  Although  it  may  become  a  question  of  mixed  law  and 
fact  where  the  intention  must  be  discovered  by  the  aid  of  extrinsic 
evidence.^" 

^^  People  V.  Tbroop,  12  Wend.  (N.        ^^  Montano  v.  Missanellese  Society 
Y.)     186;     Commomvealtli    v.    Wor-    of  Mutual  Aid,  72  Misc.  515,  130  N. 
cester,  3  Pick.   (20  Mass.)   462;  An-    Y.  Supp.  455. 
gell   &  Ames   on   Corporations    (9th 
ed.)  see.  357. 

Joyce  Ins.  Vol.  I.— 65,  1025 


CHAPTER  XXII. 
AGENTS   OF  INSURER— APPOINTMENT,   ETC.— POWERS. 


§  386.     Corporations  act  through  agents. 

§  387.     Charter  provisions  concerning  agents. 

5^  388.     Who  are  insurance  agents. 

§  389.     Classification  of  agents. 

§  390.     Appointment  of  agents. 

§  391.     Appointment  of  agents:  statutes. 

§  391a.  Statute  confining  business  of  agent  or  broker  to  certain  class,  un- 
constitutional. 

§  392.     Appointment  of  agents:  territory:  contract  with  principal. 

§  393.     Relative  power  of  agents  of  stock  and  mutual  companies. 

8  394.     Same  subject:  powers  after  completion  of  contract. 

S  395.     Who  is  general  agent.  ^ 

§  395a.  Same  subject. 

§  396.     Power  of  agents  to  delegate  authority. 

§  397.     Officers  of  insurance  corporations  and  associations  and  their  pow- 
ers. 

§  398.     Powers  of  officers  of  mutual  benefit  societies. 

§  399.     Powers  of  president. 

§  400.     Powers  of  vice-president. 

§  401.     Powers  of  secretary. 

§  402.     Powers  of  assistant  secretary. 

§  403.     Powers  of  treasurer. 

§  404.     Powers  of  directors. 

§  405.     Powers  of  superintendent. 

§  406.     Powers  of  general  managers.        , 

§  407.     Agency  of  subordinate  lodges. 

§  407a.  Same  subject. 

§  408.     Agency  arising  from  necessity  or  emergency. 

§  409.     Agent  delegated  for  special  purpose. 

§  410.     Agency:  person  referred  to  by  company. 

§  411.     Powers  of  clerk. 

§  412.     Powers  of  medical  examiner. 

§  413.     Whether  one  is  agent  or  broker. 

§  414.     Whether  broker  is  agent  of  insured  or  insurer. 

1026 


AGENTS  OF  INSURER  §§  380,  387 

§  415.     Partnership  as  agent:  joint  agents. 

§  416.     Powers  of  adjuster. 

§  416a.  Fidelitj'  bond:  when  not  obligor's  agent. 

§  386.  Corporations  act  through  agents. — Insurance  corporations 
must  act  thrciugh  agents,  especially  so  in  case  of  corporations  doing 
business  in  foreign  territory.  Every  member  of  a  corporation  or 
association  is  therefore  presumed  to  agree,  on  becoming  such 
member,  that  the  organization  shall  act  through  such  agents  as 
are  reasonably  necessary  for  the  transaction  of  its  business,  and 
imless  the  charter  or  act  of  appointment  provides  otherwise,  that 
they  shall  possess  or  exercise  all  such  powers  as  the  nature  of  their 
appointment  shall  require.-^ 

§  387.  Charter  provisions  concerning  agents. — We  have  already 
given  some  consideration  to  the  question  of  limitations  imposed 
upon  insurance  corporations  and  associations  by  the  charter  or 
articles  of  association.^  There  are  certain  class  agents,  such  as 
general  officers  and  boards  of  directors,  managing  officers,  and  the 
like,  who  derive  their  authority,  directly  or  impliedly,  from  the 
charter.  Although  their  general  authority  permits  the  exercise 
of  a  wide  discretion,  nevertheless,  if  the  charter  prescribes  the  mode 
of  exercise  of  their  authority,  and  it  is  apparent  that  the  Icigislature 
intended  such  mode  as  exclusive  of  all  others,  the  prohibition  must 
be  obsen^ed.^    An  agent  has  apparent  authority  to  insure  in  the 

1  Woodbury  Savings  Bank  v.  Char-  corporations  necessarily  act  through 

ter  Oak  Ins.' Co.  31  Conn.  517,  528,  their  agents  as  a  legal  entity  the  only 

per  Dntton,  J.;  Lattomus  v.   Farm-  knowledge  or  information  it  can  ac- 

ers'    Mut.    Fire    Ins.    Co.    3    Houst.  quire  must  come  through  its  agencies. 

(Del.)   404;  Protection  Life  Ins.  Co.  Funk   v.    Anchor   Fire   Ins.    Co.   171 

V.  Foote,  79  111.  361,  per  Scholtield,  Towa,  331,  153  N.  W.  1048,  1051,  per 

J. ;    Insurance    Co.   of   New  York    v.  Oaynor,  J.     "Defendant  being  a  cor- 

Cibson,  72:\Iiss.  58,  64,  17  So.  13,  per  poration     could     act     only     through 

AVhillield,  J;  Imperial  Fire  Ins.  Co.  agents."     Sternaman  v.  Metropolitan 

V.  Dunham,  117  Pa.  St.  460,  12  Atl.  Life  Ins.   Co.  170  N.  Y.  13,  19,  57 

668.  L.R.A.  318,  88  Am.  St.  Hep.  625,  62 

See  Angell   &   Ames   on   Corpora-  N.  E.  763.  31  In.«^.  L.  J.  276,  282. 

tions  (9th"^ed.)  sees.  231,  276  et  seq.;  ^  See  U  35,  36,  53,  and  chapters 

Bliss  on  Life  Insurance    (ed.   1872)  13,  17  herein. 

sees.  273  et  seq.     As  to  the  powers  of  As     to     appointment     of     agents : 

corporate      agents      generally,      see  charter  provisions,  see  §  390  licrein. 

Thompson     on      Corporations      (ed.  As  to  powers  of  mutual  companies 

1895-96)    e.    civ.    sees.    4873   et   seq.  and   ultra  vires,   see   §§   350   et   seq. 

When  acts  of  agents  binding,  when  herein. 

not   binding,   see   Id.    (2d    ed.)    .sees.  As  to  charter  provisions  coneern- 

159  et  seq.     See  also  Clark  &  Mar-  ing  by-laws,  see  §  366  herein, 

shall  on  Corp.  (ed.  1905)  pp.  459  et  ^  See   §   35  herein.     Examine  An- 

geq_  gell   &   Ames   on    Corporations    (9th 

Insurance     companies     like     other  ed.)   sees.  231,  280,  291. 

1027 


§  388 


JOYCE  ON  INSURANCE 


modes  authorized  by  the  company's  charter,  and  upon  the  terms 
and  conditions  inserted  in  their  policies  in  ordinary  use.*  Insur- 
ance companies  are  bound  by  the  acts  of  agents  not  prohibited  by 
their  charter  and  within  the  limits  wliich  may  reasonably  be  pre- 
sumed by  the  public  from  the  character  of  the  business  and  tlie 
general  mode  of  transacting  it.^  It  is  held  in  an  Illinois  case  ^ 
that  an  authorized  agent  has  power  to  sign  an  agreement  giving 
permission  for  an  enhanced  premium  which  was  paid  to  remove 
property,  although  the  charter  required  that  agreements  relating 
to  insurances  should  be  signed  by  the  president  and  secretary.' 

§  388.  Who  are  insurance  agents. — Insurance  agents  are  persons 
expressly  or  impliedly  authorized  to  represent  either  the  insurer 
or  insured  in  matters  relating  to  insurance.  Agents  may  directly 
represent  the  principal,  or  they  may  belong  to  the  class  designated 
as  subagents,  who  are  employed  by  the  principal  agent,  and  fre- 
quently brokers  are  thus  employed.'  A  person  was  held  to  be  an 
agent  of  the  company  where  it  appeared  that  a  circular  signed  by 
the  general  agent  was  addressed  to  such  person  as  ''agent,"  referring 
to  his  "agency,"  and  fully  instructing  him  as  to  his  duties  in  that 
capacity.  He  thereafter  acted  as  agent,  informed  the  general 
agent  of  the  loss,  and  received  a  reply  and  instructions  from  him.^ 
And  the  possession  by  an  insurance  agent  of  blank  policies,  to 

*De    Grove   v.    Metropolitan    Ins.  2  Rem.  &  Bal.  Code  Wash.  sec.  6191 

Co.  61  N.  Y.  594,  19  Am.  Rep.  305,  {construed  in  :\Iiller  v.  Spring  Gar- 

and  note,  309.     See  Reynolds  v.  Con-  den  Ins.  Co.  202  Fed.  442,  120  C.  C. 

tinental  Ins.  Co.  36  iVIicli.  131.  A.  548,  42  Ins.  L.  J.  715.     See  §  512 

5  Kenton  Ins.  Co.  v.  Shea,  6  Bush  herein. 

(69  Ky.)  174,  99  Am.  Dee.  676.  "An  agency  is  created  by  contract 

6  Farmers'  &  Merchants'  Ins.  Co.  express  or  implied.  It  'is  a  legal  re- 
V.  Chestnut,  50  111.  Ill,  99  Am.  Dec.  lation  by  virtue  of  which  one  party 
492.  (the  agent)  is  employed  and  author- 

■^  See  §§  35,  36  herein,  for  a  con-  ized  to  represent  and  act  for  the 
sideration  of  this  question.  other  (the  principal)  in  business 
'  See  Ewell's  Evans  on  Agency,  c.  dealings  with  third  persons.  The 
i.  for  definitions  of  the  different  kinds  distinguishing  features  of  the  agent 
of  agents  and  distinctions  between  are  his  representative  character  and 
them.  See  also  1  Words  &  Phrases,  his  derivative  authority.'  Meehem, 
pp.  261  et  seq.;  Id.  (2d  series)  pp.  Ag.  .sec.  1;  Story,  Ag.  sec.  3.  'To 
154  et  seq.  constitute  agency  there  must  be  eon- 
Agent  defined  under  statutes:  sent  both  of  principal  and  agent;' 
Code  Ga.  1911  (Civ.)  sec.  2443.  Whart.  Ag.  sec.  1."  Sternaman  v. 
(see.  2054) ;  Mo.  Rev.  Stat.  1909,  see.  Metropolitan  Life  Ins.  Co.  170  N.  Y. 
7052  (Rev.  Stat.  see.  8000);  2  Lord's  13,  19,  57  L.R.A.  318,  88  Am.  St. 
Ore.  Laws  (1910)  sec.  4641,  p.  1767  Rep.  625,  62  N.  E.  763,  31  Ins.  L. 
(defined  and  construed).  Tex.  Rev.  J.  276,  282,  per  Vann,  J. 
Civ.  Stat.  1911,  art.  4961  (applied  in  ^  Hamilton  v.  Home  Ins.  Co.  94 
Austin  Fire  Ins.  Co.  v.  Savles,  —  Mo.  353,  7  S.  W.  261.  See  §  718 
Tex.  Civ.  App.  —    157  S.  W.  272)  herein. 

1028 


AGENTS  OF  INSURER 


§  389 


which  the  signatures  are  affixed  of  the  company's  president  and 
secretary,  afford  snfiicient  evidence  of  a  general  agency  to  justify 
a  person's  contracting  for  insurance  with  liini,  and  to  accept  a 
policy  delivered  by  him.^°  So  a  party  employed  as  a  watchman  by 
the  owner  of  the  property  may  issue  a  policy  thereon  as  agent  of 
an  insurance  company.^^  AMiere  a  soliciting  agent  solicits  one  to 
become  a  member  of  a  mutual  benefit  association,  pretending  to 
be  its  agent,  and  produces  and  fills  out  the  ajiplication  which  is 
sent  to  the  association,  acted  on  by  it  in. issuing  a  certificate,  and 
said  certificate  is  sent  to  the  apparent  agent,  who  delivers  it  to 
assured  and  collects  the  premium,  an  agency  is  established.-^^ 

§  389.  Classification  of  agents. — In  classifying  agents  a  distinc- 
tion has  been  made  as  to  their  powers,  between  the  different  kinds 
of  agents,  and  between  those  representing  the  different  kinds  of 
insurance,  such  as  life,  fire,  and  marine. ^^  This  distinction  may  be 
of  some  importance  where  third  parties  dealing  with  such  agents 
have  knowledge  of  whatever  limitations  such  distinction  may  im- 
port. But  the  main  questions  are.  What  authority  was  the  agent 
held  out  by  the  principal  to  possess?  Were  the  agent's  acts  within 
the  scope  of  his  real  or  apparent  authority?  Did  the  person  deal- 
ing with  such  agent  have  knowledge  of  restrictions  or  limitations 
upon   the   agent's  authority?^*     As  a  general   rule,   the   general 


^^  Howard  Ins.  Co.  v.  Owens,  94 
Ky.  197,  21  S.  W.  1037,  13  Ky.  Law 
Rep.  237. 

^^  Northrup  v.  Gerraania  Fire  Ins. 
Co.  48  Wis.  420,  33  Am.  Rep.  815,  4 
N.  W.  3.30. 

^2  Whitney  v.  National  Ma.sonic 
Accident  Assoc.  57  Minn.  472,  480, 
59  N.  W.  943,  per  Collins,  J.:  dis- 
tinguishing Glide  V.  K.xfliano-e  Fire 
Ins.  Co.  53  Minn.  220,  54  N.  W.  1117 ; 
and  citing: 

United  States. — Abraham  v.  North 
German  Ins.  Co.  40  Fed.  717. 

Illinois. — Pierce  v.  People,  100  111. 
11,  46  Am.  Kep.  683;  Goscli  v.  State 
Mutual  Fire  Ins.  Assoc.  44  111.  App. 
263. 

Iowa. — Stone  v.  Hawkeye  Ins.  Co, 
68  Iowa,  737,  28  N.  W.  47. 

Maine. — Packhard  v.  Dorchester 
Mutual  Ins.  Co.  77  Me.  144. 

Oregon. — Hahn  v.  Assurance  Co. 
23  Ore.  576,  37  Am.  St.  Rep.  709,  32 
Pac.  683. 


Ohio. — Insurance  Co.  v.  Williams, 
39  Ohio  St.  584,  48  Am.  Rep.  474. 

West  Mrginia.—Deitz  v.  Provi- 
dence Washiiiiiton  Ins.  Co.  31  W.  Va. 
851,  13  Am.  St.  Rep.  909,  8  S.  E. 
616,  s.  c.  33  W.  Va.  526,  25  Am.  St. 
Rep.  108,  11  S.  E.  50. 

^^  See  Richards  on  Insurance,  pp. 
20-2(),  sec8.  16-19;  Id.  (3d  e'd.) 
sec.  155,  p.  188.  "There  seems  to  be 
no  very  well  defined  distinction  be- 
tween the  powers  of  general  agents, 
local  agents  and  subagents:"  1  May 
on  Insurance  (3d  ed.)  221,  sec.  126. 
"The  distinction  between  .special  and 
general  agents  is  of  little  or  no  prac- 
iticfd  value,  so  far  at  least  as  regards 
the  principal  and  third  partie.^:" 
Ewell's  Evans  on  Agency,  2.  See  § 
395  herein. 

^*  See  chapters,  post,  on  Agents; 
Ewell's  Evans  on  Agency  (ed.  1879) 
c.  i.  pp.  2  et  seq.;  Story  on  Agency, 
sec.  127,  note;  Union  Mutual  Life 
Ins.  Co.  v.  Wilkinson,  13  Wall.    (80 


1029 


§  390  JOYCE  ON  INSURANCE 

principles  of  agency  applicable  to  all  agents  govern  the  acts  of 
insurance  agents. ^^ 

§  390.  Appointment  of  agents.— An  agent's  authority  may  arise 
by  virtue  of  a  valid  express  appointment  by  deed,  or  writing  under 
seal,  or  it  may  rest  in  parol."  It  may  be  implied  from  usage,  from 
custom,  or  from  a  course  of  dealing  sanctioned  by  the  principal; 
or  it  may  exist  under  an  express  ratification  by  the  principal;  or 
the  implied  authority  may  arise  where  the  party's  own  acts  are 
such  as  to  constitute  him  an  agent,  or  the  agency  may  be  created 
by  a  necessity  justifying  immediate  action."  So  a  presumption 
exists  that  a  person  does  not  act  for  another  for  a  long  time  as 
agent  unless  he  is  so  authorized."  And  this  is  true  not  only  of 
agents  of  the  insurer,  but  also  of  agents  of  the  insured." 

Where  the  charter  and  by-laws  prescribe  the  performance  of 
certain  formalities  as  conditions  precedent  to  the  agent's  authority 
to  act,  such  matters  relate  to  the  management  of  the  internal  affairs 
of  the  company.  Therefore,  a  party  who  deals  with  such  agents 
has,  in  the  absence  of  notice  to  the  contrary,  the  right  to  assume 
that  such  formalities  have  been  complied  with,  and  may  deal  with 
the  agent  within  the  scope  of  his  apparent  authority.  The  cor- 
poration is  also  estopped  from  setting  up  noncompliance  by  the 

U.    S.)    222,   235,   20   L.   ed.    617,   2  Co.  14  Wis.  318,  and  numerous  otlier 

Wood  on  Fire  Ins.  (2d  ed.)  800,  sec.  cases. 

416.  ^^  Ewell's   Evans   on   Agency,   22- 

"See   Markev   v.    Mutual    Benefit  32,  *16-*23;  Swazey  v.  Union  ]Mi> 

Ins.    Co.   103   ISiass.    78,   93.     ''There  Co.  42  Conn.  556;  Perkins  v.  Wasli- 

are   no    principles   which   belong   ex-  ington  Ins.  Co.  4  Cow.   (N.  Y.)   646. 

c-lusively  to  agency  in  insurance  mat-  As  to  appointment   of  agents  under 

ters;  none,  that  is,  which  are  not  rec-  statutes,  see  S   391  lierein. 

ognized  as  a  part  of  the  general  law  "  See    Mechem    on    Agency     (ed. 

of  agency.     But  there  are  some  pe-  1889)  c.  iv.  sees.  80  et  seq.;  Story  on 

culiarities  in  the  application  of  these  Agency  (9th  ed.)  c.  v.  sees.  45  et  seq.; 

principles:"    2    Parsons    on    Marine  Wharton  on  Agency,  sec.  134;  Union 

Ins.     (ed.     1868)     416.     "The     same  Gold  Mining  Co.  v.  Rocky  Mountain 

rules   ap]dy   to  insurance   comi-)anies  National  Bank,  2  Colo.  248. 

as  apply  in  the  case  of  individuals,  If  relations  exist   which   will   con- 

and    a    pei-son    who    is    clothed    with  stitute    an    agency,    it    will    be     an 

power  to  act  for  tliem  at  all  is  treat-  agency,    whether   the    parties    under- 

ed  as  clothed  with  authority  to  bind  stand   it   to   be  such   or  not.     Their 

them,    as   to    all    matters    within    tlie  private  intentions  will   not   affect_  it. 

scope    of    his   real    or    apparent    an-  Bradstreet  Co.  v.  Gill,  72  Tex.  115,  2 

thority:"  2  Wood  on  Fire  Ins.    (2d  L.R.A.  405,  9  S.  W.  753. 

ed.)    822,  sec.  408,  citing  Bodine  v.  "Russell  v.  Palentine  Ins.  Co.  106 

Exchange    Fire    Ins.    Co.    51    N.    Y.  Miss.  290,  63  So.  644. 

117,  10  Am.  Rep.  566 ;  Eclectic  Fire  "  See  Barlow  v.  Leckie,  4  Moore, 

Ins.  Co.  V.  Fahrenkrug,  68  111.  463;  J.  B.  8;   Ewell's  Evans  on  Agency. 

Warner  v.  Peoria  Mutual  &  Fire  Ins.  (ed.  1879)  22-32,  side  pp.  16-23. 

1030  '■ 


AGENTS  OF  INSURER  §  391 

agent  with  the  prescribed  conditions.^"  But  so  far  as  the  appoint- 
ment itself  is  concerned,  it  is  not  valid  unless  made  in  conformity 
with  such  formalities  as  the  charter  prescribes,  where  the  charter 
sets  forth  the  requirements,^  although  an  irregular  or  informal 
appointment  may  be  ratified,  either  expressly  or  impliedly,  by 
acts  of  the  corporation.^  In  regard  to  special  or  class  agents,  the 
charter  may  prescribe  who  shall  act  a?  agents  in  transacting  and 
managing  certain  affairs  of  the  corporation;  such  charter  agenU>s, 
therefore,  must  look  to  the  charter  as  the  source  of  their  authority.' 
Where  an  agent's  written  commission  expressly  excludes  authority 
to  insure  manufactories  and  other  special  hazards,  it  cannot  be 
assumed  merely  from  the  fact  that  he  is  the  company's  local  agent, 
that  his  authority  is  unlimited  as  to  risks  and  terms.  Nothing  more 
can  be  implied  therefrom  than  an  authority  to  insure  in  the  mode 
required  by  the  company's  charter,  and  to  take  only  such  risks  as 
the  policies  ordinarily  used  by  the  company  would  warrant.'* 

A  person  may  by  his  own  acts  become  an  agent  where  he  had 
no  prior  authority.  So  where  a  third  party  collects  and  holds 
premiums,  he  thereby  becomes  a  bailee  of  the  company,  and  must 
account,  to  it  or  its  agent  for  money  so  received  and  held.*  An 
agent's  authority  may  also  arise  from  a  habit  and  course  of  busi- 
ness acquiesced  in  by  the  principal.® 

§  391.  Appointment  of  agents:  statutes. — In  the  case  of  foreign 
insurance  companies,  the  statutes  of  many  states  impose  certain 
conditions  upon  them  in  relation  to  the  appointment  of  agents  act- 
ing within  the  state.®"*     The  failure  to  comply  with  such  require- 

20  Bank  of  United  States  v.  Dand-  Evans  on    Asjonrv    (ed.  1879)    c.   iv. 

ridge,  12  Wheat.   (25  U.  S.)   G4,  70,  p.  192,  side  pp.  136  et  seq. 

6  L.  ed.   552,  per   Storv,   J.;    In   re  ^  i^ee  Bank  of  U.  S.  v.  Danbndg 

County  Life  Assur.  Co.  L.  K.  5  Cli.  12  Wheat.   (25  U.  S.)   113,  0  L.  e 

293,  per  (iirtard,  L.  J.;  Insurance  Co.  552,  per  iMarsliall,   C.   J.;   Beatty  v. 

V.  McCain,  96  U.   S.   84,  24  L.  ed.  Marine   Ins.    Co.    2   Johns.    (N.    Y.) 

653;   2   Morawetz   on   Private   Corp.  lOit,  3  Am.  Dec.  401;  Washinirton  & 

(2d  ed.)  sees.  637  et  secj.  Pittsburgh  Turnpike  Co.  v.  Cullen  & 

iHenning    v.    United    States    Ins.  Crane,  8  Serg.  &  R.   (Pa.)  517,  521, 

Co.   47   Mo.   425,   4   Am.    Rep.   332;  522;  Angel!  &  Ames  on  Corp.   (9lh 

Head     v.     Providence     Jns.     Co.     2  ed.)  sec.  279. 

Cranch   (6  U.  S.)   127,  2  L.  ed.  229.  ^  Reynohls  v.  Continental  Ins.  Co. 

See  Commercial  Mutual  Marine  Ins.  36  Mich.  131. 

Co.  V.  Union  Mutual  Ins.  Co.  19  Ilow.  ^  Pagan    &    Trezevaut    v.    N.    Mis- 

(60  U.  S.)  318,  15  L.  ed.  636;  Badg-  souri  Ins.  Co.  31  Ark.  54. 

er  V.  American  Popular  Life  Ins.  Co.  ®  Franklin    v.    Globe    Mutual    Lite 

103  Mass.  244,  4  Am.  Rc}).  547.  Ins.    Co.    52    Mo.    461;    Putnam    v. 

2  Farmers'  Mutual  Ins.  Co.  v.  Tay-  Home  Ins.  Co.  123  Mass.  324,  25  Am. 

lor,  73  Pa.  St.  342;  2  Morawetz  on  Rep.  93. 

Corp.    (2d    ed.)    sec.    637;    Ewell's  s*  See  §§  327  et  seq.,  512  herein. 

1031 


d. 


§§  391a,  392 


JOYCE  ON  INSURANCE 


ments  goes  to  the  question  of  the  validity  of  acts  done  by  such 
agents.'  Where  a  person,  as  "inspector"'  of  risks  for  a  foreign  com- 
pany not  authorized  to  do  business  in  a  certain  state,  solicits  in- 
surance therein,  assuming  to  act  as  an  agent,  and  reports  a  risk 
to  the  company,  which  issues  in  consequence  a  poHcy  and  receives 
the  premium,  he  is  an  agent  of  the  company,  and  is  within  the 
prohibition  of  the  statutes  relating  thereto.^  But  the  insurance 
commissioner  has  no  power  to  prescribe  requirements  in  addition 
to  those  prescribed  by  statute  concerning  licensing  agents  of  com- 
panies or  associations  organized  for  the  insurance  of  each  others 
property.^ 

§  391a.  Statute  confining  business  of  agent  or  broker  to  certain 
class,  unconstitutional. — A  statute,  the  purpose  of  which  is  to  con- 
fine the  business  of  broker  in  procuring  insurance  to  those  who 
should  make  that  their  principal  business,  or  who  should  be  real 
estate  agents  or  brokers  is  unconstitutional  as  confining  the  busi- 
ness of  agents  or  brokers  to  a  certain  class. ■'° 

§  392.  Appointment  of  agents:  territory:  contract  with  principal. 
— If  a  person  secures  an  appointment  for  an  insurance  company  as 


''  Ca.ses  where  faihire  to  comply  in-    pp.   376-7,   sees.   1-4    (commissioner 

validates:  (annot    prescribe    additional    eondi- 

lUiiiois. — Cincinnati  Mutnal  Health    tions), 


As.siir.   Co.  V.  Rosenthal,  55  111.  85, 
8  Am.  Rep.  626. 


Pennsylvania. — Thornton  v.  West- 
ern Reserve  Fire  Ins.  Co.  31  Pa.  St. 


Kentncly. — Franklin    Ins.    Co.    v.    529 


Louisville  &   A.  Packet  Co.  9  Bush 
(72  Ky.)   590. 


As    to    actions    against    ag'ents    of 
foreign   companies,  see   §§   713,  715 

Massa-chusetts. — Williams  v.  Chen-  herein, 

ey,  8  Gray  ( 74  JNlass. )  206.  On  effect  of  agent's  failure  to  pro- 

New    Hampshire. — Haverhill    Ins.  cure   license,    see   note   in    1   L.R.A. 

Co.  V.  Preseott,  42  N.  H.  547,  SO  Am.  (N.S.)  1159. 

Dec.  123.  ^  List  v.  Commonwealth,  118  Pa.  Su 

Pennsylvania. — Thorne    v.    Travel-  322,    12    Atl.    277,    under    Pa.    act, 

ers'  Ins.  Co.  80  Pa.  15,  21  Am.  Rep.  April  4,  1873. 

89,  5  Ins.  L.  J.  169.  Statute  requiring  certificate  on  ap- 

Cases  contra:  plication   to   agent   of   foreign   com- 

United    States.— The    Manistee,    5  pany  selling  stock  of  the  corporation 

Biss.    (U.   S.   C.   C.)    381,  Fed.   Cas.  and  taking-  notes.     Hughes  v.  Four 

No.  9027.     See  Crutcher  v.  Kentuck,  States   Life   Ins.    Co.   —    Tex.    Civ. 

141  U.  S.  47,  35  L.  ed.  649,  11  Sup.  App.  — ,  164  S.  W.  898. 

Ct.  851.  ^  Guy  L.  Wallace  &  Co.  v.  Fergu- 

Massachusetts. — Provincial         Ins.  son,  70  Ore.  306,  140  Pac.  742. 

Co.  V.  Lapsley,  15  Gray   (81  Ma.ss.)  i°  Hauser  v.  North  British  Mercan- 

262.  tile  Ins.  Co.  206  N.  Y.  455,  42  L.R.A. 

Missouri.— Clark  v.  Middleton,  19  (N.S.)  1139n,  100  N.  E.  52,  aff'g  136 

Mo.  53.  X.  Y.  Supp.  1015,  152  App.  Div.  91, 

Oregon. — Guy  L.  Wallace  &  Co  v.  sec.   142   Ins.   Law,  first   inserted   in 

Ferguson,  70  Ore.  306,  140  Pac.  742,  1911,  c.  748,  as  am'd  by  Laws  1912, 

aff'd  141  Pac.  542,  under  Laws  1911,  c  1,  is  unconstitutional. 

1032 


AGENTS  OF  INSURER  §  393 

district  agent  for  a  certain  territory,  under  a  contract  -vvliich  does 
not  stipulate  for  an  exclusive  right  to  act  a^  sole  agent  therein,  it 
is  not  a  breach  of  the  contract  to  appoint  another  agent  in  the 
same  territory  where  the  contract  aJso  provides  that  commissions 
shall  be  divided  between  him  and  other  agents  on  business  obtained 
by  them  acting  conjointly  in  the  given  district.^^  A  general  agent's 
commission  to  act  for  the  insurer  within  certain  territory  should 
be  liberally  construed  in  favor  rather  than  in  derogation  of  his 
authority  especially  so  in  \\e\\  of  the  fact  that  the  jurisdiction 
of  local  offices  is  customarily  extended  in  fact  and  in  practice  to 
the  immediate  neighborhood  and  the  language  of  his  commission 
is  consistent  with  such  authority. ^^  It  is  also  held  that  where  an 
agent  is  appointed  to  act  in  a  certain  locality  and  its  vicinity,  the 
word  ''vicinity"'  will  include  a  village  within  ten  miles  of  such 
locality.^^  And  where  one  is  appointed  as  a  manager  of  a  certain 
department,  embracing  the  whole  of  one  state  and  such  portions  of 
two  other  states  as  are  "'acceptable  to  the  association,"  the  principal 
may  terminate  the  contract,  and  is  not  Kable  in  damages  where 
the  agent  fails  to  secure  a  certain  amount  of  new  business  pro- 
vided for  in  the  contract,  nor  is  the  company  unconditionally 
obligated  to  keep  open  the  two  other  states. ^^ 

The  company  may  validly  stipulate  that  the  agent  shall  serve 
on  its  i)resident  or  secretary  a  written  statement  of  his  claim  a  cer- 
tain number  of  days  before  bringing  an  action  thereon  against 
the  company,  and  such  an  agreement  is  binding  on  the  agent  in 
the  absence  of  fraud. ^^ 

§  393.  Relative  powers  of  agents  of  stock  and  mutual  companies. 
— iSome  discussion  has'  been  hud  upon  the  point  whether  any  dis- 

^^  Lester  v.  Now  York  Life  Ins.  Co.  "but  in  that  case  tlie  aj?ent's  commis- 

84  Tex.  87,  19  S.  W.  3515.     See  In-  sion  expressly  (]e<'lar('(i  tliat  'all  pul- 

suranee  Company  of  North  America  icies  shall  be  null  and  void  and  of  no 

v    Thornton,  330  Ala.  222,  55  L.R.A.  binding  effect  u})on  this  company  it! 

547,  89  Am.  St.  Rep.  30,  30  So.  614.  issued    upon    i)r()perty    not    situated 

^^  Sun  Insui'ance  Ol'lice  of  London  within  the  district  (Dotliani  and  \  icin- 

V.  Mitchell,  186  Ala.  420,  65  So.  143.  ity)    in  Avhicli   the  agent  issuing  the 

The  court  notes  a  prior  decision   as  same  shall  reside  and  for  whicli  he  is 

contrary  to  the  recognized  rule  which  ajipointed.' " 

decision  holds  that  territorial  restric-  ^^  Howard   Ins.   Co.   v.   Owens,   94 

tions  upon  even  a  general  agent's  au-  Ky.  197,  21   S.  W.  103 <,  13  Ky.  L. 

thority  are  effect ual  even  as  to  unin-  Rej).  237. 

formed  persons,  so  that  the  company  ^*  Sibley  v.  Mutual   R<>serve  Fund 

is  not  bound  by  the  agent's  accept-  Life  Assoc.  87  Oa.  738.  13  S.  E.  838. 

ance  of  risks  outside  of  restricted  ter-  ^^  Better    v.    Providential    Ins    Co. 

ritory.     Insurance  of  North  America  16  Daly  (N.  Y.)   344,  32  N.  Y.  686, 

v.  TlKirnton,  130  Ala.  222.  .')5  L.R  A.  11  N.  Y.  Supp.  70. 
547,  89  Am.  St.  Rep.  30,  30  So.  614, 

1033 


§  393  JOYCE  ON  INSURANCE 

tinction  exists  between  the  powers  of  agents  of  stock  and  mutual 
insurance  companies.  It  is  held  by  some  courts  that  the  agents  of 
stock  companies  are  invested  with  larger  powei-s,  in  matters  relating 
to  completion  of  the  contract  and  waiver  of  its  terms,  than  are  pos- 
sessed by  agents  of  companies  formed  on  the  mutual  system,  where 
the  rights  of  all  the  members  are  alike  regulated  and  governed  by 
the  by-laws  which  enter  into  and  form  a  part  of  the  contract  with 
every  member.^^  This  distinction  may  be  im[)ortant,  so  far  as, 
concerns  the  authority  of  the  agent  to  act  on  matters  relating  to 
the  contract  subsequent  to  its  completion.  But  it  is  well  settled 
that  an  applicant  for  insurance  in  a  mutual  company  is  a  stranger 
to  the  by-laws,  nor  does  the  presumption  of  knowledge  thereof  arise 
against  him  until  he  becomes  a  member.^'^  And  the  fact  that  one 
becomes  a  member  of  a  mutual  insurance  company  cannot  operate 
to  convert  the  previous  acts  of  examination  and  description  by  the 
agent  of  the  company  into  the  acts  of  the  insured,  and  change  them 
into  representations  made  by  him,^^  although  it  is  held  that  all 
persons  applying  to  become  members  of  an  incorporated  insurance 

16  Pitney  v.  Glens  Falls  Ins.  Co.  65  N.    Y.    292.      But    see    Susquehanna 

N.  Y.  (5.     See  Brewer  v.  Cliclsea  Mu-  Ins.   Co.   v.   Perrine,   7   Watts  &    S. 

tual  Fire  Ins.  Co.  14  Gray  (80  Mass.)  (Pa.)   348,  331,  per  Gibson,  C.  J. 
203;    Kausal  v.   Minnesota   Farmers'        ^^  See   Lycoming   Fire  Ins.   Co.   v. 

:\!utual  Fire  Ins.  Assoc.  31  Minn.  17,  Woodwortli,  83  Pa.  St.  223,  per  Gor- 

47  Am.  Rep.  776,  16  N.  W.  430,  per  don,    J.      Examine    next    following 

Mitchell,   J.;    Susquehanna   Ins.    Co.  chapters. 

V.  Perrine,  7  Watt.s  &  S.   (Pa.)   348;        See  aL^o  the  following  cases: 
Bacon  on  Benefit  Societies  and  Life        Connecticut. — Beel)e    v.    Hartford 

Ins.  sec.  147;  1  May  on  Ins.  (3d  ed.)  Mutual  Fire  Ins.  Co.  25  Conn.  51,  65 

sec.  127.  Am.  Dec.  5.33. 

^■^  Meyers  v.  Lebanon  Mutual  Ins.        Illinois. — LTnion  Ins.  Co.  v.  Chipp, 

Co.  150  Pa.  St.  420,  425,  27  Atl.  39,  93   111.   96 ;    Commercial   Ins.   Co.   v 

per  Williams,  J.     See  Kausal  v.  Min-  Jves,  56  ill.  402. 

nesota    Farmers'    ^lutual    Fire    Ins.        Maryland. — Lycoming     Fire     Ins. 

Assn.  31  Minn.  17,  47  Am.  Rep.  776,  Co.  v.  Langley,  (52  Md.  196. 
779,   16   N.    W.   430;    Fi-anklin    Fire        Minnesola. — Kausal    v.    ^Minnesota 

Ins.  Co.  y.  Martin,  40  N.  J.  L.  579,  Farmers'     Mutual     Fire     Assoc.     31 

11   Yroom,   368,   29   Am.   Rep.    271,  Minn.   17,  47  Am.  Rep.   776,  16  N. 

280,   per   Depue,   J.;   Eilenberger  v.  W.  430. 

Protective   Mutual   Fire  Ins.   Co.   89        Mississippi. — Planters'  Ins.   Co.  v. 

Fa.    St.   464;   Columbia   Ins.    Co.   v.  Myers,   55   Miss.   479,  30   Am.   Rep. 

Cooper,    50    Pa.    St.    331,    340,    per  521,  531. 

AVoodward,  C.  J.;  In  re  County  Life       Pennsi/lvmiia. — Kister  v.   Lebanon 

Assur.    Co.    L.    R.    5    Cb.    288,    293.  Mutual  Ins.  Co.  128  Pa.  St.  553,  15 

"There  is  no  general  rule  compelling  Am.  St.  Hep.  696,  5  L.R.A.  646,  18 

persons  dealing  with  a  corporation  at  Atl.   447 ;    Eilenberger  v.   Protection 

their  peril   to  take  notice  of  its  by-  Ins.  Co.  89  Pa.  St.  464;  Cumberland 

laws."  2  Morawetz  on  Private  Corpo-  Valley  ^Mutual  Protective  Ins.  Co.  v. 

rations   (2d  ed.)   sec.  593.     See  Con-  Scliell,  29  Pa.  St.  3L 
over  V.  Mutual  Ins.  Co.  of  Albany,  1 

1034 


AGENTS  OF  INSURER  §  394 

company  must  be  presumed  to  have  known  the  terms  of  its  charter 
and  by-lavws.^^  'J'hough  there  are  many  decisions  to  the  contrary 
upon  the  general  proposition  in  courts  of  last  resort.^"  So  it  is 
declared  in  an  Illinois  ca.se.^  "It  has  been  held  by  this  court  that 
the  doctrine  of  waiver  applies  not  only  to  insurance  companies 
having  a  ca])ital  stock,  insuring  for  pecuniary  profit,  but  also  to 
mutual  benefit  associations.  .  .  .  The  nature  and  objects  as 
well  as  the  organization  and  government  of  such  associations, 
render  the  application  of  general  rules  of  law  in  most  cases  the  same 
as  mutual  benefit  associations  not  organized  for  pecuniary  profit."  ^ 
The  better  opinion,  however,  would  seem  to  be  that  by-laws  as  to 
persons  not  members  of  tlie  company,  in  so  far  as  they  limit  an 
agent's  apparent  authority,  are  substantially  secret  restrictions  there- 
on, and,  in  the  absence  of  actual  or  constructive  notice,  are  not 
binding  on  those  dealing  with  such  agent.^  At  least  such  a  rule 
ought  to  govern  upon  analogous  principles  with  those  from  which 
a  like  rule  is  deduced  in  cases  of  agents  of  stock  companies,  es- 
pecially where  the  by-laws  Contain  conditions  of  which  the  applicant 
had  no  knowledge  prior  to  the  completion  of  the  contract,  and 
which  he  could  not,  imder  the  law,  be  presumed  to  have  had  in 
contemplation  in  negotiating  for  insurance. 

§  394.  Same  subject:  powers  after  completion  of  contract. — If, 
under  the  by-laws  of  a  mutual  insurance  company,  its  agent  in  a 
certain  place  havS  authority  to  take  aj)plications  and  receive  ])re- 
miums,  and  to  deliver  the  same  to  the  company,  and  no  application 
or  renewal  is  binding  upon  the  company  until  approved  by  the 
secretary,  and  such  agent  only  receives  a  specified  sum,  in  case  of 
acceptance,  he  ceases  to  be  the  company's  agent  immediately  the 
contract  is  comj^leted,  and  has  no  authority  after  the  contract  is 
completed  to  waive  any  of  its  conditions.*     ^Miere  the  contract 

^'  Belleville  Mutual  Tn.s.  Co.  v.  Van  Bhode  Island. — Wilson  v.  Conwav 

Winkle,  12  N.  J.  Eq.  [VSA.  Mutual  Fire  Ins.  (^o.  4  IJ.  T.  141. 

^^  See  the  following  oases:  ^  I)roni<>()ld  v.  Royal  Noisjlihors  of 

Massachusetts. — McCoy    v.    IMetro-  America,  2G1  111.  GO,  103  N.  E.  584. 

politan  Life  Ins.   Co.   1.!.']  ]\lass.   82,  ^  Id.  per  Carter,  J. 

85;   Kibbe  v.  Ilaniilton   Mutual  Ins,  ^  ^ec  In  re  Countv  Life  Assur.  Co. 

Co.   11   Gray    (77   Mass.)    1(53.     See  L.  R.  5  Ch.  288,  293;  Fay  v.  Noble, 

Mulrey  v.   Sliawmut   Fire  Ins.   Co.  4  12    Cusli.    (GG   Mass.)    1,   IG   et   seq., 

Allen  "(86  Mass.)    IIG,  81  Ara.  Dec.  per  Shaw,  C.  J.;  Union  Mulual  Lilc 

689.  Ins.   Co.   v.    Whitfe,   lOG   111.    G7.   and 

New    Jersei/. — Franklin    Fire    Ins.  other  cases  cited   in   2   Moiawet/.   on 

Co.  V.  Martin,  41   N.   J.   L.   7)08,  29  Private   Corporal ion.s,    (2d  cd.)    sees. 

Am.  Rep.  271.  593,  594.     See  also  cases  in  note  18 

Ohio. — Smith   v.   Farmers'   Mutual  al)ove. 

Ins.  Co.  19  Ohio  St.  287.  *  Bourgeois  v.  Mutual  Fire  Ins.  Co. 

Pennsi/lvania.—iiuiiquehauna     Ins.  8G  Wis.  402,  407,  57  N.  W.  38,  per 

Co.  V.  Perrine,  7  Watts  &  S.   (Pa.)  Cassaday,     J.;     citinfj     Hankins     v. 

348.  Roekford  Ins.  Co.  70  Wis.  4,  35  N. 

1035 


§  394  JOYCE  ON  INSURANCE 

has  been  completed  and  a  person  has  become  a  member  of  a 
mutual  insurance  company,  the  above  considerations  become 
merged  in  the  fact  that  as  such  member  such  person  is,  as  already 
stated,  charged  with  notice  of  whatever  restrictions  on  the  agent's 
authority  are  imposed  by  the  charter  and  by-laws.  The  question 
then  resolves  itself  into  that  of  whether  such  inhibitions  are  con- 
clusive or  not.  The  determination  of  this  point  must  necessarily 
involve  the  kindred  ones,  viz.:  1.  To  what  extent,  if  at  all,  can 
the  company  itself,  or  through  its  agent,  enter  into  contracts  which 
are  not  strictly  warranted  by  the  charter?  or  2.  To  what  extent 
can  it  in  a  particular  case  waive  by-law^s  Avhich  are  applicable  alike 
to  all  members  by  reason  of  the  mutuality  of  the  system  of  insur- 
ance? In  the  case  of  Kausal  v.  Minnesota  Farmers'  Mutual  Fire 
Insurance  Association  ^  the  court  considers  the  question  of  whether 
any  distinction  exists  between  agents  of  stock  and  mutual  com- 
panies, and  holds  that  such  a  distinction  did  not  exist  in  that 
case,  for  there  the  stipulations  claimed  to  bind  the  assured  were 
only  in  the  policy,  and  the  court  adds-:  "We  fail  to  see  any  dis- 
tinction between  the  two  kinds  of  companies,  and  we  feel  confident 
that  the  average  applicant  for  ijisurance  is  rarely  aware  of  any." 
But  the  force  of  this  statement  is  somewhat  modified  as  to  dealings 
with  the  agent  subsequently  to  effecting  the  policy,  for  it  is  evident 
that  the  court  had  in  mind  only  negotiations  concerning  the  appli- 
cation; that  is,  acts  and  representations  of  the  agent  before  com- 
pletion of  the  contract.  The  court  concludes  as  follows:  ''But  in 
applying  and  contracting  for  insurance  the  applicant  and  the  com- 
pany are  as  much  two  distinct  persons  as  in  case  of  a  stock  company, 
and  we  see  no  reason  for  holding  the  agent  who  takes  the  applica- 
tion any  less  the  agent  of  the  insurer  in  the  one  case  than  in  the 
other.  The  membership  does  not  begin  until  the  policy  is  issued. 
As  to  all  previous  negotiations  the  agent  acts  only  for  the  com- 
pany." Many  courts  of  high  authority  have  held  to  a  strict  con- 
struction in  such  matters  in  favor  of  the  insurer,  and  have  declared 
unequivocally  that  officers  and  agents  of  mutual  insurance  com- 
panies have  no  authority  to  waive  its  by-laws ;  ^  although  it  is 

W.  34;  Kinidson  v.  Hekla  Fire  Ins.  Colorado. — Modem    Woodmen     of 

Co.  75  Wis.  198,  43  N.  W.  954;  Bos-  America   v.   Interuatioiial    Trust    Co. 

worth  V.  Merchants'  Fire  Ins.  Co.  80  25  Colo.  App.  26,  130  Pae.  806. 

Wis.  393,  49  N.  W.  750;   Stevens  v.  Indiana. — Leonard      v.      American 

Queen   Ins.  Co.  81  Wis.  335,  51  N.  Ins.  Co.  97  Ind.  299;  Behler  v.  Ger- 

W.  555,  29  Am.  St.  Rep.  905.  man   Mutual  Fire  Ins.   Co.   68   Ind. 

6  31  .Alinn.  17,  47  Am.'  Rep.  776,  347,  354. 

16  N.  W.  430.  Massachuselts. — Evans  v.  Tremon- 

6  See  §§  34  et  seq.,  53,  509  herein,  tain  Mutual  Fire  Ins.  Co.  9  Allen  (91 

Examine  the  following  cases:  iMass.)   329;  Brewer  v.  Chelsea  Mut. 

1036 


AGENTS  OF  INSURER 


§  394 


held  that  the  directors  of  a  mutual  company  or  tlieir  ofTicers,  by 
their  direction  or  approval,  may  so  act  as  to  entitle  a  person  to 
become  a  member  who,  by  their  fault,  has  been  prevented  from 
depositing  his  note,  and  as  to  authorize  a  court  of  equity  to  comi)el 
his  being  received,  or  to  give  the  same  relief  he  would  be  entitled 
to  if  he  was.'^  We  have  seen,  howeve.r,  that  the  courts  will,  in 
certain  cases,  uphold  contracts,  even  though  made  in  excess  of  the 
charter  powers  of  corporations,*  although  the  general  rule  is  to  the 
contrary,^  and  that  by-laws  may  likewise  be  waived,  especially 
where  the  matter  is  not  mandatory  nor  of  the  essence  of  the  con- 
tract.^o     It  is  said  in  a  Minnesota  case  that  there  is  no  difference 


Fire   Ins.   Co.   14   Grav    (80   INfass.)  J  r/.««sa.s.  —  Peebles     v.     Eminent 

203,  209;  liale  v.  Mechanics'  Mutual  Household   of   Columbian   Woodmen, 

Fire  Ins.  Co.  6  Gray  (72  Mass.)  169,  111  Ark.  435,  1(34  S.  W.  29(). 

66  Am.  Dec.  410.  Cotwecticut. — Peck  v.  New  London 

New    J^-r.se//.— Miller    v.    Hillsbor-  County    Mutual    Fire    Ins.     Co.    22 

ough  Fire  Assoc.  42  N.  J.  Eq.  459,  Conn.  575. 

7  Atl.  895.  Illinois. — Dromgold        v.        Royal 

New    York. — Mesereau   v.   Phoenix  Neighbors  of  America,  261  111.  121, 

Mutual  Life  Ins.  Co.  66  N.  Y.  274.  103  N.  E.  584,  43  Ins.  L.  J.  176. 

Examine    1     Morawetz     on     Private  Joira.— Ke.sler  v.  Farmers'  Mutual 

Corp.  (2d  ed.)  sec.  50L  Fire    &_  Lightning    Ins.    Assoc.    160 

Oklahovia.— Modern     Brotherhood  Iowa,  3/4,  141  N.  W.  954. 

of  America  v.  Beshara,  42  Okla.  684,  Jvm/McA//.— Masonic  Life  Assoc,  v. 

142  Pac.  1014  (power  was  limited  by  Robinson,  156  Ky.   371,  160   S.   W. 

by-laws).  1078. 

Tea;as.— Sovereign     Camp     Wood-  Minnesota. — Dougherty  v.  Supreme 

men   of    the    World    v.    Wagnon,    —  Court  of  Independent  Order  of  For- 

Tex.  Civ.  App.  — ,  164  S.  W.  1082  esters,  125  Minn.  142,  145  N.  W.  813. 

(but  so  held  under  Rev.  Stat.  1911,  Missouri.— VjvxWWh       v.       Supreme 

sec.  4847).  Council  of  Royal  Arcanum,  182  Mo. 

On  waiver  by  officer  of  subordinate  App.  644,  166   S.  W.  324;   Keys  v. 

lodge  of  forfeiture   for  nonpayment  National    Council   Knights   &   Ladies 

of  a.ssessments,  see  notes  in  4  L.R.A.  ^i  Security,  174  Mo.  App.  671,  161 


(N.S.)    421;    38    L.H.A.(N.S.)    571; 
and  L.R.A.1915E,  152. 

'Belleville  Mutual  Ins.  Co.  v.  Van 
Winkle,  12  N.  J.  Eq.  340,  per  Elmer, 
J. 


*  o    .»- 


.J-), 


36  herein. 


9  See  §§  35,  36  herein ;  Head  v. 
Providence  Ins.  Co.  2  ("ranch  ((i  U. 
S.)  127,  2  L.  ed.  229;  Leonard  v. 
American  Ins.  Co.  97  Ind.  299; 
Brewer  v.  Chelsea  Mutual  Fire  Ins. 
Co.  14   Gray    (80   Ma.-^s.)    203;    Bor- 


S.  W.  345;  Wallace  v.  Prudential 
Ins.  Co.  174  Mo.  App.  110,  157  S. 
W.  1028. 

Nebraska. — Krecek  v.  Sujireme 
Lodge  of  Fraternal  Union  of  Amer- 
ica, 95  Neb.  428,  145  N.  W.  859. 

New  Hampshire. — Union  iNIutual 
Fire  Ins.  Co.  v.  Keyser,  32  N.  H.  313, 
64  Am.  Dec.  377. 

Pennsijlvania. — Cumberland  Val- 
lev    Mutual    Protective    Ins.    Co.    v. 


graefe  v.  Sujireme  Lodge  Knights  &    Schell,  29  Pa.  St.  31. 
Ladies  of  Honor,  22  Mo.  App^  127.  Texas.— Splawn  v.  Chew,  60  Tex. 

1°  See  §§  .35,  36,  407,  515  herein.      532. 


Examine  the  following  eases ; 


Wisconsin. — Morrison    v.    Wiscon- 


103/ 


§  395  JOYCE  ON  INSURANCE 

between  agents  of  stock  and  mutual  companies,^^  and  it  would 
seem,  in  go  far  as  their  acts  within  the  apparent  scope  of  their 
authority  are  concerned,  that  there  can  be  no  difference.  If  an 
agent  of  a  stock  company  can  waive  express  provisions  of  the 
policy,  where  his  authority  is  broad  enough,  why  should  a  con- 
tract with  a  mutual  company  be  peculiarly  protected?  The  by- 
law^s,  though  a  part  of  a  member's  contract,  ought  not  to  impose 
greater  obligations  than  the  express  stipulations  of  a  policy  in  a 
stock  company;  and  if  the  power  to  waive  a  by-law,  which  is  neither 
mandatory  nor  of  the  essence  of  the  contract,  rests  in  the  company, 
why  not,  then,  in  an  agent  having  the  requisite  authority?  Cer- 
tainh',  if  the  company  is  empowered  to  vest  discretionary  powers 
in  its  agents  in  such  matters,  it  cannot  be  said  to  abrogate  the  prin- 
ciple of  mutuality.  Thus  in  a  New  York  case  ^^  the  court  declares 
that  it  is  the  duty  of  incorporated  companies  to  see  to  it  at  their 
peril  that  their  officers  and  agents  understand  their  powers  and 
duties,  and  that  they  do  not  habitually  transcend  such  powers.  We 
believe  the  above  expressions  are  in  accord  with  the  conclusions  of 
other  Avriters  and  with  the  tendency  of  opinion  at  the  present  time.^^ 
§  395.  Who  is  general  agent. — A  distinction  is  made  under  the 
law  of  agency,  as  to  the  extent  of  their  authority,  between  general 
and  special  agents.^*  This  distinction  Evans,  in  his  work  on 
Agency,  asserts  to  be  of  little  or  no  practical  value,  and  this  is 
true,  so  far  at  least  a-s  regards  tlie  principal  and  third  parties,  since 
the  question  in  case  of  dispute  as  to  the  agent's  powers  does  not 

sin   Odd    Fellows'   Atutnal    Life   Ins.  ^*  Crusan  v.   Rmitb,  41  Ind.   288, 

Co.  59  Wis.  162,  169,  18  N.  W.  13.  Lattomus   v.    Farmer.s'    IMntual   Fire 

The   courts   of   Ma.s.sachusetts   dis-  Ins.   Co.   3  Houst.    (Del.)    404.     See 

tinguish   as   to   these   by-laws  which  also  2  Wood  on  Fire  Insurance   (2d 

are  not   of  the   essence   of  the   con-  ed.)   873,  sec.  421;  Richards  on  Ins. 

tract:  Brewer  v.  Chelsea  Mutual  Fire  (ed.  18!)2)   p.  21,  sees.  17  et  seq.,  p. 

Ins.   Co.   14   Gray    (80   Mass.)    209;  95;  sec.  93,  p.  101;  sec.  95.     "Therp 

Priest  V.   Citizens'  Mutual  Fire  Ins.  seems  to  be  nD  very  well-defined  dis- 

Co.  3  Allen  (85  Mass.)  602.  tinction  between  the  powers  of  gen- 

^^  Kan.>^al  v.  Minnesota  Farmers'  eral  agents,  local  agents,  and  sub- 
Mutual  Fire  Ins.  Assoc.  31  Minn.  17,  agents."  1  May  on  Ins,  (3d  ed.) 
47  Am.  Rep.  776,  16  N.  W.  430.  sec.  126,  p.  221. 

^2  Conover   v.    Mutual    Ins.    Co.    1  Who  are  general  and  who  special 

Comst.  (N.  Y.)  290.  agents,  see  Great  West  Mining  Co.  v. 

^3  TTnion  Mutual   Life  Ins.   Co.  v.  Woodmas  of  Alston  Mining  Co.  12 

Wilkinson,  13  Wall.  (80  U.  S.)  222,  Colo.  46,   13    Am.   St.   Rep.   204,  90 

20  L.  ed.  617;  Peck  v.  New  London  Pac.  77;  Union  Stock  Yards  &  Tran- 

Mutual  Fire  Ins.  Co.  22  Conn.  575.  sit  Co.  v.  Mallorv  Son,  &  Zimmerman 

See  1  May  on  Ins.  (3d  ed.)  sec.  126,  Co.  157  111.  664,  48  Am.  St.  Rep.  341, 

p.  220;  sees.  127,  139,  140,  145-49;  41  N.  E.  888. 

Bacon  on  Benefit  Societies  and  Life  Special  agent  defined,  see  Thomp- 

Ins.   (ed.  1888)   sees.  147,  151,  156-  son  v.  Michigan  Mutual  Life  Ins.  Co. 

58,  171,  307,  426.  56  Ind.  App.  502,  105  N.  E.  780. 

1038 


AGENTS  OF  INSURER  §  395 

rest  alone  upon  whether  the  authority  is  general  or  special,  but 
inquiry  is  necessitated  as  to  whether  the  agent's  acts  are  within 
the  scope  of  his  real  or  apparent  authority. ^^  and  this  is  especially 
applicable  to  insurance  agents.  So  it  is  declared  in  a  Minnesota 
case  that:  "The  designation  of  agents  as  'general,"  'special,' 
'local'  and  'soliciting'  agents  in  a  rough  way  serves  to  indicate 
their  powers,  but  it  is  of  little  importance  as  between  the  prin- 
cipal and  persons  who  deal  with  the  agent.  It  is  commonly 
said  that  a  general  agent  is  one  who  ha.s  power  to  transact  all  the 
business  of  his  principal  of  a  particular  kind,  or  in  a  particular 
place,  and  a  special  agent  is  one  who  is  authorized  to  act  only  in 
a  s])ecific  transaction.^^  The  mere  fact  that  an  agent's  authority  is 
limited  to  a  particular  business  does  not  make  his  agency  special, 
if  the  authority  is  general  and  gives  him  power  to  perform  all  acts 
necessary  for  the  transaction  of  that  business  and  he  is  so  held  out 
to  the  world."  Locality  or  extent  of  territory  is  not  the  test  of 
general  or  special  agency.''  ^^  In  Iowa  there  is  also  no  distinction 
between  soliciting  and  recording  agencies.^^  AVe  will  consider, 
however,  some  of  the  decisions  relating  to  general  agents.  A  general 
agent  is  one  who  is  authorized  to  transact  all  the  business  of  his 
principal,  or  all  of  his  business  of  some  particular  kind,  or  at  some 
particular  place,  but  an  agent's  authority  is  not  made  special  by 
being  limited  to  a  particular  business  it  may  be  as  general  in 
regard  to  that  as  though  of  unhmited  range.^"  An  agent  who  is 
required  to  write  policies,  and  is  authorized  to  settle  the  terms  of  in- 
surance and  investigate  losses,  is  a  general  agent,  with  authority  to 
waive  preliminary  proofs  of  loss.^  So  agents  are  general  agents; 
where  they  fully  represent  the  company  within  a  certain  district, 
are  authorized  to  solicit  insurance,  receive  moneys  and  premiums, 
issue  and  renew  policies,  appoint  subagents,  and  adjust  losses;'^ 

15  Swell's  Evans  on  Agency,  p.  21.  ^^  Funk  v.  Anchor  Fire  Ins.  Co.  171 

See  Id.  p.  134,  side  pp.  lOi  et  seq.  Iowa,   331,   153   N.   W.    1048,    1051, 

See    also    Thompson    on    Corp.    (ed.  Code  1897,  sees.  1749,  1750. 

1895-96)  sees.  4878,  4879.  20  Thompson   v.    Midiigan    Mutual 

^^  Citing        Lord         Ellonborough,  Life  Ins.  Co.  56  Ind.  App.  502,  105 

Whitehead  v.  Trickett,  15  East  400;  N.  E.  780:  Cruzan  v.  Smith,  41  Ind. 

Story,     Agenev',     sec     17;     ]\lechem,  291,  297,  298,  quoting  from  1  Wait's 

Agencv,    sec.  ^6;     Clark    &     Skiles,  Law  &  Pract.  p.  215.     See  5  Words 

Money,  sec.  193.  &  Phrases,  p.  4202. 

^T  Citing   Crain  v.  First  Nat.   Bk.  1  Travelers'  Ins.  Co.  v.  Harvey,  82 

114  111.  519.  Va.  949,  5  S.  E.  553.     See  Painter  v. 

iSRilborn   v.   Prudential    Ins.    Co.  Industrial   Life   Assoc.   131   Ind.   68, 

99  Minn.  176,  108  N.  W.  861,  35  Ins.  73,  30  N.  E.  876  (held  general  agent 

L.  J.   844,  citing  Butler  v.   Maples,  without  regard  to  extent  of  teiTitory 

9  Wall.  (76  U.  S.)  766:  Continental  or  scope  of  powers). 

Ins.  Co.  V.  Ruckraan,  127  111.  364.  2  German  Ins.  Co.  v.  Gray,  43  Kan. 

1039 


§  395a 


JOYCE  ON  INSURANCE 


where  they  have  power  within  a  certain  territory  to  receive  proposal 
of  insurance,  to  fix  rates  of  premium,  receive  moneys,  countersign, 
issue,  and  renew  policies  of  insurance;^  where  they  solicit  and  re- 
ceive applications,  countersign  and  issue  policies ;  *  one  who  has 
control  at  times  of  the  local  agencies  in  the  state,  approves  risks, 
attends  to  the  details  of  the  company's  business,  and  at  the  request 
of  the  secretary  examines  the  same,  signs  his  name  to  letters,  and 
uses  letterheads  with  his  name  thereon  as  general  agent:*  a  per- 
son employed  to  negotiate  and  complete  contracts  of  insurance, 
accept  risks,  receive  premiums  and  premium  notes,  and  renew 
policies ;  ^  and  where  one  writes  up  and  delivers  a  policy  to  the 
assured  indorsed  with  his  name  thereon  as  ''agent,"  he  is  a  general 
agent,  with  authority  to  waive  conditions  in  the  policy.'  So  an 
agent  intrusted  with  blank  policies  and  renewal  receipts  h.as  im- 
pliedly a  general  authority  to  do  everything  necessary  to  their 
issue.' 

§  395a.  Same  subject.— An  agent  authorized  to  issue  policies, 
to  fix  rates  and  premiums,  and  to  countersign,  renew,  and  sign  the 
transfer  of  policies  in  a  certain  locality  is  a  general  agent  within 
that  district,^  and  as  such  agent  he  may  take  risks  outside  of  the 
locality  to  which  his  agency  is  limited  where  the  insured  has  no 
knowledge  of  such  limitation."  So  a  party  is  a  general  agent 
Avho  acts  in  a  certain  locality  under  a  written  connnission  author- 
izing him  to  receive  proposals  for  insurance,  countersign,  issue,  and 
renew  policies,  and  consent  to  the  transfer  of  the  same,  although  he 
is  subject  to  the  instructions  of  the  company's  officers  and  to  the 
rules  and  regulations  of  the  company,^^  and  the  local  agents  of 

497,  503,  504,  19  Am.  St.  Rep.  150,        '  Millville  Mntnal   IMarine    &   Fire 

8  L.R.A.  TOn,  23  Pac.  637,  per  John-  Ins.   Co.   v.   Mechanics'   &   Working- 

ston,  J.  men's  Bldg.  &  Loan  Assoc.  43  N.  J. 

3  Pliopnix    Ins.    Co.   v.   Hunger,   49  L.  052. 
Kan.  178,  33  Am.  St.  Rep.  360,  30       «  Carroll  v.   Charter  Oak  Ins.   Co. 

Par.  120.  40  Barb.  (N.  Y.)  292.     See  Little  v. 

*Sun  Insurance  Office  of  London  Plioenix   Ins.   Co.   123  Mass.  380,   25 

V.  Mitchell,  186  Ala.  420,  65  So.  143.  Am.  Rep.  96,  where  it  was  held  that 

5  King  V.  Council  Blutfs  Ins.  Co.  ^.gent  was  general  agent  with  author- 
72  Iowa,  310,  315,  33  N.  W.  690.  ity   to  settle   loss   and  waive   formal 

6  Hartford  Fire  Ins.  Co.  v.  On-,  56  preliminary  proofs. 

111.  App.  629 ;  Pitney  v.  Glens  Falls  ^  West  v.  Norwich  Union  Fire  Ins. 

Ins.  Co.  61  Barb.  (N.  Y.)  335,  65  N.  Co.  10  Utah,  442,  448,  37  Pac.  685, 

Y.  6,  21 :  Post  V.  ^tna  Ins.  Co.  43  per  Bortch,  J. 

Barb.     (N.    Y.)     351;    Devendorf    v.  1°  Lightbody    v.    North    American 

Beardslev,   23    Barb.    (N.    Y.)    056;  Ins.  Co.  23  Wend.   (N.  Y.)   18. 

South  Bend  Toy  Mfg.  Co.  v.  Dakota  "  Howard   Ins.   Co.  v.   Owens,  94 

Fire  &  :\larine  Ins.  Co.  2  S.  Dak.  17,  Ky.  197,  21  S.  W.  1037,  13  Ky.  L. 

52  N.  W.  866,  affirming  s.  c.  48  N.  W.  Eep.  237;  Phoenix  Ins.  Co.  v.  Mun- 
310. 

1040 


AGENTS  OF  INSURER  §  395a 

a  foreign  insurance  company  appointed  by  a  general  agent,  located 
without  the  state,  are  general  agents,  and  may  bind  the  company 
by  acts  within  the  scope  of  their  general  authority,  though  in  vio- 
lation of  limitations  thereupon  not  brought  home  to  the  knowledge 
of  the  party  cleahng  with  them.^^  So  a  local  agent  of  a  foreign 
company  is  h  general  agent  where  he  is  empowered  to  effect  con- 
tracts of  insurance,  fix  rates  of  premiums,  consent  to  change  in  and 
increase  of  risks,  and  generally  to  exercise  supervision  over  tlie 
property  covered  by  the  company's  policies  issued  through  him. 
As  such  agent  he  may,  in  the  absence  of  known  limitations  on  his 
authority,  dispense  with  conditions  and  waive  forfeitures.^^  Again, 
a  person  is  a  general  agent  who  has  charge  of  the  company's  busi- 
ness for  a  state,  and  who  acts  under  general  instructions  to  such 
{igents  and  without  special  limitations  upon  his  authority.^*  An 
agent  authorized  to  make  contracts  of  insurance,  collect  premiums, 
and  issue  and  renew  policies,  and  to  that  end  is  furnished  with 
printed  forms  of  policies  signed  in  blank  by  the  president  and 
secretary,  to  enable  him  without  conference  with  them  to  counter- 
sign and  issue  policies,  is  the  general  agent  of  the  company.^*  But 
an  agent  of  a  foreign  life  insurance  company  who  has  autliority  to 
solicit  risks,  take  applications,  issue  and  deliver  policies,  receive 
premiums,  and  deliver  receipts,  is  not  necessarily  a  general  agent 
in  point  of  law,  and  as  such  empowered  to  waive  payment  of  pre- 
miums,^^  nor  is  one  a  general  agent  who  has  merely  authority  to 
w^ork  a  certain  territory  and  to  receive  applications  under  instruc- 
tions from  the  company."  And  the  fact  that  a  person  is  a  local 
agent  does  not  determine  whetlier  he  is  a  general  or  a  special 
agent  for  a  local  agent  may  be  either  as  the  term  "local"  limits 
the  territory  and  not  the  authority  in  the  particular  business  within 
said  territory.18  So  the  term  ''agent"  embraces  general  agents  and 
also  agents' whose  authority  is  limited  or  sjtecial.^^  The  tenn 
''general  agent"  does  not  imply  that  a  rei>rescntative  of  a  cor|)ora- 
tion  is  an  officer  thereof-^"    Again,  a  statute  may  make  foreign  in- 

ger,  49  Kan.  178,  33  Am.   St.  Rep.  i«  IMesereau  v.  PlKPnix  Ins.  Co.  60 

360,  30  Pae.  120.  N.  Y.  2/4. 

12  Miller    v.    Phoenix    Ins.    Co.    27  i' Martin   v.  P\irmers'  Ins.   Co.  of 

Iowa,  203,  1  Am.  Rep.  202.  Cedar  Rapids,  84  Iowa,  510,  51  N. 

i^Viele   v.   Germania    Ins.    Co.   20  W.  29. 

Iowa,  9,  90  Am.  Dec.  83,  and  note,  ^^  xhompsson    v.    Mu'liisfan    Mutual 

112.  Life  Ins.  Co.  50  Ind.  App.  502,  105 

i*  Southern  Life  Ins.  Co.  v.  Book-  N.  E.  7S0. 

er,  9  Heisk.  (56  Tenn.)  000,  24  Am.  ^^  Queen   of   Arkansas   Ins.   Co.  v. 

Rep.  344.  Malone,  111  Ark.  229,  103  S.  W.  771. 

"Maciiiiie  Co.  v.  Insurance  Co.  50  20  Yai.(](.n,an   v.  Perm  Mutual   Life 

Ohio  St.  558,  22  L.R.A.  768,  35  N.  E.  Ins.  Co.  125  Gu.  117,  5  Am.  &  Eng. 

10,  00,  per  Williams,  J.  Ann.  Cas.  221,  54  S.  E.  00. 
Joyce  Ins.  Vol.  L— 06.      1041 


§  396  JOYCE  ON  INSURANCE 

surance  companies  responsible  for  the  acts  of  those  who  assume  to 
aid  them  in  the  transaction  of  their  business,  and  this  is  the  effect 
of  the  statute  of  the  state  of  Ilhnois  declaring  that  "'the  term  'gen- 
eral agent'  used  in  this  section  shall  include  an  acknowledged 
agent,  surveyor,  broker,  or  any  other  person  or  persons  who  shall 
in  any  way  aid  in  transacting  the  insurance  business  of  any  in- 
surance company  not  incorporated  by  the  laws  of  this  state."  ^ 

§  396.  Power  of  agents  to  delegate  authority. — Authority  is  either 
original  or  derivative.  \\'henever  a  person  possesses  the  power  in 
himself  of  his  own  right  to  do  an  act,  he  may  delegate  that  power 
to  another,  for,  in  general,  whatever  a  man  can  do  by  himself  he 
can  do  by  another,  provided,  of  course,  that  the  act  is  not  illegal. ^ 
This  consideration  is  of  importance  in  connection  with  the  right  of 
agents  of  insurance  companies  to  waive  conditions  of  a  policy, 
since  in  case  of  insurance  corporations  their  powei-s  are  limited  by 
charter.^  If  the  authority  is  derivative,  as  where  a  person  is  ap- 
pointed to  act  as  the  agent  of  another,  and  no  express  power  to 
delegate  exists,  the  maxim,  "'Delegatus  non  potest  delegare."  applies 
as  a  general  rule  since  the  authority  of  the  agent  is  exclusively  per- 
sonal,'* upon  the  ground  that  the  principal  may  rely  upon  the 
experience,  skill,  and  integrity  of  the  particular  person  whom 
he  has  appointed  as  his  agent.  There  are,  however,  important 
exceptions  to  the  rule ;  noticeably,  in  cases  where  usage  or  custom 
or  the  particular  nature  of  the  employment  warrant  an  implied 
authority  to  delegate.  So  in  cases  where  the  power  delegated  does 
not  involve  the  exercise  of  discretion,  or  in  case  the  employment  of 
subagents  is  necessitated  to  carry  out  the  instructions  of.  the  prin- 
cipal, or  where  the  act  of  substitution  is  ratifie(i  by  the  principal.* 

The  following  authorities  will  illustrate  the  above  points:  Thus, 
where  the  authority  conferred  on  the  agent  is  such  as  to  require 
the  exercise  of  skill  and  discretion,  and  no  power  of  substitution  is 
given,  the  authority  is  exclusively  personal,  and  the  principal  would 
not  be  bound  by  the  act  of  a  subagent.^     So  an  adjuster  selected 

1  Continental  Ins.  Co.  v.  Ruckraan,  *  See  EwelFs  Evans  on  Agency 
127  111.  364,  11  Am.  St.  Rep.  121,  20    (ed.  1870)  57. 

N.  E.  77.  That  authority  to  employ  subagent 

2  See  Ewell's  Evans  on  Agency  may  be  implied  from  circumstances 
(ed.  1879)  c.  vi.  p.  47,  side  pp.  35  et  or  usages  of  trade,  see  Appleton 
seq.,  for  rule  and  exceptions  thereto.  Bank    v.    McGilvray,    4    Gray     (70 

3  But  see  §§  35,  36  herein.  Mass.)  518.  64  Am.  Dec.  92. 

*  See   Smith   v.    Soublett,   28   Tex.        ^  See    remarks    of    the    court    in 

163;  Bocock  v.  Pavev,  8  Ohio  St.  270,  Brown  v.   Railway  Pass.  Assur.   Co. 

32  Am.  Dec.  707n ;  Ewell's  Evans  on  45  Mo.  221 ;  Saj-re  v.  Nichols,  7  Cal. 

Agency  (ed.  1879)  c.  vi.  p.  51,  sees.  535,  68  Am.  Dec.  280;  Lyon  v.  Je- 

2  et  seq.;  Story  on  Agency  (2d  ed.)  rome,  26  Wend.  (N.  Y.)  485,  37  Am. 

sees.  13-34a.  Dec.  271. 

1042 


AGENTS  OF  INSURER  §  396 

because  df  his  special  ability,  skill,  and  fitness  cannot  delegate  bis 
autliority  by  the  appointment  of  a  subadjusler  willioul  the  com- 
jjany  ratifies  the  act.'^    So  an  agent  in  whom  is  vested  discretionary 
power  cannot  delegate  his  authority  except  under  an  express  grant 
of  authority.®     Therefore,  a  general  agent,  whose  power  in  issuing 
policies  of  insurance  calls  for  the  exercise  of  discretion,  cannot  dele- 
gate the  same  to  another,^  nor  can  an  agent  delegate  the  power  to 
countersign  policies  where  he  is  agent  to  issue  policies  which  are 
not  to  be  valid  till  countersigned.^"    But  an  act  of  the  agent's  clerk 
in   signing  the  policy  is  a  mere   ministerial   act  when    done   in 
pursuance  of  the  slip  which  the  agent  himself  had  signed  under  a 
power  of  attorney,  the  act  of  the  clerk  being  held  not  to  rcrpiire 
the  exercise  of  any  discretion  or  judgment.    Another  factor  entered 
into  this  case  which  strengthened  the  ruling,  and  that  was,  that  the 
evidence  showed  no  adoption  of  the  policy  by  the  underwriter.^^ 
An  agent,  without  express  authority  to  appoint  a  subagent,  can- 
not make  another  an  agent  of  the  company  by  agi-eeing,  without 
the  company's  knowledge,  to  divide  commissions  with  him  on  in- 
surance procured. ^^     But  a  general  agent  of  a  life  insurance  com- 
pany, with  authority  to  employ  subagents,  may  make  a  contract 
with  a  subagent  as  to  salary,  which  will  bind  the  company,  and 
in  such  case  it,  and  not  the  agent,  is  responsible  therefor;  ^^  and 
an  agent  may  employ  a  suljagent  to  procure  aj^plications  which  he 
himself  acts  upon  and  forwards  to  the  company.^*     And  the  ads 
of  a  subagent   employed  by   a   duly   authorized   agent  to   solicit 
insurance  are  as  binding  as  those  of  the  agent  himself,^^  as  such 
subagent's  power  to  bind  the  insurer  is  coextensive  with  that  of 
his  principal  within   the  limits  of  the  authority  delegated. ^^     It 
may  also  be  generally  staled  that  an  agent  with  general  powers, 
such   as   the   authority    to    make   contracts,    deliver   policies,    and 
collect  premiums,  may  appoint  subagents,  clerks,  surveyors,  and 


'Rnthven   v.    American    Fire   Ins.  the  firm:   Kemiebec   Co.  v.   Augusta 

Co.  92  Iowa,  31(5,  60  N.  W.  663.  Ins.    &    Banking    Co.    6    Gray    (72 

*  Farmers'  Fire  Ins.  Co.  v.  Chase,  ]\Iass.)   2(N. 

56  N.  H.  341.     But  .see  ]\Iorawetz  on  ^^  Phn-nix    Ins.    Co.    v.    Spiers,   87 

Private  Corp.  (ed.  1882)  sec.  249.  Ky.  285,  10  Ky.  L.  Kep.  254,  8  S.  W. 

^^VlcClure     v.     Mississippi     Valley  453. 
Ins.  Co.  4  Mo.  App.  148.                      •      "Cotton    States   Life   Ins.    Co.   v. 

i»I;ynn   v.   Bnroovne,  13   B.   Mon.  :\rnllard,  57  Ga.  64. 

(52  Ky.)  400.     See  Copcland  v.  Mei-  i*  Rossiter   v.    Trafalgar   Life   As- 

cantile  Ins.  Co.  6   Pick.    (23   .Mass.)  siir.  Assoc.  27  Beav.  377. 

198,  203.  15  .ArcGoniclf   v.    Aurora    Fire  Ins. 

"Mason   v.   Joseph,  1   Smith    (N.  Co.  168  Pa.  St.  1,  31  Atl.  868. 

T.)  406.     One  member  of  a  partner-  ^^  Au.«tin  Fire  Ins,  Co.  v.  Brown, 

ship  Avho  are  the  agents  of  an  insur-  —  Tex.  Civ.  App.  — ,  160  S.  W.  973. 
ance  company  lias  all  the  powers  of 

1043 


§  396  JOYCE  ON  INSURANCE 

other  subordinates  to  exercise  similar  powers."  So  a  general  agent 
may  delegate  his  power  to  a  clerk,  assistant,  or  subagent  to  the 
extent  of  authorizing  the  latter  to  agree  that  a  policy  to  be  issued 
shall  obtain  a  condition  permitting  the  buildings  insured  to  remain 
vacant  for  a  period  not  exceeding  thirty  days  w^ithout  notice  to  the 
insurer. ^^  An  agent  of  an  accident  insurance  company,  with 
absolute  power  to  effect  insurances,  may  appoint  a  subagent  where 
the  skill  and  discretion  are  not  required  and  the  tickets  are  made 
out  and  signed  at  the  company's  ofiices  and  sent  to  the  various 
agencies  to  be  sold  indifferently  to  all  who  apply. ^^ 

If  an  insurance  company  specially  authorizes  its  agent  to  cancel 
a  policy,  he  cannot  delegate  such  power,  but  where  all  necessary 
acts  to  effect  a  cancelation  have  been  performed  by  him,  he  is  not 
personally  obligated  to  deliver  the  notice  and  tender  the  premium 
to  the  insured;  these  acts  may  be  performed  by  anotlier  acting  for 
such  agent.2°  Ai^local  agent  may  appoint  a  subagent  with  the 
knowledge  of  the  company.^ 

If  one  acts  as  agent  for  the  original  agent,  with  the  knowledge 
and  consent  of  the  company,  the  latter  is  bound. ^  It  is  held  that 
if  the  general  agent  employs  a  subagent  to  procure  risks,  the  com- 
pany is  bound,  unless  the  subagent  knew  the  general  agent  to  be 
without  authority  to  employ  him.^  If  the  power  of  substitution  is 
exercised  by  an  agent  acting  without  full  power,  and  the  act  is 
ratified -by  the  principal,  the  agent  is  not  liable  for  the  loss  conse- 
quent upon  such  substitution.^  But  it  is  also  held  that  an  agent 
cannot  bind  his  principal  by  ratifying  the  act  of  a  subagent  which 
said  agent  had  no  power  to  appoint.^ 

It  is  another  general  rule,  applicable  as  well  to  a  contract  of 
insurance  as  to  any  other,  that  the  original  agent  is  not  responsible 
for  the  acts  of  his  subagent  where  his  employment  is  expressly  or 
impliedly  authorized,  whether  by  usage  or  express  authority  to  sub- 
stitute, or  by  instructions  of  the  principal  or  otherwise,  unless  the 
ol'iginal  agent  was  guilty  of  fraud  or  gross  negligence  in  the  ap- 

1'  Maver  v.  Mutual  Life  Ins.  Co.  38  ^  Van  Schoick  v.  Niagara  Fire  Ins. 

Iowa,  304,  18  Am.  Kep.  34;  Eclectic  Co.  08  N.  Y.  434. 

Life  Ins.  Co.  v.  Falirenkrug,  68  ]11.  ^  ]^q^itable     Life     Assur.     Co.     v. 

463.                                                •  Brobst,  18  Neb.  526,  26  N.  W.  204. 

"Continental    Ins.    Co.    v.    Ruck-'  *  Smith  v.   Cologan,  2  Term  Rep.  .- 

man,  127  111.  364,  11  Am.  St.  Rep.  188  n. 

121,  20  N.  E.  77.  ^  Thompson    v.    Michigan    Mutual 

^^  Brown  v.  Railway  Passenger  As-  Life  Ins.  Co.  56  Ind.  App.  502,  105 

sur.  Co.  45  Mo.  221.  N.  E.  780.     See  Trudo  v.  Anderson, 

20Runkle   v.    Citizens'    Ins.    Co.    6  10  Mich.  357,  81  Am.  Dec.  795. 
Fed.  143,  149. 

^  Goit  V.   National   Protective  Ins. 
Co.  25  Barb.  (N.  Y.)  189. 

1044 


\ 


AGENTS  OF  INSURER  §  396 

pointment  or  substitution,  or  unless  the  subagent's  damaging  acts 
and  omissions  were  co-operated  in  by  him.  By  force  of  the  author- 
ity to  substitute,  a  privity  is  estabhshed.  between  the  latter  and 
the  principal,  and  the  responsibility  is  directly  to  him.^  This 
general  rule  would  seem,  perhaps,  to  be  more  broadly  stated  by 
the  court  in  a  New  York  case,  Mhere  it  is  said,  in  substance,  that 
the  ordinary  course  of  business  frequently  necessitates  the  employ- 
ment of  clerks  by  the  agents  to  assist  them.  In  agencies  doing  a 
large  business,  it  is  presumed  that  clerks  may  be  employed  to 
attend  to  the  details  of  the  business.  An  agent  can  authorize  the 
clerk  to  contract  risks,  deliver  policies,  collect  premiums,  and  other 
matters  of  like  import,  and  the  act  of  the  clerk  in  such  mattei-s 
binds  the  company,  and  the  maxim,  "Delegatus  non  potest  dele- 
gare," does  not  apply  in  such  cases,'^  but  from  an  examination  of 
the  case  and  an  application  of  these  words  to  the  facts,  it  might  be 
reasonably  assumed  that  the  court  did  not  evidently  intend  to 
enlarge  the  general  rule,  since  the  acts  of  the  subagent  were  in 
accordance  with  a  general  course  of  dealing  sanctioned  by  the  com- 
pany. He  had  procured  pohcies  and  renewal  certificates  from  the 
company,  and  frequently  delivered  them  to  the  insured  waiving 
prepayment  of  the  premiums.* 

An  authority  to  employ  a  subagent  may  impliedly  arise  from 
the  character  of  the  agency,  or  where  the  instructions  are  such  as 
to  require  the  appointment  of  a  subagent  to  execute  them,  or 
where  it  is  indispensable  to  accomplisli  the  purpose  of  the  agency;  * 
the  principle  underlying  this  rule  being  analogous  to  the  rule 
that  an  agent  may  employ  the  usual  and  necessary  means  to  execute 
his  authority,^"  and  there  is  no  reason  why  the  rule  should  not  be 
equally  applicable  to  agents  of  insurance  companies  as  well  as  to 
those  of  other  companies.    So  the  general  agent  of  a  foreign  insur- 

6  2  Duer  on  Ins.  (ed.  181U)  sec.  4,  ()6.    But  i<ce  Waldman  v.  North  Brit- 

p.  187,  citifig  Story  on  Agency   (2d  isli  Mercantile  In?-  Co.  01  Ala.  170, 

ed.)  sees.  201,  217-33.     See  generally  8  So.  06(),  24  Am.  St.  Kep.  88.?. 

Mechem  on  Agency   (ed.  188!))   sees.  '  Bodine  v.  Insurance  Co.  51  N.  Y. 

197,  728;  Strong  v.  Stewart,  9  Heisk.  117,  123,  10  Am.  Rep.  560,  o71,  per 

(56  Tenn.)    137;  Louisville  &  Nash-  Karl,  J. 

ville  R.  R.  Co.  V.  Blair,  4  Baxt.  (63  «  See  Kuney  v.  Amazon  lus.  Co.  3<i 

Tenn.)   407;  Equitable  Life  Ins.  Co.  Hun    (N.  Y.)    66. 

V.  Brobst,  18  Neb.  526,  20  N.  W.  204;  ^  Ewell's  Evans  on  Agency,  p.  o9, 

Langdon  v.  Union  Mutual  Fire  Ins.  side    p.    44;    Morawetz    on    Private 

Co.  14  Fed.   272;   IVlound   City  Life  Corp.  (ed.  1882)  sec.  248. 

Ins.  Co.  v.  Huth,  49  Ala.  529;  Maver  i°  See    Owen    v.    Brockschmult.    .>4 

v.  Mvrtual  Life  Ins.  Co.  38  Iowa,  304,  Mo.  285;  Mernck  v.  Wagiier,  44  111 

18   Am.   Rep.   34;   Eclectic  Life  Ins.  266;  Strong  v.  Stewart,  9  Heisk.  (50 

,Co.  v.  Fahrenkrug,  68  111.  463;  Kuney  Tenn.)    147.  per   "^'i^^^''"  J- ^   ^^L'^"" 

V.  Amazon  Ins.  Co.  36  Hun  (N.  Y.)  hecker  v.  Lowell,  32  Barb.  (N.  Y.)  9, 

1045 


§  397  JOYCE  OX  INSURANCE 

ance  company  is  presumed  to  have  power  to  appoint  subagents.^^ 
.Vnd  a  general  insurance  agent  authorized  for  several  counties  to 
receive  applications,  fix  premium  rates,  receive  money,  countersign, 
issue,  renew,  and  consent  to  the  transfer  of  policies  does  not  exceed 
his  authority  by  appointing  a  subagent  to  receive  applications  and 
forward  them  to  him.^^  So  the  territory  to  which  an  agent  is  ap- 
pointed may  be  such  as  to  impliedly  authorize  the  appointment  of 
suljagents  and  their  acts  done  within  the  limits  of  their  power  will 
be  l)inding  upon  the  principal. -^^ 

The  power  conferred  u[)ou  an  agent  by  a  fraternal  order  may  be 
such  that  it  may  be  delegated.^* 

§  397.  Officers  of  insurance  corporations  and  associations  and 
their  powers. — We  have  seen  that  corporations  are  presumed  to 
act  through  agents,^^  and  that  in  the  absence  of  charter  provisions 
therefor  there  is  an  implied  consent  on  the  part  of  those  becoming 
members  of  mutual  companies  that  the  necessary  officers  and  agents 
shall  be  employed. ^^  It  is  a  settled,  general  rule  of  agency  that  oth- 
cers  of  a  corporation  or  association  are  special  agents,  whose  powers 
are  limited  and  prescribed  by  the"  charter  or  articles  of  association 
and  by-laws,  and  that  persons  dealing  with  them  are  chargeable 
with  notice  of  these  limitations.^^  But  the  acts  of  the  officers  of  a 
society  within  the  lawful  scope  of  his  authority  are  binding  on  the 
company,^^  for  an  insurance  company  must  act  by  its  ofhcers,  and 
their  acts  and  statements  as  such,  done  and  made  in  the  discharge 
of  their  duty  in  that  capacity  and  in  relation  thereto,  are  evidence 
against  the  company.^^  Although  an  agent's  powers  are  limited 
by  the  by-laws,  yet  if  such  agent  belongs  to  a  pai'ticular  class,  the 
functions  and  duties  of  which  are  settled  by  general  custom,  such 
agent  may  be  legally  assumed  to  possess  such  powers  as  are  usually 
exercised  by  the  class  within  the  category  of  which  his  agency 

17;    Ewell's   Evans   on   Agency    (ed.  ^^  Protection  Life  Ins.  Co.  v.  Foote, 

1879)  59,  *44;  1  Wait's  Actions  and  79  111.  SCJl ;  §  38G  herein. 

Defenses  221  see.  2.  ^^  Alexander  v.  Cauldwell,  83  N.  Y. 

11  Keenev"  v.  Aumzon  Ins.  Co.  36  -^80 ;  City  Fire  Ins.  Co.  v.  Carrugi,  41 
Hun   (N   Y)  06  ^'^-  ^^^ '  Silliman  v.  Fredericksburg, 

12  T-     '      '       j' (f  TTi- T«„   ri^     Orange  &  Chariot t^sburg  R.  R.   Co. 

1-^  Krumm  V.  Jeiierson  lire  Ins.  Co.    „_  r-,     .^    ,^^    x  nn    o  ^r  ^ 

A(\  ni  •     Qt   9o-  2'   Cratt  ( \  a.)  119;  2  ^lorawetz  on 

4U  Ulno  bt.  _^o.  .        Corp.    (2d  ed.)    sec.   591;   Angell   & 

"Insurane  Co.  of  North  America     ._^„  „t,  ^ /OfU  ^a  ^  i^..    ooi  «f 


Ames  on  Corp.  (9th  ed.)  sees.  291  et 
seq. 


V.  Tliornton,  130  Ala.  222,  55  L.R.A. 

547,  89  Am.  St.  Rep.  30,  30  So.  614.  ""Is  Hacknev    v.    Alleghanv    County 

1*  Supreme  Lodge  Knights  of  Pj-th-  Mutual  Ins.  Co.  4  Pa.  St.  185,  187. 
las  V.  Connelly,  18o  Ala.  301,  64  So.        i9  ^ij^^  Baptist  Church  v.  Brook- 

362.  lyn  Fire  Ins.   Co.  18  Barb.    (N.  Y.) 

15  §  309  herein ;  Angell  &  Ames  on  69 ;  Muhlman  v.  National  Ins.  Co.  6 

Corp.  (9th  ed.)  sees.  276  et  seq.  W.  Va.  508. 

1046 


AGENTS  OF  INSURER  §  397 

falls. 2°  But  tlie  officers  and  directors  may  not  ratify  acts  of  tlie 
jjresideut  which  they  themselves  could  not  have  originally  done.^ 
It  is  held  that  the  officers  of  mutual  insurance  companies  have  no 
authority  to  waive  the  by-laws  and  provisions  adopted  by  tlie  mem- 
bers of  the  company  for  their  mutual  protection.^  But  where  the 
waiver  is  of  some  matter  which  relates  rather  to  the  remedy  than  to 
the  substance  of  the  contract,  the  officers  of  the  company  luivr 
power  to  waive  the  by-laws,^  and  where  the  affairs  of  a  mutual 
company  are  managed  by  a  board  of  directors,  who  select  all  the 
officers  of  the  company,  such  officers  have  power  to  waive  defects 
and  ratify  invalid  policies  of  insurance.*  But  the  officers  cannot 
waive  a  condition  of  the  policy  in  a  mutual  company  which  jh-o- 
vides  that  in  case  of  any  change  in  the  facts  or  in  the  condition  of 
the  premises  the  policy  should  he  void,  except  upon  written  notice 
to  and  written  consent  of  the  directors  signed  by  the  secretary,  and 
the  payment  of  an  additional  premium  or  deposit.^  So  where  a 
by-law  of  a  mutual  company  provides  thai:  consent  to  other  insur- 
ance may  be  given  only  by  the  president  and  secretary,  it  is  error 
to  charge  the  jury  that  it  may  be  given  by  a  director  or  the  secre- 
tary.^ The  officers  of  the  company  may  waive  a  breach  of  conditioti 
of  an  insurance  policy  by  neglecting  to  cancel  the  policy  and 
thereafter  collecting  an  assessment  with  knowledge  of  the  fact.«.'^ 
So  the  company  may  waive  its  right  to  have  the  values  stated  in 
detail  by  its  oHicers  accepting  an  aggregate  valuation  of  all  the 
property  covered  by  the  application ; '  and  if  officers  of  a  com- 
pany, with  knowledge  of  tlie  actual  condition  of  the  title  of  the 
applicant,  choose  to  accept  the  risk,  the  policy  is  not  voided  becaui=e 
the  interest  of  the  assured  is  other  than  that  of  an  entire,  uncon- 

20  See     Commercial     Ins.     Co.     v.  Conway  Mutual  Fire  Ins.  Co.  4  K.  I. 

Union  Ins.  Co.  19  How.    (60  U.  S.)  141. 

318,  1.3  L.  ed.  636;  Union  Mutual  Life  ^  Brewer   v.    Chelsea    In.'^.    Co.    14 

Ins.  Co.  V.  White,  106  III.  67;  Minor  Gray    (80  ^Nlass.)   203,  209.     See  §§ 

V.  Mechanics'  Bank,  1  Pet.  (26  U.  S.)  35    36,  407  heroin. 

46   7  T    pH   47  *  Pratt   v.    Dwollinir-house    Mutual 

i  Crimm's  Appeal,  66  Pa.  St.  474.  J^^  ^^<^  ^f^/-  Y-  "-^Oe,  29  N.  K. 

See  §J^  455  et  seq.  herein.  i\^      ^  '      '  '  „,'  '  ,    •       nr  *     i 

2  TiV  1  en  i.  nr  i      1  T7.-  *  Evaus    V.     1  romountain     Mutual 

T     ^     Y  lu      ZT\\      "  T  .     «f    Fire  Ins.  Co.  9  Allen  (91  Mass.)  329. 

^*°'-  S""-  t^!^'^  ^f^  ^^"^-^   ^^^;/^        'Stark  County  Mutual  Ins.  Co.  v. 
Am.  Dec.  689;  Behler  v.  German  Mu-    jj^„.^|   yj  q,,j^    ^49     gee  §§  401,  404 

tual  Fire  Ins.  Co.  68  Tnd.  347,  354;  jieroin. 

Lyon     V.     Supreme     Assembly,    153       7  Ostorloh  v.  New  Denmark  Tns.  Co. 

Mass.  83,  26  N.  E.   236;   Baxter  v.  60  Wis.  126.  18  N.  W.  749.    Examhie 

Chelsea  Mutual  Fire  Ins.  Co.  1  Allen  Ware  v.  Millville  Fire  Ins.  Co.  45  N. 

(83  Mass.)  .294,  79  Am.  Dec.  730  and  J.  L.  177. 

note  733;  Westchester  Fire  Ins.  Co.        '  Residence  Fire  Ins.  Co.  v.  Hanna- 

V.   Earle,   33   Mich.   150;    Wilson    v.  wold,  37  IMicli.  103. 

1047 


§  397  JOYCE  ON  INSURANCE 

ditional,  and  sole  ownership  as  required  by  the  policy.'  So  parol 
evidence  is  admissible  to  show  that  a  misdescription  contained  in 
the  policy  arose  from  the  mistake  of  the  officer  of  the  company,  to 
Mhom  the  building  was  accurately  described.^"  But  an  officer's 
knowledge  acquired  by  rumor  or  in  his  individual  capacity  does 
not  operate  as  constructive  notice  to  the  company. ^^  And  where 
the  question  was  whether  a  policy  had  been  forfeited  for  breach 
of  condition  as  to  the  building  being  unoccupied,  it  was  held  imma- 
terial that  the  officers  knew  of  the  vacancy.^^ 

Where  the  president  and  director  of  the  company  go  at  once 
upon  the  ground  after  the  fire,  for  the  purpose  of  examining  into 
the  circumstances,  tliis  is  sufficient  evidence  of  notice,  although 
the  policy  provides  that  notice  of  loss  be  given  forthwith. ^^  So  the 
company  waives  the  right  to  demand  formal  proofs  of  loss  where 
the  officer  to  whom  such  proofs  should  be  made  visits  the  ground 
subsequent  to  loss,  and  agrees  with  the  insured  as  to  the  valuation 
of  the  property  destroyed ;  ^*  but  if  the  personal  examination  be 
made  by  the  officer  subsequent  to  the  thirty  days'  limit  it  does  not 
constitute  a  part  of  the  proofs,^*  although  the  agreement  of  an 
officer  of  the  company  and  the  insured  to  adjust  a  loss  does  not 
necessarily  raise  an  estoppel  against  the  company  to  claim  a  for- 
feiture for  breach  of  conditions. ^^  It  is  a  sufficient  compliance 
W'ith  a  condition  requiring  that  preliminary  proofs  of  loss  be  deliv- 
ered at  the  office,  if  there  be  an  actual  delivery  there  to  any  officer 
in  charge;  such  officer  may  also  waive  further  proofs  than  those 
submitted."  It  is  held  in  California  ^^  that  the  officers  of  an 
insurance  company  had  no  power  to  bind  the  company  for  the 
payment  of  the  premium  on  a  policy  by  acting  as  agents  of  an 
applicant  in  procuring  insurance  from  another  company. 

In  a  suit  by  a  bank  upon  a  surety  bond,  in  the  nature  of  a 
fidelity  insurance  contract,  an  instruction  that  the  officers  of  the 
bank  ai-e  required  to  give  the  same  supervision  and  care  over  the 

9  Union  Ins.  Co.  v.  Chipp,  93  111.  Ala.  436,  24  So.  399,  28  Ins.  L.  J.  199. 

96.  See  §§  575  et  seq.  herein. 

i^Moliere  v.  Penn  In.s.  Co.  5  Rawle  i*  Susquehanna   Mutual    Fire    Ins. 

(Pa.)  342,  28  Am.  Dec.  675.     See  §§  Co.  v.  States,  102  Pa.  St.  529.    See  §§ 

505-507  herein.  575  et  seq.  herein. 

^^  Keenan  v.  Dubuque  Mutual  Fire  ^^  Winnesheik  Ins.  Co.  v.  Sehueller, 

Ins.  Co.  13  Iowa,  375.     See  §§  544-  60  111.  465.    See  §§  575  et  seq.  herein. 

546  heroin.  16  Colonius   v.   Hibernia   Fire   Ins. 

12  Hermann  v.   Adriatic  Fire  Ins.  Co.  3  Mo.  App.  56.     See  §§  575  et 

Co.  85  N.  Y.  162,  39  Am.  Rep.  644.  seq.  herein. 

See  §§  565,  566  herein.  "  Edgerly  v.  Farmers'  Ins.  Co.  48 

I'Roumage  v.  Mechanics  Fire  Ins.  Iowa,  644. 

Co.    13    N.    J.    L.    (1    Green)    110;  ^^  Hutchinson  v.   State  Investment 

Georgia  Home  Ins.  Co.  v.  Allen,  119  &  Ins.  Co.  53  Cal.  622, 

1048 


1 


AGENTS  OF  INSURER  §§  398,  399 

management  of  the  affairs  of  the  bank  as  an  ordinarily  prudent 
business  man  would  give  is  corrett.^^ 

§  398.  Powers  of  officers  of  mutual  benefit  societies. — Committees 
and  officers  of  mutual  benefit  societies,  in  so  far  as  the  management 
of  the  affairs  of  such  organization  devolve  upon  them,  are  clothed 
to  a  certain  extent  Avith  the  powers  of  general  agent?,  while  in 
other  respects  they  occupy  no  other  footing  than  that  of  agents 
with  special  authority,   defined  and  limited  largely  by  the  laws 
governing  the  body  for  which  they  act.     They  resemble,  in  many 
particulars,  directors  and  officers  of  corporations,  so  far  as  their 
authority  is  concerned.     But  the  rule  of  limitation  of  their  powers 
is  flexible  to  the  extent  that  the  authority  which  they  are  held 
out  to  the  world  to  posse,«s  cannot  be  held  to  yield  to  restrictions 
and  limitations  which  are  unknown  to  the  parties  with  whom  they 
deal.     Their  principals  are  bound  by  their  ostensible  authority, 
subject  to  those  limitations  upon  the  power  of  the  principal  and 
upon  their  own  powers,  which  are  in  the  charter  or  constitution 
or  by-laws,2°  and  we  see  no  reason  why  they  should  not  be  bound, 
subject  to  the  above  limitations,  by  the  same  rules  a.s  like  agents 
in  other  companies.^     Again,  the  by-laws,  articles  of  association, 
and  certificates  of  membership  of  mutual  benefit  associations  deter- 
mine the  rights  of  the  members  and  of  the  association,  and  may  be 
enforced  by  the  parties  and  beneficiaries  according  to  their  respec- 
tive rights  as  therein  provided. ^     And  while  a  member  of  such  a 
society  is  bound  to  comply  with  the  requirements  of  the  valid  by- 
laws of  the  association,   the  officers  cannot  defeat  his   claim   by 
arbitrarily  rejecting  his  proofs  as  unsatisfactory,  or  by  wrongfully 
declaring  that  he  had  not  done  what  his  contract  and  the  by-laws  of 
the  association  required  of  him.^     So  a  local  ofiPicer  of  a  benefit 
association,  required  by  its  by-laws  to  collect  dues  from  members, 
is  the  agent  of  the  association,  and  a  member  discharges  his  obliga- 
tion to  the  association  when  he  pays  his  dues  to  such  agent.     lie 
has  a  right  to  rely  upon  their  proper  application.* 

§  399.  Powers  of  president. —  in  insurance  companies  a  wide  dis- 
cretion is  usually  vested  in  the  president,  and  he,  as  well  as  the 

18  Bank  of  Tarboro  v.   Fidelity  &  erv,  70  Mich.  587,  14  Am.  St.  Rep. 

Deposit  Co.  128  N.  C.  366,  83  Am.  St.  510,  38  N.  W.  588. 

Rep.  682,  38  S.  E.  208.  3  Supreme  Council  of  the  Order  of 

^^  See  Bacon's  Benefit  Societies  and  Chosen  Friends  v.  Forsinger,  125  Ind. 

Life  Ins.    (ed.  1888)    sees.  133,  134,  52,  21   Am.   St.  Rep.  196,  9  L.R.A. 

145;  Niblack  on  Mutual  Benefit  Soc.  501.  25  N.  E.  120. 

c.  vi.  sec.  311.  ■*  Supreme    Tribe   of    Ben    Hur   v. 

'As    to     agencv     of     subordinate  Hall,  24  Ind.  App.  316,  79  Am.  St. 

lodges,  see.§  407  herein.  Rep.  262,  56  N.  E.  780. 

2  Union   Mut.   Assoc,   v.    Montgom- 

1049 


§  399  JOYCE  OX  INSURANCE 

secretary,  may  generally,  in  all  matters  relating  to  the  transaction 
of  the  company's  business  at  its  office,  bind  the  company  by  acts 
which  are  within  the  legitimate  scope  of  the  business  and  of  his 
ostensible  authority.^  The  president  of  an  insurance  company  may 
indorse  its  notes  although  the  charter  requires  that  all  contracts 
and  other  agreements  made  by  the  company  in  the  necessary 
course  of  business  shall  be  in  writing  or  in  print,  and  signed  by  the  , 
president  and  secretary,  or  by  such  other  officer  or  officers  as  the 
directors  may  appoint  therefor,  and  in  such  case  it  is  not  necessary 
to  prove  a  formal  vote  of  the  directors.^  80  if  the  president  is 
authorized  to  adjust  and  pay  losses,  he  may  indorse  notes  and  deliver 
them ;  '^  and  an  ex-president  acting  as  president  may  by  indorse- 
ment pass  title  to  a  promissory  note  payable  to  the  company, 
especially  where  the  company  accepts  the  benefit  thereof  by  con- 
verting the  proceeds  to  its  use.^  The  president  may  also  validly 
transfer  a  premium  note  in  payment  of  a  loss  where  the  act  is  in 
the  ordinary  course  of  business,  and  in  conformity  with  a  usage 
and  a  standing  by-law  of  the  company,  although  the  charter  pro- 
vides that  the  corporate  business  shall  be  transacted  by  trustees 
and  agents  whom  they  may  appoint,  and  although  the  act  was 
not  expressly  authorized  by  the  board  of  trustees.^  But  it  is  held 
that  if  the  president  is  not  authorized  by  the  charter  or  l)y-laws  to 
indorse  and  negotiate  the  company's  notes,  that  he  has  no  au- 
thority as  such  officer  to  do  so,^°  and  if  he  gives  a  promissory  note 

5  See  Dilleber  v.  Kniokerbocker  "^  Baker  v.  Cotter,  45  ^Nle.  236.  See 
Life  Ins.  Co.  76  N.  Y.  567,  aff'g  7  Bank  of  Attica  v.  Pottier  &  Styrans 
Dalv,  540:  Cotton  State.s  Ins.  Co.  v.  Mfg.  Co.  1  N.  Y.  483,  49  Hun,  606,  ' 
Edwards,  74  Ga.  220;  Smith  v.  Smith,  17  N.  Y.  St.  Rep.  32/  :  Fifth  Natioji- 
62  111  493,  per  "Walker,  J.;  Bacon  v.  al  Bank  v.  Navassa  Phos|)liate  Co. 
Mississippi  Ins.  Co.  31  ]\ris.s.  116;  St.  119  N.  Y.  256,  23  N.  E.  737. 
Nicholas  Ins.  Co.  v.  Howe,  7  Bosw.  ^  Patten  v.  Moses,  49  Me.  255.  See 
(N.  Y.)  450.  Tuscaloosa    Cotton-Seed    Oil    Co.    v. 

See,    generally,    as    to    powers    of  Perry,  85  Ala.  158,  4  So.  635. 
president     and     other     oflicers     and       ^  Howland  v.  ilyer,  3  Comst.    (N. 

agents  of  corporations.  Sparks  V.  Dis-  Y.)     290;     affirming     Aspinwall     v. 

patch  Transfer  Co.  104  Mo.  531,  24  IMeyer,  2  Sand.  (N.  Y.)  180.     See  in 

Am.  St.  Rep.  351,  12  L.R.A.  714n,  15  connection  with  this  case  the  statute 

S.  W.  417;  Ceeder  v.  H.  M.  Loud  &  of  New  York  (1  Rev.  Stat.  722,  sec. 

Sons  Lumber   Co.   86  Mich.   541,  24  8)  in  regard  to  act  to  prevent  the  in- 

Am.    St.    Rep.    134,   49   N.    W.    575;  solvency  of  moneyed  corporations,  it 

Sherman  Center  Town  Co.  v.  Swigart,  being  held  that  a  transfer  of  a  note 

43  Ivan.  292,  19  Am.  St.  Rep.  137,  23  for  more  than  one  thousand  dollars, 

Pac.   569;    Thompson   on   Corp.    (ed.  without  a  resolution  of  the  board  of 

1895-96)   sees.  4613  et  seq.,  4697  et  tru.stees,  was  not  in  violation  of  that 

seq.,  4716  et  seq.,  4846  et  seq.,  4873  act,  as  the  charter  was  granted  sub- 

et  seq.  sequently  to  the  passage  of  the  act. 

6  Topping  V.  Beckford,  4  Allen  (86        ^°  Marine    Bank    v.     Clements,    3 
Mass.)  120.  Bosw.  (N.  Y.)  600. 

1050 


AGENTS  OF  INSURER  §  399 

as  president  of  ihe  company,  it  is  not  the  company's  not<?,  but  his 
own;^^  and  if  he  issues  forged  certificates  of  slock  for  an  indi- 
vidual loan  the  company  is  not  bound. ^^  Where  the  general  super- 
vision of  the  affairs  of  a  company  are  vested  under  its  by-laws  in  the 
president,  and  a  poUcy  upon  a  special  risk,  signed,  as  required 
by  the  by-laws,  by  the  president  and  secretary,  is  issued,  and  such 
officers  have  full  knowledge  of  all  facts  material  to  the  risk,  the 
policy  is  valid  and  enforceable,  although  the  rules  of  the  company 
provide  that  such  sjiecial  risks  shall  be  ai>proved  by  the  executive 
committee  and  three  directors  before  the  policy  is  issued,  and  the 
rule  is  not  complied  with.^^ 

The  president  has  authority  to  employ  counsel.^*  He  may  waive 
a  forfeiture  for  nonpayment  of  premiums,  as  in  ca.«e  the  insured 
rches  upon  his  statements  that  the  company  would  give  liim  what- 
ever accommodation  was  necessary,  and  the  company  thereafter, 
for  several  years,  receives  overdue  premiums. ^^  So  it  is  held  that 
lie  may  make  a  contract  with  a  special  agent,  whose  life  is  insured 
l)y  the  company,  to  charge  the  premiums,  although  a  by-law  pro- 
vides that  all  i)remiums  shall  Ijc  paid  in  ca.<h,  and  this  although  the 
agent  was  indel)ted  to  the  company  when  such  agreement  was  made 
by  him  with  the  president.^^'  He  may  waive  a  deviation  from  the 
risk  where  such  act  is  in  accordance  wnth  q, uniform  practice  of  tlie 
company  and  there  is  an  extra  compensation  paid  therefor.  In 
such  ca.se  an  indorsement  written  across  the  policy  without  any 
new  signature  and  recorded  by  the  secretary  is  sufficient."  And 
it  is  held  that  knowledge  of  the  president  is  knowledge  of  the  com- 
pany." So  the  president  alone,  or  with  concurrence  of  any  director, 
may  settle  a  loss  where  the  charter  and  by-laws  give  him  specifically 
such  authority,  although  its  charter  and  by-laws  also  provide  that 
the  company's  affairs  shall  be  managed  by  a  board  of  directors,  who 
may  appoint  sucli  other  officers  as  are  necessary  for  the  transac- 
tion of  its  business.i^     Where  the  president  is  held  out  as  having 

"Barker  v.   Mechntiirs'   Fire   Ins.        is  jjiHeber   v.    Knickc-rboeker   Life 
Co.  3  Wend.  (N.  Y.)  94.  20  Am.  Dec.    Ins.  Co.  7  Daly,  'yW,  70  X.  Y.  567. 
f)fi4.     But  see  as  to  same  principle,       ^^  Mi.ssouri  Valley  Life  Ins.  Co.  v. 
Thompson  v.  Bell,  10  Ex.  10,  123  L.   Dunklee,  16  Kan.  LIS. 
J.  Ex.  321.  ^^  Warren  v.  Ocean  Ins.  Co.  16  Me. 

12  Manhattan     Life     Ins.     Co.     v.   430,  33  Am.  Dee.  674. 
Fortv-Second  St.  &  Grand  St.  Ferry       "  Pomeroy     v.     Rocky     Monntani 
Co.  46  N.  Y.  St.  Rep.  130,  atfd  139   Ins.   &  Savings  Inst.  9  Col.  290,  o9 
N.  Y.  146,  34  N.  E.  776.  Am.  Rep.  144,  12  Pac.  153. 

"Merchants'      &      Manufacturers'       i^  Mercer  County  Mutual  Ins.  Co. 
Ins.  Co.  V.  Curran,  45  Mo.  142,  100   y.  Strauahau,  104  Pa.  St.  246. 
Am.  Dec.  361. 

1*  Oakley   v.   Workingman's  Bene- 
fit Soc.  2  Hilt.  (N.  Y.)'487. 

1051 


§  399 


JOYCE  ON  INSURANCE 


authority  to  make  oral  contracts  for  insurance,  third  persons  are 
not  affected  by  secret  limitations  on  his  authority  where  they  deal 
with  him  in  good  faith  and  without  notice  of  such  limitations.^" 

But  where  the  by-laws  require  the  written  consent  of  the  presi- 
dent to  other  insurance,  and  the  by-laws  are  attached  to  the  policy, 
it  is  held  that  in  such  case  his  oral  consent  is  insuihcient.  It  was 
also  provided  in  the  policy  in  this  case  that  the  by-laws  could  not  be 
altered  except  by  a  vote  of  two-thirds  of  the  stockholders  or  direc- 
tors.^ And  where  the  act  incorporating  an  insurance  company  pro- 
vides that  no  losses  shall  be  settled  or  paid  without  the  approbation 
of  at  least  four  of  the  directors,  Avith  the  president  or  assistants, 
or  a  plurality  of  them,  the  acceptance  of  an  abandonment  by  the 
president  and  assistants  alone  will  not  be  binding  on  the  company.^ 

So  it  is  held  that  the  president  of  a  mutual  company  has  no  au- 
thority to  waive  conditions  of  an  insurance  policy  dependent  upon 
the  by-laws,  and  make  a  difl'erent  contract  from  that  authorized  by 
such  by-laws.^  It  is  also  held  that  he  has  no  power  to  waive  or  dis- 
pense with  any  of  the  conditions  of  the  policy,  unless  authorized 
thereto  by  the  charter  or  by-laws  or  the  board  of  directors ;  ^  that 
he  cannot  wtiive  full  preliminary  proofs  of  loss;*  that  he  has  no 
power  to  waive  a  by-law  requiring  prepayment  of  the  premium 


^^  Commercial  Mutual  Marine  Ins. 
Co.  V.  Union  Mutual  Ins.  Co.  19  How. 
(60  U.  S.)  318,  15  L.  ed.  636,  2  Curt. 
(C.  C.)  524,  Fed.  Cas.  14372). 

Cited  in  United  States. — Ball  & 
Sage  Wagon  Co.  v.  Aurora  Fire  & 
Marine  Ins.  Co.  20  Fed.  232,  235; 
Constant  v.  Allegheny  Ins.  Co.  20 
Fed.  235. 

Colorado. — Union  Gold  Mining 
Co.  V.  Kocky  Mountain  National 
Bank,  2  Colo.  257;  Oro  Mining  & 
Milling  Co.  v.  Kaiser,  4  Colo.  App. 
219,  226,  35  Pae.  677. 

Indiana. — St.  Joseph  Hydraulic 
Co.  V.  Globe  Tissue  Paper  Co.  156 
Ind.  665,  675,  59  N.  E.  995. 

Maine.- — Walker  v.  Metropolitan 
Ins.  Co.  56  Me.  371,  378;  Sanborn  v. 
Firemen's  Ins.  Co.  16  Gray  (82 
Mass.)  448,  454. 

Missouri. — Huggius  Cracker  & 
Candy  Co.  v.  People's  Ins.  Co.  41 
Mo.  App.  530,  545. 

Neiv  Jersey. — Fifth  Ward  Savings' 
Bank  v.  First  National  Bank,  48  N. 
J.  Law,  513,  528,  7  Atl.  318. 


New  York. — Ellis  v.  Albany  City 
Fire  Ins.  Co.  50  N.  Y.  402,  405,  10 
Am.  Rep.  495;  Perry  v.  Council 
Bluffs  City  Waterworks  Co.  67  Hun 
(N.  Y.)  466,  22  N.  Y.  Supp.  151; 
Post  V.  MhvA  Ins.  Co.  43  Barb.  (N. 
Y.)  351,  363. 

North  Dakota. — MeCabe  Bros.  v. 
.^tna  Ins.  Co.  9  N.  D.  19,  23,  47 
L.R.A.  644,  81  N.  W.  426. 

^  Hale  V.  Mechanics'  Mutual  Fire 
Ins.  Co.  6  Gray  (72  Mass.)  169,  66 
Am.  Dee.  410;  Worcester  Bank  v. 
Hartford  Fire  Ins.  Co.  11  Cush.  (65 
Mass.)   265,  59  Am.  Dec.  145. 

2  Beatty  v.  Marine  Ins.  Co.  2 
Johns.  (N.  Y.)  109,  3  Am.  Dec.  401. 

3  Piiest  V.  Citizens'  Ins.  Co.  3  Al- 
len  (85  Mass.)  602;  Brewer  v.  Chel- 
sea Fire  Ins.  Co.  14  Gray  (80  Mass.) 
203.     See  §§  35,  36  herein. 

*  McEvers  v.  Lawrence,  1  Hoff  Ch. 
(N.  Y.)  172. 

*  Dawes  v.  North  River  Ins.  Co.  7 
Cow.   (N.  Y.)  462. 


1052 


AGENTS  OF  INSURER  §§  400,  401 

as  a  condition  precedent  to  the  validity  of  the  policy.^  In  this 
last  case  it  was  also  held  that  the  company  was  not  bound  by  the 
representations  of  the  president  to  a  mortgagee  that  the  mort- 
gagor had  procured  insurance  upon  the  mortgaged  property,  pay- 
able to  the  mortgagee,  when  in  fact  the  policy  had  not  been  deliv- 
ered, because  of  the  failure  of  the  mortgagor  to  pay  the  premium. 
And  the  sufficiency  of  preliminary  proofs  of  loss  is  not  admitted, 
nor  further  proof  waived,  by  the  statement  of  the  president  that 
"the  policy  will  show,"  on  inquiry  being  made  of  him,  as  to  "what 
further  preliminary  proof  of  loss  was  required."'  And  where  sucli 
notice  of  loss  is  not  given  witliin  the  time  required  by  the  by- 
laws, no  waiver  arises  from  the  remark  of  the  president,  made 
seventeen  months  after  the  loss,  that  the  comi)any  knew  when  the 
fire  occurred  that  it  was  its  loss,  that  it  would  do  what  was  right. 
and  was  not  surprised  that  they  were  not  notified.^  But  the  president 
and  secretary  may,  by  a  statement  made  in  the  course  of  their 
duties  after  the  loss  and  when  notice  of  it  is  received,  bind  the 
company,  as  in  case  they  admit  that  they  liad  agTced  to  insure 
the  property  or  keep  it  insured,  such  statement  binds  the  com- 
pany as  much  as  a  certificate  of  renewal  or  of  payment  of  the 
premium.^ 

§  400.  Powers  of  vice-president.— The  vice-president  of  a  corpora- 
tion may,  in  certain  cases,  such  as  the  absence  of  the  ])rcsident  or  a 
vacancy  in  the  office,  act  in  his  place  and  stead,  and  i)ei-form  tlie 
duties  wliich  would  have  devolved  upon  the  president.^"  A\'here 
the  title  of  the  assured  was  not  truly  stated,  Imt  the  existence  of  a 
mortgage  was  known  to  the  agent  and  to  the  vice-pr&sidenl  of  the 
insurance  company,  it  was  held  that  there  was  no  such  conceal- 
ment of  the  true  title  as  to  invalidate  the  policy,  notwithstanding  a 
provision  therein  that  it  should  be  void  if  tlie  interest  of  the  assured 
be  not  stated  in  the  policy  where  it  was  not  absolute." 

§  401.  Powers  of  secretary. — Where  the  powers  and  duties  of  the 
secretary  are  not  prescribed  by  the  charter  or  by-laws,  tlie  ]n-esuin].- 
tion  arises  that  he  possesses  and  may  exercise  all  such  powers  as 

6  Baxter   v.    Chelsea    Mutual    Fire  i"  Smith  v.  Smith.  62  111.  4ii;!,  per 

Ins.  Co.  1  Allen  (83  Mass.)   294,  79  Walker,  J.;  Mil.liell  v.  Deeds,  49  111. 

Am.  Dee.  730.  417,  424,  95  Am.  Dee.  621,  cited  in 

'SprinV  Garden   IMutual   Ins.   Co.  Morawetz    on     Private     Corp.     (ed. 

V.  Evans,^9  Md.  1,  66  Am.  Dee.  308.  1882)    sec.  252. 

8  Smith  V.  Haverhill   Mutual  Fire  "Home   INIntual    Fire  Ins.   Co.  v. 

Ins.  Co.  1  Allen  (83  Mass.)   297,  79  Garfield,  60  111.  124,  14  Am.  Rep.  27. 

Am.  Dee.  733.  As  to  the  power  of  the  vice-president 

^  First  Baptist  Church  v.  Brookivn  to  fill  vacancies  in  a  committee,  see 

Fire  Ins.  Co.  18  Barb.    (N.  Y.)    69.  Burton    v.    St.   George's   Society,   28 

See  §§  575  et  seq.  herein.  Mi<'h.  161. 

1053 


to 


§  401  JOYCE  ON  INSURANCE 

the  duties  of  the  office  reasonably  and  necessarily  require. ^^  Such 
officer  of  an  insurance  company  is  its  official  agent  to  carry  into 
effect  the  votes  and  directions  of  the  managing  body,  unless  the 
contrary  appears.^^  The  secretary  of  the  company  is  one  of  its 
general  managing  agents,  and  when  in  the  discharge  of  the  duties 
of  his  office  represents  the  corporation.  The  test  of  his  authority  is 
not  whether  he  acted  in  the  general  office  of  the  company  or  in 
another  state,  but  Avhether,  at  the  time,  he  was  engaged  in  the 
general  duties  of  his  office.^*  The  secretary  has  authority  to  bind 
the  company  by  his  acts  done  in  the  usual  course  of  business,  and 
in  such  case  his  consent  to  an  assignment  of  the  policy  indorsed 
thereon  is  presumptively  the  consent  of  the  company,  although  the 
policy  provided  that  such  consent  must  be  in  pursuance  -of  the 
by-laws,  and  although  there  was  no  resolution  of  the  board  of 
directors  authorizing  the  secretary's  action.^^  So  evidence  is  not 
competent  of  the  admissions  of  the  secretary  to  prove  that  the 
property  was  insured  at  the  time  of  the  fire,  when  he  was  not  then 
engaged  in  any  act  connected  with  his  agency.  Such  evidence  is 
not  a  part  of  the  res  gestic.  nor  is  such  testimony  competent  to 
disprove  the  agent's  denial  of  such  claimed  admission. ^^  A  secre- 
tary who  has  authority  to  collect  assessments  may  waive  a  for- 
feiture for  nonpayment  of  premiums.^'''  So  a  secretary  of  a  mutual 
benefit  association  may  bind  it  by  a  statement  to  the  insured  that 
he  need  not  pay  his  dues  until  certain  cliarges,  then  pending 
against  him,  were  determined,  where  such  charges,  if  true,  would 
operate  to  forfeit  the  policy,  and  such  statement  is  not  ultra  vires ;  ^^ 
and  it  is  held  that  where  a  policy  has  lapsed  for  nonpayment  of 
premiums,  it  may  be  extended  by  the  oral  agreement  of  the  secre- 
tary, made  out  of  the  state,  where  the  home  office  is  located. ^^ 
And  notice  to  the  com))any  of  a  sheriff's  sale  of  the  property,  and 
of  an  equitable  title  thereto  in  the  assured,  may  be  established  by 
proof  that  the  assured  had  conversed  with  the  secretary  of  the  com- 
pany in  relation  to  the  sale,  and  had  told  him  that  the  property 
Avas  his  the  same  as  before  the  sale,  although  it  was  shown,  in 

12  Ree  §  387  lierein.  ^^  First  Baptist  Church  v.  Brook- 

i^Leary  v.  Blanchard,  48  Me.  269.  lyn  Fire  Ins.  Co.  28  N.  Y.  153. 

1*  Hastings  v.   Brooklyn   Life  Ins.  ^"^  Lonohbriclae   v.    Iowa   Life    En- 
Co.  138  N.  Y.  473,  34  N.E.  289,  revV  dowment  A.ssoc'.  84  Iowa,  141,  50  N. 
53  N.  Y.  St.  Rep.  63,  63  Hun,  624,  W.  568. 
17  N.  Y.  Supp.  333.  is  Jones  v.  National  Mutual  Bene- 

i^Conover  v.   :\rutual   Ins.    Co.   of  fit   Assoc.   8  Kv.   Law   R.   599,   2   S. 

Albany,  3  Denio   (N.  Y.)   254;  afif'd  W.  447. 

1  N.  Y.  290;  Durar  y.  Hudson  Ins.  ^^  Hastings  y.   Brooklyn  Life   Ins. 

Co.  24  N.  J.  L.   (4  Zab.)   171.     But  Co.   138  N.   Y.   473,   34  N.   E.   289, 

see    Loring    y.    ]\Iannfacturers'    Ins.  rey'g  44  N.  Y.  St.  Rep.  37,  63  Hun. 

Co.  8  Gray  (74  Mass.)  28.  624,"  17  N.  W.  Supp.  333. 

1054 


AGENTS  OF  INSURER  §  401 

connection  with  this  testimony,  that  there  was  also  a  public  notice 
of  the  sale;'^°  though  knowledge  of  the  couipany  doe.--  not  an^e, 
as  a  matter  of  law,  from  the  fact  that  an  agent  of  the  company 
told  the  secretary  of  the  use  of  cotton-gins,  which  increiu^^ed  the 
risk,  where  such  information  was  given  the  secretary  on  the  street 
and  in  another  town,  and  he  forgot  the  fact.^  But  knowledge  of 
the  secretary  of  a  county  mutual  lire  insurance  C()m])any,  coupled 
M^tli  his  consent  and  the  receipt  of  assessments  by  the  board  of 
directors  constitutes  a  waiver  of  a  condition,  even  though  written 
consent  of  the  company  is  required  to  bind  it.^  And  a  mutual 
company  is  not  estopped  from  chiiming  the  violation  of  a  by-law 
not  set  out  in  the  policy,  although  the  treasurer  of  tlie  company, 
upon  being  a.'^ked  by  the  holder,  in  the  presence  of  the  secretary, 
if  the  policy  expressed  all  the  conditions  and  he  replied  that  it  did, 
the  secretary  remaining  silent.^  So  a  change  of  beneliciaries  is  not 
valid,  although  consented  to  by  the  secretary,  where  such  act  is 
not  within  the  scope  of  his  authority,  and  the  provisions  of  the 
constitution  relating  to  such  changes  are  not  complied  with.*  It 
is  decided  that  the  secretary  cannot  issue  a  policy  to  himself  so 
as  to  bind  the  company  without  its  actual  knowledge  of  the  facts.^ 
If  the  secretary  undertakes  to  act  in  tilling  out  the  application, 
the  presumption  arises  that  the  company  waives  inquiry  into  mat- 
ters concerning  which  information  is  not  requested.  Statements 
of  facts  in  the  application  may  l^e  waived  by  the  failure  of  the 
secretary  who  fills  it  out  to  insert  them  therein. ^  Where  the  proofs 
of  loss  \vere  pronounced  insufficient  by  the  company,  and  the 
evidence  is  contradictory  upon  the  question  whether  there  was  a 
waiver  or  not  by  the  secretary,  the  question  of  waiver  is  for  the 
jury.''  And  the  a^^^isnee  of  a  policy  is  justified  in  inferring  that 
it  had  been  canceled  by  the  company  where  he  receives  a  letter 
from  its  secretary  stating  tnat  all  policies  were  canceled  by  tlie 
company  for  failure  to  pay  assessments  within  thirty  days.^  But 
the  secretary  of  an  insurance  company  has  no  authority,  by  virtue 

20  Elliott  V.   Asliland   Mutual  Fire  Fire  Ins.  Co.  130  N.  Y.  20G,  2!)  N. 

Tns.  Co.  117  Pa.  St.  548,  2  Am.  St.  E.  117,  rev'g  53  Hnn  (N.  Y.)  101,  6 

Hop.  703,  12  Atl.  676.  N.  Y.  Supp.  78.  25  N.  Y.  St.  Kep. 

^  Texas  Baiikint?  Co.  v.  Hutchin.s,  784. 

53  Tex.  61,  37  Am.  Rep.  750.  ^  Tiefenthal     v.     Citizens'     Mutual 

2Kesler  v.  Farmers'   IMutual  Fire  Fire   Ins.   Co.   53   ^licli.   306,   19   N. 

&   Li.2:litning   Tns.    Assoc.   160   Iowa,  W.  0. 

374,  141  N.  W.  954.  '  Susquehanna    Mutual    Fire    Tns. 

3  Miller    V.    Hillsboroush    Mutual  Co.  v.  llallock   (10  Sadler,  386,  Pa. 

Fire  Assoc.  42  N.  J.  Eq.  459.  1888)  14  Atl.  167,  22  Wkly.  Not.  Cas. 

*  Wendt  V.  Iowa  Learion  of  Honor,  151. 

72  Iowa,  682,  34  N.  W.  470.  *  Columbia  \ns^.  Co.  v.  Masonheim- 

6  Pratt  V.   Dwelling-House  Mutual  er,  76  Pa.  St.  138. 

1055 


§  401  JOYCE  ON  INSURANCE 

of  his  ofRce  alone,  to  bind  the  company  by  any  arrangements  which 
he  may  choose  to  make  with  an  insured  in  the  adjustment  of  the 
loss.^  Where  it  is  the  duty  of  the  secretary  of  a  mutual  insur- 
ance company,  under  its  by-laws,  to  keep  records  of  the  doings 
of  the  directors  and  of  the  companj',  and  to  receive  notice  of  loss, 
his  admissions  made  in  letters  addressed  to  the  assured  are  admis- 
sible in  evidence  in  a  suit  upon  the  policy  where  they  acknowledge 
notice  of  loss  or  refer  to  the  acts  of  the  directors  in  connection 
therewith.^"  So  the  secretary's  letter  to  the  assured  constitutes  a 
waiver  of  defects  in  the  proofs  of  loss,  when  written  upon  the 
receipt  thereof,  and  objecting  to  the  magistrate  who  signed  the 
certificate,  but  not  to  the  form  of  the  certificate.^^  So  the  secre- 
tary may  bind  the  company  by  his  admissions,  made  in  the 
course  of  correspondence,  as  to  the  sufficiency  of  proofs  of  loss, 
where  he  is  generally  authorized  to  answer  all  communications 
of  the  insured ;  ^^  so  where  the  policy  requires  that  notice  and 
preliminary  proofs  of  loss  be  sent  to  the  secretary,  he  is  the  agent 
of  the  company,  fully  empowered  to  acknowledge  the  receipt 
thereof  and  to  determine  their  sufficiency,  and  his  admissions  relat- 
ing thereto  will  bind  the  company ;  ^^  and  it  is  sufficient  if  such 
notice  of  loss  be  transmitted  to  the  secretary  by  a  local  agent  of  the 
company,  upon  knowledge  thereof,  given  the  latter  by  the  assured.^* 
The  company  is  bound  by  an  oral  agreement  to  pay  the  loss  within 
a  certain  time,  made  by  the  secretary  in  the  presence  of  the 
president  of  the  company,  who  did  not  dissent,  where  the  assured 
also  receives  a  writing,  signed  by  the  company's  secretary  and 
general  agent,  notifying  him  of  the  acceptance  of  the  proofs  of 
loss.^^  Again,  orders  for  the  payment  of  the  loss,  signed  by  the 
secretary,  constitute,  if  he  knew  all  the  facts,  a  conclusive  waiver 
in  writing  within  the  terms  of  a  by-law,  providing  that  there 
could  be  no  waiver  of  any  conditions  of  the  policy  except  by  in- 
dorsement on,  or  specific  acknowledgment  in,  the  policy.^®  Where 
two  companies,  doing  business  under  one  name,  issued  a  policy 
which  provided  that  proofs  of  loss  should  be  given  to  the  com- 
panies, it  is  a  sufficient  compliance  with  the  conditions  if  such 

*  Cohimbian  Ins.  Co.  v.   Ashby,  4  ^*  West    Branch   Ins.    Co.   v.   Hel- 

Pet.  (29  U.  S.)  139,  7  L.  ed.  809.  fenstein,  40  Pa.  St.  289,  80  Am.  Dec. 

^°  Lewis  V.  Monmouth  Mutual  Fire  573. 

Ins.  Co.  52  Me.  492.  ^*  Farmers'  &  Merchants'  Ins.  Co. 

"  Bailey  v.  Hope  Ins.  Co.  56  Me.  v.  Chesnut,  50  111.  Ill,  99  Am.  Dec. 

474.  492. 

12  Troy  Fire  Ins.  Co.  v.  Carpenter,  ^^  Farmers'   Mutual   Fire  Ins.   Co. 
4  Wis.  20,  32.  V.   Gargett,  42  Mich..  289,  3  N.  W. 

13  Trov  Fire  Ins.  Co.  v.  Carpenter,  594. 
4  Wis.  20. 

1056 


AGENTS  OF  INSURER  §§  402,  403 

proofs  are  given  to  a  person  who  acted  as  secretary  for  both  com- 
panies, and  by  him  given  to. one  who  acted  as  president  of  both 
companies,  and  had  charge  of  tlieir  loss  department.^'''  But  the 
secretary  has  no  authority  to  bind  the  comi)any  bv  a  statement 
in  a  letter- written  to  a  broker  that  the  company  would  see  that 
certain  policies  issued  b}^  other  ofliccs  were  adjusted  satisfactoi-ily. 
In  this  case  the  company  had  sent  its  own  policy  for  part  of  the 
amount  of  insurance  requested  and  those  of  three  other  companies 
for  the  balance.-^* 

The  mere  fact  tliat  an  insured  did  not  demand  of  the  secre- 
tary Of  the  insurance  company  in  which  he  held  a  policy,  to  show 
his  authority  to  enter  into  an  arrangement  for  the  seltleuient  of  a 
loss,  is  not  suflicient,  as  matter  of  law,  to  show  an  admission  on  his 
part  of  such  authority. ^^ 

§  402.  Powers  of  assistant  secretary, —  it  is  held  in  Virginia^" 
that  an  assistant  secretary  of  a  life  insurance  comi)any  may  waive 
the  forfeiture  of  a  ])olicy  arising  from  tlie  nonpayment  of  pre- 
miums when  due.  and  that  he  has  authority  to  reinstate  the  policy. 

§  403.  Powers  of  treasurer. — The  treasurer  of  an  insurance  coin- 
]iany,  from  the  nature  of  his  office,  is-authorized  to  receive  moneys, 
and  it  becomes  his  duty  to  account  for  the  same.^  But  boiTowing 
money  to  ])ay  benefits  in  the  association  is  not  an  act  within  the 
scope  of  his  oflicial  duties;  ^  no-r  does  the  fact  that  he  received  assess- 
ments from  the  insured,  after  knowledge  of  his  misrepresentation 
as  to  his  age,  validate  the  contract.'  He  may,  however,  ])ind  the 
company  by  all  acts  within  the  usual  course  of  his  business,*  and 
if  the  treasurer  of  a  corporation  has  been  accustomed,  with  the 
knowledge  and  consent  of  the  company,  to  pursue  a  certain  course 
of  business  for  a  number  of  years,  such  as  signing  and  indorsing 
business  paper  in  its  name,  and  a  person,  with  knowledge  of  such 
custom,  becomes  a  purchaser  of  an  accommodation  note  indorsed 
to  him  for  value,  the  company  is  estopped  to  deny  the  authority 
of  the  treasurer  to  perform  such  act.^     The  last  two  decisions, 

iminnock  v.   Eureka  Eire  &  Ma-  l^ibber  Co.  4  Blaldif.   (U.  S.  .C.  C.) 

rine  Ins.  Co.  90  Mich.  236,  51  N.  W.  1,  Fed.  Cas.  No.  10153. 

307_  2  ScrewiiKMi's   I'ciicvolcnt   Assoc,  v. 

^8  Constant  v.   AUeo-liany   Ins.   Co.  Smith,  70  Tex.   I(i8,  7  S.  W.  79:1. 

3  Wall.  Jr.   (U.  S.  C.  C.)   313,  Fed.  '  g^^ett  v.  Citizens'   Mutual   Relief 

Cas.  No.  3i:?6.  Soc.  78  Me.  541,  7  Atl.  394. 

"Columbian  Ins.  Co.  v.  Ashley,  4  *  Stark  Bauk  v.  Cniled  States  Pot- 
Pet.  (29  U.  S.)  139,  7  L.  ed.  809.  I  cry  Co.  34  Vt.  144. 

2°  Piedmont  &  Arliusiton  Life  Ins.  5  c-j,^o,,,|  Nj,tional   P.ank  v.  Pother 

Co.  v.  McLean,  31  Gratt.   (Va.)   517.  &  Stymus  Mfg.  C„.  18  N.  Y.  St.  R. 

iSee  Portaoe  County  Mutual   Ins.  954,  2  N.   Y.   Supi).   044,  50   N.   Y. 

Co.   V.   Wetraore,   17   Ohio,   330;   N.  Sup.  Ct.  216,  annotated  case. 
E.   Car   Sprina:  Co.   v.   Union   India 

Joyce  Ins.  Vol.  I.— 67.        1057 


§  404  JOYCE  ON  INSURANCE 

while  not  those  relating  to  insurance,  would,  however,  by  analogy 
be  applicable  to  the  acts  of  treasurers  of  insurance  companies,  since 
the  principles  underlying  them  are  those  applicable  to  all  agents  in 
general. 

§  404.  Powers  of  directors.^ — It  is  a  general  rule  that  where  a 
body  is  intrusted  by  the  charter  with  the  management  of  the  affairs 
of  the  corporation,  and  the  mode  of  action  is  prescribed  therein, 
the  company  can  act  only  through  the  designated  parties  and  in 
the  manner  specified.'  But  in  the  absence  of  provisions  in  the 
statutes  or  by-laws  limiting  the  authority  of  directors,  their  powers 
are  supreme.®  The  relation  which  directors  sustain  to  the  cor- 
poration or  stockholders  is  fiduciary  in  its  character,  and  there  is 
an  implied  rule  of  law,  applicable  to  all  trustees,  that  they  will 
not  abuse  the  confidence  or  trust  reposed  in  them.^  A  director 
cannot  vote  upon  a  matter  in  which  he  is  personally  interested.^" 
Individual  directors  cannot  act  validly  in  a  matter  which  the  charter 
requires  to  be  done  by  the  board ;  ^^  but  the  board  may  act  through 
others  by  virtue  of  a  statutory  authorization,  as  where  they  appoint 
a  committee  to  act.^^  xhe  directors  may  by  their  acts,  done  with 
full  knowledge  of  the  facts,  waive  conditions  in  the  policy.  So  if 
the  policy  provides  that  all  claims  under  it  shall  be  forfeited  for 
fraud  of  the  assured  in  making  proofs  of  loss,  and  the  assured,  in 
good  faith,  includes  therein  articles  not  her  own,  and  such  act 
is  done  with  the  knowledge  of  an  officer  of  the  company,  and  the 
directors  thereafter,  knowing  all  the  facts,  order  the  policy  paid, 
they  thereby  waive  the  forfeiture. ^^  In  an  Iowa  case  the  by-law  of 
a  mutual  company  provided  that  the  directors  might  recover  the 

6  Under  the  general  corporation  ^  Hoyle  v.  Plattsburg  &  Montreal 
law  of  New  York  the  term  "diree-  R.  R.  Co.  54  N.  Y.  314,  13  Am.  Rep. 
tors,"  used  in  relation  to  corpora-  595,  per  Johnson,  C;  Brinkerhotf  v. 
tions,  includes  trustees  or  other  per-  Bostwick,  88  N.  Y.  52;  Chase  v.  Van- 
sons  by  whatever  name  known,  duly  derbill,  62  N.  Y.  307. 
appointed  or  designated  to  manage  ^^  Beers  v.  New  York  Life  Ins. 
the  affairs  of  the  corporation:  Laws  Co.  49  N.  Y.  182;  Gamble  v.  Queens 
1892,  e.  687;  Laws  1909,  c.  28,  Co.  Water  Co.  123  N.  Y.  91,  9  L.R.A. 
Consol.  Laws,  c.  23;  Parker's  N.  Y.  527,  25  N.  E.  201. 
Ins.  Law  (ed.  1915)  with  "General  ^^  People's  Mutual  Ins.  Co.  v. 
Corp.  Law;"  Jones  on  Business  Cor-  Westcott,  14  Gray  (80  Mass.)  440; 
poration  Law,  88.  Monmouth   Mutual  Fire  Ins.   Co.   v. 

'  See    Union    Mutual    Ins.    Co.    v.  Lowell,  59  Me.  504. 

Keyser,  32  N.  H.  313,  64  Am.  Dec.  ^^  Sheridan    Electric   Light    Co.   v. 

375.  Chatham  National  Bank,  52  Hun  (N. 

SBeveridge  v.  New  York  Elevated  Y.)  575,  580,  aft'd  127  N.  Y.  517,  28 

Ry.  Co.  112  N.  Y.  1,  2  L.R.A.  648,  N.  E.  467. 

19    N     E.    489;    Gamble    v.    Queens  ^^  farmers'   Mutual  Fire   Ins.    Co. 

County  Water  Co.  123  N.  Y.  91,  9  v.   Gargett,  42   Mich.   289,  3  N.   W. 

L.R.A.  527,  25  N.  E.  201.  954. 

1058 


AGENTS  OF  INSURER  §  404 

Avliole  premium  note,  and  annul  the  policy  at  tbfeir  option,  upon  the 
nonpayment  of  an  assessment.  A  member  was  delinquent  in 
makinji;  {)ayment,  and  the  directors  voted  that  he  should  lose  all 
the  benelit  under  his  policy  during  the  period  of  such  default,  but 
that  he  should  be  liable  for  future  assessments,  and  it  was  decided 
that  the  directors  bad  not  exceeded  their  authority  by  such  con- 
ditional annulment.^*  So  the  directors,  or  an  agent  authorized  by 
them,  may  rescind,  by  mutual  agTcemcnt  with  the  insured,  a  con- 
tract of  insurance,  for  it  is  essentially  necessary  to  the  safe  and 
proper  conduct  of  the  company's  business  that  such  a  power  should 
exist  in  its  board  of  directors. ^^  The  acts  of  the  directors  of  a 
mutual  company  in  a.ssessing  a  premium  note  are  not  judicial, 
and  they  are  obligated  in  making  such  assessment  to  comply  with 
the  requirements  of  the  comi)any"s  charter,  or  tlieir  acts  are  in- 
valid.^® So  evidence  is  ad)nissil)le,  in  an  action  on  the  policy  in 
a  mutual  company,  that  an  assessment  was  levied  at  a  meeting 
where  only  five  directors,  out  of  thirteen,  were  present,  if  such  a 
nimiber  constitutes  a  quorum  under  the  by-laws  of  the  company, ^"'^ 
and  the  authority  of  the  directors  of  a  mutual  company  to  lay  an 
assessment  after  a  certain  date  is  not  taken  away  by  a  vote  of  the 
board  that  all  outstanding  policies  shall  be  canceled  on  such  certain 
date.^8  But  a  minority  of  the  directors  cannot  legally  make  an 
assessment  to  meet  losses  and  expenses  for  a  certain  term :  ^^  nor 
can  the  insured  bind  the  company,  by  giving  notice  of  loss  to  a 
director,  where  the  policy  provides  that  such  notice  must  be  given 
to  the  company's  secretiU'y  or  other  authorized  oflicer.^"  But  it  is 
held  that  the  directors'  acts  in  consenting  to  an  assignment  of  a 
])olicy  constitutes  a  w-aiver  as  to  prior  insurance,  effected  contrary 
to  a  charter  provision  that  the  application  shall  state  the  existence 
of  prior  insurance  or  the  policy  shall  be  void.^  Again,  the  trustees 
of  a  mutual  benefit  society  have  no  power  to  vote  back  jiay  to  them- 
selves.2  And  it  is  held  in  Connecticut  that  the  knowledge  of  a 
director  must  have  been  obtained  by  him  while  acting  officially 
in  the  course  of  his  business  in  order  to  bind  the  company,  unless 
he  is  acting  under  some  special  authority  other  than  that  merely  of 

1*  Coles  v.  Iowa  State  Mutual  his.        i^  Monmouth   County  Mutual  Fire 

Co.  18  Iowa,  425.  Ins.  Co.  v.  Lowell,  59  Me.  504. 

15  Roland  v.  Whitman,  33  Ind.  64.        ^o  |„iand  Insurance  &  Deposit  Co. 

16  Herkimer    County    Mutual    Ins.  v.  Staufier,  ."53  Pa.  St.  397. 

Co.  v.  Fuller,  14  Barb.  (N.  Y.)   373.        ^  Barnes  v.  Union  Mutual  Fire  In.';. 

"  Susquehanna    Mutual    Fire    Ins.    Co.  45  N.  H.  21. 
Co.  v.  Tunkliannock  Toy  Co.  97  Pa.       ^  state  v.  People'.s  Mutual  Benefit 
St.  424,  39  Am.  Rep.  816.      .      •  Assoc.  42  Ohio  St.  579. 

1*  Fayette  Mutual  Fire  Ins.  Co.  v. 
Fuller,  ^8  Allen   (90  Mass.)   27. 

1059 


§  404  JOYCE  ON  INSURANCE 

a  director.^  Parsons,*  however;  denies  that  tins  case  is  a  correct 
statement  of  the  law,  and  asserts  that  if  the  director  had  the  knowl- 
edge ''in  mind  when  he  acted  in  the  company's  business,"  the  com- 
pany would  be  bound.  While  this  might  l)e  true,  if  the  fact  were 
conceded  on  the  trial,  we  apprehend  that  otherwise  there  might  be 
some  dithculty  in  proving  thM  the  director  ''had  it  in  mind  when 
he  acted  in  tlie  company's  business."  Exactly  how  late  must  the 
knowledge  be  acquired  so  as  to  "be  presumably  ]iresent  in  the  mind 
of  the  agent  at  the  time  he  acts  in  the  business  to  which  it  relates?" 
While  the  nearness  in  time  when  the  information  was  acquired  to 
the  time  when  the  director  acted  "in  the  company's  business"  might 
perhaps  afford  an  inference  of  knowledge  on  his  part  while  so  act- 
ing, it  Avould  seem,  in  the  absence  of  other  proof,  too  nearly  hypo- 
thetical to  justify,  as  against  the  company,  a  deduction  of  actual 
knowledge,  at  such  meeting,  on  the  part  of  the  agent.  The  true 
test  ought  always  to  be,  Was  the  knowledge  acquired  by  the  agent 
under  such  circumstances  as  to  justify  a  fair  and  reasonable  pre- 
sumption that  he  was  acting  within  the  apparent  scope  of  his 
authority  at  the  time?  If  so,  the  company  should  be  bound ;^ 
and  we  might  add  that  if  the  proof  is  clear  that  at  the  time  of 
acting  for  the  princii)al  such  knowledge  was  present  to  the  agent's 
mind,  the  princi|ial  would  be  bound.  Ijut  the  evidence  ought 
certainly  to  be  clear  and  satisfactory.^  The  levy  and  collection 
of  assessments  by  the  board  of  directors  of  a  county  mutual  fire 
insurance  company,  coupled  with  -the  knowledge  and  consent  of 
the  secretary  will  constitute  a  waiver  of  a  condition  notwithstanding 
no  written  consent  of  the  company  is  given  as  required  by  the 
policy.' 

It  is  not  optional  with  the  directorate  of  mutual  life  companies 
not  purely  stock  cori)()rations  whether  they  will  declare  dividends 
or  to  what  extent  of  the  so-called  surplus  such  companies  are  bound 
to  treat  the  accounts  of  its  policy  holders  as  if  they  were  cestuis 
que  trust  and  they  must  keep  accurate  accounts  with  their  policy 

3  Farrell     Foundrv     v.     Barb,     26  wliich    it    relates.     ...     It   would 

Conn.  376.     See  Stennett  v.  Pennsyl-  be    ridiculous   to   hold   that    a   board 

vania  Fire  Ins.  Co.  68  Iowa,  674,  28  of  directors  might  act  as  tliough  ig- 

N.  W.  12;  General  Ins.  Co.  v.  United  norant  of  a  fact  tliat  came  to  them 

States  Ins.  Co.  10  Md.  517,  69  Am.  on  the  street  or  othenvise  before  the 

Dec.  174;  Shafer  v.  Phrenix  Ins.  Co.  hour   of   board   meeting."     He  cites 

53  Wis.  361,  10  N.  W.  381.  the  two  first  cases  in  the  last  note. 

*Mav  on  Insurance  (Parsons  ed.)  ^  S§  544,  545  herein, 

see.   133d.     He  says :    "Time  of  ac-  ^  ggg  Satterfield  v.  Malone,  35  Fed. 

quiring   knowledge   is   immaterial   if  445,  1  L.R.A.  35. 

present  or  so  late  as  to  be  presum-  '  Kesler  v.  Farmers'   Mutual   Fire 

ably  present  in  the  mind  of  the  agent  &  Lightning  Ins.   Assoc.   160   Iowa, 

at  the  time  he  acts  in  the  business  to  374,  141  N.  W.  954. 

1060 


AGENTS  OF  INSURER  §§  405,  406 

liolders  as  classes  failing  which  no  presumi)tion  will  ho  indulged 
in  the  company's  favor  when  it  conies  to  valuing  and  applying  '"sur- 
plus" or  "dividend  additions"  to  lapsing  policies.* 

§  405.  Powers  of  superintendent.-;— The  power  of  a  superintendent 
to  represent  or  bind  the  company  may  be  expressly  conferred  or 
may  arise  by  imi)li(ation  from  the  acts  and  declarations  of  the 
company;  and  if  an  insurance  company  is  responsible  for  the  acts 
of  its  sui)erintcndent  in  making  such  representations,  evidence  is 
admissible  that  delay  in  bringing  an  action  was  caused  by  such 
agent's  assurances  that  the  company  would  pay  the  claim,  if  just. 
If  such  assurances  were  acted  upon,  they  will  estop  the  comi)any, 
notwithstanding  a  ])r()vision  of  the  policy  that  agents  of  the 
comi)any  are  not  authorized  to  waive  forfeitures.^  It  further  ap- 
peared, however,  in  this  case  that  there  had  been  several  communi- 
cations between  the  company  and  the  claimant,  that  tlie  superin- 
tendent had  received  the  proof  of  death,  and  had  put  his  certificate 
thereon,  and  the  answer  of  the  company  to  the  claim  and  proofs 
were  made  through  him.  There  Avas  no  evidence  of  his  authority 
other  than  that  given  by  himself,  which  was  that  he  had  solicited 
insurances  and  forwarded  ap])lications,  and  had  authoiily  to  receive 
and  deliver  the  amount  paid  in  settlement  of  just  claims.  It 
would  seem,  therefore,  that  he  was  held  out  by  the  comyjany  as 
possessing  the  authority  exercised." 

§  406.  Powers  of  general  managers. —  Where  agents  of  foreign 
companies  represent  them  as  general  managers  or  managers,  they 
have  generally  large  discretionary  powers  in  regard  to  making 
insurances  and  transacting  business  relating  thereto.  Their  i)Owers 
are  similar  to  those  of  officers  of  the  company.  A  resident  agent, 
designated  officially  as  ''manager,"  has  authority  to  employ  an- 
other to  solicit  risks,  contract  therefor,  to  deliver  policies,  and 
collect  premiums,  and  the  acts  of  the  agent  so  appointed,  done 
within  the  employment,  will  bind  the  company."  Ho  may  also 
waive  conditions  in  the  policy,  and  estop  the  company  by  his  acts 
w^ithin  the  scope  of  his  authority.^'^  And  wliere  he  has  entire 
control  of  the  company's  aHairs,  he  may  bind  it  by  acts  warranted 

ninited    States    LifV,  Jns.    Co.    v.  lo  See  §§  42r)-427,  31):?,  :m  herein. 

Spinks,    126    Kv.    405,    13    L.K.A.  "  Kclectic  Life  Ins.  Co.  v.  Fahren- 

(N.S.)    10r)3,    fKf   S.    W.    880.     Case  kru-.  (i8  111.  -Kii!. 

seems  to  be  first  to  deMne  "dividend  ^^  s,.(.  Mcdnrk  v.  Metroiudilan  Life 

additions"   under   statutes    providing:  Co.  .')(!  Conn.  528,  1   L.R.A.  563,  16 

as,'-ainst  forCeilure  for  I'ailure  to  pay  Atl.   263;    Fastcrn    K.  K.  Co.  v.   Re- 

preniiums    (note,    Id.   1033)    statutes  lief  Ins.  Co.  lO.")  Mass.  570;  Ameri- 

are  also  considered.  <'»"  Life  Ins.  Co.  v.  Malione,  21  Wall. 

9  Jenninus    v.     Metropolitan    Life  (88  U.  S.)  152,  22  L.  ed.  593. 
Ins.  Co.  148  Mass.  61,  18  N.  E.  601. 

1061 


§  407  JOYCE  ON  INSURANCE 

by  an  established  course  of  business  recognized  by  Uic  members, 
although  no  express  authority  so  to  act  may  be  conferred  on  him.^^ 
§  407.  Agency  of  subordinate  lodges. —  In  certain  nuitual  benefit 
societies  which  do  what  is  substantially  an  insurance  business  on  the 
lodge  system,  the  contract  of  insurance,  or  the  contract  for  the  pay- 
ment of  money  upon  the  decease  of  a  member,  is  made  through  the 
local  lodge  with  tlie  supreme  or  grand  lodge,  while  the  contract  for 
sick  benefits  is  made  with  the  local  lodges,  and  the  payment  thereof 
is  made  out  of  the  funds  of  the  local  lodge.  These  local  lo.dges  may, 
however,  be  authorized  by  the  constitution  and  by-laws  to  act  in 
the  matter  of  receiving  applications  for  re-admission  to  the  society 
and  restoration  to  membership  therein.  Again,  membership  in 
such  organizations  is  frequently  made  dependent  by  the  by-laws 
upon  the  continuance  of  membership  in  the  subordinate  society, 
and  where  such  membership  ceases  in  the  subordinate  organization, 
it  is  terminated  in  the  society. ^^  Many  questions  have  arisen  from 
this  complex  system.  Tlie  difiiculty  of  formulating  any  j)0sitive 
and  certain  rule  concerning  the  exact  status  of  such  subordinate 
or  local  lodges,  as  to  the  meml)er  and  the  society,  is  also  greatly 
increased  by  the  fact  that  the  provisions  of  various  cliarters  or 
articles  of  association  are  so  diverse  and  the  l)y-laws  themselves  are 
frequently  so  ambiguous;  moreover,  the  decisions  in  ai)i)arently 
analogous  cases  are  often  so  widely  divergent  and  conflicting,  as 
to  be  irreconcilable  on  any  common  ground  or  })rincii)le  of  the 
law  of  agency.  The  starting  [xtint  in  tlie  determination  of  the 
extent  of  authority  of  such  subordinate  lodges  must  be,  and  neces- 
sarily is,  the  constitution,  the  charter  or  articles  of  association,  and 
the  by-laws  which  govern  their  action  and  are  the  source  of  their 
authority,  as  well  as  by  the  law  of  the  land  affecting  such  associa- 
tions.^^ Another  factor  to  be  considered  is  this  that  a  fraternal 
benefit  association,  as  required  b\'  the  Nebraska  statute  iiuist  have  a 
representative  form  of  government.  This  requires  that  the  direc- 
tors or  other  oflicers  who  have  general  charge  and  control  of  the 
business  and  proj)ei'ty  of  the  society  and  the  management  of  its 
affairs  shall  be  chosen  by  the  membership  thereof  either  directly 
or  through  representatives  chosen  by  the  membership  for  that 
purpose  and  the  company  must  not  exceed  its  powers  or  conduct  its 
business  fraudulently  and  must  comply  with  the  state  statutes.  And 
the  managing  oflficers  are  trustees  for  the  members. ^^  Again,  the 
presumption  exists  that  applicants  for  membership  have  acquainted 

^'  Topeka  Primary  A.ssoe.  Univer-  ^^  See  Lucli  v.  Harris,  2  Brewst. 
sitv  Builders  v.  Martin,  39  Kan.  77A),  (Pa.)  571;  Dolan  v.  Court  Good  Sa- 
18  Pac.  941.  niaritan.  128  i\tass.  4;}9. 

i*See  Burbank  v.  Boston  Relief  ^^  t^tale  v.  Bankers'  Union  of  the 
Assoc.  144  Ma.ss.  434,  11  N.  E.  691.    World,  71  Neb.  622,  99  N.  W.  531. 

,1062 


AGENTS  OF  INSURER  §  407 

themselves  with  the  extent  of  the  authority  of  such  lodges,"  and 
members  at  least  are  avssumed  to  be  cognizant  of  the  provisions  of 
the  charter  and  by-la\v<,  which  the  contract  embodies,  and  to  have 
assented  thereto.^*  It  would  also  seem  that  in  so  far  as  these  soci- 
eties do  an  insurance  l)usincss,  they  should  be  governed  by  the 
same  principles  as  apply  to  other  mutual  life  insurance  companies.^' 
The  general  rule  may  be  stated  that  in  societias  of  the  character 
under  consideration  the  local  lodges  may  be  principals  in  matters 
relating  to  the  payment  of  benelits  to  sick  members,  wliore  the 
contract  is  Avith  Ihcm  and  depends  upon  their  constitution  and 
by-laws.  When  the  contract  for  tlie  payment  of  moneys  on  the 
death  of  a  mem})cr  is  made,  however,  with  the  supreme  or  highest 
lodge,  acting  tluouuli  the  subordinate  or  local  lodge,  and  the 
certificate  of  insurance  is  issued  by  the  former  and  the  assessments 
collected  by  the  latter,  then  the  former  is  the  principal,  and  its 
constitution  and  by-laws  govern  the  contract,  and  the  latter  act  in 
these  matters  as  the  agents  of  the  former,  and  are  subject  to  their 
direction  and  control.^"  The  subordinate  lodges  may  also  act 
through  their  ministerial  oflicers,  who  then  become  their  agents. 
The  decisions  are  clearly  not  reconcilable  u[)on  the  doctrine  of 
waiver  by  mutual  l)cnefit  societies.  It  has,  however,  l)ecn  held 
that  neither  subordinate  lodges  nor  their  ministerial  ofiic-ers  can 
set  aside  or  waive  the  positive  requirements  of  the  rules  of  the 
order,  and  that  therefore  the  doctrine  of  waiver  by  subordinate 
lodges  has  no  api)licalion  to  forfeitures  of  membership  in  such 
order.  In  this  case  dues  were  payable  to  the  subordinate  lodge  for 
local  purposes,  and  also  to  the  supreme  lodge  for  insurance  benefits. 
The  member  at  his  decease  stood  suspended  for  nonpayment  of 
assessments.  The  subordinate  lodge  had  treated  him,  however, 
as  a  member,  and  credited  his  insurance  dues  as  money  payable 
to  the  supreme  lodge  by  it ;  ])ut  the  court  held  that  no  recovery 
could  be  had  by  the  beneficiary.^  In  such  cases  of  failure  to  pay 
assessments,  where  the  by-laws  provide  that  the  delinquent  shall 
cease  to  be  a  member,  the  law  is  said  to  be  self-executing  and  the 

"  Supreme  Lodo:e  Kniohts  &  La-  ^  Borgraefe     v.     Supreme     Lodge 

dies  of  Honor  v.  Grace,  (iO  Tex.  nO!).  Knights  of  Honor,  22  Mo.  App.  127, 

^8  Hclleiil)erii-  v.   Di.slrict  No.   1   of  per     Tlioinpsou,     J.     See     Swett    v. 

Independent    Order   B'uai  Berith,  94  Citizens'   Miilual   Kolief  See.  78  Me. 

N.   Y.  580;   Schenck  v.   Gegenzeiter,  541,   7   Ati.   394;    Splawn   v.    Chew, 

44  Wis.  ;J69.  00  Tex.  5.'32. 

^^  See  Erdmann  v.  Mutual  Ins.  Co.  On  waiver  by  subordinate  lodge  of 

44  Wis.  376,  379,  per  Cole,  J.  right  of  benefit  association  to  in.sLst 

20  See  Bacon's  Benefit  Societies  and  upon  forfeiture  of  benefit  because  of 

Life    Insurance,    sees.    11,    118,    144,  violation  of  laws  of  as.-^ociation,  see 

146,  148-50,  266.  note  in   10  L.R.A.(N.S.)   136. 

1063 


§  407a  JOYCE  ON  INSURANCE 

nonpayment  of  itself  works  a  forfeiture.'^  But  a  forfeiture  may, 
it  is  held,  be  waived  wliere  the  local  lodge  receives  and  the  supreme 
lodge  retains,  with  knowledge,  assessments  made  after  the  death 
of  a  member.^  ^A'hen  the  laws  of  a  relief  fund  association  provided 
that  on  notice  of  the  disability  of  a  member  a  board  of  physicians 
should  examine  him  and  report  to  the  supreme  council,  that  all 
proofs  for  death  or  disability  benefits  should  be  approved  In'  the 
subordinate  council,  and  that,  upon  approval  of  satisfactory  proofs 
of  a  member's  disability,  he  should  be  entitled  to  a  benefit,  it  was 
held  that  the  subordinate  council  could  not  finally  reject  a  claim.* 
§  407a.  Same  subject. — T>ocal  lodges  are  agents  of  the  supreme 
or  governing  body  so  that  their  acts  within  their  jurisdiction  are 
binding  upon  said  body.^  So  it  is  held  in  an  Illinois  case  ^  that : 
''Notwithstanding  the  declarations  of  by-laws  of  mutual  benefit 
societies  to  the  contrary,  under  the  decisions  in  this  state  the 
subordinate  lodge  or  council  is  the  agent  of  the  supreme  lodge  or 
council.'''  ''This  is  practically  conceded  by  appellee,  but  it  is  insisted 
that  it  has  never  been  held  by  this  court  that  the  agency  of 
the  subordinate '  lodge  cannot  be  limited  by  the  by-laws  of  the 
association.  This  court  has  recently  had  occa.sion  to  consider 
this  question  in  I.ove  v.  Modern  Woodmen  of  America,'  and 
there  stated  that,  while  the  local  camp  was  the  agent  of  the  head 
camp,  as  to  some  things,  it  was  not  a  general  agent  authorized  to 
do  everything  that  the  head  camp  or  its  officers  could  do,  but  further 
stated:  '■*  'The  subordinate  lodge  of  a  benefit  astsociation,  authorized 
to  receive  or  collect  dues  and  transmit  them  to  the  association,  is 

2  Rood   V.   Railway   Passengers'   &  ^  United  Moderns  v.  Pike,  —  Tex. 

Freight   Conductors'   Mutual   P.enelit  Civ.  App.  — ,  76  S.  W.  774. 

Assoc.  31  Fed.  62.     See  Mandego  v.  ^  Dromgold  v.  Roval  Neighbors  of 

Centennial    Mutual    Life    Assoc.    64  America, '2til  Til.  60,  103  N.  K.  584. 

Iowa,  134,  17  N.  W.  656,  19  N.  W.  '  Citing  Johnson   v.   Royal   Neigii- 

877.  bors  of  America,  253  111.  570,  97  N. 

^  See    Manning   v.    Ancient    Order  E.  1084;  Jones  v.  Knights  of  Honor, 

United  Workmen,  86  Kv.  136,  9  Am.  236  111.  113,  127  Am.  St.  Rep.  277, 

St.  Rep.  270,  5  S.  W.  385,  9  Ky.  L.  86   N.   E.   191 ;    Court   of   Honor   v. 

Rep.  428;   Erdmann   v.   Mutual"  Ins.  Dinger,  221   111.  176,  77  N.  E.  557; 

Co.  of  the  Order  of  Hermann's  Sons,  Grand  Lodge  Ancient   Order  United 

44  Wis.  376 ;  Schenck  v.  Gegenzeiter,  Workmen  v.  Lachmann,  199  111.  140, 

44  Wis.  369;  Schen  v.  Grand  Lodge,  64  N.  E.  1022;  Royal  Neighbors  of 

17  Fed.  214.  America   v.    Boman,   177    111.    27,   69 

On  waiver  by  otifieer  of  subordinate  Am.    St.    Rep.    201,   52   N.    E.    264; 

lodge  of  forfeiture  for  nonpayment  Independent   Order  of  Forresters  v. 

of  .assessments,  sec  notes  in  4  L.R.A.  Schweitzer,   171    111.    325,    49    N.    E. 

(N.S.)    4'21;    38    L.R.A. (N.S.)    571;  506. 

and  L.R.A.1915E,  152.  «  259  111.  102,  102  N.  E.  183. 

4  Albert  v.  Order  of  Chosen  Friends  «*  Id.  p.  106. 
(U.  S.  C.  C.)  34  Fed.  721. 

1064 


AGENTS  OF  INSURER  §  407a 

the  agent  of  the  a.'^sociation  for  that  purpose,  and  its  acts  witliin  the 
scope  of  the  agency  are  binding  on  the  association.  So,  if  a  subordi- 
nate lodge,  with  full  knowledge  of  a  fact  which  would  render  a  cer- 
tificate void,  continues  to  receive  dues  from  a  member,  the  right  to 
forfeit  the  certificate  on  account  of  tliat  fact  is  waived.  A  sulmrdinate 
lodge  receiving  dues  and  ])aying  them  over  to  the  principal  lodge 
necessarily  treats  the  insurance  as  in  force.'  The  by-laws  of  this 
organization  require  the  members  to  make  their  payments  to  the 
local  camp.  They  cannot  lemit  directly  to  the  su))reme  recorder. 
The  officers  of  the  supreme  lodge  may  have  had  no  actual  knowl- 
edge of  what  the  local  recorder  had  done,  but  these  local  lodges  are 
the  agents  of  the  order,  clothed  with  autliority  to  act  for  it  in 
receiving  the  payment  of  dues,  and  with  them,  alone,  the  member 
must  deal.  If  the  order  permits  the  subordinate  lodge  and  its  officers 
to  act  in  such  a  manner  that  the  holder  of  a  certificate  is  justified  in 
believing  that  the  reasons  for  forfeiture  specified  in  the  by-laws  have 
beeii  waived,  it  cannot  set  up  a  forfeiture  incurred  by  relying 
upon  such  action  as  a  defense  against  the  certificate."*  ^  But  the 
knowledge  and  acts  of  an  officer  of  such  a  society  obtained  in  the 
exercise  and  within  the  scope  of  his  duties  is  that  of  the  order  which 
he  represents,  there  being  no  fraud. ^°  And  the  knowledge  of  ofiicers 
of  a  fraternal  benefit  society  as  to  the  business  over  which  they 
have  charge  and  control  will  be  deemed  to  be  that  of  the  society." 
So  a  subordinate  lodge  clothed  with  authority  under  its  charier 
as  to  the  collection  of  assessments,  and  the  suspension  of  members 
for  nonpayment  is,  with  its  financier,  an  agent  of  said  lodge  and  it 
may  waive  strict  compliance  of  the  requirement  as  to  said  pay- 
men  ts.^^  And  a  grand  lodge  vested  by  the  supreme  lodge  with  the 
power  to  perform  certain  duties  and  services  and  with  the  direction 
of  certain  benefit  matters  within  a  designated  territory  is  the  agent 
of  said  supreme  lodge,  even  though  the  collection  and  disbursement 
of  its  monies  is  subject  to  state  laws."  And  the  negligence  of  a  sec- 
retary of  a  local  lodge  in  not  forwarding  dues  received  is  chargeable 
to  the  order  of  whicli  he  is  an  agent  and  will  prevent  a  forfeiture  for 
nonpayment  of  dues.^*  So  the  acts  of  the  grand  recorder  of  a  lodge, 
after  a  forfeiture,  in  requesting  further  special  proofs  of  loss  con- 

^Dromjrold  v.  Royal  Neighbors  of  ^2  jo],p.4on  v.  Grand  Lodge  Ancient 

America,  '261  111.  60 j  103  N.  E.  584.  Order  United  Workmen,  31  Utah,  45, 

lOHendrickson     v.     Grand    Lodge,  8(i  Pae.  404. 

Ancient  Order  United  Workmen,  120  "  Grand     Lodge     Ancient     Order 

Minn.  36,  138  N.  W.  946.  United     Workmen     v.     Connecticut 

"Griffith      V.      Supreme      Council  Grand   Lodge  Ancient  Order  TTnited 

Royal  Arcanum,  182  Mo.  App.  644,  Workmen,  83  Conn.  241,  76  Atl.  533. 

166  S.  W.  324.     See  §  515  herein.  ^*  Supreme     Lodge     Knights     of 

1065 


§  408  JOYCE  ON  INSURANCE 

stitutes  a  waiver.^^  But  while  the  officers  of  a  sovereign  camp  are 
its  agents  for  certain  purposes  they  cannot  bind  their  principal 
when  dealing  with  the  members  by  acting  within  merely  the 
apparent  scope  of  their  authority  as  that  rule  does  not  apply  where 
the  party  dealing  with  such  agent  knows  or  is  bound  to  know  the 
extent  of  the  agent's  powers  with  reference  to  a  particular  matter 
especially  so  where  powers  and  duties  of  such  officers  are  prescribed 
and  regulated  by  the  constitution  and  by-laws  adopted  by  the 
sovereign  assembly  and  are  a  part  of  his  contract  and  accessible 
to  him.^^ 

But  it  is  also  held  that  the  collector  of  a  local  council  is  neither  an 
agent  nor  officer  of  the  society.^'''  And  a  member  of  a  subordinate 
lodge  is  held  not  the  agent  of  the  supreme  lodge,  after  the  former 
has  received  its  charter  and  its  officers  are  elected,  so  as  to  bind 
the  society  for  said  members  alleged  tortious  acts  while  participating 
in  an  initiation. ^^  And  the  relation  of  agency  sustained  by  a 
local  lodge  to  the  governing  body  has  no  application  where  a 
member  of  said  lodge  enters  into  a  contract  with  the  governing 
body  and  it  cannot  waive  any  stipulation  thereafter  in  favor  of 
the  member  in  the  absence  of  acquiescence  therein  by  the  supreme 
lodge.^^  And  the  rule  that  the  acts  of  an  agent  must  be  within  the 
scope  of  his  authority  in  order  to  bind  the  principal  applies  to 
statements  made  to  a  lodge  physician  in  his  professional  capacity 
and  not  otherwise. 2°  False  reports  and  forgeries  by  the  financier 
of  a  local  lodge  does- not  charge  the  grand  lodge  with  notice  of 
such  acts  as  said  agent's  knowledge  of  his  own  wrong  does  not  bind 
the  principal.^ 

§  408.  Agency  arising  from  necessity  or  emergency. — It  some- 
times hapi)ens  that  an  agent  is  called  upon  to  exercise  an  authority 
in  cases  of  necessity  or  special  emergency  which  will  justify  the 
act.  In  such  cases  the  duration  and  extent  of  the  authority  is 
measured  by  the  necessity  or  emergency.  Thus,  if  an  agent  of  an 
insurance  company  makes  a  demand  upon  the  insured  during  a 

Pythias  v.  Witliers,  177   U.   S.   260,  ^^  Qj-and  Temple  of  Tabernacle  of 

44  L.  ed.  7G2,  20   Sup.   Ct.   Gil,  30  Knights   &   Dau<>liters   of    Tabor   of 

Ins.  L.  J.  30.  the  I.  0.  T.  v.  John.son,  —  Tex.  Civ. 

15  Hendriekson     v.     Grand     Lodge  App.  — ,  135  S.  W.  173. 

Ancient  Order  United  Workmen,  120  ^^  United  Moderns  v.  Pike,  —  Tex. 

Minn.  36,  138  N.  W.  946.  Civ.  App.  — ,  76  S.  W.  774. 

1^  Bennett     v.      Sovereign      Camp,  ^o  \Yijjg.|j^fjj  ^    Supreme  Court  In- 

Woodmen  of  the  World,  —  Tex.  Civ.  dependent  Order  of  Friends,  51  Ore. 

App.  — ,  168  S.  W.  1023.  489,  94  Pac.  968. 

1"^  Attorney     General    v.     Supreme  ^  Grand      Lodge      Ancient      Order 

Council  American  Legion  of  Honor  United  Workmen  v.   State   Bank  of 

(Blair,  In  re)   206  Mass.  188,  92  N.  Winfield,  92  Kan.  876,  L.R.A.1915B, 

E.  149.  815,  142  Pac.  974,  144  Pac.  257. 

1066 


AGENTS  OF  INSURER  §  409 

fire  to  remove  his  goods,  such  act  of  the  agent,  while  it  may  have 
been  outside  his  authority,  and  though  it  may  not  fix  the  liability 
of  the  insurer  for  loss  by  theft  during  the  removal,  it  is  nevertheless 
a  powerful  and  significant  fact  to  establish  the  propriety  of  the  re- 
moval,^  although  in  such  case  the  insurer  would  probably  be  liable 
on  the  ground  that  goods  were  damaged  ex  necessitate  to  protect 
them.^  Generally,  it  is  a  rule  of  agency  that  if  the  act  of  the  agent 
is  warranted  by  the  necessity  or  emergency,  and  is  done  in  good 
faith,  the  principal  is  bound,  otherwise  the  object  and  purposes  of 
the  agency  might  be  defeated.* 

§  409.  Agent  delegated  for  special  purpose.  A  waiver  or  estoppel 
may  arise  against,  or  knowledge  Ijc  imputed  to,  the  company  in 
cases  where  it  specially  delegates  an  agent  to  act  in  a  particular 
matter,  or  where  it  gives  special  instructions  to  the  agent  in  relation 
to  the  insurance  or  to  the  execution  of  some  act  concerning  the 
apf)lication,  the  policy,  or  the  loss.^  Thus,  if  the  company  does  not 
rely  upon  the  statements  of  the  applicant,  but  sends  ils  own  agent 
to  examine  the  premises,  and  the  agent  does  so,  and  inserts  a  mis- 
description of  the  building  in  the  policy,  the  company  is  liable  for 
the  amount  of  the  insurance  in  case  of  loss,  even  thougli  (bore  is 
a  warranty,  and  the  insured,  although  acting  in  good  faith,  aided 
in  the  erroneous  description.^  no  an  agency  may  be  implied  from 
the  acts  of  an  agent  of  other  insurers  in  matters  concerning  the  loss 
and  adjustment  in  l)ehalf  of  said  insurers.''  An  imidied  agency 
may  also  arise  by  the  insurer's  acts  in  sending  a  policy  to  a  person 
for  delivery  to  insured  so  as  to  warrant  insured  offering  to  return 
the  same  to  him.^  So  a,  subagent,  with  authority  to  represent  the 
company  in  a  parliculai-  line  of  its  business,  becomes,  in  relation 
thereto,  the  com[)any"s  direct  representative,  so  as  to  bind  it  by  a 
notice  to  him,  or  by  any  acts  which  the  nature  of  the  })usiness 

2  Leiber  v.  Liverpool,  London  &  Johns.  Cas.  (N.  Y. )  17-'),  17!)n;  Jer- 
Glol)e  Ins.  Co.  6  Bush  ((iOKy.)  G39,  vis  v.  lloyt,  2  llim  (N.  Y.)  037; 
Of)  Ani.  Dec.  695.  Dusar  v.  Perit,  4  liinii.  (I*a.)   Mil. 

3  See  Gordon  v.  liemington,  1  ^  See  Cumherhmd  N'aHey  Ins.  Co. 
Camp.  12;5;  Independent  Mutual  Ins.  v.  Schell,  29  Pa.  St.  31;  H«)th  v.  City 
Co.  V.  Ao-new,  34  Pa.  St.  9tj,  7.')  Am.  Ins.  Co.  6  McLean,  32-4.  Ked.  Caa. 
Dec.  638;  Witherell  v.  Maine  Ins.  Co.  No.  12084;  Conunercial  Kire  lii.s.  Co. 
49  Me.  200 ;   Newmai U   v.   Liveii)ool  v.  Ives,  56  111.  402. 

Fire  &  Life  Ins.  Co.  30  Mo.  160,  77  6  Continental    Ins.    Co.    v.    Kasey, 

Am.  Dec.  608.  25   Gratt.    (Va.)    268,   18   Am.    Hep. 

*See  Greenleaf  v.   Moody,  13  Al-  681. 

len    (95   Mass.)    363;    See   also   Wil-  "'Stockton    Coml>ined   Harvester  & 

liams    v.    Sluxckeliord,    16    Ala.    318;  Agricultural    \Vorl<s_  v.    Glens    Kails 

Judson   V.    Sturges,   5   Day    (Conn.)  Ins.  Co.  121  Cal.  l(u,  56  Pac.  565. 

556,    560;    Good^ivillie    v.    McCarthy,  «  Kuhlman  v.  Adkins,  180  111.  App. 

45   III.   186:   Lawler  v.   Keaquick,   1  611. 

1067 


§  410  JOYCE  ON  INSURANCE 

intrusted  to  his  care  maj'  warrant.®  And  if  the  company  sends  two 
agents  at  different  times  to  ascertain  the  loss,  and  invests  them 
with  authority  to  compromise  and  settle  the  same,  it  thereby  waives 
objection  to  delay  in  sending  the  notice,  and  is  estopped  from  de- 
fending on  the  ground  that  the  notice  was  not  sent  "forthwith ;''  ^* 
and  where  a  clerk  in  another  office  than  that  of  the  company  is 
requested  by  the  general  adjuster  to  go  to  a  certain  city  and  see 
about  a  loss,  and  examine  the  business,  he  has  authority  to  adjust 
the  same.-^^  Again,  if  the  company  places  the  claim  of  the  insured 
in  the  hands  of  an  agent  for  adjustment,  his  demands  in  the  course 
of  the  business  may  constitute  a  waiver  of  the  conditions  of  the 
policy  in  relation  to  the  loss.^^  But  it  is  held  that  where  a  general 
agent  is  sent  to  examine  into  the  circumstances  surrounding  the 
death  of  the  insured,  that  the  company  is  not  bound  by  his  expres- 
sion of  opinion  as  to  the  advisability  of  a  settlement  by  the  com- 
pany,^^  and  where  a  broker  is  sent  by  the  agent  of  whom  the 
company  had  sought  the  required  information  to  ascertain  the 
ownership  of  the  property  insured,  and  the  broker  returns  false 
information,  though  the  assured  told  him  the  truth,  the  company 
is  res]:)onsible.^* 

§  410.  Agency:  person  referred  to  by  company. — Where  a  party 
is  referred  to  by  the  company  for  information  or  for  coiiduct  of  a 
particular  matter,  or  as  a  person  to  exercise  certain  authority  in 
reference  thereto,  the  powers  of  such  agent,  although  limited  to 
the  subject  of  reference,  is  nevertheless  co-extensive  therewith,  and 
his  acts  and  declarations  concerning  the  same  bind  the  company, 
although  it  is  held  that  if  he  volunteers  information  not  called  for 
where  he  is  to  answer  certain  questions,  that  the  principal  is  not 
obligated  thereby. ^^  Where  a  party  is  formally  referred  to  an 
general  agent  by  the  company,  in  regard  to  exchanging  a  paid-up 
policy,  and  in  consequence  of  the  agent's  advising  him  not  to 
exchange  and  giving  him  time  to  decide,  a  default  is  made  in  the 
payment  of  the  premium  by  the  assured,  tlie  company  is  bound 
by  the  waiver  arising  from  such  affirmative  act  of  the  agent, ^^  and 

9  Ma.s.sacbusetts    Life    Ins.    Co.    v.  hone,  21  Wall.  (88  U.  S.)  152,  22  L 

Eshelman,  30  Ohio  St.  647.  ed.  oOS. 

1°  Lyeomin.ii-  Ins.  Co.  v.  Schreffler,        ^*  Mullin  v.  Vermont  Mutual  Fire 

42   Pa.    St.   188,   82   Am.    Dee.    501.  Ins.  Co.  58  Vt.  113,  4  Atl.  817. 
See   Lycoming   County   Mutual    Ins.        15  ggg   Swett  v.   Fairlie,  6   Car.   & 

Co.  v.  Sehollenberger,  44  Pa.  St.  259.  P.  1,  per  Lord  Deninan,  C.  J.;  Rawls 

11  Swain  v.  Agricultural  Ins.  Co.  v.  Ameiican  Mutual  Life  Ins.  Co.  27 
37  Minn.  390,  34  N.  W.  738.  N.  Y.  282,  294,  84  Am.  Dee.  280. 

12  Brown  v.  State  Ins.  Co.  74  Iowa,  i^  Wyman  v.  Pbonnix  Mutual  Life 
428,  7  Am.  St.  Rep.  495,  38  N.  W.  Ins.  Co.  119  N.  Y.  274,  29  N.  Y.  St. 
135.  R.  567,  23  N.  E.  907. 

13  American  Life  Ins.   Co.  v.   Ma- 

1068 


AGENTS  OF  INSURER  §  411 

if  the  company,  on  receiving  notice  of  loss,  refers  the  insured  to 
its  resident  agent  for  settlement,  who  is  instructed  to  procure  a 
statement  of  the  loss,  he  is  invested  with  authority  to  extend  the 
time  for  furnishing  the  proofs.^''  Again,  if  the  secretary  and  man- 
ager refers  a  person  to  a  clerk  of  the  company,  as  to  the  validity 
of  the  policy,  any  important  information  given  by  the  former  to 
the  latter,  although  not  reported  to  the  manager,  operates  as  notice 
to  the 'company.^* 

§  411.  Powers  of  clerk. — There  is  no  doubt  concerning  the  right 
of  an  agent  to  employ  clerks,  since  it  cannot  be  presumed  that  an 
agent  will  attend  personally  to  all  the  details  of  his  business.  So 
he  may  employ  them  to  attend  to  his  ofiice  during  his  absence  or 
sickness:  ^^  to  contract  for  risks,  collect  premiums,  receive  payment 
thereof  in  cash,  give  credit  therefor,  or  take  securities;  2°  to  receive 
applications,  fill  out  policies  and  renewals,  and  attend  to  whatever 
business  ''is  transacted  behind  the  counter;"^  and  the  act  of  the 
clerk  is  in  all  such  cases  the  agent's  act,  and  binds  the  company  the 
same  as  if  done  by  the  agent  personally.^  Acts  done  and  informa- 
tion given  by  an  agent's  clerk  or  employee  of  an  agent  in  the  line 
of  his  duty  bind  the  company.  The  following  from  the  opinion  of 
the  court  in  the  case  so  liolding  is  important:  'Tt  was  suggested  in 
argument,  and  some  reliance  seems  to  be  placed  on  the  suggestion, 
that  inasmuch  as  the  statement  that  the  policy  in  controversy  had 
been  renewed  was  made  by  William  B.  Shepard,  who  was  an  em- 
ployee of  Benson  &  K  lit  land,  the  defendant  company  is  not  affected 
or  bound  by  that  representation.  The  facts  with  reference  to  this 
contention  seem  to  be  that  Shopard  was  a  confidential  employee 
and  book-keeper  of  the  firm  of  Benson  &  Kirtland,  and  had  been 
in  their  service  some  years,  lie  was  fully  posted  as  to  the  details 
of  the  business  carried  on  bv  the  firm,  and  in  their  absence  had 
full  charge  of  the  ofiice,  and  was  undoubtedly  authorized  hy  them 
to  give  information  as  to  whether  a  particular  policy  that  had  been 
registered  on  the  books  of  the  agency  had  or  had  not  been  removed. 
.     .     .     The  evidence  in  the  case  at  bar  shows  that  the  statement 

"Lycoming    County    Miilual    Ins.  Ins.  Co.  3:{  W.  Va.  .')2G,  25  Am.  St. 

Co.  v.  Scliollenberger,"44  Pa.  St.  259.  Rep.  908,  11  S.  E.  oO. 

See  Lvcominii'  Ins.   Co.  v.   Schrefller,  ^o  Bodine    v.    Exchange    Fire    Tn.s. 

42  Pa.'  St.  188,  82  Am.  Dec.  501.  Co.  51  N.  Y.  117,  10  Am.  Hep.  50(5. 

^8  Fitzgerald  v.  Hartford  Life  An-  *  See   Cooke   v.   2E[ird   Ins.   Co.   7 

nuitv   Ins.    Co.    56    Conn.    110,    G   N.  Dalv   (N.  Y.)  555. 

Eng.  Rep.  180,  7  Am.  St.  Rep.  288,  2^^,11,1,1     chy    Life     Ins.    Co.    v. 

27  Cent.  L.  J.  336,  13  Atl.  073,  17  Hutli,  49  Ala.  529;  ArfT  v.  Starr  Fire 

Atl.  411.  Lis.   Co.   125  N.   Y.   57,  21   Am.   Si. 

i^Deitz  V.  Providence  Wastiington  Rep.  721,  10   L.R.A.  609,  25   N.   E. 

1009 


§  411  JOYCE  ON  INSURANCE 

made  by  Shepard  to  Gibson,  that  the  policy  in  question  had  been 
renewed,  waa^  made  in  the  company's  office  wliile  Shepard  had 
charge  of  the  same,  and  Avhile  he  had  custody  of  the  poUcy  register. 
The  statement  was  made  in  the  line  of  his  duty,  not  in  answer  to 
an  idle  inquiry,  but  in  response  to  a  question  asked  by  a  policy 
holder,  who  was  interested  in  knowing  if  a  certain  policy  had  been 
renewed  and  continued  in  force.  It  does  not  follow  that  because 
a  person  is  employed  by  an  agent  of  an  insurauce  company,  rather 
than  by  the  company  itself,  none  of  such  person's  acts  or  repre- 
sentations are  binding  on  the  company.  It  is  customary  for  agents 
having  charge  of  important  agencies  to  employ  persons  to  per- 
form clerical  and  much  other  work  in  their  office,  and  to  assist 
them  generally  in  the  discharge  of  the  various  duties  which  such 
agents  have  to  perform.  The  business  of  insurance  could  not  well 
be  transacted  without  such  assistants,  and  all  insurance  companies 
are  doubtless  well  aware  of  the  practice  of  employing  them.  It 
results  from  this  w-ell-known  business  usage  that  acts  done  and  in- 
formation given  by  such  subordinate  employees  in  the  line  of  their 
duty  should  be  held  binding  upon  the  companies  which  they  repre- 
sent. We  think,  therefore,  that  presumptively  Shepard  had  author- 
ity to  inform  Gibson  wliether  the  policy  now  in  question  had  or 
had  not  been  renewed,  and  that  the  statement  made  by  him  should 
be  given  the  same  effect  as  if  it  had  been  made  by  either  Benson 
or  Kirtland."  ^ 

The  insurer  is  responsible  not  only  for  acts  of  its  agents  within 
the  scope  of  their  agency,  but  also  for  the  acts  of  the  agents'  clerks, 
when  the  company  knew  or  ought  to  have  known  that  other  persons 
would  be  employed  by  and  to  act  for  the  agents.*  So  the  insurer 
is  responsible  for  not  only  the  acts  of  its  agents  within  the  scope 
of  their  authority,  but  also  for  the  acts  of  the  clerks  of  such  agents 
where  knowledge  of  the  necessity  of  employing  clerks  ought  to  be 
charged  to  them.^  So  an  insurer  is  responsible  for  the  acts  of,  and 
is  affected  by  notice  given  to,  the  clerks  and  employees  of  his  gen- 
eral agents,  who  are  known  to  assist  such  general  agents  in  the 

1073 ;  Bodine  v.  Exchange  Fire  Ins.  *  Duluth   Nat.    Bank   v.    Knoxville 

Co.  51  N.  Y.  117,  10  Am.  Rep.  566;  Fire  Ins.  Co.  85  Tenn.  76,  4  Am.  St. 

Kuney  v.  Amazon  Ins.  Co.  30  Hun  Rep.  744,  1  S.  W.  089. 

(N.  Y.)  66;  Houghton  v.  Ewbank,  4  *  Thompson    v.    Michigan    Mutual 

Camp.  88.  Life  Ins.  Co.  56  Ind.  App.  502,  105 

3  International   Trust   Co.   v.   Nor-  N.    E.    780,    783;    Duluth    National 

wich  Fire   Ins.   .Soe.  71  Fed.   81,  17  Bank  v.  Knoxville  Fire  Ins.  Co.  85 

C.  C.  A.  608,  014,  36  U."  S.  App.  277,  Tenn.    76,    4   Am.    St.   R«p.    744,    1 

per  Thayer,  C.  J.  S.  W.  689. 

1070 


AGENTS  OF  INSURER  §  411 

dif=eharge  of  their  duties.^  The  fact  that  the  pohey  provides  that 
no  persons  shall  be  considered  the  company's  agent  except  snch 
"as  shall  hold  the  commission  of  this  company,"  does  not  operate 
to  prevent  such  employment  being  validJ  Where  a  clerk  is 
deputized  to  examine  and  report  upon  certain  property,  and  to 
write  out  a  policy  thereon,  the  right  to  recover  on  such  policy  is 
not  defeated  by  a  clerical  error  of  the  clerk  in  writing  in  the  name 
of  another  than  that  of  the  true  owner,  and  such  mistake  may  be 
corrected  in  an  action  on  the  policy.^  A  clerk  may  by  virtue  of 
his  employment  be  authorized  to  bind  the  company  by  a  parol 
contract;^  to  receive  notice  of  and  consent  to  other  insurance;^" 
to  bind  the  company  by  a  material  alteration  of  the  terms  of  the 
policy,  where  he  is  a  clerk  in  the  company's  otiice  and  makes  the 
same  alteration  in  the  insurer's  records,  although  it  is  proven  that 
he  had  no  authority  to  make  or  alter  contracts  for  them,^^  and  he 
may  contract  with  the  insured  after  a  fire  to  repair  the  building 
insured. ^^  So  the  company  may  be  bound  by  his  knowledge  of 
the  existence  of  other  insurance  on  the  property  where  he  solicits 
the  risk  and  takes  the  a])plication,  and  the  agent  employing  him 
therefor  issues  the  policy,  and  in  such  case  the  condition  making 
the  policy  void  for  prior  insurance  without  notice  is  waived. ^^ 
But  it  is  held  that  a  person  einployed  to  fill  out  and  issue  policies 
as  mere  clerical  work  cannot  consent  to  additional  insurance  nor 
waive  a  forfeiture  therefor,  and  is  not  an  agent  to  receive  notice 
of  additional  insurance.^*  It  is  also  held  that  a  clerk  in  an  insur- 
ance office  cannot  bind  the  company  by  receiving  overdue  premi- 
ums.^* But  it  is  also  decided  that  the  company  is  not  relieved  from 
liability  where  the  clerk  of  a  local  agent  fails  to  note  the  fact  of 

^  Goode  V.  Georgia  Home  Ins.  Co.  Fire  Insurance,  109.     The  question, 

92  Va.  392,  53  Am.  St.  Rep.  817,  30  however,  turned  on  the  point  whether 

L.R.A.  842,  23  S.  E.  744.  the  party  receiving  tlie  notice  was  a 

'  Arff  V.   Starr  Fire  Ins.   Co.  125  clerk  of  the  agent's  or  a  mere  broker, 

N.  Y.  57,  21  Am.   'St.  Rep.  721,  25  and  he  wa-s  hdd  to  be  a  clerk. 

N.  E.  1073,  10  L.R.A.  609.  i*  Wasliington     Fire    Ins.     Co.    v. 

'  Deitz   V.   Providence   Washington  Davison,  30  Md.  91. 

Ins.  Co.  33  W.  Va.  526,  25  Am!  St.  ^^  Hilton  v.  Newman,  6  Mo.  App. 

Rep.  908,  11  S.  E.  50.     See  Deitz  v.  304. 

Providence   &   Washington    Ins.    Co.  ^^  Bennett   v.    Council    Bluflls    Ins. 

31  W.  Va.  851,  13  Am.  St.  Rep.  909,  Co.  70  Iowa,  600,  31  N.  W.  948. 

8  S.  E.  616.  i*Waldman  v.  North  British  ]Mer- 

8  Cooke  V.  Minn  Ins.  Co.  7  Dalv  caiitile  Ins.  Co.  91  Ala.  170,  24  Am. 

(N.  Y.)  555.  St.  Rep.  883,  8  So.  666. 

^°  Artf  V.  Starr  Fire  Ins.  Co.  125  ^*  Koelges   v.    Guardian    Life   Ins. 

N.  Y.  57,  21  Am.  St.  Rep.  721,  10  Co.  2  La^s.    (N.  Y.)   480,  58   Barb. 

L.R.A.    689,    25    N.    E.    1073.      See  185,  9  Abb.  Prac.  N.  S.  (N.  Y.)  91. 
criticism  on  this  case  in  Ostrander  on 

1071 


§  412  JOYCE  ON  INSURANCE 

other  insurance  in  the  apphcation  which  he  had  written,  it  appear- 
ing that  other  risks^  upon  the  property  were  held  hy  said  agents, 
and  that  the  clerk  was  so  informed  at  the  time  by  the  assured.^^ 
So  a  clerk  in  the  employ  of  a  firm  acting  as  general  agent  of  the 
company,  said  clerk  being  empowered  to  solicit  insurance  for  the 
firm,  receive  premiums,  fill  out  and  deliver  policies,  has  power  to 
waive  a  condition  in  an  accident  policy  providing  against  death 
by  intentional  injuries.^''^  Where  one  who  was  either  a  clerk  for 
or  member  of  a  firm  of  insurance  agents  promised  the  assignee  of 
a  policy,  holding  it  as  mortgagee  of  the  property,  that  he  would 
either  buy  the  mortgage  or  obtain  a  purchaser  therefor,  such  state- 
ment is  not  a  waiver  of  delay  in  bringing  suit  where  the  agents 
jiad  from  the  first  denied  their  liability  on  the  ground  that  the 
insured  had  burned  the  property.^* 

Again,  a  person  who,  while  not  belonging  to  the  class  which, 
bv  the  rules  of  a  benefit  insurance  societv  and  the  statute  resulatirm 
such  associations,  is  entitled  to  become'  a  beneficiary,  has  his  name 
inserted  in  a  benefit  certificate,  has  no  right  to  receive  any  part 
of  the  benefit  fund,  and  the  acceptance  of  assessments  paid,  after 
his  name  has  been  so  inserted,  even  if  with  full  knowledge  of  the 
existing  relations,  does  not  confer  such  rights,  as  a  clerk  of  the 
order  cannot  waive  the  provisions  of  a  statute  which  expressl}^ 
prohibits  the  payment  of  benefit  funds  to  any  person  who  is  not 
within  the  class  designated  as  "beneficiaries."  ^^ 

§  412.  Powers  of  medical  examiner. — A  medical  examiner  is  an 
agent  with  limited  powers,  but,  nevertheless,  his  acts  in  and  about 
the  business  intrusted  to  his  care  are  binding  within  the  scope  of 
his  authority,  and  to  this  extent  the  same  general  rules  of  agency 
are  applicable  to  him  as  to  other  special  agents.  Where  he  is 
required  to  jjersonally  write  in  the  answers  to  questions  in  the 
certificate,  and  not  to  allow  them  to  be  dictated  by  any  person,  and, 
after  the  applicant  signs  the  certificate,  such  agent,  without  his 
knowledge,  erroneously  fills  in  an  answer  as  to  the  cause  of  death 
of  the  applicant's  sister,  the  responsibility  for  the  error  rests  upon 
the  company.^"     And  where  the  examination  blanks  are  sent  to 

^^  Steele    v.    German    Ins.    Co.    93  notice  to  eompanv,  see  Phoenix  In.s. 

Mich.   81,   18   L.1?.A.   85,   o3   N.   W.  Co.  v.  Ward,  7  Tex.  Civ.  App.  13,  20 

514.  S.  W.  763. 

^"^  Henderson  v.  Travelers'  Ins.  ^^  Corveon  v.  Providence  &  Wash- 
Co.  t)9  Fed.  762,  16  C.  C.  A.  390,  65  ington  Ins.  Co.  79  Mich.  187,  44  N. 
Fed.  438.  24  Ins.  L.  J.  351,  s.  c.  163  W.  431. 

U.  S.  708,  41  L.  ed.  312,  16  Sup.  Ct.  "  Modern  Woodmen  of  America  v. 

1207.     That  notice  to  clerk  of  general  Comeaux,    79    Kan.    493,   25   L.R.A. 

agent  with  power  to  solicit  insurance  (N.S.)   814,  101  Pac.  1. 

and  issue  policies,  except  signing,  is  2°  Gi'attan     v.    Metropolitan     Life 

1072 


AGENTS  OF  INSURER  §  412 

the  medical  examiner,  with  directions  to  complete  the  same,  and 
he  has  to  some  extent  acted  as  and  represented  himself  to  be  the 
company's  general  agent,  and  occupied  its  oflice,  the  principal  is 
estopped  to  set  up  the  falsity  of  the  answers,  though  erroneously 
written  by  such  agent  ;^  and  the  same  ruling  obtains  where  such 
physician  assumes  to  write  in  the  answers  upon  his  own  knowledge 
of  the  facts,  instead  of  relying  upon  the  answers  given  by  the 
applicant.^  So  the  certificate  of  the  medical  examiner  is  con- 
clusive upon  the  company  as  to  its  recitals  in  the  absence  of  fraud 
of  the  applicant  in  making  the  representations  or  in  conceaHng 
material  facts  ;^  and  in  answering  the  questions  of  the  medical 
examiner  the  applicant  has  the  right  to  rely  upon  his  construction 
of  them  at  the  time,  and  may  answer  them  in  the  light  of  such 
interpretation.*  So  if  such  agent,  knowing  the  facts,  suggests 
answers  which  are  made  in  accordance  therewith,  the  company  is 
bound.^  Again,  an  insurance  company  is  bound  by  the  act  of  its 
medical  examiner  in  reporting  an  applicant  to  be  a  fit  subject  for 
insurance,  unless  he  was  puiposely "  misled  by  the  applicant,  and 
inveigled  into  recommending  him  as  a  fit  subject  for  insurance 
Avhen  but  for  such  deception  he  would  not  have  done  so.^  But 
where  the  answers  of  the  applicant  given  to  the  medical  examiner 
are  false  and  material  and  are  known  by  him  to  be  so,  his  conduct 
in  writing  them  down  and  in  not  communicating  his  knowledge 
to  his  principal  constitutes  a  fraud  upon  the  insurer  who  is  not 
chargeable  with  notice  thereof  and  is  not  estopped  to  set  up  their 
falsity.'  Such  examining  physician  is  the  insurer's  agent  even 
though  the  application  makes  him  the  applicant's  agent  and  his 
acts  within  the  scope  of  his  authority  are  binding  upon  the  associa- 
tion,* and  the  company  is  estopped  to  show  incompetency  of  its 
medical  examiner.^ 

Ins.  Co.  80  N.  Y.  281,  36  Am.  Rep.  *  Connceticut     General    Life     Ins. 

617,  92  N.  Y.  274,  44  Am.  Rep.  372.  Co.  v.  McMurdy,  89  Pa.  St.  363. 

iFlynn  v.  Equitable  Life  Ins.  Co.  »  Higgins  v.    Plurnix  Mutual  Life 

78  N.  Y.  r,68,  34  Am.   Rep.  561,  Earl,  Ins.  Co.  74  N.  Y.  6.     But  soe  Flynn 

J.,  dissented.     But  see  the  same  case,  v.  Equitable  Life  Assoc.  67  N.  Y.  500, 

67  N.  Y.  500,  23  Am.  Rep.  134.  34  Am.  Rep.  561. 

2  Pudritzky     v.     Supreme     Lodge  ^  R^e  v.  National  Life  Ins.  As.soc. 

Knio-hts  of  ilonor,  76  Midi.  428,  43  37  Iowa,  696,  17  L.R.A.(N.S.)  1144, 

N.  W.  373.  ll-^  N.  ^Y.  500 

Mlolloman    v.    Life    Ins.     Co.    1  'Mutual  Life  Ins.   Co.  v.   Powell, 

Woi.ds  (tJ.  S.  C.  C.)  674,  Fed.  Ca.'^.  217  Fed.  565,  133  C.  C.  A.  41/,  4o 

No.    6623.     See    llogle   v.    Guardian  Ins.  L.  J.  127. 

Life  Ins.  Co:  4  Abb.  Pr.  N.   S.   (N.  »  Turner  v.   Modern  Woodmen   of 

Y.)    346;    Valton   v.   National   Fund  America,  186  111.  App.  404. 

Life  As.snr.  Co.  17  Abb.  (N.  Y.)  268,  On  medical  examiner  a.«5  agent  of 

aff'd  4  A  1)1).  Dec.  437.  insurer  or  of  insured  and  estoppels 
Joyce  Ins.  Vol.  I.— 68.       1073 


§§  413,  414  JOYCE  ON  INSURANCE 

§  413.  Whether  one  is  agent  or  broker. — Whether  one  is  an  agent 
or  broker  is  a  qH-iestion  necessarily  dependent  upon  the  particular 
facts  of  each  case.  Thus  one  employed  to  solicit  applications  for 
insurance,  and  to  fill  up  and  issue  policies,  is  not  an  insurance 
broker,  within  the  terms  of  a  city  ordinance  providing  for  the  pay- 
ment of  a  license  fee  by  such  broker.^"  Again  in  a  New 
York  case  ^^  it  appeared  that  one  R.  who  was  the  agent  of  sev- 
eral insurance  companies,  but  not  of  the  defendant,  whose 
agent  was  one  J.  R.  wrote  his  own  name  on  an  application 
as  "general  agent,"  and  took  a  premium  note  for  the  regular 
premium  and  another  note  for  a  portion  of  the  premium  payable, 
at  a  certain  date  thereafter,  conditioned  that  the  policy  should 
become  void  in  case  of  nonpayment  of  the  note  when  due.  The 
policy  also  contained  a  like  condition.  Thereafter,  the  insured 
delivered  to  R.  another  note  for  a  larger  sum,  payable  to  his  order, 
which  he  discounted  and  retained  the  proceeds.  The  two  prior 
notes  were  delivered  through  J.  to  the  defendant.  Receipt  of  the 
payment  of  the  first  premium  was  acknowledged  in  the  policy. 
There  wa.-*  no  claim  nor  proof  that  the  insured  understood  that 
R.  was  the  agent  of  the  defendant  company.  The  second  note  was 
not  paid  when  due,  except  as  above  stated.  In  an  action  on  the 
policy  it  was  held  that  R.  was  merely  a  broker,  and  delivery  of  the 
last  note  to  him  did  not  operate  as  a  payment,  and  that  the  policy 
was  forfeited.  A  local  agent  to  whom  application  is  made  for 
insurance  and  who  obtains  it  through  the  agent  of  another  com- 
pany, said  local  agent  paying  the  premiums  through  the  other 
agent,  is  only  a  broker,  the  policy  stipulating  that  agents  must 
be  authorized  in  writing  to  act  as  such.^^  g^  ^  firm  of  insurance 
agents  is  held  not  insurer's  special  agents  but  brokers  under  the 
Missouri  statute  which  declares  who  are  insurance  brokers,  but 
excludes  as  such  ai)pointed  agents  or  officers  of  the  insurer.^^ 

§  414.  Whether  broker  is  agent  of  insured  or  insurer.— In  Eng- 
land, an  insurance  broker  represents  the  insured  in  effecting  the 
policy,  and  in  other  matters  relating  thereto,  but  is  the  under- 

arisino-  by  his   acts,   see  note  in   41  Mutual  Life  Ins.  Co.  134  Fed.  732, 

L.R.A:(N:S.)  506.  67  C.  C.  A.  636. 

9  Holloman  v.  Life  Insurance  Co.  ^^  How  v.  Union  Mutual  Lite  ins. 
1  Woods  (U.  S.  C.  C.)  674,  Fed.  Ca.s.  Co.  80  N.  Y.  32. 

j^Q    5623  ^^  Wisotzkey  v.  Hartford  Fire  Ins. 

10  Bernlieimer  v.  Leadville,  14  Col.  Co.  98  N.  Y.  Supp.  763,  112  App. 
518,  24   Pac.   332.     See   East   Texas   Div.  596. 

Fire  Ins.  Co.  v.  Brown,  82  Tex.  631,  ^^  Edwards  v.  Home  Ins.  Co.  100 
18  S.  W.  713.  When  person  is  brok-  Mo.  App.  695,  J3  _S.  W.  881,  Rev. 
er  and  not  insurer's  agent ;  fraud  of    Stat.  1899,  sec.  7997.  i 

aerent,    see    Mahon    v.    Royal    Union 

1074 


AGENTS  OF  INSURER  §  414 

writer's  agent  in  regard  to  the  premium.^*  The  custom  of  having 
such  broker  is  declared  to  have  arisen  from  the  fact  that  the  person 
desiring  insurance  was  frequently  at  a  distance,  and  was  unknown 
to  the  underwriter.^*  It  is  not  our  purpose,  however,  to  consider 
in  this  section  the  question  of  agency  in  connection  with  the  insured, 
but  only  the  point  whether  the  broker  is  the  agent  of  the  insurer 
or  insured  in  this  country.  It  is  said  that  "what  is  understood 
under  the  designation  of  an  'insurance  broker'  is  one  who  acts 
as  a  middleman  between  the  insured  and  the  company,  and  who 
solicits  insurance  from  the  public  under  no  employment  from 
any  special  company,  but,  having  secured  an  order,  he  either  places 
the  insurance  with  the  company  selected  by  the  insured,  or,  in  the 
absence  of  any  selection  by  him,  then  with  the  company  selected 
by  such  broker. ".^^  In  the  United  States  an  insurance  broker  does 
not,  in  the  absence  of  a  special  agreement,  differ  from  any  other 
broker  or  agent. ^"^  It  has  been  held  that  a  broker  employed  to 
procure  insurance  is  the  agent  of  the  employer.^^  This  is  also 
declared  to  be  the  rule  not  only  in  such  case,  but  also  where  he 
is  employed  to  procure  the  modification  of  the  terms  of  the  policy. ^^ 
And  one  whose  services  are  performed  for  a  foreign  insurer  is 
such  company's  agent.^"  In  another  case  it  was  declai-ed  that 
the  broker  was  the  agent  of  the  insurer  where  it  appeared  that  he 
was  paid  by  commissions  received  from  the  company  for  his  serv- 
ices,^ and  the  same  ruling  was  made  in  a  case  where  he  received 
commissions  from  another  agent  of  the  company.^  But  it  is  also 
held  that  an  insurance  agent  to  whom  a  person  makes  a  request  for 
insurance,  and  who,  acting  as  broker,  procures  all  or  part  of  such 
insurance  through  agents  of  other  companies  not  represented  by 
him  may  be  agent  of  the  insured  and  the  mere  fact  that  he  receives 
a  commission  from  a  company  which  he  does  not  represent  for 

i^Minett    v.    Forrester,    4    Taunt.        i^  Standard    Oil    Co.    v.    Triumph 

541n,  per  Mansfield,  C.  J.;  East  Tex-  Ins.  Co.  3  Ilun   (N.  Y.)   591,  5  Ins. 

as  Fire  Ins.  Co.  v.  Brown,  82  Tex.  L.  J.  594.     See  lis  to  completing  con- 

631,  18  S.  W.  713.  tract,  Marland  v.  Royal  Ins.  Co.  71 

15  Power  V.  Butcher,  10  Barn.  &  C.  Pa.  St.  393;  Union  Ins.  Co.  v.  Chipp, 

329,  340,  13  Eng.  Rul.  Cas.  407,  per  93  111.  96  (case  of  notice  to  soliciting 

Bayley,  J.  broker,    being    held    notice    to    com- 

i^Arff  V.   Starr  Fire  Ins.  Co.  125  pany). 
N.  Y.  57,  21  Am.   St.  Rep.   721,  10        ^o  Commercial  Union  Assur.  Co.  v. 

L.R.A.  609,  25  N.  E.  1073.  State,  113  Ind.  331,  15  N.   E.  518; 

^■'^1  Phillips  on  Ins.   (3d  ed.)   274,  Indiana  Insurance   Co.   v.   Hartwell, 

sec.  508.  123  Ind.  177,  24  N.  E.  100. 

"  Hamblet    v.    City    Ins.    Co.    36        ^  Indiana  Ins.  Co.  v.  Hartwell,  123 

Fed.  118;  Pottsville  Mutual  Fire  Ins.  Ind.  177,  24  N.  E.  100. 
Co.   V.   Minnequa   Springs  Improve-       ^  ]\feadowcraft    v.     Standard    Ins. 

ment  Co.  100  Pa.  St.  137.  Co.  61  Pa.  St.  91. 

1075 


§  414  JOYCE  ON  INSURANCE 

placing  the  insurance  does  not  make  him  the  agent  of  the  com- 
pany.^ In  a  Michigan  case  *  he  is  held  to  be  the  agent  for  the 
insured  so  far  as  he  acts  "as  an  insurance  broker."  ^  Where  one 
solicited  insurance  and  turned  over  the  order  to  a  firm  of  "brokers," 
who  sent  a  written  statement  of  application  to  the  defendant  com- 
pany, whom,  however,  they  did  not  represent,  and  had  no  rela- 
tions with  them,  they  were  held  agents  of  the  plaintiff  and  not 
of  the  company.^  But  in  another  case  it  is  held  that  if  such 
broker  procures  the  policy  for  the  insured,  he  is  his  agent,  as  to 
subsequent  instalments  of  premiums  paid  to  the  broker,  where 
the  policy  provides  that  in  transactions  relating  to  the  insurance 
all  persons  other  than  the  insured  who  procure  the  policy  shall 
be  the  agent  of  the  insured,  and  not  of  the  insurer."^  Substantially 
the  same  ruling,  viz.,  that  the  broker  is  agent  of  the  assured  under 
similar  provisions  in  the  policy,  has  been  made  in  other  cases.* 
Brokers  who  obtain  a  policy  for  insured  after  cancelation  of  a 
former  one  procured  by  them  are  insured's  agents.^     Again,  it  is 

3McGraw    Wooden    Ware    Co.    v.  Virgrm'a.—Untual    Assur.    Sop.   v. 

German  Fire  Ins.  Co.  126  La.  32,  38  Scottish  Union  &  National  Ins.   Co. 

L.R.A.(N.S.)    614,   52    So.    183,    39  84   Va.  116,  10  Am.   St.   Rep.   819, 

Ins.  L.  J.  1036.  -i  S.  E.  178. 

On  insurance  broker  as  auent  for  ^  IManhattan  Fire  Ins.  Co.  v.  Har- 

insured,  see  note  in  38  L.R.A.(N.S.)  lem  River  Lumber  &  Wood   Co.  56 

614.  N.  Y.  Supp.  186,  26  IMisc.  194. 

*  Hartford      Fire      Ins.      Co.      v.  When   broker  is  agent   of  insurer 

Reynold,  36  Mich.  502.  and  not  of  insured  and  knowledge  of 

5  See  also  Lycoming  Fire  Ins.  Co.  agent    is    insurer.^    knowledge,    see 

V    Rubin,   79  "ill.   402,   403,   404,    8  Lehmann  v.  Hartford  Fire  Ins.  Co. 

Chi.  Leg.  News,  150.  183  i\Io.  App.  696,  167  S.  W.  1047. 

^Fromherz    v.    Yankton    Fire   Ins.  Whether   broker   agent   of   insurer 

Co.  7  S.  Dak.  187,  24  Ins.  L.  J.  672,  or  insured :  prepayment  of  premium, 

63  N.  E.  748.  see  §  73  herein. 

'Wilbur     v.     Williamsburg     City  When    broker    agent    for    insurer, 

Fire  Ins   Co.  122  N.  Y.  439,  25  N.  E.  see   Western   Ins.   Co.  v.   Ashby,   53 

926,  34  N.  Y.  St.  R.  48.     See  §  512  Ind.  App.  518,  102  N.  E.  45;  I\Iary- 

herein  land   Casualty   Co.   v.   Gaffney   Mfg. 

8  ^Zabawa.— Sellers  v.  Commercial  Co.   93   S.   Car.  406,  76   S.  E.   1089 

Fire  Ins.  Co.  105  Ala.  282,  24  Ins.  (under    Civ.    Code    1902,    sec.    1810 

L.  J.  354,  16  So.  798.  [Civ.  Code  1912,  sec.  2712]). 

Connecticut. — Young     v.     Newark  When    broker    agent    for    insured, 

Fire  Ins.  Co.  59  Conn.  41,  22  Atl.  32.  .see  Lvnch  v.  Travelers'  Ins.  Co.  200 

Massac/mse^s.— Wood  V.  Firemen's  Fed.  193,  118  C.  C.  A.  3/9,  42  Ins. 

Ins.    Co.   126   Mass.   316;   Abbott   v.  L.  J.  453  (application  was  signed  by 

Shawmut  Mutual  Fire  Ins.  Co.  3  Al-  agent  as  "broker,  solicitor,  agent  or 

len   (85  Mass.)   213.  .  subagent")  ;    Travelers'    Ins.    Co.    v. 

New    JorA-.— Sargent    v.    National  Thome,    38    L.R.A.(N.S.)     626,    180 

Fire  Ins.  Co.  86  N.  Y.  626,  10  Ins.  Fed.  82,  103   C.  C.  A.  436,  39  Ins. 

L.   J.   852;   Devens   v.   Mechanics  &  L.  J.  1638   (signed  same  a.s  above); 

Traders  Ins.  Co.  83  N.  Y.  168.  Commonwealth  Mutual  Fire  Ins.  Co. 

1076 


AGENTS  OF  INSURER  §  414 

held  in  Illinoi.-:  ^°  that  it  might  be  shown  that  the  broker  acted 
for  the  company  in  delivering  the  policy  and  collecting  the  pre- 
mium, notwithstanding  a  provision  that  a  broker  procuring  a 
policy  or  its  renewal  should  be  the  agent  of  the  insured  in  all 
transactions  relating  to  the  insurance.  So  where,  at  the  time  of 
making  the  application,  the  agent  was  acting  as  an  insurance 
broker,  although  he  had  not  been  employed  by  the  company  prior 
thereto,  he  was  held  to  be  the  agent  of  the  insured  in  procuring 
the  policy,  and  only  the  agent  of  the  company  to  collect  the  pre- 
mium and  deliver  the  policy,  and  that  the  company  would  not  be 
bound  by  notice  to  him  of  an  encumbrance  on  the  property  or 
notice  that  it  stood  on  leased  ground.^^  It  is  held  in  New  York  " 
that  there  must  be  some  evidence  of  an  authorization,  or  some  fact 
from  which  a  fair  inference  of  an  authorization  by  the  company 
might  be  deduced,  to  make  an  insurance  broker  the  agent  of  the 
company.  It  is  also  declared  that  a  broker  who  affects  an  insur- 
ance policy  is  the  agent  of  both  parties,  and  that  an  indorser  might 
be  charged  by  notice  to  him  of  abandonment."  And  in  Washing- 
ton it  is  held  that  an  insurance  broker  who  is  employed  to  place 
insurance  is  the  agent  of  his  employer,  and  not  of  the  insurer, 
but  where  a  person  applies  to  an  insurance  com]:>any  for  a  gross 
amount  of  insurance,  without  giving  instructions  to  place  any  por- 
tion of  such  insurance  with  other  companies,  and  receives  there- 
after from  such  company  policies  for  the  entire  amount  of  the 
insurance,  signed  by  several  other  companies,  and  indorsed  with 
a  statement  that  the  company  applied  to  is  the  agent  of  the  compa- 
nies issuing  the  |)olicies,  the  company  applied  to  must,  for  the 
purpose  of  defining  the  relative  rights  of  (he  applicant  and  the 
insurers,  be  regarded  as  the  agent  of  the  latter,  and  not  of  the 
former.!*  In  a  Connecticut  case  where  a  broker  procured  insurance 
for  another  but  by  his  fraud  procured  them  to  be  canceled  and 
other  policies  taken  out  for  his  financial  advantage,  it  was  held 
that  such  fraud  did  not  change  his  relations  with  the  assured  as 
the  fraud  was  practised  upon  the  insurer.    It  was  also  decided  that 

V    Wm    Knabe  &  Co.  Mfg.  Co.  171  "Allen   v.   German-American   Ins. 

Ma.ss.  265,  50  N.  E.  516;  Condon  v.  Co.   123   N.   Y.   G,   33   N.   Y.   St.   R. 

Exton-Hall      Brokerage      &      Vessel  216,  25  N.  E.  309. 

Ao-enev,    80    Misc.    369,    142    N.    Y.  ^^  Cronsillat     v.     Ball,     3     Yeates 

Rupp.  548,  42  Ins.  L.  J.  1351;  Mor-  (Pa.)  375,  4  Dall.  294,  1  L.  ed.  840, 

ris  V.  Home  Ins.   Co.  78  Misc.  417,  2  Am.  Dec.  375. 

139  N    Y    Sudd    674,  42  Ins.  L.  J.  i*  INIesterman  v.  Home  Mutual  Ins. 

513.         ^'  ^  t'^          '  Co    5   Wash.  .524,  34  Am.   St.  Rep. 

1°  Newark   Fire  Ins.   Co.   v.    Sam-  877,  32  Pac  458. 
mons,  110  111.  166. 

"  East    Texas     Fire    Ins.     Co.    v. 
Brown,  82  Tex.  631,  18  S.  W.  713. 

1077 


§  414  JOYCE  ON  INSURANCE 

notice  of  cancelation  to  a  broker  employed  to  procure  insurance 
was  not  effective  after  the  insurance  was  procured  as  his  agency 
then  ceased,  although  the  policies  had  not  been  delivered,  and  that 
he  had  no  power  to  waive  or  receive  said  notice.^*  The  court,  per 
Thayer,  J.,  said:  "The  conclusion  of  the  court  that  the  defendant 
did  not  cancel  the  policies  is  equally  conclusive  against  a  recovesy 
by  the  plaintiff.  It  is  found  that  the  policies  were  duly  procured, 
and  that  there  was  an  attempted  cancellation  of  them  prior  to  the 
fire,  but  that  for  want  of  the  five  days'  notice  required  by  the  poli- 
cies the  attempted  cancelation  was  ineffective.  The  plaintiff's  claim 
that  upon  the  facts  found  the  defendant  after  the  insurance  was  pro- 
cured continued  to  represent  the  plaintiff,  so  that  his  attempted  can- 
celation of  the  policies  was  a  waiver  by  the  plaintiff  of  the  five 
day's  notice  cannot  be  sustained.  The  general  rule  is  that,  where 
an  insurance  broker  or  agent  is  employed  by  a  person  to  procure 
insurance  for  him,  the  broker  or  agent  becomes  his  agent  until 
the  insurance  is  procured,  so  that  any  knowledge  of  facts  by  the 
agent  or  false  statements  made  by  him  when  procuring  the  insur- 
ance are  imputable  to  the  insured;  but,  after  the  insurance  has 
been  procured,  he  ceases  to  be  the  agent  of  the  insured,  and  has 
no  authority  to  waive  or  to  receive  notice  of  the  cancellation  of 
the  policies  in  behalf  of  the  insured.^^  The  course  of  business 
between  the  parties  may  be  such  as  to  warrant  the  inference  tliat 
the  broker  still  has  authority  to  receive  or  waive  the  notice.  But, 
in  the  absence  of  facts  from  which  such  an  inference  may  be  drawn, 
the  i*ule  is  as  stated.  The  complaint  in  the  present  case  alleges, 
and  the  court  has  found,  that  the  defendant  was  employed  to  pro- 
cure insurance  upon  the  plaintiff's  property  to  a  specific  amount 
for  the  specified  term  of  one  year.  This  he  did.  Under  the  deci- 
sions, he  then  ceased  to  be  the  plaintiff's  agent.  The  case  shows 
no  course  of  iDusiness  between  the  parties  from  which  it  can  be 
inferred  that  the  defendant  still  represented  the  plaintiff',  so  that  he 
had  authority  to  waive  the  notice  of  cancellation  provided  for  in 
the  policies." 

It  will  be  seen,  therefore,  that  the  decisions  are  far  from  unani- 
mous. They,  however,  present  two  important  questions  for  con- 
sideration, and  these  are :  Was  the  broker,  at  the  time  of  effecting 
the  insurance,  acting  for  himself,  independently  of  any  employ- 
ment by  the  company;  or  was  he  then  ostensibly  or  actually  con- 
is  Cheshire  Brass  Co.  v.  Wilson,  86  Ins.  Co.  109  U.  S.  278,  283,  27  L. 
Conn.  551,  86  Atl.  26,  42  Ins.  L.  J.  ed.  932,  3  Sup.  Ct.  207;  Hermann  v. 
677.  Niagara  Fire  Ins.  Co.  100  N.  Y.  411, 

16  Citing  1  May  on  Ins.   (4th  ed.)    415,  53  Am.  Rep.  197,  3  N.  E.  341. 
see.  67g;  Grace  v.  American  Central 

1078 


AGENTS  OF  INSURER  §  415 

nected  with  the  company  and  employed  by  it?  The  determination 
of  these  facts  must  be  of  weight  in  arriving  at  a  conchision  upon  the 
question  concerning  whose  agent  he  was,  and  this  distinction  was 
made  by  the  court  in  one  of  the  cases  above  noted."  We  beUeve 
tfiat  the  inquiry  should,  in  addition  to  the  distinction  just  made, 
resolve  itself  into  these  questions:  1,  From  whom  did  the  broker's 
express  or  implied  authority  to  do  the  act  relied  on  originally 
proceed?  2.  Was  the  act  one  which  the  broker  was  expressly 
authorized  to  do,  or  did  it  arise  as  a  usual  and  necessary  means 
to  accomplish  the  execution  of  the  authority  conferred?  3.  Was 
the  act  done  independently  of  the  original  employment,  and  if 
so,  for  whom  or  at  whose  instance?  4.  Which  party  could  the 
broker  hold  directly  responsible  for  his  remuneration  at  the  time 
the  act  in  question  was  done?  5.  Was  there  any  limitation  upon 
the  broker's  ostensible  authority  of  which  the  person  dealing  with 
him  was,  or  ought  to  have  been,  cognizant?  6.  Was  there  any 
ratification  by  the  ostensible  principal  of  the  claimed  unauthorized 

act? 

§  415.  Partnership  as  agent:  joint  agents.— One  of  a  firm  of  in- 
surance agents  has  all  the  powers  of  the  firm  in  efiecting  insurances, 
and  one  partner  may  execute  the  agency  for  the  firm."  Where 
one  D.'  was  the  ostensible  and  commissioned  agent  of  the  company, 
and  he  and  one  L.  were  in  partnership  in  the  business  of  soliciting 
insurances,  and  L.,  with  the  consent  of  D.,  acted  as  the  company's 
agent  in  procuring  an  application,  which  fact  the  company  knew, 
but  did  not  disapprove,  and  a  joint  commission  had  been  promised 
to  these  two  as  the  company's  agents,  which  was  delayed,  but  finally 
issued  before  the  policy  was  delivered,  it  was  held  that  L.  was  the 
company's  agent.^^  But  in  case  of  dissolution  of  the  partnership 
by  death  or  otherwise,  and  the  assured  has  knowledge  thereof,  he 
is  obligated  at  his  peril  to  ascertain  the  extent  of  the  authority  of 
the  surviving  partner  or  partners,'^"  although  a  ppwer  given  to  sev- 
eral to  jointlv  and  severally  sign  policies  in  their  discretion,  may, 
after  the  death  of  a  part  ojf  the  number,  be  executed  by  a  part  of 
the  survivors,  where  such  appears  to  be  the  intent  of  the  mstra- 
ment.^  Under  a  New  York  decision  an  authority  conferred  by  a 
principal  upon  two  or  more  agents  is  presumed  to  be  joint,  but 

"Arff  V.  Starr  Fire  Ins.  Co.  125  20Martine    v.    Tntornational    Life 

N    Y    57,  21  Am.   St  Rep.  721,  10  Assur.    Soc.    Co.   62    Barb.    (N.    \.) 

L.R.A.  609,  25  N.  E.  1073.  181.                                           .    n      i 

18  Kennebec     County    v.    Augusta  ^  Guthrie   v.    Armstrong,   1    Do^^\. 
Ins.    &    Banking    Co.    6    Gray     (72  &  R.  248. 

Mass.)  204. 

19  Van    Schoick    v.    Niagara    Fire 

Ins.  Co.  68  N.  Y.  434. 

1079 


§  416 


JOYCE  ON  INSURANCE 


the  rule  is  not  inflexible  as  it  yields  to  indications  to  a  contrary 
intent  dependent  upon  the  course  of  dealing,  the  terms  of  the  power 
and  the  surrounding  circumstances.  If  partners  are  appointed 
agents  either  member  of  the  firm  can  do  any  act  within  the  scope 
of  the  agency  the  same  as  in  other  partnerships  and  it  would  be 
implied  from  such  appointment  that  the  authority  was  joint  and 

several.^ 

§  416.  Powers  of  adjuster.— A.n  adjuster  may  occupy  such  a 
relation  to  the  company,  either  by  virtue  of  a  long-continued 
employment  and  his  long-continued  custom  in  relation  to  the  con- 
duct of  certain  matters,  that  his  acts  will  bind  the  company,  as 
in  case  of  his  statement  of  the  insurer's  grounds  for  refusing  to 
adjust  a  loss  whereby  a  waiver  may  arise.'  And  although  an  adjust- 
er may  not  be  a  general  agent  with  power  to  settle  losses  finally, 
yet  if  he  is  authorized  by  the  corporation  to  carry  blanks  to  prepare 
proofs,  the  jury  may  be  warranted  in  finding  an  agency  for  such 
purpose,  and  may  extend  the  time  within  which  such  proof  could 
be  formally  made,  and  make  such  time  dependent  upon  his  own 
convenience  in  preparing  the  same.*  But  an  offer  to  compromise 
a  loss  for  half  the  amount  due  on  a  policy  of  insurance  made  by 
a  general  adjuster,  without  authority  to  waive  or  alter  any  of  the 

^Unterberg   v.    Elder,    211   N.    Y.  defendant,   and  in  tliis  case  such   a 

499,  105  N.  E.  834,  44  Ins.  L.  J.  271.  notice    was    sent    him    on    the    visual 

^Rockford   Ins.    Co.    v.    Williams,  blank,   and   he  went   to   Watseka   in 

no  111.  App.  338.     The  court  said  in  pursuance  of  it,  and  investigated  the 

this  case:    "It  is  contended  that  Do-  title  to  the  property  in  question.     He 

Ian  did  not  sustain  such  a  relation  to  found  the  mortgage  which  apparent- 

the  defendant  as  authorized  him  to  ly  rendered  the  policy  void,  and  made 

speak  for  it  on  that  subject,  so  as  to  his  report  to  defendant  of  that  fact, 

make  a  refusal  to  pay  on  the  ground  and  did  nothing  further  in  the  mat- 


stated  a  waiver  of  other  grounds.  The 
evidence  was  that  Dolan  had  been  in 
the  employ  of  the  defendant  for 
about  twenty  years.  He  was  work- 
ing on  a  salary  as  agent  of  defend- 
ants, looking  after  agents,  visiting 
them,    making    contracts   with   them 


ter.  It  seems  that  he  was  an  ad- 
juster of  defendant,  and  had  been 
engaged  as  such  in  this  matter.  We 
think  that  his  statement  of  defend- 
ant's ground  for  refusal  to  adjust 
the  loss  would  bind  defendant."  Per 
Cartwright,  J.     See  Anthony  v.  Ger- 


looking  over  their  accounts,  adjusting  man-American  Ins.  Co.  48  Mo.  App. 
losses,  and  making  collections,  etc.  65  (case  where  after  notice  of  loss 
He  had  adjusted  a  great  many  losses  by  local  agent  adjuster  was  wired 
covering  a  good  many  years.  He  to  give  prompt  attention,  and  short- 
had  cards  for  use  furnished  by  de-  ly  thereafter  appeared  and  made  ef- 
fendant,  on  which  he  was  designated  fort  to  settle).  See  also  ^tna  Ins. 
as  special  agent  and  adjuster  for  de-  Co.  v.  Shryer,  85  Ind.  362. 
fendant.  The  method  adopted  to  As  to  waiver  by  acts  of  adjuster: 
set  him  to  work  as  adjuster  in  any  proofs  of  loss,  see  §§  584-586  herein, 
case,  was  to  send  him  'notice  of  the  *  Searle  v.  Dwelling-House  Ins. 
loss  on  a  printed  blank  prepared  bv  Co.  152  Mass.  263,  25  N.  E.  290. 

i080 


AGENTS  OF  INSURER  §  416 

terms  of  policies,  is  not  such  an  exercise  of  authority  as  will  bind 
the  company,  and  constitute  of  itself  a  waiver  of  the  right  to  forfeit 
the  policy  for  breach  of  condition.*  A  refusal  of  an  adjuster  to 
settle  because  of  his  doubts  as  to  the  cause  of  the  fire  may  operate 
to  bind  the  company  as  a  waiver  of  proofs.^  If  by  the  conditions 
of  the  policy  the  assured  may  be  required  to  submit  to  an  examina- 
tion under  oath,  and  an  adjuster,  claiming  to  represent  the  com- 
pany, conducts  such  examination  apparently  for  them,  and  subse- 
quently writes  to  assured  in  relation  thereto  upon  one  of  the  com- 
pany's letterheads,  wherein  he  is  advertised  as  adjuster,  it  may 
be  ])roperly  found  that  he  is  the  insurer's  agent.'  A  professional 
adjuster  who,  by  reason  of  his  technical  skill  and  knowledge  is 
employed  generally  by  any  and  all  companies  as  they  may  need 
him,  has  a  right  to  follow  his  business  wherever  he  may  deem 
it  necessary,  and  the  fact  that  he  goes  to  another  state  to  adjust 
a  loss  there,  at  the  request  and  under  the  employment  of  an 
unlicensed  foreign  company,  does  not  make  him  its  agent,  and 
subject  to  a  penalty  under  a  statute  prescribing  a  penalty  on  agents 
of  unlicensed  foreign  companies  adjusting  losses  in  the  slate.^  An 
authority  to  adjust  a  loss  occurring  on  the  British  coast  cannot  be 
presumed  from  the  fact  that  the  agents  in  Boston  of  a  British 
company  ^vere  authorized  to  issue  policies,  receive  the  premiums, 
and  represent  the  principal  in  legal  proceedings  in  Massachusetts.' 

5  Richards  v.  Continental  Ins.  Co.  tution  of  the  United  States;  and  any 
83  Mich.  508,  21  Am.  St.  Rep.  611,  hiw  abridging  or  re.s|ri(ting-  that 
47  N.  W.  350.  right   would   tje  void,"   per  Keed,   P. 

6  Mix  V.  Royal  Ins.  Co.  169  Pa.  St.  J.,  citing  numerous  eases  on  the  gen- 
639,  32  Atl.  460.  era!     proposition     as     to     legislative 

'  Enos  V.  St.  Paul  Fire  &  Marine  power  and  linutations,  and  citing  on 
Ins.  Co.  4  S.  Dak.  639,  46  Am.  St.  the  point  that  appellant  was  not  the 
Rep.  706,  57  N.  W.  919.  agent   of   the   Chicago    coni|)any   for 

8  French  v.  People,  6  Colo.  App.  any  purpose  within  the  statute; 
311,  24  Ins.  L.  J.  678,  40  Pae.  463.  Union  Mutual  Life  Ins.  Co.  v.  Wil- 
The  court  said  in  this  case:  '^\p-  kinson,  13  Wall.  (80  U.  S.)  222,  20 
pellant  was  not  the  agent  of  the  Chi-  L.  ed.  617;  Weed  v.  London  & 
cago  company.  By  reason  of  his  Lancashire  Fire  Ins.  Co.  116  N.  Y. 
technical  knowledge  and  ability  in  106,  22  N.  E.  229;_Marvin  v.  Life 
his  particular  department  he  was  Ins.  Co.  85  N.  Y.  2<8,  283,  39  Am. 
employed  by  any  and  all  companies  Rep.  657;  Peehner  v.  The  Phenix  Ins. 
needing  him.  The  calling  with  him  Co.  65  N.  Y.  195,^  207 ;  People  v. 
was  his  business  and  profession,  be-  Gilbert,  44  Hun  (N.  Y.)  522. 
ing  a  legal  business.  He  had  a  right  '  Monroe  v.  British  &  Foreign  Ma- 
to  follow  it  in  any  state  where  his  rine  Ins.  Co.  3  C.  C.  A.  280,  5  U.  S. 
employment  called 'him— a  right  de-  App.  179,  52  Fed.  777. 
«lared  and  guaranteed  by  the  Consti- 

1081 


§  416a  JOYCE  ON  INSURANCE 

* 

§  416a.  Fidelity  bond:  when  not  obligor's  agent. — If  a  fidelity 
bond  for  indemnity  against  an  employee's  dishonesty  is  signed  by 
the  obligor  and  it  is  delivered  to  the  employee  he  is  not  thereby 
constituted  the  obligor's  agent  with  authority  to  bind  the  latter 
by  a  waiver  of  such  signature.  Such  contracts  were  distinguished 
from  those  of  insurance.^" 

^^  United  States  Fidelity  &  Guar-  But  fidelity  guaranty  bonds  or 
anty  Co.  v.  Ridgely,  70  Neb.  622,  97  contracts  constitute  insurance,  see  §§ 
N.  W.  836.  339a,  339b  herein. 

1082 


LAW  LIBRARY 

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